Corporate social responsibility (CSR) is referred to in the US as ‘corporate responsibility’ and on the Continent it is subsumed under the wider concept of ‘sustainable development’. Whatever the tag, it boils down to the same thing. Whereas historically businesses have focused on maximising shareholder value, now shareholders are only one of a number of ‘stakeholders’ whose interests companies must answer to – others include suppliers, customers, the wider community and workers. In addition to financial performance, businesses should concern themselves with their social and environmental impact. Hence the so-called ‘triple bottom line’.
CSR is not just about being a good corporate citizen. As far as the financial and investment communications are concerned it is more about managing risk. Even in the pre-Enron age there were perceived business risks surrounding brand or reputational damage, such as Gerald Rattner’s comments about his firm’s jewellery, in environmental damage (Union Carbide/Bhopal) and arising out of staffing concerns – witness the child worker exploitation allegations made against some sports goods manufacturers. But post-Enron, these have loomed larger. One only needs to note the recent UK obsession with so-called ‘fat cat’ pay to appreciate the significance that corporate governance and related issues now hold for many corporations and their investors. It is no coincidence that we have seen the advent in recent years of new indices such as the Ftse4Good Index and goodcorporation.com as well as CSR-type investment guidelines issued by the Association of British Insurers and the National Association of Pension Funds.
