Wednesday, July 22, 2009

Fiduciaries Need to Proactively Raise Corporate Responsibility Matters

As the global financial crisis moves into maturity, it is clear that novel solutions must be found to a novel set of problems. The United Nations Environment Programme Finance Initiative(UNEP) proffers such a new approach.

According to its most recent report, investment advisors have a fiduciary responsibility to proactively raise environmental, social and governance (ESG) issues, in addition to other financial matters.

KEY HIGHTLIGHTS OF THE REPORT:

* The global economy has now reached the point where ESG issues are a critical consideration for all institutional investors and their agents.

* Investment consultants and asset managers have a duty to proactively raise ESG issues within their advice and services to institutional investors.

* ESG issues must be embedded in the legal contracts between institutional investors and their asset managers to hold asset managers to account, and that ESG issues should be included in periodic reporting by asset managers. Equally, the performance of asset managers should be assessed on a longer-term basis and linked to long-term incentives.

* Institutional investors will increasingly come to understand the financial materiality of ESG issues and the systemic risk they pose, and the profound long-term costs of unsustainable development and the consequent impacts on the long-term value of their investment portfolios.

* Institutional investors will increasingly apply pressure to their asset managers to develop robust investment strategies that integrate ESG issues into financial analysis, and to engage with companies in order to encourage more responsible and sustainable business practices.

* Policymakers should ensure prudential regulatory frameworks that enable greater transparency and disclosure from institutional investors and their agents on the integration of ESG issues into their investment process--as well as from companies on their performance on ESG issues.

* Civil society institutions should collectively bolster their understanding of capital markets such that they can play a full role in ensuring that capital markets are sustainable and delivering responsible ownership practices.

* Market incentives that reward long-term investment must be made to help create responsible and sustainable capital markets that would help identify future challenges in the financial system, reduce the chances of further crises and help avert a "Natural Resources Crisis"--and accelerate the transformational process to a green, inclusive and sustainable global economy.

It will not be long before corporate directors, as fiduciaries, should have to play by the same rules. Stay tuned. . . .

(c) 2009 Adonis E. Hoffman

Saturday, July 18, 2009

Supporting the United Nations Global Compact

As the founder and chairman of the American Business Leadership Institute, I am proud to announce our support of the United Nations Global Compact, and our subsequent acceptance as a signatory by UN Secretary-General, Ban-Ki Moon.

The Ten Principles

The UN Global Compact's ten principles in the areas of human rights, labour, the environment and anti-corruption enjoy universal consensus and are derived from:

The Universal Declaration of Human Rights
The ILO's Declaration on Fundamental Principles and Rights at Work
The Rio Declaration on Environment and Development
The United Nations Convention Against Corruption

The Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti-corruption:

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights;

Principle 2: make sure that they are not complicit in human rights abuses.

Labour Standards

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour;

Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility;

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

Wednesday, July 15, 2009

Technology, Society & Corporate Responsibility

In a thought-provoking article in Information Week entitled, "Can Tech Companies Do the Right Thing?", Michael Hickins points out that some technology companies who have been held up as model corporate citizens in one continent are being castigated as bad actors in another.

He is referring to the recent allegation by Iranian protesters that Nokia--by use of its advanced technology by the Iranian government to spy on and track demonstrators--is complicit in the denial of basic of human rights to Iranians.

The irony, Hickins points out, is that Nokia recently was lauded as a leading socially responsible company for all of its good work in the U.S.

What this all suggests to me is that norms of corporate behavior can be adjusted to fact-specific situations and cited as either positive or negative.

Moreover, technology, which is normally thought of as a neutral tool (or force) that can be utilized for good or evil, may not be so innocent. I hesitate, though, to jump to the conclusion reached by the Iranian democracy dissidents that mere usage of a technological tool by a repressive regime, renders the technology inherently bad.

In their earnest efforts to draw international condemnation on the Iranian government, the democracy demonstrators have directed their wrath in the wrong direction.

(c) 2009 Adonis E. Hoffman

Monday, July 13, 2009

Responsibility of the Faithful

Faith-based socially-responsible investors generally, and those in the Catholic faith particularly, have not always been welcome voices among the chorus of corporate responsibility activists. But that is changing.

Occasionally shrill on the issues, these conscientious monitors remind us that there is more to the call for socially-responsible investment than the usual list of do-good stakeholder demands. Dare we say they are truly focused on how companies do business and how those business decisions will affect the whole of society.

Thus, Sister Patricia Daly of the Sisters of St. Dominic, who is director of the Tri-State Coalition for Responsible Investment should be commended for her principled stance on environmental and governance issues.

It is hard to argue with an order that takes a vow of poverty, chastity and obedience--and still finds room to make money for their investors.

(c) 2009 Adonis E. Hoffman

Wednesday, July 01, 2009

Has Corporate Responsibility Reached a Plateau?

If we believe the recent results of an IBM annual survey, it would appear that corporate responsibility in practice may have reached a plateau.

In a recent article in Forbes, two IBM execs point out that across the globe, managers are committed to sustainable practices, but don't always do the necessary follow-through. I've re-published the salient comments and advise you to read the findings for yourself.

"IBM recently completed its second annual survey of senior executives around the world asking them how they are handling green and sustainability issues in their corporate strategies. The results are encouraging in some respects, but they show how very far businesses still need to go to truly be on the road to sustainability.

"The overwhelming majority of the 224 respondents said they are committed to incorporating principles of corporate social responsibility into their business strategies--despite the global recession--as a way to improve their business performance, their contribution to society and their reputation. Some 60% said this was more important to them than a year ago; only 6% said it was less."

"And businesses, for the most part, are no longer just paying lip service to sustainability. They're trying to optimize their operations to reduce environmental impact and improve social effects while also improving business performance.

"But our survey shows a significant gap between the business and sustainability goals companies are setting for themselves and what they are actually doing to attain them. And information is at the heart of the problem.

"Specifically, our survey findings show that:

--Companies aren't collecting and analyzing the information they really need or aggregating it often enough. Because of that, they can't implement real changes to fundamentally increase efficiency, lower costs, reduce environmental impact and improve their reputations with key stakeholders.

--Few are collecting enough data from their global supply chain partners, so they're missing major opportunities to reduce the inconsistency, inefficiency, waste and risk that can ripple through a global supply network.

--Most still don't understand the concerns of their key stakeholders, particularly customers, and they're not actively engaging them to find out. That means they're missing out on knowledge that could improve their businesses and lead to new opportunities."

I suppose that means there's still a long way to go.

(c) 2009

Wal-Mart's Everyday Responsibility

As a company known for "everyday low prices", Wal-Mart has not exactly been known as a champion of corporate responsibility, primarily due to its employment and benefits policies that seem to shortchange employees in terms of healthcare coverage.

Whether that reputation is earned or not is debatable; what is indisputable today, though, is that Wal-Mart's tune has changed.

Along with the Service Employees International Union (SEIU) and the Center for American Progress, Wal-Mart--the nation's largest employer--has endorsed the so-called "employer mandate" which requires businesses to provide health insurance coverage in a letter to President Obama.

As Obama called for a new era of responsibility in his inaugural address, it looks as if the guys in Bentonville were listening. Bravo!

(c) Adonis Hoffman 2009