Presented by Milton K. Wong to The World Environment Centre and International Environment Forum North American Roundtable: “CSR: Building the Business Model and the Business Case.” October 2004, Montreal.
“…Competition for market share is fierce, and consumers can choose from a wide selection of providers of just about anything, from cars to shoes to energy. Studies are showing that consumers with sufficient means will buy from socially responsible corporations even if their prices are slightly higher than those of competitors. If prices are equal, even more people will choose the responsible corporation over its more careless competitors.
“Then there are investors, who are even more likely to be concerned about corporate social responsibility. Globalization has created a whole new set of liabilities for companies, and investors are keen to consider and mitigate those potential risks. There is a growing body of evidence to support the notion that socially responsible corporations are a better investment bet in the long run.
“At its genesis, socially responsible investing was chiefly concerned with what we called ‘negative screening’ in order to filter out the corporate bad boys. Over the years, this kind of investing has progressed to include looking at corporate accountability in the context of risk to long-term shareholder and stakeholder value. That’s because a company’s bottom line doesn’t exist in a social vacuum. It’s impacted directly by shareholders, customers, employees, suppliers and communities, each of whom lives in a world where value systems are always evolving. The corporation’s value systems have to keep up.
“For example, nobody used to care where their coffee came from as long as it was hot. In the past decade, there has been a coffee revolution. Information about fair trade, bird-friendly coffee, shade-grown and organic coffee, and news about the poor treatment and compensation of coffee farmers in developing countries, has created a huge market for purveyors of coffee with a conscience—and has resulted in the success stories we know today as Starbucks and Bridgehead, among others.
“Similarly, no one wants to find out that a company whose shoes they wear is relying on child labour in another country. No one wants to find out a company is dumping toxic effluent into the river they grew up swimming in. No one wants to find out the person who picked the banana they ate for breakfast later gave birth to a baby with defects because of the pesticides used. When people find out things like this, they vote with their wallets. They give their business to companies that are better behaved.
“When corporations are discovered to be the perpetrators of environmental violations or worker exploitation, or are accused of unethical behaviour, consumers get hostile— and the smart investor is alarmed. The fact is that such misdemeanours are associated with poor management and flawed business models.
“The prudent investor knows that these are the companies that will not improve their behaviour until expensive litigation or regulation forces them to. As a result, they will lag their competitors….”