Posts Tagged ‘Corporate Responsibility’

Noreena on Sustainability

October 29th, 2010 by admin

Dialogue magazine: ‘Sustainability in Context’ in support of Amsterdam’s Sibos 2010 conference.

Published: Quarter 4 2010

Does sustainability have a broader application than the environment and environmental impact?

I think it’s a very reductionist definition of sustainability to think of it only in terms of green issues. The term has been used in a multiplicity of ways. From a company’s point of view, sustainability involves an understanding of what it takes to survive today, and in the future. That incorporates issues like the environment, but also things like labour relations, human rights, employee discrimination, equal opportunity, and the company’s role in society. In other words, what does it take for a company to succeed today and in the future, beyond what one would associate with a standard balance sheet or a profit and loss statement?

Does that mean it goes beyond the things that the CFO of a company would think that shareholders should be interested in?

Well, it may go beyond what he or she currently thinks shareholders should be interested in, but I would argue that, actually, all of these issues are issues that shareholders should be interested in. If we take a case like BP and we look, with hindsight, at the company and how it works, we can see a host of issues that analysts and institutional investors should have been aware of and interested in: for example, the discrepancy between a very strong focus on personal accident safety reporting and a lack of reporting on the safety of industrial core processes.

If I’m a bank executive and I want to address the issue of sustainability in a comprehensive and concrete manner, where do I start?

There are a few areas where sustainability interacts with what the bank does. One is the kind of products that the bank offers. Then of course, there’s the issue of how analysts evaluate companies where sustainability also needs to come into the picture. Then there are issues around the bank’s own brand and reputation. Those are three of the main elements we could look at. One of the most interesting is the area of valuation. I think we are increasingly coming to see that risk is being underestimated by analysts who are only looking at a very narrow set of metrics in judging the success of a company.

Can sustainability issues be expressed in terms of metrics?…

To read the rest of the interview view Dialogue magazine’s PDF: Sustainability in context: measuring the impact on financial institutions.

Noreena Hertz: Keynote speech, Deloitte

July 12th, 2010 by emma

Noreena delivers the Keynote Speech at Deloitte UK’s Consulting Event in London.

The New Statesman: ‘Doing the right thing is good for business’

By Noreena Hertz
Published: 4th September 2006

Back in the 1970s, Kodak tried to give $25m to a black civil rights organisation in Rochester, New York. The company’s shareholders rose up in arms: making this politically charged offering wasn’t the reason they had entrusted Kodak with their money. The donation was withdrawn.

Fast-forward to the past 12 months. The Norwegian Petroleum Fund, the world’s largest institutional investor, has hired an ethical phil osopher to determine what it should and should not invest in: it sells its shares in Wal-Mart allegedly because of its serious and systematic vio- lation of human and labour rights. A group of 17 leading US pension funds and investors controlling $658bn in assets have pushed for face- to-face meetings with the Exxon Mobil board of directors to discuss the company’s persistent lack of acknowledgement of climate change. In Britain alone, socially responsible investments have increased by 31 per cent.

Today, an increasing number of shareholders are not only not objecting to radical behaviour on the part of the companies they invest in, but they are actually demanding it of them. And this trend is going to accelerate.

I make this claim for the following reasons. First, radical businesses are valuable: witness Cadbury’s glee in acquiring the organic chocolate company Green & Black; ditto ‘Oréal’s acquisition of the Body Shop and Ford’s recent decision to invest one billion dollars in envir onmentally sound cars. Second, it is no longer simply fringe groups that care about these issues, but, increasingly, mainstream pension funds and charities looking to invest in companies whose values are aligned to those they represent. Many young internet and high-tech magnates (the new coterie of high-net-worth individuals) are also keen to put their investment dollars in environmentally and ethically sound companies. Third, because of a legal opinion issued a few months ago by Freshfields.

The renowned international law firm was asked by the United Nations Environment Program to check whether pension funds, public and private insurance companies and mutual funds could incorporate environmental, social and governance issues into their investment decisions. The opinion Freshfields came back with in October 2005 was startling. Not only could they do so, but they have an active duty to have regard to these issues in every single decision they make.

It’s not, to quote Milton Friedman, that the business of business is no longer business. Of course, it is. Nor is it the case that investors are no longer mandated to realise maximum profits for those who entrust their money to them. Of course, they are. It’s just that, as society evolves, the nature of what will ensure the greatest profitability evolves too.

Read the rest of the article on the New Statesman website