While corporate profits might seem incongruous with doing social good, Howard Schultz, the executive chairman of Starbucks, would counter that the opposite is true.
There is a great need, Mr. Schultz said, “to achieve the fragile balance between profit, social impact, and a moral obligation” to do everything possible “to enhance the lives of our employees and the communities we serve.”
At the annual DealBook conference last week, hosted by The New York Times, he said that for such goals to be attainable, sound business practices were essential. “The price of admission to have a social impact agenda is to have financial performance.”
Starbucks has stood out over the years in its efforts on behalf of social do-gooderism.
In 1988, it became one of the first companies in the United States to offer comprehensive health benefits to both full- and part-time employees, including coverage for domestic partners.
Under Mr. Schultz’s leadership, Starbucks started stock ownership and free college tuition programs for its workers; it made a point of hiring people from underserved groups, including veterans and refugees.
But the notion that companies had some obligation to social good started long before Starbucks, although the history is a little murky.
The discourse about how companies should make money dates to the early 1600s in Amsterdam. The Dutch East India Company, the world’s first publicly listed company, profited “by war, rape, pillage and colonization,” said Stephen Davis, associate director and senior fellow of the Harvard Law School Program on Corporate Governance.
“A group of Dutch burghers protested, arguing that the company should abide by ethical principles, so they launched what became the world’s first shareholder boycott of company stock on social grounds,” Dr. Davis said. The effort failed and the company carried on its ways, he said, but it laid the groundwork for addressing corporate behavior “that’s become part of the DNA of capital markets.”
In America, some early examples of corporate social responsibility (also known today as corporate citizenship, conscious capitalism and purposeful businesses) date to the late 19th and early 20th centuries with the creation of company towns for workers and the Community Chest movement, one of the first large-scale endeavors by business people to be involved in local communities, said Archie B. Carroll, professor emeritus of the Terry College of Business at the University of Georgia and a co-author of “Corporate Responsibility: The American Experience.”
By midcentury, business philanthropy and employee volunteerism, in which corporations give away resources like money, products and services, as well as their employees’ time and expertise, began to take hold, he said.
But it wasn’t until the 1970s that the debate over how companies should ethically make money resurfaced, instigated in large part by Ralph Nader, whose challenges to General Motors and auto safety caused shareholders, investors, and consumers to question “how companies choose to behave,” said Dr. Davis, who is co-author of “What They Do With Your Money: How the Financial System Fails Us and How to Fix It.”
In the late 1970s and 1980s during the anti-apartheid era, large-scale divestiture by American colleges and universities prompted shareholders to pressure their companies to also pull investments out of South Africa.
From the 1960s through the 1990s, in response to social movements and ethics scandals, “we witnessed a broadening in the social contract between business and society,” Dr. Carroll said. A heightened expectation of social performance and a series of regulatory actions, like the formation of the Consumer Product Safety Commission, led to an increase in corporate accountability. The public began expecting businesses to do more than supply jobs, goods and services, he said.
It was in this climate that the Social Venture Network, a group of socially oriented entrepreneurs and investors, was created as a way to serve society by aligning business with personal values.
“It was a shift in thinking,” said Joshua Mailman, who founded the group with Wayne Silby in 1987 to bring together like-minded people for inspiration and collaboration, and to support businesses for social good. “We wanted to instigate a movement, to change the world,” Mr. Mailman said.
What began as a small gathering at Gold Lake Ranch in Colorado is today a coalition of more than 600 entrepreneurs, investors and nonprofit leaders, and hundreds more through affiliations with similar groups it spawned or inspired. Some of the network’s first members are well-established companies today: Bright Horizons, Ben & Jerry’s, Stonyfield Farm and Seventh Generation.
Mr. Mailman, managing partner of Serious Change, and Mr. Silby, co-founder of Calvert Funds, continue to be involved in social impact investment initiatives. Mr. Silby is also chairman of SynTao, a Beijing-based consultancy that advises Chinese companies and multinational corporations operating in China on what it means to be a corporate citizen.
“Some of those concepts are kind of new,” he said. “The Chinese are known for strong family values, but have not traditionally embraced concepts of community and the integration of social values in business.”
Dr. Davis, of Harvard, said in recent years there has been a big paradigm shift. “Corporate social responsibility has moved from an ethics issue to a risk issue,” as companies and investors are increasingly concerned about managing risks, such as how to deal with global warming and greenhouse gases.
Today, much of what were once thought to be acts of corporate social responsibility are now important, competitive business issues, Dr. Carroll said, like producing higher quality and sustainable products that are safe; promoting honest and ethical business behavior; committing to safe workplaces and environmental protections; and avoiding deceptive advertising.
And while most highly recognized companies today do much more than the robber barons of the past, there are very few true believers, Dr. Carroll said.
There is considerable greenwashing going on, through deceptive public relations, making claims without evidence and misleading labeling, he said, characterizing those acts as attempts to convey an image of social responsibility when, in fact, it’s business as usual. But the public will continue to expect companies to integrate social concerns into their everyday business practices. Corporate social responsibility “will continue to grow in importance,” he said.
Mr. Silby said the Social Venture Network’s founding principles remain more relevant than ever.
“We need to get ready to face the challenges ahead because of the way society is going to change, due to the rapid force of technology.” He recounted a recent meeting of Silicon Valley billionaires, after which one participant told him some of them regretted what they had created, referring to their businesses and their societal impact.
“There really is some soul-searching going on,” Mr. Silby said. “It’s important to take risks and stand up for what’s right, but we need a community behind us to help us do that, to be more bold.”