70 percent of CEOs surveyed by the World Economic Forum (WEF) believe
that mainstream investors will have an increased interest in corporate
citizenship issues, according to a report released by the WEF in
January. Developed by the WEFs Global Corporate Citizenship
Initiative (GCCI), in partnership with the International Business
Leaders Forum (IBLF), the report explores how CEOs, CFOs and investor
relations officers (IROs) from 14 market sectors and headquartered
in 14 different countries communicate the strategic importance of
the social and environmental aspects of their firms performance
to investors. It examines how these companies are articulating both
the business case and the leadership or values
case for global corporate citizenship, highlighting some of the
challenges of communicating often intangible, but nevertheless quite
relevant issues to owners.
We see increased interest in the social and environmental
aspects of corporate performance by pension funds, insurance companies
and other shareholders, said Richard Samans, WEF managing
director, who added, 2004 might just be the year corporate
citizenship comes of age in the mainstream investment community.
Based on the experiences recounted directly by many of the CEOs
and CFOs questioned, the report, Values and Value: Communicating
the Strategic Importance of Corporate Citizenship to Investors,
makes note of a number of effective practices and offers a set of
recommendations for those seeking to communicate the importance
of corporate citizenship to shareholders and investors. Key findings
1. Signs of change in the financial sector: In a limited, but
interesting number of cases, during 2003 some of the worlds
major institutional investors started to flex their muscles on issues
related not only to improved corporate governance and ethics, but
also broader issues of corporate citizenship. At the same time,
the Socially Responsible Investment (SRI) movement, while still
representing a tiny percentage of global funds under management,
continues to grow in terms of size, sophistication, geographic scope
2. Obstacles to overcome: The CEOs, CFOs and IROs surveyed
identified five interrelated types of obstacles to mainstream investors
showing more interest in how corporations address the risks and
opportunities related to corporate citizenship:
* Problems of definition of corporate citizenship/corporate social
* Problems of making and measuring the business case.
* Problems with quality and quantity of information.
* Problems of skills and competence in managing and measuring CSR.
* Problems of time horizon for measured impact on business performance.
3. Four golden rules: Survey respondents identified four
rules for communicating the importance of corporate
citizenship to investors:
* Frame corporate purpose, principles and values with clarity.
Even when speaking to investors, corporate citizenship needs to
be about more than simply making a business case that
links it directly to bottom line benefits. It should also be a statement
about what the company stands for and would stand by, even if this
sometimes incurs costs or results in a lost business opportunity.
* Emphasize the social contribution of core business. At
the same time, business leaders need to be less defensive about
their core role in society. They need to be able to demonstrate
the societal contribution made by their economic multipliers such
as employment and income generation, technology transfer, training,
supply chain development, innovation and wealth creation.
* Present a credible and measurable business case for corporate
citizenship. Each board of directors and executive team needs
to be able to define, explain and, ultimately, measure the ethical,
social and environmental risks and opportunities faced by its company
and industry sector including both intangibles and their impact
on reputation as well as the measurable.
* Ensure consistency and coherence of message. A major cause
of distrust, among investors as well as other stakeholders, is inconsistent
messages and incoherent policies from business. Corporate leaders
need to apply a similar rigor and analysis to their social and environmental
reports as they do to their annual report. They need to ensure that
their social and environmental commitments extend to all aspects
of the company, from the boardroom to the mailroom, from public
policy positions to pension fund options, and from headquarter functions
to far-flung operations.
To view the report, visit www.weforum.org/corporatecitizenship
For further information on the Global Corporate Citizenship Initiative,
the report and the initiatives CEO statements, contact Caroline
Bergrem, GCCI project manager, at firstname.lastname@example.org.