When I first started working as a corporate responsibility advisor around the turn of the century the job felt very different to what it is now. In those days, it was a very small world which consisted of a handful of advisors and some people in the investment community who used to practice something called socially responsible investing or “SRI”. The latter invariably involved running screened tracker investment funds which excluded companies from certain industrial sectors (tobacco, weapons manufacture for example). The work wasn’t easy to get and mainly focused on writing small sections of annual reports and the relevant bit of the company website.
Many hours were spent in meetings explaining what the subject was all about and presenting slides that talked about business conduct, climate change and human rights and not philanthropy, altruism and giving corporate money to charity.
The industry has changed a great deal since then. Strangely, the corporate responsibility advisory world is still rather small and select. However, the rest of the business world has realised that there are some big numbers attached to getting this stuff right. Larry Fink, boss of one of the world’s largest investors (BlackRock) mirrored this change of mood in his annual letter to CEOs at the start of the year.
“Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioural finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?”
These days investors don’t talk about SRI anymore and refer to “ESG” (environment, social and governance). They take the issue seriously. Consequently, many listed companies see this part of their business as an increasingly important aspect of their investor and financier relations and their relationships with many other important stakeholders including their employees.
Private companies and other organisations have also had to address increasing requirements from customers and regulators to demonstrate a responsible business approach. This can be time consuming and demanding particularly for smaller businesses. Clients now want advice on strategy, policy, management systems development and governance as well as related reporting, investor relations and communications.
It’s quite clear that this trend is going to continue and those organisations that don’t move in tandem with it will find it harder and harder to be successful. It’s a long time since I went into a room and had to explain that I wasn’t there to advise the people in it about doing things with charities.
Do make sure that your organisation isn’t one of those that still has this mentality about corporate responsibility and is a laggard. Some have stuck with the turn of the century mindset. But the numbers are dwindling – and fast!!
Tim Purcell is a corporate responsibility, corporate governance and investor relations consultancy specialist. Tim is based in London, with a global client base.