Milton Friedman Was Wrong: Corporations Do Have Social Responsibility

by | Nov 23, 2022 | Corporate Social Responsibility

The sustainability challenges facing humanity — including climate change, pollution, and social inequity — are threatening the well-being of people across the globe including the citizens of wealthy countries. Increasingly, medium-to-large corporations are adopting measures to reduce their environmental footprint in response to the changing preferences of their customers and investors, government regulations, and the advocacy of the media and nongovernmental organizations. However, these measures are inadequate, and progress is too slow —  while the sustainability challenge is enormous and urgent.  In other words, corporations are failing their social and environmental responsibility.

Do corporations have social and environmental responsibility?  Fifty years ago, Nobel Laureate economist Milton Friedman absolved corporations of social responsibility beyond legal compliance. Friedman argued that social welfare is the business of governments, which safeguard the commons by enacting laws and regulations.[1] This minimalist view is workable only if governments are not subjugated to corporations and if they assume ownership of the common good and responsibility for its protection. Both conditions are lacking in the current monopoly capitalist system.

Over the past 50 years, corporations for the most part, have continued to focus on shareholder value growth through growth in market opportunities and the maximization of people and capital productivity. This objective encourages continuous growth in production and corresponding consumption, reduction in worker value (through lower wages and benefits and longer working hours), and increased production output capability (through automation, economies of scale, and centralization of production)—all of which tend to be counter to sustainable utilization of resources and worker well-being. The goal of continuous business growth is irreconcilable with the objectives of social, environmental, and resource sustainability. During the past decade, business leaders have increasingly become aware of the sustainability imperatives including their business risks and opportunities.

Corporations can fulfill their social responsibility by adopting the following four strategies:

  1. Innovation: develop new and improved products and services that maximize societal value and minimize social and environmental impacts.
  2. Business strategy: develop strategies through holistic assessment of impact not only on business outcomes but on contribution to the common good in space and time.
  3. Choice influencing: use marketing and awareness campaigns to promote sustainable products, consumer behavior, and social justice.
  4. Private-Public collaboration: invest in social and human capital (e.g., through multisector solutions) for long-term economic development and social justice.

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[1] Milton Friedman, “The Social Responsibility of Business Is to Increase Its Profits,” New York Times Magazine, September 13, 1970, pp. 122–124.

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