2002 Deakin University Research Report
	Research Stories
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The Company as a Good Citizen

After the corporate excesses and corporate disasters of the ‘80s, greed is no longer good. Many chief executives now talk about the triple bottom line: profitability, combined with social and environmental responsibility.

But the mantra often produces no practical outcome. The real bottom line, according to Deakin University academic Professor David Birch, is that only a few companies really understand where they fit within the community.

“Most businesses are operating in the comfort zone of familiar, outmoded, language,” says Professor Birch, director of Deakin University’s Corporate Citizenship Research Unit. “Many CEO’s trot out the ‘triple bottom line’ thing, but few companies are genuinely committed to it, mainly because they don’t know how to measure it.”

“Or they say they can’t get involved in corporate citizenship because they have to maximise returns to shareholders. That’s a myth – it is unlikely their shareholders have ever instructed them not to do it.”

Professor Birch says corporate citizenship is a concept that extends well beyond corporate philanthropy, conventional sponsorships and donations to worthy charities. It’s both an ethos and a culture: a way of thinking and operating that will be integral to being a successful business in the coming decades.

To be seen as good corporate citizens, companies will have to link their core business to issues of social and environmental responsibility, as well as ensuring profitability.

Their ability to sustainably position their products or services in the marketplace, and to develop new markets, will depend on them actively responding to a cultural shift that is being driven by both internal and external forces.

“The internal pressure seems to be coming from generational change,” said Professor Birch. “Younger people from Generation X and Generation Y are beginning to voice their opinions in big companies that commonly have been controlled by Baby Boomers.”

“Given that the corporate excesses of the ‘80s and ‘90s occurred while Baby Boomers were in charge, the younger generations want change. They do not believe that maximising profit for shareholders should be cited as a corporation’s sole goal, and some people at the top of the more enlightened companies are beginning to listen.”

Some companies have had to react to external pressures or crises. Big oil companies involved in major environmental disasters, like the Exxon Valdez oil spill, have not been able to ignore the damage to their profits and to their public image. Similarly, footwear and clothing companies have come under fire for the adverse social impacts of reaping huge profits by exploiting cheap labour – including children - in Third World countries.

Non-government organisations like Greenpeace and Amnesty International have played their role by lobbying or applying other forms of pressure to big corporations, but Professor Birch says there is also a major trend for pressure to come from within, from both workers and management.

“People no longer want to work for companies whose policies and practices have adverse social and environmental impacts,” he said.

Professor Birch says that in the past two years, Deakin University’s Corporate Citizenship Research Unit is receiving a steadily increasing number of inquiries from large Australian companies concerned with issues of corporate citizenship.

“Many companies are floundering – they want to change, but they don’t know how to do it.”

Professor Birch says companies not only need help in identifying the big issues, they also want help in developing reliable measures of their impacts on society and the environment.

The Unit’s advice to companies is solidly grounded in research, rather than just theory, and is tested in business practice. Profit remains important, but companies are increasingly concerned with sustainability – not just in the sustainability of their own activities, but of society as a whole.

“Many companies have been operating in a vacuum in this area,” he said. “It’s a terrible indictment of the way we have taught business management in Australia.”

“Business and society courses are popular in tertiary institutions, but many are based on books, texts or ideas from the 1970s. Even though some have been revised, they have little relevance today.”

“Overall, the paradigm in business schools in Australia remains very much one of maximising profits to shareholders.”

The banks, which have become notoriously unpopular in Australia for making mega-profits while closing down branches and charging excessive fees on accounts, have shown very little sign of changing, says Professor Birch – although some have begun to “throw money at community organisations” in an effort to improve their public image.

But that tactic will not succeed, because it will be seen as an attempt to buy off critics.

“The chief executive of one major bank still argues that corporate citizenship gets in the way of maximising profits to shareholders – while they are still making mega-profits, they really don’t care, and branch closures will continue.”

“The banks have an agenda which fails to recognise and understand the traditional role of banks in communities. Banks in the past operated in communities very much like local churches and schools, but the current perspective denies this role. But more recently, some banks like the ANZ, have made serious moves towards change, recognising the importance of local communities, and it is hoped that this agenda will persuade others to follow.”

One of the major trends over the next few years, Professor Birch predicts, will be that more companies will engage with detailed social and environmental reporting, and to avoid accusations of mere window-dressing, business will seek to bring about real social benefits which it can openly, and accurately, report on.

“They will want to be more accountable, and will be looking to position themselves as socially and environmentally responsible. they will start using their annual reports as a vehicle to put real social and environmental issues on the agenda.”

“When that happens, we will start to see business having a real impact on society.”

Companies have recognised the huge expense and social costs of the hire-and-fire practices of the past two decades, which led to a generation of nomadic employees with little loyalty to their employers.

Itinerant employment will continue, but major companies that have been turning over 40-50 per cent of their staff in a year as employees moved from one highly-paid technical job to another will seek to retain valued staff for their knowledge and experience – not by throwing money at them, but by involving them in social activities that give them pride in themselves and in their companies.

“There has to be mutual benefit, which is why concentrating on corporate philanthropy as it is currently conceived is holding Australia back.”

Companies need to adopt a strategic approach that will benefit themselves and the community in the longer term. Government and community organisations need to come to terms with this, or be left behind in a generally irrelevant mode of thinking.

“They need to ask themselves: what business, social and environmental strategies do we need to pursue to ensure that we are still here in 50 years’ time, not just how much money should we give away to earn our licence to operate in this community?”

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	2002 Deakin University Research Report