When a manager delivers profits but discriminates against some staff, while only paying lip service to the impact that his company is making on the environment, is he doing a good job? Certainly not, says US Jeans company Levi-Strauss, which claims it links bonuses to corporate values and involves three hundred staff from three continents in the process. Like many companies of similar reach and profile, Levi-Strauss has come to recognise that corporate values need to go a good deal further than the fluffy ideals of old. In all walks of business there is growing evidence of companies grappling with issues that affect the morale of their staff, their wider reputations and ultimately the bottom line. They want to be seen to be ethical. Take corporate giants BP Amoco and Nike, for example. Both have been on the receiving end of adverse publicity concerning their relationship with staff and other stakeholders, but both are making concerted efforts to manage the ethical side of their businesses and to report on it – warts and all. BP Amoco, for example, now produces an environmental and social report that includes comments from those affected by its activities in all parts of the world. The publication is certainly not a platform for grievances, but there is still a genuine attempt to reflect the wider issues affecting the company’s operations and its license to operate. In the UK this summer, there was unprecedented interest in the Business in the Environment Index of Corporate Environmental Engagement, which ranked FTSE-350 companies for their activities across a number of areas not normally associated with profit and loss. They were asked about their targets to reduce environmental impact, product stewardship programmes and environmental performance measurement. Clearly, environmental impact is going to be greater for a transport company than for a bank, but whatever the business, the index helps to demonstrate that taking care of the environment is simply another facet of sound management. But the stark reality for companies is that it’s not getting easier to manage issues which have the potential to create waves of damaging publicity. Hindsight is no help if you are a Shell manager who got the public message all wrong during the climb-down over the disposal of the Brent Spar platform. The same might be said for any number of other organisations which have found themselves in the media spotlight and which might think that the consultancy profession has been failing them. The recent Channel 4 documentary, Masters of the Universe, highlighted the fact that management consultancy is moving from a traditional ‘efficiency and effectiveness’ model to one that concentrates on creativity and innovation. The same change is taking place in this writer’s mainstream environmental domain, in which the wider world of business ethics can count for just as much as plain technical understanding. In effect we have created hybrid which is about adding value and minimising risk-although the trick is to combine them, as in the case of the food retailer which declares itself entirely GM free while at the same time announcing a new organic product line. Ideally, a consultant providing advice on environmental and ethical issues will have a combination of business and scientific knowledge. But real science can rapidly lose out to emotion when an issue goes public. How many punters understand the issues which have cost the British beef industry in excess of £4bn, or the levels of risk posed by contaminated animal feed? People are susceptible because they are avid consumers and because science has become fair game for the media. Yet, for companies with sound ethical management, there is an upside to the effect of publicity, because these threatening issues can also be used to add value. Does the environmentally managed company that is currently able to get away with higher emissions in certain parts of the world delay the decision to invest in new pollution abatement equipment? Does the clothing company sever all possible connections with child labour when the alternative for the children may be prostitution? Is the oil company prepared to spend more on the safety of its local workforce when profits are down? These are all hard management decisions for which there is not always an obvious immediate or even medium-term bottom line gain. Yet, these same decisions also happen to be among the reasons why environmental and social issues are continuing to move up the management agenda. That way, problems can be pre-empted, and a more enlightened, innovative approach to planning and decision making can be adopted. Unfortunately, the sad fact is that many companies are continuing to neglect these issues because of the pressures on them and their consultants to deliver balance sheet value today. And the unpalatable conclusion is that consultants of all shapes and sizes are not providing clients with enough of what they need. In terms of the emerging environmental and social agenda they are repeatedly missing the bit that veers away from the bottom line world of process and production. As an article in the Financial Times on the Big Five accountancy firms noted, they may be failing to spot an organisation’s wider impact on stakeholders and society and they are not acting as an early warning system for their clients. At the other end of the spectrum, numerous so-called environmental and ethical consultants are simply too green and narrow-minded to provide their clients with the big picture. They have technical understanding but cannot relate this to the business they are trying to help. They know about a product’s environmental impacts but not about those it has on the market place. So we are left to query what business really needs in this area, given that it is being serviced not only by management consultants, but from an environmental consulting profession whose revenues now amount to well in excess of £400m per year in the UK alone. For those who, on behalf of their clients, are seeking to avoid being a part of the next Bhopal or Brent Spar disaster it seems that the requirement is a combination of real knowledge about a subject and the issues it throws up, combined with an understanding of business risks and opportunities. Put those two together and you can start to add value for those who seek a larger than life profile on the world stage. Tom Woollard is a technical director with the international consultancy ERM.
Just one half of UK practices have implemented a pricing structure around auto enrolment implementation and advice - with many suffering increased costs
Deloitte's north-west Europe foray; BDO, Smith & Williamson investment paths; Shelley Stock Hutter; and Wilkins Kennedy discussed by editor Kevin Reed on our Friday Afternoon Live broadcast
Accountants should alter their perspective on auto-enrolment to maximise business opportunities, according to Eric Clapton.
Kevin Reed discusses whether new accountancy group Cogital can rival the Big Four...and its likely direction of travel