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Your Business is Everybody’s Business: The Importance of Social Responsibility and Social Capital in Today’s Business Environment

Published on
April 17, 2018

Fans of economics and economists (I know you’re out there) will remember Milton Friedman’s apocryphal statement that “The business of business is business.” Following his multi-day grilling by Congress last week about privacy breaches connected to his business (but not, arguably, his core business), you may be tempted to ask Facebook CEO Mark Zuckerberg what he thinks.

As today’s headlines increasingly show, businesses that strictly follow Friedman may find themselves out of business.

Even before its appearance before Congress about data breaches, Facebook had voluntarily changed its focus to creating “more meaningful social interactions,” which it expected to reduce engagement and the amount of time people spend on its platform (intended to deal with concerns about fake news and the impact on politics). Late last year, Apple faced pressure from investors to deal with iPhone addiction, particularly in children.

Survey data tells us a significant majority of the public believe companies should lead in taking action, rather than waiting for governments to regulate. In other words, it shouldn’t have to take international outrage or shareholder activism – and associated drops in share prices – for a company to identify risks to its reputation and address them accordingly. Even in highly regulated sectors – like cannabis or alcohol – there are always strategies and actions companies or industry associations can take to stay ahead of the curve.

Actually, cannabis companies serve as an ideal example. Even with the slippage from the July 1 date for legalization and sale of recreational cannabis, there is a very short period of time to sort out a large number of “bread-and-butter” business issues, such as exactly how companies or brands can market themselves and firming up supply agreements with the various provincial retailers. Facing this kind of time crunch, the natural tendency is to focus on the “business-critical” issues, often to the exclusion of other pursuits.

Yet regulatory regimes are not static. Especially for a ‘new’ industry, it is likely the (federal and/or provincial) government will regularly tweak the rules, particularly in response to events and public sentiment. Recent research indicates Canadians don’t believe cannabis companies are doing enough to ensure safety and responsible usage.

Just in the past few days, the locations of the first four Ontario Cannabis Stores was revealed, also revealing the Toronto location to be uncomfortably close to schools, prompting close scrutiny from the Premier. Undoubtedly, some of the controversy stems from uncertainty before any of these stores actually start operations. But, ask yourself: would there be the same reaction to the opening of an LCBO or Beer Store in the same location? The social capital these businesses have built with the public – for example, that they take seriously and have shown they will not sell alcohol to minors – is a large reason for the differences.

Cannabis companies should consider what they are doing – and what they should do – to hopefully stay ahead of the curve. Investing resources in corporate social responsibility programs and other actions to build one’s social capital is an important and proactive form of risk management – and can serve as a competitive advantage.

Companies in all industries can leverage the goodwill from building their social capital for commercial, as well as public and government relations, benefit. For example, when GE launched its Ecomagination campaign, it gained significant positive media exposure as well as the support of influential stakeholder groups. At the same time, GE (with the support of these stakeholder groups) lobbied government to set energy-efficiency standards for appliances – which, coincidentally, GE products already met, but their competitors’ products would take years and millions of dollars to reach.

Friends are the ones who stand by you when the going gets tough. Cannabis companies should be asking themselves who will be standing up for them and advocating on their behalf if and when major regulatory changes are being proposed on them. These sorts of relationships are built over years and are based on genuine actions and goals, not financial contributions.

The interventions of non-governmental stakeholders can impact regulatory outcomes. In a prior role, I led the environmental sustainability programs within the beer industry across Canada and was able to marshal support from environmental groups, municipalities and others in good times and in difficult ones. Their advocacy and support – often made without being requested to do so – meant the industry was able to maintain a dialogue with government, no matter what else was taking place, and largely influenced the policy direction government chose to take.

For a new and growing industry, such as cannabis, taking action to grow your social capital is critical. But whether you’re in consumer goods, mining or development, it’s an important activity for companies and industries new and old. We have 20 years’ experience helping companies, industry and professional associations, labour groups and not-for-profits stay ahead of the curve. We‘d be happy to meet with you to design a plan that achieves your corporate objectives, builds your social capital and grows your profile with the public and with government.

After all, in today’s environment, how you conduct business is everyone’s business…and it will affect your success in business.

Brian Zeiler-Kligman
Senior Associate
Brian is a Senior Associate in the firm’s Ontario Government Relations practice. A member of the Ontario Bar, Brian has over a decade of experience representing, advocating for and building the influence of businesses in their public policy and regulatory objectives. With a diverse professional background, Brian has expertise in a number of policy areas to meet his clients’ objectives and add significant value to their organizations.
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