C.S.R. should mean ‘Collective Shareholder Responsibility’

CSRSocial values drive commercial value. That statement might feel empty to many business leaders. But when Unilever reports that their ‘brands with purpose’ are growing at twice the speed of others in their portfolio, it’s time to sit up and take note.

Startups intrinsically understand this need to do good in order to do well. Looking at young ventures like Perfect World (premium ice cream made of nutrients that are positively good for you) to Aurelio beer (“the only beer brand that gives back to the men that drink it, by giving all of its profits to Prostate Cancer UK”) and Mozambique Renewables (biomass fuel produced for the UK from elephant grass in impoverished African communities), it’s clear that post-Yuppie entrepreneurs know how to turn social values into commercial value.

However, with a few notable exceptions like the aforementioned Unilever, big business is lagging behind. As O2’s chief executive Ronan Dunne neatly sums up, big businesses have “fundamentally failed” to do good and well in parallel.

But Rockefeller managed it. And so did George Cadbury. So why can’t today’s businesses do it? Just what is this force that’s stopping CEOs from pursuing commercially valuable social purpose agendas? Why hasn’t the fact that ‘social values drive commercial value’ pierced the consciousness of The Ultimate Power That Must Be Obeyed?

I don’t mean the customer. On the contrary. When it comes to mixing business and social purpose, customers have moved at lightning speed from suspicion through acceptance to outright expectation. Nor do I mean the chairman. Nor even the Chairman’s wife.

I refer to that ethereal being which, like Voldemort, lives ominously in the shadows, whilst holding boardrooms in its vice-like mental grip – appearing only once a year at the company AGM to give terrifying physical form to its spectral influence. I refer, of course, to…The Shareholder.

The benefit of long-term strategic thinking to major corporations was lost years ago to the short-termism of The Shareholder. Be that in public companies or those owned by private equity. Most CEOs are apprehensive of prescribing bold social purpose agendas for fear of shareholders bailing out; City analysts writing ‘sell’ notes; and the investment community generally thinking they have abandoned their suits and ties for a kaftan and a spliff.

We need to change the culture. Just as Rome wasn’t built in a day, so it is hard to demonstrate that societal value will create more shareholder value, when that value is measured via quarterly profit reporting. The Dow Jones Sustainability Index has benchmarked company performance on societal impact for 16 years. But shareholders still rarely use it as the basis for buying or selling. Nor is the global business community meaningfully aware of it. The index is effectively a cute add-on, just like a PLC’s annual Sustainability Report – a sideshow to the main event.

The business community is blessed with amazing leaders whose commercial instincts and burning desire to leave a legacy can help build nations, rebuild communities and yes, find a cure for cancer. But to encourage them, we need to help CEOs secure a ‘license to operate’ a social purpose agenda from their shareholders.

Gordon Gekko may have been right. Greed might well be good. But let’s make it longer term. Let us educate the shareholder community into understanding that social impact investment will produce a more loyal customer base, more sustainable revenues and a better quality of earnings for the companies in which they own stock. If shareholders are helped to understand that this return simply requires a little more patience, they could shift their focus from short-term yields to longer-term higher earnings, higher EPS and higher dividends.

It would be wonderful to create a new financial belief system that reduces volatility, locks out hedge traders and other short-term market manipulators; one that unites the shareholder community in understanding that by permitting their investees to do societal good, they will all do better financially.

Ultimately, we have to see that responsibility lies in the hands of all of us who have ever owned shares. And it’s for this reason that we need to redefine CSR (Corporate Social Responsibility) as Collective Shareholder Responsibility.(TLE)

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