An alternative way of analysing CSR impact?

Analysts at Co-operative Asset Management (CAM) recently published an assessment of which companies in the UK FTSE 350 have the most sustainable business models. Sustainable equals CSR doesn't it? Or does it?

In this case, 'sustainable' does not mean what we might expect it to. The chair of CAM, John Reizenstein, has been quoted as saying that the assessment sets aside the ethical question of which companies are the best corporate citizens. Instead, he says, it looks at long-term environmental and societal trends and suggests which companies have a sustainable business model in a world of scarce resources.

In other words, it is predicting whose business is likely to survive because it is addressing these concerns for economic reasons, not because of a moral imperative.

Logically speaking, there will be a large amount of cross over between those companies which do take CSR seriously for moral reasons and those which have a sustainable business model. In part, this is borne out by the results of the CAM study, which was commissioned for the UK Sunday newspaper, The Observer.

For example, in the mining and oil sectors, companies in mineral and fossil fuel extraction such as Shell and BP are highlighted as having a poor sustainability outlook. The reasons demonstrated are that they are running down their assets and often face damaging pollution issues. Companies mining minerals will also benefit from demand in emerging markets, but many cause environmental difficulties for populations or operate in unstable countries. Those which are disrespectful of the communities in which they operate often suffer financial consequences. Vedanta, with its attempts to mine bauxite from a sacred mountain in India belonging to the Dongria Kondh tribe, has been vilified and has now been legally prevented from mining there.

However, according to the CAM study, other companies in this sector have better prospects, such as platinum mining company Lonmin. Platinum can help with environmental challenges, such as developing hydrogen-fuelled vehicles.

Clearly, although this study is not intended to measure corporate responsibility, those companies which make CSR a central plank of their operations, are often those whose futures look brighter.
This is not always the case, however. The study points out that defence contractors such as BAE Systems and Chemring could benefit as competition for scarce resources increases the potential for wars. This is worrying. Although CAM says that the report is not intended to provide share tips, it is, by implication showing these companies as a potentially strong investment. This could lead to CAM's analysis being used to prop up a company with which it fundamentally disagrees.

However interesting this analysis is (and it is), it is a mistake to divorce CSR, and specifically the 'corporate citizen' aspect, from it. Corporate responsibility should now be the rule and not the exception. Thankfully, the bulk of this study demonstrates that environmental and social concerns are intrinsically linked with business success. A sustainable responsible brand is a commercial advantage. If CAM repeats this exercise, perhaps it could include an addendum showing the additional advantage of being a good corporate citizen.

Photo credit: K Prolingheuer