The 20th Edge Debate: 6 May 2004

View Points

The following notes were made during the debate and reflect some strongly held views

1. Amazing that with state of financial services it is rich to hear about CSR. Disclosure requirements - trustees delegate the problem to fund managers. Have we moved forward - does this change behaviour - how do we achieve this? Market is the driver. Stakeholders have to look at the interactions. Attitude of owners is key. They want the companies to be well run, on financial and non-financial lines. The driver is the long-term value of the business. Our political system is not geared to attaining sustainable society - won't force energy saving on consumers for instance - people don't realise implications of their decision-making.

2. Invisible hand and shrinking … How can you do this so that it enables rather than hobbles people? Do we need to be against regulation - no. Major problem for business is in resisting what is considered to be anti-social practice. We need a new dividing line between what is acceptable regulation and what is not. Sometime management has too high a view of its own capacity. It needs to be about owners exercising their rights in the market to bring companies to book - on issues like fat cat salaries.

CSR does not have to be different from the market. CSR has become mainstream. We made sense of CSR when the owners, feeling the value of their ownership was being affected, started asking questions.

If customers demand something then it is a market pressure. Doing what most of your customer wants may make the world a worse place.

3. Enron was a boost to CSR industry. Do we have too high an expectation on the return on our investments? What is acceptable?

The economist's answer is that there is not an equitable return on investment. The return needs to be commensurate with the risk.

4. There must be a limit? The limit is set by competition

5. How can construction become more sustainable? Is CSR the way of doing this? What are the outcomes from the CSR reporting? Business are getting global and profit may exceed principle? Hasn't the WWF campaign for a million sustainable homes inspired business? Surely such advocacy is not a bad thing? The focus on means might mean we miss where we need to go?

If you believe engaging with stakeholders is a good way forward WWF project is a good example. In the same way reporting has also taught HBOS an awful lot. Helps answer questions on such things as what is responsible lending? We are at the start of journey It is about engaging with stakeholders. It is therefore a bit of both.

Are we going to agree on what sustainability is? When we look at the construction industry and its lack of progress there is a 'cycle of blame'. To break out of this, each group involved has to understand its responsibilities and have to be held to account. There has to be measurement for this to happen.

6. Much of the discussion has been defensive. What part of CSR is about companies showing leadership?

The debate has this negative aspect because people are worried about things going wrong. We find few companies make comment on the opportunities. They see it as risk management.

The problem is that the CSR debate has been hijacked. No room for business to say 'take the initiative' - it is too busy reacting

7. We heard a strict definition of CSR. If a company has risks that are not covered by law and is not doing CSR that is fine. CSR brings higher costs and impairs performance. I think very few people would agree with this. They believe that in non-quantifiable areas CSR adds value.

It is essential to take on board the financial and non-financial risk for the safeguarding the long-term value of the business. Our members employ a number of analysts and being incorporated into mainstream evaluation processes. From investor's point of view the reason why this area might not have progressed very far is because bank analysts do not take CSR into account. They work on financial models with an 18 months' horizon. They also work on business models that are open ended and look at where the business is going. It is what is material to each business.

The chairman invited a final propositions from each of the speakers:

On question of sustainable development: what should business do. I am not impressed by objective in making the world more sustainable as it is normally interpreted. How do people acquire satisfactory housing standards? Through individual countries making economic progress. Anything that holds up this process retards progress. CSR is supposed to support sustainable development, but it does the opposite.

Issue of insurance industry investing in fossil fuel industry when insurance industry is in jeopardy from climate change. Would like to see politicians grasp climate change.

Problem of characterisation of the business sector. The characterisation is that business = 'bad'. CSR cannot solve the problems of the world and should be seen as if it could. Would like to see better understanding of limits of CSR. Need a more grown up partnership between the different sectors of government.

We need to get away from using the term CSR altogether. We would be better talking about trust and loyalty. We should look to do away with its CSR team. It should be about quality. If you do this right you will stay in business. If you get it wrong you will go out of business.