The recent link up between the Royal British Legion and BAE Systems – the arms manufacturer sponsored this year’s Poppy Day commemorations – appeared initially to be another example of companies and charities coming together in a mutually beneficial way. The Royal British Legion gain valuable finance to help its work whilst BAE Systems gains credibility from the association with a respected charity in its area. The real outcome was, however, that they both faced carefully orchestrated attacks, mainly through the media, by dedicated activists such as the Campaign Against the Arms Trade. These critics compared the co-operation to ‘King Herod sponsoring a special day reserved to prevent child cruelty’. This disparaging coverage meant that both parties suffered reputational damage as a consequence.
This example puts into sharp focus the need for companies and charities to understand who they are linked to and ask themselves whether the link makes real sense for both parties. Cause related marketing is defined as when a company with a product, image or service, builds a relationship or partnership with a cause or not-for-profit organisation for mutual benefit. Along with other forms of Corporate Social Responsibility (CSR) activity, it is really an attempt to present business in a favourable light whilst demonstrating that it is making a contribution to society.
At this time, when Corporate Social Responsibility is on the politician’s radar, companies are increasingly forced to take it seriously. This is partly because some expect direct Government intervention in this area and partly because of societal expectations. The UK Government has a dedicated CSR Minister based in the Department of Trade and Industry and has undertaken a review of company law, whilst the European Commission has issued a Green Paper on the issue and has launched a multi stakeholder platform to bring together key players to discuss the way forward.
People expect more from companies and believe that they should contribute more to society. Consequently, far from being a useful add-on which gives business some beneficial PR exposure, CSR activity is increasingly becoming a fundamental element of operations. Yet companies should expect that if they profile raise on the basis of their CSR work, then they will be subject to scrutiny. If a link-up is perceived to be merely opportunistic, expect trouble. Organisations and activist groups will go through CSR claims and inspect every detail, looking for weaknesses and failures. Which? magazine criticised schemes which required a very large number of purchases before any gifts could be exchanged. The Walker’s Crisps ‘Free Books for Schools’ scheme was said to encourage ‘an unhealthy activity’, i.e. eating crisps. Likewise Tesco’s ‘Computers for Schools’ was attacked since £¼ million worth of shopping was required to get a £1,000 computer for a school. Of course, both schemes are popular and the companies defend themselves vigorously. However, the dangers are clear.
There are groups who aim to keep companies on their toes and it is vital to understand their position. If a company understands this then the chances of avoiding future dangers and possible criticism are hugely increased. Some companies have gone further still and invite outside groups into their decision-making processes. The link between Shell and Greenpeace, established in the wake of the Brent Spar furore, is often viewed as a model to follow. However, just because an outside organisation is brought on board, does not prevent them from openly criticising the company. Also, remember if their recommendations are accepted they are likely to push hard to keep the company on the ‘straight and narrow’. These sort of link-ups are not new but their range and scope is developing apace as companies look to fulfil their, presently voluntary, CSR obligations.
In addition, just because a link is made with one group, companies are still vulnerable to attack from others. This may especially be the case if you operate in an environment where many smaller, more radical groups are challenging the authority of the larger established groups. These smaller groups may make a virtue of their ‘outsider’ status.
Aside from their own CSR activity, insurance companies are coming under criticism for not taking account of broader, especially environmental, issues in their investment and fund management strategies. According to a Friends of the Earth report, ‘Capital Punishment: UK Insurance Companies and the Global Environment’, ‘companies such as Allied Dunbar, Norwich Union, Legal and General and Scottish Widows continue to fund activities such as forest clearance, the displacement of indigenous people, toxic dumping and the production of dangerous chemicals’.
The ABI has recognised these dangers and has been at the forefront of the development of guidelines to help the industry cope with the demands of CSR. As they say, ‘CSR is now less of a choice and more a necessity for businesses to flourish’. Socially Responsible Investment guidelines and the new CSR guidance for the Financial Services sector, jointly with the British Bankers Association (BBA), are intended to demonstrate that the insurance industry takes the issue seriously.
As Mary Francis, Director General of the ABI stated:
‘The right approach to social, ethical and environmental issues is vital in adding and preserving value for investors in the companies they own. This is reflected in the ABI’s own guidelines. So we welcome this effort to produce guidance on the best way forward for all financial services companies’.
Whilst CSR work can have definite community benefits, brand benefits, increase sales, improve share prices, assist in the recognition of companies and help them to be seen in a more favourable light, badly run or organised CSR can have the opposite effect. Companies are obviously trying harder than ever to improve their activities in line with societal expectations but still face ongoing pressure from activist groups. However, inappropriate links, over-inflated statements and action can lead to attacks which may hit your business hard. Understand the impacts, both positive and negative, before taking up the challenges of CSR.
Published in Insurance Day, Thursday 28 November 2002