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The importance of

corporate responsibility

A white paper from


the Economist Intelligence Unit
sponsored by Oracle
The importance of corporate responsibility

Preface

The importance of corporate responsibility is an


Economist Intelligence Unit white paper, sponsored by
Oracle.
The Economist Intelligence Unit bears sole
responsibility for this report. The Economist
Intelligence Unit’s editorial team executed the
surveys, conducted the interviews and wrote the
report. The findings and views expressed here do not
necessarily reflect the views of the sponsor. Justin
Doebele is the author of the report.

Our research drew on two main initiatives:


We conducted two global online surveys on the topic
of corporate responsibility in October 2004. One
survey of senior executives gathered 136 respondents.
The other of institutional investors received 65
responses. To supplement the survey results, we also
conducted 17 in-depth interviews with senior
executives and analysts. Mr. Kevin Money of the John
Madejski Centre for Reputation at Henley Management
College in the UK advised in the initial stages.

Our thanks are due to all survey respondents and


interviewees for their time and insights.

January 2005

© The Economist Intelligence Unit 2005 1


The importance of corporate responsibility

Executive summary

C
orporate Responsibility (CR) has emerged as a bottom line.
significant theme in the global business ● Brand enhancement (61%) and better staff morale
community and is gradually becoming a (67%) were picked by both groups as the most
mainstream activity, according to a new important business benefits of CR.
survey by the Economist Intelligence Unit, in co- ● But both groups also cited cost implications (42%)
operation with Oracle Corporation. The growing and unproven benefits (40%) as the two biggest
emphasis on corporate responsibility is affecting the obstacles to implementing CR programs.
relationship between companies and their various There are several definitions of CR, but for the purpose
stakeholders, such as investors, customers, vendors, of this paper, the term is defined as “the integration of
suppliers, employees, communities and governments. stakeholders’ social, environmental and other
In October 2004 we conducted an online survey of concerns into a company’s business operations.” “CR
corporate executives around the world and a separate is really about ensuring that the company can grow on
online survey of institutional investors, asking them to a sustainable basis, while ensuring fairness to all
assess the importance of corporate responsibility. In stakeholders,” says N R Murthy, the chairman of an
all, 136 executives and 65 investors responded. The Indian IT firm, Infosys.
main findings of the survey include: This definition implies an emphasis on a company’s
● Eighty-five percent of executives and investors external relationships. But our survey shows that
surveyed said CR was now a “central” or executives are much more focused on the internal
“important” consideration in investment decisions. aspects of CR, in particular ethical behaviour,
This figure is almost double the 44% who said CR corporate governance and transparency. By contrast,
was “central” or “important” five years ago, external aspects received much less emphasis:
demonstrating the growth in CR’s significance. philanthropic giving and ethical investments were
● The three most important aspects of CR for ranked as priorities by 6% and 4% respectively of
executives surveyed were: ethical behaviour of staff those surveyed. Another sign of this internal focus was
(67%); good corporate governance (58%); and that the most important stakeholders for executives,
transparency of corporate dealings (51%). after customers (65%), were employees (61%) and
● For institutional investors, transparency of shareholders (46%). And they said that this focus
corporate dealings was even more important. Sixty- would not change much in the next five years.
eight percent said it was one of the three most Stakeholders such as non-governmental organisations
important aspects of CR, followed by high standards and local communities were given a low priority at the
of corporate governance (62%) and ethical present time (1% and 5% respectively) and a slightly
behaviour of staff (46%). higher priority in five years (2% and 9%). Over time,
● Eighty-four percent of executives and investors some argue, the internal and external aspects of CR
surveyed felt CR practices could help a company’s will merge as companies build strong internal-

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The importance of corporate responsibility

governance structures and are able to turn their may produce such intangible benefits as brand-
attention outwards. enhancement, stronger employee morale and greater
Until recently, board members often regarded CR as investor confidence. But, on the tangible side, it is
a piece of rhetoric intended to placate harder to prove that CR leads to higher profits. Indeed,
environmentalists and human rights campaigners. But it is easier to quantify the costs of emphasising CR
now, companies are beginning to regard CR as a than the benefits. A full-fledged CR programme at a
normal facet of business and are thinking about ways large multinational can cost tens of millions of dollars,
to develop internal structures and processes that will or as much as 2% of total revenue.
emphasise it more heavily. In the not-too-distant The worldwide development of CR, then, is neither
future, companies that are not focusing on CR may linear nor uniform. At this stage, CR seems like the
come to be seen as outliers. As companies focus on proverbial elephant being felt by different blind men—
non-financial performance, an important yardstick of it is interpreted in many ways, but, nonetheless, is a
CR, the measurement of intangibles, such as customer large, single body and one that is on the move. If CR is
satisfaction and employee morale, are likely to to progress to the next stage of its development, a
become less vague and more credible. major challenge is to establish more widely accepted
The CR trend is being driven by a variety of factors, ways to measure CR. At the moment, there are many
such as the erosion of trust in large corporations, the competing standards of measurement. CR also remains
globalization of business, the corporate-governance a controversial subject, rejected by many corporate
movement, the rise in importance of socially boards as an unwelcome and unnecessary intrusion
responsible funds and sheer competitive pressures. into company affairs. The arguments, if anything,
This last factor, however, does not necessarily imply prove that CR is very much a “live” topic and one that
that firms emphasising CR will beat the competition. It has to be addressed by the global business community.

© The Economist Intelligence Unit 2005 3


The importance of corporate responsibility

Introduction

C
orporate Responsibility (CR) is not an own CR standards on all the farms supplying it with raw
academic topic to A.J. Devanesan, the products, affecting cocoa farmers in Ghana, Ivory
president of one of the world’s largest pulp Coast and other African nations. “As we sell to many
and paper companies, Asia Pacific Resources confectioners, they are very concerned that we are not
International Ltd (APRIL), based in Indonesia. In buying from farms that use child labour,” says Olam
September 2004 an angry crowd of 250 illegal loggers CEO, Sunny Verghese. Among Olam’s clients are Nestle
ambushed APRIL’s staff on a remote logging road deep and Cadbury.The CR activities of APRIL and Olam are
in the rainforests of Sumatra. They were upset that far from isolated cases. There are many straws in the
APRIL had prevented them from illegally harvesting wind, among them:
APRIL’s forests. The mob started hurling stones and ● More than 1,500 companies have signed the United
firebombs, setting one of the APRIL workers ablaze (he Nation’s Global Compact since it was launched in
escaped uninjured). 2000. The Global Compact asks companies to
Welcome to the brave new world of CR. As it uphold 10 principles relating to human rights, the
becomes more generally accepted, it is also moving environment and clean business practices.
further afield, even into the remote rainforest. ● Almost a quarter of all Global Fortune 500
Indonesian timber companies are not often upheld as companies now produce some kind of report that
paragons of CR but APRIL is an exception. After being provides an account of their environmental, social
criticized for years by rainforest groups for its logging or sustainability efforts. Among them are General
policies, APRIL is seeking to become a good corporate Electric, ExxonMobil and Intel.
citizen. “We want to be known as a world-class ● The New York-based GovernanceMetrics
company, one which does the right thing,” says Mr International (GMI), which covers corporate
Devanesan. APRIL is not only trying to stop illegal governance and CR, now produces in-depth rating
logging, but has also set aside around 20% of its total reports on 2000 companies around the world and
330,000 hectares of forest for conservation purposes has a growing client base including TIAA-CREF,
In some cases, firms such as APRIL take it upon State Street Bank and ABP, the largest pension
themselves to improve their CR. In others, there is a fund in Europe.
ripple effect, as one company practising CR requires all ● Officials in Canada, Norway, Japan, Denmark,
its vendors and suppliers to uphold the same Sweden, South Africa, France, the Netherlands,
standards. A US fruit company, Chiquita, requires all Taiwan, the UK and Australia have either adopted or
its fruit suppliers to adhere to its CR standards in order are considering adopting some form of CR
to continue to do business with the firm, a decision reporting, either for the governments themselves
that affects fruit growers across Latin America. or for companies that are reporting to the
The Singapore-based Olam, the world’s second- government.
largest trader of cocoa and robusta coffee, imposes its ● More than 10,000 individuals and 3,000 listed

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The importance of corporate responsibility

companies have helped to develop the standards of CR is a “central” or “important” consideration in


the Global Reporting Initiative (GRI), an decision-making. This compares with 54% of executives
organisation based in Amsterdam, trying to create who said it was a “central” or “important” consideration
a single global measure for CR performance. Among five years ago. The biggest percentage change between
its corporate clients implementing GRI standards now and five years ago was among European
are Bayer, Canon, Deutsche Bank, General Motors, executives. A total of 46% said CR was “central” or
Heineken and Shell. “important” five years ago compared with 84% at the
● A group of five major European institutional present time. In Asia, the proportion rose from 49% to
investors, including the second-largest pension 82% and in North America from 66% to 88%.
fund in the UK and the largest pension fund in the The survey of professional investors reveals a
Netherlands, jointly stated in October 2004 that sharper trend. Eighty-one percent of those surveyed
they would allocate 5% of their budgets for the said CR was currently a “central” or “important”
purchase of non-financial research analysis of such consideration in their investment decisions, compared
topics as corporate governance, labour with 34% who said it was “central” or “important” five
management and environmental practices. years ago. In fact, 14% of them said CR was not a
● One in every nine investment dollars under consideration at all five years ago. Now, not a single
professional management in the US is now invested investor said it was not a consideration.
in socially responsible funds. This amounts to US$2 Once companies have begun to pay more attention
trillion (trn) out of a total of US$19trn in investible to CR, it is hard to reverse the direction. Investors and
funds, according to the 2003 report on socially other stakeholders come to expect the company to
responsible investing (SRI) produced by the Social emphasise CR more and more. “Sure, there are
Investment Forum, the national trade body for the companies that go backward—but that is a path to
SRI industry. disaster,” says the chief executive of Chiquita,
The results of our survey show a similar growth in the Fernando Aguirre. “It would be very difficult [for
importance of CR. A total of 88% of executives said that Chiquita] to go backwards now.”

