... but should focus on the next ones instead to save the planet Humans are destroying the planet - it is a scientifically-documented fact. What will the future be like in 50 or 100 years from now? Will the Earth be sustainable for future generations? Firms play a crucial role in making the world a more sustainable place (or destroying it). The latest research by ESADE Associate Professor Daniel Arenas in the Journal of Business Ethics shows that thinking about 'future generations' is a tough call for businesses. "Future generations have largely been ignored by business ethics, in part because of a firm's obligations to its current stakeholders," says Arenas. "There are serious doubts as to whether future generations can be considered stakeholders of firms in any way." So, if firms need immediate results to create shareholder value, how can businesses take a more ethically responsible approach to the future? "We argue that businesses need to stop thinking about the vague concept of 'future generations' and focus on the most immediate next generations instead," says Arenas. How can one expect managers to take into account obligations for people living in the year 3415? When businesses think about 'future generations' without specifying whether it is 3, 10 or 100 generations hence, their moral obligations dwindle. "How can one expect managers to take into account obligations for people living in the year 3415? Even those who defend obligations to future generations admit that moral motivation fades away when one thinks about remote generations." The next generations The article argues that when a business thinks about the next generations (that is, those that either overlap or come shortly after the present generation), the barriers to moral behavior are considerably lower and motivation grows. "The next generations can act as a better motivator to incentivize managers and firms to engage in pro-sustainability behavior," says Arenas. For instance, when managers face dilemmas on the most immediate next generations (access to clean water, clean air and so on), stakeholders will have good reasons to consider that the firm cannot easily neglect its obligations to them. "Global climate change in particular raises questions regarding inter-generational obligations, which make the debate on businesses' responsibilities even more urgent. We argue that business ethicists can make some progress in this area by focusing on the most immediate next generations," says Arenas. 4 potential pathways for a better future The research proposes 4 potential pathways to help businesses raise their moral awareness and meet their obligations towards the next generations. 1. Vision across generations Firms that want to preserve their memory, identity and culture will be more successful if they keep in mind the next generation of employees and managers that will continue ongoing projects and sustain the organization. "Firms need to think about their future survival. Being indifferent to the future is morally reprehensible - one should attempt to leave the organization in the best possible state so that the next generation can attain the firm's goals," says Arenas. "The sense of continuity through the various cohorts in the organization is linked to a culture of responsibility." 2. Meaning after quitting Why should managers care about what happens to the firm when the next generation takes over? The answer is because most people are not indifferent to the actions and behaviors of others in the organizations they have worked for, even after they have left the company. In fact, firms that engage in fraudulent behavior leave former employees with a mixed feeling of having lived a lie. Firms that engage in fraudulent behavior leave former employees with a mixed feeling of having lived a lie "As human beings have a psychological need for a meaningful life story, it is in everyone's best interest that the next generation taking over continues the projects and sustains the organization they worked for," says Arenas. 3. Stakeholders' attachments Companies should not see stakeholders as important only in relation to the firm. Stakeholders are human beings who have special relationships with other people and also have a concern for their children's future. "So companies need to assume that their stakeholders would not willingly cooperate with the firm if they knew its actions would hurt their own children (and possibly grandchildren) and make it harder for them to lead a decent life." 4. Indirect reciprocity Why do people donate blood even when the beneficiary cannot return the favor? Just as in the case of blood donations, there is a golden rule that claims that the present generation should treat future generations as they would like to have been treated by the preceding one. Firms have benefited from institutions and individuals in the past, and from a general system of public goods, for which they cannot repay directly but for which they have an obligation to reciprocate indirectly. Providing benefits rather than harm for the next generations fosters a climate of cooperation among current employees and stakeholders, even if the returns are not immediate in the short term. This article was originally published in the ESADE Knowledge Pills magazine by Executive Education. You may also like: ESADE Institute for Social Innovation

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Why firms are unable to think about future generations

05/2018

... but should focus on the next ones instead to save the planet


Humans are destroying the planet - it is a scientifically-documented fact. What will the future be like in 50 or 100 years from now? Will the Earth be sustainable for future generations? Firms play a crucial role in making the world a more sustainable place (or destroying it).


