Twenty years ago, amid the mass unemployment and inner- city riots that marked the nadir of the early 1980s slump, a few old-fashioned patrician businessmen decided they ought to do something to alleviate the suffering that closures and lay-offs were causing. The result was Business in the Community, a business lobby that worked first on local employment creation and now argues the case for broad corporate responsibility.
To the thrusting new generation of entrepreneurs who were building Thatcher’s Britain, the social concerns of these quaint old toffs (the likes of Lord Sieff and Sir Alastair Pilkington) were the cause of Britain’s economic woes, not the solution to them. The business of business, they thought, was business: greed was good, and the only corporate responsibility that mattered was making as much money as possible within the law – or at least without getting caught.
That American-inspired dream has now turned into the nightmares of Enron, Tyco and WorldCom, and every self-respecting company espouses corporate social responsibility (CSR). But behind the vision statements, have 20 years of CSR really changed anything? Shareholders rule the roost even more than they did then. Chief executives such as Vodafone’s Chris Gent receive packages beyond the dreams of avaricious 1980s moguls. Companies still lay off workers in their thousands at the slightest hint of a dip in profits – though the workers are in mobile phone factories and call-centres rather than steel mills or coal mines.
Evaluating CSR is a bit like looking at Enron’s books: plenty of smoke, a lot of mirrors. Business people tend to use the right language, but it is not always easy to see what has actually changed on the ground. For example, the past few weeks have seen CSR reports published by BAE Systems (purveyors of jets and missiles to Indonesia and military air-traffic control systems to Tanzania), BAT (tobacco sellers and smugglers) and ExxonMobil (successful lobbyists against the Kyoto climate agreement). That companies such as these have joined the trend to social reporting is dramatic. But it has not changed what they do.
Nevertheless, it is progress of a sort when cannibals take up forks (the notion from the Polish poet Stanislaw Lec which provided the title of a 1997 book by the sustainability guru John Elkington). And it is impossible to imagine BAE, even ten years ago, saying (to quote its recent report): “We acknowledge and respect the rights of individuals to hold different views on our industry and are keen to engage in the debate with critics and supporters alike about our role in society.”
That readiness to engage is the most significant change. It reflects a rather touching humility that would have been unthinkable in the 1980s. The result may be a somewhat unfocused desire to please everybody, but it is a welcome change from the days when business knew best and didn’t much care what anybody thought – even the shareholders.
A recent book by the new CBI president, Sir John Egan, and the veteran campaigner turned corporate activist Des Wilson (a co-operation that is certainly a sign of the times, though some may think it says more about Wilson than about Egan) argues that businesses have no option but to become “stakeholder companies” which deliver shareholder value by acknowledging broader responsibilities to other groups. This is a powerful message, although some way from being a new orthodoxy. Several forces have brought about the transformation from 20 years ago when such views would have been regarded as close to communism and CSR assumed to be a distant part of the Soviet empire.
Some of these forces have been positive – the “business case” argument that it is hard to prosper in the midst of decay and destitution. Some have been simply unavoidable – the retreat of government which has left the private sector in the limelight. But the most powerful force has been the threat of some catastrophic bad publicity, such as Shell’s Brent Spar, Monsanto’s genetically modified foods or Balfour Beatty’s Ilisu dam.
The process began to take off in the early 1990s, with the Earth Summit in Rio de Janeiro. Business was central to the world’s efforts to combat climate change. It was no longer just the job of governments to deal with environmental problems. But it was Seattle in 1999 that transformed a primarily technical debate into a political issue that grabbed the attention of business people everywhere. The demonstrations may have been about the World Trade Organisation, but corporate power was a key issue, and companies had to take notice of the anti-capitalist movement.
And at home, consumers, employees and investors are all more interested in what companies are up to, not just what products, jobs and dividends they can deliver. There is a kind of “multiplier effect” at work here. Twenty years ago, a sizeable proportion of people worried about pollution, the way companies treated their employees and the impact businesses had on local communities. But the more legitimate (as business issues) these matters have become, the more people have been prepared to voice their concerns – whether in the supermarket aisles or in job interviews. In the 1980s, few job applicants would have raised questions about a company’s social or environmental responsibilities. Now, most companies expect such questions, and know they need adequate answers if they are to recruit the best graduates.
Investors have been spurred on by legislation. An amendment to the Pensions Act, which came into force two years ago, requires pension fund trustees to say whether they take account of social, ethical and environmental issues in their investment policy. Few funds have dramatically changed their approach, but this legitimisation has made finance directors take social responsibility more seriously. With £120bn in funds that take account of CSR in one way or another, they have to.
So these matters are much higher up the boardroom agenda than they were 20 years ago. But that doesn’t necessarily mean that companies behave better.
Wilson and Egan recount recent experiences with two leading companies, which were obviously not seriously interested in social responsibility. “Actual business behaviour, as opposed to PR rhetoric, suggests that even where the arguments are accepted in principle they are not always reflected in practice,” they say.
The Department of Trade and Industry has come to the same conclusion. Its annual report on CSR observes: “Although there has been good progress, much remains to be done. There are still many organisations that are not adopting socially and environmentally responsible practices.”
Douglas Alexander, the minister responsible for CSR until the May reshuffle, brought intellectual rigour to what had been a fairly flabby subject. Before moving on, he set CSR in the context of globalisation and the broad battle between the state and market capitalism.
Alexander said that “the adoption by business internationally of high corporate standards” was one of the “building blocks” that would help to make globalisation work for the poor. But there is a long way to go to meet such aspirations. While most large companies pay lip-service to social responsibility, few have begun to understand it in the terms Alexander set out. For example, the majority of British retailers still do not ensure that wood in the products they sell comes from sustainably managed forests. And most banks continue to finance companies and projects that destroy communities or natural resources such as forests.
Julia Cleverdon, who has been head of Business in the Community for the past decade, is enthusiasm personified, but even she acknowledges the limitations of what CSR has so far achieved. “In 1992,” she says, “we had 300 members, half of whom really didn’t know what all this was about. Now we have about 700 and most of them know what it’s about, although half of them probably think it will go away. But the other half understand that this is about all of business. They have really woken up to the challenge and they are working hard to face it.”
She despairs most about race. A recent survey of leading members, with 2.5 million employees, reported that just 44 senior executives came from ethnic minorities. Only 18 of the 100 biggest quoted companies even deigned to take part.
On the other hand, most large companies, and many smaller ones, have engaged with environmental issues, and realised it is not enough just to clean up their own emissions. Many have also plunged into community activity, encouraging employees to volunteer and supporting a wide variety of organisations. Some are working hard on labour conditions in their supply chains.
It is also true to say that Britain is ahead of most other countries. In the US, CSR is still only about community support. On the Continent, it is about employee protection and environmental issues. Here, it is more rounded, and the leading cohort of companies (such as BP, Shell, BT, Rio Tinto and the privatised utilities) understands that CSR is about the way they go about their business, not just what they do on the periphery or how much they give to charity.
They also realise that CSR is a moving target. Twenty years ago, it was about job creation in Brixton and St Helens. Now it is about human rights in Burma, Aids in South Africa, closing bank branches in Bridlington and climate change everywhere.
It is disappointing that so many businesses have failed to keep up with the pace of change, but it is encouraging that more and more are trying.
No Scruples? edited by Roger Cowe is newly published by Spiro Press (£16.99)