Executives Executives
How important a consideration is corporate responsibility at Five years ago, how important a consideration was corporate
your company? Select the statement that best applies. responsibility to your company?
(% respondents) (% respondents)

It is a central consideration in It was a central consideration in


most corporate decisions 42 most corporate decisions 20

It is an important consideration, It was an important consideration,


but only one variable in any but only one variable in
decision 46 any decision 35

It is a consideration, but It was a consideration,


not an important one 9 but not an important one 32

It is a consideration on It was a consideration on


rare occasions 2 rare occasions 4

It is not a consideration 1 It was not a consideration 10

© The Economist Intelligence Unit 2005 5


The importance of corporate responsibility

Investors Investors
How important a consideration is corporate responsibility to your Five years ago, how important a consideration was corporate
investment decisions? Select the statement that best applies. responsibility to your investment decisions?
(% respondents) (% respondents)

It is a central consideration in most It was an important consideration,


investment decisions. 20 but only one variable in any
decision. 31
It is an important consideration, but
only one variable in any decision. 61 It was a central consideration in
most investment decisions. 3
It is a consideration, but
not an important one. 14 It was a consideration, but not
an important one. 37
It is a consideration
on rare occasions. 5 It was a consideration
on rare occasions. 15
It is not a consideration. 0
It was not a consideration. 14

In Asia, recent corporate scandals, greater media emphasis on CR gives them a competitive advantage, a
focus and greater regulatory pressure were all ranked view held by about one-third of all European
by executives as the factors that led to the growing executives surveyed, against only 18% of Americans
importance of CR (with around one-third of them and just 16% of Asians.
reporting these three as the highest pressures). In
comparison, executives in Europe and the US said Definitions of corporate responsibility
these factors were less significant. The difference can Despite the growing importance of CR, there is little
most probably be explained by factors such as the agreement as to what the phrase means and there are
financial crisis in Asia in 1998 that highlighted CR several different names for the same or similar
issues in the region. In Europe, executives say that an practices, such as Corporate Social Responsibility
(CSR), Corporate Citizenship, Global Citizenship and
Chiquita case study Corporate Accountability.
While some may argue over the distinctions among
Home for howler monkeys these terms, at the core they all point towards the
same fundamental principle: that a company is
Once vilified by CR advocates, Chiquita has transformed its environmental responsible for providing more benefits than just
and labour policies in the last few years. One of its major projects is a 100-
profits for shareholders. It has a role to play in
hectare nature reserve set up on donated land on its banana plantations in
treating its employees well, preserving the
Costa Rica. The reserve, established in co-operation with a leading Swiss
retailer, Migros, is designed to preserve an area of rainforest that is rich in environment, developing a sound corporate
biodiversity. Two-toed sloths and howler monkeys live in the forest as well governance, supporting philanthropy, fostering
as a wide variety of other flora and fauna. The company has built a visitor human rights, respecting cultural differences and
centre and trails in the area so it can also be used for educational purposes, helping to promote fair trade, among others. All are
such as visits from local school children on field trips. The project has taken
meant to have a positive impact on the communities,
several years to develop and the company is looking at ways to improve on
cultures, societies and environments in which
it, such as opening forest corridors so that the reserve can be connected to
other nearby forest areas enlarging the natural ecosystem for the forest companies operate.
inhabitants. These efforts should also benefit a company’s
various stakeholders, who comprise all or some of the

6 © The Economist Intelligence Unit 2005


The importance of corporate responsibility

Executives
following: customers, employees, executives, non- What are the most important stakeholders to your company?
executive board members, investors, lenders, vendors, Select the top three stakeholders.
(% respondents)
suppliers, governments, NGOs, local communities,
environmentalists, charities, indigenous people, Customers
65
foundations, religious groups and cultural
Employees
organisations. “CR is still an emerging term,” says 61

Melissa Brown, executive director at Association for Other investors and shareholders
46
Sustainable and Responsible Investment in Asia
Board of directors
(Asria). “I have met many people with strong feelings 43
about the terms, but I’m an agnostic. The underlying Institutional investors
34
issues are fundamental—environment, human rights,
governance, corruption and so on.” Government and regulators
19
As for the executives in the survey, in their opinion Vendors
the two most important stakeholders are customers 7

and employees, followed by shareholders and board Local communities


5
directors. The survey results indicate that executives
Non-governmental organisations (NGOs)
may embrace CR in their companies, but they still do 1

not give high importance to a broad range of Other


3
stakeholders. When asked their priorities in five years’
time, the executives surveyed see little change in the
ranking. require good statistical and monitoring ability.” A
There is a wide regional difference in the Japanese retailer, Lawson, for example, takes a factual
importance of the various stakeholders. In the United attitude to CR.
Kingdom, there is a high sensitivity to companies’ use Japan is not the only country where companies go
of animals in medical tests. Scandinavia is one of the by the book. In the survey, both executives and
most progressive regions in the world on virtually all investors were asked how to judge CR from the
CR issues, with the exception of whaling, which is viewpoint of this rules-based approach. On average
practised by Norway. Singapore places much emphasis half of both groups said “compliance with laws and
on CR, but at the same time permits companies to do regulations” was the key measurement by which to
business in Myanmar, contrary to the practice of many judge a company’s CR, far ahead of other yardsticks,
other developed countries. such as philanthropic activities.
It is not surprising then that there is a wide At the other end of the spectrum is a fuzzier version
variation in approaches to CR. At one extreme is a of CR that emphasises the spirit, as well as the letter, of
legalistic approach, in which a company “goes by the the law. It is the application of CR that goes beyond
book” on CR, following a set of specific guidelines or building a school in rural Africa or making sure the firm
measurements. is complying with the US Sarbanes-Oxley Act. Some say
Many Japanese firms follow this method. “More that this form of CR even requires a fundamental and
than 600 Japanese companies produce environmental permanent modification of capitalism.
reports,” says Ms Brown. “And environmental reports Stephen Davis is one of the world’s foremost

© The Economist Intelligence Unit 2005 7


The importance of corporate responsibility

Lawson case study

Lawson takes a gentle approach

Lawson, the second-largest convenience store chain in Japan after plastic in one year.
Seven-Eleven, has an extensive “environmental and social” 4) the donation of 30 sewing machines to help disadvantaged
programme that is outlined in a 47-page sustainability report people in Sri Lanka, Myanmar and Vietnam.
subtitled “a gentle approach to our earth and its people” – the sixth 5) the planting of 20,000 trees in 46 locations across Japan.
such report produced. The report contains a detailed account of the
company’s CR programmes, such as: The company also discloses its success rate in achieving its own
1) the use of recycled plastic to make store uniforms to save 2.3m internal targets on various CR efforts, such as saving energy,
plastic bottles. recycling and environmental protection. A typical entry is a 91.8%
2) the development of over 1,500 Lawson-brand food items without success rate in introducing 73 low emission delivery trucks (only 67
preservatives or artificial colours. were actually introduced). On four other measures, Lawson also
3) the introduction of plastic bags that are 0.38 grammes lighter failed to meet its targets. But Lawson achieved its targets in seven
than the previous ones, saving a total of 6 m kilograms of measures, such as recycling 100% of its printer toner cartridges.

authorities on corporate governance. Mr Davis, who priorities of internal stakeholders will become more
has studied governance for 15 years as head of Davis closely aligned with external ones. New corporate
Global Advisors, based in Boston, Massachusetts, sees rules, such as those enshrined in the Sarbanes-Oxley
evidence that the world is moving towards a “civil Act, focus on improving internal governance. Once
economy,” where the principles of a civil society are those become strong, the focus is likely to shift onto
applied to the global economy. He believes that the external stakeholders.

Executives Investors
How should a company's corporate responsibility be judged, How should a company's corporate responsibility be judged,
in your view? Select the top two answers. in your view? Select the top two answers.
(% respondents) (% respondents)

By its record of compliance with laws and regulations By its record of compliance with laws and regulations
47 58

By its application of recognised standards in areas such as corporate governance By its application of recognised standards in areas such as corporate governance
41 35

By its actual activities in environmental, philanthropic, ethical or social areas By its actual activities in environmental, philanthropic, ethical or social areas
36 32

By its formulation and communication of internal standards By the frequency and quality of communications with stakeholders
24 23

By its market reputation for corporate responsibility By its market reputation for corporate responsibility
21 20

By the frequency and quality of communications with stakeholders By its formulation and communication of internal standards
16 15

Not sure Not sure


1 0

Other Other
1 2

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The importance of corporate responsibility

“You have people who think of corporate from voting on shares they bought with their
governance in the old fashioned ways and then there government-held retirement investment accounts.
are the CR folks who are thinking about structural Even though individuals own the money in the
issues,” agrees Gavin Anderson, the founder of accounts, the government considers that the accounts
GovernanceMetrics International, based in New York are owned by it, and that the government has the right
(Mr Davis is one of the co-founders of the group). One to vote, not the individual But, recently, the
example is in Singapore. David Gerald, the head of government relaxed the rule, saying investors could
Asia’s largest shareholder group, the Securities attend annual meetings of companies they held
Investors Association of Singapore (SIAS), is pushing through these retirement funds, even if they were still
to get rid of a government rule that blocks individuals not allowed to vote.

© The Economist Intelligence Unit 2005 9


The importance of corporate responsibility

Forces for change

T
he survey confirms that shareholders financial scandals, such as those that enveloped Enron
constitute one of the drivers behind the in the US and Parmalat in Italy.
growing emphasis on CR. Executives around Globalisation: Anti-globalisation groups, such as
the world chose three main factors that are Earth First, have demanded greater accountability
causing firms to pay more attention to CR: greater from governments and companies alike. Companies
focus on CR by shareholders, recent corporate are increasingly adopting CR as a form of insurance
scandals and greater pressure from governments and policy to circumvent or mollify outside pressure
regulators. groups.
According to the survey, executives said that the Competitive pressure: As more companies in an
strongest drivers of the increase in importance of CR industry adopt CR practices, the laggards come under
were shareholders, recent corporate scandals and increasing pressure to follow suit. A typical example is
greater pressure from regulators (all 29%). the oil industry, where almost all companies now
There are several other motives for companies to engage in some form of CR programme.
adopt CR measures, including: Competitive advantage: Many companies regard
Erosion of trust: Public trust in corporate the intangible benefits of a CR programme, such as a
management has declined, following a spate of better brand image, as a way of gaining the upper
hand over their rivals.
Executives
If CR has grown in importance, what are the main drivers of the change? A rules-based approach to CR may have its
Select all that apply.
(% respondents)
advantages, but few would disagree that CR ultimately
depends on the personal integrity of the people who
Greater focus by shareholders on issues of corporate responsibility work in a company. “You can’t have two standards, one
29

Recent corporate scandals


for society and one for companies. Both must promote
29 good morals and ethics,” says Mr Gerald. If the
Greater pressure from governments or regulators individuals themselves can conduct their businesses in
29
an ethical and sustainable manner, the argument
Greater focus by media on issues of corporate responsibility
24 goes, then the company will inevitably conform to any
Evidence that it offers a competitive advantage external CR standard. “I use the golden rule in every
24
transaction: do unto others as you would have them do
Globalisation and offshoring
18
unto you,” says N R Murthy, chairman of an Indian IT
Increasing customer power allied to consumers’ concerns in this area firm, Infosys. An example of this idea is an annual
16 survey of “trust”, conducted by a US public-relations
More effective action by non-governmental organisations and activists firm, Edelman, scoring consumer confidence in the
7

Other
integrity of companies, government and other
4 institutions.The results of the Economist Intelligence

10 © The Economist Intelligence Unit 2005


The importance of corporate responsibility

Executives
How much pressure does your company receive from its stakeholders to improve its corporate responsibility? Please rate each stakeholder
from 1 to 5, where 1=A source of heavy and continuous pressure and 5=Not a source of pressure.
(% respondents)

