Corporate Social Responsibility and Environmental ManagementCorp. Soc. Responsib. Environ. Mgmt 9, 67–80 (2002)DOI: 10.1002/csr.7

THE DOMINANT ECONOMICSPARADIGM AND CORPORATESOCIAL RESPONSIBILITY

Jouni Korhonen*

University of Joensuu, Finland

For many centuries, industrial societies inthe Western modernity have been drivenby a dominant social paradigm (DSP). It isargued in this paper that this paradigmhas some serious difficulties in the light ofthe development of the field of corporatesocial responsibility and in the light of itspractice. Therefore, a new paradigmaticfoundation is required for corporate socialresponsibility. The dominant socialparadigm is contrasted with metaphorsand principles that are derived fromsources that are outside the paradigmaticbasis of Western modernity, and outsidethe paradigm of neoclassical economics.These new metaphors and principles maybe suitable for further development of thecorporate social responsibility paradigmas well as for reconsideration of theeconomics paradigm. Copyright 2002John Wiley & Sons, Ltd and ERPEnvironment.

* Correspondence to: Dr. J. Korhonen, University of Joensuu,Department of Economics, PO Box 111, 80101 Joensuu, Finland.E-mail: jouni.korhonen@joensuu.fi

Copyright 2002 John Wiley & Sons, Ltd and ERP Environment.

Received 3 October 2001Revised 8 November 2001Accepted 30 November 2001

INTRODUCTION

For some several centuries, industrial soci-eties in the West have been drivenby a dominant social paradigm (DSP)

(Ehrenfeld, 1997, p. 87). This paradigm, anal-ogously to Thomas Kuhn’s sense of a scien-tific paradigm (1962), can be understood todescribe, guide and direct societal develop-ment in general, and the everyday of variousinstitutions, actors or organizations in partic-ular. ‘A paradigm is a framing set of con-cepts, beliefs, and standard practices that guidehuman action’ (Ehrenfeld, 1997, p. 88) or ‘. . . aparadigm is or contains a set of structures ontop of which social action is created. . .’ (Ehren-feld, 2000). A paradigm is a vocabulary withwhich we make sense of the world and it is thebasis of our underlying worldview.

It can be argued that the economicsparadigm, and especially the neoclassical eco-nomics science paradigm, is very powerfulin Western thinking, in modern science andin the society of modernity. Lazear (2000)prefers to use the notion ‘economic imperial-ism’ when he describes how economics sciencehas been able to invade intellectual territory

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that was previously deemed to be outside thediscipline’s realm. In the level of standard andnormal economics analysis or empirical casestudies, now also themes such as individualtastes and preferences, social discrimination,family, divorce, crime, free time of individuals,religion, social interaction, demography, busi-ness strategy and organizational behaviour arestudied. Lazear notes that normal economicsconcepts and notions such as those of maxi-mizing rational behaviour and efficiency haveenabled economics to gain ground in other sci-entific fields, e.g. in sociology or in psychology.‘Because economics focuses so intently onmaximisation, equilibrium, and efficiency, thefield has derived many implications that aretestable, refutable, and frequently supportedby the data. The goal of economic theory is tounify thought and to provide a language thatcan be used to understand a variety of socialphenomena’ (p. 142). According to Lazear, thesuccess of economic imperialism provides evi-dence on the power of economics as a scientificdiscipline.

In other words, it can be argued that, bothat the level of a paradigm and a metaphorand at the more practical level of normal sci-ence and analysis, economics has been verypowerful in modern science. Although thepurpose of this paper is to discuss the eco-nomics paradigm with a critical approach, itmust be noted that oversimplification of thecritique can also be risky. The influence ofeconomics on other disciplines is not inher-ently bad and economics has been importantfor the development of other scientific dis-ciplines. It has provided clear answers andtestable hypotheses on many issues that havenot been measurable before, and despite sim-plification this has generated important dis-cussion in social science. However, in termsof the development of the fields of cor-porate social responsibility and environmen-tal or ecological economics there are alsosome potential risks involved in economicimperialism.

For Ehrenfeld (2000), following Kuhn, ashift in the dominant social paradigm is aprocess that has two stages. The first oneis paradigmatic, metaphoric and normative,while the second is descriptive, analytic andpositive. In order for a paradigm shift to occur,a deep change is needed in the first stage,the paradigm stage, not only a change in thesecond stage, the normal practice stage. Thepractice or the action stage does not changein a deep or fundamental manner withouta change in the first stage of the paradigmshift. Then, for the implications for the par-ticular interest of this paper, it can be askedwhether the dominant social paradigm or thedominant economics paradigm is a suitableprecondition for the development of the the-ory and practice of the field of corporate socialresponsibility. If the current dominant socialparadigm is not suitable for corporate socialresponsibility or for sustainability and sustain-able development, a paradigm shift is required.This means a change in the vision or in thevocabulary of economics and in the way weview the world. New metrics, instruments orsocial accountability and quality managementsystems are important but not enough aloneand not substitutes for the first stage in theparadigm shift.

