Some companies are so controversial that opinions about them range from completely positive (we love them) to despairingly critical (we hate them). This is the paradox of clean capitalism.
By Elaine Cohen
Love Tobacco Companies - Hate Tobacco
Tobacco companies are the obvious headline-hitters in a review of some of the companies we love to hate. While it is hard to find anyone who can say something terribly positive about tobacco companies, except, perhaps, for those who get rich by working for them or investing in them, the global tobacco business continues to make more profit than ever before, equivalent to the GDP of countries like Poland, Saudi Arabia, Sweden and Venezuela, according to the Tobacco Atlas.
Despite the fact that 50 million people have died from tobacco in the last decade, and the healthcare costs of smoking-related sickness significantly outweigh government revenues from tobacco taxes, investors continue to encourage these companies to do better and better. Tobacco stocks remain a popular investment, resistant to recession and delivering strong dividends over time.
All the major tobacco players publish Corporate Responsibility Reports. BAT's last report, for example, published in March 2012, explains the company's vision for sustainability, and claims that "by addressing our social, environmental and economic impacts, we build value for the business, for our shareholders and for other stakeholders"; value that is, apparently, very one-dimensional.
Tobacco companies do have other sustainability impacts beyond helping kill people, such as those relating to agriculture, supply chain and employment practices, and it is commendable that the sector attempts to minimize these impacts. However, ultimately, from a CSR standpoint, we love to hate them, while investors hate to love them.
Forbes' World's Most Innovative Companies list, which was shared on Facebook over 11,000 times and tweeted over 2,500 times, includes several more of these companies we love to hate. The methodology for this listing includes an Innovation Premium, described as:
"A measure of how much investors have bid up the stock price of a company above the value of its existing business based on expectations of future innovative results (new products, services and markets)."
In other words, investors love these companies.
They promise better business and better profits. Right up there in the top 10, with Apple and Google, who have also known controversy in recent times, is another big name in this love-hate relationship: Monsanto.
Love Monsanto – Hate GMO
Now, Monsanto has come under fire for years for social and environmental abuses in the name of advancing sustainable agriculture and food security for the world's growing population. RP Siegel reviews Monsanto's recently released 2012 Sustainability Report, summarizing the arguments against Monsanto's positive value creation:
"Monsanto products have been tied to declines in pollinator populations, the emergence of herbicide resistant weeds and pesticide resistant bugs has led to an escalating spiral of chemical warfare, the company’s bovine growth hormone has contaminated the nation’s milk supply…alleged bullying of farmers, prosecuting them for patent infringement for saving seeds…and for “stealing their intellectual property” by being located downwind of a farm using Monsanto’s GMO (genetically modified organism) crops."
Yet, Monsanto has achieved a five-year average net income growth of 44.7 percent, according to the same Forbes List. Investors just love that. In its 2102 Sustainability Report, the company states:
"Producing more. Conserving more. Improving lives. That’s sustainable agriculture. And that’s what Monsanto is all about."
But, in general, public sentiment against genetically modified food is said to be reaching a tipping point, reinforced by a ballot this November in California that will offer citizen's the opportunity to vote for their right to know whether the food they buy is contaminated with GMOs. Consumers hate GMO's but investors love Monsanto.
Love Nestlé – Hate Bottled Water
Another winner in investor analytics, this time, with sustainability investors, is Nestlé. Included in the Dow Jones Sustainability World Enlarged Index, representing the top 20 percent of the largest 2,500 companies in the Dow Jones Total Stock Market based on long-term economic, environmental and social criteria, Nestlé can claim to be loved.
The original poster-child of the new "shared value" revolution, Nestlé's tagline, "For a company to be successful in the long term and create value for its shareholders, it must also create value for society", is quite lovable. Who could possibly hate Nestlé? It may be those who took a stand against Nestlé on unsustainable palm oil, or even those who hate the unsustainability of bottled water, representing about 8 percent of Nestlé's global business, and of course, those who participate in the long-standing "Nestle-free zone" boycott, protesting against alleged unethical marketing practices in emerging economies, which advance the use of infant formula (another core money-maker for Nestlé) as a replacement for the sustainable option of breastfeeding.
But with 7.5 percent organic growth in 2011 and underlying earnings per share up by 7.8 percent, Nestlé has no need to succumb to its haters. The business is doing well. The Creating Shared Value pioneer is winning awards. Love is still in the air.
The Paradox of Clean Capitalism
The companies we love to love are few and far between. IntertaceFlor can apparently do no wrong. Unilever's Sustainable Living Plan is generating a lot of love.
However, the hard reality of the sustainability movement is that the companies that stockholders hate to love remain those, which many stakeholders love to hate. Sustainability perfection may be too aspirational a goal for most companies. For many, a change is not possible without a conscious choice to go out of business.
The fact is that clean capitalism remains more capitalism than clean and the love of investors outpaces the hate of just about everyone else.