1 Heavy 2 3 4 5 No Average
pressure pressure
Institutional investors
18 25 26 13 47 3.36

Other investors and shareholders


16 43 29 13 27 2.94

Board of directors
37 48 21 12 14 2.38

Employees
16 34 41 18 18 2.91

Customers
19 32 29 25 22 2.99

Vendors
2 15 23 34 47 3.9

Government and regulators


32 34 31 16 13 2.56

Local communities
7 29 32 21 34 3.37

NGOs
10 15 28 18 51 3.7

Unit survey support the view that executives and organisations (NGOs) and other interest groups all
investors place a high value on integrity. The three have their own definition. Those who are most
most important aspects of CR for executives surveyed interested in environmental issues tend to put forward
were: ethical behavior of staff (67%), good corporate an environmental definition that gives short shrift to
governance (58%) and transparency (51%). Labour other factors. Those who support philanthropy
practices and employee rights also received a high emphasise the charitable component of CR. Those who
score (44%). uphold human rights see CR as largely a labour issue.
For institutional investors, transparency of Now there is a growing number of people who are
corporate dealings was even more important. Sixty- urging the need for a single, universally accepted
eight percent said it was one of the three most method of measuring CR, so that firms can be
important aspects of CR, followed by high standards of compared across borders and across industries. “We
corporate governance (62%) and ethical behaviour of need to have one homogenized global standard that
staff (46%). Labour practices received a much lower can be applied around the world—the same standard
score (23%) among investors than among executives everywhere,” says Jim Thompson, who runs Hong
(44%). Kong-based Crown Relocation, one of the world’s
This emphasis on qualities that are hard to measure largest moving companies.
means that CR remains a poorly defined concept. But which standard should apply and how should it
Companies, consultants, lawyers, non-governmental be administered? One idea is to establish a central

© The Economist Intelligence Unit 2005 11


The importance of corporate responsibility

Executives Investors
What are the most important aspects of corporate responsibility to What are the most important aspects of corporate responsibility to your
your company? Select up to three aspects. investment decisions? Select up to three aspects.
(% respondents) (% respondents)

Ethical behaviour on the part of all staff members Transparency in corporate dealings
67 68

High standards of corporate governance High standards of corporate governance


58 62

Transparency in corporate dealings Ethical behaviour on the part of all staff members
51 46

Labour practices and employee rights Equitable pricing and remuneration policies
44 32

Environmental practices Labour practices and employee rights


22 23

Equitable pricing and remuneration policies Environmental practices


18 14

Philanthropy and charitable giving Avoidance of markets with poor human rights records
6 11

Ethical investments Ethical investments


4 9

Avoidance of markets with poor human rights records Philanthropy and charitable giving
4 2

Other Other
1 2

organization that sets the standard for CR, rather like to consultants, accounting firms and others who, in
the International Accounting Standards Board for the turn, can charge companies to certify their CR
accounting profession. The central body would certify programs by the GRI standard.
accountants who, in turn, would audit firms for their A similar, rival model for certifying CR programmes
CR practices. This model is the one being pursued by is being promoted by the New York-based Social
the Global Reporting Initiative (GRI). “Just as there Accountability International (SAI). For fees ranging
are global standards for financial reporting, we want from US$5,000 to many thousands of dollars, third-
to establish one global standard for non-financial party auditors will certify that a company conforms
reporting,” says Alyson Slater, Associate Director of with the SAI’s SA8000 standard that focuses mostly on
the Amsterdam-based body. “The world is too labour practices. SAI, in turn, regulates these third-
cluttered with standards, codes of conduct and party auditors to ensure they are qualified to issue
guidelines for CR.”GRI is a non-profit organization SA8000 certifications. Among the companies using
that is trying to work out how to “monetize” its GRI SA8000 is Chiquita, to prove that the company has no
standard. They are thinking of issuing “accreditation” child labour, forced labour or discrimination.

12 © The Economist Intelligence Unit 2005


The importance of corporate responsibility

Managing corporate responsibility

A
nother approach is for companies to issue CR reports person to be responsible for CR, but someone based in the
and to assign someone to manage their corporate CR public affairs division rather than at an executive level. “We
programme, either in a full-time or a part-time need a single person who can manage the relationships with the
capacity. Again, the models vary widely. In some various CSR, NGO and sustainability groups,” says David Stangis,
companies, CR officials are full-time high-level executives and who is charged with the task. Intel issues an annual CR report
the company issues detailed annual CR reports separate from that uses GRI standards. Its 2003 “global citizen” report is 40
annual reports. “Our report allows us to capture in one concise pages long, covering issues such as the recycling of electronic
package where we are and where we are going with CR,” says Jim waste, community programmes and labour relations. The
Walter, senior vice president of Worldwide Quality Assurance company also holds special briefings about its non-financial
(who oversees CR as part of his duties). Chiquita, for example, accounting for socially responsible investors and other groups.
has had a full-time CR executive for four years who reports to the The idea of better communication is an essential one to CR.
board of directors. Among executives in the survey, the three top ways in which
At other companies, CR is regarded as a public relations or
marketing function, often relegated to a junior public relations
Software case study
staffer who writes a one- or two-page CR study that forms part of
the standard annual report.Other companies practise CR without Programming responsibility
using the term. They engage in activities that could be described
as CR, such as the promotion of philanthropy, fair trade, Dozens of software houses have in recent years begun to sell pro-
environmental protection, human rights and so on, but don’t grammes designed to help companies conform with CR stan-
dards. “At least 50 or 60 companies are writing some kind of
know or don’t care to include these activities under CR. On the
software,” says GRI’s Ms Slater. The GRI body itself is seeking to
other side of the coin, many companies like to promote various develop a software programme that companies can use to imple-
activities as being “CR”-friendly, but appear to be normal ment GRI standards and issue CR reports. When GRI sent out a
business practice. For example, the Japanese convenience store request for companies offering to develop the technology, it
chain, Lawson, boasts that it is environmentally friendly by received 50 proposals. At Infosys, CR and software converge.
reducing power consumption in its stores and having more fuel- While the company supports a number of charities and environ-
mental efforts (such as using recycled toilet water to irrigate its
efficient delivery trucks, but both measures are ones that any
lawns), Infosys uses IT to manage its employees in a transparent
company would pursue to save money, with or without CR. and fair manner. For example, all employee-appraisal forms are
CR practice varies widely, but the overall trend is clear. done online and then stored in a central database. The company
General Electric, for example, appointed a full-time vice has an in-house programme based on human-capital accounting
president for “corporate citizenship” two years ago. The CEO of theory to analyze the income-generating potential of all employ-
GE, Jeff Immelt, was recently quoted as saying “It’s up to us to ees, including value added per employee and similar measures.
“CR is really about ensuring that the company can grow on a sus-
use our platform to be a good citizen, because not only is it a
tainable basis while ensuring fairness to all stakeholders,” says
nice thing to do, it’s a business imperative.” the chairman, N R Murthy.
Intel has also for the last three years appointed a full-time

© The Economist Intelligence Unit 2005 13


The importance of corporate responsibility

they report they are improving CR are strengthening says Sunny Verghese, the CEO of Olam.
governance structures (63%), implementing open and Developing a link between “doing good” and
candid conversations with stakeholders (60%), and “doing well” is now a major focus of many CR
providing special training for executives and advocates. “All the companies we talk to tell us one
employees (46%). thing: show us the business case. Everyone is doing
Investors have a similar attitude, saying that they analyses now, trying to pull this together,” says Ms
can improve CR through private dialogue with Slater. One term often used is the “triple bottom line,”
companies and also requests to companies to improve that is, a bottom line for profits, but also for social and
governance structures. These results show the environmental benefits, often defined as “economic
importance of transparency in dealings with prosperity, social responsibility and environmental
stakeholders, such as employees and shareholders. sustainability.”
But does CR actually improve profits? “There is
The business case mixed evidence on CR and performance. No one has
Few corporate executives these days would deny that been able to pin it down,” says Mr Davis. While the
robust CR practices yield intangible benefits, but it idea of a company with good CR having better financial
continues to be difficult to quantify the impact, if any, performance makes intuitive sense, it is hard to verify.
of CR on profits. Although CR dates back several “It is really difficult to measure the bottom-line impact
decades, it has taken a long time to gather momentum, of CR. I have gone through plenty of data and there is
because it was perceived in the boardroom as a cost
rather than an investment. “The CR movement never Investors
In what ways is your organisation working to improve standards of
really took off until there was a business case for it,” corporate responsibility? Select all that apply.
(% respondents)

Executives
In what ways is your company working to improve standards of corporate Requesting that the companies you invest in improve their governance structures
to meet accepted standards
responsibility? Select all that apply.
43
(% respondents)
Preferring to talk privately to the managers and directors of a company,
if you think there is a problem
Improving governance structures to meet accepted standards
42
63
Investing only in companies that operate to high standards
Implementing open and candid communication programmes
26
with all stakeholders
60
Implementing structured communication programmes with companies you invest in
25
Rolling out special training for executives and employees
46 Making statements at annual shareholders meetings about the standard of corporate
responsibility at the company that is holding the meeting
Engaging in various programmes such as philanthropy, environmental, 18
social or community outreach efforts
40 There are no special programmes in this area
18
Applying responsibility standards set by third-party groups or consultants
26 Making statements to the press about the standards of corporate responsibility
at companies in general
Developing specific resources with responsibility for this area 11
26
Making statements to the press about the standards of corporate responsibility
There are no special programmes in this area at particular companies
11 1

Other Other
1 1

14 © The Economist Intelligence Unit 2005


The importance of corporate responsibility

not much correlation. That [connection] is elusive,” Investors


In what ways is your organisation working to improve standards of
says Intel’s Stangis. Others claim the question is corporate responsibility? Select all that apply.
(% respondents)
irrelevant. “We don’t even calculate a return on our
investment in CR,” says Ericsson spokesperson, Pia Requesting that the companies you invest in improve their governance structures
to meet accepted standards
Gideon. “It is one of our core values, so we must do it.” 43

The survey results confirm the difficulty of justifying Preferring to talk privately to the managers and directors of a company,
if you think there is a problem
CR on a return-on-investment basis. Among both 42

executives and investors, when asked what are the Investing only in companies that operate to high standards
26
biggest obstacles to CR, they both picked two main
Implementing structured communication programmes with companies you invest in
factors: unproven business benefits and the cost of CR 25

programmes. Making statements at annual shareholders meetings about the standard of corporate
responsibility at the company that is holding the meeting
Major CR programmes are not cheap. Intel spends 18

around US$100 m on improving various programmes, There are no special programmes in this area
18
such as its chemical and solid-waste recycling
Making statements to the press about the standards of corporate responsibility
programmes and college scholarship programmes. at companies in general
11
Infosys estimates it spends around 1% of its corporate
Making statements to the press about the standards of corporate responsibility
profits on programmes such as offering free IT courses at particular companies
1
to poor communities. An American toy maker, Mattel,
Other
estimates it spends about 2% of total revenue on its 1

Executives
How much pressure does your company receive from its stakeholders to improve its corporate responsibility? Please rate each stakeholder
from 1 to 5, where 1=A source of heavy and continuous pressure and 5=Not a source of pressure.
(% respondents)

1 Heavy 2 3 4 5 No Average
pressure pressure
Institutional investors
18 25 26 13 47 3.36
Other investors and shareholders
16 43 29 13 27 2.94

Board of directors
37 48 21 12 14 2.38

Employees
16 34 41 18 18 2.91
Customers
19 32 29 25 22 2.99
Vendors
2 15 23 34 47 3.9

