There are three main ways to encourage directors and shareholders to take greater account of CSR, says Roger Cowe
CSR has come a long way in the past few years, but it is still beset by confusion over one rather important element – money.
First, there is the question of money or morals. Former Amnesty International Business Group chairman Sir Geoffrey Chandler has argued eloquently that we must not get caught up in the question of whether the right behaviour pays. From this point of view, companies ought to do the right thing simply because it is the right thing.
In some respects I think this argument is absolutely right. Firms ought to respect human rights, shun unacceptable working conditions, avoid bribery and so on, regardless of whether they can make more money by doing so.
The trouble is that this moral position only provides guidance on the big issues. UN declarations and ILO standards help to set the boundaries. But they don’t help deal with the vast majority of serious business decisions managers have to make – such as closing branches, or making (entirely legal and popular) products which pollute or damage human health. That’s where money comes in.
For all the talk of morality and corporate values, it is money that makes the business world go round. At the highest level, shareholders rule the roost. That is a fact of City life, which is demonstrated with increasing frequency. So boards have to pursue shareholder value.
Money also rules inside the company, from the executive corridors to the factory floor. Whether it is share options or bonus schemes, managers’ decisions are influenced by the factors which will influence their pay and progress through the company. It doesn’t mean that managers are immoral, or will do bad things in pursuit of riches (although that does happen, as we have seen recently at Enron). But it does mean that exhortation is likely to be less effective in changing behaviour than melding CSR with management systems.
But this focus on money raises another danger – the belief that everything that needs to be done can be done by businesses pursuing shareholder value. It isn’t true, and that is why we have a mass of law (in the developed world) protecting employees, consumers and society at large.
I have no doubt that the most effective way of achieving worthwhile change, at the individual or corporate level, is by making it worthwhile in a financial sense. But there are many areas where that cannot be made to happen, which is where we have to step over the boundary into regulation and legislation. So this particular triple bottom line consists of morality, which sets the framework, self-interest, which drives behaviour, and regulation, which takes effect where self-interest fails.
Roger Cowe is a business journalist specializing in CSR. He is editor of No Scruples? to be published by Spiro Press in July