Why big businesses resist positive change


Decades ago, corporate responsibility to protect human rights and the environment was, at best, a trivial matter of business ethics. Some doubted that a company could be ethically responsible. And many businesses believed that these rights, if any, were a matter of the government, not the corporation. However due to positive change in 21st century the term “sustainability” has become a business term. And in order to thrive in this century the companies must improve and balance their economic, social and environmental performance.  This includes working conditions, human rights, the environment, anti-corruption, corporate governance, gender equality, professional integration, taxes and consumer interests.

Unfortunately there are still companies that resist this positive change until today due to a number of different reasons. Such as the Milton Friedman thesis suggests that the only social responsibility of corporations is to increase its profits, while staying within “the rules of the game” which are a set of side-constraints on profit-maximization. The case also suggested businesses are not people with real beliefs or morals, so they don’t have to act against their best (financial) interests to improve society. Managers who benefit the society at the expense of profit may lose their jobs and be replaced by those who put profits first. As some critics believe corporate management has a fiduciary duty to its shareholders, and such changes directly runs counter to this, since management’s responsibility to shareholders is to only maximize profits.

Other than that businesses in regeneration mode or with low margins may view corporate social responsibility as a luxury or cost and they don’t see the value added to their business. According to IO Sustainability’s project ROI study, companies that do well with corporate social responsibility can reap huge benefits, while companies that have no corporate social responsibility at all perform better than those who have CSR programs that are not well managed. Just like with with any other aspect of your business, poor execution can lead to unintended consequences and failure to meet your goals. Hence businesses fear the change will result in little or no benefit.

Increased accountability is another reason as the businesses that do adopt these changes and are more responsible when once they become known for their ethics and the financial performance hits a rough patch (which most companies eventually do hit), the business becomes vulnerable to pressure from people claiming you’ve “taken your eye off the ball” as before they were being held high than their peers and are more accountable and responsible for their actions.

Also some businesses consider there is a competitive disadvantage in embracing such positive practices as it can be proved harmful to the business in long run. As companies adopting ethical practices will have their production and operation cost increased which means less profit and if instead the cost is passed on to the customer and it results in increased prices of the final product then mostly the customers won’t be interested in buying the product as the competitors might have cheaper products due to the lower cost, leading to extra pressure on the business.

However businesses should consider these changes as it leads to a positive image of the company which attracts better employees resulting in more talent for the business.  Also positive working environment can lead to innovation and overall better work quality making the company stronger in the long run. Furthermore big businesses and corporations have the power to make the world a better place as they have an huge influence so not only they can raise awareness but if every company does their little part it can have a positive impact on others and serious issues like child labor, environment (climate change) and hunger and poverty can be eradicated and it can make the world healthier and happier place.