As far back as 1970, the highly influential Nobel prize-winning economist Milton Friedman argued that for the benefit of society as a whole, the primary concern of business should be business, not social responsibility.

It is perhaps unsurprising that free-market economists such as Friedman and Smith would be dismissive of corporate social responsibility. What is interesting is that the ethical concern that may appear to be a contemporary phenomenon is in fact not a new consideration.
What has changed is the attention that it is getting. With NGO campaigns unveiling unethical business practices, and social and environmental concerns becoming important factors in consumer choice, corporations can no longer afford to dismiss their duty to the community.

The World Bank Group defines corporate social responsibility (CSR) as: ‘The commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development.’

This extends beyond statutory obligations to comply with legislation. It also assumes that companies are accountable to the whole of society and not just to their stockholders.

A major motivating factor behind the recently heightened interest in corporate social responsibility has been the increase in consumer awareness and the emerging focus on the origins of products.

‘Fair trade’, ‘organic’, ‘sustainably sourced’, ‘ethically produced,’ ‘carbon footprint’: accreditations are multiplying and labels and packaging offer an increasing amount of information about how products are made and where they come from.

Books like The Rough Guide to Ethical Living and Oxfam’s The Good Shopping Guide provide detailed information on what brands to buy, which shops to shop in, which services to use, and, more importantly, which to avoid.

Corporations are aware of this increased interest: they want to avoid being pariahs like Nike or Wal-Mart, and they have also realised that having an ethical reputation is itself of commercial worth. Indeed, companies such as The Body Shop and Starbucks have built their brands (and client-bases) around their ethical practices.

Over the years, The Body Shop has initiated campaigns for women’s rights, fair trade, and HIV awareness, and against animal testing among other things. One of Starbucks’ guiding principles is to ‘contribute positively to our communities and our environment.’

It is impossible to enter a branch of either of these companies without being made aware that they take their social responsibility seriously.

This kind of ethical marketing is very much aimed at a lucrative, elite niche: affluent, educated, urban Westerners. Doug Holt, Professor of Marketing at the Saïd Business School, points out that this ethical focus is absent in business-to-business marketing, or in products aimed at consumers of lower socioeconomic standing.

During a recent talk Professor Holt argued that as well as buying into an ‘ethical experience’, consumers are also realising that ‘corporations have become the most powerful actors in society, so they need to believe that they are somehow constrained or doing good.’

Aside from influencing companies to adopt ethical practices to attract customers, the value of having this sort of reputation has also given NGOs leverage, which they can use to shape the behaviour and decisions of large corporations.

In a dispute over the trademarking of premium coffee, Starbuacks was forced to concede victory to the Ethiopian government in May 2007. Trying to trademark three types of coffee native to their country to improve coffee farmers’ revenue, the Ethiopian government ran up against the powerful coffee retailers’ lobby in the US.

These coffees were part of Starbucks’ premium line. Professor Holt assisted the campaign waged by Oxfam to aid the Ethiopian government, as he explained: ‘Starbucks had built up their brand into an ethical myth, but then they were doing something that could blow up in their face.’

By framing the case as an investor issue, with the negative coverage potentially destroying Starbucks’ ethical equity and thus putting the entire brand at risk, Oxfam and Holt managed to get the coffee retailer to back down. The Ethiopian government got its trademarks.

Of course public attention and consumer preferences affect only a very narrow slice of business. While consumers can choose to patronise a different coffee shop or buy a certain body lotion, they don’t choose between different types of copper based on the social responsibility of the mining company. Yet here, again, business incentives can push these companies to operate responsibly.

The NGO Earthwatch helps companies develop environmentally -sustainable practices, working with corporations such as Cadbury Schweppes, British American Tobacco and Newmont Ghana Gold. Whether or not the companies partnering with Earthwatch are genuinely seeking to be socially responsible, self-interested motives remain important.

