Applying Stakeholder Capitalism to Endocrine Disrupting Chemicals: A New Path Forward 

The current age we are living in requires companies to think more broadly about their role in society and how their mission aligns with that of the communities they impact. Although this should be a principle all firms should aspire to regardless of political climate, the new generation of consumers views corporations in a more critical light than generations past (Schaeffer, 2019). Market research has found that millennials increasingly want to know the social mission of the companies they engage with and many value the policies such companies put in place with regard to environmental accountability (Schaeffer, 2019). Given this new landscape for corporations and chief executives, it would be wise for private sector decision makers whose products contain endocrine disrupting chemicals to adopt a stakeholder capitalist approach to their business out of both self-interest and communal good.

 

To fully understand the logic behind this argument, it’s valuable to first consider the definition of stakeholder capitalism and how it intends to disrupt the traditional norms and values adopted in Corporate America today. In a landmark paper on the topic by Freeman & Parmar  in 2007, the authors argue the current forms of capitalism that popularly exist today are inadequate for advancing a society most would agree is socially desirable, equitable, and prosperous. Such versions the authors dismantle include “free-market” versions like investor capitalism that recklessly ignores other interests in the pursuit of profit and government capitalism that relies too heavily on corruptible institutions as a savior for business-derived externalities (Freeman & Parmar, 2007). The solution, consequently, the paper postulates is stakeholder capitalism in which a socially conscious business considers not only its employees, shareholders, and profits, but also everyone that is impacted by the decisions it decides to make. For the purposes of considering chemical regulation and environmental pollutants, one facet of the definition is particularly striking. Under a subcomponent of the definition entitled “The Principle of Stakeholder Responsibility”, the authors write “When third parties are harmed, they must be compensated, or a new agreement must be negotiated with all of those parties who are affected (Freeman & Parmar, 2007) .” Although fairly unremarkable in terminology, the implications of taking this principle to heart is utterly transformative. It argues corporations should not wait for regulations to stop them from committing harm, government issued penalties for them to rewrite past wrongs, or dodge responsibility where it is financially beneficially, but rather engage in a social contract with its stakeholders that assumes full accountability and cooperation when they make a mistake. In terms of applying this logic to chemical manufactures and businesses that engage with EDCs, that means taking on additional responsibility beyond what is required by regulations and the law to minimize harm and voluntarily issue reparations for damages.

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One interpretation of adopting such additional responsibility into a chemical producing company’s business plan would be using the “precautionary principle” to minimize risk to consumer safety. As described in a review of international policy approaches to EDC regulation, the “precautionary principle” is a legal standard adopted in the European Union which broadly postulates that in the instance where the safety, health implications, or toxicity of a chemical or product is in doubt, it is best to avoid it, or otherwise act in an “abundance of caution (Berman et al., 2013).” Although a legal standard, and not a corporate doctrine, the application of the spirit the principle presents can be an attractive option for endocrine-disrupting chemical producers who want to abide by stakeholder capitalism. The rationale for this ultimately being that any increased investment required by divesting from chemicals “failing” the “precautionary principle” standard would be acceptable given the massive repercussions a company could face should these chemicals be found to cause harm to a community. 

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Given that this concept is only just becoming more “mainstream” in the corporate world, however, many arguments have been presented that this vision for an economic system is either idealistic or impractical, however, both critiques overlook the numerous benefits it presents both to the corporation and to society. In reviewing the points made by stakeholder capitalism’s detractors, it is clear many are skeptical of the sudden shift to an altruistic tone, claiming promoters of the idea are doing so just out of regard for self-image, with no real commitment to action (Denning, 2020). This claim isn’t inherently without evidence either as research compiled by the New York Times noted many supposed “stakeholder capitalist companies” didn’t fulfill self-made promises of social responsibility in many cases many months after making them (Goodman, 2020). Although there are definitely companies capitalizing on this social movement insincerely for personal gain, this isn’t an argument for abandoning the principle just because it isn’t being adopted. Rather this research suggests additional transparency, combined with public and shareholder pressure, is necessary to ensure the new path forward is being followed. Beyond claims that this proposed system isn’t being taken seriously, critics also argue it is too complicated a task to consider the needs of all stakeholders a company has and that it would be easier and more effective to just listen to “what the consumer wants.” Although considering stakeholder needs is definitely an additional concern companies didn’t have before, claiming it’s “too complicated” downplays the necessity of engaging in the complexity for societal good. For the example of a product that contains endocrine disrupting chemicals, dismissing stakeholder capitalism could mean dismissing the impact a chemical manufacturing plant has on a local water supply because assessing this risk isn’t easy even though it is both the morally and fiscally responsible thing to do. Secondly, this argument is flawed as it assumes consumers don’t already demand a level of stakeholder capitalism from the companies they engage with, which, after reviewing recent market research, it is clear they do (Schaeffer, 2019). After reviewing counter-arguments to stakeholder capitalism and their rebuttals, it quickly becomes clear of the necessity of EDC producers to take this movement seriously and begin making shifts in their business model to adapt to these new changes.