By Nick Gerry-Bullard  on Sun 5 Feb - 0 Comments
Categories: entrepreneurship, shared value business

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The table has been set for second semester, with a prix-fixe menu of new courses and the now-familiar diet of cases twice to three times a day. One that at first glance resembled a mere amuse-bouche, about investment-banker brothers creating an exotic liqueur, turned out to be a quite substantial entrée - into topics of social responsibility that I hope we can digest further in Leadership & Corporate Accountability.

In crafting VeeV, their acaí-infused spirit, Courtney and Carter Reum also are attempting to create a company that has a net-positive impact on society. The case, and the VeeV website, detail these efforts, which include per-bottle donations to sustainability projects in Brazil, carbon neutrality for the core company, and incentives for employees to pursue their own greening efforts. All good things, I thought, but class discussion dissected the issue from the bottom up. Do companies even have an obligation to society beyond generating wealth? Regardless, do alcohol companies have some special responsibility, apart from obeying the law? If so, are "offsets" like VeeV's the best approach, and how tied need they be to the company's core activities? 

I was fascinated by the debate generated on the very first question: simply, whether it's even appropriate for a company to divert its investors' money to non-profit-generating activities. In the case of VeeV, where equity came from a small group of private investors and the social mission was in place from the start, it would seem uncontroversial to do so. But the sustainability donations can also be seen from a business perspective - not as environmentalism, but as investments in the supply of product inputs. What it's rational for business to invest in changes with your time scale: measured in days, VeeV needs to move product; over years, however, its profitability depends on the resilience of the acaí berry's environment.

We also talked about the social costs of alcohol and whether VeeV should be addressing these specific externalities. It would seem unsurprising that a luxury brand would prefer to avoid associations with these issues, especially when VeeV does not appear to be uniquely implicated by them. But the question remained of how broadly any company should construe its responsibilities. Is it sufficient to pay taxes, indirectly supporting, for instance, enforcement of legal drinking ages and clinics for substance abuse? In the U.S., where the public sector and insurance combine to create a fairly strong safety net, it might seem so. But what about countries where the safety net is frayed or nonexistent? Do companies have a stronger obligation to take full account of their activities in these environments?

I was surprised to find myself concluding that it might come down to the CEO's own personal judgment. Imagine a two-by-two, for instance, with the axes of "time scale" and "stakeholder inclusiveness." Wherever one starts in defining a company's impact, there are always constituents and effects further downstream to consider, and yet the company's ability to reliably affect them diminishes with distance. So a rational case could likely be made for scoping a social responsibility program almost anywhere on the grid. Whether that rational case is reasonable or ethical, though, is a harder question.