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Corporate Responsibility in the Platform World

Corporate Responsibility in the Platform World

Posted on Friday, May 13, 2016

Who is accountable when the value chain is not as clearly defined as a manufacturing pipeline?

Uber's recent US$100 million settlement of two lawsuits in which former Uber drivers sought to be classified as employees, represents only the tip of the iceberg of larger questions about Uber's value chain. Key to the issue is exactly what constitutes Uber's value chain, which largely will determine where Uber's responsibility starts and stops. In essence: can regulators, employees, shareholders, or others can make Uber responsible for the range of impacts that it has-social, environmental, and financial, among others?

Markets have already spoken about Uber's financial footprint; it currently has a valuation in excess of US$62 billion at its last fundraising cycle: greater than that of both General Motors and Ford, respectively, as well as most of the S&P 500. Answering questions about social and environmental responsibility however, requires a bit more enquiry.

Why is this important?  Because quite simply, responsibility - defined as looking after one's social and environmental impact-is one of the few ways to ward off damage brought by potentially invasive regulation (of the type that Uber was running from) or of coverage that is potentially damaging to one's reputation.

Unfortunately, almost everything we know about corporate responsibility was built for the pipeline world, where companies basically pushed products or services through a figurative pipeline and distributed them via channels at the other side. In such a context, responsibility and sustainability are largely determined by the value chain which goes into the product and its distribution.

Consumer product companies have spent many years understanding that this responsibility has little to do with actual ownership. So long as an entity or operation is part of your value chain, you are responsible for what goes on in it. So ABC apparel company is responsible for the conditions in the third-party factories that make its products, and when ABC apparel reports its CO2 emissions and water usage, it should also include consumption in its suppliers' operations-ideally down to the level of cotton fields and mills-as well as its own stores.

This is what became crystal clear after Rana Plaza in Bangladesh collapsed in 2013.  Even though the building and the factories inside were all owned by locals, the entire apparel industry was viewed as responsible for what happened in the building and its eventual collapse.  So today, consumers, the public, governments, and investors might assert that brands have an implied responsibility to look after the conditions on their value chain. And these stakeholders would have a point, because if anyone has leverage, it is the brand whose name is on the product and whose wallet takes the lion's share of the profits.

Fast forward to the platform age - where the bulk of value creation takes place in networks joining producers and consumers - and it is clear that our notions about the sustainability and responsibility implied in a value chain, or a value network, need to be updated. It is certain that Uber drivers are not like traditional employees, given that they use their own car and set their own hours. Yet, every ride with Uber has an undeniable Uber stamp (or branding), not that of Johnny Uber driver. Uber's payments, styling, and principles are all part of the service, and at least for the present, form the core of Uber's value chain.

This is not about whether Uber and their other ride-sharing apps are "good" or "bad" for the environment, but rather, about what corporate responsibility means for platform companies who now command the highest valuations and who supposedly represent the future of business. What does this mean for Uber's responsibility - not only financially, but socially and environmentally? In other words, an orchestrator of rides like Uber, might also be responsible for the CO2 emissions, pollution, and any negative social impacts of those rides.

In today's world-where climate action and investment to meet the climate as well as other global challenges like poverty, will largely come from the private sector, the question is not a moot point.  Even though platform companies are currently the darlings of the markets, their valuations should not free them of the need to examine the social and environmental legs of the triple bottom line. The basis for this is how they define their value chain. If recent history is anything to go by, they should accept the challenge of defining their responsibility broadly based upon that.

Any attempt to seek a narrow definition of their responsibility - and to hide behind its legal boundaries as Uber has sought to do in this case- will not be appreciated by consumers, or by potential regulators. One contrasts Uber's valiant efforts to seek refuge in case law with Baidu CEO Robin Li's recent pledge to do the right thing by taking responsibility for the "countless numbers of people making decisions based on Baidu's search results." Of course, coming on the heels of the government's investigation of a young man's death, this might seem to be made under duress or perhaps under the threat of regulation.

But regardless of how the company arrived at its newfound position, the contrast with Uber is stark. In one case, the company essentially says that the rules of responsibility "don't apply to me" and in the other case, the company basically sets a new standard for how platform companies should define their responsibility.

Former EU competition commissioner Neelie Kroes has made headlines by joining Uber's new public policy advisory board. One hopes that her presence might produce a more nuanced understanding of responsibility and reputation not only to her newfound advisee, but also to platform companies and their devotees worldwide.


The views expressed in this article are the author's own and do not necessarily reflect Asia Global Institute's editorial policy.

Further Reading on Uber's settlement:

https://www.theguardian.com/technology/2016/apr/21/uber-driver-settlement-labor-dispute-california-massachusetts

and

https://newsroom.uber.com/growing-and-growing-up/


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