Big Picture of corporate social responsibility
After the riots at the WTO conference in Seattle, the confrontations at the IMF/World Bank, and the demonstrations in London that defaced the sculpture of Winston Churchill; the world is waking up to the fact that the worldwide problems of poverty, indebtedness, child labour, pollution and corruption are still with us. The attention has been focussed upon the publicly financed international organisations yet many are also wondering about the role of the large multi-national organisations and the private sector in general. It is known, through books such as David Korten’s When Corporations Ruled the World that many large companies have sales larger than the GDP of countries such as Holland – it is worth mentioning that sales should not be equated with GDP which is, essentially, sales less costs of value added. But the point remains, the private sector, and large corporations in particular, are expected to pull their weight.
But this expectation has bemused large corporations whose main experience has been to create shareholder value and stay in business. They have neither the experience nor the expertise to confront world problems. How can this conundrum be resolved? Thinkers such as Judge Mervyn King (the King Commission on Corporate Governance in South Africa) told me that not only do companies have to work out how much ‘conformanceí’ to rules they must undertake but that they must also think about ‘performance’. Further, it is not enough to think about their ‘accountability’ to shareholders they must also think about their ‘responsibility’ to their stakeholders including the wider issues in the world in which they operate. Indeed, today, a company cannot survive, King insists, without having a clear statement of its purpose and values, an acknowledgment of who are its stakeholders, followed by an understanding of the processes it must follow to put these into operation. In other words, corporations have to devote more and more attention to non-financial aspects to satisfy not only worldwide pressure groups but, in the end, to survive at all.
The extent to which corporations must consider non-financial aspects of their business or, in other words, their level of corporate social responsibility is an area of intense research today. Not only its extent, but the language required so that people in the corporate sector can actually understand what is expected of them must be developed and defined more precisely than hitherto. MHCi has attempted to define some of the main terms that are being used (see glossary ) and is continuing its research on the extent of corporate involvement in non-financial measures and their relation to corporate financial performance ñ also know as the business case for corporate social responsibility (see The J-Curve ).
[Contributed by Michael Hopkins, July 2000]