MARKET DEVELOPMENT
The Costs and Benefits of Being Ethically Good in Business
The Costs and Benefits of Being Ethically Good in Business
05/04/2013 (The Liverpool Post) - Businesses are increasingly attempting to portray themselves as ethically good, but can they ever be purely altruistic, or is there inevitably a profit motive behind all decision or actions they take?
There are many examples of businesses going to some lengths to be seen to be good. In February, Barclays announced it would cease speculative trading in food commodities because this activity is blamed for pushing up the price of food in poor countries.
Barclays chief executive Antony Jenkins said the practice was “not compatible with our purpose”. He wants to build a “socially useful” bank and “shred situations where we’re short-termist, too aggressive and too self-centred.”
According to estimates from the World Development Movement, speculative trading in agricultural commodities earned Barclays £750m over the last three years. Barclays’ withdrawal follows announcements in 2012 by several German, Austrian and Scandinavian banks that they would do the same.
Barclays is seeking to rebuild its reputation after a string of damaging incidents. It was fined £290m last year for attempting to rig the Libor interest rate, and has also been caught up in the industry-wide mis-selling scandals involving payment protection insurance and interest rate investment products.
The bank also said it would curtail its investment banking activities, an area of banking blamed for the banking crisis of 2008.
At the time of the announcement, one leading academic criticised the measures, warning they may be good for Barclays’ image but would cost the bank dearly.
Professor of Organisational Behaviour at Cass Business School, Andre Spicer, said: “Barclays’ announcement is about image, not profit.
“The strategy is about rebuilding the legitimacy of the bank. It is trying to win back the trust of investors, regulators and the broader public.
“By cutting back the investment banking division, it appears Barclays is willing to kill the golden goose which has produced a significant chunk of its profits in the past.
“This move is a gamble. It will inevitably lead to lower rates of profit in the future.”
Away from financial services, global consumer goods giant Unilever is also trying to balance the competing pressures of being good and making profits. The company promotes the fact that its research and development has made its soaps and other hygiene products more affordable and effective in developing countries, thereby saving lives and improving the standard of life for billions of people.
In its publicity material, the company, which has major detergent factories at Port Sunlight and Warrington, states: “Unilever’s ambition is to double the size of our business, whilst reducing our overall environmental impact (including sourcing, consumer use and disposal).
“We are also committed to doing what we can to improve health, nutrition and hygiene, with a target to help more than a billion people take action to improve their health and well-being, as well as sourcing all our agricultural raw materials sustainably by 2020.
“All of these goals are itemised in around 60 time-based commitments in our Unilever Sustainable Living Plan.”
Unilever also opened itself up to an audit by Oxfam of employment conditions at its Vietnam operations. While the openness was applauded, parts of the report were critical of the pay and conditions of its employees. Oxfam said the study found significant gaps between the company’s high level commitments and the reality on the ground for workers.
However, Oxfam’s report also states: “Unilever took part in the study as a means of stimulating a wider debate and encouraging other companies to face up to the issues in this area.
It has made a series of significant commitments to address Oxfam's recommendations, including a ‘sustainable living review’ in the 180 countries in which it operates by the end of 2015.”
Just last week, Nestle and Mars, which together control 27% of the world chocolate market, also bowed to pressure from Oxfam. The companies agreed to take action to improve the livelihoods of women cocoa farmers and work with other organisations to address gender inequality across the industry.
Pressure from protest groups such as Greenpeace has brought about a change to the way canned fish firms catch tuna. The previous method used fish aggregation devices which caught a lot of other species as well as the tuna. Following the protests, new methods to catch the fish used by the likes of Liverpool-based Princes Foods were introduced.
Sustainable palm oil production remains a big area of concern for both environmentalists and food producers.
Palm oil plantations have resulted in millions of hectares of deforestation in Malaysia, Indonesia and elsewhere. As a result, longstanding habitats have been destroyed, creating threats to a wide range of species that include the orang-utan. The deforestation also adds to the amount of greenhouse gases in the atmosphere.
On the other hand, palm oil is widely used in food and other products that most of us eat or use every day.
Liverpool-based New Britain Palm Oil is sensitive to concerns about how its palm oil is produced. The company’s website states that it is one of the world’s leading producers of sustainable and traceable palm oil and emphasises its participation in an industry-run certification scheme that involves many other palm oil producers and users known as the Roundtable on Sustainable Palm Oil (RSPO).
Other companies that subscribe to the scheme include AB Foods, Heinz, Kraft, Premier Foods and Kellogg. The firms believe participation in the scheme establishes that their palm oil is sustainably produced.
Greenpeace, however, argues that the RSPO scheme lacks independence and amounts to the industry regulating itself.
Nevertheless, Greenpeace has ranked the environmental performance of palm oil firms and acknowledged New Britain is in fact one of the better producers.
A spokesman for the campaign group said: “The scorecard is from last year. It puts New Britain Palm Oil at second out of 11 palm oil producers.”
New Britain Palm Oil produces 1.1% of the RSPO certified palm oil in the world. The spokesman added: “They were relatively good on peatland protection – draining and burning peatland is a major source of greenhouse gases – and certification.
“Clearly, certification isn’t a guarantee, but if you can’t get your oil certified by the RSPO then there must be something going badly wrong.”
He added, however, that New Britain Palm Oil didn’t do so well on forest protection.
The spokesman said: “They are included in the report as an example of current best practice in the industry, but not as a model of sustainability.
“They have come out of it comparatively well. It does not mean that they are great. It’s just they are not as bad as those companies that are worse.
