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The Business Perspective and Corporate Social Responsibility

Traditional economics and corporate finance teach us that the one objective of a company should be the increase of shareholder wealth. However, Corporate Social Responsibility (CSR) is becoming an increasingly important issue for companies, their customers and business stakeholders. More and more, customers decide that they do not want to buy from organisations that do not act in a fair, honest and ethical way. Similarly, there is a growing trend among business customers not to risk their own reputations by dealing with organisations, such as suppliers or retailers, which do not take their responsibilities to society and the environment seriously.

Even under the new Companies Act 2006, the Directors' duty to promote the success of the Company now includes taking into consideration the impact of the company’s operations on the community and the environment.  This interlinks stakeholders, high standards and fairness as important business factors with the welfare of the community and the environment – on a local and global level.

There are a number of good reasons for a company to invest in the environment – either via plain carbon offsets, reduced energy consumption or through the support of special projects such as supporting local-community sustainable development, and helping sustain or enhance the ecosystem services associated with habitat protection and restoration:  

• Such positive work can help enhance a company’s image and reputation, through connection in the customers’ minds with ethical and caring behaviour and by engaging the customers with the projects, too.  
• Activists these days have the internet and mobile phones with video cameras to hand and are able to find out and document what companies do.  So are reporters all over the world.  Companies using sweatshops in the Far East have thus become known to consumers. Similarly, companies involved in palm oil plantations and rainforest deforestation are more and more being exposed and will have to face questions from their customers.  Therefore, as accountability increases for companies and people in general for their actions, it becomes more and more important to make the right choices – and to work with suppliers and retailers who do too.  
• Good community relations will lead to better shareholder and stakeholder interactions and mutual understanding and respect. It will be easier to communicate company goals and actions to the market.
• Customers are generally more willing to support and recommend a company if its image is positive and if it is known to be involved in projects which help to improve the lives of people – either locally or elsewhere on the planet.
• A company that engages actively in community projects (either locally or abroad) can generally command increased employees’ loyalty and commitment as well as the ability to attract top recruits.  This can be seen in many companies where staff is working together with local schools, helping pupils with their reading or with homework: a sense of community is created between company employees who give up their time to help and local children and their families.  Similarly, a sense of unity and purpose can be created by all employees of a company helping with a community project abroad, such as the ecological restoration of fragmented landscapes into biodiversity corridors; the sustainable improvement of agro-ecological systems; or the expansion of new growth on degraded lands.
• Business partners are more likely to treat such a company favourably and investors and capital markets might even perceive a lowered company risk.
• Furthermore, carbon emissions are a business cost, leading to higher liabilities on a company’s balance sheet.
• Investments in real tangible projects allow leadership companies to communicate a positive message to concerned consumers, shareholders, and employees using clear examples. Also, many projects bring jobs and investments to a region and companies are often finding they can build better relationships with local communities.
• Involvement with projects can help enhancing brands and/or differentiating products, Companies might also find that, in due course, they are able to offer products that are carbon neutral.
• Investments in soil, forest and biodiversity protection will attract investors, particularly in the light of increasing investor awareness of risks associated with greenhouse gas emissions in a carbon constrained future.
• Overall, in a changing society, environmental and ethical questions are being taken much more seriously by consumers.  This could be seen, for example, by recent TV coverage of the plight of battery chickens, leading to higher demand for organic poultry.  Public perception and demand should never be underestimated by producers and service providers.
• Finally, with governments all over the planet starting negotiations for the successor to the Kyoto Protocol for broader and deeper emissions reductions, pressure will increase on companies to do the same.  Demand will rise for more energy efficiency and for offsets where such efficiencies cannot be achieved.