Government and regulators


32 34 31 16 13 2.56

Local communities
7 29 32 21 34 3.37
NGOs
10 15 28 18 51 3.7

© The Economist Intelligence Unit 2005 15


The importance of corporate responsibility

Executives Investors
Which one of the three companies below would you most likely invest in? Which one of the three companies below would you most likely invest in?
(% respondents) (% respondents)
Company A's shares outperformed its
peers and the company paid little Company A's shares outperformed its peers
attention to corporate responsibility and the company paid little attention to
or stakeholders (aside from corporate responsibility or stakeholders
shareholders). 14 (aside from shareholders). 16

Company B's share performed about Company B's share performed about
the same as its peers and the company the same as its peers and the company
paid a moderate amount of attention paid a moderate amount of attention
to corporate responsibility and all to corporate responsibility and all
stakeholders. 52 stakeholders. 63

Company C's share performed slightly Company C's share performed slightly
below that of its peers and the company below that of its peers and the company
paid a great deal of attention to corporate paid a great deal of attention to
responsibility and all stakeholders. 34 corporate responsibility and all
stakeholders. 22

programmes and APRIL spends about 1% of its companies with good CR. The next biggest group of
revenue on CR. 23% said that “none” of their personal investments
In the survey, both executives and investors tended was with “ethical investments.”
to choose a middle course between making a profit on There are plenty of examples of companies that say
their shareholdings and investing according to their CR has helped profits. Chiquita said last year that it
conscience. Both groups were asked to choose saved US$5 m a year in fertilizer costs through an eco-
between three companies in which to invest. One friendly programme developed by the Rainforest
company had a good performance and no CR, another Alliance and US$4 m by recycling pallets—significant
had lower performance and good CR and the third savings for a company with a net profit of US$99 m last
company had achieved a moderate performance and year. “Most of those savings went to the bottom line,”
modest CR. The overwhelming majority chose the last says company spokesman, Michael Mitchell.
company. Of course, in the Chiquita and Lawson cases, the
In terms of personal investments, both groups also hard-headed response would be that companies are
put little emphasis on using CR as an investment taking normal cost savings and labelling them as CR.
criterion. In both cases, one quarter of them were “not But this would seem to imply simplistically that CR has
sure” how much of their investments were in to be painful and costly to be genuine. The reality is

Executives Investors
Roughly what percentage of shares in your personal investment Roughly what percentage of shares in your personal investment portfolio
portfolio are in companies or mutual funds that are “ethical investments”? are in companies or mutual funds that are “ethical investments”?
(% respondents) (% respondents)

None 24
None 23
1-10% 8 1-10% 12
10-30% 11 10-30% 20
30-50% 6
30-50% 8
50-75% 5
50-75% 11 75-100% 8
75-100% 12 Not sure 26

Not sure 25

16 © The Economist Intelligence Unit 2005


The importance of corporate responsibility

Investors Investors
If it has grown in importance, what are the main drivers of the change? Do you think that firms that emphasise corporate responsibility tend to
Select all that apply. have a better long-term financial performance than firms that don't?
(% respondents) (% respondents)

Recent corporate scandals


Yes 69
49

Evidence that it offers a competitive advantage No 6


34

Greater focus by media on issues of corporate responsibility Not sure 25


32

Greater focus by shareholders on issues of corporate responsibility


32

Greater pressure from governments or regulators


22

Globalisation and offshoring Executives


20 Do you believe that good corporate citizenship can help a company's
bottom line?
Increasing customer power allied to consumers’ concerns in this area (% respondents)
15

More effective action by non-governmental organisations and activists Yes 87


3
No, it’s a necessary cost of
Other doing business but no more 10
5
No, it’s an unnecessary
drain on resources 0

Not sure 3

more complex. As Mr Aguirre says: “You can’t say [our Sometimes you have to look very hard for a company
efforts] are all due just to CR, but much of it is—there that’s just wanting CR for its own sake.”
are a number of elements at play.” The idea that intangibles are important supports the
Indeed, among investors surveyed, they ranked view that CR can be evaluated statistically. A New York-
“evidence that it offers a competitive advantage” as based investment advisory firm, Innovest, has
the second most important reason for companies to developed a proprietary “intangible valuable asset”
adopt CR. (IVA) measurement to gauge the value of such assets as
Respondents in our survey appear to be “sustainable governance,” “eco-value,” “human
inconsistent. They agree that CR is good for long-term capital” and “stakeholder capital.” The group argues
performance but cite CR’s unproven business results as that traditional accounting methods cannot capture the
the main reason for not implementing such value of such intangibles as intellectual property,
programmes. There is wider agreement, however, customer loyalty, strategic alliances and a company’s
about the intangible value of CR. A good CR ability to innovate. It assigns a value to IVA, a heavy
programme has enormous value in areas such as part of which is derived from CR aspects. Innovest’s
brand-enhancement, company morale and investor approach has found some serious supporters. The group
satisfaction. As Olam’s Verghese says: “Some people is chaired by Jim Martin, the former chief investment
will do CR to motivate staff, others to get a higher officer of TIAAF-CREF, and among the minority
stock price. A third reason could be regulatory. shareholders is Europe’s largest pension fund, APB.

© The Economist Intelligence Unit 2005 17


The importance of corporate responsibility

Executives Investors
If yes, in which ways can it positively affect the bottom line? If yes, in which ways can it positively affect the bottom line?
Select up to three ways. Select up to three ways.
(% respondents) (% respondents)

Higher employee morale and commitment Higher employee morale and commitment
68 66

Enhancement of the brand with customers Enhancement of the brand with customers
64 58

Better relations with governments, local communities, etc Reduced likelihood of regulatory intervention
49 45

Competitive advantage over rivals Better relations with governments, local communities, etc
31 35

Reduced likelihood of regulatory intervention Competitive advantage over rivals


29 25

Cheaper capital from investors Cheaper capital from investors


7 8

Other Other
1 2

Here again, the survey respondents strongly agreed it this way: “It is hard to quantify sometimes. The
on the value of intangible benefits of CR. Both company is dedicated to a clean, safe and healthy
executives and investors picked the same two variables, workplace. Our workers work harder, more
by a wide margin, as those benefiting the most from productively and with less turnover.” Mattel says that
good CR practices. The two variables were enhancement the number of work days lost owing to work-related
of the brand and higher employee morale. injuries has been cut almost in half between 2000 and
This view was supported by some interviewees. “For 2003, a clear improvement in worker productivity. “CR
Mattel, it’s the lack of a negative, that’s how our CEO makes a difference,” says Stefano Pessina, chief
puts it,” says Mr Walter. “We make toys, we’re in a very executive of Europe’s leading drug distributor,
public arena and we have a sensitive consumer base. Alliance Unichem, based in the UK. “We have fewer
It’s a type of insurance policy. We are trying to avoid problems if our employees are happy. We get a big
any [bad] event.” The same rationale is true for gain in productivity. Absentee rates fall.”
Chiquita. “CR gives you brand strength with Then there is the issue of shareholder returns. “If
consumers. It’s an intangible benefit to invest in the you have a company with good CR, it is also a
brand. Some of the return is measurable and some of it confident company. It is happy to have high
is not,” says Mr Aquirre. disclosure. Analysts can more easily understand it, so
About 40% of American and European respondents they give it higher ratings,” says Mr Anderson. Mr
to the survey said that the main reasons for Murthy gives one example: “In 1995 we pulled out of
emphasising CR included the need to improve contract talks with General Electric over a
community relations and to deflect pressure from disagreement on pricing. Within 48 hours we met with
regulators. In Asia, where companies are less sensitive all the analysts and they liked [the fact that we spoke
to community relations and where regulators are less to them]. Anyone can tell good news. We want to be
powerful, only 33% of respondents took this view. known for proactively telling the bad.” Having good
Employee morale is also important. Mr Walter puts transparency and high ratings by analysts not only

18 © The Economist Intelligence Unit 2005


The importance of corporate responsibility

helps the stock price, but can also lower the cost of embrace CR faster than those who stay at home, in her
capital for companies, as several studies have shown. view. “You tend to look for sustainable models as soon
Clear communication with stakeholders can help as you go” abroad, she says, since an outsider entering
companies withstand a crisis, as when Johnson & a new market will be forced to depend on rules to
Johnson quickly withdrew Tylenol from the market in succeed, as it has fewer local connections than
1982 and 1986, when capsules were tampered with. entrenched domestic players.
Many Asian executives in the survey disagreed with This is where some companies can gain an edge by
the idea that a high standard of CR can help a company utilizing CR to build a clean image. “We have a
in the financial markets, however. Only 3% of them competitive advantage because the reputation of
said that good CR helps them to obtain cheaper Chinese companies is so low in the global market,”
capital. This may reflect the fact that CR is not a very says Jack Ma of an online trading company,
important consideration for local banks and investors. Alibaba.com, based in Hangzhou. Mr Ma emphasizes
For Europeans and Americans, about 9% of these two what he calls the “three trusts” in his company: the
groups on average felt that good CR lowered their cost first between the company and customers, the second
of capital. between the company and employees, and the final
one between the company and investors. “We want to
Poor practices can be expensive be known as the best employer in China, also the
Of course, a company doesn’t have to be dedicated to company with the best CR,” he says.
CR to seek to improve workplace safety, be transparent It is Alibaba’s strong brand image that helps drive
or build a good brand. But these figures do highlight a the business. Because Alibaba has gained the trust of
negative point: a company that pays no attention to traders outside China, it can be a bridge to bring small
CR is not necessarily going to have lower costs and be Chinese companies to the world market. Mr Ma has
more profitable than one that does. In other words, reinforced the company’s image by certifying Chinese
while the bottom-line benefits of CR may be hard to suppliers as being trustworthy partners for Western
quantify, the reverse is also true: the lack of CR doesn’t buyers. These days, dozens of companies are willing to
guarantee higher profits for a company, all other pay Alibaba thousands of dollars a year to be certified
things being equal. as a trusted Alibaba supplier. Obviously, this business
“Companies that pollute often have tremendous model requires Alibaba to maintain its credibility with
inefficiencies in manufacturing. For example, coal- Western buyers; otherwise the entire company’s future
fired plants with a dirty burn aren’t efficient,” says Ms would be threatened.
Brown. Companies that lack CR may gain some short- “Three years ago, some salespeople were accepting
term advantages over those that have it, she says, but kickbacks from companies to list them as our trusted
over time it is not clear that they remain competitive. suppliers,” says Mr Ma. “I had a clear message: no
Poor labour relations, high pollution and similar CR kickbacks. I would rather go bankrupt than do this. We
problems will erode the performance of a factory, not had to fire the salespeople who were doing this.
help it, she says. Therefore everyone knows that when you do business
The same is also true for issues such as corruption. with Alibaba it is clean.”
“Bribery is an expensive business model,” she says. But some companies go too far in burnishing their
Whenever companies begin to globalize, they tend to credentials. Excessive corporate chest-beating about

