More Responsible, Better Off

July 24, 2009

More Responsible, Better Off

  Corporate responsibility is an integral component of reputation.  Even more so than ever because it matters to so many stakeholders – employees, customers, government, prospective talent, academics, media, bloggers and NGOs.  I think it might even matter to the financial community although perhaps to a lesser degree.  However, analysts have noticed its importance as we have seen with the proliferation of socially responsible investing funds.

In 2008, Weber Shandwick’s Planet 2050 corporate responsibility and sustainability practice conducted a proprietary analysis that demonstrated the rising prominence of corporate responsibility on leadership agendas. Corporate responsibility mentions in global Fortune 100 annual report CEO Letters to Shareholders increased 18 percent from 2003 to 2007. In 2007, energy efficiency and carbon emissions were the dominant corporate responsibility agenda initiatives addressed in Global 100 CEO Letters to Shareholders. These topics barely figured in CEO annual report Letter mentions in 2003. To a lesser extent, but still noteworthy, leaders in 2007 highlighted their eco-friendly products—such as hybrid cars and healthy food products—in their Letters to Shareholders. Volunteerism, a topic featured in 2003 CEO annual report Letters, appeared less frequently in 2007.

As business leaders seemed to increasingly  commit  to corporate responsibility initiatives prior to the economic meltdown, we thought we’d look into whether such efforts helped soften the financial blow of the stock market collapse in 2008.

Using the 2008 Fortune Most Accountable Companies list as the measure of corporate commitment to social and environmental goals, Weber Shandwick explored the relationship between accountability  and stock price performance within the Fortune Global 100. The Accountability Rating was first developed by AccountAbility and Csrnetwork and designed with Asset4.  Since nearly every company on this list experienced a share price decline during 2008, the analysis focused on the average percentage change of closing prices on December 31, 2007 and December 31, 2008. It was of particular interest that 9 out of the top 10 most accountable companies were European (GE was the only American company).

We found that the top 10 most accountable global companies performed better than the overall global Fortune 500 in terms of share price and profitability.  When compared to the 10 least accountable companies, the most accountable ones performed better. We were a bit surprised by the +1% lift in profitability among the least accountable and discovered that two highly profitable companies – Petronis at #99 and Berkshire Hathaway at #100 – were on the list, therefore driving the 1% increase. Even when we take Berkshire Hathaway out of the group, the difference is not as dramatic as we expected. The nine least accountable companies fell to -3% in terms of profitability. If Petronis and Berkshire Hathaway both come out the eight least accountable companies fall to -16%.

 

Total Global 500

10 Most Accountable

10 Least Accountable

Share price

-43%

-22%

-35%

Profit

+5%

+46%

+1%

 

 

 

 

The analysis shows that even in an unprecedented  year like 2008, the most responsible companies  outperformed their peers. As my fellow colleague and founder of Planet2050 Brendan May said, “It is not surprising that effective and genuine corporate responsibility impacts the bottom line, in good times and bad.” Companies cannot afford to abandon their corporate responsibility efforts although it is understandable if progress slows in this economy.  Companies that abandon corporate responsibility and sustainability efforts are proof positive that it was all for show in the first place.

Share this article: Share on LinkedInTweet about this on TwitterShare on FacebookEmail this to someone
Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of corporate and CEO reputations.

2 Comments
  • Lily Walker
    Posted at 01:14h, 20 May Reply

    i already upgraded my family car to Hybrid to help the environment.~-‘

  • Garden Lighting `
    Posted at 06:42h, 12 October Reply

    the best thing about hybrid cars is that they do not pollute the environment in the same way that petrol cars do.,’

Post A Comment