Submit Content
Get the latest delivered to your inbox
Privacy Policy

Why Global Corporate Citizenship Matters For Shareholders: A Survey of Leading CEOs

Published 01-08-04

Submitted by World Economic Forum

Geneva, Switzerland - Over 70% of CEOs surveyed by the World Economic Forum believe that mainstream investors will have an increased interest in corporate citizenship issues, according to a report released today.

Developed by the World Economic Forum’s Global Corporate Citizenship Initiative (GCCI) in partnership with the International Business Leaders Forum (IBLF), the report explores how chief executive officers (CEOs), chief financial officers (CFOs) and investor relations officers (IROs) communicate the strategic importance of the social and environmental aspects of their firm’s performance to investors. It examines how these companies are articulating both the business case and the “leadership” or “values” case for global corporate citizenship, highlighting some of the challenges of communicating often intangible but nevertheless quite relevant issues to owners.

“We see increased interest in the social and environmental aspects of corporate performance by pension funds, insurance companies and other shareholders. Investment analysts, trustees and portfolio managers appear to be taking these issues more seriously than they were just a few years ago,” said Richard Samans, World Economic Forum Managing Director, who added, “2004 might just be the year corporate citizenship comes of age in the mainstream investment community.”

The report, “Values and Value: Communicating the Strategic Importance of Corporate Citizenship to Investors,” is based on CEO, CFO and IROs’ responses to a written survey and set of personal interviews, conducted primarily with executives in signatory companies of the World Economic Forum’s Global Corporate Citizenship Initiative. Although this initiative represents a small and self-selected group of companies, they offer perspectives from 14 different industry sectors with headquarters in as many different countries. Some of the key messages are reinforced by the findings of research conducted by SAM Sustainable Asset Management in 2003, covering over 1,000 companies, and the findings of several global, European and American surveys of institutional investors – each covering over 400 investors – which are listed in the footnotes.

Marilyn Carlson Nelson, Chair and Chief Executive Officer of Carlson Companies, USA, and a Co-Chair of the World Economic Forum’s Annual Meeting 2004, comments: “This Global Corporate Citizenship Initiative report provides interesting and encouraging insight into how the corporate community communicates the strategic importance of their corporate social responsibility (CSR) activities to the investment community, and the growing interest by investors in factoring a corporation’s CSR activities into investment decisions. This phenomenon has taken hold particularly in Europe and will, I believe, become of increasing importance to mainstream investors in the US and the rest of the world.”

Based on this analysis and the experiences recounted directly by many of the CEOs and CFOs questioned, the report makes note of a number of effective practices and offers a set of recommendations for those seeking to communicate the importance of corporate citizenship to shareholders and investors. The report comes as the World Economic Forum prepares for its Annual Meeting 2004 in Davos. Under the theme “Partnering for Prosperity and Security” the report will be used to inform and illuminate sessions on corporate citizenship at the Meeting.

Key findings from this in-depth survey of CEOs include:

1. Signs of change in the financial sector: In a limited, but interesting number of cases, during 2003 some of the world’s major institutional investors started to flex their muscles on issues related not only to improved corporate governance and ethics, but also broader issues of corporate citizenship. At the same time, the Socially Responsible Investment (SRI) movement, while still representing a tiny percentage of global funds under management, continues to grow in terms of size, sophistication, geographic scope and influence.

2. Obstacles to overcome: The CEOs, CFOs and IROs surveyed by the World Economic Forum identified five interrelated types of obstacles to mainstream investors showing more interest in how corporations address the risks and opportunities related to corporate citizenship:

