The article in the url link below discusses the issue of the discount rate used in economic forecasting. On the surface, this might not appear to be directly related to CSR, but I think it is highly relevant when we think of what obligation today’s society has to future generations, and how much we should be willing (compelled?) to pay today to minimize the future costs of our current actions. This issue is particularly relevant in terms of dealing with issues such as climate change, but relates also to the broader issue of social value:
“Groucho Marx describes one end of a spectrum of opinion. The only obligation we owe to future generations is to sell them assets to pay our pensions. Sir Nicholas Stern's climate change report takes an opposite view. Governments must value the welfare of all present and future citizens equally and give no special preference to current voters.”
The newspaper coverage in general at the time of the Stern report on climate change identified a number of assumptions the committee had made in the economic analysis that seemed to exaggerate the immediate cost implications of climate change and diminish variables such as the possibility for technical innovation and the greater wealth of future generations. Getting this balance between current and future responsibility/burden ‘right’ is crucial if we are to ensure effective and realizable public policy in response to this hugely important issue:
“If Groucho's position is morally indefensible, Sir Nicholas's is operationally impossible. The problem of weighting the present and the future equally is that there is a lot of future. The number of future generations is potentially so large that small but permanent benefit to them would justify great sacrifice now. If we were to use this criterion to appraise all long-term investment, the volume of such investment would impoverish the current population. No government advocating it would ever be elected. The burden of caring for all humanity, present and future, is greater than even the best-intentioned of us can bear.”
With the huge implications in changes in behavior that will be required by people in both developed and developing countries, it is essential that buy-in is secured as quickly as possible. In order for politicians to act, however, it is essential that there be no obvious personal consequences of their actions (i.e., the danger of them losing their jobs). This is a sad, but realistic position that aims to achieve change, rather than adopting an idealistic position that will never be realized. Walking the tightrope between being sufficiently alarmist to ensure the attention of the world is directed toward the issue of climate change, while not requiring too radical sacrifices in the near future (that are likely to be rejected) is essential for making meaningful progress. This balanced perspective in making public policy decisions is the message I took away from Kay’s article (below):
“Governments cannot be expected to do more, and should not be permitted to do less, than express the concerns their citizens really feel. History illustrates the harm done when the fundamentalism of faith or abstract reasoning overtakes pragmatism as political principle.”
I also think the analogy carries over to the burden placed on firms in relation to their social responsibility. Firms will respond to their consumer needs (in search of profit) more quickly than they will to regulatory coercion (considered an additional cost). Importantly, from both an economic and social value perspective, I am not sure we should expect much else of them. Until firms’ stakeholders (and consumers in particular) re-shape their priorities and demand specific levels of social responsibility, I think it is unrealistic to expect firms to do all the heavy lifting. As a society, we get the politicians for whom we vote and the firms at which we shop.
Have a good weekend.
Dave
Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther
Climate change: the (Groucho) Marxist approach.
By JOHN KAY
692 words
28 November 2007
Financial Times
Asia Ed1
Page 11
http://www.ft.com/cms/s/0/e8978fba-9cfb-11dc-af03-0000779fd2ac.html
