CHAPTER 1

THE CONTEXT OF RESPONSIBLE

MANAGEMENT
INTRODUCTION
This chapter introduces the external factors influencing responsible management. The first section
presents main sectorial actors (from government, business, and civil society sector) and typical
subjects (also called issues) in responsible management. The second section then gives answers to
the question Why do companies and individuals engage into responsible management activities?
by illustrating five main drivers of responsible management activity. The third section of the chapter
asks the opposite question of What keeps companies from engaging into responsible management?
by presenting a set of five typical inhibitors and criticisms encountered when engaging in responsible
management.

CHAPTER OBJECTIVES
After reading this chapter, students should

. . . understand main sustainability, responsibility, and ethics issues.

. . . be able to map the main actors and their roles in responsible management.
. . . understand main drivers of responsible management.
. . . be able to manage barriers, inhibitors, and criticisms of responsible management.

CHAPTER OUTLINE
I.
Subjects and Actors of Responsible Management: The setting of responsible
management activities is determined by the subjects addressed (e.g. climate change, human rights,
transparency) which can be divided into the three different background theories (sustainability,
responsibility, and ethics) and the organizational actors with which responsible managers work (e.g.
businesses, NGOs, local governments).
A.
Subjects and Background Disciplines
Subjects, issues, and causes are often used as synonyms
Background disciplines
Sustainability: Triple bottom line
Responsibility: Stakeholder
Ethics: Moral dilemma
B.
Sectorial Actors
Governmental (Public): e.g. city council, public sector utility company
Civil society: e.g. civil society organization, individual activist
Business (Private): e.g. multinational corporation, social enterprise
C.

The Workplace of Responsible Managers

Organizations from the business sector can be classified by their

1. mission (philanthropic or egoistic)
2. value creation (external or internal)
Resulting business-sector organization types are irresponsible and responsible
businesses, social enterprises, and business foundations.
The work environment of a responsible manager will change significantly, based on
what type of organization he works in.

II.

The Megatrend and Its Drivers: The drivers of responsible management can be
grouped into five broad categories: stakeholder wants and needs, new markets and business case,
converging global crises, Internet and transparency, and new institutionalized powers.
A.
Stakeholder Wants and Needs: Among the majority of main stakeholder groups
we can observe a general tendency to favor businesses that behave responsibly. Examples
are employees picking companies with a reputation for responsibility to work with,
financiers identifying good companies through socially responsible investment practices,
and consumers basing their buying decision on responsible company reputation.
B.
New Markets and Business Case: This driver refers to how responsible
management practices can make business sense from a self-serving perspective. The term
business case describes the advantages that may be achieved. One dominant line of action
is the advantages achieved from new markets related to sustainability, responsibility and
ethics topics.
Business Case:
o Potential Win-Win or virtuous cycle
o Potential benefits: Attraction, motivation, and retention of employees; cost
savings; reduced risk; the attraction of new investment; and increased
profitability
New Markets:
o Consumerist movements for responsibility: e.g. LOVOS, LOHAS, political
consumption.
o Customer attraction and retention, improvement of product quality of products.
C.

Global Crises: Companies have begun to be driven in their responsible

management practices by the need to respond to global social, environmental, and ethical
issues and crises:
Potential for global megacrisis
o Systemic global challenges
o Effect of crises on business
Significance for responsible management
o Need to understand crises interrelatedness with business practices
o International organizations as sources of information
D.
Internet, Transparency, and Globalization: The global communication
ecosystem has evolved to being more effective in detecting and scaling the communication
of good and bad business behavior.
Shared global standards for responsible conduct
Technical factors
o Internet availability
o Mobile devices
Increased reputation and brand risks and rewards

E.
Institutionalization of Responsible Management: A network of global and local
institutions is quickly growing in size and influence. An important role is played by
organizations and norms such as the following:
ISO 26 000 (social responsibility) and ISO 14 000 (environmental management)
Global Reporting Initiative (GRI)
United Nations Global Compact (UNGC)
World Business Council for Sustainable Development (WBCSD)
Dow Jones Sustainability Index (DJSI)

III.

Barriers, Inhibitors, and Criticisms: For responsible managers, it is of importance to

understand the arguments brought forward by critics of responsible management. Typical counterpoints can be attributed to the lines of argumentation illustrated through the following subsections.
A.
Profit Issues: Criticism related to profit typically arises from the following two
diverging arguments:
Questioning profit as good motivation: Companies are focusing on responsible
business only to make more profits, to instrumentally and greedily abuse a good topic
for profit reasons.
Friedman Argument: The business of business is to generate profit for shareholders,
and there is no legitimate responsibility toward any other stakeholder.
B.
Economic Crises: The argument has been made that responsible management
activities will be cut down in times of economic hardship. However, it has been found that
the budget for responsible management actually has a tendency to remain constant or even
to increase during economic crises when responsible management focuses on core business
activities and is designed to generate advantages for the business.
C.
Greenwashing
Greenwashing: The practice of creating a misleading impression of a companys social,
environmental, or ethical performance.
Recommendations: Do what you say, say what you do (Walk the talk), communicate
truthfully, and abstain from exaggeration and misleading communication
D.
Cause Criticism: Stakeholders might, rightfully or not, criticize the causes a
company addresses for many different reasons, such as differing world-views and lobbying
interests.
E.
Applicable for Only a Selected Few: An often-uttered argument against
the assumption of responsible business is that the topic applies only to big corporations from
developed countries involved in producing products for the end consumer. As argued in the
chapter, responsible business is relevant for
Small and medium enterprises (SMEs) and big corporations
Business-to-business (B2B) and end-consumer companies
Developing and developed countries

F.

Operational Inhibitors: Responsible managers find a great variety of

operational issues that inhibit their efforts in practice. A survey from 2010 found the
1. complexity of implementation across functions,
2. competing strategic priorities, and
3. a lack of recognition from the financial markets
as main operational inhibitors. With the ongoing learning process, the typical inhibitors will
change over time.


PRINCIPLES OF THE CONTEXT OF RESPONSIBLE MANAGEMENT
(SUMMARY)
I.
II.

III.

IV.

V.

VI.

VII.
VIII.

Critical factors in the context of responsible management are issues encountered and
related actors and drivers of, and barriers to responsible management.
Subjects, also called issues or causes, in responsible management can be categorized
into the ones relating primarily to the triple bottom line (sustainability), to stakeholders
(responsibility), and to moral dilemmas (ethics).
Sectorial actors stem from the governmental, civil society, and business sectors. All
three sectorial actors typically provide different solution capabilities for the subjects
and issues of responsible management.
All responsible business background domainssustainability, responsibility, and ethicsmay be applied on a micro (individual), meso (organizational), and macro (systemic) level.
Main drivers of responsible management efforts can be grouped into five categories:
(1) stakeholder wants and needs; (2) new markets and business case; (3) converging
global crises; (4) Internet, transparency, and globalization; and (5) institutional power.
Barriers, inhibitors, and criticisms to responsible management can be grouped into six
categories: (1) profit criticism, (2) economic crises, (3) greenwashing, (4) cause criticism, (5) the selected few argument, and (6) a set of inhibitors stemming from operational realities.
Greenwashing describes a situation where stakeholders perceive a company as creating a misleading impression of it social, environmental, and ethics performance.
The Friedman argument is the claim that the only responsibility of a business is profit
generation, and thus companies and managers should not spend money on responsible business activities.