Monday, February 20, 2006

Beyond Profits--What Do Corporate Executives Think About Social Responsibility?

The liberal left frequently criticizes corporations for reaping large profit but refusing to contribute to social causes, such as environmental protection, improvement of labor conditions, rising salary, and corporate philanthropy. Ever wonder how this issue is viewed from the corporate executives' perspective?

According to a global survey done by the McKinsey Quarterly, executives around the world "overwhelmingly embrace the idea that the role of corporations in society goes far beyond simply meeting obligations to shareholders." While this finding is certainly encouraging, the McKinsey Quarterly also found that "most executives view their engagement with the corporate social contract as a risk, not an opportunity, and frankly admit that they are ineffective at managing this wider social and political issue."

The extensive survey was conducted in December 2005, received responses from 4,238 executives—more than a quarter of them CEOs or other C-level executives—in 116 countries. The general agreement on the corporate sector's social responsibility is one very positive step forward, a change brought by significant input from social activists, NGOs and government regulations.

Currently, many of the social responsibility projects are done through large public relations campaigns and lobbying of the government. Yet many executives responded to the survey saying that more effective avenues for social commitment may instead come from better ethical policies within the company, engagement with the stakeholders, more transparency with the risks of product, and collaboration within the industry to bring about social commitments.

The company executives are not operating without concern when it comes down to furthering sociopolitical causes. When asked if their own companies are active in pursuing social good, many emphasized that there could be risks to the reputation of companies, as well as the potential for damaging their shareholder value, if the company engages in socially beneficial projects.

So what exactly are the big companies doing these days beyond the usual profit-seeking? Some positive news:

Baxter International Inc. is donating more than 280,000 doses of the company’s NeisVac-C (for meningitis) vaccine to International Health Partners (IHP). The donation will help complete the inoculation of the nearly 500,000 earthquake victims at risk of contracting meningitis in Kashmir in advance of the coming spring, one of the region’s (India and Pakistan) most prevalent seasons for outbreaks.

Alcoa has signed an Agreement in Principle with the Government of the Republic of Trinidad and Tobago to build a world-class 341,000 metric-tons-per-year aluminum smelter (mtpy) in the Cap-de-Ville area in southwestern Trinidad. Under the terms of the agreement, Alcoa will begin an environmental impact assessment (EIA) for the location in Cap-de-Ville as part of the company's commitment to sustainable development principles. The company will also complete detailed feasibility studies to determine the full scope and cost of the proposed project.

Latakia Communications officially launched its new website, Latakia’s Socially Responsible Business Forum.

These are some very recent examples to show that corporations DO give, and they DO care. From a more critical viewpoint, though, these corporations can always have self-interested motives. According to the McKinsey survey, "only 8 percent think that large corporations champion social or environmental causes out of 'genuine concern.' Almost nine in ten agree that they are motivated by public relations or profitability, or by both concern and business benefits in equal measure."

Looking ahead, respondents to the survey suggested that there are major social issues that will affect the corporate world in the near future, including job loss and offshoring, corporate political influence, environmental issues, pension and retirement benefits, and privacy and data security.

Judging from the report, it seems like the current state of corporate philanthropy is one of a mixed bag. While many recognize the value of social contribution, other concerns can override the corporate sector's wish to engage actively in social commitments, whether this wish is of a genuine concern for the society or with self-interested motives.

McKinsey Quarterly, The McKinsey Global Survey of Business Executives: Business and Society, January 2006.

Corporate Social Responsibility Wire (CSR Wire)

Latakia's Socially Responsible Business Forum