Companies that work in tourism or natural resources are dependent on the environment and its resources to stay in business. They therefore have a clearly vested interest in the sustainability of their practices. Investing in developing sustainable practices can also be lucrative in an unexpected way, as there is now a market to sell such innovative techniques to other companies.

A number of companies that Earthwatch works with also invest in conservation capacity-building in developing countries where they operate. By building up the skills and knowledge of members of the communities where they mine, grow or extract they are contributing to their long-term prospects in those areas.

Furthermore,in certain other sectors, such as construction, companies known for respecting and surpassing environmental regulations are awarded contracts by planning commissions.

Claire Lippold, of Earthwatch, explained that her NGO works with even the most controversial companies as they are the most important ones to push into adopting sustainable practices.

More importantly, their partnership with Earthwatch isn’t merely ‘Greenwashing’: ‘We have very strict screening process and companies have to prove they are serious about their commitment before we get involved with them.’

Indeed to get the full commercial benefits of social responsibility, corporations cannot simply pay lip-service to ethical practices. Both the FTSE and the Dow Jones have sustainability indexes with which they track the financial performance and social responsibility records of ‘sustainably driven’ companies.

This serves to facilitate investment in these companies and to set a model for other businesses hoping to improve their scores.

While Milton Friedman may have dismissed corporate social responsibility as a form of socialism, what he seems to have missed is that in many cases ethical practices are not merely altruistic but also make sound business sense.

To quote his own words: ‘The most important single central fact about a free market is that no exchange takes place unless both parties benefit.’ This is perhaps the idea that provides the most hope for corporate social responsibility.

That businesses will eventually see that being ethical is to their benefit.

Lord Douglas Hurd was one of the most influential Cabinet politicians in the governments of both Margaret Thatcher and John Major.
As Secretary of State for Northern Ireland from 1984 to 1985, Home Secretary in 1985-1989 and Foreign Secretary between 1989-1995, he oversaw the signing of the Anglo-Irish Agreement, the end of the Cold War, the disbanding of the Soviet Union, and the first Gulf War.

Born in 1930 Hurd is now retired from front-line politics, although as a member of the House of Lords, President of the Prison Reform Trust, a Patron of the Tory Reform Group, and a novelist who also has several business appointments, he is hardly ‘retired’ in the usual sense of the word.

His latest book is a biography of Robert Peel, the 19th century politician and founder of the modern police force. I ask him whether he likes writing better than he liked politics. ‘I like having something to write,’ he replies.

‘I’m writing a book about British Foreign Secretaries, and I’m enjoying doing that very much… I might go back to writing a novel, but at the moment I’m into history. History’s fun. In a way a novel’s more hard work, you have to flog your imagination the whole time.’

During his time in office, Hurd helped to promote good relations between Britain and the US, then led by George Bush Snr.

When asked whether he thinks that Britain’s special relationship with America is a good thing, given the unpopularity of the Iraq War, he muses: ‘Well, the Iraq war is wrong and foolish and we made a big mistake in getting involved in it. We’re a junior partner with the United States, and we have to learn how to do that properly. We’ve lost the art at the moment, and we have to find it again. Being a junior partner means you’re supportive but you’re not a slave. The partnership remains important…but it doesn’t mean just falling over and doing whatever they say.’

Hurd’s autobiography, Memoirs, revisits his opposition to military intervention in Bosnia in the early 1990s, and I wonder whether today he would make the same decision again. ‘I’m sure we were right not to try and impose a solution by force,’ Hurd concurs.

‘You can’t bomb people into peace. I’m sure we were right to have an arms embargo. Whether NATO could have intervened a little bit earlier than it did, say in ‘94 rather than ‘95, I’m not sure. The moment you intervene, you kill a lot of innocent people.

With hindsight, maybe. You have to be absolutely sure that you’re going to produce a better situation – at the time, we judged that we would not.’