It is assumed in this paper that the cur-rent dominant social paradigm, for exam-ple that of neoclassical economics, has someserious difficulties in the light of corpo-rate social responsibility. The developmentof the field of corporate social responsi-bility needs a new paradigmatic founda-tion. For this purpose, our paper derivesmetaphors and principles from outside thedominant social paradigm. These are intendedto consider an alternative dominant socialparadigm and to reconsider the economicsparadigm. The metaphors and principlesbelong to the first stage of the process ofa paradigm shift. Perhaps these can con-tribute to the discussion on the basic paradigmof the emerging field of corporate socialresponsibility.

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DOMINANT SOCIAL PARADIGM

Some central features of the dominant socialparadigm that also seem to be embeddedin neoclassical economics can be presented.Arguably, such features underlie, drive orheavily influence the everyday actions, practiceand decisions of corporate management andbusiness strategy. This part of the paperconsiders five central characteristics of the DSP.Our presentation is, and of course, only can be,highly simplified. At times, simplification canbenefit a structured discussion.

Globalization

The global market economy, global trade andglobalization in general are largely Westerninduced phenomena. As noted above, thispaper wants to focus on those aspects of glob-alization that can be criticized in terms ofthe corporate social responsibility vision orthe vision of sustainability. Such problemshave been addressed in many occasions inthe literature on development and sustain-able development as well as in many otherparts of the current societal discussion. Theinequality between the developing and devel-oped nations and the resulting social problems,poverty, crime, inaccessibility of education andinsecure and unhealthy living conditions canbe argued to belong to those problems thatcan result from the globalization paradigm.Undoubtedly, economics as a scientific disci-pline has been an important driving force ofglobalization.

Countries and regions experience new socialproblems, e.g. because of increasing urban-ization that may be a result of internationaltrade. Trade makes cheap agricultural prod-ucts available through imports and makes itmore economic to leave the countryside andstop practising rural professions (Wackernageland Rees, 1997). Furthermore, distant foreigninvestors may not be able to take the localcultural tradition and social conditions intoaccount. This can make it difficult to secure

the cultural and social diversity in the regionsto which they are investing. The regions canbe valued mainly in terms of the short-termeconomic benefits of the investments. Anthro-pologists argue that the modern sense of theworld as a globe mirrors an unrealistic view ofthe lifeworld, which is, and only can be, a localworld and which is experienced by the localpeople, with the exception of a few fortunateastronauts, who have seen the global worldfrom the window of a spacecraft (Ingold, 1993).In this line of argument, intervention in localsocietal systems is then intervention in some-thing in which the intervening party does notgenuinely feel a part of.

The globalization paradigm can presentsome difficult challenges for environmentalpolicy and management. This is particularlythe case with large multinational corporations.The inter-regional, inter-national and globalproduct and capital flows carry with them-selves many environmental questions. Theinter-regional life cycles of products and theassociated environmental impacts are diffi-cult to trace, monitor and control. The geo-graphical separation of production from end-consumption increases the overall use ofenergy, creates emissions and makes it difficultto establish holistic environmental manage-ment networks that include manufacturers aswell as end-consumers. Problem displacementfrom business locations in the developed coun-tries toward those at the developing countriesor from production emissions to consumptionemissions and wastes has been observed inthe literature on ecological or environmentaleconomics.

Specialization

The economics logic is that of specialization.The theory of comparative advantage is anexample of this. Specialized products areselected that are expected to yield the highestprofits. Investments and production capacityare then directed to those products. Thiscan have some serious social effects on local

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communities, and on the vulnerability ofregional or national economies. For example,many developing nations and their economiesare vulnerable, because the developed nationshave required rapid large-scale production ofkey products, e.g. timber or sugar, while thediversity of the economy has been neglected(and its ecological and social dimension).

In case of the ecological aspect of corporatesocial responsibility, it can be noted that eco-nomic specialization seems to work againstecological or ecosystem diversity (Weitzman,2000). Large-scale mass production of indi-vidual crops or species in agricultural fieldscreates a risk of the emergence of new geneticcombinations of parasites and pathogens. Inother words, when the host population is arti-ficially increased, the number and the risk ofparasites can also increase. Monoculture ofcommercially managed agricultural or forestecosystems risks natural diversity and the abil-ity of the ecosystem to sustain itself in the longterm. Such loss of diversity may be an indi-rect consequence of international trade andof the comparative advantage thesis of eco-nomics theory (Gale, 2000). Certain regional ornational economies are required to specializeand mass produce in agriculture and forestry,which may neglect ecosystem diversity.

