Virtue?s Reward? Companies Make The Business Case for Ethical Initiatives

Tuesday, April 29, 2008

By Michael Skapinker

In Unilever’s London headquarters, Gavin Neath, the consumer goods group’s head of sustainability, takes a plastic contraption out of its cardboard box and places it on a table. It looks like a small and semi-transparent version of the vending machines that dispense drinks to office workers.

The device is called a Pureit – and it is a drinks dispensing machine of sorts. Developed by Hindustan Unilever, the company’s Indian subsidiary, the Pureit provides drinking water from any source, however polluted, purifying it with a series of meshes, parasite and pesticide traps and a germ-killing battery kit, without the need for boiling and without the use of mains electricity.

The Pureit is an illustration of how multinationals are trying to get to grips with the notion of sustainability. In the US and western Europe, the priorities are reducing the amount of packaging, cutting fuel consumption and providing for consumers who want to be sure that their purchases have been produced in an ethical or environmentally friendly fashion.

April has been “Earth Month” at Wal-Mart, for instance. Customers can buy “eco-friendly” lightbulbs and detergents. They can also choose between organic, Fair Trade or Rainforest Alliance-certified coffee as part of their contribution, the US retailing giant says, to “sustainable agricultural practices that protect the environment, ecosystems and farm workers’ welfare”.

Yes, this is Wal-Mart, long-time prime target of environmentalists, fair-trade campaigners and union activists. Lee Scott, Wal-Mart’s chief executive, now sounds like the greens who for so long excoriated his company. Mr Scott says he wants Wal-Mart to move towards being powered entirely by renewable energy, to create no waste and to sell “products that sustain our resources and environment”.

Hau Lee, professor of operations, information and technology at Stanford business school, defines sustainability as “ensuring that we are using resources today that will not jeopardise the resources of tomorrow”. But sustainability goes further than that: companies are using their sustainability programmes to cut costs, develop innovative products and find new consumer markets.

For advocates of responsible business, sustainability is what they have been seeking for years – a way for companies to do good while at the same time improving profits and shareholder returns.

The attempt by companies to demonstrate that they are friends rather than foes of the public good has a long history and has gone through several changes. It began as philanthropy – funding schools, concert halls and art galleries. Activities then widened into what became called “corporate social responsibility” – the idea that companies should be accountable not just to their shareholders, but to a wider group of stakeholders including employees, suppliers, the local community and non-governmental organisations.

CSR has long attracted critics, most of them agreeing with the economist Milton Friedman, who said: “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”

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Source: Financial Times (link opens in a new window)