You cannot always measure corporate citizenship
Ask the average chief financial officer what keeps him awake at night and the chances are that corporate restructuring would probably edge out carbon containment.
The bet is that managing debt levels would probably preoccupy him a tad more than donating to worthwhile causes.
Rehabilitating the company’s share price would always get the nod over rehabilitating the firm’s standing in the community.
There is no doubt that the global financial crisis has relegated corporate social responsibility (CSR) – in all its many guises – into the second division of corporate Australia’s priorities. It is perceived to be “immeasurable” and its impact as “soft”.
The average executive will always ignore or discount a risk which cannot be measured. You cannot always measure corporate citizenship – if customers dislike what a company stands for or what it does, the company may never know it.
Shareholder contentment is the only value which rules - and yet there is ample evidence that corporate ethics can have a devastating affect on profile – and profits.
A classic case was Coca-Cola Amatil’s breast cancer campaign in 2006-2007, which did wonders for its Mount Franklin mineral water brand.
Mount Franklin asked consumers to visit a website, thewellofpositivity.com, where for every wish made it would contribute $1, up to $150,000. This was on top of the $100,000 it has already pledged.
Sales of bottles with pink lids rose on the back of the tie-up - Mount Franklin's share of the bottled still-water market rose by 4.6 percentage points in supermarkets. Here was a case of “being good” making money.
Selling out
And yet last year, Coca-Cola’s next “do-good” campaign, where Coca-Cola paid Land care Australia to plant trees to offset the million of plastic bottles it creates, was considered a disaster – a clear case of “green washing”.
“People were saying every time I buy a bottle of water of Mount Franklin I’m paying money to Land care yet on the other hand you’ve got plastic bottles – and Land care were seen to be selling out,” says Hailey Cavill, whose company Cavill and Co. specialises in corporate cause relationships.
“The point is Mount Franklin are allowed to give to breast cancer and yet not allowed to give to the land – it’s because it’s perceived that one good cause fits and the other doesn’t,” she says.
Cavill and others believe that consumers tend to be much more savvy about corporate citizenship than the corporate themselves – they see through giving to good causes which bear no relationship with the company at all.
For companies to succeed in courting the public, their ideals must align closely with their own activities.
Giving to Oxfam one day and the bushfires the next is perceived as a scatter gun approach and worthy of scorn. It’s better for a drinks company to help fight alcoholism or for a bank to do something to improve financial literacy.
“Companies need to decide what they stand for – there’s too many people jumping on the environmental campaign when it has nothing whatsoever to do with their organisation,” Cavill says.
A Cavill & Co / Sweeney Research report last year, “Real not Spiel”, asked 500 consumers which causes motivated them.
The research showed that “people causes” had far more weight than environmental ones – people’s health came way above environmental problems. “The only environmental cause that rated with consumers was water management,” Cavill says.
Debt and ethics
It is an interesting new development in the CSR arena that high debt levels, which manifested themselves so patently during the GFC, now appear to have an ethical dimension. That is, high liquidity is good ethics and vice versa.
John Purcell, corporate regulation policy adviser at CPA Australia, says debt levels are now directly correlated with corporate responsibility. “The financial sector has had the rudest awakening,” he says.
Purcell says there is a proven connection between good non-financial reporting and an improved bottom-line performance. Those who report on matters outside the financial ironically tend to have lower financial risk than the “non-reporters”.
“The reasons are the availability of high levels of cash flow and underlying attributes of sound governance,” Purcell says.
Conversely, there is a growing awareness that pure financial reporting doesn’t capture the full dimension of corporate performance. “It simply doesn’t reveal what the future issues and challenges are which the corporations need to confront,” he says.
Managers tend to be at a loss without key performance indicators.
In the ethics and social responsibility sphere there are a number of indexes which rank companies according to their CSR credentials, although many of the indices are often perceived to lack credibility – they invest in “best of breed” banks and “best of breed” resource companies – those which make a point of advertising their corporate good behaviour.
