When most charities were formed they had as a basic mandate the desire to bring about change – so shouldn’t they be using their leverage to challenge and to change? Yet, there is always a nervousness that by collaborating with commercial interests you can become tainted.
World Wildlife Fund has sometimes been criticised for their partnership with the Lafarge Group – who are the one of the biggest producers of building materials. Yet, as Robert Napier, of WWF UK says: “This relationship has helped us not only in our conservation work but also in promoting environmentally sound business practices. We receive funds for forestry projects and quarry rehabilitation initiatives and help to bring about significant environmental commitments, such as reducing Lafarge’s carbon dioxide emissions.”
When I was recently in Africa I visited the Congo, Rwanda and Dafur, in Sudan. Congo is rich in minerals. Every company that has worked there has simply exploited and stolen every asset they could lay their hands on. The other contribution of European companies has been the sale of arms in Congo, Rwanda and Darfur. The result? In Darfur, 70,000 dead; in Rwanda, 800,000 killed in the genocide and in Congo a corrupt and chaotic society robbed of its natural wealth. Since 1998 more than 3 million have been killed: that’s 2,000 people every day. So what can we do? Only when companies are there who are committed to helping end the conflict and build a civil society will we see fundamental change.
Investors, pension funds and charities can all play their part in making this happen. Take the example of Starbucks and Oxfam.
Ethiopia is the birthplace of coffee. 20 years ago famine killed 1 million people. Oxfam have chosen Ethiopia as the focus of their first collaboration with a multinational company. This is in the shape of Starbucks, the world’s largest coffee retail chain.
Starbucks – in return – are contributing £100,000 to Oxfam’s rural development programme – and will be used to improve irrigation, to provide seeds and tools and to support women’s literacy projects. Scott Keiller, Starbuck’s UK head of corporate social responsibility and communications (that they even have such a post shows how much every big company now needs to engage in such issues), says: “By working together we realised we could achieve more than by working alone.”
Simultaneously, Oxfam have criticised Nestle, Kraft and other coffee producers for failing to safeguard the countless African casualties who have been hit by the crisis in world coffee prices. Nestle have now responded by announcing that they plan to launch their own fair-trade coffee brand. Good. It shows once again how far corporate and social responsibility has moved up the agenda.
Oxfam recognise that they will be accused of “selling out”, of jeopardising their “independence” and of being “exploited” buy a high profile company. That’s why they signed a memorandum of understanding with Starbucks. If the company renege on their undertakings then Oxfam will be free to say so. They are also committed to continuing their campaign for Fair Trade and to speak out against rigged rules and double standards in world trade. Oxfam will also be measuring the success of their joint venture – by assessing the amount of land brought intro use and the number of women given literacy training.
What Oxfam and Starbucks have done is to recognise that keeping an arms length relationship might preserve purity but would not effect change.
Bandwagons – like ethical and social responsibility campaigns – can roll along at a cracking pace – and the sincerity of the commitment of some of the passengers is open to doubt.
Many companies would have a lot of sympathy with St.Augustine’s request to the Lord “To make me virtuous: but not just yet.” But as Oxfam and Starbucks have shown we can’t go on waiting for change for ever. We need many more to follow their lead.
Addenda
Many people underestimate the real sea change that has occurred.
As Charity Times reported in May: “Engagement or divestment?” it asked “Not an either/or option.”
Now that the Charity Commission requiring charities to report on whether their investments are taking into account social, environmental or ethical issues, trustees and supporters of charities are simply engaging in an exercise that has become widespread in many other parts of society over the past decade.
Yet we are all well aware that if engagement is to be followed, it is crucial to have a well-thought out strategy. We have to be clear about what issues are being identified and why. We need to set up specific objectives for engagement and we need to extract specific and meaningful commitments from companies we decide to engage with. If we are not going to disinvest then we need to set up a mechanism for tracking and following up promises that companies give to modify or alter their own practices. We also have to have a clear idea of what the next steps will be if, having engaged and used our corporate leverage, the company does not adequately address the issues we have raised.
It could also be that by understanding the real sea change that has occurred that we could harness this impulse by creating alliances among charities and other investors to work together on particular issues – thus enabling them to increase their leverage and impact.
As we think how best implement a socially responsible approach we should not simply go for the easiest options. Companies with forward-thinking policies – on issues like the sale of arms or environmental depredations – obviously make attractive partners but the less forward-looking companies can make even more attractive targets. When most charities were formed they had as a basic mandate the desire to bring about change – so shouldn’t they be using their leverage to challenge and to change.
