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April 16, 2002

It's a Blue World

In the information age, social responsibility becomes responsibility to shareholders

By Don Tapscott

In business symbolism, red is bad and black is good when it comes to the bottom line. And more and more companies want to be seen as green, as in environmentally friendly. But, in a world of instant communications and transparent corporations, the emerging color to aim for is blue, a color that evokes the clarity of a cloudless summer sky.

A blue company demonstrably does the right thing, not necessarily for ethical considerations but to enhance shareholder value. Corporations that don't choose this path will increasingly be punished in the marketplace.

As corporate operations become based on collaboration and networks, their souls are revealed — enabling consumers, particularly the young ones, to assess if a company is worthy of their patronage. Is its supply chain ethical? Does the company intentionally use material from countries with feeble labor or environmental laws? Is child labor involved anywhere along the line? Does it support oppressive political regimes? Are animals harmed needlessly in the research or production process? How does it treat its customers? Does it give back to the community?

In the past, consumer activists were a small and pretty isolated lot. Today we're all becoming activists because of unprecedented access to information. Legions of consumers today use the Internet to pepper corporations with detailed inquiries, monitor private-sector behavior around the world, and swap insight and intelligence with one another. Via email and Web sites, intelligence gathered by groups such as the Sierra Club and Amnesty International diffuses quickly into the general population. Being a blue consumer in the old economy was hard work, but now it's easy. A couple of minutes at the keyboard will get the straight goods on almost any company.

In the industrial economy, if the media spotlighted some injustice, the targeted company usually tried to appease customers on a case-by-case basis until the media got bored of the issue. "We regret that our bank service charges wiped out all Billy's lemonade stand profits. We are refunding Billy's money and thank the Daily Bugle for bringing this issue to our attention."

This kind of stopgap damage control no longer works. It's no longer so easy to sweep embarrassments under the rug. Corporations need a new ethos. The truth will out. Corporate systems must be redesigned so that blue decisions are made in the first place. Company employees from the top to the bottom should always ask themselves: If our customers had full knowledge of the decision I just made, would they approve?

Today, the sins of the most distant outsourced production or branch plant can rise up to smear a corporate brand, and previously mundane products become politically charged.

"My wife and I have two kids in school and daycare, we regularly waste time (and money and gasoline) that could have been saved if we owned cell phones, and we want to buy cell phones," explains a contributor to a consumer action Web site. "We know we should be boycotting companies that use Congolese coltan, but which ones are they? Are there companies [that] have renounced using Congolese coltan?"

Cell phones (along with most electronic devices) contain tantalum, an element processed from the coltan ore mined in Canada, Australia, Brazil, and the Congo. But, revenue from the Congolese coltan industry helps buy weapons for rebel groups fighting a bloody civil war.

Manufacturers used to worry whether their phones had fancy features and looked cool. Now, blue consumers also want to know if a brand helps buy Kalashnikovs. After weighing all the online evidence, one writer concludes, "I think your best bet would be a Motorola phone."

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The public appetite for this information is getting big. The Environics International Ltd. polling firm found that two thirds of North Americans consider buying different products in order to punish a company they see as socially irresponsible. Consumers in 23 countries were asked whether a corporation should do more for society than simply focus on its profitability, and 90 percent said yes.

Transparency and the "bluing" of marketplaces demand deep transformations in business processes across the firm — from the way companies deal with stakeholders and manage their supply chains, to the way they measure their success and govern their organizations. Various indicators of social and environmental capital are now popping up on the corporate balance sheet as firms try to figure out how to quantify their good behavior. They need hard data to back up their claims to customers, shareholders, regulators, and stakeholders. Companies want to be able to say, "Not only can we prove we are blue, we can also prove we are bluer than our competitors. That's why you should do business with us."

In the new economy, companies that aren't blue will find operating in the black increasingly difficult, if not impossible.

Don Tapscott [dtapscott@digital4sight.com] cofounded Digital 4Sight (www.digital4sight.com) and is coauthor of Digital Capital (Harvard Business School Press, 2000).