Corporate Responsibility
People have ongoing conversations and even wars about the best strategies for creating and distributing goods and services. Free enterprise and communist governments have started to coalesce around regulated corporate enterprises and started to develop principles of corporate responsibility. There has been recognition that incentives are important—people are motivated by opportunities to benefit from their efforts.
Standards
Generally speaking, corporate law imposes a legal obligation upon directors and officers to be diligent in supervising and managing a corporation’s affairs—exercising the care, diligence and skill a reasonably prudent individual would exercise[i]. Due Diligence requires directors to seek and take the advice of a qualified expert as needed developing protocols for complying with governance and financial management standards[ii]. This duty is commonly referred to as the “duty of care” or “due diligence”.
Trading blocs such as the European Community set standards and require certification that companies are complying with environmental standards before goods manufactured by that company can be imported to the community.
Because sales matter, companies bring ethical and environmental standards into their business operations policies. Ethical practices center on three basic principles (1) sustainability, (2) accountability – acknowledgment of how its actions affect the environment, and (3) transparency – reporting information on performance accuracy. Many boards cultivate their corporate culture, undertaking serious discussions with management on such topics as quality, safety, honesty, environmental stewardship and philanthropy. Such companies frequently have compliance officers with responsibility to hold senior management accountable. Identify and contact compliance officers or if there is no compliance officer, the board of directors and public relations departments or corporations about concerns.
Insurance
Insurance companies and banks are now setting insurance and lending rates that reflect environmental threats and climate risks of businesses, forcing companies to consider sustainability in their planning. Banks assess environmental risk factors when making loans to fossil fuel companies. As environmentally risky businesses start losing market share to environmentally sound practices, the environmentally risky businesses are losing market share.???
Investment in the production of goods that are no longer in demand, results in financial loss because of stranded assets—assets that have been purchased but can no longer be used. As society changes to purchase of electric vehicles, factories that produce gas engines are losing market share. Manufacturing processes developed to produce non-recyclable products fall from use. As the use of fossil fuels is being phased out, oil and gas companies will have increasing difficulty selling products. Polluters that may face hefty fines suffer loss of profits making them riskier investments.
Corporate Image
Boards of directors are concerned about their corporation’s image. Companies that earn a community reputation as a bad corporate citizen, a polluter or a violator of human rights lose market share as people avoid purchasing their products. Companies that engage in fair trade practices tout their performance. Companies advertise their product as recycled. Companies that do not comply with environmental laws and standards can suffer declines in sales and a resulting drop in profit. Reputation for honesty and fair dealing are referred to as ‘Corporate Social Responsibility’.
