Environmental and social issues can be just as vital to company success

The nosedive in Lonmin’s share value over the last week is proof that the environmental, social and human rights activities of companies are linked to their financial value.

Companies have traditionally been less willing or able to make a business case for their social obligations – to people, communities and wider society – than they have for their responsibility to the environment.

Moral commitments to the environment can often have tangible cost benefits; urging customers to switch off lights and appliances reduces gas and electricity bills for customers, while asking people to switch off taps or use the same towels for an entire hotel stay conserves water and lowers costs.

By contrast, exercising due diligence, conducting human rights impact assessments, consulting with and adjusting large scale projects to meet the needs of local communities and paying the living wage are all more difficult to sell to a board because the short-term advantages and profit-making potential are less obvious. What is obvious is that such measures can engender a significant cost in the short-term.

The solution - long-term cost benefit analysis - is discouraged by the nature of our financial markets but increasingly companies are beginning to discover that the benefits of long-term responsibility are no less tangible and significant when they arise: costs such as delays and disruptions of operations; problematic relations in local labour markets; insurance and security; reduced output; diverted staff time and, perhaps most significantly in this case, reputational damage.

This week’s events at Lonmin demonstrate that the markets understand this too.  There is an increasing recognition that environmental and social factors can have a material impact on returns and should be a greater priority for companies.  In the aftermath of the financial crisis, few would dispute the need for more forward-thinking and long-term planning from multinationals and for greater cognisance of the wider impact of business. The Gulf of Mexico oil spill, which forced BP to cancel its dividend for the first time since the Second World War and to report its first annual loss in nineteen years, demonstrated that environmental and social issues can be vital to company success.

Yet there remains doubt in the private sector, and particularly among investors, that Government is willing to offer the expertise, support and clarity to business about their social obligations and how to meet them. Companies who are leaders in social responsibility complain that the playing field is tilted against them, and want to see greater rewards from Government for good behaviour, and greater sanctions for rule breakers. Successive governments have failed to do this.

In May this year I tabled an amendment to the Financial Services Bill, which would have sent a clear signal to companies like Lonmin that such behaviour would not be accepted by the London Stock Exchange. In October, colleagues in the Lords will put forward similar amendments that will clarify the purpose of the stock exchange, allowing the new regulator, the Financial Conduct Authority, to take into account an applicant’s respect for human rights and sustainable development in protecting the integrity and respectability of the exchange.

Richard Lambert, former Director-General of the CBI, wrote in an opinion piece for the Financial Times in June 2011: ‘It never occurred to those of us who helped launch the FTSE 100 index 27 years ago that one day it would be providing a cloak of respectability and lots of passive investors for companies that challenge the canons of corporate governance, such as Vedanta, ENRC, Kazakhmys, Fresnillo. Perhaps it is time for those responsible for the index to rethink its purpose.’

The government has been handed an opportunity to correct the market failure that led to the death of 34 miners last week. It is widely accepted that a more sophisticated understanding of investment risk – one which takes longer-term sustainability issues into account – is urgently required.  If this Government is serious about its commitment to responsible capitalism and sustainable development, both companies and their investors must be engaged in the debate and the stock exchange is uniquely positioned to facilitate this process.

Lonmin's Marikana platinum mine. Photograph: Getty Images

Lisa Nandy is the MP for Wigan, and Shadow Secretary of State for Energy and Climate Change.

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Everyone's forgotten the one issue that united the Labour party

There was a time when Ed Miliband spoke at Momentum rallies.

To label the row over the EU at Thursday’s Labour leadership hustings "fireworks" would be to endow it with more beauty than it deserves. Owen Smith’s dogged condemnation of John McDonnell’s absence from a Remain rally – only for Corbyn to point out that his absence was for medical reasons – ought to go down as a cringing new low point in the campaign. 

Not so long ago, we were all friends. In the course of the EU referendum, almost all of the protagonists in the current debacle spoke alongside each other and praised one another’s efforts. At a local level, party activists of all stripes joined forces. Two days before polling day, Momentum activists helped organise an impromptu rally. Ed Miliband was the headline speaker, and was cheered on. 

If you take the simple version of the debate, Labour’s schism on the EU appears as an aberration of the usual dynamics of left and right in the party. Labour's left is supposedly cheering a position which avoids advocating what it believes in (Remain), because it would lose votes. Meanwhile, the right claims to be dying in a ditch for its principles - no matter what the consequences for Labour’s support in Leave-voting heartlands.

Smith wants to oppose Brexit, even after the vote, on the basis of using every available procedural mechanism. He would whip MPs against the invocation of Article 50, refuse to implement it in government, and run on a manifesto of staying in the EU. For the die-hard Europhiles on the left – and I count myself among these, having run the Another Europe is Possible campaign during the referendum – there ought to be no contest as to who to support. On a result that is so damaging to people’s lives and so rooted in prejudice, how could we ever accept that there is such a thing as a "final word"? 

And yet, on the basic principles that lie behind a progressive version of EU membership, such as freedom of movement, Smith seems to contradict himself. Right at the outset of the Labour leadership, Smith took to Newsnight to express his view – typical of many politicians moulded in the era of New Labour – that Labour needed to “listen” to the views Leave voters by simply adopting them, regardless of whether or not they were right. There were, he said, “too many” immigrants in some parts of the country. 

Unlike Smith, Corbyn has not made his post-Brexit policy a headline feature of the campaign, and it is less widely understood. But it is clear, via the five "red lines" outlined by John McDonnell at the end of June:

  1. full access to the single market
  2. membership of the European investment bank
  3. access to trading rights for financial services sector
  4. full residency rights for all EU nationals in the UK and all UK nationals in the EU, and
  5. the enshrinement of EU protections for workers. 

Without these five conditions being met, Labour would presumably not support the invocation of Article 50. So if, as seems likely, a Conservative government would never meet these five conditions, would there be any real difference in how a Corbyn leadership would handle the situation? 

The fight over the legacy of the referendum is theatrical at times. The mutual mistrust last week played out on the stage in front of a mass televised audience. Some Corbyn supporters jeered Smith as he made the case for another referendum. Smith accused Corbyn of not even voting for Remain, and wouldn’t let it go. But, deep down, the division is really about a difference of emphasis. 

It speaks to a deeper truth about the future of Britain in Europe. During the referendum, the establishment case for Remain floundered because it refused to make the case that unemployment and declining public services were the result of austerity, not immigrants. Being spearheaded by Conservatives, it couldn’t. It fell to the left to offer the ideological counter attack that was needed – and we failed to reach enough people. 

As a result, what we got was a popular mandate for petty racism and a potentially long-term shift to the right in British politics, endangering a whole raft of workplace and legal protections along the way. Now that it has happened, anyone who really hopes to overcome either Brexit, or the meaning of Brexit, has to address the core attitudes and debates at their root. Then as now, it is only clear left-wing ideas – free from any attempt to triangulate towards anti-migrant sentiment– that can have any hope of success. 

The real dividing lines in Labour are not about the EU. If they were, the Eurosceptic Frank Field would not be backing Smith. For all that it may be convenient to deny it, Europe was once, briefly, the issue that united the Labour Party. One day, the issues at stake in the referendum may do so again – but only if Labour consolidates itself around a strategy for convincing people of ideas, rather than simply reaching for procedural levers.