Out-Law Analysis | 07 Sep 2007 | 11:11 am | 2 min. read
A gallant company will encourage car sharing for commuters, pour FairTrade coffee for staff, print its diversity stats on recycled paper and switch off the lights after hours. It might even brag about these worthy deeds in a press release – after all, being a responsible corporate citizen has become good for business. What is sometimes overlooked is that being a good corporate citizen is about more than shrinking your carbon footprint: it is about all aspects of business.
What good is an ethical supply chain if you cheat customers in your small print? Blue chip companies detail eco-friendly water conservation and battery recycling policies on their websites; yet some of those same companies publish policies on how they deal with customers that verge on hostile.
One manufacturer says its green policies have diverted more than half of its waste away from landfills. Yet its terms of sale say that its products come without a guarantee of “fitness for any particular purpose”. The company adds that in no event shall it “be liable for any damages whatsoever.” Such side-stepping of basic customer expectations is surely bad for business, particularly in a Web 2.0 world where aggrieved individuals so easily become an angry mob.
Until recently, a mobile operator made consumers agree to all terms in all documents produced by the company, including those it will conceive in the future – i.e. you sign up to the unknown. On the other hand, the company is a big donor to wildlife conservation groups.
It is not just customers that suffer neglect. A retailer that pours millions into child welfare is also criticised frequently for low pay and bad conditions, and predatory pricing that squeezes both suppliers and local competition to the point of economic suffocation.
These companies may not be acting illegally, even if some of the contracts might not stand up in court. But that could change. A recent survey says that 82% of Americans want Congress to ensure companies meet pressing social issues, according to research by consultants Fleishman-Hillard. They also found a substantial majority saying that companies do not act responsibly.
Lawmakers have already intervened in Europe. Working time and anti-discrimination laws have been followed by new environmental obligations. Right now the UK Government is consulting on the Unfair Commercial Practices Directive, a law that closes perceived loopholes in today’s consumer protection and bans sharp marketing practices. What’s unusual about this law – which may indicate a new, cover-all-bases approach – is that a huge list of specific examples is written into the legislation. Thus, it becomes a crime to advertise a bargain product when only a few are available, in the hope of persuading customers to buy an alternative, more expensive product. It becomes a crime to lie about geographic origin. The display of a kite mark on false pretences is also a new offence, as are about 30 other practices that, until now, were merely unscrupulous.
The trend surely will continue. Lawmakers will continue to codify ethical practice and, in the meantime, corporate responsibility will continue to evolve beyond an exercise in public relations.
A company will struggle to become a genuinely good corporate citizen if the effort is steered by a corporate affairs or marketing department. That is a path on which it surely will stumble on hypocrisy and trail behind compliance. Instead, a board must take the lead, to make corporate responsibility an integral part of the company’s culture. Social and regulatory pressures are converging. The smart organisation will foresee their intersection and get there first.