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The financial crisis: will CSR survive the fallout?

November 2008

Could recent events in financial markets be the death of corporate responsibility and responsible investment, or the making of it? Seven commentators give EP their views.

Mark Goyder, founder director of Tomorrow’s Company, UK
This is judgement day for corporate responsibility. A few years ago I remember challenging the CSR spokesman for a major bank about conflicts of interest in that bank’s investment banking activities. He clearly had little knowledge, let alone ownership, of this mainstream issue around the way a large part of his company behaved. If CSR doesn’t flow from the core values and through the core activities of a company it will not survive – and may not deserve to. If it does, then it should be closer than ever to the company’s management of risk.

Dirk Matten, chair in corporate social responsibility, Schulich School of Business, Canada
In the short term, CSR might very likely take a hit, with ‘We have to tighten our belts’ the most popular excuse. Long term, though, what is virtually the nationalization of the banking sector in many economies might embed a broader social responsibility in the industry. Shareholders are no longer fat cats only, but middle class pensioners and home owners. New regulation and revised governance procedures may result in more embedded CSR by orienting corporate responsibilities not only to shareholders’ short-term returns but towards good governance of the long-term interests of society.

Janet Williamson, senior policy officer, UK Trades Union Congress
In recent years companies have  argued that CSR is not an ‘add-on’ to operations but integral to all they do. These challenging times will put that assertion to the test. One of the lessons from the financial crisis is the importance of long-term, responsible decision making and the need to manage risk. There is no good reason why the credit crunch should lead companies to cut back on their CSR strategies, and if this is what happens, we will know that the corporate responsibility sceptics were right.

Simon Zadek, chief executive, AccountAbility, UK
With crisis comes opportunity. This is a once-in-a-lifetime chance to realign the investment community towards genuine responsible investment. This would involve, at least, (a) restructuring bonuses to incentivize long term investment behaviour and discourage short term trading; (b) refashioning pension fund governance to make decisions more transparent and responsive to the owners of capital; (c) building a suite of new credit agencies and auditors truly free of financial conflicts of interest. The future will assuredly be worse if we do not step up to the plate in demanding such changes. And the window is small. Once the pain retreats thanks to large chunks of tax dollars rather than any clawback of undeserved bonuses (hundreds of billions of dollars, let’s not forget), the space to bring change will close.

Tom Peyton, managing director, EnAct Consulting, UK
Three key concepts have been highlighted in recent weeks – accountability, responsibility and transparency – all of which are fundamental to corporate responsibility. Stakeholders will want to see a return to these fundamentals, presenting an opportunity for companies to claim the higher ground. Companies and directors will feel exposed and will look to corporate responsibility programmes to restore trust, add value and differentiate. Expect CSR to get much more focused.

Julie Gorte, senior vice president for sustainable investing, Pax World Funds, US
The credit crunch will affect most, if not all, sectors in the short run. In the medium and long terms, though, the drivers of corporate sustainability remain strong. An example of a medium-term stimulus is the recent renewal of the solar investment tax credit in the US, which allows homeowners to write off 30 per cent of the installed cost of a solar system from federal tax. A long-run example is climate change. Finally, the diffusion of information technology will heighten global scrutiny of corporations. Progress on climate change, gender empowerment and alleviation of poverty may be slowed by shorter term economic pressures, but it is worth remembering that availability of credit is merely a means to an end; the ends are unchanged by temporary variations in the means.

Matt Christensen, executive director, European Social Investment Forum, France
Recession and uncertainty will drive businesses to focus on urgent short-term challenges, and CSR may not immediately be top of mind for business leaders in the short term. In the longer term, resource constraints and under-built infrastructure across the world mean that environmental, social and governance issues will only grow as a business concern.  Dealing effectively with CSR issues will become even more a part of mainstream business culture in the next three to five years, not less.




Global | Financial Crisis

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