WWF has sometimes been criticised for their partnership with the Lafarge Group – who are the one of the biggest producers of building materials. Yet, as Robert Napier, of WWF UK says: “This relationship has helped us not only in our conservation work but also in promoting environmentally sound business practices. We receive funds for forestry projects and quarry rehabilitation initiatives and help to bring about significant environmental commitments, such as reducing Lafarge’s carbon dioxide emissions.”
S, of course, organisations like WWF have to have a care for their reputation but properly explained, their strategy of engagement can actually have highly desirable outcomes – outcomes that would be explicable and acceptable to their supporters when seen as part of a strategy for social engagement.
Let me give another example.
I have just returned from Africa – where I visited the Congo, Rwanda and Dafur, in Sudan. Congo is rich in minerals. Every company that has worked there has simply exploited and stolen every asset they could lay their hands on. The other contribution of European companies has been the sale of arms in Congo, Rwanda and Darfur. The result? In Darfur, 70,000 dead; in Rwanda, 800,000 killed in the genocide and in Congo a corrupt and chaotic society robbed of its natural wealth. Since 1998 more than 3 million have been killed: that’s 2,000 people every day. So what can we do? Only when companies are there who are committed to helping end the conflict and build a civil society will we see fundamental change.
Let me give an example of what I mean and how charities can play their part.
Ethiopia is the birthplace of coffee. 20 years ago famine killed 1 million people. Oxfam have chosen Ethiopia as the focus of their first collaboration with a multinational company. This is in the shape of Starbucks, the world’s largest coffee retail chain.
Starbucks – in return – are contributing £100,000 to Oxfam’s rural development programme – and will be used to improve irrigation, to provide seeds and tools and to support women’s literacy projects. Scott Keiller, Starbuck’s UK head of corporate social responsibility and communications (that they even have such a post shows how much every big company now needs to engage in such issues), says: “By working together we realised we could achieve more than by working alone.”
Simultaneously, Oxfam have criticised Nestle, Kraft and other coffee producers for failing to safeguard the countless African casualties who have been hit by the crisis in world coffee prices. Nestle have now responded by announcing that they plan to launch their own fair-trade coffee brand. Good. It shows once again how far corporate and social responsibility has moved up the agenda.
Oxfam recognise that they will be accused of “selling out”, of jeopardising their “independence” and of being “exploited” buy a high profile company. That’s why they signed a memorandum of understanding with Starbucks. If the company renege on their undertakings then Oxfam will be free to say so. They are also committed to continuing their campaign for Fair Trade and to speak out against rigged rules and double standards in world trade. Oxfam will also be measuring the success of their joint venture – by assessing the amount of land brought intro use and the number of women given literacy training.
What Oxfam and Starbucks have done is to recognise that keeping an arms length relationship might preserve purity but would not effect change.
The need to challenge many other companies to do the same is illustrated by figures published this week that show that only 44 of the FTSE 100 companies and 26 of the FTSE 250 provide a direct link on their web site from their annual report or investor-relations pages to sections on the web dedicated to corporate and social responsibility. Among the Fortune 100 companies only two, Coca Cola and Johnson and Johnson – have clear links from their investor pages to CSR information.
The challenge to companies and charities who don’t take these issues seriously is growing day by day. A straw in the wind was the decision of The Sunday Times, in March, to launch its Companies that Count campaign – a corporate responsibility index devised by Business in the Community. It aims to encourage firms to measure and control their impact on society and the environment in which they operate. Yet we all know that bandwagons can roll along at a cracking pace – and that the sincerity of the commitment of some of the passengers is open to doubt and that there often remains a gap between the impulse and the practice, the rhetoric and the reality.
For many companies and even charities thinking about CSR we know that we would have a lot of sympathy with St.Augustine’s request to the Lord “To make me virtuous: but not just yet.” Conversion may be delayed and it can also be synthetic.
—————————————————————————————————————————————————
Extended version:
I want to begin, this morning, with an illustration of how we make simple things complicated and how we often fail to see the blindingly obvious:
As part of a training scheme for professional people Anderson Consulting Worldwide asked four questions. Around 90% of the professionals tested got all the questions wrong. The reason? We look for the complicated rather than the obvious.
These were Anderson’s four questions:
- 1. How do you put a giraffe into a refrigerator?
