The Guardian: Responsible attitudes

By Marc Lopatin

Wednesday May 19, 2004

Posted 20 May 04

Many companies now report on the social and environmental impacts of their activities as a way of enhancing their reputation. But is this just window-dressing for business-as-usual?

After years of defending itself from charges of worker exploitation, Gap, the clothing retailer, last week made the shock confession that many of its 3,000 factories across the world fail to comply with minimum labour standards.

Such an admission would have been unthinkable a few years ago when Shell dumped an oil platform in the North Sea. But while this corporate confession - unlike its theological equivalent - does not instantly absolve Gap from its responsibilities, it does demonstrate the changing role of business in society.

Corporate social responsibility (CSR) is a growth industry among consultants and PR firms as high-profile multinational companies learn to manage the social and environmental concerns of campaigners and customers as just another aspect of reputational risk. As a result, many big corporations have accepted - albeit voluntarily - arguments about social and environmental reporting that once made them balk.

Social and environmental impact reports (not all glossy) are now de rigueur among FTSE 100 companies, and not just those operating in pilloried industries such as oil, mining and garments.

Over the last year, the connection between CSR and health has brought ethical and responsible concerns closer to the British consumer than ever before. Whether it is too much salt in ready meals or the button-popping "go large" options at fast-food restaurants, food manufacturers and retailers are being dragged into the debate about what is responsible business at a time when obesity levels in Britain are soaring.

So never mind the environmental and social repercussions of global sourcing that squeezes producers in the developing world and shuts corner shops in the developed, the phrase "out of season" may fast be entering the annals of retail history. What is making us fat now gets CSR top billing.

Even the insurance industry is warning policyholders that they will see their premiums rise, as insurers cover themselves against the risk of obesity that is reversing life expectancy after decades of medical advance.

A spokeswoman for the Food and Drink Federation, which represents food manufacturers, claims that, from the outset, "the industry has said it wants to work with the government on improving the nation's health. Each year, the industry spends millions of pounds on CSR initiatives, from working with local schools to supporting national events such as the London marathon or the industry's own food fitness campaign."

Cadbury's Get Active campaign, which pledged to give free sports equipment to schools, is probably the most high-profile example of this type of initiative. But it is not called cause-related marketing for nothing. To get the equipment, the children had to collect vouchers - by buying Cadbury chocolate. Schools decided to boycott the scheme, and Cadbury received hostile press coverage.

It is not the only company that has tarnished its reputation when trying to appear socially responsible and boost sales. The reason, according to Tim Wright, last year's winner of the Guardian/Ashridge MBA essay competition, is that CSR is little more than window-dressing. Wright argued that it is often a "cosmetic and calculated mechanism that simply disguises the reality of business as usual".

This year, MBA students are asked to examine the changing role of business in society. The government, in its long-awaited response to the company law review, earlier this month proposed regulations requiring almost 1,300 companies in Britain to complete an operating financial review (OFR) that includes reporting on the social and environmental impact of its business.

The government, however, fell short of making social and environmental reporting mandatory. According to Deborah Doane, chair of the Corporate Responsibility Coalition of up to 100 groups, including Friends of the Earth and the TUC, the government's response is indicative of the way in which CSR has been hijacked by big business.

"As long as company law is aimed at protecting shareholder interests, we cannot go on pretending there will always be a win-win," Doane says. "In other words, there's a trade-off between profits and reining in certain social and environmental impacts."

The Confederation of British Industry takes a more benign view of the proposals. "It is clear the government is trying to encourage business to take on board CSR issues by advocating a voluntary approach," says Bryan Cress, the CBI's senior adviser on CSR and globalisation. "This comes at a time when more and more businesses are engaging with CSR. I hope this leads to more constructive partnerships with NGOs, but we have a long way to go."

Perhaps the true barometer of CSR is what consumers are prepared to tolerate. Despite numerous surveys in which they say it is extremely important for companies to behave ethically, this rarely translates into buying habits. In reality, shoppers like their food and clothing cheap, and would rather not dwell on the grim economics of the global economy when shopping at the local mall.

Marks & Spencer, for example, defines itself by good employee relations, backed by an increasing number of ethical and community-driven programmes to embed stores firmly in the local area. But this has not stopped the slide in sales that led to the departure of its chairman last week.

So does being a top-drawer corporate citizen have any financial dividend? Are companies now being rewarded by the financial markets for being more sustainable? Should well-behaved companies receive higher ratings and cheaper access to capital? And what of the thousands of small and medium-sized businesses that supply high-street names but lie far beyond the gaze of consumers?

Perhaps multinational corporations should be made responsible for the total life cycle of their goods and services - from raw material to finished product on the shelves.

It is doubtful, however, that Britain's boards of directors and their investors are yet equipped to deal with such a step change in responsibility.

More details about the Guardian/Ashridge MBA essay competition at www.ashridge.com

The Corporate Responsibility Coalition is at www.foe.co.uk/campaigns/corporates/core

http://society.guardian.co.uk/societyguardian/story/0,7843,1219356,00.html