John Paul

Rethinking the Social Responsibility of Business

One of the fundamental principles for business engagement with the ?base of the pyramid? is to take a triple bottom line approach to business model development and evaluation. This approach takes into account environmental and social impacts in addition to–and in support of–the financial bottom line.

Whole Foods has built a successful business around this principle. It’s co-founder and CEO John Mackey states that ?the enlightened corporation should try to create value for all of its constituencies. From an investor’s perspective, the purpose of the business is to maximize profits. But that’s not the purpose for other stakeholders-for customers, employees, suppliers, and the community. Each of those groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate.?

This business philosophy runs counter to a famous article written in 1970 by future Nobel laureate Milton Friedman whose title aptly summed up its main point: “The Social Responsibility of Business Is to Increase ItsProfits.” Friedman wrote “there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.?

Who is right? Decide for yourself! The two preeminent business thinkers duke it out in a fascinating debate. The exchange, originally published by Reason magazine, can be found here on the Whole Foods blog.

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