A political moderate, Hurd has had a contentious relationship with those further right than him in the party. He has ‘disagreed with Norman Tebbit on most subjects under the sun’.

‘Well,’ he explains, ‘You have to work with people who don’t agree with you on everything, that’s what politics is about. I worked very successfully with Margaret Thatcher. We had one or two arguments, but it was a good relationship. Equally with Tebbit. I disagreed with him over Europe, particularly after he left the government. But that’s what politics is about. You disagree on some things and agree on others, but have to work with other people.’

He is also quoted as saying that ‘people are very interested in politics, they just don’t like it labelled politics,’ so I question him about how to make the subject appealing to the public. Hurd believes that the Conservatives today have become increasingly skilled at this.
‘Politicians have got to talk about the things that interest people in a way that people understand, and that’s what David Cameron’s trying to do, and I think he’s been quite successful. It’s wrong to say people are bored with politics – they’re just bored with the issues being treated as party politics.’

On the subject of David Cameron, I ask Hurd whether he thinks the Tory leader has lived up to his promise to change politics, making it more ‘grown-up.’ I also ask whether he thinks the Conservative Party is changing, and whether they will win the next election.

His take: ‘It’s certainly changing and our position is improving, and it’s improving because he changed the way he talks, the things he talks about, and more people are becoming interested. He’s in now with a very good chance. I would like to see politics become more local. I’d like to see people voting for a Member of Parliament as an individual and not just because of his or her party label. So that Members of Parliament are more important in their own right.’

As President of the Prison Reform Trust, Hurd has declared that ‘prison is just an expensive way of making bad people worse.’

British prisons are notoriously overcrowded, and Hurd thinks that a better solution is ‘to prevent crime. People who are sent to prison are mostly young people, they are people who’ve failed in education, they’ve been excluded from school or they played truant, they can’t really read or write, they get into drugs or they get into an argument when they’re drunk….

‘You’ve got to try and operate at the first stage, before they get into this drink and drugs situation. And that’s not something the police can do, it’s something the parents have to do. Once you do get into crime you’ve got to find other ways outside prison of punishing people.

‘I think the community sentences are the right approach but we haven’t yet found the kind of community sentences that the magistrates and judges think are sufficiently hard. The newspapers are always pressing for harder sentences, and I wish they’d spend a little time visiting prisons to see what happens.’

Against the apparent lawlessness of modern youth, Hurd promotes social institutions like the Church of England, of which he is a lifelong member: ‘The Church of England is the most important voluntary society in this country. The fact that it’s not as powerful as it was is used to make us forget.’

He describes it as ‘the only sort of community institution that works. The voice of bishops in the House of Lords is important. It shouldn’t be overwhelming, it shouldn’t suppress other points of view, but yes, of course, there is an ethical input into most of these problems. Certainly into war and peace. Capital punishment. At heart, they’re all moral questions. So the Church has a perfectly legitimate right to express a view.’

At Oxford University the Tory Reform Group has already merged with OUCA, but Douglas Hurd, a Patron of the national TRG, asserts that there is still a role for the organisation: ‘I think it’s important in some places, where you’ve got divisions in the Tory party – it’s very important that the One Nation view is powerfully represented. In some places you need a Tory Reform Group, and that’s why I support it. Cameron has moved the party in a One Nation direction, and that’s a good thing.’

Finally, in light of his most recent book, Hurd comments on how modern politicians compare to Robert Peel. ‘It’s a different world. The media are much more important now, politicians spend much more time dealing with the media, and that’s both good and bad, but it means taking the right decision is a lot more difficult. House of Commons has fallen into a pit in terms of what people think of it, and getting the House of Commons out of that pit is hugely important, perhaps the most important thing that politicians have to do.’

Now that he has left the Commons, this is not something that Hurd has to worry about himself; he can leave it for his successors, Cameron and Brown et al., to ponder.

Nevertheless the evidence suggests that Douglas Hurd will be an active figure in politics for some time yet.