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It Pays to be a Good Citizen

Saturday, April 1, 2006 - 07:58

Corporate responsibility is much more than business throwing money at worthy causes, it's about environmental and social sustainability - and building customer trust. By Gillian Bullock

For the past four years Westpac, in partnership with Indigenous Enterprise Partnerships, has been sending employees to Cape York in far north Queensland to provide the indigenous community there with the skills and knowledge they need to help improve their lifestyle.

So far, more than 200 Westpac employees have ventured north for anything from two weeks to a year, and their total contribution is equivalent to 33 years of full-time work.

It's been a two-way street. Members of the Cape York community have started to budget and save for many items that had previously been beyond their reach; at the same time the Westpac employees who have been seconded to Cape York have returned to their regular jobs enriched.

This is just one example of corporate responsibility in Australia . And Westpac is clearly emerging as a leader in this field, ranking No. 1 on many local and global indexes that have been developed to measure companies' corporate responsibility and sustainability. Such indexes include Reputex, the Dow Jones Sustainability Index and Australia 's Corporate Responsibility Index.

So what is corporate responsibility, and how does it interact with the other buzz word, sustainability?

According to Graham Paterson, Head of Corporate Responsibility and Sustainability at Westpac, corporate responsibility is about doing the right thing socially, ethically and environmentally.

And sustainability is a key part of that corporate responsibility.

"Sustainability is a component of corporate responsibility," according to Paterson . "Ultimately corporate responsibility is all about sustainability. What it is saying for Westpac is that we have been around for 189 years and what can we do to keep going for the next 189 years."

But Ramsay Moodie, Director of Corporate Affairs at Fuji Xerox, does not agree with this. According to him corporate responsibility is more a subset of sustainability than the reverse. And under sustainability there are the subsets of environment and equity among human beings.

The World Business Council for Sustainable Development has the following definition: "The continuing commitment by business to behave ethically and to contribute to economic development, while improving the quality of life for the workforce and their families as well as the local community and society at large."

As ANZ Chief Executive John McFarlane observes: "Companies are not islands that exist separately from the communities within which they operate. Successful companies understand and engage with their customers, their staff and their communities."

Business imperative

Tim Sheehy, Chief Executive of Chartered Secretaries Australia, believes that companies embracing corporate responsibility today do so because it is usually a good business decision.

"A short-sighted focus on profits alone is not a sustainable approach to business," says Sheehy. "By contrast, pursuing a bona fide corporate responsibility policy can open up value-creating opportunities, build customer trust and promote innovation, all of which give a company a competitive advantage and builds a strong brand in the long run."

Former IBM Australia CEO and Managing Director Philip Bullock (recently promoted to head up IBM's hardware business across the Asia-Pacific region) says that corporate responsibility sends out a signal about values to clients, employees and the community.

"It's an intangible that becomes tangible when it comes to attracting and retaining the right employees," says Bullock.

Corporate responsibility is measured in the triple bottom line, a term coined in 1998 by John Elkington, the founder of the company SustainAbility. Basically, the triple bottom line is the quantitative measure of economic prosperity, environmental quality and social justice.

According to the Corporate Responsibility Index (CRI) in Australia, examples of possible corporate responsibility strategies include drafting a meaningful code of ethics, revising employment relations, social and environmental reporting and audits, philanthropy, employee volunteering, and community forums.

The CRI, a joint venture between St James Ethics Centre, The Sydney Morning Herald and The Age, and supported by Ernst and Young, was launched in February 2004.

For some companies, the focus is the environment, for others it's more community or employee based.

Fuji Xerox's Moodie says his firm sees responsibility towards the environment as half the equation.

"If we don't look after the environment, then we have a real crisis," says Moodie.

One of the recent highlights for Fuji Xerox on the environment front is the establishment of an "end-of-life" equipment recycling facility in Thailand.

"With the capacity of the Thailand facility being progressively implemented, we can see our target of zero waste to landfill will be achievable," says Moodie.

ANZ, meanwhile, has broadened the initial emphasis it placed on its customer charter and employee engagement when it started down the path of corporate responsibility some five years ago.

Julie Bisinella, Head of Corporate Responsibility at ANZ, says the bank's focus now includes such issues as improving the public's financial literacy as well as an environmental charter.