Mass production and economic growth

Social problems in the world that relate torich–poor or developed nations–developingnations relations can be argued to be the resultof the current form of economic growth, butthis is not necessarily to argue that all economicgrowth is harmful for societal developmentor for well-being. For instance, prosperityhas created significant advances in education,infrastructure and health care and in theaccessibility of such services. However, theabove problems of inequity or the environmentseem to relate to the quantitative economicgrowth. The increasing gap between the richand the poor as well as quantitative growth ofmaterial throughput are examples. Despite the

fact that economic growth seems to be peaking,three of the major social problems seem to bepeaking too: global unemployment, inequalityand population growth (see Daly, 1998). Thenegative environmental consequences in therelation of the human economic subsystem andthe larger ecosystem, in which the economicsystem is embedded, have also been observed.The economic subsystem is growing inside thenon-growing mother ecosystem. The conflictis obvious. The source as well as the sinkfunctions provided to the economic system bynature are limited.

Competition

The modern ideal of a firm seems to be thatof an organization that is independent fromits surroundings (Boons and Baas, 1997). Com-petition is one of the central features of thedominant neoclassical economics paradigm.Competition can have serious social effects,leading to e.g. domination or neglect of thecommunity or the developing nations. Compe-tition obviously relates to the above notions ofspecialization and mass production, and there-fore also to the domination and overuse of thenatural source and sink functions provided tothe firm by natural ecosystems. Competition isalso a barrier of the efforts of increasing stake-holder cooperation and cooperation betweenthe firms and its suppliers or the local com-munity actors. This kind of cooperation wouldbe important for corporate social responsibilityand for environmental management, the visionof which are that the responsibility of the firmshould include social actors and stakeholders,not only internal management or the share-holders and investors.

Linear, reductionist and mechanistic approach toscience and society

Economics science seems to be based on sub-ject–object dualism and a linear or reductionistapproach to theory. Some cultural philoso-phers have preferred to use the ‘machinemetaphor’ to describe the scientific position

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of modernity (Oliver, 1989). For example,some argue that dominant economics produc-tion theory, e.g. the Cobb-Douglas productionfunction, is developed and applied in isolationfrom its surrounding and contextual factorson which it is dependent (Daly, 1996; O’Hara,1997). Natural resources or land rarely enterthe production theory and wastes and emis-sions are non-existent. When resources areentered, they are allowed to approach zeroif compensated or substituted with human-manufactured capital. This position may wellbe inadequate in terms of environmental pol-icy. The fishing boat is not much good withoutthe fishing population and a power plant willneed fuels derived from nature or the CO2

assimilation capacity of the ecosystems.Further, the social sustaining functions, such

as ease of stress or emotional pressure andresting, nurturing, child rearing, caring, inti-macy or gardening and the provision of socialbonding and shelter services do not enterthe production function. These, however, arealso complementary to labour and human-manufactured capital; you cannot have onewithout the other. This question on the eco-nomics production theory is further elaboratedin the latter parts of the paper. In addition,markets and the economics paradigm seem tousually account mainly for those goods andservices that have a monetary value. The mon-etary value of natural resources, ecosystemlife supporting services or of social sustainingfunctions provided by the household economyor the social structures and bonding of the localcommunity cannot reflect the diversity or thevalue of these goods in a complete way.

However, despite oversimplification andperhaps an incomplete approach to study, eco-nomics has made some important contribu-tions to many fields of social science (Lazear,2000). The economics theory and the conceptof rational maximizing behaviour have beenapplied, for example in the study of such anuntraditional economics area of life as love ormarriage (Lazear, 2000). The analogy to labourmarkets and the ‘marriage’ between workers

and firms has been used. A good marriageconsists of a situation in which enough sur-plus is created, i.e. more than with a differentpairing. Accordingly, the workers choose theirjobs on the basis of firm-specific human capi-tal, e.g. the time spent in a job. When enoughtime is spent in one particular job, the workeris more likely to stay in that position instead ina situation in which less time has been spentin the job. The marriage-specific human capitalcan then consist of such factors as the existenceof children and the time spent in the marriage.Results show that with more time and withchildren divorce is less likely than in a situa-tion where the marriage is young and there areno children (Lazear, 2000).

The success and the important contributionof economic imperialism as Lazear likes tocall the economics influence on many socialsciences shows also in the development of pop-ulation policy. Economists have been able tomeasure, predict and quantify some of theimplications of the education level and thewage level of women for fertility rates. Pro-found suggestions for policy have been derivedfrom these economics studies that propose thatwages of women can be raised and their labourmarket alternatives (e.g. through education)can be improved to reduce fertility. Also hereit is argued that the economics science canmake such clear predictions, suggestions andmeasurements or probability studies that othersocial sciences find it difficult to do without thehelp of economics theory.

