Can profitability go hand-in-hand with responsibility?

OECD Forum, 15th May, 2001: SD Roundtable: What is the Contribution of Corporate Responsibility to Sustainable Development? Moderator Maria Cattaui
OECD Observer

As Chairman of Koc Holding Company, Rahmi Koc knows the bottom line, and his voicing of a standard business fact was the anchor to which all parties involved in Tuesday’s discussion agreed. “The goal of business is, as it always was-making money.” As a philanthropist however, he has pursued quite a different personal agenda, and he stands firm in support of broad corporate responsibility that includes attention to workers, the environment, honesty and fair conduct, and transparency. He remains clear though, that “The right government mechanisms must be put into place, but the companies themselves must be allowed to decide their specific approaches privately, in a more pro-active approach.”

Acknowledging that business must always strive to maintain its profitability does not mean it has to abandon social goals, however. Clearer evidence must be shown about the relationship between responsibility and profitability, a fact that is slowly becoming more evident. Today, responsibility must be made to support the bottom line. “If one can show to a CEO that there is a tiny percentage gain in the share prices of his company from following responsible policies, then that CEO will be convinced to use those policies,” says John Maresca of the Swiss Business and Humanitarian Forum. “Right now we’re in a phase where that hasn’t yet been demonstrated in a convincing way for CEOs.”

As head of Andersen UK’s Greenhouse Gas Emissions Trading Services, Frank Joshua said that the real challenge ahead is to bring the goals of business and social responsibility to a meeting point, a process that has begun gradually over the past 15 to 20 years. “What we have seen in the last ten years in the climate change arena really is an evolution in the attitude of business towards climate change. We have had a number of businesses like BP, Shell, Dupont and others … to put their companies at the forefront of reducing greenhouse gasses. In most cases these companies are not regulated by any government, they’re not required to do it, but its good business sense.” Companies, he concluded, are driven to better conduct by concerns about compliance costs.

Voluntary initiative does require costs though, and costs affect competitiveness if not all parties comply. Christina Tahon, director of health, safety, and environment at SOLVAY presented several ways her company has voluntarily reduced both greenhouse gas and wastewater emissions since 1992. She admitted that for the chemical industry “countries need to harmonise environmental regulations,” and that for global benefit on a long term basis, there is a need for “industrial citizenship, and communication with both the scientific world and regulatory authorities.”

Robert Massie is chairperson Global Reporting Initiative, a coalition of activist and social interest groups which strives to work with businesses to promote social and environmental responsibility. According to him, the future for sustainability lies in the creation of standardised reporting guidelines. “We realised on the one hand companies were receiving diverse information requests, while stakeholders were getting very uneven information that could not be compared,” he said. “Our idea was that perhaps we could convene a process to create a generally accepted reporting framework through a multi-stakeholder gathering.” This standard, he suggested, could be used as reference point for stakeholder negotiations and conflict resolutions.

Irresponsible company behaviour in the past will, of course, lead to credibility issues whenever business and humanistic goals are attempted to be linked. Mr Massie believes his group’s benchmarking will be able to restore it.

Peter Winsemius of McKinsey & Company, noted “in the past, there was a level of certainty. Governments regulated and companies either complied or were forced to by fines.” Today, he continued, business responsibility has been brought before both customers and investors. “Business people are slowly becoming surrounded by people who demand responsible behaviour.” He added that the transition to environmental concerns was a logical progression. “In the post Cold War era, a whole generation has grown up with a feeling of certainty that has allowed for higher goals.”

When John Evans of TUAC asked why the OECD guidelines for multinationals adopted by governments last year had not been mentioned as a potential benchmark, John Maresca answered: “there are many products out there that are called guidelines, and the OECD product is not the most prominent among them. I guess the Global Compact would be the most prominent among them.” Similarly, a student from the group, while acknowledging the positive discussion at the meeting, asked why it seemed companies were simply moving to third-world safe havens to escape responsible conduct even after the Global Compact was passed. Moderator Maria Cattaui noted that the Global Compact was designed to improve operational conduct, not ethical conduct, before answering: “why do negative things happen still? Well, I don’t think any of us would say there’s a magic wand that was suddenly waved by the Secretary General of the UN, though we all admire him for throwing out this challenge. The question is, can we minimise the negative impacts and maximise the others?”

©OECD Observer May 2001

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