Can corporate social responsibility survive through recession?

In recession, people are actually less forgiving of bad behaviour, writes Philip Monaghan.

All film-lovers will recall the famous scene in Butch Cassidy and The Sundance Kid: our anti-heroes stand at the cliff edge with the prospect of either jumping off into the rapids below or being caught by the chasing posse to face a firing squad. The Sundance Kid (Robert Redford) hesitates, saying he is scared to leap because he cannot swim. Butch Cassidy (Paul Newman) laughs out loud, pointing out that he need not worry – the jump from the cliff will kill them anyway. Both men make the jump and survive.

Many corporate leaders face a similar leap of faith when it comes to integrating sustainable development into their business strategies. Barclays, BP, Enron, Lehman Brothers and NewsCorp all have or had corporate social responsibility (CSR) programmes in place, many of which have been lauded. Barclays and BP have rightly been praised in the past for their leadership roles in the Equator Principles (to enable environmental and social considerations in project financing) and the Extractive Industries Transparency Initiative (to counter bribery and corruption) respectively. Yet the Barclays interest-rate manipulation scandal in 2012 and the BP deepwater horizon spill in 2006 show that despite these best intentions a culture of "making a quick buck" at someone else’s expense can be extremely hard to shake. This has only had disastrous consequences for shareholders and wider society, but led to the ongoing existence of both companies been called into question at one point or another.

So what is the problem? Is CSR still merely a periphery activity in companies despite the hula? Does short-term gain always trump long-term value? Or is it just a few rogue actors within a company bringing the rest down, which is impossible to 100 per cent safeguard against? Maybe. Or perhaps it is because corporate planners and risk evaluators are simply looking at the wrong thing: their resiliency strategy needs rewiring. Misguided business executives assume they can ride out the storm from any high-stake gamble, including an illegal one. Their hunch is that they will not caught because they are smarter than everyone else. That even if they do get caught the market will forgive them if they continue to deliver good investor returns. And that people have short memories. Yet this is a very narrow approach to resiliency, one that is focused on being able to resist immediate shocks and fails to understand the complex system in which a single entity operates. Survival is also about the ability to learn and transforming. During a global recession, people's tolerance of bad corporate behaviour is much lower and their memories much longer. So the political uproar and ferocity of the regulator response on both sides of the Atlantic is no surprise (and hopefully any new supervision will include an overhaul of how credit rating agencies evaluate non-financial risk too).

If CSR is to be relevant for a post-recession world from 2015 onwards, it needs to become infused with resiliency thinking. CSR advocates now stand at the cliff edge at a time of great uncertainty. They can turn back or make another great leap of faith to shape a more responsible capitalism. Not an easy choice by any means, but the right choice for shareholders and society alike.

News Corp, one of many companies with a CSR program. Photograph: Getty Images

Philip Monaghan is founder & CEO of Infrangilis (a consultancy and think-tank on resiliency strategies). He is the acclaimed author of the books Sustainability in Austerity (2010) and How Local Resilience Creates Sustainable Societies (2012).

Photo: Getty
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In the race to be France's next president, keep an eye on Arnaud Montebourg

Today's Morning Call. 

Good morning. As far as the Brexit talks are concerned, the least important voters are here in Britain. Whether UK plc gets a decent Brexit deal depends a lot more on who occupies the big jobs across Europe, and how stable they feel in doing so.

The far-right Freedom Party in Austria may have been repudiated at the presidential level but they still retain an interest in the legislative elections (due to be held by 2018). Both Lega Nord and Five Star in Italy will hope to emerge as the governing party at the next Italian election.

Some Conservative MPs are hoping for a clean sweep for the Eurosceptic right, the better to bring the whole EU down, while others believe that the more vulnerable the EU is, the better a deal Britain will get. The reality is that a European Union fearing it is in an advanced state of decay will be less inclined, not more, to give Britain a good deal. The stronger the EU is, the better for Brexit Britain, because the less attractive the exit door looks, the less of an incentive to make an example of the UK among the EU27.

That’s one of the many forces at work in next year’s French presidential election, which yesterday saw the entry of Manuel Valls, the French Prime Minister, into the race to be the Socialist Party’s candidate.

Though his star has fallen somewhat among the general public from the days when his opposition to halal supermarkets as mayor of Evry, and his anti-Roma statements as interior minister made him one of the most popular politicians in France, a Valls candidacy, while unlikely to translate to a finish in the top two for the Socialists could peel votes away from Marine Le Pen, potentially allowing Emanuel Macron to sneak into second place.

But it’s an open question whether he will get that far. The name to remember is Arnaud Montebourg, the former minister who quit Francois Hollande’s government over its right turn in 2014. Although as  Anne-Sylvaine Chassany reports, analysts believe the Socialist party rank-and-file has moved right since Valls finished fifth out of sixth in the last primary, Montebourg’s appeal to the party’s left flank gives him a strong chance.

Does that mean it’s time to pop the champagne on the French right? Monteburg may be able to take some votes from the leftist independent, Jean-Luc Mélenchon, and might do some indirect damage to the French Thatcherite Francois Fillon. His supporters will hope that his leftist economics will peel away supporters of Le Pen, too.

One thing is certain, however: while the chances of a final run-off between Le Pen and Fillon are still high,  Hollande’s resignation means that it is no longer certain that the centre and the left will not make it to that final round.

THE SOUND OF SILENCE

The government began its case at the Supreme Court yesterday, telling justices that the creation of the European Communities Act, which incorporates the European treaties into British law automatically, was designed not to create rights but to expedite the implementation of treaties, created through prerogative power. The government is arguing that Parliament, through silence, has accepted that all areas not defined as within its scope as prerogative powers. David Allen Green gives his verdict over at the FT.

MO’MENTUM, MO’PROBLEMS

The continuing acrimony in Momentum has once again burst out into the open after a fractious meeting to set the organisation’s rules and procedures, Jim Waterson reports over at BuzzFeed.  Jon Lansman, the organisation’s founder, still owns the data and has the ability to shut down the entire group, should he chose to do so, something he is being urged to do by allies. I explain the origins of the crisis here.

STOP ME IF YOU’VE HEARD THIS ONE  BEFORE

Italy’s oldest bank, Monte Paschi, may need a state bailout after its recapitalisation plan was thrown into doubt following Matteo Renzi’s resignation. Italy’s nervous bankers will wait to see if  €1bn of funds from a Qatari investment grouping will be forthcoming now that Renzi has left the scene.

BOOM BOOM

Strong growth in the services sector puts Britain on course to be the highest growing economy in the G7. But Mark Carney has warned that the “lost decade” of wage growth and the unease from the losers from globalisation must be tackled to head off the growing tide of “isolation and detachment”.

THE REPLACEMENTS

David Lidington will stand in for Theresa May, who is abroad, this week at Prime Ministers’ Questions. Emily Thornberry will stand in for Jeremy Corbyn.

QUIT PICKING ON ME!

Boris Johnson has asked Theresa May to get her speechwriters and other ministers to stop making jokes at his expense, Sam Coates reports in the Times. The gags are hurting Britain’s diplomatic standing, the Foreign Secretary argues.

AND NOW FOR SOMETHING COMPLETELY DIFFERENT

It’s beginning to feel a bit like Christmas! And to help you on your way, here’s Anna’s top 10 recommendations for Christmassy soundtracks.

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Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.