© The Economist Intelligence Unit 2005 19


The importance of corporate responsibility

their CR practices can backfire, when, for example, make more money, helping the entire rural economy—
companies over-publicize their charitable works, Mr and, Mr Verghese points out, they have no obligation
Gerald gets upset when he sees a company engaged in to sell their better beans only to Olam.
what is called “cause-related marketing.” “I don’t like “We don’t have the skills to cure AIDS,” says Mr
it when a company spends a thousand dollars on a Verghese, “but we can find where our CR and economic
charity and then spends a million dollars advertising interests meet. Then you have an incentive to do it
the fact,” says Mr Gerald. right. And it is sustainable.” Mr Ma makes a similar
Indeed, advertising and public-relations companies case for his business. “Our CR is to help the small and
have developed sophisticated cause-related marketing mid-sized businesses of China to grow. We have to
strategies for companies, on the premise that it is one help create jobs,” he says. He mentions a visit to an
of the cheapest and most effective forms of building impoverished part of northern China, where he claims
brand loyalty. It’s a tactic used by dozens of a village of 50 people were making a living by selling
companies, from Starbucks to the Body Shop. Mr goods over Alibaba. “You have kept us alive,” he
Gerald suggests that there is a more open way to recalls a woman saying.
address the issue. “Boards have no mandate to give to Even those who operate in developed markets, such
charities. If they want to do that, then they should put as the founder of the Easy Group in Europe, Stelios
the money aside in a trust and put it to a shareholder Haji-Ioannou, make the same argument. He sees Easy
vote,” he says. Mr Gerald argues that it is always better Group’s main contribution to CR as a social one, wiping
to give the money back to investors and let them be out the high costs and bureaucracy of one bloated
philanthropic. “Charity begins at home,” he says. industry after another. “Our mission statement says
It’s a sentiment echoed by Mr Verghese: that whatever we do has to be low-cost, has to be fun,
“Companies don’t have the skills or assets to do social has to be innovative and has to be the underdog
good, there are others who can do it much better than fighting for the little guy,” he says. “We are the
the company. Let shareholders decide on consumer’s champion.”
contributions to charity.” Chiquita is also aware of the
risk of overselling CR. “We are not doing CR just to sell Corporate responsibility:
more bananas,” claims Mr Aquirre. a false notion?
Some corporate executives argue that the best form Indeed, the arguments of Olam, Alibaba and the Easy
of CR is actually one that uses the company’s expertise Group are a variation of what critics of CR have said for
and has a business purpose. The survey supports this, years: that the best, and only, business of a company
since 87% of executives believe that good corporate is its business. Left alone, a company will maximize
citizenship helps the bottom line. profits (done within a legal framework), resulting in
For example, Olam is helping cocoa farmers in the maximum happiness for all stakeholders.
Ghana to improve their yields and quality. Even though The advocates of CR, say these critics, imply there is
Olam is the world’s second-largest trader of cocoa something shameful in companies making profits by
beans, and buys from these same farms, Mr Verghese providing goods and services to consumers. So, CR
argues that this business-minded approach leads to implies that redemption can only be found through
improvements in CR. “We have helped 250,000 being “responsible” as a good “corporate citizen”.
farmers,” he says. As these farmers get better, they But critics say that CR distracts companies from

20 © The Economist Intelligence Unit 2005


The importance of corporate responsibility

being successful, throwing sand into the gears of purposes that are open to question and with worrying
global capitalism by increasing the burden of implications for the efficient conduct of enterprises.
regulations and other costs, and thus ultimately Across economic systems and political boundaries, it
eroding the benefits that accrue to global would strengthen existing tendencies to regulate
stakeholders. One of the clearest critiques has come transactions, and to limit competition, in ways that
from an economist, David Henderson, the former head would further restrict the opportunities and freedom
of the economics department of the OECD, and of choice of people and enterprises.”
currently a visiting professor at the Westminster The same sentiment was summed up by a
School of Business. In a 2001 treatise entitled, management thinker, Peter Drucker, who says in the
“Misguided Virtue: False Notions of Corporate Social Canadian movie documentary “The Corporation”
Responsibility” (published by the New Zealand released in 2004: “If you find an executive who wants
Business Roundtable), Mr Henderson wrote: to take on social responsibilities, fire him. Fast.”
“CSR is flawed in its prescription, as well as its Yet respondents to the survey appear to disagree.
diagnosis. What it proposes for individual businesses, Eighty-eight percent of executives believe that it is
through ‘stakeholder engagement’ and giving effect to now an important consideration in most corporate
the ‘triple bottom line,’ would bring far-reaching decisions. There seems no hint of remorse for this,
changes in corporate philosophy and practice, for because 87% believe good CR helps the bottom line.

© The Economist Intelligence Unit 2005 21


The importance of corporate responsibility

Conclusion

CR is a difficult and elusive topic for companies to deal unresolved argument over what CR means. Companies
with. It can often be very costly and yield benefits that face a plethora of options among the various
are hard to quantify. Perhaps this is one reason why standards, guidelines, benchmarks and other
companies, according to the survey, have put so much proposed measures of CR.
focus on the internal improvements that can be made, One point that all can agree on is that CR is not a
such as improving corporate governance and neutral topic. There is a persistent debate about
transparency. This could also explain why the most whether the CR “movement” represents an unjustified
important stakeholders, after customers, are the intrusion into corporate affairs, and whether
traditionally important employees and shareholders. companies should invest profits in their own CR
There’s also the issue of just what standard of CR projects or return the money to shareholders to let
should companies use and how far companies should them invest as they see fit. But there is no denying
go to perform their responsibilities beyond what the that CR has become an important issue facing the
laws call for. The issue of what is the “responsibility” of global business community and one that promises to
a corporation is far from being settled, and there is an grow in importance in the coming years.

Interviews for the white paper


1) Fernando Aguirre, chief executive, Chiquita, Cincinnati, Ohio 10) Michael Mitchell, spokesperson, Chiquita, Cincinnati, Ohio
2) Gavin Anderson, president, GovernanceMetrics International, 11) N R Murthy, co-founder, Infosys, Bangalore, India
New York 12) Stefano Pessina, chief executive, Alliance UniChem, London
3) Melissa Brown, executive director, Asria, Hong Kong 13) Alyson Slater, associate director, Global Reporting Initiative,
4) Stephen Davis, president, Davis Global Advisors, Boston Amsterdam
5) A.J. Devanesan, president, Asia Pacific Resources International 14) David Stangis, director, Corporate Responsibility, Intel, Santa
Ltd., Singapore Clara, California
6) David Gerald, founder, Securities Investors Association 15) James Thompson, founder, Crown Relocation, Hong Kong
Singapore 16) Sunny Verghese, chief executive, Olam, Singapore
7) Pia Gideon, spokesperson, L.M. Ericsson, Stockholm, Sweden 17) Jim Walter, senior vice-president, Worldwide Quality
8) Stelios Haji-Ioannou, founder, Easy Group, London Assurance, Mattel, El Segundo, California
9) Jack Ma, founder, Alibaba.com, Huangzhou, China

22 © The Economist Intelligence Unit 2005


Appendix: executive survey results

The Economist Intelligence Unit conducted two global online surveys on the topic of corporate responsibility in October 2004.
One survey of senior executives gathered 136 respondents. The other of institutional investors received 65 responses (p30).

Executives Executives
What is your primary industry? What are your organisation's global annual revenues in US dollars?
(% respondents) (% respondents)

Financial services
20 US$500m or less 56

Manufacturing US$500m to US$1bn 10


15
US$1bn to US$5bn 10
Professional services
12 US$5bn to US$10bn 7
Healthcare, pharmaceuticals and biotechnology
US$10bn or more 16
10

IT and Technology
10

Automotive
6
Executives
Entertainment, media and publishing Which of the following best describes your title?
4 (% respondents)

Transportation, travel and tourism


4
CEO/President/Managing director
19
Retailing
4 SVP/VP/Director
19
Consumer goods
3
Manager
17
Energy and natural resources
3
Head of Department
14
Construction and real estate
2
Head of Business Unit
8
Agriculture and agribusiness
1
Board member
6
Defence and aerospace
1
CFO/Treasurer/Comptroller
5
Education
1
CIO/Technology director
3
Government/Public sector
1
Other C-level executive
2
Logistics and distribution
Other
1
6
Chemicals
1

Telecommunications
0

© The Economist Intelligence Unit 2005 23


Appendix: executive survey results
The importance of corporate responsibility

Executives Executives
What are your main functions? How should a company's corporate responsibility be judged,
Please choose no more than 3 functions. in your view? Select the top two answers.
(% respondents) (% respondents)

General management By its record of compliance with laws and regulations


43 47

Strategy and business development By its application of recognised standards in areas such as corporate governance
41 41

Marketing and sales By its actual activities in environmental, philanthropic, ethical or social areas
29 36

Finance By its formulation and communication of internal standards


21 24

Information and research By its market reputation for corporate responsibility


20 21

Operations and production By the frequency and quality of communications with stakeholders
15 16

Customer service Not sure


12 1

IT Other
12 1

Risk
10

Human resources Executives


9 What are the most important aspects of corporate responsibility to
your company? Select up to three aspects.
Research and development (% respondents)
6

Supply-chain management Ethical behaviour on the part of all staff members


6 67

Procurement High standards of corporate governance


4 58

Legal Transparency in corporate dealings


1 51

Labour practices and employee rights


44

Environmental practices
22

Equitable pricing and remuneration policies


18

Philanthropy and charitable giving


6

Ethical investments
4

Avoidance of markets with poor human rights records


4

Other
1

24 © The Economist Intelligence Unit 2005


Appendix: executive survey results
The importance of corporate responsibility

Executives Executives
How important a consideration is corporate responsibility at If CR has grown in importance, what are the main drivers of the change?
your company? Select the statement that best applies. Select all that apply.
(% respondents) (% respondents)

It is a central consideration in Greater focus by shareholders on issues of corporate responsibility


most corporate decisions 42 29

It is an important consideration, Recent corporate scandals


but only one variable in any 29
decision 46
Greater pressure from governments or regulators
29
It is a consideration, but
not an important one 9 Greater focus by media on issues of corporate responsibility
24
It is a consideration on
rare occasions 2 Evidence that it offers a competitive advantage
24
It is not a consideration 1
Globalisation and offshoring
18

Increasing customer power allied to consumers’ concerns in this area


Executives 16
Five years ago, how important a consideration was corporate
responsibility to your company? More effective action by non-governmental organisations and activists
(% respondents) 7

Other
It was a central consideration in 4
most corporate decisions 20

It was an important consideration,


but only one variable in Executives
any decision 35 What are the most important stakeholders to your company?
Select the top three stakeholders.
It was a consideration, (% respondents)
but not an important one 32

It was a consideration on Customers


rare occasions 4 65

It was not a consideration 10 Employees


61

Other investors and shareholders


46

Board of directors
43

Institutional investors
34

Government and regulators


19

Vendors
7

Local communities
5

Non-governmental organisations (NGOs)


1

Other
3

© The Economist Intelligence Unit 2005 25


Appendix: executive survey results
The importance of corporate responsibility

Executives Executives
In five years' time, which do you expect to be the most important How has the importance of corporate responsibility to your company
stakeholders to your company? Select the top three stakeholders. changed over the past five years?
(% respondents) (% respondents)

Customers It has become far more


67 important 36

Employees It has become somewhat


63 more important 34
Other investors and shareholders Its importance
46
has not changed 29
Board of directors
40 It has become somewhat
less important 1
Institutional investors
33 It has become far less important 1

Government and regulators


17
Executives
Local communities
Who are the most effective actors in instilling a sense of corporate
9
responsibility? Select the top three actors.
Vendors (% respondents)
9

