Managers need to think about social responsibility in terms of externalities. Externalities are economic terms, such as the link above tells you, is to "effect the purchase or use a set of decisions on others which the party had no choice and interests that are not considered."
We believe companies who want to be seen as a responsible must start by addressing those externalities. They must take ownership of their impact. And, because trying to be putting a lot on their plates, their efforts may have to end there.
While this term is still one foreign to many practicing managers, and can be regarded as truly eggheaded by some, we hear more and more from the mouth of the executive - and the activists took them to task. Some leaders actually already started to adopt this approach - or at least suggest it.
Founder and chairman of carpet manufacturer Interface, responding to interviewer questions about the rules. "I actually do not support more government regulation, but I support ... a system that gets the right priority, that internalizes the externality itself, which ultimately depend on market information, people insist that the products they buy are made in a responsible manner."
In New York last fall, we sat in an appreciative audience at the Aspen conference in New York and heard the founder of the green Seventh Generation products provider, run the same terminology. And he will not hesitate to do it again, in its contribution to this debate "HBR special" end of this month.
he is an outlier in several respects. Under their leadership, their company has become famous for their sustainability focus. But both are also practiced in communicating their views to other executives, and do not hesitate to use the language of externalities. This is only the most rational way to discuss what needs to be done.
At least that's what we think. But we also want to hear another viewpoint. In the coming weeks we hope to hear from various types of business and thought leaders we have assembled. We also hope to hear from you. Does your business need a better way to think about responsibility? And if so, what better way?