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3 things that make a company fair and sustainable

Corporate social responsibility is increasingly on the agenda for companies – and financial professionals. So what does the general public think makes a fair company and what do economists think?

Top three issues that make corporates 'fair'

Corporate social responsibility (CSR) and sustainable, green business practices (including financial) are increasingly on the agenda for companies and financial professionals. So what do the general public think makes a fair, socially-responsible company? According to research by Just Capital the top three factors that define corporate “justness” (according to a survey of American people) are:

  1. worker pay and benefits;
  2. worker treatment; and
  3. leadership and ethics.

Who's with Milton?

Just Capital's survey results are perhaps not surprising, given that we all tend to see matters from a particular perspective. The general public will of course see salary, benefits and employee treatment as key indicators of CSR. From an economist's point of view, things might look a little different – as outlined in 1970 in Milton Friedman's argument that “The Social Responsibility of Business is to Increase its Profits”. He stated that: “there is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” There will be those who argue that there is much more to a socially-responsible business than just “staying within the rules of the game... without deception or fraud”.

Need to update our notion of financial sustainability

And perhaps our ideas about CSR need to be updated from time to time – after all, it's nearly 50 years since Friedman wrote his article in the New York Times. On Euractiv this week, a law professional writes that the EU needs to revise its notion of corporate governance to protect us from “short-term shareholder interests”, arguing that the EU should “end corporate short-termism and create sustainable financial system.” Filip Gregor, head of responsible companies at European law firm Frank Bold, says: “It is a now-or-never moment to tackle the short-termism that is deeply entrenched in the functioning of capital markets.” He argues that the increased focus on maximising shareholder value is a strategy that has been detrimental to companies' ability to properly consider risks, long-term development and the interests of society: “This model takes the focus away from investment in R&D and innovation, as well as from human and social capital. More broadly, it contributes to rising inequality within firms and society at large, and prevents companies from being socially responsible – at least genuinely so.”

Reply to EU public consultation on sustainable finance

To have your say on how you think the EU should develop a sustainable financial system, respond to this public consultation, organised by the High Level Expert Group on Sustainable Finance. Answers must be submitted by 20 September.

CTMfile take: As a financial professional, what do you think makes a “just” company? When focusing on CSR goals, do you aim to achieve these goals through your company's investments and the supply chain? Or does your company also focus on the top three issues in the Just Capital survey? Or rather, do you think Milton Friedman was right in advocating 'shareholder primacy'?

This item appears in the following sections:
Sustainable Green Treasury
Green Corporate Treasury Department
Sustainable Business Models

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