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Working out what a responsible business look like does not necessarily fit into an index or list of criteria. It can often be an art rather than a science, argues Mallen Baker
We have a lot of sophisticated tools out there now for spotting socially responsible companies.
We have indices, and awards, and quality standards - you name it. Between them, they look at every management process you can think of, and cover every issue that might affect a company.
But what if all that information gets in the way, rather than helps?
In his book 'Blink', Malcolm Gladwell tells the story of the statue that didn't look right.
An art dealer sold the J.Paul Getty Museum a marble statue, apparently dating from the sixth century BC.
The museum was cautious. It studied whether the statue was stylistically consistent.
It tested the material it was made of and ensured it was the correct age. It analysed it using an electron microscope, electron microprobe, mass spectrometry, X-ray diffraction, and X-ray fluorescence.
The statue came through with flying colours. It even had a layer of calcite on the surface, which could only appear after thousands of years, showing that it ws genuinely old, not a modern fake.
One day, an expert on Greek sculpture Evelyn Harrison was taken to see the statue. As the cloth was removed and she laid eyes on it for the first time, she immediately declared it to be a fake. She couldn't explain why she thought this.
Another two experts also proclaimed it to 'feel wrong'. One said that the first word that came into his head when he saw the statue was 'fresh'. Not a word that is associated with ancient statues. Another expert said they had a wave of "intuitive repulsion" when the saw it.
Of course, they were right. So how could it be that all the sophisticated tests had come up positive, but experts that took one look - without being able to explain why - intuitively knew that this was a fake?
Because the human brain is very good at coming to subconscious conclusions about complex matters. In the right circumstances, the intuitive 'gut feel' can be more accurate than all the tests you can devise.
Obviously, there are certain factors that make this work. These were experts in their field, with a lot of experience of dealing with such objects. It's easy for someone to hold an intuitive position in ignorance that bears no relation to the facts.
Nevertheless, I do wonder whether the CSR indices and frameworks may not be just as poor at telling the authenticity of a business. They measure things that seem to the logical mind to be relevant, but can easily mislead.
So a company has a good environmental policy. So did Enron.
So a company has visionary products that are pushing its market sector into faster innovation in the future. Like hybrid cars, for instance. But does that tell you how well the company will cope with another social responsibility dilemma - for instance safety and product recalls?
If I'm judging a company, I am pretty influenced by a number of things that the indices will never measure. What's my 'feel' for whether the CEO gets it? Never mind what he says - that's probably been written for him anyway - what does his body language say?
Gladwell tells also about how certain clues in facial expressions and body language provided astonishing accuracy in predicting things like whether someone was lying, or indeed even whether couples would still be together in a year's time.
Likewise, what's the company like to do business with? I recall one company that won various accolades for its environmental programmes, its reporting and its charitable work, that nevertheless had a dreadful reputation amongst corporate customers for its arrogance in how it did business day to day. For me, that is a big warning sign.
Any idiot can craft a programme and call it CSR. But only a company with integrity in their overall corporate culture is going to be consistently and reliably responsible when faced with core business choices, and the difficult dilemmas.
It's all dreadfully intuitive and unreliable, of course. So we devise complex systems, and gather more and more information. More information is good, right? Who would ever claim that in order to make the right decisions, they should have less information?
But Gladwell points to various situations where more information has been debilitating, not helpful. A surgery where doctor's decisions on whether someone was having a heart attack were identical to flipping a coin - but once they isolated the three or four factors that actually counted and ignored all the rest of the information, accuracy went up dramatically.
And the military exercises where the side with superior intelligence and tactics lost dramatically to the opponent that decided to move smart and fast, and to be aggressive in the face of less information. Whilst the analysts were poring over all the data, their theoretical warships were getting slaughtered.
I don't think I'm saying that the tools and indices have no value whatsoever. I think that reviewing and comparing companies on some of these details is what, over time, helps to provide that expertise and familiarity base that can turn into sound judgement.
But many of them purport to identify the most responsible companies, and to rank them. They purport to do this to help investors make investment decisions, and consumers make buying decisions.
They are just not competent to provide that degree of certainty.
Reproduced with kind permission from Mallen's Business Respect newsletter. To sign up or visit the Business Respect website, click here