Economics can contribute in many ways todifferent fields of social science as it can presentsimplified concepts, measures and results evenon such issues as tastes or preferences, butobviously there is a risk of oversimplification,e.g. more factors than time and children con-tribute to marriage and these cannot alwaysbe measured or accounted for with economicsmethods. For the performance measurementand analysis of corporate social responsibilityand its practice as well as for the measure-ment of corporate environmental management

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or valuation of natural capital, this kind of dis-cussion is very important to take into account.Oversimplification can be risky for sustainabil-ity: consider the vulnerability of ecosystems ornatural habitats and the difficulty of measuringand quantifying biodiversity. Consider how tovalue or weight the difference between theimportance of household income growth andthe reduction in the time available for publicparticipation and communication to coordinatecommunity services (O’Hara, 1997).

TOWARD A CORPORATE SOCIALRESPONSIBILITY PARADIGM

In this section of the paper, the dominant socialparadigm is contrasted with metaphors andprinciples that are derived from outside it,i.e. from outside the neoclassical economicsparadigm. Below four features of such apossible paradigm are presented. Arguably,these may be suitable for further developmentof the corporate social responsibility paradigmand for reconsidering the economics paradigm.Our presentation, as above, is highly simplifiedbut hopefully serves to illustrate the point.

Characteristics of a corporate social responsibilityparadigm

Globalization of modernity can be contrastedwith a locality principle. Arguably, andunder certain circumstances, the local/regionalarrangement of the product, capital and mate-rial flows can benefit societal development. Itcan increase the ability of the local actors tocontrol and manage their resources. Increasingcontrol over the local resources may increasethe possibility of the emergence of a self-reliant economy and reduce dependencies onimports and exports. Through internationalmarket changes, that are not possible for theregional decision-makers to control, unhealthydependencies between regions may emerge.Such dependencies can have difficult socialconsequences.

In regional economics literature, the poten-tial of closely located firms and networkshas been observed. For example, reduc-tion in the costs of imported fuels, whenusing locally derived fuels, or reduction inthe transportation costs can be achieved.Innovation opportunities can also increasein a regional economy through network-ing between the firms. Local/regional net-working can imply increasing participationof the community actors in regional plan-ning and decision-making, as well as coopera-tion between a company and its stakeholders.Cooperation may be easier to achieve in a situ-ation in which the actors involved are locatedin close physical proximity to each other and atleast partly share the same resources and cul-ture and local tradition than in inter-regionalor inter-national networks. All of these featuresare important for the emergence of the fieldof corporate social responsibility, the philos-ophy of which is to increase the interactionbetween business and the society. Perhaps,a suitable testing ground for this philoso-phy is the relation between business and itslocal societal cooperation partners. Further-more, through local empowerment, the eco-nomic gap between the periphery and thecentre in regional development can be reduced.

The environmental benefits can also beachieved by arranging the economic activityinto local or regional systems. When theproduct flows and the life cycles and theirresource use are increasingly within localboundaries, the environmental effects of theseflows may be easier to monitor, control andmanage than with inter-regional life cycles.This also reduces the overall use of energy andrelated emission generation.

The specialization paradigm can be con-trasted with the metaphor of diversity. Someargue that economic trade policy, and eco-nomic agricultural or forestry production,should adopt an ecosystem approach ratherthan the approach that follows from eco-nomics theory of specialization (Gale, 2000).

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It is argued that in this way, environmen-tal gains can be possible. Monoculture andspecialization to produce large quantities ofcertain key species, crops or adopt a targetspecies approach to fishing (Hanna, 1997) mayreduce the natural ecosystem diversity andlead into extinction of the targeted species. Thiscan also lead into negative economic effects, atleast in the long run. In policy, then, ecologicaldiversity should be seen as a condition towardwhich the economic system would try to adapt.Correspondingly, it can be argued that per-haps the most severe environmental questionof industrial production today, climate change,could be seen in a different light if the fuelinput of economic energy production weremore in tune with the diversity metaphor andincluded not only fossil fuels, but also biomass,biogas (CH4, methane), industrial wastes andsource-separated household wastes or wastesfrom agriculture and forestry.

Social benefits may also arise through morediverse production structures and economies.For example, the vulnerability of the thirdworld economies can be reduced if their pro-duction output has a more diverse set ofproducts. Diversity is also an important pre-condition of local and regional cooperation, e.g.that between a company and its stakeholders.Large manufacturers, SMEs, public municipalorganizations, research institutions and NGOsconstitute a basic group in which the inter-action between a firm and society must takeplace. For understanding such a network, aholistic systems approach to network diversityis required.