NGOs Management
91
2

Other Board of directors


61
1
Employees
42

Executives Government and regulators


With which of the following groups of stakeholders does your company 33
have formal, regular and structured communications? Select all that apply.
Customers
(% respondents)
20

Board of directors Institutional investors


72 15

Employees Other investors and shareholders


68 15

Other investors and shareholders Local communities


54 5

Customers NGOs
47 1

Institutional investors Vendors


46 1

Government and regulators Other


44 1

Vendors
24

Local communities
16

NGOs
7

Other
2

26 © The Economist Intelligence Unit 2005


Appendix: executive survey results
The importance of corporate responsibility

Executives Executives
Do you believe that good corporate citizenship can help a company's In what ways is your company working to improve standards of corporate
bottom line? responsibility? Select all that apply.
(% respondents) (% respondents)

Yes 87 Improving governance structures to meet accepted standards


63
No, it’s a necessary cost of
doing business but no more 10 Implementing open and candid communication programmes
with all stakeholders
No, it’s an unnecessary 60
drain on resources 0
Rolling out special training for executives and employees
Not sure 3 46

Engaging in various programmes such as philanthropy, environmental,


social or community outreach efforts
40

Applying responsibility standards set by third-party groups or consultants


Executives
26
If yes, in which ways can it positively affect the bottom line?
Select up to three ways. Developing specific resources with responsibility for this area
(% respondents) 26

There are no special programmes in this area


Higher employee morale and commitment
11
68
Other
Enhancement of the brand with customers 1
64

Better relations with governments, local communities, etc


49

Competitive advantage over rivals Executives


31 What are the main barriers to an improvement in the standards of
corporate responsibility at your company? Select all that apply.
Reduced likelihood of regulatory intervention (% respondents)
29

Cheaper capital from investors Cost implications of corporate responsibility


7 41

Other Unproven business benefits of corporate responsibility


1 33

The industry is not one in which this is a high priority


26

Fierce competition does not allow us the luxury to worry


about corporate responsibility
23

The board and senior managers are not interested in the subject
18

Other
7

© The Economist Intelligence Unit 2005 27


Appendix: executive survey results
The importance of corporate responsibility

Executives
How much pressure does your company receive from its stakeholders to improve its corporate responsibility? Please rate each stakeholder
from 1 to 5, where 1=A source of heavy and continuous pressure and 5=Not a source of pressure.
(% respondents)

1 Heavy 2 3 4 5 No Average
pressure pressure
Institutional investors
18 25 26 13 47 3.36

Other investors and shareholders


16 43 29 13 27 2.94

Board of directors
37 48 21 12 14 2.38

Employees
16 34 41 18 18 2.91

Customers
19 32 29 25 22 2.99

Vendors
2 15 23 34 47 3.9

Government and regulators


32 34 31 16 13 2.56

Local communities
7 29 32 21 34 3.37

NGOs
10 15 28 18 51 3.7

Executives Executives
Judged by the attention your company pays to your interests as an As an employee, how are your concerns and views represented in the
employee, how satisfied are you with its performance? company decision-making processes? Select all that apply.
(% respondents) (% respondents)

Extremely satisfied 16 Via informal dialogue with line-managers


63
Satisfied 52
Via open forums with senior managers
Neither satisfied nor 52
dissatisfied 17
Via formal dialogue with line-managers
44
Dissatisfied 11
Via formal employee surveys
Extremely dissatisfied 4 34

Via formal employee representatives, such as trade unions


14

Other
4

28 © The Economist Intelligence Unit 2005


Appendix: executive survey results
The importance of corporate responsibility

Executives Executives
Which one of the three companies below would you most likely invest in? Is your own buying behaviour influenced by whether the company
(% respondents) producing the goods or services has high standards of
corporate responsibility?
Company A's shares outperformed its (% respondents)
peers and the company paid little
attention to corporate responsibility
or stakeholders (aside from
shareholders). 14 Always 16
Company B's share performed about
the same as its peers and the company Often 42
paid a moderate amount of attention
to corporate responsibility and all Sometimes 36
stakeholders. 52
Company C's share performed slightly Never 5
below that of its peers and the company
paid a great deal of attention to corporate
responsibility and all stakeholders. 34 Other 1

Executives
Roughly what percentage of shares in your personal investment
portfolio are in companies or mutual funds that are “ethical investments”? Executives
(% respondents) As a customer, how would you like to see your concerns represented in
company decision-making processes? Select all that apply.
None 24 (% respondents)

1-10% 8
Via formal customer surveys, focus groups and market research
10-30% 11 51

They do not need to be represented—I can just choose not to buy


30-50% 8
products or services if I am dissatisfied
38
50-75% 11
Via formal consumer representatives, such as consumer organisations
75-100% 12 34

Not sure 25 Via informal dialogue with companies


24

Other
1
Executives
Do you think that firms that emphasise corporate responsibility tend
to have a better long-term financial performance than firms that do not?
(% respondents)

Yes 72

No 8

Not sure 20

© The Economist Intelligence Unit 2005 29


Appendix: institutional investors survey results

Investors Investors
What is your title? How should a company's corporate responsibility be judged,
(% respondents) in your view? Select the top two answers.
(% respondents)

C-level executive 46
By its record of compliance with laws and regulations
Senior vice-president / 58
Vice president 18
By its application of recognised standards in areas such as corporate governance
Portfoloio manager 7 35

Analyst 3 By its actual activities in environmental, philanthropic, ethical or social areas


32
Other 26
By the frequency and quality of communications with stakeholders
23

By its market reputation for corporate responsibility


20

By its formulation and communication of internal standards


Investors 15
What is the value of your company’s total global assets under
management, in US dollars? Not sure
(% respondents) 0

Other
Less than US$5bn 75 2

US$5bn to US$20bn 13

US$20bn to US$50bn 6 Investors


Which statement do you think ought to reflect the stance
More than US$50bn 6 of institutional investors toward corporate responsibility?
(% respondents)

Corporate responsibility is not a matter for


institutional investors to track; financial
performance should be the only concern. 0

Corporate responsibility is a factor,


but much less important than financial
Investors performance. 6
Do you personally manage assets?
(% respondents) Corporate responsibility should be one
of many factors that institutional
investors track in addition to
financial performance. 62
Yes 45
Corporate responsibility should be elevated
to one of the primary factors institutional
No 55 investors track when making investment
decisions. 32

30 © The Economist Intelligence Unit 2005


Appendix: investors survey results
The importance of corporate responsibility

Investors Investors
What are the most important aspects of corporate responsibility to your Five years ago, how important a consideration was corporate
investment decisions? Select up to three aspects. responsibility to your investment decisions?
(% respondents) (% respondents)

It was an important consideration,


Transparency in corporate dealings but only one variable in any
68 decision. 31

High standards of corporate governance It was a central consideration in


62 most investment decisions. 3

Ethical behaviour on the part of all staff members It was a consideration, but not
46 an important one. 37

Equitable pricing and remuneration policies It was a consideration


32 on rare occasions. 15

Labour practices and employee rights It was not a consideration. 14


23

Environmental practices
14

Avoidance of markets with poor human rights records Investors


11 If it has grown in importance, what are the main drivers of the change?
Select all that apply.
Ethical investments (% respondents)
9

Philanthropy and charitable giving Recent corporate scandals


2 49

Other Evidence that it offers a competitive advantage


2 34

Greater focus by media on issues of corporate responsibility


32

Greater focus by shareholders on issues of corporate responsibility


Investors
32
How important a consideration is corporate responsibility to your
investment decisions? Select the statement that best applies. Greater pressure from governments or regulators
(% respondents) 22

Globalisation and offshoring


It is a central consideration in most
20
investment decisions. 20
Increasing customer power allied to consumers’ concerns in this area
It is an important consideration, but
only one variable in any decision. 61 15

It is a consideration, but More effective action by non-governmental organisations and activists


not an important one. 14 3

It is a consideration Other
on rare occasions. 5 5

It is not a consideration. 0

© The Economist Intelligence Unit 2005 31


Appendix: investors survey results
The importance of corporate responsibility

Investors Investors
How often does your firm have formal and candid communications with Do you believe that good corporate citizenship can help a
the companies in which it invests? company's bottom line?
(% respondents) (% respondents)

Every quarter 31 Yes 80


Twice a year 13 No, it’s a necessary cost of
doing business but no
Annually 26 more 8
Less than once a year 6 No, it’s an unnecessary
drain on resources 0
Never 13
Not sure 12
Other, please specify 11

Investors Investors
What are the most effective actors in instilling a sense of corporate If yes, in which ways can it positively affect the bottom line?
responsibility? Select up to three actors. Select up to three ways.
(% respondents) (% respondents)

Management Higher employee morale and commitment


78 66

Board of directors Enhancement of the brand with customers


72 58

Employees Reduced likelihood of regulatory intervention


29 45

Government and regulators Better relations with governments, local communities, etc
28 35

Institutional investors Competitive advantage over rivals


26 25

Customers Cheaper capital from investors


18 8

Local communities Other


6 2

Other investors and shareholders


6

Non-governmental organisations (NGOs)


3

Vendors
0

Other
4

32 © The Economist Intelligence Unit 2005


Appendix: investors survey results
The importance of corporate responsibility

Investors Investors
Which one of the three companies below would you most likely invest in? In what ways is your organisation working to improve standards of
(% respondents) corporate responsibility? Select all that apply.
(% respondents)
Company A's shares outperformed its peers
and the company paid little attention to
corporate responsibility or stakeholders Requesting that the companies you invest in improve their governance structures
(aside from shareholders). 16 to meet accepted standards
Company B's share performed about 43
the same as its peers and the company
paid a moderate amount of attention Preferring to talk privately to the managers and directors of a company,
to corporate responsibility and all if you think there is a problem
stakeholders. 63 42
Company C's share performed slightly
below that of its peers and the company Investing only in companies that operate to high standards
paid a great deal of attention to 26
corporate responsibility and all
stakeholders. 22 Implementing structured communication programmes with companies you invest in
25

Making statements at annual shareholders meetings about the standard of corporate


responsibility at the company that is holding the meeting
Investors 18
Roughly what percentage of shares in your personal investment portfolio
are in companies or mutual funds that are “ethical investments”? There are no special programmes in this area
(% respondents) 18

Making statements to the press about the standards of corporate responsibility


at companies in general
None 23
11
1-10% 12
Making statements to the press about the standards of corporate responsibility
10-30% 20 at particular companies
30-50% 6 1

50-75% 5 Other
1
75-100% 8
Not sure 26

Investors
What are the main barriers to an improvement in the standards of
corporate responsibility at the companies in which you invest
(or don’t invest)? Select all that apply.
Investors (% respondents)
Do you think that firms that emphasise corporate responsibility tend to
have a better long-term financial performance than firms that don't? The board and senior managers are not interested in the subject
(% respondents) 46

Unproven business benefits of corporate responsibility


Yes 69 46

Cost implications of corporate responsibility programmes


No 6 42

Fierce competition does not allow us the luxury to worry about corporate responsibility
Not sure 25 23

The industry is not one in which this is a high priority


20

Other
2

© The Economist Intelligence Unit 2005 33


Appendix: regional survey results
The importance of corporate responsibility
The Americas
Europe, Middle East and Africa
Asia Pacific