The latest research by ESADE Associate Professor Daniel Arenas in the Journal of Business Ethics shows that thinking about 'future generations' is a tough call for businesses. "Future generations have largely been ignored by business ethics, in part because of a firm's obligations to its current stakeholders," says Arenas. "There are serious doubts as to whether future generations can be considered stakeholders of firms in any way."


So, if firms need immediate results to create shareholder value, how can businesses take a more ethically responsible approach to the future? "We argue that businesses need to stop thinking about the vague concept of 'future generations' and focus on the most immediate next generations instead," says Arenas.


How can one expect managers to take into account obligations for people living in the year 3415?


When businesses think about 'future generations' without specifying whether it is 3, 10 or 100 generations hence, their moral obligations dwindle. "How can one expect managers to take into account obligations for people living in the year 3415? Even those who defend obligations to future generations admit that moral motivation fades away when one thinks about remote generations."


The next generations


The article argues that when a business thinks about the next generations (that is, those that either overlap or come shortly after the present generation), the barriers to moral behavior are considerably lower and motivation grows. "The next generations can act as a better motivator to incentivize managers and firms to engage in pro-sustainability behavior," says Arenas. For instance, when managers face dilemmas on the most immediate next generations (access to clean water, clean air and so on), stakeholders will have good reasons to consider that the firm cannot easily neglect its obligations to them.


"Global climate change in particular raises questions regarding inter-generational obligations, which make the debate on businesses' responsibilities even more urgent. We argue that business ethicists can make some progress in this area by focusing on the most immediate next generations," says Arenas.


4 potential pathways for a better future


The research proposes 4 potential pathways to help businesses raise their moral awareness and meet their obligations towards the next generations.

1. Vision across generations


Firms that want to preserve their memory, identity and culture will be more successful if they keep in mind the next generation of employees and managers that will continue ongoing projects and sustain the organization. "Firms need to think about their future survival. Being indifferent to the future is morally reprehensible - one should attempt to leave the organization in the best possible state so that the next generation can attain the firm's goals," says Arenas. "The sense of continuity through the various cohorts in the organization is linked to a culture of responsibility."


2. Meaning after quitting


Why should managers care about what happens to the firm when the next generation takes over? The answer is because most people are not indifferent to the actions and behaviors of others in the organizations they have worked for, even after they have left the company. In fact, firms that engage in fraudulent behavior leave former employees with a mixed feeling of having lived a lie.


Firms that engage in fraudulent behavior leave former employees with a mixed feeling of having lived a lie


"As human beings have a psychological need for a meaningful life story, it is in everyone's best interest that the next generation taking over continues the projects and sustains the organization they worked for," says Arenas.


3. Stakeholders' attachments


Companies should not see stakeholders as important only in relation to the firm. Stakeholders are human beings who have special relationships with other people and also have a concern for their children's future. "So companies need to assume that their stakeholders would not willingly cooperate with the firm if they knew its actions would hurt their own children (and possibly grandchildren) and make it harder for them to lead a decent life."


4. Indirect reciprocity


Why do people donate blood even when the beneficiary cannot return the favor? Just as in the case of blood donations, there is a golden rule that claims that the present generation should treat future generations as they would like to have been treated by the preceding one. Firms have benefited from institutions and individuals in the past, and from a general system of public goods, for which they cannot repay directly but for which they have an obligation to reciprocate indirectly. Providing benefits rather than harm for the next generations fosters a climate of cooperation among current employees and stakeholders, even if the returns are not immediate in the short term.


This article was originally published in the ESADE Knowledge Pills magazine by Executive Education.


You may also like: ESADE Institute for Social Innovation

More Knowledge
On firms and the next generations: Difficulties and possibilities for business ethics inquiry
Arenas Vives, Daniel; Rodrigo Ramírez, Pablo
Journal of Business Ethics
Vol. 133, nº 1, 01/2016, p. 165 - 178
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