August 10, 2011 10:51 pm
Do corporate citizenship reports matter?
By Michael Skapinker
I have spent the past fortnight steeped in adultery. My holiday reading, Gustave Flaubert’s Madame Bovary and Ford Madox Ford’s The Good Soldier, are both full of it. They are also stories so compelling that you go to sleep regretting having to part with them until morning.
Returning to work, I was hoping to be equally enthralled by General Electric’s latest Citizenship Report . Sadly not.
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There was nothing inevitable about this disappointment. Corporate anthropologists will one day pore over these citizenship – or corporate responsibility or sustainability – reports with fascination. What, they will ask, were these powerful companies trying to achieve?
To the many contemporary critics of these literary efforts, the answer is: nothing particularly creditable. There are those who argue that companies should stick to their real jobs: producing returns for their shareholders. There are others who claim social responsibility reports are a cover for the irresponsible corporate reality.
The first objection ignores the political and social context in which modern companies operate. For all the benefits they bring through jobs created, taxes paid and products and services sold, they are ready targets for criticism at times of economic distress. Politicians, eager to escape the blame, attack them. The public dislikes them for closing factories and, as many see it, exporting jobs. Companies need society’s consent, an implicit licence to operate, and they often struggle to get it. Their employees like to be seen to be doing good too; they don’t enjoy critical questions from friends and family.
The second criticism – that these reports are sticking plasters – is harder to contest. Take those taxes: GE faced criticism after an article in the New York Times claimed it paid no tax at all last year.
To GE’s credit, its citizenship report confronts this. “The reason our tax rate was lower in 2008, 2009 and 2010 is simple: we lost $32bn in GE Capital during this time, as a result of the global financial crisis.”
But there is a paradox: “We fully comply with the law and there are no exceptions. GE acts with integrity in relation to our tax obligations wherever we operate. At the same time, we have a responsibility to our shareowners to reduce our tax costs as the law allows.”
This is the central problem with corporate responsibility reports, indeed with corporate responsibility itself: what the public expects may not be what shareholders want. Resolving the contradiction is never easy. It requires a compelling narrative connecting the two sides, and GE doesn’t quite manage to construct one.
It has a go. GE’s activities, it says, depend on the “institutions of stable, prosperous societies”. Too true, as the UK’s riot-hit businesses know.
GE also boasts of those of its businesses, such as renewable energy and healthcare, that offer solutions to world problems – from the depletion of energy sources to diseases that afflict an ageing population.
But GE largely fails to achieve what, for example, Unilever does. With its large network of saleswomen in India, the consumer goods group connects its commercial activities among the poor – the “fortune at the bottom of the pyramid” – with its long-term profitability.
The best GE can manage is a lame “we are starting to make inroads into closing the healthcare gap [between rich and poor] but there is clearly a long way to go to reach all those who would benefit”.
What is missing too are stories – of people and what the company has done for them, the tales that give dull reports some life. Walmart, that other corporate giant, and a fervent convert to the sustainability creed, does it better. Its global responsibility report has, among several stories, that of Adriana Rezende, a vibrant-looking graduate of the Social Retailing School that Walmart operates in Brazil. Thanks to her training, she got a job with the company.
GE, by contrast, on its citizenship website, tells us that it is supporting 5,000 girls through primary school in Kenya but does not tell us about any of them.
A video about how its technology speeds patients through a US emergency ward manages not to interview a single patient.
Ford Madox Ford wrote that “every word set on paper must carry the story forward”. Admittedly, in his novel, as in Madame Bovary, the central characters end up ruined and dead. There is no need for companies’ efforts to suffer the same fate, but they need to learn how to tell their stories.
Copyright The Financial Times Limited 2011
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