From the bank's perspective, there are two strands to its environmental focus.

"We look at the direct impact on the environment of the resources we use, while indirectly we consider the impact of our lending decisions on the environment. For instance, we look at ways to engage our clients in identifying and managing key environmental and social issues relevant to their business," says Bisinella.

Beyond chequebook charity

David Grayson, Chairman of the UK's Small Business Consortium and Director of Business in the Community, says the days of corporate chequebook charity, where companies simply gave money away to good causes, have largely been superseded by corporate community investment.

This is certainly where Westpac's Cape York project fits. In a similar vein, ANZ employees are given the opportunity to take eight hours of paid volunteer leave each year. ANZ also offers the chance to take a two-year career break once employees have notched up five years' service, which allows employees to pursue other interests including volunteering.

According to Grayson, volunteering can improve a company's image within the community in which it operates, thus strengthening its reputation. In addition, a company offering volunteering opportunities can often improve its ranking in terms of being an employer of choice.

Westpac's Paterson says: "Our corporate responsibility record is a key decision driver for a lot of new employees. It means we can attract very good quality employees and keep them."

A balancing act

Of course, corporate responsibility needs to deliver to all stakeholders - employees, customers, the community at large and shareholders.

As Paterson says, there is no point pursuing corporate responsibility without recourse to delivering real shareholder value.

"You can never lose sight of the bottom line and the need to always drive shareholder value," says Paterson. "After all, if the business fails, what does all the corporate responsibility stand for?"

Fuji Xerox Managing Director Phil Chambers reinforces this view. "In the context of sustainable development, successes and the resultant profitability are highly important. Without sound profitability, options are reduced, there is pressure to protect the profit to the detriment of long-term investment whether that be in the business or the community."

In most cases corporate responsibility is not a stand-alone part of a business but something that reaches across the whole spectrum.

"There is no specific corporate responsibility program at Westpac," says Paterson. "It's just part of what we do."

While many Australian companies have taken on corporate responsibility in recent times, the quality of their reporting lags behind the rest of the world.

According to recent research by the Federal Government, Australian companies have been slower than their global counterparts in adopting sustainability reporting.

Only 23 per cent of Australian companies currently publish a sustainability report. This is discouraging when compared with companies adopting the practice in Japan (80 per cent), or Britain (71 per cent).

And of those who do, Paterson says only about six Australian companies actually have their reports audited at present.

Paterson makes the point that an unaudited report carries nowhere near as much weight since words without substance don't mean a great deal.

Some companies have been publishing reports for a number of years. At IBM, for example, an Environment and Wellbeing Report has been issued since 2000, while a formal Corporate Responsibility Report has existed since 2002.

Insurance group IAG is another company that takes corporate responsibility seriously. Given its line of business, IAG focuses on reducing risk in the community.

"To achieve positive long-term social outcomes, an organisation must invest in initiatives closely aligned with its purpose," says IAG CEO Michael Hawker.

These include programs covering such issues as promoting safety at home, at work and on the road, reducing crime and helping slow the effects of global warming, which IAG believes is linked to the increasing number of catastrophes.

At ANZ, Bisinella says the bank tracks its performance through a number of measures. These include surveys on customer satisfaction and employee engagement, the outcomes of its community programs, and the assessment of corporate responsibility ratings agencies such as Reputex, CRI and the Dow Jones Sustainability Index.

"These agencies identify and rate leading CR [corporate responsibility] practice and help companies to understand opportunities for improvement," says Bisinella. "And the bar is being raised continuously."

And that's not such a bad thing. As the Corporate Responsibility Index reports, benefits from engaging in such an activity are numerous, including improved financial performance, reduced risk exposure, enhanced brand image, increased staff motivation, and reduced costs through environmental best practice leading to more sustainable profitability.

Westpac's experience at Cape York is an example of where involvement in a local community has paid many dividends. The program has proved so successful that Indigenous Enterprise Partnerships has identified Shepparton in Victoria as a second location to extend its work to.

The two-way street that exists here probably sums up what corporate responsibility is all about. It reflects the interdependency of business with its various stakeholders, whether investors, employees, customers or the community at large...and this delivers tangible results.