Large companies actually do get it. They are aware of the big issues of the day because their bottom line is, and will be, severely affected.
By Michael Hopkins
The financial sector has failed to act in a meaningful way to promote sustainability and CSR and may well ‘present the greatest block to global progress.’ But the main reason is not unconcern but because investors, shareholders and boards continue to focus on the quarterly financial statement that drives the share price and not longer-term concerns.
Keynes was correct about what drives recessions and unemployment but didn’t use that insight to become a wealthy investor on the stock market. He simply tried to get in ahead of where the ‘crowd’ was going. He would have known (although not in the same detail as data today) that between 1979 and 2007 incomes of the top 1 percent of Americans grew by an average of 275 percent [Congressional Budget Office].
He would have invested, accordingly, in luxury goods and if alive today would note, for example, that Rolls Royce car sales in the U.S. were up by 31 percent in 2011 over the year before.
So large companies actually do get it! They are aware of the big issues of the day simply because their bottom line is, and will be, severely affected. What are these big issues of the day? These six might lead most lists:
- Recession, unemployment and inequality
- Climate Change
- Resource shortages (water, agriculture, safety, health)
Let me pick the first of these and digress on how, or not, corporations are actually involved in big issues.
What the Recession has to do with Sustainability
Corporations are certainly affected by the recession and many of course, don’t worry about CSR and sustainability issues. But are we really a resource-constrained globe?
Certainly we are a catastrophe-constrained globe, but, as ever, the devil is in the details. In January 2012, Washington-based Institute of International Finance, that speaks for financial institutions worldwide, estimated that corporations in the U.S., the euro zone, the U.K. and Japan held $7.75 trillion in cash, or near equivalents, an unprecedented sum.
The same is true across a number of mature and emerging economies with corporate cash holdings worth now $2.64 trillion across the euro zone and an extraordinary £750 billion ($1.19 trillion) in the U.K. alone – twice as large as the stimulus package that the Obama Administration used to try and stave off recession.
But why are corporations not spending their cash mountain?
Besides, the continual lack of demand, corporations worldwide are worried about overspending without generating corresponding income. In fact, chief executives of more than 80 major U.S. corporations, including Aetna [NYSE: AET], Goldman Sachs [NYSE: GS], Macy’s [NYSE: M] and Boeing [NYSE: BA] issued a joint manifesto recently calling on Congress to bring down the federal deficit. Corporate chiefs urged policy makers to prepare a fiscal plan that would “stabilize the debt as a share of the economy, and put it on a downward path.”
Corporate Sustainability: Business "Gets" It
They get it. They've also set up a B Corp certification for sustainable businesses to distinguish themselves from their competitors.
On the other big issues, corporations are stepping up as well.
- Developing Economies: For example, corporations need healthy economies to grow and at least $50 billion went into development in 2007, as I discuss in my book.
- Resolving Conflict: Having worked on the UEFA’s CSR policy (yes they have one!) this summer, I noticed great interest in Football Associations using football to bring conflicting sides together..
- Terrorism: Insurance companies are funding anti-piracy measures and oil companies are realizing that aboveground acts account for a large part of their risk in many emerging economies.
- Climate change: More and more companies are realizing the danger, although Europe is far more advanced than the U.S. in moving the needle on business practices.
- Resource shortages: From Coca Cola to Nestle, concerns are widespread and solutions are continuing to emerge every month.
But why don’t financial organizations get it?
Simple. They only make money on transactions when investors buy and sell. So it is up to investors to get it! Why don’t they? Join the conversation by leaving a comment or connecting with us @CSRwire.
A good start would be to read CSRwire regularly and attend one of CSR and Financial Institute's upcoming workshops around the world.