Why good companies do bad things?

As David Cameron and Ed Milliband take turns to propose a newer moral form of capitalism, the question I've heard a hundred times from taxi drivers, dinner party guests and playground acquaintances is "do they care?". And I always hesitate, but tend to settle for "it depends".

It's an occupational hazard and the dialogue goes the same way: "What do you do?"

"I'm a very specialised sort of management consultant"

"Doing what?"

"Working with big companies on social, environmental and ethical issues."

"Oh, interesting. Lots of call for that I'd imagine. And you must see the inside story – tell me, do they care?"

The problem is that before we can answer the question, we need to completely deconstruct it. Who's 'they'? And what do we mean by 'care'? The more I've thought it, the more convinced I've become that at best the question is a nonsense (what philosophers call a 'category error') and at worst it's holding society back from making progress on some of the biggest problems it faces.

Because business does have a profound effect on the world around us and that effect is not always for good. From catalysing the credit crunch to the evidence before the Leverson enquiry. From carbon footprints to accusations of driving runaway consumption. From government lobbying to iniquitous bonuses. There is no shortage of material to paint businesses as psychopathic villains, with no values or morals.

Step forward the alternative view. Companies bring us food, water, clothes and shelter, mobile phones, gadgets and entertainment. And they are getting ever kinder as they do so, with warm corporate values, inspiring vision statements, recycling policies, caring employment practices and mega-bucks charity cheques for smiling children.

The question we end up with is "are companies nice or nasty?" There seems to be a battle going on for the soul of business.

But there are some grave problems with this framing. The most obvious is that the company isn't a moral entity. It's made up of thousands of people – some nice and some nasty — and (usually) paid for by thousands of shareholders. How can it possibly be said to have one set of values? How can it 'care'?

To solve this, we conflate the company with the people running it. So campaigners and the media focus on those running large companies, concluding that they are morally 'worse' than the rest of us. They do what they do because they are callous, greedy, indifferent or even psychopathic. If that's true, then it's only reasonable that we should control them. They must answer personally to the law at every turn. We should see who they meet for lunch and what they are paid.

But what if people running companies are morally no different from the rest of us? What if they are – on the whole – no greedier, no less caring about the environment, no less capable of feeling or empathy than anyone else.

My experience is that this is much closer to reality. If we think this way it leads to a very different framing of the whole discussion on big business, society and the environment. If the people inside companies start off just like you and I and they are doing things that we wouldn't want them to do then we need to ask a very different set of questions. Why do they act as they do? Why do they put so much pressure on workers? Why do they seek political influence? Why do they damage the environment?

To answer questions put this way, we need to explore incentives, systems, market failures and regulations. And — I believe – it leads to a much more effective way of getting what we want: businesses that work in the interests of society not against it.

Of course, business is partly to blame. It has certainly responded to accusations of moral failing with moral crusade. But those of us inside companies then find ourselves having to justify 'niceness' using a financial case. But in doing so we are mixing oil and water; making the argument for an ethical principle based on a financial argument. In the end, there's a deep reluctance in business to get drawn in to the argument on a truly moral basis. And there is a similarly great frustration in society that business won't do this and instead reverts constantly back to profits.

So what do we do? I think we need to reframe the arguments about responsible business without reference to morals. Businesses certainly need to conform to the consensus moral standards of society. They musn't lie, cheat or steal.

But beyond that we need to be a little more dispassionate. If it's more profitable for a company to legally dump its waste than treat it, we shouldn't wring our hands and say it's being naughty. It's doing exactly what one would expect given the way the market is set up. Change the rules. If no one in society wants to buy expensive, unreliable renewable technologies, we can't blame companies for not selling them. We need to encourage investment and development to the point at which they are must-have no-brainers. And if we want workers in the developing world to be paid better, we need to somehow connect the buyer of the iPhone with the hands that assemble it. Product provenance on the label. Change the rules.

These are major system changes, and need to be thought through thoroughly, to the minutest details. They still leave room for voluntarism. But, to use the phrase literally, if the 'bottom line' is social benefit, then a well constructed market is one of the best ways to guarantee it.

Simon Hodgson is a senior partner at Acona

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