The business/society interface has and will continue to be marked by rising demands for increased transparency and social responsibility. Moreover, this trend has been accompanied by not only public policy regulation but also by non-legal social expectations of how modern businesses should act.
Consider the array of forces that are pushing for socially responsible business practices:
Customers - Edelman’s 2015 Trust Barometer®, an annual survey of over 27,000 people in 27 countries, links increased trust in business to areas such as having ethical and transparent business practices, treating employees well and placing customers ahead of profit. 81% of respondents believe companies can take actions that both increase profits and improve local economic and social conditions.
Investors - There has been an explosion of investment funds that monitor companies using social performance indicators. From 2012 through 2014, more than 202 institutional investors - public pension funds, labor funds, religious investors, foundations and investment management firms representing more than $1.7 trillion in assets under their control - have filed or co-filed stockholder proposals on social issues.
Employee Productivity - Employees who believe their company has deeply rooted core values are more engaged, loyal and productive. Ethisphere’s annual ranking of the World’s Most Ethical Companies shows that the list’s publicly traded companies, when indexed together, regularly outperformed the S&P 500.
Recruits - There is a universe of young talent paying close attention to CSR and searching for ethical employers. One example, with over 400 dues paying members, the Social Enterprise Club is one of the largest student organizations at the Harvard Business School.
International Lenders - The financial community is increasingly incorporating social risk into its lending practices. The International Finance Corporation (IFC) Environmental and Social Performance Standards and the Equator principles are two examples of this trend.
The Public Sector - Government impact on business is indisputable - setting standards, procurement, licensing and the creation of new markets. From Dodd-Frank legislation to the Foreign Corrupt Practices Act or the United Kingdom’s anti-bribery act, staying ahead of the curve is a critical business activity because the arc is constantly moving.
Non-governmental Organizations (NGOs) - NGOs are at the forefront of pushing governmental regulation of the private sector. NGOs can impact media, legislative and regulatory agendas. NGOs come in many stripes but ultimately represent important stakeholders for companies.
Competition - Leading companies are looking increasingly to industry metrics that formally document their company’s adherence to sustainability and other social values. Two examples are the Dow Jones Sustainability Indexes and the Financial Times FTSE4Good Index.
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