It is 35 years since Milton Friedman, the influential free market economist, said: “The social responsibility of business is to increase profits.” In the intervening period, especially around the millennium, corporations began to sing a slightly different tune - seemingly more responsible and socially aware - some more cautiously and others more openly. This shift in focus has affected the way businesses see themselves, are seen by the public at large and by the top talent that the recruiters work so hard to attract.
The United Nations Global Compact (UNGC) is a non-regulatory agreement among the world’s nations from around the turn of the millennium, coinciding with other big issues such as the Kyoto Treaty and the World Business Council on Sustainable Development. Such topics appear to be gathering momentum and Corporate Social Responsibility (CSR), sustainability and environmental issues have become en vogue catchphrases for businesses around the world as a result.
As with most UN proposals, opinion is strongly divided. Many firmly approve and support the Ten Principles that drive the UNGC (for further details see www.unglobalcompact.org), while critics suggest it is a mere flash in the pan, a PR opportunity to react to the bad old days of corporate irresponsibility. Indeed on its website the British arms manufacturer BAe Systems mentions the words ‘responsible’ and ‘responsibility’ no fewer than 16 times (with no mention of the words arms or weapons at all).
Others maintain it lacks teeth as it is not regulatory and merely appeals to businesses to adopt the principles. Commentators such as David Vogel in The Market for Virtue argue that, “There is a business case for CSR, but it is much less important or influential than many proponents of civil regulation believe.”
In today’s shareholder society, there is no question that profits still form a bottom line and, as yet, there is no clear indication that a UNGC supporting company will be more or less profitable than one that is not. However some companies indicate that the benefits cannot be evaluated simply by end of year figures. Company culture, staff morale and recruitment are all heavily influenced by the kind of social influence suggested by the UNGC.
Lord Michael Hastings of Scarisbrick is a supporter and signatory to the UNGC and is KPMG International's Global Head of Citizenship and Diversity. For him, businesses that still hide behind the CSR shield or use it simply for PR are a dying breed: “Very few companies nowadays do this for flag waving or for reputation. Most companies are actively involved in environmental and climate issues, in community development, in recruiting, supporting and developing people in and backing alongside educational programs and international development programs.”
Others echo his sentiments, showing that influential work such as the UNGC is having a profound international effect. Christine Rivera, Principal in the Sustainability Practice at AT Kearney says: “We are striving to embed sustainability into all our practices and how we think about all our engagements. We try to look at assignments now through a ‘sustainability prism’ and ensure that all our recommendations – not just those made as part of a sustainability project – are, in fact, sustainable. It’s becoming part of the way we think.”
Statistics show that increasing numbers of MBA graduates are starting to shy away from applying to companies who, while offering equivalent salaries, are not seen to have strong CSR, sustainability or environmental ethics. An MBA is up to 20 per cent more likely to opt for a company with a perceived high ethical stance, and a 2007 survey by QS Quacquarelli Symonds, organizers of the QS World MBA Tour, showed that some of the more controversial industries that recruit business school graduates, such as tobacco, oil and defense, come low down the list of priorities for MBA aspirants.
The pressure put to bear on big businesses by innovations such as the United Nations Global Compact may divide opinion in some ways. However it is clear that, while the vehicle is at the policy-level of organizations and businesses, the drivers are the people and the targeted recruits of big businesses themselves.