Ken Silverstein | Mar 25, 2011

 

Japan is in crisis but its predicament is presenting an opportunity to discuss what it means to be a responsible corporate citizen. The notion of serving one constituency at the expense of others is giving way to the recognition that a company’s mission extends beyond its immediate borders.

At the center of the dialogue is Tokyo Electric Power Company (TEPCO), which has had a history of being less than forthright. While some of that may be because of its Japanese culture, the utility must still recognize that its obligations to shareholders and its customers are overlapping. Doing what’s right translates into trust, which in the end, potentially benefits all stakeholders.

“Really, the minimum ‘responsibility’ for any company in any industry is the compliance with applicable laws, regulations and industry norms,” says Perry Goldschein, a consultant specializing in corporate sustainability. It is also about “communicating truthfully and effectively with its various stakeholders, including the public, about the situation -- something to which TEPCO appears to be struggling with.”

Companies in a state of crisis such as TEPCO often wrestle with how to balance the concerns of their shareholders, employees, customers and communities. The gut instinct is to listen to the lawyers -- to give name, rank and serial number, so as to avoid a plethora of litigation.

True, sometimes the interests of the various constituencies will conflict. But oftentimes they will coincide, says Goldschein. And while corporate boards have a duty to their investors, they also have one to their customers and to the societies that they serve. Those businesses that take the long view and incorporate such civic thinking into their missions are the ones that ultimately thrive, he adds.

Case in point: Implementing best available technologies in businesses such as utilities will result in the creation of goodwill with their regulators and their customers. While the costs will be passed through to ratepayers, those end-users will be agreeable to that if they understand that it could result in fewer emissions and healthier environments.

The Mission

To be clear, a difference exists between corporate social responsibility and socially responsible investing, which is driven by those shareholders who push their corporate boards to channel funds in such things as green technologies and by extension to avoid those processes that are considered “dirty.”

TEPCO’s experience is a bit dubious. In September 2002, it committed to implementing transparent nuclear operations and an internal monitoring system designed to carry out safe business practices. It also created a corporate philosophy of investing in clean energy technologies that include such things as the smart grid, as well as wind and solar energy.

But there has been a dichotomy between what it has said and what it has done. As with this current nuclear accident, the utility tried to play hide-and-seek regarding a much smaller nuclear incident in 2007. Then, it was faulted for taking too long to report broken pipes, radioactive water leaks and a small release of radioactive material. It was not until hours later when smoke and fire were seen at a transformer site near the plant that it made a public statement.

While corporate social responsibility makes everyone feel good, there is no true scorecard to determine whether those enterprises thrive more in the market place, or on Wall Street, says Aneel Karnani, in a column he authored in the Wall Street Journal. He goes on to call such activism “potentially dangerous” given that companies are obliged to earn the highest rates of returns for shareholders. That, in turn, provides jobs and creates wealth, allowing whole communities to flourish.

It is up to the individuals who support those businesses with their dollars to effect change, he adds. That means shareholders hold sway, along with customers and voters, who elect the officials making the laws.

Others, though, cite studies that say those companies that live and breathe their missions do better financially than those that largely disregard popular benefits and just pursue profits. They say that the socially-conscious ones are attracting the essential capital to grow. Enron, by comparison, had a powerful ethical standard. But it ignored those values if they got in the way of quarterly reporting.

“In a world with limited resources and mounting sustainability concerns, corporate social responsibility is not only relevant; it is essential,” says Lisa Woll, chief executive of the Social Investment Forum, in a letter. “The tremendous growth in socially responsible and sustainable investing in recent years is proof that the investment community certainly thinks so.”

Businesses that are going beyond their basic obligations and serving their broader constituencies are being rewarded.  It’s about being good corporate citizens and living up to mission statements. It’s a simple lesson but one that must be revisited in light on the nuclear accident in Japan.

EnergyBiz Insider has been named Honorable Mention for Best Online Column by Media Industry News, MIN.

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