Economics, Corporate Sustainability and Social Responsibility

Abstract

The main objective of this chapter is to show that the continuing economic (financial) viability of a corporation is the dominant factor determining its survival. A corporation cannot afford to adopt social and environmental behaviours that will compromise its economic viability, otherwise the corporation will not be sustainable. Self-interest limits the extent to which corporations can engage in socially desirable behaviours and survive, particularly if externalities or public good elements are present. When externalities and public good elements are present, collective corporate action is required for improved social and environmental outcomes but these actions can usually only be brought about by state intervention designed to police the rules of collective corporate behaviour. In such cases, state intervention helps to establish a level playing field for corporate competition and allows most corporations to discharge their social and environmental 'duties' without becoming insolvent. It is contended in this chapter that social rules are necessary to limit self-serving behaviour and improve the performance of market systems. These rules in turn support the sustainability of the commercial sector and market economic systems. The chapter at first considers whether or not there is a single or triple bottom line for the survival of a corporation. It then examines in depth, and in turn, economic viability, social and environmental responsibility as requirements for the sustainability of a corporation. In discussing economic viability, such matters as what is required for corporate economic viability, the influence of uncertainty on this viability and the extent to which the financial security of a corporation can be traded off to pursue social and environmental objectives are discussed. In relation to social responsibility matters involving social and commercial ethics are considered and their economic consequences are explored. Although corporate environmental behaviour involves aspects of social responsibility, it is of sufficient current interest to be discussed in a separate section in this chapter. Issues such as whether environmentally friendly behaviour by a corporation adds to its sustainability are examined and constraints on the adoption of such behaviour are outlined. In many cases, it is clear that socially responsible use of natural environments can only be achieved as a result of state intervention. Such intervention has implications for corporate sustainability which vary with the method of regulation adopted. This aspect is also considered.