Principle 9: Corporate Citizenship (Item 2)
The organization's action to ensure a clean, safe, fair and prosperous
society enhances the perception of its value to the community.
What you do should ads value to the community. (Rather than costs the
community money in the long or short term.)
Companies must ensure that they are seen to `add value' to society
as well as delivering particular goods and services. You should use
practices that the community perceives as friendly and that appear to
`add value' to the community in general. Companies succeed by their
relevance and the value they add to the community they serve.
If the community perceives that the company does not add value, is
causing harm or is taking value from the community, the community will
act to withdraw the company's right to operate, as we have seen above.
This is a logical extension of the value proposition concepts described
in Principles 3 (`Customers') and 7 (`Enthusiastic People').
In those Principles, if the value proposition is not to the customer's
(or employee's) liking, the customer (or employee) withdraws support.
Depending on the extent of the mismatch, the customer can go so far
as to buy from someone else (a failure to return or to show loyalty).
The employee can go so far as to leave, or to sabotage (indirectly by
inaction or directly by deliberate action against the company).
In the context of Principle 9, the company must build its value propositions
so that it provides what the community thinks of as value. In fact,
it does not appear to work so much from the positive perspective –
ie expecting value added. The community is not there yet. Principle
9 operates more from the negative context of the community becoming
more and more intolerant of companies that take value from the community,
or that operate in a way that will impose an additional cost to the
community or society. Now or in the future.
Increasingly, the community expects the full cost of production to
be covered by the company and so included in the product or service
price to customers. This includes the cost of air and water that were
once considered free.
- If the process of production contaminates them, the community demands
the cost of decontaminating them to pre-production levels be covered
by the company and so included in the price to customers.
- If excess energy or greenhouse gases are released into the atmosphere,
the community expects the cost of removal of these be covered by the
company and so included in the price to customers.
- If a company releases products that harm the health of product users
or others in the community, the community expects the company to pay
the cost of rehabilitation.
[We have not reached this next one yet, but it will not be long. The
community will punish companies that do not use their depreciation allowance
to replace equipment (as intended by governments) but instead passes
those funds on to shareholders (as `profits'), and then cries poor when
the equipment is obsolete and sacks its workforce. Similarly, for companies
who distribute employees pension funds to shareholders as `profits'.]
Shareholders should all be wary of companies that have such practices.
Profits will not be as high for long.
This is why we see a continued backlash against globalization
– a strategy that pays no tax (and so does not support community
infrastructure) and pays poverty level wages in third world communities.
The globalization strategy may look good for shareholders but it is
seen to take from the community.
Companies that operate close to the boundary of unacceptable practice
must work very hard to keep the community's perception on their side.
The risks of a community backlash are high.
Principle 9 significantly challenges the concept that shareholders
are the only stakeholders that matter. (An issue that is taken up further
in Principle 10 `Value for All Stakeholders'.)
The boundary is often defined in the form of regulation or legislation.
You have all heard the constant cry that `my industry is over regulated'.
"If only those regulations were not there I could make a decent
living – I could before." Possibly. However, regulation and
legislation is the community's way of positioning the boundary –
often as a response to unethical behavior. Regulations are, and will
continue to be, a fact of life. They are Principle 9 in action. They
are the community's way of having their say in `market forces', and
making certain that companies do no harm.
We are not saying that all regulation is good. Because there is more
and more regulation, there is more need for it to be up-to-date –
to reflect current community needs. Unfortunately, too often,
regulation is out-of-date and so is of no practical use. Poor, or out-of-date
regulation is an actual hindrance to the community it is supposed to
serve and imposing unnecessary costs on suppliers. It is therefore up
to the regulators to make certain they are up-to-date. In those cases,
we agree with the cry of the over-regulated. However, most often, regulations
are imposed on companies so that they do not harm the community.
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