Ethical Corporation is now Reuters Events - LEARN MORE
As recession looms, it is time for corporate responsibility professionals to prove their worth
For most working in corporate responsibility, an economic slowdown holds more uncertainty than it does for their counterparts in other areas of business.
This is because the corporate responsibility movement, which has blossomed in recent years, has never had to deal with a full-blown recession. Even when the dotcom bubble burst in 2000, leading to an economic slowdown, the idea of big business having social and environmental goals embedded in strategy seemed far-fetched. Today corporate responsibility is not yet the norm, but sustainability commitments and programmes have certainly mushroomed in the “noughties” credit boom years.
Now the real value of those commitments is to be put to the test, as the sub-prime-fuelled credit crunch makes boards reconsider their spending plans. Department heads are nervous, as they wonder where their teams stand in the line for the chop.
The expected slowdown will test just how far corporate responsibility has come in making itself indispensable to the companies that claim to practise it.
Some corporate responsibility managers are worried about the size of their budgets for the coming year.
A typical corporate social responsibility manager of a major listed company told Ethical Corporation that he fears a slowdown will “put pressure on our ability to continue to do things that we are trying to do”. His community involvement budget has already been cut.
But corporate responsibility is likely to be no different, in this respect, to other parts of a business. Staff in departments from marketing to human resources are all being asked to save cash.
A straw poll of Ethical Corporation subscribers finds that, in general, budget cuts are so far being confined to discretionary spending. Non-essential travel is one area earmarked for cutbacks. Another is consultants.
Our readers say companies are sticking to their sustainability targets. Having publicly committed, for example, to reduce carbon footprints and ensure suppliers meet ethical codes of conduct, companies cannot stop initiatives without risking severe damage to their reputations.
So corporate responsibility or sustainability managers can be sure that there is work for them and their companies to do. Today’s challenge for managers is to achieve the same targets with limited resources – a constant problem for any business leader, but one that is becoming ever more acute.
Impressing the board is also likely to get more difficult. You can expect directors to ask even more questions than usual about the business case for ethics – a tricky one to answer at the best of times. Conventional arguments about attracting and retaining staff will not wash should companies stop hiring and even start looking to make lay-offs. Hard facts about savings made through energy-efficiency measures are much more likely to convince sceptical chief financial officers.
The cloud of economic gloom could yet have a silver lining for companies that are serious about being responsible. The credit crunch could separate those companies that can back up their sustainability pledges from those that cannot. According to companies interviewed for our cover story, a recession is an opportunity for those firms that have spent money on doing good to reap the rewards of that investment.
When times are tough, a good reputation – and the trust it engenders in employees, especially – is priceless.
Is GRI working?
One benefit of a possible recession is that companies looking to save money might restrict their sustainability reports to the web – meaning a much lighter recycling bin here at Ethical Corporation.
More seriously, company reports on social and environmental performance have improved by any measure in recent years. The Global Reporting Initiative deserves some credit for this. More than 700 firms currently use the GRI framework, which aims to make corporate non-financial reporting as comparable as company accounts.
But doubts remain over the use of GRI for companies that want to report on what is truly relevant to their business and most important to stakeholders. It is not clear whether GRI will evolve into the de facto standard for corporate reporting on social and environmental matters, or whether it is just a useful tool for companies considering their impacts in theses areas.
So this month we ask: “Is GRI failing as a reporting standard?” In a lively and occasionally heated debate, Ethical Corporation columnist Mallen Baker argues that GRI isn’t doing the job, while consultant Andy Savitz makes the initiative’s case.
Is GRI failing, or is it working? To let us know your views, visit www.ethicalcorp.com to post a comment and continue the debate.