Companies that recognise corporate responsibility as a driver of performance will be the successful global companies of tomorrow.
When I became chief executive of Standard Chartered in November 2001, the idea of corporate responsibility was virtually unheard of. It now runs through our company.
We have introduced an annual corporate responsibility report, we have a board-level corporate responsibility committee and the bank has established a global environment programme to manage the impact of our business. But our most visible activities are our community initiatives.
Many countries in our key markets of Asia, Africa and the Middle East do not enjoy the same level of economic and social development as those in the western world, so we have put in place global campaigns on two of the major blights in our markets – avoidable blindness and HIV-Aids.
Some will say it is not a company’s job to make a difference to communities in this way: “The social responsibility of business is to increase its profits,” as Milton Friedman put it.
But this argument is based on an increasingly false dichotomy.
We have found that the long-term sustainability of a responsible company and its communities are more closely linked than we expected. In future those links will strengthen, to become crucial to the success of global businesses.
Charitable partnership
Our “Seeing is Believing” campaign is ahead of schedule in restoring sight to one million blind people. The programme, a joint project with Sightsavers International and other leading charities, has involved our staff, customers and suppliers to achieve more than the bank could do alone.
The campaign has helped form a stronger bond with those stakeholders than was there before, showing how making a difference to communities also brings benefits for the bank.
This point is further emphasised by our “Living With HIV” campaign to raise awareness and understanding of HIV and Aids within the bank and outside. We operate in countries devastated by HIV and Aids. In Botswana 25% of those aged 15 to 45 have HIV, and in Zimbabwe the figure is 26%.
We employ 5000 people in Africa and on any day 500 of them will be off work because of HIV and Aids, receiving treatment, caring for a relative or attending a funeral. It is in our long-term interest to minimise the impact of the disease. The campaign also has near-term benefits.
By establishing “Living With HIV” and policies preventing discrimination against infected staff, we are seen as a responsible employer. Our employees, who put the programme into action, are motivated because they want to work for a responsible business that works for the wider community.
The campaign has also strengthened links with governments. Other examples of this include working with a Chinese government agency on a billboard poster campaign to improve awareness of HIV/Aids. In Thailand, we are training government officials and have received many awards from the Ministry of Public Health.
We have found that these activities improve relations not only with the governments of the countries concerned but also with other sympathetic countries and non-governmental organisations, some of whom are clients.
Natural disasters
The need for companies to take responsibility has increased because we live in a less predictable world. One of the major changes we have seen so far this century has been an increase in shocks, both natural and man-made. Our main regions have experienced the outbreaks of Sars and avian flu, the Asian tsunami, earthquakes in Pakistan and Iran, and war in Iraq and Afghanistan. Other shock events include Hurricane Katrina and the terrorist attacks in New York and other cities.
In a volatile world, people will look to companies to contribute when communities are damaged by unexpected events. Standard Chartered donated $5m to the Tsunami relief; the bank pledged $1m towards the effort in Pakistan and, as the extent of the damage and suffering becomes clearer, we are looking at ways to increase our contribution.
These efforts have helped to make life better for people in our markets through sustainable development. But the initiatives do not stand alone. They reflect a set of values I have set out for the bank, which I believe are essential for managing a diverse global business and protecting its reputation.
Standard Chartered employs more than 40,000 people in 56 countries with widely varying business cultures. The bank has added about 10,000 staff in the past year, including more than 5000 in Korea, where we bought Korea First Bank (now SC First Bank) last year.
Protecting reputations
In managing a fast-changing business of this size, it is essential that we maintain our high ethical standards wherever we operate. In a world of increasing regulatory scrutiny and global communications, mistakes can cause huge damage to a company’s reputation and relations with governments and regulators. That is why instilling in staff the values of a responsible, trustworthy company is hugely important.
Much has been written about the so-called war for talent. Amid increasing competition to hire and keep talented staff, Standard Chartered’s stance on social responsibility has been a key retention and recruitment tool. Fifty per cent of our graduate applicants last year cited our approach to corporate responsibility as a reason for choosing us over our competitors.
These activities are now a part of our business, and they are good for business. But we must also be responsible when we do business. Prudent bankers have always assessed risk when deciding to whom they should lend, but the spectrum of risk has widened.
When lending, we now take into account a company’s impact on wider social issues, recognising that this may affect their ability to repay in future or the reputation of the bank as a provider of funding.
One of the biggest and most complex areas of concern is the environment. Helping to raise prosperity in our markets increases the living standards of the communities in which we operate, but this success brings more challenges in ensuring a sustainable world.
Banking does not have the direct impact on the environment as, say, a natural resource or construction company, but as a large employer and as financiers of industrial and commercial activity we have a responsibility.
Decisions are not always easy. Should Standard Chartered finance a project to build a hydroelectric dam to provide power for thousands of people that will also displace an indigenous community and affect the environment? We increasingly have to use our judgment to find the appropriate decision, and the choice is never black or white. The framework of the Equator Principles that we have adopted gives good guidance but does not provide all the answers.
Benefit analysis
Standard Chartered operates in some of the fastest-growing but most underdeveloped countries in the world, and making a difference through corporate responsibility is a huge issue for us. We believed that doing the right thing would enhance our reputation, but there have been extra benefits that we did not fully appreciate.
We have strengthened relationships with internal and external stakeholders and improved awareness of the Standard Chartered brand beyond our expectations. The values of a responsible company help underpin our standards when we do business as the bank grows rapidly.
Those who are sceptical about corporate responsibility point to a tension between shareholders’ desire for returns and the cost to companies of supporting communities. But investors increasingly understand that making a difference is an investment, and Standard Chartered’s shareholders support our corporate responsibility activities.
Our approach is paying off now, but the real benefits will be long term. Companies who focus solely on their duty to make a profit will be healthy today, but those that recognise corporate responsibility as a driver of performance will be the successful global companies of tomorrow.
Mervyn Davies is chief executive of Standard Chartered Group.
