Holding Business to Account

times_of_malta196x701

published on April 11, 2009

by Carmel Cacopardo

_________________________________________________________________________________________ 

On September 13, 1970, in the New York Times magazine, economist Milton Friedman said that the sole purpose of business was to generate profits for shareholders. The business of business, he argued, is business.

Forty years on some still think on the same lines: that shouldering environmental and social impacts generated by business is not the business of business. They insist that, if pressed to address its impacts, business would consider relocating, seeking countries where legislation relative to environmental and social protection is minimal or inexistent.

By publishing its Corporate Social Responsibility report for 2006-08, Vodafone Malta is making a very powerful statement: modern business thinks otherwise. It considers that the business of business is much wider than business. In its second CSR report, Vodafone outlines its initiatives in managing its corporate risks and responsibilities in greater detail than it did two years ago.

CSR signifies a commitment that business is carried out in a responsible manner. Tree-planting and sponsorship of worthy causes, though laudable, are marginal to CSR!

Vodafone’s statements on the management of hazardous waste relating to mobile phones are welcome as are its declarations on its reduced carbon footprint.

The listing of ethical purchasing criteria make excellent reading although the manner in which these have been applied could have been substantially more informative. In particular, it would have been appropriate if stakeholders were informed whether there were any suppliers who fell foul of the said criteria during the reporting period. The adopted criteria use the available guidelines, standards and tools that have been drawn up globally to facilitate sustainability benchmarking and reporting. They are largely modelled on the social accountability standard SA8000, full compliance to which should lead to the ethical sourcing of goods and services. This standard has also been used by others, among which Avon Products Inc., The Body Shop, Reebok International, Toys ‘R’ Us and The Ethical Trading Initiative.

On a different note, reporting on the radiation emission levels of its base stations and the identification of the standards to which it conforms makes Vodafone’s second CSR report an adequate reporting tool. This is an issue, however, which requires more analysis and discussion.

In line with global CSR reporting standards, Vodafone discloses of being in breach of consumer legislation on one occasion during the reporting period relative to comparative advertising. Such disclosure, though not yet an everyday occurrence in these islands, is an essential element of CSR reporting.

Vodafone’s third CSR report should move a further step forward: Its statements should be subject to an audit and be independently verified as being correct. CSR reporting is as important as financial reporting and should be subject to the same level of assurance.

Vodafone has made an important contribution to CSR reporting in Malta.

Together with BOV, it has made the first strides locally in this previously unexplored domain. It is hoped that the competition in the communications industry in Malta would make equally valid contributions. While Go plc could substantially improve on its 61-word paragraph devoted to CSR in its 2007 annual report (the latest available), stakeholders await Melita’s first utterances on the matter.

Although some tend to equate CSR with corporate philanthropy, this is just one tiny element of CSR. To make sense, corporate philanthropy must be founded on and be the result of a sound CSR. A company can sponsor environmental initiatives but, if its own environmental policy is blurred, the sponsorships dished out could only be considered as an exercise in green-washing. When deciding on sponsorships, business should be consistent with the manner it carries out its day-to-day operations. Corporate philanthropy would thus be much more than another cheap marketing ploy.

Vodafone Malta, through its CSR report is laying its cards on the table. As a result, its corporate philanthropy can be viewed in context. It would be quite a feat if, for example, the banking sector in Malta could follow suit by determining and applying environmental criteria in the advancing of finance to the building industry and, subsequently, informing stakeholders of its achievements through CSR reporting! With just one stroke of a pen, the banking sector in Malta can prevent substantial damage to both the natural and the historical environmental.

The adoption of CSR by business signifies the acceptance of the fact that its shadow is much wider than its shareholders.

Business is responsible towards its shareholders but it is accountable towards its stakeholders: employees, customers, consumers, trade unions, environmental groups and also future generations. It is with this wider stakeholder group that business must develop a dialogue. Such a dialogue must be based on trust and, consequently, it must be both transparent and leading to genuine accountability. It is not just governments that need to be accountable! CSR reporting is a tool that can be of considerable assistance in achieving this purpose.

One comment on “Holding Business to Account

  1. I hold BIG BUSINESS at arms lenght. I believe in the philosophy of E.F. SCHUMACHER…SMALL IS BEAUTIFUL or in the words of G. K. Chesterton … DISTRIBUTISM.
    The larger the company, the greater the business ethical responsibility, and the more difficult to be ethical. Western democracies are more often plutocracies…. if not kleptocracies.
    P.S. I worked with big companies…theory backed by experience.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s