Power to the people…but for what purpose?

A friend of mine works for a large multinational City firm, where some employees take home six-figure salaries and bonuses that are even bigger.

They are, by all accounts, a decent enough firm with a pretty good reputation for corporate social responsibility and a good company to work for. Each year they select a charity to support, which they do so in a range of ways – from employee payroll giving and corporate donations, to fundraising events and employee volunteering. Fairly standard stuff these days for any firm worth their CSR salt.

The centrepiece of their annual fundraising effort is a hike up and down mountains (though it could equally be substituted for a bike ride, a walk, a parachute jump or trekking in the Himalayas!). Staff are invited to raise money for charity by being sponsored for their efforts…

The firm stumps up around £300 for each member of staff who wants to take part and everyone has to raise £600 in sponsorship (though this is topped up by a central fundraising effort). So around £1,000 is raised per person in a good cause. But of course the lucky charity doesn’t get to see this amount. The costs of the trip (not including the time off given to staff) are over £400 per person. This money is paid to a private company who organise the trip – who no doubt make a healthy profit on the venture.

Meanwhile well intentioned employees try to raise money from friends and family to support a good cause. Their sponsorship forms don’t even include a provisio in smallprint that only 60% of your donation actually goes to support the charity in question.

Of course many people will argue that the event costs money to put on and this has to be met by someone and that without this type of initiative people would not be doing it and so the charity would be worse off. The market provides the opportunity and people pay what the service is worth to them. I don’t really have a problem with this type of initiative – though I think it would be good to see some not-for-profit organisations offering this sort of service – but I do think it highlights how limited our current ambitions are in relation to corporate social responsibility.

My issue is really with the lack of integration of corporate social responsibility into businesses’ core strategy and activity. Supporting good causes is bolted on to how firms do business, not integrated into their standard ways of working.

Environmental policies may seek to limit or mitigate against the negative impact of doing business, but how many firms have developed a business model that considers their impact from start to finish? Is spending power harming or helping society and the environment? Are resources deployed in ways that add value to the communities in which businesses are located? Of course maximising profits is required in the shareholder model for publicly listed companies…but with interest in ethical investment growing steadily, there’s surely a better balance between financial and social return to be had.

There are (arguably) a handful of firms that have embedded social responsibility into their corporate strategy and business model….but only (at best) a few.

Much of the focus – at least within the not-for-profit sector and to some extent within government – is on charities and social enterprises delivering goods and services. But this type of activity is dwarfed by the scale of private sector activity which has the potential to be a force for good or a ‘societal destroyer’.

Banking is one obvious example of a sector that can send shockwaves through society when profit takes precedence over social impact, as we saw with the recent financial crisis. However, with the right regulatory framework (for example with a Community Reinvestment Act) banking could easily be more ‘socially useful’ whilst still returning a fair profit for its shareholders – by investing in local community finance institutions.

We need to be far more focussed on making our businesses more socially responsible – particularly the largest ones that have the potential to be hugely damaging or be forces for good.

To date the Big Society debate has focussed primarily on ways to encourage voluntary effort and support more social activity. Even the Giving White Paper that seeks to support the growth of philanthropy focuses principally on individual giving. Far too little attention has been given to making business more socially responsible.

The responsibility for this sort of change does not rest solely with government or even with the private sector. As citizens and consumers we get the goods and services we demand (or perhaps more accurately, if we don’t demand different things we get the same crap we’ve always had). If Big Society’s ambitions (and I’d suggest we forget the labels here, but focus on what it could mean) are to be realised, we need to channel civil action into demanding more social responsibility from the firms whose goods and services we consume.

That’s why organisations like FairPensions are so important, in helping to make the link between how a company acts and its share price. FairPensions calls on investors to ‘recognise their power and responsibility as shareholders to improve the behaviour of the companies in which they invest in order to bring about a better world and a more sustainable financial return for pension fund members.’

I realise that these comments are not particularly new and are advocated by numerous organisations working in social investment. However they tend to be too rarely present in mainstream debate, even within the voluntary and community sector. Until we start making a noise, we are unlikely to see any great shift towards more socially responsible corporate practice.

The prime minister says Big Society should place power in the hands of ordinary people. What we do with that power is up to us.