For further information: Simon Zadek David Vidal tel: + 44 (0) 7930 388 509 The Conference Board For Release Wednesday, December 6, 2000 Release #4609A
CORPORATE CITIZENSHIP IS EMERGING AS A CENTRAL BUSINESS ISSUE New Conference Board Report Examines Whether It Contributes to Business Strategy
Globalization, competition and shareholder activism are increasing corporate citizenship programs around the world, according to a report from The Conference Board.
"Corporate citizenship is emerging as a central issue for business," says Simon Zadek, chair of the London-based international professional body, the Institute of Social and Ethical Accountability, and author of The Conference Board report. "As its significance in terms of policy commitments and practices rises, so too do the calls for proof of its results by stakeholders including customers, employees, suppliers, governments, communities, and shareholders."
The increased size and influence of companies, the retrenchment or repositioning of government, the growth in information, and the war for talent, are also spurring the citizenship movement.
DOES DOING GOOD RESULT IN FINANCIAL GAINS?
There is clear evidence that "doing good" produces financial gains by improving employee recruitment, retention, productivity, customer loyalty, and a positive public policy environment. But it is equally possible to do all sorts of good things and see no financial gains, or worse, suffer financial losses as a result of taking one's eye off the critical elements of business success.
"The viability of the broadening scope and impact of corporate citizenship depends on a company's success in integrating good corporate citizenship into its core business strategy, rather than treating it as an ad hoc add-on," says Zadek.
THE BUSINESS CASE MUST BE DEFINED
Since companies engage in corporate citizenship for a variety of reasons, the business case for citizenship initiatives must be clearly defined, The Conference Board study finds. Among the different types of cases:
-- The case for defending reputation and avoiding potential financial loss
-- The traditional cost-benefit business case, in which specific activities are expected to yield tangible financial gains
-- The strategic business case, through which corporate citizenship becomes an integral element of a company's broader strategic approach to long-term performance
-- The New Economy case, through which companies feel citizenship can help them manage risks and promote innovation and learning in a dynamic and complex environment.
THE GROWTH OF ACTIVIST INVESTORS
While investment funds that contain social and environmental screens have until recently been ignored by most companies and fund managers, the growth of these funds and their wider influence is making such behavior less sustainable. The U.S.-based Social Investment Forum estimates that taking social screening and shareholder activism together, approximately $1.2 trillion, or 9% of the total investment assets under management in the U.S., engaged in some type of socially responsible investing in 1997. Equally important is the fact that these funds are shifting rapidly from a negative screening approach -- essentially excluding the "bads" from their portfolios -- to an activist shareholder approach that variously offers public challenges and private advice to companies they target for improved social and environmental performance. Screened funds are rapidly becoming a force to be reckoned with because of their leverage.
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Source: Doing Good and Doing Well: Making the Business Case for Corporate Citizenship Research Report #1282-00-RR, The Conference Board
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