Corporate finance in job scotland

THE CORPORATE RESPONSIBILITY GROUP

UK companies and Corporate Group Responsibility Group members have a long history of social responsibility and are among leaders of best practice around the world, says Mike Tuifrey. They can help governments achieve their social objectives, if treated as partners.

Nearly a quarter of a century has passed since that callow youth, William Hague, first caught the headlines with a call at the Tory conference to roll back the frontiers of the state and let the private sector in. That sentiment, variously expressed, has become the dominant theme of much public policy-making since then. But few in politics are yet wholly comfortable with the idea of companies playing an active social role.

For many on the right, the business of business is business, pure and simple -- award contracts to run public services by all means, but decide on price alone and don't ask companies to deviate from profit maximisation. For many on the left, the words "corporate" and "responsibility" are oxymorons; they, too, can't see beyond short-term profits as the only possible driver of company behaviour.

Confounding both are companies such as Centrica, whose British Gas subsidiary last month launched a new scheme to help people on low incomes pay less for their energy, keep warmer in winter and claim more of their benefit entitlement. Fuel poverty remains a killer in Britain today despite repeated efforts by government, with older people and the chronically sick at most risk. Around one million people are eligible for the British Gas Warm-a-Life scheme. The average dual fuel customer could save up to [pound]688 in the first year, through a combination of free home insulation, a free benefits health check and price reductions.

The energy minister, Helen Liddell, has recognised the role companies can play in fighting fuel poverty, saying that "considering the needs of poorer customers is not just civilised, it improves the industry's commercial position and enhances its image more widely".

Centrica is just one of a group of 50 leading UK-based companies who are members of the Corporate Responsibility Group, all committed to adopting a social, ethical and environmentally responsible approach to their business practices. This marks a big change over the past 25 years. Now such behaviour is the norm among large companies. Then it was a few exceptions, often US multinationals, who were keeping alive a tradition going back to the early days of the industrial revolution, when enlightened entrepreneurs realised that ill health, poor housing, the demon drink and illiteracy did not make for an effective workforce.

The recent history of corporate social responsibility in Britain can be traced back to 1972, when IBM helped set up the Action Resource Centre to match seconded managers from companies with job opportunities in charities. A decade on, the Prince of Wales took the lead in bringing companies together to form Business in the Community. In those days, many saw their involvement as essentially philanthropic or "putting something back". But even then, such traditional companies as Marks & Spencer talked about healthy high streets being dependent on healthy back streets, a "business case" approach.

Today, M&S is a CRG member and the moving force behind Children's Promise, one of the few millennium schemes to command popular support. The company worked with seven charities to raise awareness of children in need. Around one in three adults participated in some way, many donating an hour's earnings at the end of the year and raising more than [pound]19m. Fellow retailer Boots has looked to its own resources and, since 1984, has run a recycling project to distribute surplus merchandise to community and charity groups. Since 1991, some stockhas been repaired or sorted through a partnership with the Nottinghamshire Probation Service. Unlike the US, where the value of such in-kind contributions is routinely exaggerated by using notional "as-if-new" retail prices. Boots follows the exacting standards of the London Benchmarking Group in its reporting of schemes such as this.

Founded by six CRG members in 1994, this group has now grown to more than 30 companies, all committed to professional evaluation of the impact of their community contribution programmers. The drinks company Diageo has pledged to contribute at least 1 per cent of its worldwide pre-tax profits -- in 1999, worth ore than [pound]18m. This includes [pound]500,000 to Tomorrow's People, a training charity that has helped more than 300,000 young and unemployed people since the company set it up 15 years ago. The added value to the UK economy is estimated at more than [pound]150m in extra tax revenues minus welfare costs.

A similar long-term impact has been achieved by another CRG member, NatWest, now part of the Royal Bank of Scotland. NatWest Face 2 Face with Finance was set up in 1994 to improve financial literacy in secondary schools. Since then, branch staff have helped more than 150,000 pupils in more than 2,400 secondary schools, by running ten different learning and activity-based modules, such as basic banking and mini-enterprise schemes.

Systematic evaluation by the National Foundation for Education Research found that NatWest Face 2 Face with Finance has a positive impact on literacy scores, and the government recently announced that financial literacy is to be a formal part of the curriculum. Evaluation by NatWest also found the scheme helps develop the skills and confidence of staff, underpins the bank's corporate reputation and, in some circumstances, generates new business.

During the 1990s, two other longtime CRG members pioneered successful ways to support their employees who wish to volunteer. Zurich Financial Services (formerly Allied Dunbar) has become well-known among fellow Swindon-based "white-collar" companies in securing mass participation in weekend challenge-style events. The erstwhile brewer Whitbread succeeded where others have not in fostering activity by "blue-collar" workers through a network of local, staff-run action committees.

By the end of the 1990s. attention was shifting to new ways of engaging businesses in social action. Companies such as BT convinced their marketing departments that a link-up with a charity could motivate customers. In one early effort, sales of mobile phones rose 25 per cent over one quarter, by offering a [pound]4 contribution to the children's charity WhizzKidz for each new connection made. Twenty disabled children gained mobility aids, while the charity achieved valuable national publicity for its cause.

The Unilever brand Persil also achieved a 25 per cent sales uplift while raising more than [pound]250,000 for Comic Relief during a Red Nose promotion last year. Staff got involved, other companies such as Sainsbury's helped with in-store support, and Comic Relief gained valued extra publicity.

Now social responsibility is extending into investment decisions, too. Earlier this year, Prudential launched a "light green" pension fund, allowing fund holders to direct their retirement savings into companies that follow ethical policies while still achieving superior longer-term returns. Most fund managers now have at least one such product in their range, responding to rapidly growing demand -- up about one-third each year.

Despite this growth, such funds are still worth only around [pound]3bn, compared to pension funds alone of [pound]800bn and much more under institutional management in general. Of greater long-term significance is Prudential's decision that its UK equity holdings, about [pound]150bn in total, will henceforth be assessed for environmental and ethical impact. This does not mean immediate disinvestment, but a process of engaging companies in debate about improving impact, in the belief that well-managed companies, alert to ethical issues, are more likely to provide superior returns over time. The Pru is the biggest single investor in 19 of the UK's top 100 companies.

Such CRG members are active not only in the UK; many are global businesses, and so are setting standards of behaviour around the world. In June, Shell announced a new international foundation to advance the goal of sustainable development. Among early projects are $20m for schemes to tackle poor air quality in large cities in Latin America and a biogas initiative to reduce forest depletion in rural China.