Most people chose to dissect the animal or said it couldn’t be done.
The correct answer is: Open the refrigerator, put in the giraffe, and close the door. This question tests whether you tend to do simple things in an overly complicated way.
The second question asks:
2. How do you put an elephant into a refrigerator? In answer, did you say, open the refrigerator, put in the elephant, and close the refrigerator? This is the wrong answer.
The correct answer is: open the refrigerator, take out the giraffe, put in
the elephant and close the door. This tests your ability to think through the repercussions of your previous actions.
The third question is this:
3. The Lion King is hosting an animal conference. All the animals
attend… except one. Which animal does not attend?
The correct answer is: The Elephant. The elephant is in the refrigerator.
You just put him in there. This tests your memory. Even if
you failed to answer the first three questions correctly, you still have one more chance to show your true abilities.
The fourth question asks:
4. There is a river you must cross but it is used by crocodiles, and you do not have a boat. How do you manage it? Of course, the correct answer is that you jump into the river and swim across. Have you not been paying attention? All the crocodiles are attending the Animal Conference. This tests whether you learn quickly from your mistakes.
I liked this story because it illustrates the importance of simplicity, of thinking through repercussions and not forgetting too easily the things we have done before.
Just 10% of those who were asked managed to give the right answers (and I would not have been among them). However, many pre-school four-year-olds did get several correct answers.
The simple question I want to put to you today is do you want your charities to be an oasis of influence, in a desert of indifference, do you want charities to raise their game and to become real agents for fundamental change?
John Ruskin once wrote that “a nation cannot last as a money making mob.” Most of us would concur with that view and would want to see wealth used ethically and creatively.
The Chancellor of the Exchequer, Gordon Brown, puts it like this:
“Today, corporate social responsibility goes far beyond the old philanthropy of the past – donating money to good causes at the end of the financial year – and is instead an all year round responsibility….Now we need to move towards a challenging measure of corporate responsibility, where we judge results, not just by the input but by its outcomes: the difference we make to the world in which we live, and the contribution we make to poverty reduction.”
The movement in favour of the ethical use of money and socially responsible investment has taken that impulse and turned it into corporate mission statements, government policies, and investment decisions. Ruskin would surely have approved.
Throughout the 1990s a range of organisations campaigned for this change to come about. The Ethical Investment Research Service (EIRIS) and the UK Social Investment Forum – through their “Tomorrow’s Company” campaign deserve to be mentioned in despatches but so do those charities and pressure groups who have been involved in promoting a combination of ethical consumerism and disinvestment campaigns. And so do singular individuals, such as Russell Sparkes, whose authoritative writing on these issues has given the argument clear definition. Russell cogently demolishes the myth that investing ethically and acting in a socially responsible manner is incompatible with good business returns. Indeed, the reverse is often true.
There is no doubt that there has been a sea change and that many more companies and institutions do now routinely consider their responsibility to their stakeholders and the wider community.
Even so, although more people are asking the simple question, how do you get the giraffe into the refrigerator, or more, precisely, how do we best use the funds under our stewardship to achieve greater equity and fairness, never-the-less, there still remains a gap between the impulse and the practice, the rhetoric and the reality.
For those who are lagging behind the question is not whether ethical investment is a good or bad thing.
As Charity Times reported in May: “Engagement or divestment?” it asked “Not an either/or option.”
The Charity Commission requires charities to report on whether their investments are taking into account social, environmental or ethical issues. Trustees and supporters of charities no longer have a choice about this and, in reality, they are simply engaging in an exercise that – as I have said – has become widespread in many other parts of society over the past decade.
To make this approach effective it is crucial to have a well-thought out strategy. We have to be clear about what issues are being identified and why. We need to set up specific objectives for engagement and we need to extract specific and meaningful commitments from companies we decide to engage with. If we are not going to disinvest then we need to set up a mechanism for tracking and following up promises that companies give to modify or alter their own practices. We also have to have a clear idea of what the next steps will be if, having engaged and used our corporate leverage, the company does not adequately address the issues we have raised.
It could also be that by understanding the real sea change that has occurred that we could harness this impulse by creating alliances among charities and other investors to work together on particular issues – thus enabling them to increase their leverage and impact.
