The bottom line: Social responsibility a good investment

2007-10-17

Corrupt business practices.

Unethical sourcing.

Mass pollution. Lead in toys.

Headlines trumpeting both the real and imagined bad behaviour of the global economy leap off the front pages of our newspapers and have acted as a clarion call for corporations, investors and consumers alike to change how business is conducted.

A few years ago, social responsibility and sustainable development were trendy ideas practiced by a select handful of companies. Today, they’re forces that can affect a corporation’s bottom line. Savvy investors, business partners and consumers demand products and services that have been ethically developed and produced.

Responding to this shift, the International Organization for Standardization (ISO) is developing a voluntary standard for social responsibility. The standard (ISO 26000), is slated to be published in November 2009.

The objective is to produce a document, written in plain language, that is understandable and usable by nonspecialists, and that provides guidance on concepts, definitions and evaluation methods for organizations interested in practicing social responsibility. The working group tasked to develop this standard is comprised of industry, government, labour, consumers, and nongovernmental organizations from a wide range of countries.

From a risk point-of-view, a corporation that practices social responsibility is a better investment than one that doesn’t, says Dr. Kernaghan Webb, a professor at Ryerson University, and a special advisor to the UN Global Compact on the ISO standard.

"The investment community is increasingly recognizing that companies that are reputable corporate citizens are good investments," he says. "If a company is socially responsible, that typically means they have a good relationship with their workers, their business partners and their communities and are less likely to run into significant liabilities or problems. Implementing socially responsible behaviour is a good, proactive risk management practice that is appreciated by investors."

Social responsibility is not just the right thing to do—a check mark on the side of good corporate citizenship—it also makes solid business sense, according to Blair Feltmate, Director of Sustainable Development for Ontario Power Generation.

"It can provide a company with access to new markets," he says. "For instance, if you’re a mining company and want to open a new operation, you’d better be able to walk into that community with a substantial sustainable development and environmental stewardship track record under your arm. If you don’t have that kind of reputation, the probability of gaining a license for that facility is very limited."

Feltmate believes companies in trouble over a real or perceived issue will have a much easier time if they’re known to be good corporate citizens. "If you’ve consistently been a responsible environmental and economic best-practices organization, the community, the regulators and the government are far more understanding than if you’re a company that has always pushed the limits and done the bare minimum," he says.

"It’s the cover-up that kills you," adds Feltmate, an advocate of full public disclosure. "You have to put it all out there, warts and all. The public is reasonably forgiving when you tell the truth about whether things are working out or not. It’s much better than pretending something didn’t happen."

Bob White, of BRI International Inc. and one of the members of the Canadian advisory committee providing input to the international standard, explains that because the new standard is intended as guidance rather than for certification purposes, it could revolutionize the way relationships are built between an organization and its stakeholders including customers.

"Many believe a certification program just encourages companies to do the bare minimum to satisfy the auditor rather than thinking about best practice," he says. "With ISO 26000, the process for social responsibility will be so open and transparent that third-party certification will not be necessary."

Developing nations are keen to meet a social responsibility standard that will help them grow in a sustainable way, adds White. "It’s not a case of the West has had its turn and now they want theirs because they know they’ll pay a phenomenal price if they don’t embrace social responsibility."

According to White, developing countries want a benchmark that provides a clear path to follow so that when it comes time to export their goods, they can meet global standards and expectations. He says, "a voluntary social responsibility standard is a win-win situation for everybody."

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This article first appeared in volume 34 of CONSENSUS Magazine, 2007.  The information it contains was accurate at the time of publication but has not been updated or revised since, and may not reflect the latest updates on the topic.  If you have specific questions or concerns about the content, please contact the Standards Council of Canada.

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