Standing up to what?

Some 20 years ago, in the aftermath of the Toxteth riots, Michael Heseltine bussed business leaders around the mean streets of Merseyside. He challenged business to play its part in tackling big picture issues of social deprivation and to find ways of doing more business in the inner cities. For a Conservative Party in thrall to Milton Friedman and his ‘the business of business is business’ dictum it was a risky, and in some people’s eyes heretical, initiative. I am not to know whether a lot of new investment actually flowed as a result but it was a defining moment for the debate in Britain about the role of business in society.

In the intervening period, expectations of corporate social responsibility have evolved. The potency of such expectations has helped to generate a strong cause-related marketing sector and they have become central to concepts of corporate ‘brand’ and reputation.

Moreover, CSR has moved from a focus on philanthropy — for example giving away 1% of pre-tax profit — to the far more ambitious project of expecting companies to better understand and manage the totality of their impacts upon society including through their workplace and procurement policies.

One of the leading gurus of the debate around corporate responsibility, Steve Hilton, is now to be found at the elbow of David Cameron, as his communications chief.

With increasing globalisation, multinationals may enjoy unparalleled opportunities to invest and to move their money around but they also face much wider accountabilities and expectations to contribute to the sustainable development of the countries where they work.

Given this, it was surprising how, when a key theme of the recent international development white paper was the need for sustainable wealth creation, little mention was made of the work done by leading multinationals in working to improve their developmental linkages through observing higher standards, investing in training and seeking to build local supply chains. The Commission for Africa particularly highlighted the importance of the investment climate and of the generation of indigenous businesses if the subsequent G8 agenda on aid and debt is to be made sustainable.

Why have many leading UK-based major companies become advocates of a relatively wide interpretation of corporate responsibility — especially in developing countries? Have they been cowed by belligerent NGOs or the threat of exposure in the media? Such factors have played their part, but most businesses see a case for CSR because it helps to protect their licence to operate, enhance the value inherent in their reputations, attract talent, and also, perhaps, to increase the low level of trust enjoyed by companies from society at large. Even many investors are exerting pressure on companies to ensure that they are managing their non-financial risks more effectively.

The key public policy argument in recent years has been to ensure that moves towards embedding CSR in corporate practices should be done through market and peer group pressure rather than through regulation. CSR is essentially about innovation and about particular businesses finding ways — ideally through their core business activities — to add value in society, often through working in partnership with other ‘stakeholders’ in the public, private, or ‘voluntary’ sectors. Clearly a one-size fits all regulatory approach is likely to produce a compliance mentality and to squash entrepreneurialism.

So where, following the demise of the Major government, in which Michael Heseltine played such a key role, have the Conservatives been on these issues? The answer is that over the last decade they have not really figured much.

This is, no doubt, why many people in business felt a sense of betrayal when at the turn of the year they learned that David Cameron had chosen to talk about his willingness to ‘stand up’ to ‘big business’.

The evidence of this willingness was apparently to be found in the highlighting by Tory spin-doctors of a single line in a speech about the importance of partnerships in society in addressing health issues. This particular line lambasted WH Smith — which for decades has blamelessly sold confectionary and is not a greengrocer — for offering discounted chocolate oranges next to their tills rather than fresh fruit. This was portrayed as corporate irresponsibility.

As someone who works for a ‘big’ business I felt mildly put-out by the need for the ‘standing up to big business’ pledge, not because governments don’t or shouldn’t, but because the uttering of the phrase conjured up ideas of ‘bullying’, over-mighty companies, and that being a ‘big’ business is in some way undesirable.

But still, given the unpopularity of capitalism in a fundamentally capitalist world, such a statement was clearly an important part of the Conservative party’s repositioning. The WH Smith example was not, on the other hand, necessarily a particularly fair one.

David Cameron has outlined his thinking in greater depth in three major speeches — to the CBI, to Business in the Community, and to the Google ‘Zeitgeist’ conference. From these we can tease out a number of key strands:

• The importance of business embracing ‘social values’ or what he terms ‘capitalism with commitment, for work that has meaning, and for relationships that are about more than just money and markets’ (Google)

• The desirability of avoiding new regulation but of searching out an area for public policy activism which stands between ‘regulation and indifference’ (Google)

• The need to ‘campaign for capitalism, to sharpen competitiveness, and to win the battle against red tape through winning the battle for open markets’ (CBI)

• ‘Profits are the lifeblood of capitalism’, but we should not turn a blind eye if ‘the system sometimes leaves casualties in its wake’, and if ‘the cultural impact of business activity has a negative effect on our society’s values we need to complain’ (BiTC)

• ‘The real world alternative to corporate responsibility is not some buccaneering profit–maximising Utopia: it is the dead hand of state regulation’ (BiTC)

• Those companies which voluntarily indicate their adoption of higher CSR standards may be rewarded by the government through a lighter touch regulatory enforcement regime’ — presumably in the form of fewer visits from the Inland Revenue, the Health and Safety Executive, or the Environment Agency (BiTC).

The question arises as to whether these ‘tenets’ are merely evidence of an attempt to be ‘all things to all men’ or are intellectually defensible and coherent?

Whilst one might have reservations about the occasional eye-catching phrase, the package does hang together. It is not sustainable for business to find itself widely distrusted by the rest of society. We have to rehabilitate the profit motive and also to explain that for many companies profits are best maximised for shareholders by a shrewd understanding of the needs and interests of other stakeholders. Companies do not exist to be motors for social reform but neither should they be amoral or oblivious to anything beyond their legal obligations.

It would appear that Cameron’s Conservatives will be defenders of capitalism and open markets; they will be reluctant regulators, but will not be averse to taking pot-shots at companies whom they feel fall short of reasonable expectations — or, perhaps, where there are political dividends to be gained.

The point of differentiation with the Thatcherites is this greater willingness to attack businesses and to expect business to deliver some wider societal goods. The point of differentiation with New Labour is the seeming reluctance to regulate — although the present government have been amongst the most robust in resisting any idea of blanket regulation of CSR.

The new idea is that there might be lighter regulation for ‘good’ companies. Without a great deal more fleshing out, it is difficult to know whether this is a realistic option or how great an incentive it would be. It would, for example, seem very difficult to calibrate across a range of industries and regulatory agencies. But it does have a sense of more carrot and less stick about it.

But it is questionable whether the sorts of objectives which David Cameron has outlined as his party’s core values — around work-life balance, family friendly policies, and environmental improvements, for example ­— are all realisable by exhortation rather than regulation. If under a Conservative government business does not help deliver on them, will exhortation give way to something steelier?

Edward Bickham is Head of External Affairs at Anglo American plc. He writes here in a personal capacity.