Exclusive research for The Observer shows that the business world faces a big challenge in persuading opinion formers that companies are serious about corporate social responsibility (CSR) and do not need to be forced to behave better.
The research reveals high levels of scepticism among leaders from the voluntary sector, education, local government and media about companies’ claims to be improving their environmental performance and benefiting communities.
The panel of activists and leaders in key social sectors come across as firm believers in CSR but do not think the corporate world can be trusted with a voluntary approach, especially in the face of a recession.
Their clear call for legislation comes as the Government is considering how to preserve its business-friendly stance and head off the anti-corporate sentiment fuelled by globalisation protests.
The Trade and Industry Secretary, Patricia Hewitt, is deliberating on how to enact the recommendations of the mammoth Company Law Review. The 500-page report from the three-year review landed on Hewitt’s desk as soon as she took over at the DTI after the election.
It recommends that directors have broad responsibili ties, while retaining direct accountability only to shareholders.
But the Government will be under pressure to legislate for clearer responsibilities to society, and to require reporting of social and environmental impacts.
The CSR minister, Doug Alexander, is under pressure to take a more active line than his predecessor, Kim Howells, who pursued a policy of encouragement rather than ‘naming and shaming’ or compulsion. Alexander will make his first public statement on CSR next week in the City.
So far there has been little indication that the DTI will soften its opposition to regulation, hoping instead that companies will be forced to demonstrate greater respon sibility by activity from non-governmental organisations (NGOs), consumers and investors. Mainstream investment managers are putting increasing pressure on companies to address social and environmental risks.
New indices such as FTSE4 Good have grabbed the attention of finance directors and put CSR on the boardroom agenda. But the business world insists that companies be left to develop social responsibility on their own.
Julia Cleverdon, director of the business-led CSR lobby, Business in the Community, said: ‘Anyone pushed into CSR will do the bare minimum and just pay lip service.’
But those polled in the research for The Observer think that is what is happening now, under the voluntary approach espoused by Business in the Community. These ‘community leaders’ were asked if they believe British businesses are sincere when they say they want to be good ‘corporate citizens’. Half of the 100-strong panel felt they could not make a judgement. Among the rest, there was a slight majority of doubters. Just under a quarter agreed that companies are sincere about corporate citizenship.
This scepticism is clearly focused on companies’ sincerity – not on the potential for greater social and environmental responsibility.
An overwhelming majority believes that CSR need not conflict with financial requirements, even among public companies with clear duties to external shareholders. Only 5 per cent disagreed with this notion, while 58 per cent agreed strongly with it.
Enthusiasm for CSR was confirmed in another question. The public and voluntary sector leaders overwhelmingly rejected the idea that the Government expects too much from companies on social responsibility. Just 28 per cent supported this view.
The Government’s view that the private sector needs to make more effort to enhance its contribution to society may have won support. But its determinedly voluntarist approach did not.
Three-quarters of the panel agreed – most of them ‘strongly’ – that legislation is necessary to make companies act more responsibly. Only one in eight disagreed with this proposition.
This view appears to be based partly on the feeling that community involvement, environmental projects and other corporate social responsibility activity, will dwindle in a recession. The vast majority agreed that there would be less CSR activity in harder times.
The research was carried out by The Smart Company, a CSR consultancy, among a panel of social sector leaders in areas such as the arts, sport, housing, education, employment and voluntary organisations.
The panel also includes a number of small business leaders. Polling took place in the week following the terrorist attacks in the US.