Corporate America doesn’t need a ‘business case’ to do good
Corporate responsibility may not lead to bigger profits, but it’s still essential.
FORTUNE — In her testimony to the U.S. House of Representatives this week, General Motors chief executive Mary Barra uttered a point that was music to the ears of everyone who has ever pushed for safer and more sustainable practices inside a big company.
“If it’s a safety issue, there should not be a business case calculated,’’ Barra said. Barra was responding to Senator Barbara Boxer’s assertion that GM GM made the same mistake as Ford F 40 years ago, when that company infamously decided not to make safety improvements to the Pinto because they cost more than the $200,000 value that Ford set for a human life.
Whether or not Barra’s principle holds true at GM remains to be seen. Let’s hope it does: “The business case” is the scourge of everyone who works on safety, ethics, sustainability, or human rights in the corporate world. These are issues for which return on investment is hard to measure. But when things go wrong, the costs in terms of human suffering, reputational damage, legal fees, consumer trust, and bottom line impacts may be massive.
I worked on human rights for BP BP for most of my time with the company, from 1999 to 2008, investing in the health and well-being of contract workers and communities living around big BP projects in the developing world.
The projects I worked on had gnarly social and environmental challenges that threatened their viability far more than any technical issue. For example, for a liquefied natural gas (LNG) plant in Indonesia, we had to resettle 127 households, work with the notoriously violent and corrupt military, and operate in an area with few government services and a historically neglected citizenry.
The “business case” for my work was made by other extractive projects in the country. In 2001, ExxonMobil XOM had to shut down its LNG facility in Aceh for four months because of surrounding social unrest, estimated to have cost the company anywhere from $100 million to $350 million. In 2010, Freeport-McMoran spent $28 million on security at its Grasberg copper and gold mine, up from $22 million in 2009.
So I could point to worst-case scenarios for the downside. But I had to be careful of seeming too alarmist, and would have liked a more inspiring argument: How much money can a company earn, and how much value can be created by handling human rights well?
There are studies that show correlation between good sustainability practices and good financial performance — and it makes intuitive sense that companies that proactively manage social and environmental issues would excel in other areas as well. But I have yet to see a study that clearly shows causation between corporate responsibility investment and financial performance; there are too many other factors at play, like market conditions and competition.
For my book about my time with BP and corporate responsibility, The Evolution of a Corporate Idealist: When Girl Meets Oil, I interviewed dozens of peers pushing for more responsible practices inside big companies and found that they faced similar challenges as I did in BP. Many of them managed to secure resources for their activities with a “business case,” but a few years (or CEOs) later faced a conundrum: that their success is defined by crises not occurring, and people rarely get rewarded for something that doesn’t happen.
One interviewee told me that she was livid when one of her company’s prestigious internal awards went to a colleague who handled a major safety disaster. “Really?” she marveled. “What about those of us who made sure we didn’t have any safety disasters?”
Ebele Okobi leads Yahoo’s YHOO programs to protect and promote privacy and free expression on the Internet. She told me: “A big part of what you do is prevent bad things from happening. So being good at your job means that people start thinking, ‘Do we really need this?’”
Of course companies have to justify expenditures. But when value is measured only in short-term returns, human rights are at risk. General Motors and every other company would do well to put the “business case” in its rightful place: behind considerations of safety and the sustainability of people and our planet. It is clearly a matter of life and death.