As we think how best implement a socially responsible approach we should not simply go for the easiest options. Companies with forward-thinking policies – on issues like the sale of arms or environmental depredations – obviously make attractive partners but the less forward-looking companies can make even more attractive targets. When most charities were formed they had as a basic mandate the desire to bring about change – so shouldn’t they be using their leverage to challenge and to change.
WWF has sometimes been criticised for their partnership with the Lafarge Group – who are the one of the biggest producers of building materials. Yet, as Robert Napier, of WWF UK says: “This relationship has helped us not only in our conservation work but also in promoting environmentally sound business practices. We receive funds for forestry projects and quarry rehabilitation initiatives and help to bring about significant environmental commitments, such as reducing Lafarge’s carbon dioxide emissions.”
So, of course, organisations like WWF have to have a care for their reputation but properly explained, their strategy of engagement can actually have highly desirable outcomes – outcomes that would be explicable and acceptable to their supporters when seen as part of a strategy for social engagement.
Let me give another example.
I have just returned from Africa – where I visited the Congo, Rwanda and Darfur, in Sudan. Congo is rich in minerals. Every company that has worked there has simply exploited and stolen every asset they could lay their hands on. The other contribution of European companies has been the sale of arms in Congo, Rwanda and Darfur. The result? In Darfur, 70,000 dead; in Rwanda, 800,000 killed in the genocide and in Congo a corrupt and chaotic society robbed of its natural wealth. Since 1998 more than 3 million have been killed: that’s 2,000 people every day. So what can we do? Only when companies are there who are committed to helping end the conflict and build a civil society will we see fundamental change.
Let me give an example of what I mean and how charities can play their part.
Ethiopia is the birthplace of coffee. 20 years ago famine killed 1 million people. Oxfam have chosen Ethiopia as the focus of their first collaboration with a multinational company. This is in the shape of Starbucks, the world’s largest coffee retail chain.
Starbucks – in return – are contributing £100,000 to Oxfam’s rural development programme – and will be used to improve irrigation, to provide seeds and tools and to support women’s literacy projects. Scott Keiller, Starbuck’s UK head of corporate social responsibility and communications (that they even have such a post shows how much every big company now needs to engage in such issues), says: “By working together we realised we could achieve more than by working alone.”
Simultaneously, Oxfam have criticised Nestle, Kraft and other coffee producers for failing to safeguard the countless African casualties who have been hit by the crisis in world coffee prices. Nestle have now responded by announcing that they plan to launch their own fair-trade coffee brand. Good. It shows once again how far corporate and social responsibility has moved up the agenda.
Oxfam recognise that they will be accused of “selling out”, of jeopardising their “independence” and of being “exploited” buy a high profile company. That’s why they signed a memorandum of understanding with Starbucks. If the company renege on their undertakings – or try to wear a merit badge of virtuous but unfulfilled intentions – then Oxfam will be free to say so. They are also committed to continuing their campaign for Fair Trade and to speak out against rigged rules and double standards in world trade. Oxfam will also be measuring the success of their joint venture – by assessing the amount of land brought intro use and the number of women given literacy training.
What Oxfam and Starbucks have done is to recognise that keeping an arms length relationship might preserve purity but would not effect change. What a contrast between this genuine attempt at social responsibility and the aggregates company that put up an owl nesting box on a patch of land at the edge of acres of devastated farmland. We have to be wary of empty owl boxes and empty gestures.
The need to challenge many other companies to do the same as Starbucks is illustrated by figures published this week that show that only 44 of the FTSE 100 companies and 26 of the FTSE 250 provide a direct link on their web site from their annual report or investor-relations pages to sections on the web dedicated to corporate and social responsibility. Among the Fortune 100 companies only two, Coca Cola and Johnson and Johnson – have clear links from their investor pages to CSR information.
The challenge to companies and charities who don’t take these issues seriously is growing day by day. A straw in the wind was the decision of The Sunday Times, in March, to launch its Companies that Count campaign – a corporate responsibility index devised by Business in the Community. It aims to encourage firms to measure and control their impact on society and the environment in which they operate. Yet we all know that bandwagons can roll along at a cracking pace – and that the sincerity of the commitment of some of the passengers is open to doubt and that there often remains a gap between the impulse and the practice, the rhetoric and the reality.
For many companies and even charities thinking about CSR we know that we would have a lot of sympathy with St.Augustine’s request to the Lord “To make me virtuous: but not just yet.” Conversion may be delayed and it can also be synthetic.
