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| Thought Leaders: Investing |
Louder than Words
Christine Arena
11/01/2006
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Corporate directors, fund managers and institutional investors hoping to
burnish their reputations and their bottom lines by investing in companies that
are environmentally or socially innovative should beware: When it comes to
corporate social responsibility (CSR),
token gestures are often mistaken for
true commitment. Real CSR is not a mode of marketing, philanthropy or legal action. In the best cases, it is a fully integrated business strategy that
generates benefits to both society and shareholders.
In the worst cases,
however, CSR is nothing more than a cynical, cosmetic exercise. Consider
Chevron. In 2005, it launched a $50 million “Will You Join Us?” ad campaign
conveying its commitment to energy efficiency and conservation. Yet the company
presently spends only 2 percent of its record profits—$300 million out of $14
billion—on solutions to meet these favorable ends.
Following the Vioxx
debacle, in which pharmaceutical giant Merck withdrew the arthritis drug from
the market in the face of multiple lawsuits, the company increased philanthropic
spending to $975 million and commissioned a $20 million “Patients Come First”
advertising campaign highlighting the company’s strengths. Merck, however, has
never acknowledged any wrongdoing, paid court-awarded damages to plaintiffs or,
critics allege, fully addressed the internal factors that led to the Vioxx
recall in the first place.
Lagging behind successful moves by Hewlett-Packard
and Dell, Apple recently expanded its computer recycling program by offering
free computer take-back with the purchase of a new Macintosh system. Unlike
competitors, however, the company did not commit to specific goals for the
program.
Today, these efforts attract more and more criticism. In the cases
of Chevron and Merck, groups such as the Sierra Club and experts including FDA
researcher David Graham question whether these companies’ actions match their
rhetoric. In the case of Apple, publications such as Wired suggest that its
efforts are too little, too late.
But the public haranguing they engender
may not be the most troublesome aspect of these CSR campaigns, particularly for
investors. What is significant is that each of these firms fails to seize larger
market opportunities. They miss the chance to better leverage CSR as a means to
spur innovation and build long-term value.
Consider the bottom-line
possibilities if Chevron were to funnel far more of its $15 billion to $16
billion annual fossil fuel exploration and production budget into other energy
sources, or if Merck instilled a stakeholder web of accountability to ensure
that future drug scandals never occur. For its part, Apple could lead the
computer industry in addressing the problem of computer disposal by building its
computers from materials that are designed to be perpetually recycled, as
opposed to ending up in landfills.
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