Erik Belfrage. How business is making the world better
One interesting thing about corporate social responsibility is just how long we in business have been talking about it. Certainly a decade, perhaps longer.
Today, a growing number of companies approach corporate responsibility as a comprehensive set of values and principles, which are integrated into business operations through management policies and practices and decision-making processes. Many of these companies are now regularly providing documented information on the non-financial impacts of their activities.
As the new head of the International Chamber of Commerce's Commission on Business in Society, one of my first suggestions is that we need always to get the balance right.
In this regard, I believe that a policy statement by ICC's commission, published in March, is particularly valuable. Over a period of two years it sought to gain a better understanding of how companies approach the challenge of providing information on non-financial matters: that is, on the economic, environmental and social aspects of their activities. The commission noted that such reporting can not only enhance a company's reputation, but can build morale among employees and - this is important - can ultimately benefit a company's bottom line.
Business is aware of the ongoing debate on corporate responsibility and of the different views expressed on the subject. Not everyone approves of the way companies treat CSR. Various non-governmental organizations have been in the forefront of demands for companies to do more.
This in turn has led to action on the part of a number of governments which are now mandating companies to provide non-financial information in addition to their normal financial reports. But such government regulation, ICC believes, is likely to lead to a mechanical lowest-common-denominator approach to reporting, of little value to the wide range of stakeholder audiences. Instead, governments should support existing global initiatives for voluntary reporting.
In a nutshell, ICC favours a voluntary and flexible approach to one that is prescriptive and standardized. Such an approach allows a company to design reports that maximize their value both to the company and its key stakeholders, which will in turn encourage more companies to produce such communications. Reports with high costs and few benefits divert resources from more productive uses.
The costs of CSR are a sensitive subject. Back in 2000, in the heady spirit of the new millennium, European leaders meeting in Lisbon set a goal for the EU to become "the most dynamic and competitive knowledge-based economy in the world" by 2010. Half way to that date Europe is hardly the beacon of economic growth and prosperity that the leaders foresaw. In many European countries the economic outlook is worse than it was in 2000. In France and Germany unemployment is around 10%. In the Euro zone, GDP is forecast at only 1.6% for 2005.
Business has to live with a failed Lisbon Agenda. It continues to hope for policies that foster future economic growth and employment, facilitating the development of the private sec tor and its contribution to society. No other human activity matches private enterprise in its ability to assemble people, capital and innovation to produce goods and services profitably and create employment. But should business use the agenda's failure as an excuse to modify its support for corporate responsibility? Certainly not. Business's commitment to improve society and safeguard the environment is deep and lasting. However, business's first duties are to survive and thrive. Unless a business prospers it is powerless to make the world a better place, however virtuous its intentions.
Erik Belfrage is the new chair of the International Chamber of Commerce's Commission on Business in Society, ICC's policy-making body on corporate responsibility. He is Senior Vice-President of Skandinaviska Enskilda Banken.
Published in European Voice 4th May 2005 www.europeanvoice.com
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