In my Opinion: Chartered Management Institute

Alan Coppin, chairman of Redstone and a Companion of the Chartered Management Institute, insists that responsible business is as important as ever in tough economic times.

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Last Updated: 09 Oct 2013

Not long ago, it was only the ultra-politically correct fringe who dared to suggest that corporate social responsibility was an important, or even a critical, element for corporate success. I recall a conversation with the macho leader of a major corporation, who told me quietly that he supported the approach, 'provided it is kept well away from me'.

Things are different now. The smartest CEOs recognise that doing business in a responsible way is just good business. Responsible business manifests itself in a number of dimensions. It means treating employees fairly and with respect; managing the impact of the company's activities on society and the environment; protecting the environment for future generations; and being a responsible neighbour. Naturally, it also means employing a business approach to these matters, with appropriate measures and independent verification built in. Such an approach is not just about minimising risk but, if done well, realising real bottom-line benefits by maximising opportunities.

But will toughening conditions affect organisations committed to responsible business and put off those not already engaged? Is there a risk of corporate backsliding as a result of the deterioration in the business environment?

There are a number of reasons why this should not be the case. Apart from any moral or ethical considerations, the first point is that all recessions end - a difficult point to appreciate amid the economic gloom and despondency. Businesses that continue to be run responsibly and well will be better placed to compete as we emerge from the downturn. For instance, a friend who led a large advertising agency faced significant City pressure to cut staff costs in a previous recession. He resisted it. It was worth enduring the City's temporary wrath, for, when good times returned, his highly motivated people significantly outperformed the competition.

A related point is that responsible business is about good management, not 'goody goody' management. So, although it may be necessary to make redundancies in difficult times, operating responsibly means dealing fairly with the people affected and with the remaining staff.

Second, there's the bottom-line argument. Some managers will say that the business needs to focus on the core in difficult times and that responsible business and profitable business are mutually exclusive; the former is, in effect, an expensive luxury - a 'nice to have' but not a necessary component of performance. The same people see responsible business as a bolt-on to the normal way of doing business rather than an integral part of it. Managers with this mindset see operating ethically and sustainably as being about risk minimisation, rather than opportunity maximisation.

I do not share such views. Profit enhancement should result from a properly implemented, responsible business plan. The following benefits should result from a carbon reduction strategy, for instance: cost reduction, particularly for organisations affected by rising energy prices or by carbon trading; workforce appreciation, resulting in improved morale, loyalty and increased productivity; and greater community involvement, creating more loyal customers and supportive stakeholders.

Indeed, in 2007 the investment research firm Innovest published its Carbon Beta and Equity Performance Study, involving 1,500 US companies. It found 'a strong, positive, and growing correlation between industrial companies' sustainability in general, and climate change in particular, and their competitiveness and financial performance'. And a Goldman Sachs survey, conducted in the same year, found that companies on an ethical list outperformed the MSCI World Index by an average of 25%, with 72% of them outperforming their sector peers. McKinsey has found that corporate leaders increasingly view socially responsible conduct as key to creating competitive advantage and improving performance, rather than as a costly burden.

The third reason for maintaining responsible business is that the socio-political operating climate will bring influences to bear on companies to ensure responsible business compliance, even in hard economic times. Opinion polls suggest the environment is high on the list of consumer worries: as Sir Bob Worcester of Ipsos Mori has said, 'Greenery is well-embedded'.

Governments and investors will also exert pressure. And our staff - the people who make us successful - will have strong views on the issue. They provide their most precious asset, their time, to the firm and they expect to be rewarded with more than just money. They increasingly believe that the organisation's values should match their own.

A responsible business approach, embedded in the overall business strategy and applied with basic common sense, is good for business in times of both feast and famine. It can be a source of real competitive advantage. In the tough times that we face, strong leaders must make the case that responsible business is not an optional extra but the only way to do business.

CV - Alan Coppin is chairman of Redstone and a non-executive director of Capital & Regional (where he chairs the responsible business committee), Berkeley Group Holdings and Air Command (Royal Air Force). He is a patron of the Windsor Leadership Trust and a member of the steering board of the Chartered Management Institute's 'Greening Management' research study.

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