We all know that SRI can very easily become just another piece of public relations and window dressing; that, as Stuart McGreevy has argued, it can be seen as a “nice to do” rather than as a “must do activity”. That would be to misunderstand both the public mood and the new legal obligations that no longer leave SRI as an optional extra.
This is especially true for those of us involved in charities and non-governmental voluntary organisations. I speak to you today as someone who is himself a trustee and patron of several charities: and therefore acutely aware of the conflicting pressures, priorities and competing demands that those who run charities have to face.
Yet, for the reasons I will adumbrate it would be a huge error to leave SRI compliance as a subsidiary issue relegated to the backwaters of long agendas. Nor is it an issue that can be abdicated to the fund manager with trustees washing their hands of their own responsibility to ensure SRI compliance. The Trustee Act and Charity Commissioners now impose a duty on charities to include ethical as well as financial considerations with their standard investment criteria. Yet, this time last year, some 60% of the UK’s top 100 charities still had no written ethical or socially responsible investment policy, and two thirds of those were unable to say what plans they had to address the issue.
Because of the new statutory obligations every trustee needs to know how SRI impacts the objects of their charity: they need to appraise investment performance, legal obligations, the moral standpoint, compliance obligations and risk management.
Trustees have to lead on this issue by example – and also consider carefully the implications of not doing so. On the down side, a failure to engage properly in SRI will back-fire on disengaged charities, and will jeopardise their reputations, standing, donations and goodwill.
Many of you will have followed the recent debate about the decision of Campaign Against The Arms Trade to name 63 charities who own shares in arms exporters. These include major players in the charity world, including Cancer Research UK, the MS Society and the RNLI.
It was deeply revealing to hear the explanation given by the MS Society: “We never made a conscious decision to invest in the arms trade. We simply have a discretionary portfolio which means that our fund managers decide our investments for us. We can’t exclude any investment because our constitution doesn’t allow us to.”
Another charity said: “We don’t knowingly invest in any shares. Our investment managers manage our portfolio to the returns that we want, but how they invest it is down to them.”
But is it?
And can trustees any longer legitimately try to pass the buck?
In the past trustees have simply cited their fiduciary duty to get the best possible returns. But times and the laws have changed.
Sophie Chapman, speaking on behalf of the Charity Finance Directors’ Group says that “The Charity Commission now accepts that an ethical investment policy may be entirely consistent with the principle of seeking the best returns. For instance, trustees may be of the view that companies that adhere to ethical criteria are less risky and will perform better in the long term.”
In fact, Charity Commission guidance quite specifically permits a charity to exclude investments that “might hamper its work by making potential beneficiaries unwilling to be helped because of the source of the charity’s money or by alienating supporters.”
Failure to take SRI seriously can become a public relations disaster. For instance, following Campaign Against The Arms Trade’s disclosure about RNLI, the agency who organise al of their street fundraising, Dialogue Direct, have terminated their contract with RNLI.
The RSPB also fell foul – if I can use that phrase – of a decision to invest in a company responsible for an oil spill that killed thousands of birds.
I was recently in correspondence with a major national charity who have been leading calls for disinvestment in The Sudan while some of their own pension fund investments are
tied up with major interests in that country. Clearly this is extremely damaging for a charity’s reputation and, of course, donors may well move their donations to other charities if they feel aggrieved.
Nor is the old shibboleth about SRI producing far lower returns true. Half of Barnardo’s pension fund has been invested ethically since 1999 when the charity introduced changes to its general investment policy. Their finance director says: “We monitor the returns carefully and it’s actually been running slightly ahead of the market as a whole.” A 2002 report by West LB Panmure into the SRI market found that there was no sign of “systematic performance disadvantage.” Richard Stroud, the Chief Executive of The Pensions Trust adds: “Trustees must recognise ethical investment will give a different – which isn’t to say worse – return than conventional funds.”
For today’s discussion Stuart has identified six key barriers which have stood in the way of pushing SRI up the charity agenda. I hope that what I have said this morning helps to overcome some of the barriers and reinforces the urgency of taking SRI seriously.
The answer to the question, how do you put a giraffe into a refrigerator is a simple one and the initial answer to the question, how can we operate ethically and effectively, is equally simple. And EIC can easily provide you with the answers.
If, as John Ruskin put it, our only interest is in being “a money making mob”, it will diminish the vitality of the charity, disillusion supporters, and be significantly out of step with the mood of most people in this country. Surely we can do better than that.
Thank you.