  • Problems of definition of corporate citizenship / corporate social responsibility
  • Problems of making and measuring the business case
  • Problems with quality and quantity of information
  • Problems of skills and competence in managing and measuring CSR
  • Problems of time horizon for measured impact on business performance
3. Four golden rules: The CEOs, CFOs and IROs identified four “rules” for communicating the importance of corporate citizenship to investors:
  • Frame corporate purpose, principles and values with clarity – Even when speaking to investors, corporate citizenship needs to be about more than simply “making a business case” that links it directly to bottom line benefits. It should also be a statement about what the company stands for and would stand by, even if this sometimes incurs costs or results in a lost business opportunity.
  • Emphasize the social contribution of core business – At the same time, business leaders need to be less defensive about their core role in society. They need to be able to demonstrate the societal contribution made by their economic multipliers such as employment and income generation, technology transfer, training, supply chain development, innovation and wealth creation.
  • Present a credible and measurable business case for corporate citizenship – Each board of directors and executive team needs to be able to define, explain and ultimately measure the ethical, social and environmental risks and opportunities faced by its company and industry sector including both intangibles and their impact on reputation as well as the measurable.
  • Ensure consistency and coherence of message – A major cause of distrust, among investors as well as other stakeholders, is inconsistent messages and incoherent policies from business. Corporate leaders need to apply a similar rigour and analysis to their social and environmental reports as they do to their annual report. They need to ensure that their social and environmental commitments extend to all aspects of the company, from the boardroom to the mailroom, from public policy positions to pension fund options, and from headquarter functions to far-flung operations.
“Focusing on the rapidly growing interest of investors in corporate citizenship as a feature of sound risk management and a benchmark to quality and customer acceptance, this latest report from World Economic Forum and IBLF collaboration demonstrates even further that CSR has migrated from the philanthropy arena to mainstream and strategic corporate practice for the most successful companies in the financial marketplace,” said Robert Davies, CEO of the International Business Leaders Forum.

Note Ed

Companies contributing to the report on Corporate Citizenship* are the following:

ABB
Abbott
Accenture
Anglo American Plc
Arthur D. Little
Artoc
Ayala Corporation
Carlson Companies Inc.
The Coca-Cola Company
Codelco
Deloitte Touche Tohmatsu
Deutsche Bank
DHL
Diageo plc
Infosys Technologies
ING Group
Lafarge
Merck & Co. Inc.
Nestlé SA
Pakistan State Oil Company
Phillips-Van Heusen Corporation
Rio Tinto Plc
RWE Thames Water
Siemens AG
Statoil ASA
Timberland

*The companies contributing to the report on Corporate Citizenship do business in 14 sectors: banking; clothing and footwear; conglomerates; construction; electronics; food and beverage; insurance; logistics and transportation; mining and metals; oil and gas; pharmaceuticals; professional services; travel and tourism; utilities. The companies are headquartered in 14 countries: Belgium; Chile; Egypt; France; Germany; India; the Netherlands; Norway; Pakistan; the Philippines; South Africa; Switzerland; UK; USA.

GCCI Background Information
Launched in July 2001, the World Economic Forum's Global Corporate Citizenship Initiative (GCCI) is working to increase business engagement in corporate citizenship. Believing that companies can gain from sharing experience and best practice in corporate citizenship as well as exploring common areas of interest, the GCCI is collaborating with companies to advance the agenda of corporate citizenship on a global as well as regional level. Using the Forum's Annual, Regional and Governors’ Meetings as platforms, initiative members exert thought leadership and expand the market for enlightened corporate citizenship in cooperation with experts and other organizations around the globe that specialize in corporate responsibility. Today, more than 40 companies representing a variety of regions and sectors are engaged in the initiative.

To view the report, please visit http://www.weforum.org/corporatecitizenship or http://www.iblf.org

For further information on the Global Corporate Citizenship Initiative, the report and the initiative’s CEO Statement, please contact Caroline Bergrem, Project Manager GCCI, at caroline.bergrem@weforum.org

The World Economic Forum is an independent international organization committed to improving the state of the world. The Forum provides a collaborative framework for the world's leaders to address global issues, engaging particularly its corporate members in global citizenship. Incorporated as a foundation, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests. The Forum has NGO consultative status with the Economic and Social Council of the United Nations. (http://www.weforum.org).

World Economic Forum logo

World Economic Forum

World Economic Forum

www.weforum.org

More from World Economic Forum

Join today and get the latest delivered to your inbox