In a press release issued by Marriott International this past week, the company announced its has again been included as a company member of the FTSE4Good Index, an index that measures the performance of companies that meet globally recognized corporate responsibility standards. The press release states that Marriott’s commitment to social responsibility and community engagement is focused on five signature issues: Shelter and food, environment, readiness for hotel careers, vitality of children, and embracing diversity and people with disabilities.
This is all nice but does this really define whether a company is socially responsible?
Should a company be recognized for its social responsibility by doing things external to its core business? Can a company such as Marriott do charitable things while opposing worker organizing efforts, doing business in troubled parts of the world and committing unethical acts in the course of its normal business activities and get the moniker of “socially responsible”?
I think you, the reader, know where I’m going with this. I would answer these questions with a resounding NO!
What is a Socially Responsible Company?
This raises another related question about how companies claim that they are socially responsible, adopting codes of conduct and the like while acting entirely differently.
These are questions that get to the fundamental issue of corporate social responsibility. It’s not just about what you say you do but how you actually act as a corporate citizen around the world that counts as far as I’m concerned. In my opinion, a company should be evaluated not only for its policies – however it chooses to label those – but also how it acts day to day in its normal business activities.
In drawing an informed opinion about a company, several broad areas of inquiry emerge. Does a company conduct itself reasonably with respect to:
- the workers it employs around the world
- its investors as manifested in its corporate governance practices
- the local communities in which it operates
- how it conducts itself ethically in its domicile country and in other countries around the world
- the environment
I propose that these actual behaviors determine the worth of a company and its responsibility to all of its stakeholders. As I am fond of saying, you can put lipstick on a pig but at the end of the day, it’s still a pig. This is true also of companies adopting environmental, social and governance (ESG) policies when corresponding practices aren’t actually adhered to on a consistent basis.
The Social Responsibility Conundrum
This raises a number of questions of course. Fundamentally, how do we differentiate between companies that are bad actors and those that have passing problems with their ESG practices? I don’t think there is any clear-cut answer to this question. At least not yet. The problem is exacerbated by the fact that, in the investment world, clear cut answers to these sorts of questions are the norm and fuzzy answers to this question don’t fit well into their analysis. This forces analysts to look at assessment factors that can be quantified such as codes of conduct. Unfortunately, this doesn’t get us the best results or the right answers.
The challenge then is to develop a quantitative approach for what is basically a qualitative problem. This evaluation problem, which in my view is very subjective, must ultimately be forced into an objective matrix that can then be duplicated on a consistent basis.
Now that I have thrown down the gauntlet on this topic, I would like to hear from you, the reader, about how you would tackle this problem of assessment.
Any takers?
For my part, I will post several follow up articles in which I will try to tackle these questions. I look forward to hearing from you.
The idea of an “industry standard” is a good one, but its implementation may be problematic. A model is LEED (Leadership in Energy and Environmental Design). LEED grew from an idea of the National Resources Defense Council and administered by the U.S. Green Building Council. In a decade and a half, LEED has become a nearly ubiquitous industry standard in A&E and construction. However, a LEED type certification standard is based upon a point system awarded for meeting concrete measurable outcomes. As John’s article points out, definitions of the terms involved with sustainability vary widely, and even the categories he proposes are not universally accepted. Moreover, most measures in John’s categories depend on qualitative data and reports or analyses of organizational trends. This less objective set of standards is not an insurmountable problem, but it is not one that is easily overcome. Second, there is no authoritative body or convening authority that speaks for sustainable business, so not only is convoking a group to address the issues unlikely, but their ability to enforce a standard is even less so. Again, this is not an insurmountable problem, nor does it imply that steps to organize such an effort should not be undertaken. However, together the key challenges outlined above suggest that work needs to be done in building an infrastructure and presence before the suggested task has meaning.
I agree that any approach needs to take into account all actions/operations of a company. As you suggest, just because it excels in one facet doesn’t make it socially responsible if it is falling down in other areas – especially if these actions are tied to its day-to-day operations. I look forward to your follow-up pieces to this.