Ethical companies still want to turn a profit
OPINION: According to the latest Acumen Republic/Edelman Trust Barometer for New Zealand, 59 per cent of Kiwis think chief executives are ‘‘driven more by greed than a desire to make a positive difference in the world’’.
In the Edelman survey, which covers 28 countries and interviewed a mammoth 33,000 people, we were bang on the global average, with 60 per cent of total respondents thinking CEOs are more greedy than caring.
For shareholders, that may almost be reassuring. Public companies take other people’s savings and put them to work to gain a return on capital. Call that greed if you want, but even those putting money in an ethical investment fund expect a return.
As Andy Gracey, portfolio manager for Australian Ethical Investment’s flagship Australian Shares Fund, told BusinessDesk this week: ‘‘We have this ethical stream and … once that universe is defined, we are really your typical investment team.
‘‘I don’t really need people explaining the virtues of their company from an ethical perspective because that’s a has-tobe anyway. I am really looking for a robust investment, something where I can see good returns for our investors.’’
Few public companies today fail to include, at the very least, verbal commitment to corporate social responsibility (CSR). Health and safety records are routinely first in a public company’s earnings pack.
Many also have either sponsored or commercial initiatives that are cost rather than profit centres, at least in the short term, because it gives them an ethically positive story to tell.
Yet when the McGuinness Institute went looking for attitudes among New Zealand companies to deeper reporting of their CSR actions, they uncovered high levels of scepticism at the corporate coalface about the cost, efficacy, and competitive downsides of so-called ‘‘extended external reporting’’ (EER).
The most sceptical 10 per cent of EER users are particularly concerned about about the cost and the agenda of such reporting.
‘‘The people going down this track need a dose of reality, or is socialism the goal?’’ said one.
However, some 40 per cent of EER users – a mix of investors, industry organisations, nongovernment organisations, and universities – take the view that EER reporting will become increasingly important. One such supporter went so far as to suggest that increasingly a company’s value ‘‘is not in their financial and physical assets’’.
For the majority of today’s corporate bean-counters, however, that seems to be a step too far.
Commissioned by the External Reporting Board, a Crown entity charged with improving the quality of New Zealand corporate reporting, the McGuinness survey elicited just 92 responses after sending it to the chief financial officers of every NZX-listed company and the Deloitte Top 200 companies. Admittedly, CFOs are often not the cuddliest beasts, being in charge of the numbers.
No matter how many native birds you’ve saved, how much plastic you’ve recycled, or how much gender equity you’ve promoted, when the numbers don’t add up, the organisation will cut its cloth accordingly or fail.
The impression gained from the research is that, unless a company’s very existence depends on the quality of its EER reporting, CFOs are likely to regard such initiatives as early victims of any cost-cutting drive.
Also problematic: EER reports can make uncomfortable reading.
As one EER auditor put it: ‘‘In my experience, company systems for reporting this information are not mature and they are more prone to error. I have assured a number of sustainability reports and have identified contextual errors, issues of balance that need to be addressed, and potential bias towards a more positive story.’’
The Edelman research finds that in an untrusting world, many people are looking to businesses to take a lead on a wider front than their traditional focus on profit.
The McGuinness findings suggest that, faced with the choice, most companies are more likely to stick to their traditional knitting. –BusinessDesk
No matter how much plastic you've recycled, when the numbers don't add up, the organisation will cut its cloth accordingly or fail.