BUSINESS SUSTAINABILITY
Corporate Social Responsibility…

Increased corporate governance and the supporting evidence appear to be in two minds. On one side, supporting the theory of corporate governance reforms in turn makes for a more transparent and accountable organisation.

Increased accountability will thereby minimise the potential abuse of agency powers, as we have witnessed in the last few years with the likes of Enron, HIH and Ansett.

Good corporate governance will provide a framework to operate more effectively and be aligned with the goals of the organisation. The opposing view is that more corporate governance is seen as applying the “brakes” to an organisation.

But does the shift for corporate governance priorities to encompass not only economic but environmental and social responsibilities, result from an emotional push from external stakeholders, or is it just good basic management principles to consider the triple bottom line?

After all, the proactive approach to governance could multiply reward companies through potential cost savings, a higher retention and attraction of employees; reduce the company's risk profile while improving the scope for innovation. There would appear to be more than a triple bottom line win on the balance sheet.

Many virtuous public statements in annual reports and marketing collateral about Corporate Social Responsibility (CSR) have proliferated from multinationals globally in recent years.

It appears executives are not only responsible for the delivery of profits but they are indeed essential in the social fabric of our communities and that they achieve this with minimal impact upon the environment.

Basically, companies are here to serve and are essential not only to our communities but to safeguard the environment as well. Why are we still in this day and age informed of environmental disasters occurring due to business activities from some of our Fortune 500 companies, when they claim that 52% of the top 250 embrace CSR?

Public sentiment has shifted the priorities of organisations to support the principles of CSR, and from a public relations perspective it has indeed been a windfall. It is difficult not to think that CSR is just lip service or “greenwashing” when push comes to shove, it would be hard to find an organisation where profit did not come first.

Of the FTSE100 companies published by the Guardian newspaper a mere average of 0.97% pre-tax profits were charitable contributions. However CSR is not just about being philanthropic, it is the bigger picture, safeguarding future generations, employees, consumers and the overall consideration to society. This index or input is difficult to quantify on the balance sheet.

Support in Australia from the peak director representative body, The Australian Institute of Company Directors (AICD), in response to the Australian Parliamentary Joint Committee on Corporations and Financial Services recommendations towards CSR, agreed with the findings describing them as a win for the both the corporate sector and the community.

AICD believes that well run corporations already consider all stakeholders in regard to company policy and that CSR reporting should not impose more regulation through the prescriptive measures of legislation and mandatory reporting.

AICD Chief Executive Officer Ralph Evans quoted “Directors are required to act in the best interests of their company at all times.

To be sustainable, a corporation must maintain its reputation and balance the legitimate interests not just of shareholders, but of its employees, customers, business partners and the communities and environment in which it operates.”

Evans then when on to state that CSR should be a natural part of the ASX reporting framework under a companies' risk management strategy. When companies are preparing statutory financial reports inevitably environmental and social risks may affect the overall economic performance.

However there is still a disconnect between reporting a companies' profit and loss and cash flow and it's long term sustainability by incorporating and reporting on CSR. These are still regarded as two separate performance areas when considered in corporate governance.

Trends are emerging where short term gains economically are proving not to be an adequate measure for stakeholders, and government need to take note of this trend, particularly in the provision of infrastructure requirements for future generations.

Stakeholders are demanding greater transparency and long term projections through measures that address the long term sustainability of a company or government, and in turn our societies and communities.

The benefits in adopting CSR principles include creating a transparent dialogue with stakeholders, which increases a company's alignment with its stakeholders, and is in effect a social license to operate.

To undertake business activities requires permission from the electorate through legislative powers. Many small business owners rely on the multinationals to pay taxes, provide employment, infrastructure and to provide public spending.

In the changing landscape of Australia's providers of infrastructure and privatization, it is now essential that company's have good business ethics and strong corporate governance that embraces CSR principles as they have a duty and responsibility to be good corporate citizens, particularly in regional Australia.

All too often, even though half of Australia 's export is generated in the regions, the withdrawal of services by major enterprises and government occur.

The balance of power appears to be shifting where stakeholders are demanding that economics is not the primary indicator of a company's good health. Capitalism serves society and therefore the executives have to be held accountable, and that accountability is being measured by a companies' good corporate governance and resulting CSR.

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Juliet Duffy is the Managing Director of Wireless Marketing Pty Ltd and can be contacted on 02 6885 5361 or juliet@wirelessmarketing.com .au