Executive survey Executive survey Executive survey


Which of the following best describes your title? What are your main functional roles? Country
(% respondents) Please choose no more than 3 functions. (% respondents)
(% respondents)
Board member
4 Customer service United States of America 72
7 12
8 Canada 20
6
15 Brazil 4
CEO/President/Managing director
22 General management Jamaica 2
17 50 Uruguay 2
17 42
CFO/Treasurer/Comptroller 36
10 Information and research
3 20
2 19
CIO/Technology director 21
2 Legal
3 2
4 0
Other C-level executive 2
2 Operations and production
0 20
United Kingdom 35
4 16 Netherlands 6
SVP/VP/Director 10 Poland 6
18 Risk Spain 6
27 8
15
Switzerland 6
16
8 Austria 3
Head of Business Unit
10 Supply-chain management Belarus 3
3 2 Belgium 3
10 13 France 3
Head of Department 6 Other 26
12 Finance
23 24
10 19
Manager 21
14 Human resources
17 12
21 3
Other 10
6 IT
0 16
India 37
10 6 Singapore 15
11 Australia 8
Marketing and sales Hong Kong 8
24 China 6
39
29 Indonesia 6
Procurement Japan 6
8 New Zealand 4
3 Taiwan 4
2 Other 8
R&D
6
3
8
Strategy and business development
40
42
42

34 © The Economist Intelligence Unit 2005


Appendix: regional survey results
The importance of corporate responsibility
The Americas
Europe, Middle East and Africa
Asia Pacific

Executive survey Executive survey Executive survey


How should a company's corporate responsibility be judged, How important a consideration is corporate responsibility at If it has grown in importance, what are the main drivers
in your view? Select the top two answers. your company? Select the statement that best applies. of the change? Select all that apply.
(% respondents) (% respondents) (% respondents)

By its record of compliance with laws and regulations It is a central consideration in most corporate decisions Recent corporate scandals, Labour practices and employee rights
50 44 22
42 39 42
46 42 31
By its application of recognised standards in areas such as corporate governance It is an important consideration, but only one variable in any decision Globalisation and offshoring
26 52 8
42 45 29
54 38 23
By its formulation and communication of internal standards It is a consideration, but not an important one Evidence that it offers a competitive advantage
18 2 18
32 13 16
25 13 33
By its market reputation for corporate responsibility It is a consideration on rare occasions Greater pressure from governments or regulators
26 0 30
19 3 32
15 4 25
By its actual activities in environmental, philanthropic, ethical or social areas It is not a consideration More effective action by non-governmental organisations and activists
40 2 4
35 0 13
34 2 8
By the frequency and quality of communications with stakeholders Greater focus by media on issues of corporate responsibility
20 18
13 32
15 25
Not sure Executive survey Greater focus by shareholders on issues of corporate responsibility
2 Five years ago, how important a consideration was corporate 30
0 39
0 responsibility to your company? 25
Other, please specify (% respondents) Increasing customer power allied to consumers’ concerns in this area
2 12
0 It is a central consideration in most corporate decisions 13
2 24 19
23 Other
13 8
It is an important consideration, but only one variable in any decisio 3
42 2
Executive survey 23
35
What are the most important aspects of corporate responsibility It is a consideration, but not an important one
to your company? Select up to three aspects. 26
(% respondents) 39 Executive survey
35
What are the most important stakeholders to your company?
Environmental practices It is a consideration on rare occasions
Select the top three stakeholders.
22 2
16 10 (% respondents)
25 2
Labour practices and employee rights It is not a consideration Institutional investors
44 6 32
48 6 29
42 15 37
Avoidance of markets with poor human rights records Other investors and shareholders
6 46
3 39
2 50
Ethical investments Board of directors
2 28
3 58
8 46
Ethical behaviour on the part of all staff members Employees
66 64
35 55
65 63
High standards of corporate governance Customers
60 72
65 61
52 60
Philanthropy and charitable giving Vendors
6 10
0 10
10 4
Equitable pricing and remuneration policies Government and regulators
16 22
23 19
19 17
Transparency in corporate dealings Local communities
54 4
55 3
46 8
Other Non-governmental organisations (NGOs)
2 2
0 0
2 0
Other
4
0
4

© The Economist Intelligence Unit 2005 35


Appendix: regional survey results
The importance of corporate responsibility
The Americas
Europe, Middle East and Africa
Asia Pacific

Executive survey Executive survey Executive survey


In five years' time, which do you expect to be the most important With which of the following groups of stakeholders does your What are the most effective actors in instilling a sense of
stakeholders to your company? Select the top three stakeholders. company have formal, regular and structured communications? corporate responsibility within companies?
(% respondents) Select all that apply. Select the top three actors.
(% respondents) (% respondents)
Institutional investors
34 Institutional investors Management
29
33 42 92
48 100
Other investors and shareholders 46 86
46 Other investors and shareholders Institutional investors
48
46 56 12
55 6
Board of directors 54 23
26 Board of directors Other investors and shareholders
58
68 10
42 71 16
Employees 75 21
68 Employees Board of directors
55 74 52
63
61 71
Customers 67 65
72 Customers Employees
58
67 46 50
48 39
Vendors 46 35
12 Vendors Customers
13
4 24 20
22 19
Government and regulators 25 17
18 Government and regulators Vendors
16
17 48 2
45 0
Local communities 40 0
10 Local communities Government and regulators
0
13 16 36
10 32
Non-governmental organisations (NGOs) 21 31
4 Non-governmental organisations (NGOs) Local communities
0
2 6 4
3 0
Other 11 8
0 Other Non-governmental organisations (NGOs)
0
4 2 0
0 0
4 4
Other
0
3
2
Executive survey
How has the importance of corporate responsibility to your
company changed over the past five years?
(% respondents)

It has become far more important


33
45
35
It has become somewhat more important
26
42
35
Its importance has not changed
37
13
31
It has become somewhat less important
2
0
0
It has become far less important
2
0
0

36 © The Economist Intelligence Unit 2005


Appendix: regional survey results
The importance of corporate responsibility
The Americas
Europe, Middle East and Africa
Asia Pacific

Executive survey Executive survey


Do you believe that good corporate citizenship can help a In what ways is your company working to improve standards of
company's bottom line? corporate responsibility? Select all that apply.
(% respondents) (% respondents)

Improving governance structures to meet accepted standards


62
Yes 90 71
60
No, it’s a necessary cost of doing Implementing open and candid communication programmes with all stakeholders
business but no more 8 56
55
No, it’s an unnecessary 63
drain on resources 0 Applying responsibility standards set by third-party groups or consultants
18
Not sure 2 32
31
Engaging in various programmes such as philanthropy, environmental, social or community outreach efforts
34
26
54
Rolling out special training for executives and employees
Yes 87
42
48
No, it’s a necessary cost of doing 46
business but no more 6 Developing specific resources with responsibility for this area
28
No, it’s an unnecessary 29
drain on resources 0 23
There are no special programmes in this area
Not sure 6 14
6
11
Other
0
Yes 82 3
0
No, it’s a necessary cost of
doing business but no more 15

No, it’s an unnecessary Executive survey


drain on resources 0
What are the main barriers to an improvement in the standards of corporate responsibility at your company? Select all that apply.
Not sure 2 (% respondents)

Unproven business benefits of corporate responsibility


26
35
40
Fierce competition doesn't allow us the luxury to worry about corporate responsibility
16
29
Executive survey 27
If yes, in which ways can it positively affect the bottom line? The board and senior managers aren't interested in the subject
Select up to three ways. 10
19
(% respondents) 25
The industry is not one in which this is a high priority
Enhancement of the brand with customers 28
60 22
64 29
65
Cost implications of corporate responsibility programmes
Higher employee morale and commitment 42
74 35
61 42
65
Other
Reduced likelihood of regulatory intervention 6
38 6
26 10
19
Competitive advantage over rivals
32
35
27
Cheaper capital from investors
8
3
10
Better relations with governments, local communities, etc
54
39
48
Other
0
6
0

© The Economist Intelligence Unit 2005 37


Appendix: regional survey results
The importance of corporate responsibility
The Americas
Europe, Middle East and Africa
Asia Pacific

Executive survey Executive survey


How much pressure does your company receive from its stakeholders to improve its corporate responsibility? Judged by the attention your company pays to your interests as
Please rate each stakeholder from 1 to 5, where 1=A source of heavy and continuous pressure and 5=A source of no pressure. an employee, how satisfied are you with its performance?
(% respondents) (% respondents)
1 2 3 4 5

Institutional investors 12 17 29 4 37 Extremely satisfied 18


Other investors and shareholders 15 35 22 4 24 Satisfied 55
Board of directors 29 31 15 6 19
Neither satisfied nor dissatisfied 12
Employees 13 32 34 11 11
Dissatisfied 10
Customers 11 23 32 17 17
Extremely dissatisfied 4
Vendors 2 9 20 26 43

Government and regulators 30 26 21 13 11

Local communities 4 18 38 13 27

NGOs 4 11 29 11 44 Extremely satisfied 13

Satisfied 53

1 2 3 4 5 Neither satisfied nor dissatisfied 23


Institutional investors 14 21 14 18 32
Dissatisfied 10
Other investors and shareholders 14 32 25 11 18
Extremely dissatisfied 0
Board of directors 37 30 20 13 0

Employees 15 15 44 15 11

Customers 19 37 4 26 15

Vendors 4 15 15 35 31 Extremely satisfied 14


Government and regulators 27 31 31 8 4
Satisfied 49
Local communities 8 23 27 15 27
Neither satisfied nor dissatisfied 18
NGOs 8 8 28 16 40
Dissatisfied 14

Extremely dissatisfied 6
1 2 3 4 5

Institutional investors 14 22 14 12 38

Other investors and shareholders 10 33 22 14 22

Board of directors 22 45 16 10 8

Employees 12 24 26 18 20

Customers 16 22 22 20 20 Executive survey


As an employee, how are your concerns and views represented in
Vendors 0 11 22 26 41 the company decision-making processes? Select all that apply.
20 26 24 16 14 (% respondents)
Government and regulators

Local communities 6 27 16 20 31 Via formal employee surveys


30
NGOs 10 16 16 18 39 23
42
Via formal dialogue with line managers
36
48
50
Via informal dialogue with line managers
62
65
63
Via open forums with senior managers
46
48
61
Via formal employee representatives such as trade unions
8
19
15
Other
6
3
4

38 © The Economist Intelligence Unit 2005


Appendix: regional survey results
The importance of corporate responsibility
The Americas
Europe, Middle East and Africa
Asia Pacific

Executive survey Executive survey Executive survey


Which one of the three companies below would you most Roughly what percentage of shares in your personal investment Is your own buying behaviour influenced by whether the company
likely invest in? portfolio are in companies or mutual producing the goods or services has high standards of corporate
(% respondents) funds that are “ethical investments”? responsibility?
(% respondents) (% respondents)

Company A's shares outperformed its None Always 16


peers and the company paid little 32
23
attention to corporate responsibility 18 Often 36
or stakeholders (aside from 1-10
shareholders) 12 8 Sometimes 38
13
Company B's share performed 6
Never 8
about the same as its peers and 10-30
the company paid a moderate 14
13 Other 2
amount of attention to corporate 8
responsibility and all 30-50
stakeholders 54 6
10
10 Always 6
Company C's share performed slightly
below that of its peers and the company 50-75
8 Often 39
paid a great deal of attention to corporate 6
responsibility and all stakeholders 34 16
75-100 Sometimes 48
8
Company A's shares outperformed its 3 Never 6
18
peers and the company paid little
Not sure Other 0
attention to corporate responsibility
24
or stakeholders (aside from 32
shareholders) 22 24