“The RSPO could be a useful starting point.
“If they had regulations that were enforceable it would be quite useful, but as it is it doesn’t come anywhere near that.
There are many examples of businesses going to some lengths to be seen to be good. In February, Barclays announced it would cease speculative trading in food commodities because this activity is blamed for pushing up the price of food in poor countries.
Barclays chief executive Antony Jenkins said the practice was “not compatible with our purpose”. He wants to build a “socially useful” bank and “shred situations where we’re short-termist, too aggressive and too self-centred.”
According to estimates from the World Development Movement, speculative trading in agricultural commodities earned Barclays £750m over the last three years. Barclays’ withdrawal follows announcements in 2012 by several German, Austrian and Scandinavian banks that they would do the same.
Barclays is seeking to rebuild its reputation after a string of damaging incidents. It was fined £290m last year for attempting to rig the Libor interest rate, and has also been caught up in the industry-wide mis-selling scandals involving payment protection insurance and interest rate investment products.
The bank also said it would curtail its investment banking activities, an area of banking blamed for the banking crisis of 2008.
At the time of the announcement, one leading academic criticised the measures, warning they may be good for Barclays’ image but would cost the bank dearly.
Professor of Organisational Behaviour at Cass Business School, Andre Spicer, said: “Barclays’ announcement is about image, not profit.
“The strategy is about rebuilding the legitimacy of the bank. It is trying to win back the trust of investors, regulators and the broader public.
“By cutting back the investment banking division, it appears Barclays is willing to kill the golden goose which has produced a significant chunk of its profits in the past.
“This move is a gamble. It will inevitably lead to lower rates of profit in the future.”
Away from financial services, global consumer goods giant Unilever is also trying to balance the competing pressures of being good and making profits. The company promotes the fact that its research and development has made its soaps and other hygiene products more affordable and effective in developing countries, thereby saving lives and improving the standard of life for billions of people.
In its publicity material, the company, which has major detergent factories at Port Sunlight and Warrington, states: “Unilever’s ambition is to double the size of our business, whilst reducing our overall environmental impact (including sourcing, consumer use and disposal).
“We are also committed to doing what we can to improve health, nutrition and hygiene, with a target to help more than a billion people take action to improve their health and well-being, as well as sourcing all our agricultural raw materials sustainably by 2020.
“All of these goals are itemised in around 60 time-based commitments in our Unilever Sustainable Living Plan.”
Unilever also opened itself up to an audit by Oxfam of employment conditions at its Vietnam operations. While the openness was applauded, parts of the report were critical of the pay and conditions of its employees. Oxfam said the study found significant gaps between the company’s high level commitments and the reality on the ground for workers.
However, Oxfam’s report also states: “Unilever took part in the study as a means of stimulating a wider debate and encouraging other companies to face up to the issues in this area.
It has made a series of significant commitments to address Oxfam's recommendations, including a ‘sustainable living review’ in the 180 countries in which it operates by the end of 2015.”
Just last week, Nestle and Mars, which together control 27% of the world chocolate market, also bowed to pressure from Oxfam. The companies agreed to take action to improve the livelihoods of women cocoa farmers and work with other organisations to address gender inequality across the industry.
Pressure from protest groups such as Greenpeace has brought about a change to the way canned fish firms catch tuna. The previous method used fish aggregation devices which caught a lot of other species as well as the tuna. Following the protests, new methods to catch the fish used by the likes of Liverpool-based Princes Foods were introduced.
Sustainable palm oil production remains a big area of concern for both environmentalists and food producers.
Palm oil plantations have resulted in millions of hectares of deforestation in Malaysia, Indonesia and elsewhere. As a result, longstanding habitats have been destroyed, creating threats to a wide range of species that include the orang-utan. The deforestation also adds to the amount of greenhouse gases in the atmosphere.
On the other hand, palm oil is widely used in food and other products that most of us eat or use every day.
Liverpool-based New Britain Palm Oil is sensitive to concerns about how its palm oil is produced. The company’s website states that it is one of the world’s leading producers of sustainable and traceable palm oil and emphasises its participation in an industry-run certification scheme that involves many other palm oil producers and users known as the Roundtable on Sustainable Palm Oil (RSPO).
Other companies that subscribe to the scheme include AB Foods, Heinz, Kraft, Premier Foods and Kellogg. The firms believe participation in the scheme establishes that their palm oil is sustainably produced.
Greenpeace, however, argues that the RSPO scheme lacks independence and amounts to the industry regulating itself.
Nevertheless, Greenpeace has ranked the environmental performance of palm oil firms and acknowledged New Britain is in fact one of the better producers.
A spokesman for the campaign group said: “The scorecard is from last year. It puts New Britain Palm Oil at second out of 11 palm oil producers.”
New Britain Palm Oil produces 1.1% of the RSPO certified palm oil in the world. The spokesman added: “They were relatively good on peatland protection – draining and burning peatland is a major source of greenhouse gases – and certification.
“Clearly, certification isn’t a guarantee, but if you can’t get your oil certified by the RSPO then there must be something going badly wrong.”
He added, however, that New Britain Palm Oil didn’t do so well on forest protection.
The spokesman said: “They are included in the report as an example of current best practice in the industry, but not as a model of sustainability.
“They have come out of it comparatively well. It does not mean that they are great. It’s just they are not as bad as those companies that are worse.
“The RSPO could be a useful starting point.
“If they had regulations that were enforceable it would be quite useful, but as it is it doesn’t come anywhere near that.