DO COMPANIES HONOUR THEIR RESPONSIBILITY TO THEIR STAFF, environments and communities? Do they have a community? Stuart Graham reports.
Does business have any responsibility to society? The Nobel laureate economist Milton Friedman does not think so. Friedman says society’s significant increase in living standards in the past century was achieved through business’ single minded desire for profit. As a result businesses can have clear conscious when it comes to its corporate responsibility.
“In a free-enterprise, private-property sys¬tem, a corporate executive is an employee of the owners of the business,” Friedman wrote in The New York Times Magazine in 1970. “He has direct re¬sponsibility to his employers. That responsi-bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con¬forming to the basic rules of the society.”
But what would Friedman have to say about the spread of Aids, which affects not only employees but a firm’s customer base? If companies were to adopt a laissez-faire attitude to their HIV positive workers and potential customers, what impact would that have on their profits? Surely it would be in their interests to have a healthy and productive population?
The Grant Thornton International Business Owners’ Survey 2006, which includes companies with 50 to 250 employees, found recently that South Africa is losing between R1.8 billion and R2.2 billion a year through worker absenteeism from Aids.
South African firms have realised the devastating impact that the disease is having on their profit margins and productivity levels. The Business Owners Survey found that companies have become more inclined to provide treatment since the average annual cost of treating an employee infected with HIV has dropped from R48,000 in 1998 to less than R10,000 a year.
As a result comprehensive HIV programmes are now mandatory at most firms. Crime is another instability in society and its effect on corporate profits is large. Some would argue that it is a business’ responsibility to do whatever it can to reduce crime. A few years ago South African companies formed the Business Against Crime organisation. Although, the move was perhaps more of a necessity than a responsibility.
Overall, South African companies have had to change the way they look at their corporate social responsibilities in recent years.
The second King Report on corporate governance, which provides ethical and social guidelines for firms to follow, was launched in 2002. Firms have to be King II compliant before they are allowed to list on the Johannesburg Securities Exchange.
As a follow up to the King Report, the JSE launched the voluntary Socially Responsible Investment Index in 2004. The SRI now grades firms according to their social projects.
So far South African firms have performed admirably when it comes to corporate responsibility. In 2005 the country’s business social commitment ranked eighth out of 60 nations in the World Competitiveness Yearbook.
A KPMG survey found recently that South Africa had shown the biggest increase in stand-alone corporate responsibility reporting in the world.
Bill Lacey of SA Chamber of Business says a good corporate citizen in one that is attentive to the needs and aspirations of its shareholders, workers and its consumers.
“The public at large is important especially in the areas such as Aids and environmental protection,” he says. “These are areas that business has increasingly had to attend to in recent years.”
One way in which businesses are playing more of a social role is by implementing projects that get their employees more involved with the community. Gas company Afrox, which receives regular awards for its governance for its social responsibility projects, has had its Community Involvement Programme used as a model by the United Nations.
The programme, which has been running since 1995, entails employees volunteering to provide care and support to orphanages and centres for abused and abandoned children. The project was initially met with some cynicism by the staff, but its popularity grew. Some 80 percent of Afrox’s business units now participate. In 2003 the company had 125 projects going, representing 8000 children.
“Despite the slow uptake (15 projects in the first year), the programme has since grown to become one of the best employee involvement programmes in the country,” the UN says.
The UN says where properly planned and implemented, programmes such as Afrox’s CIP help build employee skills, encourage teamwork, promote loyalty and job satisfaction and help attract and retain employees.
“They can also help companies establish brand reputation and strong relations with communities, government leaders and other stakeholder groups,” the UN says.
Politician turned businessman Tokyo Sexwale is using his company, Mvelaphanda, to fund a variety of social initiatives.
One of its projects involves working with the Department of Health to provide wheelchairs to the underprivelidged.
A few years ago after a major fire in the township of Khayalitsha, Mvelaphanda provided blankets and other goods to help the homeless. Two years ago the company distributed television sets to hospitals around Gauteng. It also provides for the widows of apartheid freedom fighters. “The company focuses its charity work on very specific areas,” company spokesman Chris Vick says.
The environment is another area where firms are having to show responsibility. The three fundamentally important pieces of South African environmental legislation are the Constitution, the National Environmental Management Act and the Environment Conservation Act.
The legislation however, is fragmented and has resulted in problems of comprehension and enforcement. It is often up to watchdog organisations and the media to keep an eye on companies that are hurting the environment. The difficulty of proving the liability of a firm in a pollution case was seen a few years ago when members of the town of Prieska took the apartheid era platinum miner Gencor to court after people in the community developed the lung disease asbestiosis. Gencor fought the claim tooth and nail. It finally agreed to a R400 million payout without admitting liability before unbundling into Impala Platinum.
Companies such as Sasol and Mondi, which impact the environment through their operations, have been commended for the way they handle their responsibilities.
Sasol has been a Responsible Care signatory since 1994 and subscribes to the Sustainability Reporting Guidelines of the Global Reporting Initiative. The guidelines provide an internationally accepted framework for reporting on the social, economic and environmental performances of businesses.
Sasol has been named one of the top performers on the JSE’s SRI. It was also named one of the six top performers out of 31 companies in the category for high environmental impact.
Mondi on the other hand is actively involved in recycling paper. The company’s national sales and marketing manager Peter Hunter says about 300,000 tons of waste paper and cardboard are recovered a year, with an average of 25,000 tons recycled a month.
Mondi involves schools and charities in a nationwide paper pick-up programme that enables schools and charities to raise funds, while raising environmental awareness.
“There are currently about 2,000 schools and charities in this programme,” Hunter says.
The office paper pickup programme involves the provision of a twinbin to each workstation, as well as a free confidential shredding service. The programme educates staff and involves them in an environmental programme, while generating a modest cash return.
Mondi’s small-business paper pickup programme encourages entrepreneurs to start their own recyclable paper and board collection businesses, called buyback centres, by advising, training and equipping them. A firm’s ultimate goal may be profit, but South Africa has proved that the fate of a company is undoubtedly linked to the well being of society. Had Friedman ever studied the South African economy, he may have changed his views. – Heartlines Features.