Company B's share performed


about the same as its peers and Always 22
the company paid a moderate Executive survey
amount of attention to corporate Do you think that firms that emphasise corporate responsibility Often 51
responsibility and all tend to have a better long-term financial performance than
stakeholders 52 firms that don't? Sometimes 25
(% respondents)
Company C's share performed slightly Never 2
below that of its peers and the company
paid a great deal of attention to corporate Yes 76 Other 0
responsibility and all stakeholders 26
No 10

Company A's shares outperformed its Not sure 14


peers and the company paid little
attention to corporate responsibility
or stakeholders (aside from Executive survey
shareholders) 12 As a customer, how would you like to see your concerns
represented in company decision-making processes?
Company B's share performed Select all that apply.
about the same as its peers and (% respondents)
the company paid a moderate Yes 58
amount of attention to corporate Via formal customer surveys, focus groups and market research
responsibility and all No 13 44
stakeholders 51 52
58
Not sure 29 Via informal dialogue with companies
Company C's share performed slightly
26
below that of its peers and the company 23
paid a great deal of attention to corporate 25
responsibility and all stakeholders 37 Via formal consumer representatives such as consumer organisations
26
29
44
They do not need to be represented—I can just choose not to buy
Yes 76 products or services if I’m dissatisfied
36
42
No 4 38
Other
Not sure 20 0
3
0

© The Economist Intelligence Unit 2005 39


Appendix: regional survey results
The importance of corporate responsibility
The Americas
Europe, Middle East and Africa
Asia Pacific

Executive survey Executive survey


What is your primary industry? What are your organisation's global annual revenues in US dollars?
(% respondents) (% respondents)

Agriculture and agribusiness $500m or less 62


2
0
2 $500m to $1bn 6
Automotive
12
$1bn to $5bn 8
3
0 $5bn to $10bn 8
Chemicals
2 $10bn or more 16
0
0
Construction and real estate
0
0 $500m or less 52
6
Consumer goods $500m to $1bn 10
0
10
2 $1bn to $5bn 13
Defence and aerospace
2 $5bn to $10bn 6
3
0
$10bn or more 19
Education
0
0
4
Energy and natural resources
6 $500m or less 56
3
0
$500m to $1bn 13
Entertainment, media and publishingChemicals
2
6 $1bn to $5bn 11
4
Financial services $5bn to $10bn 8
16
26 $10bn or more 11
21
Government/Public sector
4
0
0
Healthcare, pharmaceuticals and biotechnology
16
6
6
IT and Technology
6
0
21
Logistics and distribution
2
3
0
Manufacturing
14
16
15
Professional services
10
10
13
Retailing
6
6
0
Telecoms
0
0
0
Transportation, travel and tourism
0
6
6

40 © The Economist Intelligence Unit 2005


Appendix: regional survey results
The importance of corporate responsibility
The Americas
Europe, Middle East and Africa
Asia Pacific

Investors survey Investors survey Investors survey


What is your title? How should a company's corporate responsibility be judged, What are the most important aspects of corporate responsibility
(% respondents) in your view? Select the top two answers. to your investment decisions? Select up to three aspects.
(% respondents) (% respondents)
C-level executive
40 By its record of compliance with laws and regulations Environmental practices
50 13
71 73
42 15
Senior vice president / Vice president 57 14
30 By its application of recognised standards in areas such as corporate governance Labour practices and employee rights
9 33 20
0 31
42
Portfoloio manager 29 14
3 By its formulation and communication of internal standards Avoidance of markets with poor human rights records
5 17
0 17
15 8
Analyst 14 0
3 By its market reputation for corporate responsibility Ethical investments
5 10
0 10
23 12
Other 43 0
23 By its actual activities in environmental, philanthropic, ethical or social areas Ethical behaviour on the part of all staff members
32 47
27
29 38 42
29 57
By the frequency and quality of communications with stakeholders High standards of corporate governance
23 57
27 57
Investors survey 0 0
What is the value of your company’s total global assets under Not sure Philanthropy and charitable giving
management, in US dollars? 0 3
0 0
(% respondents) 0 0
Other Equitable pricing and remuneration policies
Less than $5bn
0 30
76 42
81 4
0 0
71
Transparency in corporate dealings
$5bn to $20bn 53
10 73
15 100
0
Other
$20bn to $50bn Investors survey 3
10 Which statement do you think ought to reflect the stance 0
4 0
0 of institutional investors toward corporate responsibility?
More than $50bn (% respondents)
3
0 Corporate responsibility is not a matter for institutional investors to
29 track; financial performance should be the only concern.
0 Investors survey
0 How important a consideration is corporate responsibility to your
0
investment decisions? Select the statement that best applies.
Corporate responsibility is a factor, but much less important than (% respondents)
Investors survey financial performance.
Do you personally manage assets? 7 It is a central consideration in most investment decisions
8
(% respondents) 0 17
27
14
Yes Corporate responsibility should be one of many factors that institutional
33 investors track in addition to financial performance. It is an important consideration, but only one variable in any decision
50 67 62
57 46 54
86 71
No
67
It is a consideration, but not an important one
Corporate responsibility should be elevated to one of the primary factors 14
50 institutional investors track when making investment decisions.
43 15
27 14
46 It is a consideration on rare occasions
14
7
4
0
It is not a consideration
0
0
0

© The Economist Intelligence Unit 2005 41


Appendix: regional survey results
The importance of corporate responsibility

The Americas
Europe, Middle East and Africa
Asia Pacific

Investors survey Investors survey Investors survey


Five years ago, how important a consideration was corporate How often does your firm have formal and candid What are the most effective actors to instilling a sense of
responsibility to your investment decisions? communications with the companies in which it invests? corporate responsibility within companies?
(% respondents) (% respondents) Select up to three actors.
(% respondents)
It was a central consideration in most investment decisions
0 Every quarter 30 Management
4 77
14 Twice a year 11 81
It was an important consideration, but only one variable in any decision 86
Annually 30
23 Board of directors
35 73
43 Less than once a year 7
65
It was a consideration, but not an important one. 86
Never 19
40 Institutional investors
46 Other 4 37
0 19
It was a consideration on rare occasions. 14
17 Other investors and shareholders
4 10
43 4
Every quarter 27 0
It was not a consideration.
0 Twice a year 12 Employees
12 33
0 Annually 31 19
43
Less than once a year 8 Customers
20
Never 8 23
0
Other 15
Investors survey Vendors
If it has grown in importance, what are the main drivers of the 0
0
change? Select all that apply. 0
(% respondents) Government and regulators
Every quarter 43 17
Recent corporate scandals 50
53 Twice a year 14 0
50 Local communities
29 Annually 0 0
Globalisation and offshoring 12
17 Less than once a year 0 14
27 Non-governmental organisations (NGOs)
14 Never 14
3
Evidence that it offers a competitive advantage Other 29 4
27 0
42 Other
29
3
Greater pressure from governments or regulators 8
27 0
15
29
Investors survey
More effective action by non-governmental organisations and activists If yes, in which ways can it positively affect the bottom line?
3
Select up to three ways. Investors survey
4
0 (% respondents) Roughly what percentage of shares in your personal
Greater focus by media on issues of corporate responsibility investment portfolio are in companies or mutual funds that
27 Enhancement of the brand with customers are “ethical investments”?
46 53 (% respondents)
14 69
Greater focus by shareholders on issues of corporate responsibility 29
None
37 Higher employee morale and commitment 30
27 70 23
29 54 0
Increasing customer power allied to consumers’ concerns in this area 100
1-10%
13 Reduced likelihood of regulatory intervention 13
15 57 12
14 19 14
Other 71
10-30%
7 Competitive advantage over rivals 30
0 23 8
14 23 29
43
30-50%
Cheaper capital from investors 3
7 8
8 14
14
50-75%
Better relations with governments, local communities, etc 3
43 8
31 0
29 75-100%
Other, please specify 3
0 12
4 0
0 Not sure
17
31
43

42 © The Economist Intelligence Unit 2005


Appendix: regional survey results
The importance of corporate responsibility

The Americas
Europe, Middle East and Africa
Asia Pacific

Investors survey Investors survey Investors survey


Do you believe that good corporate citizenship can help Which one of the three companies below would you most In what ways is your organisation working to improve standards
a company's bottom line? likely invest in? of corporate responsibility? Select all that apply.
(% respondents) (% respondents) (% respondents)

Company A's shares outperformed its peers and the company paid Investing only in companies that operate to high standards
Yes 83 10
little attention to corporate responsibility or stakeholders
38
No, it’s a necessary (aside from shareholders). 24.14% 57
cost of doing business 24
8 Requesting that the companies you invest in improve their
but no more 10 14 governance structures to meet accepted standards
No, it’s an unnecessary 40
Company B's share performed about the same as its peers and 42
drain on resources 0 57
the company paid a moderate amount of attention to corporate
Not sure 7 responsibility and all stakeholders. 55.17% Implementing structured communication programmes with
55 companies you invest in
65 27
71 23
29
Company C's share performed slightly below that of its peers Making statements to the press about the standards of corporate
Yes 70 and the company paid a great deal of attention to corporate responsibility at companies in general
responsibility and all stakeholders. 20.69% 17
No, it’s a necessary 20 4
cost of doing business 27 0
but no more 8 14 Making statements to the press about the standards of corporate
No, it’s an unnecessary responsibility at particular companies
drain on resources 0 7
8
0
Not sure 23
Investors survey Making statements at annual shareholders meetings about the
Roughly what percentage of shares in your personal standard of corporate responsibility at the company that is holding
investment portfolio are in companies or mutual funds that the meeting
are “ethical investments”? 10
(% respondents) 27
Yes 100 14
Preferring to talk privately to the managers and directors
No, it’s a necessary of a company, if you think there is a problem
cost of doing business 17
but no more 0 Yes 63 58
43
No, it’s an unnecessary No 3
There are no special programmes in this area
drain on resources 0
Not sure 33 23
19
Not sure 0 0
Other
7
4
14

Investors survey
Roughly what percentage of shares in your personal
investment portfolio are in companies or mutual funds that Yes 69
are “ethical investments”? Investors survey
(% respondents) No 8 What are the main barriers to an improvement in the standards
of corporate responsibility at the companies in which you invest
Not sure 23 (or don’t invest)? Select all that apply.
None
30 (% respondents)
23
0
Unproven business benefits of corporate responsibility
1-10% 50
13 13
12 29
14
Fierce competition doesn't allow us the luxury to worry about corporate responsibility
10-30% 17
30 27
8 43
29 Yes 83
The board and senior managers aren't interested in the subject
30-50% No 14 60
3 27
8 Not sure 0 43
14
The industry is not one in which this is a high priority
50-75% 13
3 23
8 29
0
Cost implications of corporate responsibility programmes
75-100% 47
3 42
12 14
0 Other
Not sure 0
17 4
31 0
43

© The Economist Intelligence Unit 2005 43


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