The corporate social responsibility debate took an interesting turn in 2016, as critics of ExxonMobil, the world's largest oil and gas company, alleged that company executives "knew humans were altering the world's climate by burning fossil fuels even while [the company] was helping to fund and propel the movement denying the reality of climate change." ExxonMobil's campaign to discredit its critics coincided with a decision by the Rockefeller Family Fund — a philanthropy established by the grandchildren of John D. Rockefeller, founder of Standard Oil, ExxonMobil's direct antecedent — to divest its holdings in fossil fuel companies and, as fund president David Kaiser wrote in an issue of the New York Review of Books, to do so "gradually," even as it singled out ExxonMobil for immediate divestment because of its "morally reprehensible conduct."
The Texas-based multinational was not amused and moved quickly to rebut the allegations, arguing that it had become the target of "a well-funded and politically motivated conspiracy to harm its core business." But the controversy merely underscored the difficult act that global corporations, especially those in the energy and extractives sector, must pull off as they try to balance the expectations of shareholders against the demands of an increasingly "green" global public.
To learn more about the changing CSR environment, PND contributing editor Michael Wiener recently exchanged emails with Alison Taylor, a New York-based director at Business for Social Responsibility, a global nonprofit organization that works with a network of more than two hundred and fifty member companies and other partners to build a just and sustainable world. In September, BSR, in partnership with the Rockefeller Foundation, announced the launch of an initiative aimed at building more inclusive global supply chains.
Philanthropy News Digest: How do you define integrity in the context of business sustainability?
Alison Taylor: Business sustainability is one approach and framework for considering organizational integrity. The other is ethics and compliance. Ethics and compliance teams tend to focus on oversight of internal rules and processes and on ensuring that organizations comply with regulations, though they are increasingly being held responsible for wider organizational ethics. Sustainability and CSR teams consider issues of current and emerging public concern such as climate change, human rights, and social impact, with regulatory considerations secondary. Although questions of ethics and integrity are important for sustainability and CSR teams, they sometimes are less explicitly drawn. And frankly, in many organizations there is a disconnect between the two frameworks and approaches; there may be policies and Codes of Conduct that address organizational values, but companies can contradict themselves — for example, by investing in community development but also using offshore investment structures to avoid taxes. By considering integrity in a more integrated and consistent way, and by building structures and cultures to support that integrity, companies can reduce risk and improve their reputations.
PND: How are companies using ethical frameworks to drive business sustainability?
AT: I think sustainability practitioners use ethical arguments to drive support for their programs, but there is also considerable focus on the business case for sustainability and on demonstrating that sustainable businesses are more profitable and successful in the long term. I actually think that where there is considerable support from corporate CEOs and boards, they are more often compelled to take these actions due to ethical considerations. But many companies remain skeptical of the sustainability agenda, and so the field remains focused on making commercial arguments to support that agenda. Those arguments are becoming stronger, however, as public trust in business plummets and voices for greater transparency grow louder. Companies know they can no longer reliably control or manage their public profiles, and so they are paying more attention to sustainability.
PND: What do you say to people who argue that the most important responsibility of any publicly owned company is to maximize shareholder value, not to address social, environmental, or human rights issues or problems?
AT: The emphasis on shareholder value and quarterly reporting remains the status quo and reality. It's also why companies sometimes welcome environmental and social regulation, as the need to comply with existing regulations and laws means they can resist pressure to undertake unsustainable activities in order to keep investors happy. To date, only a few really large companies, notably Unilever, have successfully managed to resist quarterly reporting pressure when it comes to corporate sustainability measures. However, the growing focus on environmental, social, and governance (ESG) issues among investors, coupled with widespread disruption and ongoing failures of leadership and governance in the private sector, means that there is more and more discussion of leadership and growth models that might work better.
There is overwhelming evidence, for example, that companies need to do more to consider community and society's needs and not just take a narrow, self-interested view. Even Milton Friedman argued that companies needed to do this in order to survive over the long term. But once you start to consider sustainability issues, it brings into play huge amounts of complexity in terms of priorities, decision making, and even a company's core activities. I think it's the reason why the shareholder-value concept has been so powerful for so long. It enables prioritization and clear decision making around priorities.
PND: Is there a model for companies in the energy and extractives sector that would allow them to maximize, or nearly maximize, their profits while advancing social and environmental sustainability? Can you give us an example or two of a company that is successfully threading that needle?
AT: This is a very live issue in the oil and gas industry, of course, as pressure grows for those businesses to do something in response to climate change. I found it very interesting, for instance, that ExxonMobil made a public statement in support of the Paris agreement the day after the U.S. election. It suggests that the debate about climate change is over, at least insofar as the oil and gas industry is concerned. That said, these companies must then respond to a number of difficult and existential challenges and choices. What should and can they do to adjust to a world where renewable energy dominates but all paths to that future are risky and challenging? There are no easy answers, and public criticism and mistrust only increases the difficulties.
At the project level, most large oil and gas and mining companies have rigorous programs to reduce the social and environmental harm their activities cause. The concept of a social license to operate has traction, but making this work in practice is incredibly challenging. Arguably, social and environmental programs, and consideration of issues such as human rights, are more advanced in energy and extractives than in many other industries, but of course the stakes are extremely high, and problems continue to occur. It is also worth noting that renewable energy companies, even though they are supporting global environmental goals, cause significant disruption to communities at the project level. Any large capital investment of this kind directly impacts the people living around the project, often negatively, and that's a problem that is not going away.
PND: Is it in the interest of any company to be completely transparent in its operations and practices? And if it isn't, what is the "right" amount of transparency for a publicly owned company with a fiduciary responsibility to its shareholders?
AT: Calls for transparency are almost universal today. And with the release of the Panama Papers, WikiLeaks, and so on, there is an argument to be made that the game is over. Companies should deliberately make the decision to be transparent because attempts to hide poor conduct are unlikely to be successful. Even if you can protect yourself via cyber security, your third-party vendors may not.
However, companies remain understandably defensive about the transparency concept. And one important point they often make is that there is a transparency and liability tradeoff. For example, investors and the public may call on companies to identify and disclose the presence of trafficking and slavery in their supply chains, but there also is a powerful monetary incentive to avoid criticism and legal action and hope that such problems never come to light. What's more, we have seen, especially this year, that there is no such thing as universal truth or totally objective information in the public domain, which is why the Oxford English Dictionary just designated post-truth as its word of the year. I'm not surprised that many organizations are fearful and defensive, and I think my answer to your question would depend on the company and issue involved. Transparency sounds simple, straightforward, and unarguably beneficial, but the truth is always more complicated than that.
— Michael Wiener