Corporate social responsibility and the global reset ~ Management 2.0 developing social capital

Thursday, 5 February 2009

Corporate social responsibility and the global reset

On Monday's Talking HR show, I spoke about how businesses need to prepare for the longer, as well as just the short-, term. And I mentioned the World Economic Forum leaders' call in Davos for a 'fundamental reboot' of the economy. This reboot will be partly structural, led by the 'global redesign initiative' to reform banking, regulation and corporate governance; and supported by other initiatives, such as Obama's curbs on executive pay. But I think it needs to be largely cultural as well; it needs to be about a new way of doing business.

This point is coming through strongly from many different areas, including many / most? of the leaders at Davos. But I still wonder how much things are really going to change. There's almost as much push back as there is momentum forward.

Take this article on CSR by Stefan Stern at the FT. Stern suggests that "now the recession’s here we can forget all that nonsense about corporate social responsibility (CSR) and get back to trying to make some money".

He describes my uncertainty about momentum and push-back as a "mismatch" between "politically correct rhetoric" and "the reality of what managers have to do every day of the week". And he concludes: "we need to cut through the well-meaning waffle".

So in Stern's view at least, nothing's going to change. We're just going to carry on with reducing levels of trust, happiness and engagement, and assume that organisations designed for the 20th century still do the job today.

I don't believe we're going to let that happen. And I hope that there are enough CEOs and business leaders in the world who for their own sakes, and the sakes of their companies, as well as any progressive or humanistic principles they may have, will ensure that we don't.

Stern provides a couple of examples of the 20th century leader. One is Terry Leahy, CEO at Tesco:

"In an article for the Daily Telegraph last week, Sir Terry let off steam about what he sees as the growing risk of over-reaction by governments and regulators in the current crisis. We risk losing sight of a few fundamentals: 'free trade in competitive markets, enabling individuals to pursue their own interests, and all within a clear framework of law,' he wrote. Do-gooders, whether they mean to or not, are likely to do bad.

Yes, he went on to say, the role of something called 'green consumption' could also play a powerful role for good, in cutting the use of carbon.

But it is obvious where Sir Terry’s priorities lie. In a lecture in the same week he told suppliers that they would be coming under increasing pressure to cut the prices they charge Tesco this year. How worried is Sir Terry by the thought that his suppliers may be forced into finding cheaper and potentially less environmentally friendly ways of producing their goods? Not very, would be my guess."

I do believe that CSR and more generally, the rebooted economy, need to be supported by more government regulation. Tesco does need to be constrained before the whole of the UK is covered over in concrete and fake clock towers. But both CSR and the rebooted economy also need to be supported by a real desire to engage.

Compare Stern's and Leahy's comments to those of Jeffrey Immelt, GE's CEO, speaking at the BSR CSR conference last year (on the video). Echoing the Davos leaders' call for a 'fundamental reboot', Immelt notes that the current economic crisis represents a 'reset' - not just a part of the standard business cycle:

"The era of transparency; accountability for corporations; responsibility - is profoundly different today versus where it was even six months ago... You've got the run the company with trust - compliance, governance and transparency... a long-term dedication to people. Companies need to stand for something - they need to be accountable for something more that just the money they earn..."

Immelt also suggests that "people who understand this will prosper in the future, people who don't understand that will be left behind". I tend to agree - GE's going in my HCM fund, and Tesco's staying out.