World Economic Forum Survey Projects Mainstreaming of Corporate
Citizenship
By William Baue
Is corporate citizenship, also known as corporate social responsibility
(CSR), entering mainstream investors' consciousness? No and yes,
according to a new World
Economic Forum (WEF) report that surveys chief executive officers
(CEOs), chief financial officers (CFOs), and investor relations
officers (IROs) at 26 companies from 14 different countries.
Little Interest in CSR
These executives report surprisingly little current interest in
CSR expressed by mainstream investors. Over two-thirds of the respondents
said their companies field CSR-related questions from mainstream
investors only occasionally, and then only around crisis situations
or "hot" topics such as climate change, diversity, obesity
and HIV/AIDS. Some of the respondents (15 percent) never field such
CSR-related questions from mainstream investors. Only three companies
— Anglo American (ticker: AAL.L),
Infosys (INFY)
and Deutsche Bank (DB)
— state that mainstream investors often ask them CSR questions.
However, over 70 percent of the respondents who hail from such
companies as Coca Cola (KO),
Diageo (DEO),
Rio Tinto (RTP)
and Siemens (SIEG),
believe that mainstream investors will have an increased interest
in CSR issues.
"2004 might just be the year corporate citizenship comes of
age in the mainstream investment community," said Richard Samans,
managing director of the WEF, a nonprofit devoted to world improvement
and funded by over 1,000 corporate members.
The
report, entitled "Values and Value: Communicating the Strategic
Importance of Corporate Citizenship to Investors," credits
the socially responsible investment (SRI) community, among other
influences, with advancing CSR into the mainstream. Other influences
include new legal requirements such as Sarbanes-Oxley, new international
norms such as the United
Nations Convention against Corruption, and voluntary reporting
mechanisms such as the Global Reporting Initiative (GRI).
Increases in Activism
Almost half (42 percent) of the respondents felt there has been
a major increase in the level of activism, engagement and sophistication
from the SRI community regarding CSR.
"Many of the companies see SRI fund managers as increasingly
influential, both in terms of their influence on policy makers and
their impact on corporate behaviour through active engagement with
companies and their promotion of an investment style that takes
nonfinancial performance into account," the report states.
However, some of the respondents also offered critical commentary
on the SRI community's influence on the mainstreaming of CSR. According
to one CEO, the SRI community sends mixed messages.
"Many SRI investors invest with an ethical motive and are
prepared to accept average returns or below if their ethical standards
are upheld," he stated. "Others believe that a portfolio
of companies with strong corporate citizenship policies and implementation
should provide better than market average returns in the longer
term.
"As long as these two opposing theories sit side by side in
the SRI community, its credibility will suffer and mainstreaming
will not progress," he concluded.
Lack of Training
Another CEO points to obstacles on both the SRI and the mainstream
investors' side of the fence inhibiting the growth of corporate
citizenship as a legitimate driver of investment value.
"There is a lack of training of many SRI analysts in basic
financial and accounting issues. There is also a relative lack of
understanding of some of these corporate citizenship risk areas
on the part of many mainstream analysts," he stated. "However,
for many sectors, it is inevitable that the two perspectives will
converge."
The WEF's Global Corporate Citizenship Initiative (GCCI),
which wrote the report, also sponsors the Mainstreaming Responsible
Investment project in conjunction with AccountAbility,
an international nonprofit that advances corporate accountability.
The project seeks to "improve understanding of impediments
to and opportunities for broader integration of social and environmental
aspects of corporate citizenship in mainstream investment policies
and practices."
Toward this goal, the project is convening a series of roundtables.
Deutsche Bank hosted the first in London in July 2003 focusing on
identifying constraints and opportunities, and Swiss Re hosted the
second in New York in October 2003 focusing on the pivotal relationship
between pension fund trustees and their fund managers. The third
roundtable is slated for early 2004.
William Baue has been writing about socially responsible investing
for SRI World Group's SocialFunds.com
web site since November 2001. His articles on business have appeared
in other publications including Green@Work magazine, Business
Ethics magazine, and the Encyclopedia of Major Marketing
Campaigns.
This article originally appeared at SocialFunds.com.
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