Corporate Responsibility & the Unsafe Mine
Should you drink coffee from beans harvested by slave labor? Should you use drinkable water to sprinkle your lawns and wash your car? Should you buy electricity generated by burning high-sulfur coal?
Over the last 20 years, people increasingly have said, “Of course not!” to such questions. Not only did they take a socially responsible stand for themselves, but they urged corporations to do the same. In response, corporations have come tumbling into social responsibility, with ever larger numbers of companies now committed to caring for the earth’s resources and going green.
Result? You can buy “fair trade” coffee today just about everywhere, though it may cost a little more. The water question is harder. However much we agree in spirit that we shouldn’t use potable water on grass and shrubs, few people are willing to pay the plumber to capture gray water from their sinks and washing machines.
And if you don’t like coal-fired electricity? Too bad. In most cities, the power company is the only game in town, with no competitor in sight. Your only real alternative is to go off the grid, involving substantial expenses and invoking lifestyle changes.
Social responsibility, in other words, can come at a cost. When the cost is small — a few cents more for a cup of coffee — we’re easily persuaded. When the costs start to rise, we’re pulled between what we think is responsible and what we feel is practical. We’re torn, in other words, between the two poles of a right-versus-right dilemma.
“That’s not a dilemma!” the environmental idealist will shout. “The only right thing is to call in the plumber and go off the grid — right now!” But what if the costs of going green are so steep that paying them would be unethical? If social responsibility means you can no longer send your children to college — or that you have to throw your live-in mother out of the house so you can rent out her room — the moral fulcrum suddenly shifts. What seemed clear in the ideal becomes complicated in the practical. Why? Because suddenly both sides are right.
In the ideal, too, it’s easy to chastise corporations for refusing to take up social responsibility as fast as we might like. But like us, they too have tough ethical choices to make between two rights. The other day, in a workshop with corporate executives, a dilemma came on the table that neatly illustrated those pressures. (Hats off to Kevin Moss of BT Americas and his ethics team at the Corporate Responsibility Officers Association for framing an earlier and quite different version of this dilemma.) It went like this:
Your firm, a publicly traded metal fabricator based in the United States, makes products that often depend on hard-to-get metals. To ensure continuity of supply, your firm recently acquired a mining operation in a third-world country. Because of your two-part position in the company — as the chief procurement officer in charge of supply-chain management, and as the chief promoter of corporate social responsibility in the supply chain — you were actively involved in the purchase.
Three days ago, a worker at the mine was killed in an accident. It now appears that the equipment that caused the accident was outdated — a fact that due diligence prior to acquisition failed to uncover. Although the equipment still meets the host country’s safety standards, at the time of the accident it no longer met U.S. standards. Workers at the mine, upset and frightened, want the old equipment removed. There is little chance of strikes or protests, however, since the region has few other job opportunities.
Your company’s board of directors agreed some months ago to upgrade the facility, with work budgeted to begin a year from now. Immediate replacement of the outdated equipment would be extremely costly and probably only temporary, since the replacements could not be used under the master plan. Your chief financial officer has told the board that the cost of immediate replacement might force the company to restate earnings and perhaps even forego paying a dividend to shareholders.
The CEO is seeking your advice. What should you tell him to do?
On one hand, of course, it’s right to replace equipment that the company never would use in the United States. Not to do so endangers the remaining workers and may lead to accusations that your firm is willing to treat foreign workers as an expendable cost of providing shareholder profits. When lives are at stake, investments that otherwise might seem excessive suddenly can become essential.
On the other hand, it’s clear that using the equipment in question was not illegal under the host country’s laws. A steep expenditure could so increase the cost of extracting metals that the mine would become unprofitable. If it were closed, large numbers of workers would be unemployed. Besides, mining is inherently dangerous: Experts agree there’s no guarantee that new equipment would prevent further fatalities from other causes.
And as for what you tell the CEO? Wearing your supply management hat, you might argue against an immediate short-term investment, lest the mine be abandoned, your source of rare metals be removed, and the company’s market value be reduced. But wearing your corporate responsibility hat, you might argue that the long-term health of the company depends on holding to a single ethical standard — upholding U.S. practices and policies despite lower standards elsewhere. Finally, wearing your private citizen hat, you might ask yourself whether in your private life (with your own lawn sprinkling or your coal-fired power) you would do what you’re asking the CEO to do in his or her public life.
If the CEO asked you for advice, what would you say — and how would you justify your position? I’ll be watching for your responses in the blog-space below.