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. She was formerly Shadow Secretary of State for Energy and Climate Change.

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Commons Confidential: Dave's picnic with Dacre

Revenge is a dish best served cold from a wicker hamper.

Sulking David Cameron can’t forgive the Daily Mail editor, Paul Dacre, for his role in his downfall. The unrelenting hostility of the self-appointed voice of Middle England to the Remain cause felt pivotal to the defeat. So, what a glorious coincidence it was that they found themselves picnicking a couple of motors apart before England beat Scotland at Twickenham. My snout recalled Cameron studiously peering in the opposite direction. On Dacre’s face was the smile of an assassin. Revenge is a dish best served cold from a wicker hamper.

The good news is that since Jeremy Corbyn let Theresa May off the Budget hook at Prime Minister’s Questions, most of his MPs no longer hate him. The bad news is that many now openly express their pity. It is whispered that Corbyn’s office made it clear that he didn’t wish to sit next to Tony Blair at the unveiling of the Iraq and Afghanistan war memorial in London. His desire for distance was probably reciprocated, as Comrade Corbyn wanted Brigadier Blair to be charged with war crimes. Fighting old battles is easier than beating the Tories.

Brexit is a ticket to travel. The Independent Parliamentary Standards Authority is lifting its three-trip cap on funded journeys to Europe for MPs. The idea of paying for as many cross-Channel visits as a politician can enjoy reminds me of Denis MacShane. Under the old limits, he ended up in the clink for fiddling accounts to fund his Continental missionary work. If the new rule was applied retrospectively, perhaps the former Labour minister should be entitled to get his seat back and compensation?

The word in Ukip is that Paul Nuttall, OBE VC KG – the ridiculed former Premier League professional footballer and England 1966 World Cup winner – has cold feet after his Stoke mauling about standing in a by-election in Leigh (assuming that Andy Burnham is elected mayor of Greater Manchester in May). The electorate already knows his Walter Mitty act too well.

A senior Labour MP, who demanded anonymity, revealed that she had received a letter after Leicester’s Keith Vaz paid men to entertain him. Vaz had posed as Jim the washing machine man. Why, asked the complainant, wasn’t this second job listed in the register of members’ interests? She’s avoiding writing a reply.

Years ago, this column unearthed and ridiculed the early journalism of George Osborne, who must be the least qualified newspaper editor in history. The cabinet lackey Ben “Selwyn” Gummer’s feeble intervention in the Osborne debate has put him on our radar. We are now watching him and will be reporting back. My snouts are already unearthing interesting information.

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution