This was one of the key questions addressed last month at a conference organised by CSR Europe to mark both its 10th anniversary and the launch of “A European Roadmap for Business”, a new initiative which shows companies how to integrate social and environmental concerns into their daily operations.
Started in 1995 by the then European Commission President Jacques Delors and consisting of over 65 multinational firms, CSR Europe is a network of corporate professionals committed “to shaping the business and political agenda on sustainability and competitiveness”.
One of the central messages of CSR Europe is that the practise of corporate responsibility goes hand in hand with competitiveness and profitability. A number of the network’s “ambassador” members described the corporate responsibility initiatives being pursued both within their own organisations and in the wider international community.
David Norton, company group chairman of Johnson & Johnson, claimed that his firm had been following CSR practices for the last 25 years and that shareholders had earned a great return over that time.
Patrick de Smedt, chairman of Microsoft EMEA, maintained that the firm was responsive to both shareholders and stakeholders, contending that if a firm is spending money on CSR activities that are purely philanthropic in nature, then it is wasting shareholder money. Each company, he added, had to learn how to balance long-term CSR goals with the need to report positive short-term results to shareholders.
He said: “Shareholder pressure should not force us to make short-term decisions that might be detrimental to the long-term profitability of the company.
“Microsoft does not allow itself to be pressurised into making hasty or what it believes are wrong decisions for the sake of reporting attractive short-term results to Wall Street.”
The challenge of integrating CSR practices into all functions of the company was stressed at the conference. But while speakers highlighted areas such as employee training, research, marketing and procurement,no-one mentioned pension funds and socially responsible investment, save for a fleeting reference by Frank Welvaert, director, CSR Johnson & Johnson EME, to the performance in 2001 of the Dow Jones Sustainability Index and the FTSE4Good Index.
A bit of joined-up thinking should surely bring the recognition that a truly consistent approach to CSR is also reflected in the investment strategy of company pension funds. Would not SRI represent a vote of confidence in firms implementing CSR initiatives? And if CSR really does make a positive contribution to shareholder value, isn’t everyone a winner?
Perhaps not. Olivier Poswick, head of portfolio management of the €1.3bn Suez-Tractebel pension fund sees SRI as secondary to his chief priority which is to achieve a good investment return.
He said: “Our SRI exposure is quite small as we haven’t found any SRI proposal that beats traditional approaches to investment. If SRI is unable to deliver the same return as other asset classes, it is difficult for us to consider such an investment.”
The views on SRI of the head of Belgium’s largest pension scheme are cast in a somewhat ironic light, when one learns that the president of CSR Europe is a certain Viscount Etienne Davignon, vice-president of the industrial and engineering company, Suez-Tractebel.
In fairness, Tractebel is not the only pension scheme with investment policies that fail to reflect the sponsoring firm’s CSR principles.
While KBC Asset Management runs €500m of institutional assets in SRI funds, this total does not include any portion of the sizeable amount of money it manages for its own company pension scheme.
Edwin Meysmans, investment director of KBC Pensioenfonds, said that when KBCAM and other fund managers are given an equity or bond brief, they are instructed to also consider the ethical standards of the target stock and of its location. There are exclusions – the pension fund will not invest in any company involved in weapons or pornography, for example.
Mr Meysmans, who is also vice-president of the Belgian Association of Pension Funds, acknowledged that investors tend to pay lip-service to SRI and that in the final analysis, performance is all-important. If studies can show that there is a performance-related benefit from investing in ethical funds, then, he says, his fund might have a concrete reason to invest ethically.
He ruefully observed: “But one week you see a study saying that ethical funds perform better, the next you see a study saying that ethical funds perform worse. Right now, it’s not very clear what the real story is.”
Henry Smith, editor, henry.smith@ft.com
