How Can a Business Be Socially Responsible?

This article is an excerpt from the Shortform book guide to "Servant Leadership" by Robert Greenleaf. Shortform has the world's best summaries and analyses of books you should be reading.

Like this article? Sign up for a free trial here.

What does it mean to have social responsibility? How can a business be socially responsible?

Servant Leadership by Robert K. Greenleaf believes that servant leaders will ensure that the businesses they belong to fulfill their social responsibility. They’ll do this by changing these businesses from the inside out with a clear vision of a better path forward.

If you’re a leader who wants to avoid business failures by being socially responsible, keep reading.

Advice for Businesses Who Want to Succeed

How can a business be socially responsible? According to Greenleaf, the social responsibility of businesses is to provide fulfilling jobs for employees and fulfilling services for consumers. He explains that fulfilling jobs are those in which employees can use their unique strengths to provide an important service for others. For example, media companies provide fulfilling jobs for journalists—journalists are good researchers and writers, and they enjoy using those strengths to help subscribers learn. As for fulfilling services, Greenleaf believes that as society improves, people will become less concerned with material goods and more concerned with their psychological needs—so companies should strive to provide services that meet those psychological needs.

(Shortform note: Greenleaf’s belief that businesses have a social responsibility to fulfill the needs of employees and consumers is controversial—others argue that the only responsibility businesses have is to maximize profits for shareholders. This viewpoint has been championed most famously by Nobel Prize-winning economist Milton Friedman, who explains in Capitalism and Freedom that when shareholders invest in a company, they’re paying the company and its employees to generate profits. They own the company, and every cent the company spends actually belongs to them, so the company is beholden only to shareholders—it has no responsibility to employees or consumers.)

To fulfill this social responsibility, Greenleaf argues that businesses must accomplish two things:

Commit to helping employees grow. This requires that businesses embrace continuing education in the workplace and equip aspiring leaders with the skills they need to progress. Greenleaf also argues that labor unions are an important aspect of this process—they represent the interests of employees and negotiate with company leadership to ensure that work conditions are healthy and sustainable.

(Shortform note: According to management experts, some ways to support employee growth include paying for continuing education, matching junior employees with experienced mentors, and helping them identify their career goals and how to achieve them. You can also support employee growth by providing benefits like health insurance and paid leave, which help employees live healthier, happier lives. Securing benefits like these are one reason unions exist—and some experts suggest that unionization doesn’t just benefit employees but also benefits entire communities and individual businesses—for example, by reducing employee turnover.)

Proactively work to contribute to the greater social good. First, companies should evaluate how they’re currently faring on this front by collecting data and the opinions of everyone whose life is touched by the company, from consumers to employees to shareholders. Based on that information, company leaders should then come up with a plan for improvement. Greenleaf notes that it’s not good enough for a company to follow the letter of the law—it must stay ahead of the curve when it comes to social issues. For example, this could mean striving for true inclusion of people with disabilities instead of simply meeting the minimum legal requirements for accessibility.

(Shortform note: Some business experts call this corporate social justice—a management concept that entails businesses being accountable for the well-being of society. According to these experts, it’s becoming more common—and more profitable—for companies to take a stance on social issues and pursue social justice-related goals, like Ben & Jerry’s commitment to combating racism. However, companies may face pushback if their social justice initiatives are seen as hypocritical or performative. For example, many businesses have been criticized for rainbow-washing—offering LGBT-themed products so as to appear supportive of LGBT rights, without making meaningful investments in LGBT communities or causes.)

How Can a Business Be Socially Responsible?