Thursday, June 21, 2007

Is there a link between sustainable business practices and financial performance?

Q. (cont.) Do you believe there is a verifiable link between a company's corp. social responsibility initiatives and its financial performance?

A. A sustainable business requires social responsibility. Unfortunately business "success" that is achieved by externalizing costs can go undetected for years while the business reports strong but distorted financial performance. It has yet to be proved that socially responsible investments are more successful but I suspect that day is not far off. Meanwhile it is a matter of belief and there are strong arguments for the case.

A business that is managed to satisfy it's stockholders only, and that means competing with other businesses to deliver investor value only, will inevitably short-change other stake-holders. Disgruntled employees, pissed-off customers and unpaid vendors will spread the word and the community at large won't want it in their back yard.

The success of the information-based, global economy contains the seeds of destruction of anti-social corporate behavior. Increasing transparency combined with 24/7 feedback from anyone anywhere are every day asserting accountability, making millions of new connections between business practices and stakeholder needs. This sea-change may take a while but it appears inevitable.

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