The diversity metaphor is important for cor-porate social responsibility, but alone it willnot necessarily lead into cooperation. Hence,interdependency and cooperation can be pre-sented as a distinct element of the corporatesocial responsibility paradigm. Joint planningof the company policy and management sys-tems needs to be undertaken between thecompany and its local and regional stakehold-ers and also the public municipal authority.Some authors have suggested the possibility of

a regional management system (Welford andGouldson, 1993) that would follow the stepsand the structure of a normal managementsystem of an individual company. Many of themanagement systems of today tend to focuson and are designed for a single company, e.g.ISO 14001 and EMAS.

A regional management system wouldinvolve many different companies, publicorganizations, NGOs, research institutions andcitizen groups of a certain region into a com-mon effort. I am not sure whether networkscan be designed, planned or intentionally man-aged, but it seems that a regional managementsystem could be important for the implemen-tation and practice of the principles of corpo-rate social responsibility. It serves the purposeof a platform for regional cooperation anddecision-making, increases participation andopportunities for economic innovation or forthe exchange of tacit knowledge. Obviously,the potential of a regional management sys-tem in light of the environmental dimension ofcorporate social responsibility is important too.The material and energy flows and product lifecycles affect or are affected by many differentactors in the society and require a holistic sys-tems perspective and cooperation in order forsocietal actors to be able to control and reducethe associated environmental burden.

A reductionist, linear or mechanistic appro-ach to science and society may not be enoughfor the emergence of corporate social respon-sibility as a field of study or for its success-ful implementation in practice. Therefore, anadditional feature of the paradigm can be anorganic and holistic approach to scientific the-ory and to society. The economics logic inproduction theory of separating productionfrom its physical and social preconditions obvi-ously works against the principles of corpo-rate social responsibility. Natural capital andthe social sustaining functions provided bycommunity and household economy are com-plements of human-manufactured capital andlabour. Human-manufactured capital does not

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yield perfect substitutes for these, despite eco-efficiency can increase and day-care centres,nursing homes, entertainment industries andfurniture mills can be established to sell thosegoods and services that have traditionally beensupplied by households (for discussion, seePietila, 1997).

SOURCES FOR A CORPORATESOCIAL RESPONSIBILITY PARADIGM

Our aim has been to consider the possibility ofmoving toward a corporate social responsibil-ity paradigm or a sustainability paradigm. Wehave assumed that the current dominant socialparadigm is not adequate for this purpose.Therefore, it can be important to draw fromsources that are outside the DSP. Arts, sports,indigenous cultures, village cultures or differ-ent religions can provide radically differentworldviews from that of Western modernity.One such source could also be found in thelong lived or sustainable natural ecosystems(Ehrenfeld, 2000; see Korhonen, 2001a, 2001b,2000).

The ecosystem provides us with such char-acteristics as connectedness, community andcooperation. These run counter to individuallibertarianism, fragmentation and competition,which are central in the current unsustainabledominant social paradigm or in the neoclas-sical economics paradigm (Ehrenfeld, 2000).Below some features of a natural ecosystemare further considered to reflect back on thepossibility of the corporate social responsibilityparadigm.

Nature as a source of a corporate socialresponsibility paradigm

Ecosystems need to rely on the locality condi-tion or principle. It is not possible for them tosubstitute the local natural limiting factors withtrade or with human-manufactured capital. Ineconomic systems, the value of local naturalcapital can be undermined, when resourcesfrom distant regions become available through

trade and markets. The eventual result may bethe exceeding of the local carrying capacity.Ecosystems need to minimize the overall con-sumption of energy and so organize into localnetworks of green plants as producers, animalsas consumers and decomposers, bacteria orfungi as recyclers. Modern economic sys-tems have geographically separated produc-tion from end-consumption with the assump-tion of the infinite availability of fossil energyto drive transportation, imports and exports.

Ecosystems are characterized by diversity,biodiversity, diversity in species, in organismsand in their genetic variance and informa-tion. Through system diversity and feedbacks,ecosystems are able to secure the overall bal-ance and recover from environmental distur-bances. No monetary value exists in nature,which in human economic systems reduces theinterpretation of the system diversity. Differ-ent goods and qualitatively different resourcesor even different regions are described witha common denominator, the monetary value(Ring, 1997). This can lead to incomplete infor-mation and to incomplete action, e.g. in thecase of interventions in nature or in naturalbiodiversity.

The global natural ecosystem is a non-growing system. It is a materially closed sys-tem with the infinite solar energy input as theonly external source or the driver of the system.Waste heat is released to the surroundings ofthe organisms and from there it radiates backto space. Energy cascades in the food chain andmaterial cycles between species and organismshave secured the sustainability of the naturalecosystem as a whole. In human economic sys-tems, through quantitative economic growth,also the material throughput, resource useand waste and emission generation increase.This risks ecological sustainability of societalsystems, healthy living environment, and caneventually lead into social conflicts over scarcenatural resources.

