Corporate social responsibility in the midst of financial turmoil
The global economy is experiencing a severe downturn. The world faces the worst financial crisis in recent memory. The food and energy volatility experienced earlier this year are compounding these problems. Amidst these woes, who wants to hear about corporate social responsibility?
It is only natural that the world’s attention is turned elsewhere, concentrated on the financial crisis. But we cannot – and must not – do this at the expense of corporate social responsibility. At the core of the financial crisis is a collapse of trust in the capital markets. While lack of accountability, proper regulatory controls and transparency all played a role in this, the main problem appears to be the obsession of financial markets with short-term gains over long-term considerations. There has been insufficient respect for values that encompass ethical dimensions while addressing profitability.
The financial crisis provides an opportunity to move towards responsible investment, where there is an incentive for a long-term vision rather than short term gains. Investors need to look beyond immediate financial performance and look into how businesses are run. Decisions on investment are not just about returns but are also about ensuring healthy, productive and sustainable economies and societies.
Corporate social responsibility is, by its very nature, a broad subject – from community relations to sustainable development. However, there is one principle that lies at its core. It is the principle of conducting business in an economically, socially and environmentally responsible manner, and weaving this principle into the intrinsic fabric of every company. If every company and business refused to pay bribes, implemented fair labour practices and adopted environmentally, economically and socially responsible practices then our world could be transformed to be more balanced, more just and more sustainable.
There is increasing realization within business that it cannot survive or thrive if societies fail or if people feel that their security is threatened. Building healthy and inclusive societies, sustainable markets, combating corruption and safeguarding the environment is just as important for Business as it is for the United Nations and its member governments.
Indeed, the United Nations and Business have already made progress in this area with the setting up, in 2000, of the UN Global Compact – the world’s largest voluntary corporate citizenship initiative, with the mission of an inclusive and sustainable global economy. The Compact has brought businesses together with not only UN agencies but with governments, trade unions and civil society to advance ten universal principles in the areas of human rights, labour, environment and anti-corruption.
So far, more than 5000 companies from more than 130 countries have signed up to the Compact – many of them from Asia and the Pacific. This is indeed the power of collective action for a global, regional and national public good. For, at the end of the day, this is not solely about profit and loss, at least in the financial sense. To ensure the prosperous and peaceful future our region, it is essential that all sections of society benefit as inequalities breed social tensions.
A way forward for business in our region is to recommit to the UN Global Compact’s mission of an inclusive and sustainable global economy. There are five ways in which a commitment to the Compact could make a significant contribution to dealing with the effects of the crisis: restoring trust by demonstrating a commitment to the principles of the Compact; emphasizing the continued relevance of voluntary initiatives, while acknowledging the role of increased regulation; advancing the business case for corporate social responsibility; advancing development assistance and public-private partnership, and advocating against protectionist measures that may harm the poorest nations.
It is not only business that should have a vested interest in corporate social responsibility. The United Nations, through its regional arm, the Economic and Social Commission for Asia and Pacific, is helping governments in our region take heed – and it is heartening to note that corporate social responsibility is also increasingly appearing on agenda of governments in the Asia-Pacific region. One example is Singapore, where the government has taken on the role of promoter and practitioner of corporate social responsibility; another example is that of China, where the government has provided instructions on corporate social responsibility in relation to the operations both in China and abroad of its state-owned enterprises. Indeed, the Chinese government is now also looking into providing guidance on corporate social responsibility to foreign companies operating in China.
These are steps in the right direction. And they have that much more weight now, in light of the crisis engulfing the financial sector. Amidst the pain and suffering ensuing from the crisis, let us seize the opportunity to make corporate social responsibility a cornerstone of the business environment in Asia and the Pacific. For in our globalized world, the long-term value and success of businesses are inextricably linked to the integration of economic, social, environmental and governance issues into corporate management and operations. The sooner that this is realized, then the better our chances will be for achieving common prosperity, social progress and stability in our region.
This article is based on a speech Dr. Heyzer recently delivered at the 7th Asian Forum on Corporate Social Responsibility in Singapore.