From: Issue 41 Categories: ideas

Capital Idea

16 January, 2013

The responsible corporation: our hope for a cleaner and more equitable world?

Written by Michael Yow, Lead Analyst, CK Capital

You would think, wouldn't you, that protecting the ultimate capital asset upon which all future income depends in other words this fragile planet was worth investing in, seriously and urgently. So isn't now the critical time to be developing these technologies, business models and financial instruments for environmental reasons, above all, but also for economic reasons?” – Charles, The Prince of Wales

The private sector’s role in the creation of global economic wealth continues to grow in importance. At the end of June 2011, about 63% of the gross domestic product (GDP) from the top 20 countries in the world was derived from the private sector. Private sector businesses – predominantly in the form of corporations are a prominent source of jobs, income and innovation in most parts of the world. Equally significant is the impact of the private sector on environmental and social well-being. With resource scarcity, environmental pollution and social equity among the greatest challenges facing the modern world, the private sector has a leading role to play in addressing those issues. In other words, Corporate Social Responsibility (CSR) will have an impact on sustainable development.

The academic realm abounds with studies on the link between CSR and sustainable development, but these have generally led to mixed conclusions at best. Leaving aside the differences in the definitions of CSR and sustainable development, the general consensus is that businesses, through their corporate social and environmental initiatives, have a limited impact on furthering balanced economic, environmental and social development. According to Jeremy Moon of the International Centre for Corporate Social Responsibility at Nottingham University Business School in the UK, “responsible business is a necessary but not sufficient condition of sustainable development”.

Corporate Knights, and its flagship Global 100 Most Sustainable Corporations ranking, have sought to identify and highlight corporations that, in addition to contributing to economic growth, are fulfilling their environmental and social duties as responsible citizens in today’s world. The logical question, however, is: How and to what extent have responsible (sustainable) corporations impacted the economic, social and environmental well-being of the countries in which they are based?

Answering this fundamental question requires an extensive study of cause and effect in economic and social phenomena, which is beyond the scope of this article. Instead, we have attempted to stir readers' intellectual curiosity by mapping the sustainability performance of companies aggregated by country using Corporate Knightsranking methodology, against a measure of national economic, social and environmental performance the Human Sustainable Development Index (HSDI). Then, we will be looking at the differences and similarities in the country ranking from both lists.

The HSDI is based on the United Nations’ Human Development Index (HDI). It was developed by Chuluun Togtokh and Owen Gaffney, both of the International Geosphere-Biosphere Programme, and published in 2010. The HDI is a composite measure of standard of living, life expectancy and educational attainment. In Mahbub ul Haq’s words, the HDI attempts “to shift the focus of development economics from national income accounting to people centered policies”.

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