An ecosystem is based on adaptation tothe physical surroundings. Organisms fit inwith their surroundings. They do compete,

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but rarely make war on resources (Ehren-feld, 2000). Cooperation seems to be a moreimportant feature of an ecosystem than com-petition. The ecosystem diversity has led intointerdependent relations between the systemcomponents, system actors or organisms.Rather than a mechanistic, positivistic, or lin-ear machine metaphor of modern science, anorganic or holistic metaphor seems to describethe ecosystem structure and organization.

If we compare the ecosystem characteristicswith our earlier presentation of the poten-tial corporate social responsibility paradigm,important similarities can be found in terms ofthe metaphoric orientation.

CONSIDERING THE ECONOMICSPARADIGM

Arguably, the dominant economics paradigmis influencing the modern everyday and thebusiness strategy and the management systemof a firm. For corporate social responsibilityand for sustainability, it is important to recon-sider this dominant economics paradigm. Theabove presentation is an attempt toward thisdirection. This question on the basic economicsparadigm deserves more attention here. Her-man Daly (1996) and his use of the ‘full world’metaphor has perhaps succeeded in openingup a discussion on a new economics paradigm.Daly notes that ‘Since analysis cannot supplywhat the preanalytic vision omits, it is only tobe expected that macroeconomics texts wouldbe silent on environment, natural resources,depletion and pollution’ (Daly, 1996, p. 47).

Daly contrasts the economics picture of themacroeconomy as an isolated system of thecircular flow of goods and factors of produc-tion, or production and consumption, betweenfirms and households with his use of the fullworld metaphor. In the circular flow, the econ-omy is isolated from its physical surround-ings in the natural ecosystem as well as fromthe social sustaining functions offered to theeconomy and its workers by the household

economy. What is flowing in the circle isabstract exchange value. Natural resources andthe ecosystem services or the social sustainingfunctions offered by neighbourhoods and bythe community, its social structures, relation-ships and the capacity to social bonding andcooperation are ignored in the circular flow.In the full world metaphor, the world is fullof human-manufactured capital, e.g. machines,technology and infrastructure and empty ofnatural capital and empty of the social sustain-ing functions.

In this new picture of full world economics,the economic system is a subsystem of thesocial system and of the larger mother ecosys-tem. Here, the dependency of economy and ofindividual economic actors on the social sus-taining functions and on the natural capitalflows cannot be neglected. Consider that nat-ural capital (in a general sense, the renewableand non-renewable resources and the ecosys-tem services) is the material cause of produc-tion, which undergoes qualitative transforma-tion into output products in an economic pro-duction process. Human-manufactured capitalis the efficiency cause of production, that is theagent transforming the resource flow into anoutput product.

Efficiency is the ratio of output to inputand capital is the quantity of input. There-fore, quantitative substitution across the qual-itatively different roles of natural capital andhuman-manufactured capital is impossible (orvery difficult). More eco-efficient technologyor machines can be created and these canreduce the resource inputs to an economic pro-duction process, but these machines are notthe resource inputs themselves. Machines toorequire natural capital for their manufacturing.However, the neoclassical economics produc-tion function such as Cobb-Douglas that isbased on the circular flow picture of economicsholds the substitutability position. The aggre-gate production is written as Y = f (K, L), i.e.output is a function of capital and labour stocksand resource flows rarely enter and waste out-put is non-existent (Daly, 1996).

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The use of the full world metaphor of Daly,however, has initiated an intensive debate ineconomics on a complementarity position onproduction theory. Here natural capital andhuman-manufactured capital are each other’scomplements. What good is a sawmill with-out the forest, or the fishing boat withoutthe population of fish? Similarly, the pro-duction process needs rested and emotion-ally balanced workers who have enjoyedthe services offered to them by householdsand community, the social sustaining func-tions.

In Daly, the use of metaphors is impor-tant for the emergence of a new vision, ora new paradigm. He argues that the analy-sis cannot study what the preanalytic visiondoes not take into account. The approach inthis paper has also been metaphoric. This isbecause we believe that metaphors are impor-tant for the required paradigmatic changetoward corporate social responsibility. With-out a change in the first stage in the processof the paradigm shift, the second stage, thenormal practice stage, does not change signif-icantly. In such a situation, perhaps all thatwe can achieve are reductions in air emis-sions, which come at the expense of trans-forming or shifting the emissions to a formthat is disposed of to land, or reduction inpaper wastes at landfills which results inincreasing wastes from paper recycling suchas de-inking sludge and incineration ash, orproblem displacement from production to end-consumption with no sufficient waste man-agement practices at place. The first stage inthe required paradigm shift is the paradigmstage. This stage is paradigmatic, metaphoricand normative. The second stage, the nor-mal practice stage, is descriptive, positive andanalytic. It is argued in this paper that it isimportant for corporate social responsibility toconsider the tools and instruments or metrics,but also the metaphors that are included inthe first stage in the process of a paradigmaticshift.

