Being a good corporate citizen can be good business, too

Being a good corporate citizen can be good business, too

IBM, Accenture and others provide a fascinating business case for being a good corporate citizen.

Why this is important

Global organisations often struggle to develop commercial partnerships in developing nations. The reason is simple – it’s not corruption (though corruption is certainly something ethical companies need to be able to walk away from) – but the gap between the needs of a global organisation and the capabilities of groups in emerging nations is significant.

An AMR Research report from 2009 claimed that once these commercial challenges become obvious, projects were pushed to the corporate philanthropic organisation – in the process falling from the top of the business agenda and making it difficult to build any meaningful momentum.

“It was clear that for these projects to be successful, they had to be built into the core business strategy,” the report concludes.

And Regnan managing director, Erik Mather, agrees.

“The first thing that corporate responsibility is about is a way of expressing a strategic approach to running a business,” he said.

Regnan is a research and engagement organisation, and focuses on environmental, social and corporate governance (ESG) forces in the market.

It counts the ACT Department of Treasury, Catholic Super, HESTA Super Fund, Vanguard and Westscheme amongst its clients. The combined client base has invested more than $53 billion in S&P/ASX200 companies in 2010.

It then endeavours to present clients a long term perspective on ESG on behalf of its institutional investors, while advocating improved governance of ESG risks.

Being a good corporate citizen is not about benevolence. As with green technology, the message only becomes effective when there’s a dollar value that can be attached to it.

By definition, with ESG, Regnan’s concern is three fold – the ‘E,’ or ‘environment,’ is the green message – any initiative that has an environmental benefit has some kind of efficiency or long-term element to it, which usually amounts to a cost saving.

‘S’ (‘social’) is essentially the people story. Corporate responsibility has proven to be a key consideration for leading graduates and job seekers to the organisation – and the success that IBM, Accenture and Cisco have had in finding, retaining, and motivating skilled staff is a testament to that.

‘G’ for ‘governance’ is a straightforward case of looking at the appropriate checks and balances – including alignment of interests – that can affect an organisation’s ability to win and retain customers, and in effect stay open at all.

What can happen to an organisation that ignores ESG? Today, tenders give preference to organisations with strong green practices; skilled staff can leave to join an IBM or Accenture that will support their philanthropic urges.

And when governance goes wrong there’s a case study in Enron; indeed, it was such a substantial scandal that it single-handedly shut the huge accountancy firm, Arthur Anderson, down.

And yet, despite ESG being of such importance to the core of the modern business, many organisations have failed to recognise this.

“We say internally that we still have a significant amount of job security, which is code for ‘organisations have more to do',” Mather said.

“There are still some members of the old guard of corporate Australia that think of corporate responsibility as being the old checkbook philanthropy of the past, which it’s not.”

In numbers: 70 per cent of the capitalised value of a company is now a long list of intangible assets, and includes things like reputation and license to operate in the community. The latter phrase didn’t even exist 10 years ago, where closer to 70-80 per cent of a business was wrapped up in tangible (‘brick-and-mortar’) assets.

Mary Livanos’ work in South Africa was philanthropic in nature, and brought a great deal of value into an underprivileged environment. At the same time, the program she was involved in is a shining example of the approach to corporate citizenship that all organisations should look at into the future - yes it’s good work, but it’s good business, too.

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