Articles

Companies Are Waking Up To Social Consciousness

Monday, May 6, 2002
by Marc J. Lane

Reprint permission from the May 6, 2002 issue of Crain's Chicago Business.

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Don't judge Oak Brook-based McDonald's Corp. only by how many billions of burgers Ronald has served. The company also wants its stakeholders to know that it's a good citizen. And other Chicago-area firms should follow its lead by publicly reporting their progress in achieving socially responsible goals.

McDonald's has just published its first-ever "Social Responsibility Report." The report highlights the company's commitment to supporting local communities, conserving natural resources, building a diverse workforce, ensuring the humane treatment of animals and otherwise being an all-around corporate good guy.

It's easy to question McDonald's newly minted altruism. The company has been an obvious target for environmentalists, animal welfare activists, children's rights advocates, labor unions, anti-globalization protesters and nutrition experts. And cynics are likely to dismiss McDonald's social responsibility initiative as just another bright idea in a global public relations campaign to stifle public criticism.

But McDonald's report really seems to have more to do with public policy than damage control. In fact, some 2,000 companies around the world have preceded McDonald's and voluntarily reported on their social practices relating to health and safety in the workplace, human rights and wages and working conditions at outsourced operations.

And more than 200 companies have adopted the United Nations Global Compact. By doing so, they have rejected child labor and slave labor, recognized the rights of labor unions and assumed responsibility for protecting the environment.

Companies are starting to understand that promoting social responsibility is good for business. As a worldwide survey conducted by Environics International Ltd. recently concluded, people tend to base their judgments about companies even more on their social behavior than on their financial results.

The Global Reporting Initiative (GRI), a joint venture of the Coalition for Environmentally Responsible Economies and the United Nations Environment Program, is working to establish internationally accepted standards for social reporting. And the GRI has urged companies to keep track of the "triple bottom line" -- economic, environmental and social performance.

Putting people before profits sounds too good to be true, and some tough investors are unsympathetic to the mission. But shareholders are customers, employees and neighbors, too. They have a vested interest in seeing to it that the companies they own are good citizens.

And doing good does not preclude doing well. Mutual funds that avoid taking stakes in defense contractors, casinos and companies that produce tobacco and alcohol have been around for more than 30 years and, over that time, they have delivered excellent returns to their investors. The Social Investment Forum reports that the risk-adjusted performance of 35% of the 54 such "socially responsible" mutual funds was ranked four or five stars by Morningstar Inc., the Chicago investment research firm, compared with 32.5% of all 15,000 or so mutual funds.

The GRI isn't out to punish any specific industries, but it is after full disclosure. So, companies are encouraged to fess up about the deficiencies of their waste recycling programs, the inadequacy of wages they pay workers in developing countries and other social missteps.

But for social self-reporting to work, it needs to be consistent, accountable and brutally honest. Companies must take it seriously and identify specific targets that can be measured from year to year.

Marc J. Lane is a Chicago lawyer and financial planner and an adjunct professor of law at Northwestern University School of Law. He can be reached at [email protected].

 


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Copyright © 2002 by Crain Communications Inc.

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