DIFFICULTIES IN ADOPTING A NEWPARADIGM

Defining the focus of the critique

It is important to be critical when usingmetaphors. Metaphors can be interesting,provocative and even romantic. Therefore,there is a risk of neglecting a thorough researchapproach and becoming lost in the world of themetaphor. For example, I am not arguing nordo I think that it is necessary to argue thatall neoclassical economics is bad or all corpo-rate business management is bad if we considersome of the visions of sustainable developmentor corporate social responsibility and corporateenvironmental management. In addition, it isimpossible to make an absolute definition onwhat is included into a certain field or certainschool of thought and what is not. Of course,it would be easiest and very tempting to firstconstruct the focus of your critique and thenpresent your critique.

Consider that the emerging metaphor, anal-ogy or the field of industrial ecology (Ehren-feld, 1997, 2000; Korhonen, 2001c) has beencriticized with arguments that the term or thenotion of ‘industry’ or the interpretation ofindustrial ecology in the literature and thepresent few case studies (documented) areneglecting consumption and focusing mainlyon manufacturing and large industrial manu-facturers (Bey, 2000). Then the question arisesof what (or who) is industrial ecology and whatis not industrial ecology. It is clear that lifecycle assessment (LCA) is very relevant forindustrial ecology. It constitutes a major partof the articles now published in the Journal ofIndustrial Ecology. As early as the 1970s, LCAalerted the environmental policy and manage-ment communities to the geographical separa-tion of production and end-consumption. Thefact that the life cycle of a product and itsrelated material and energy flows affect or areaffected by both production and consumptionas well as end-disposal, recovery and recyclingbecame the contribution of LCA.

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The natural ecosystem analogy in the con-cept of industrial ecology alerts the decision-maker to the material and energy flows ofeconomic systems in general. Green plants asproducers, animals as consumers and decom-posers as recyclers all use material and energyflows in the ecosystem (see Lifset, 1997). Thesematerial and energy flows affect both produc-tion and consumption in economic systems too.In addition, if one of the ideas in the analogy isto develop energy cascades and material cyclesbetween economic actors and so mimic nature,it is just natural to consider the use of house-hold wastes as fuels in industrial energy pro-duction or the use of waste heat derived frommanufacturing in district heating networks ofresidential household systems or cities. This isintegrating production and end-consumptioninto industrial ecosystem type development(Korhonen, 2001c). Therefore, in the sense ofthe flows of matter and energy, industrial ecol-ogy indeed considers end-consumption andlife cycle assessment is not ‘outside’ industrialecology.

But of course, it seems that the strict focuson the physical flows of matter and energycan result and often has resulted in a sit-uation in which the ‘softer’ issues or thoserelated to culture and values are not takeninto account in literature on industrial ecol-ogy. Such, perhaps somewhat neglected, fac-tors that are important for industrial ecol-ogy include individual values, interests ofdifferent societal actors and consumer pref-erences or demand for products. It is obvi-ous that much environmental gain could beachieved with a thorough consideration ofalternative need satisfaction and by increas-ing the focus on the service and the functionof economic activity instead of the physicalquantity of product outputs in the market.In respect of these issues related to individ-ual values and preferences, it seems that someindustrial ecology articles deserve more cri-tique than in the case of material and energyflows.

The focus on the material and energy flowshas perhaps been the most important contri-bution that industrial ecology has made tothe sustainability discussion. A holistic systemsapproach and the life cycle thinking alerts us tothe interdependencies between different soci-etal actors, also those between production andend-consumption, but there is also a challengeto contribute to the culture of sustainability andadopt the interdependency of cultural, social,technical, economic and ecological issues morethoroughly as the focus of one’s research.Perhaps industrial ecology can contribute heretoo if the natural ecosystem analogy and themetaphor are further studied.

This simplified discussion implies that wealso need to reconsider our critique toward theneoclassical economics paradigm in this paper.It is very difficult to define what is neoclassicaleconomics and what is not neoclassical eco-nomics. There is a problem also here, in thatfirst one constructs the focus of the critique andthen attacks it, leaving it little room for defence.For instance, some might interpret the classicLeontief input–output economics and tablesas neoclassical economics (Leontief, 1986), butLeontief input–output economics is suitablefor the Daly or ecological economics com-plementarity thesis regarding the relation ofdifferent kinds of capital in economics produc-tion theory. Leontief I–O economics assumesthat all factors of production are complementsinstead of substitutes (Daly, 1996).

