Corporate Social Responsibility

Thursday, May 18, 2017 - 16:47


As an independent strategy consultant, there are often issues which have many sides to the coin. A current trend is for companies to try and make themselves appear socially responsible so their customers or shareholders will like them. The banks in Australia tried a whole lot of ways, having for example "GayTMs" as well as following along on what ever happened to be IN at the time. Didn’t help much when the Australian Treasurer this week talking about the big new tax levied on the banks which will now be passed to consumers, told a press briefing that “No one likes the banks anyway”.

These are good throw away lines for the media but behind the façade of trying to remain cool, at least the corporate model does try and go out of its way not to piss people off or you have a reaction as against Cooper’s Beer simply because two opponents discussed same sex marriage while sipping a Coopers.

The argument now is that good corporate social responsibility benefits improving sales but can also reduce the cost of capital. Arguably everyone wants to get on the bandwagon and try and look good for customers so we know having sport shoes made in sweat shops somewhere in third world countries does not look good but investors and the capital market it is argued, give favourable rates to “good look” companies.

It also looks good if you are a multinational not paying tax in some countries where you make millions, so you want to be looking as green as possible. You get into recycling, using less raw materials and try and do away with plastics. Not much argument in public against any of this even from the sceptics.

So you have Apple with $50 billion revenue last quarter making sure it publicises that all its headquarters are run on renewable energy, all packaging from renewable forests, and even solar day time can make ice which then keeps offices cool the next day. All very cute. But actually, while corporate leaders have to follow these greening trends, their power over the closed loop supply chain becomes even more powerful. As with Apple and their high profile since 4.9 billion people have iPhones in the world today, they can impose their conservation agenda on their suppliers and even their non Apple sales outlets. You want to do business with us, we want to look green and so must you; we don’t want to run any risk. This is the trickle down effect. The argument goes, if you make it good for business to be green, then green it will be.

Carrying this mantra a little further, these environmental policies are being increasingly reflected in the official reports of companies making a social responsibility statement along with their annual financial declarations. The argument here being that people invest in shares and banks lend to companies which look healthy and stand out as good socially responsible citizens. If the company looks healthy, its financial performance it is argued is also likely to be healthier. Its hard to argue about this as a concept even if looking pretty doesn't mean you can't go belly up. But back to if its good for business...

So we have companies filing their annual reports decked out in green and dressed up with all the good environmental works they perform in running their operations. Carrying this one step further one could argue that a social responsibility statement should be legally mandated for all annual reports required to be filed with the companies’ office and at respective the stock exchanges. In theory, this seems like a good idea but it would take some time to legislate exactly the parameters determining good corporate social responsibility. Having said that, accounting standards took a long time to evolve so perhaps we should put this idea in the pipeline.