Taking stock: The future of corporate responsibility

Posted: Thursday 7 May 09, 10.26am GMT

Business in the Community’s Chief Executive Stephen Howard considers the opportunities ahead for companies as they work to build confidence in business.

Stephen Howard, CEO of Business in the Community

There is a related discussion in our forums that we invite you to join after you have read this news story.

The current economic and financial crisis has generated legitimate public frustration. At this time it is vital that the short-term pressures on business decisions are balanced against the drivers of longer-term business value.

Business in the Community (BITC) research conducted by IpsosMORI revealed that FTSE companies that actively managed and measured corporate responsibility issues, including environmental activity, outperformed their FTSE 350 peers on total shareholder return by between 3.3% and 7.7% throughout the period 2002-2007.

Three vital themes emerge from this work and the recent crisis: Leadership, managing resources wisely and the need for us to work together to build confidence in business.(1) Responsible leadership in a recession involves exercising judgement on what adds value in the long term.

Leadership

How businesses live and communicate their values and vision cannot be done by publishing statements or group rehearsal of values – it requires action and engagement. ‘Do as I do’ – not as I say. The imperative for business leaders must be to instil and be the custodian of values, create a culture of responsible behaviours to support these values and ensure performance incentives throughout the business reward long term performance, not just quarterly results.

Manage our resources wisely

Businesses that are going through restructures or downsizing should think carefully about how these are implemented and make changes with care and respect for the individuals and communities involved. This investment will both protect your business today, and place you in a better position for the future when economic conditions improve.(2) Research by Cranfield points out that those companies who do not invest in training are 2.5 times more likely to fail than those who do. (3)

We are seeing community programmes continue to be sustained and a real vigour behind programmes delivering community investment. Community investment based on the sound principles of the CommunityMark(4) rests on taking action on issues most important to the business and its communities. This sustained commitment is an important contributor to employee morale in difficult times and our members continue to exhibit a high level interest in benchmarking.

The Prince’s May Day Network continues to work to keep climate change from dropping off the agenda. The absolute imperative of tackling climate change is no less in a tougher economic climate. In fact if no action is taken to curb emissions, it could shrink global economies by 20% – but action now at a cost 2% of GDP offers to save £1.32 trillion globally.(5)

Building confidence in business

Building confidence and trust in business – and the value of business – is critical. The recent Edelmans Trust Barometer shows 68% of people trust business less than they did a year ago.

To recover from this low ebb, practical action is required. Companies should work with their board to ensure robust corporate governance of Corporate Responsibility. In 2005 BITC worked with Insight and FTSE4Good to develop principles for the effective governance of Corporate Responsibility which many companies are starting to apply.

Particularly consumer facing businesses are signing up to the Marketplace Responsibility Principles(6) These draw on the experience of those companies placed by their regulators under greater obligations towards customers and suppliers.

Embedding the principles which emerge helps businesses foreshadow consumer opinion and advocate effectively in policy forums.

Scanning the horizon – where next for corporate responsibility?

So that’s where we are at today, but are there new issues and themes emerging from the debate around the financial crisis?

Stakeholder voices need to be heard – organisationally. In response BITC’s CR Academy is developing new resources and training in this area.

Despite significant advances over the past decade many are calling for increased collaboration between government, business and third sector, as well as increased business-to-business collaboration.

As work by the Committee for Economic development highlights, this must be backed up by a clearer understanding of the respective roles and responsibilities of business and government.(7) This throws up real changes as the UK/ EU Competition Law framework presents a substantial barrier to greater collaboration. (8) In contrast Australian competition law provides a mechanism for prior ‘authorisation’ of collaborative agreements between companies.(9)

An appetite has been emerging over the past few years amongst the business community – reinforced by the new context – to re-examine the orthodoxy of economic growth as an absolute must, an absolute good. Reconciling growth plans with sustainable consumption is an immense challenge and demands the development zero carbon business models.

Alongside work by Forum for the Future and WWF-UK, Business in the Community is providing exciting thought leadership in this field (10) and has recently produced a challenging paper examining the need for more focussed work by government agencies to support the development of ‘green talent’ a low carbon economy demands. (11)

The business ethics debate is more alive than ever in the public’s consciousness and this is increasing the risk of regulation that is developed in hast and poorly implemented. This raises interesting questions as to how businesses ‘lobby for good’ and engage constructively with regulators. Leading businesses are tackling global challenges head on and lobbying to drive up standards in emerging markets as well as engaging directly in the debate as to what constitutes a responsible approach to tax..

So there is the opportunity and prospect that a more equitable and less harmful relationship between business as wealth creators and business as stewards of our social, environmental and economic well being may emerge from the crisis. It does depend on businesses’ readiness to ask themselves the challenging questions about long term value and to collaborate with others in both learning and developing new ways of doing business.

Business in the Community continues to provide a place for businesses to work with their peers on issues of our time and on 10 June the debate on the future will commence at our conference: A New Era of Responsibility.