On the other hand, as noted above, it canbe argued that many neoclassical economicsapproaches and tools have not taken natureor social sustaining functions thoroughlyinto account. Indeed, a growing number ofresearchers are making this argument, e.g. inthe fields of evolutionary economics, ecologi-cal economics or within the feminist critiqueof the economics paradigm (see Brennan, 1997;O’Hara, 1997). Therefore, if metaphors are notabsolute or strict, it is arguable that the basicmetaphor or paradigm of economics may ben-efit if aspects outside the neoclassical traditionare also included in it. In particular, these gains

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can emerge in environmental policy and man-agement and in corporate social responsibility.

What is the benefit of metaphors?

Our metaphoric approach can be criticized inthe following way. Metaphors or analogiesderived from outside the dominant paradigm,e.g., from the natural ecosystem, must benefitthe theory or the discussion. In this sense, thenatural ecosystem analogy is nothing special.Arts, sports or different religions could alsoprovide us with useful metaphors for corporatesocial responsibility. For example, in indus-trial ecology, the use of the natural ecosystemanalogy is often promoted because it alertsus to recycling, but it could also be arguedthat we know that recycling can be importantwithout using the natural ecosystem analogy.This is familiar to all who are familiar withthermodynamics or entropy. Why, then, dowe need the metaphor to present this sim-ple conclusion? The conditions of locality,and in particular, diversity, interdependency,cooperation and adaptation to one’s surround-ings might be more difficult to find withinthe dominant social or economics paradigm.These metaphors describe the more structuralor organizational characteristics of sustainableecosystems. Perhaps the use of the ecosystemmetaphor can then benefit the theory in cor-porate social responsibility by including thesenotions in the paradigmatic base of the emerg-ing field.

It is also important to test the metaphorsor analogies in practice with case studies. Thiscan be difficult in terms of the social dimensionof corporate social responsibility, but easier interms of the ecological dimension. Case studiesneed to be conducted, e.g. on the use of thenatural ecosystem recycling model. We muststudy whether recycling can in fact reduce thevirgin material and energy input as well asthe waste and emission output of an industrialnetwork system. Recycling is not always thebest solution for the environment. It toorequires materials and energy and generates

wastes and emission to be dumped to air, wateror land.

Finally, it must be noted that drawingmetaphors or analogies or paradigms from adifferent system and using them for the devel-opment of another is difficult simply becauseof the fundamental difference of the two sys-tems. Consider that cultural, economic, marketor industrial evolution operates in a differentmanner than the natural, biological or geneticevolution does. Economic systems operate onthe basis of cultural information, oral, written,video or internet record. This kind of infor-mation moves rather rapidly: consider thedemand of a popular and advertised con-sumer product in the global market. Ecosys-tems, in turn, rely on information that movesthrough reproduction. The information storagemedium is the gene (Norton et al., 1997). Nat-ural evolution is therefore more in accordancewith gradual change than with rapid change(Ring, 1997). Note also that many environ-mental problems are chronic and result fromhuman interventions that have taken placedecades, or even centuries ago (Ring, 1997). Itcan be argued that a rapid transformation of acultural or economic system into an ecosystem-type system is surely very difficult or impossi-ble. The time rate of change and the feedbacksare fundamentally different in the two systems.

CONCLUSION

We have argued that for the development ofthe emerging field of corporate social respon-sibility, it is important to consider the basicparadigmatic foundation on which it rests. Forthis purpose, the dominant social paradigmwas considered. It was argued that it issimilar to the dominating economics scienceparadigm. Further, this dominating paradigmmay not be suitable for corporate social respon-sibility. To consider the paradigmatic base ofcorporate social responsibility, metaphors andprinciples were derived from sources that areoutside DSP. We used the natural ecosys-tem analogy for this purpose. It was argued

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that this could benefit the reconsideration ofthe dominant economics paradigm and con-tribute to the development of a corporate socialresponsibility paradigm.

We believe that metaphors are important inthat they can affect the change in the firststage of the paradigm shift. Such a changeis deep. This is needed because the domi-nant social paradigm seems to be more towardunsustainability than sustainability or corpo-rate social responsibility. If only superficialchanges in the practical stage of the paradigmshift are achieved, the overall condition ofunsustainability will most likely prevail.

Our approach has been an initial attemptto consider the corporate social responsibilityparadigm. Hopefully, it can serve as a partof the discussion on the development of thisnew field. Much further work is needed.There are problems in our approach to usethe natural ecosystem analogy in economicsand in business strategy or management. Theeconomic system is fundamentally differentthan the natural ecosystem. But we hope thatthe discussion on the ecosystem analogy oron other analogies and metaphors can benefitsome emerging fields and discussions withineconomics and management. For example, itmay be fruitful to follow the developmentsin the fields of ecological economics andindustrial ecology.

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BIOGRAPHY

Dr. Jouni Korhonen can be contacted atthe Department of Economics, University ofJoensuu, PO Box 111, 80101 Joensuu, Finland.E-mail address: jouni.korhonen@joensuu.fi

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