2005 Corporate Responsibility Index:
Trustee's report
by Simon Longstaff
The views expressed in this article by Simon Longstaff are solely those of St James Ethics Centre and explicitly are not those of, or endorsed by, any other organisation associated with the operation of the Corporate Responsibility Index (CRI) in Australia or overseas.
Free markets work best when people have good information on which to make their choices. The decision by consumers, investors and employees to deal with a company or purchase a product on the basis of their commitment to the corporation's practice of corporate responsibility is neither more nor less legitimate than a choice based on any other of the vast number of intangible qualities that go to make up a brand. As a voluntary tool, the CRI aims to utilise the mechanism of the market by demonstrating that self-interest need not be (and is not) at odds with responsible choice.
As Trustee for the operations of the CRI in Australia, St James Ethics Centre is responsible for three primary tasks. The first is to provide general management and coordination of the Index process, its review and development. The second is to promote the Index as a useful tool for the measurement and better management of elements of business operations that have traditionally escaped close monitoring. Finally, the Centre seeks to ensure that the integrity of the core methodology is maintained and enhanced.
Each of those tasks presents continuing challenges – ranging from enhancing the long-term sustainability of the program through to convincing Australian business that participation in a voluntary program of measurement and performance enhancement is a better alternative to berating government about the regulatory burden without offering a viable, market-based alternative.
However, eclipsing these issues during the current round of the Index has been the far more challenging question of how to deal with the active participation of companies that are, largely, either disgraced or justifiably maligned. For example, two participating companies that fit this description, at present, are AWB Ltd (AWB) and British American Tobacco (BAT).
Given the scandal surrounding AWB and its alleged corruption of the UN Oil for Food program, or the long-standing condemnation of BAT for continuing to market its lethal, addictive tobacco products, one can easily imagine a degree of mirthful incredulity at their inclusion in the CRI. Apart from being a potential source of embarrassment for all concerned, the larger problem is that the advocates of increased regulation and surveillance (rather than voluntary engagement) in this area will seek to discredit the whole exercise by lampooning what they claim to be deficiencies.
Given this, we have been carefully evaluating the question of who should (or should not) be invited to participate in the CRI. On balance, we think that the ethical argument supports a policy of ‘open entry’ – and that it is right to include all companies and sectors. However, given that some will judge this to be too liberal an approach, it is important to outline our reasons.
The principal argument against allowing companies like AWB and BAT to participate is that it aids them in manipulating and thus distorting public opinion about their underlying virtues as companies – often called ‘greenwash’. The term suggests that some companies engage in the rhetoric of corporate responsibility in order cynically to disguise their true character – as better revealed by specific failures of conduct.
That some companies might do this is not mere speculation. There is compelling documentation demonstrating that some tobacco companies (and their advisers) have in the past sought to hijack the corporate responsibility agenda in order to neutralise opposition and escape the harsh judgement that is their proper due. For example, here is how one BAT executive, Michael Prideaux, briefed the company's Board, in 2000, on the topic of indices like the CRI:
The process will not only help BAT achieve a position of recognised responsibility but also provide ‘air cover’ from criticism while improvements are being made. Essentially it provides a degree of publicly endorsed amnesty.
So, why should any organisation allow a tobacco company, or one tainted by allegations of corruption to participate in an exercise like the CRI?
For us, the most compelling reason for doing so is to challenge, at its root, the claim that business has no obligation beyond conformance with the law. Tobacco companies rely on this position as their ultimate defence when they claim their right to sell a legal product. In making this claim they have rejected the proposition that companies might go beyond what is lawful to do what is responsible and right. Ironically, the people who claim that companies ought to have no obligations beyond obeying the law invite a relentless increase in regulation and surveillance – as that is the one, blunt tool they accord legitimacy.
We believe that ethical obligations exist prior to the law. Some laws are ethically neutral (for example, laws specifying whether cars should drive on either the left or right sides of the road). Others are in conformance with ethical obligations (for example, the law against murder accords with an ethical presumption in favour of the right to life). Some laws are at odds with ethical injunctions (for example, those laws that once allowed for people to own others as slaves).
If we exclude tobacco companies from participation in programs like the CRI, then we effectively concede to them the argument on which they ultimately rely. It is our view that it is far better to engage them in a process that exposes them to new ideas and in doing so, challenges the core beliefs that otherwise allow them to prosper from the preventable deaths of millions who cannot escape their addiction. That is, we hope that participation in the CRI will introduce companies, like BAT, to a set of standards that go beyond the minimum legal requirement. Once they engage on this level, then their ultimate defence begins to crumble – from within.
The situation with AWB is quite different. Unlike tobacco, wheat is a wholesome element in the diets of millions. There is nothing intrinsically unethical about selling wheat. The problem presented by AWB is to do with the means employed in order to secure some of those sales. Once again, it would be easy to turn one's back on the company. However, we believe that engagement is a better option – especially if there is to be some hope that participation in the CRI will help the company to reform a culture that appears to have tolerated corruption of a kind and on a scale that almost beggars belief.
AWB's situation has gone well beyond the possibility of successful ‘greenwash’. Its directors and managers cannot possibly hope that participating in an exercise like the CRI will affect the judgement that awaits them (whatever that might be). However, there is a very real possibility that the information gleaned from the CRI will offer them some starting points for genuine improvement. And that is what the CRI is ultimately about – providing information to improve performance rather than mere reputation.
While we are confident that the basic argument in favour of ‘open entry’ is sound, the critical test is whether or not the CRI performs to expectation – delivering a credible result which identifies companies’ strengths and weaknesses in equal measure. For the most part, the CRI does a fantastic job – providing excellent information. However, there is always room for refinement and the CRI is a ‘living document’ subject to continuing improvement.
The CRI is emphatically not an index that measures and reports on the ethical character and ‘health’ of organisations. It does a different and important job. Essentially the CRI is a tool for better management, its primary purpose being to examine the extent to which companies have successfully integrated corporate values and commitments into mainstream business practice.
We believe that this objective could be better realised by building on the useful degree of flexibility already built into the CRI. In order to cater for the different profiles of companies (mining companies manage risks of a different kind and scale to, say, media companies), the CRI currently allows a measure of choice when selecting questions of relevance to answer. We think that this principle could be extended to take account of 'threshold issues’ related to the heart of each company's business. The CRI methodology could then consistently measure and evaluate materially adverse consequences flowing from core business activities – such as the sale of tobacco.
The CRI is an excellent tool – generating benefits for business and the wider community in which it operates. The vast majority of participating companies is exceeding minimum requirements – with performance improving year-by-year. They set the standard to which we think all companies ought to aspire.
For further details of this year's results, to learn more or to register for the next Index please visit www.corporate-responsibility.com.au.
discuss this articleDr Simon Longstaff is Executive Director of St James Ethics Centre.
This article was first published in Living Ethics, issue 64, winter 2006
© St James Ethics Centre