20 August 2004
“Socially responsible business” has become a buzz-phrase in corporate circles – and companies in South Africa may have to reach beyond the chequebook philanthropy of the past if they want to walk the talk of sustainable business.
In a move billed by some as a swing away from the “bottom line only” mentality of the past, the country’s first socially responsible investment (SRI) index was launched on the Johannesburg Stock Exchange (JSE) in July, putting South Africa in line with global trends in corporate governance.
Companies apply to be listed on the index, and have to meet the conditions of 94 criteria gauging, among other things, a business’s commitment to black economic empowerment, tackling HIV/Aids in the workplace, labour policies and environmental practices.
The barometer of sustainable business practice is the King report’s code of good corporate governance – or the “triple bottom line” principles of environmental, social and financial sustainability.
- SRI selection criteria
Of the 74 South African companies that applied to the index, only 51 made the grade – including top banks, mining houses and, according to Business Day, firms that have previously been criticised by environmental groups, such as Sasol and Iscor.
Among others also included on the index are: Anglo American, Nedcor, Standard Bank, Firstrand, Absa, Woolworths, Telkom, MTN, Iscor, Nampak and Illovo Sugar.
Business Day points out that of the 160 big companies on the JSE, notable absentees from the SRI – including some who didn’t apply to be listed – include financial services group Sanlam, luxury goods group Richemont, food and health care company Tiger Brands, media monolith Naspers, gold producer Durban Roodeport Deep, supermarket chain Shoprite, and even empowerment group Mvelaphanda – whose chairman is black business leader and entrepreneur Tokyo Sexwale.
How effective is the index going to be in getting companies to think beyond the bottom dollar – or, at the very least, to think beyond the immediate returns of bottom line?
JSE deputy CEO Nicky Newton-King says the index will help companies focus on the debate on triple bottom line practices.
One criticism of the initiative, however, is that its success is going to be measured by whether or not sustainable business practices help a company perform better in the long run.
This notion, of “social responsibility only if it means continuing profits”, may put the investor looking for better and less exploitative business practices only half at ease; it becomes hard to gauge the true motivations of those complying with the index’s standards.
The line between those in and those out, may indeed be a thin one, and one of convenience – much like black economic empowerment (BEE) fronting in order to qualify for government tenders.
On the other hand, if it can be shown that socially responsible business practices do mean more profit in the long run, it will be a way of incentivising businesses generally towards better corporate governance. According to some, the index will put big companies in the spotlight and hold companies accountable, and even place “peer pressure” on those not listed to tow the line of sustainable business.
Most agree that the index is a step in the right direction. Marketing companies are looking to brand corporates differently, and are investigating the potential of socially responsible marketing, or combining a social message with brand identity. It’s a combination that has been shown capable of strengthening a brand immeasurably.
An example is YFM, a popular Gauteng-based radio station targeting South Africa’s black youth. YFM fuses several social concerns – including HIV/Aids, and women and children abuse – with its brand identity, and the move has deepened brand identity with its target audience.
Marketing spin can, quite easily, be put on HIV/Aids workplace programmes initiated by groups like Anglo American and DaimlerChrysler. Big business BEE initiatives are also being used as marketing opportunities.
Analysts have, however, sounded a word of caution about the new trends. In the United States, one dollar out of every nine is socially responsible investment, while in South Africa only 1% of a R1.7-trillion investment industry goes towards socially responsible investments.
In other words, socially responsible business in South Africa is a big boat we’re still trying to row with little oars. And we’ve a long way to go before we reach the harbour gates and high seas.
Alan Finlay is a freelance journalist and media & ICT researcher based in Johannesburg.
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