|Ironically, of course, a lower fat option…|
I think we might have done.
Back in 2001 when Ethical Corporation started out in the world of business ethics, it was all about risk.
Risk that could affect reputation, employee morale, supply security and resilience, and investor confidence.
Don’t just take my word for it. Read this Q&A with Mike Barry from Marks & Spencer, from January 2002.
Much has changed in the 11 years since this was published, and much has stayed the same. An old cliche I know, but one that is accurate in this case.
But somewhere along the way some companies got distracted from the original risk management focus.
Some went too far along the route of “it’s all about corporate social/environmental opportunity” rather than only focusing on that when risk was managed as effectively as possible.
Call it a focus on PR, the distraction of persuading consumers to be climate or eco friendly, or the appeal of minimising energy usage and transport costs and calling it sustainability opportunity.
Call it what you will, somehow, somewhere, the slightly paranoid edge of what was then CSR, sharpened by late 1990s and early noughties scandals, became blunted in some companies.
I was discussing this a week or so ago with a 20+ year stalwart in the industry and he agreed.
Somewhere in the mix of partnerships, macro climate policy, the excitement of consumer engagement (remember carbon labelling?) and so on, we posited over coffee, some businesses lost sight of the fundamentals of risk management.
Then the crisis came along from 2008 and budgets were cut, companies went into a bit of a bunker from which some are still emerging.
Meanwhile the risk side of responsible business grew larger. Regulatory pressure, minor though it is, has created a larger stick with which to beat business, by NGOs, the media and regulators.
Globalisation of sourcing continued apace, Lehman Brothers or no Lehman Brothers, and a growth in nearsourcing due to energy costs brought risk back closer to home, sometimes without the management attention due.
This lack of attention to risk radars, to risk trends, has affected us all. Big systemic, social risks have developed unnoticed, as we focused on bigger, environmental, macro-risks most companies can do little about on their own. (that’s not to say they shouldn’t be tackled, just that dual focus is needed)
Most importantly, technology and the ability of almost anyone, anywhere to report on so-called corporate malfeasance has grown faster perhaps than even Gordon Moore might have predicted.
And so the horsemeat scandal was covered so fast companies had no time to react. And the continuing disaster of Bangladesh’s almost total lack of governance, which has been brewing for a decade, perhaps three or four, became obvious, lightening-fast, recently.
My point is this: Are companies focusing too much on “let’s engage consumers” and “let’s motivate our people with green initiatives” and not enough on “let’s work out our short/mid term risks and manage them better first”?
I know what you might say now. “It is unwise to generalise, you have to look company by company”.
Yes that is true. Much of what I write here is driven by a feeling, rather than anything specific I can point to as unequivocal evidence. That’s what a blog is for, this is not a science journal after all.
I just worry that these dual notions that “companies will save the world by ‘engaging’ consumers” and “boards can only drive change if we call it opportunity” have been hugely over sold versus the management of risk.
Now we are finding out fast, that genuine business innovation that is truly ‘game changing’ is still, sadly, rare, and that consumers are not really motivated by corporate campaigns to change their ways permanently.
As the Accenture study showed recently, CEOs are noticing that many of the easy wins on energy efficiency etc, have been made, and opportunity to save has turned into discussions about serious allocation of capital to go to the next level.
Yes of course we should sell the opportunity of CR/sustainability/ethics to company boards and investors. But not at the expense of better risk management. My concern is that the latter has been substituted by the former in some businesses.
There’s clearly a maturing approach being taken by companies to supply chain risk, as this recent post discusses. It’s moving up the chain of corporate importance, of that there is no doubt. My concern is that companies are being distracted in some cases, from managing these risks as well as they might.
Many companies are run by former CFOs, they, above everyone, understand risk management on the balance sheet.
So whilst we focus on quantifying opportunity we must not forget that equally quantification of risk is at least, if not more, important.