Why being a socially responsible company is about morals, not profits

Over the past 12 months, there seems to have been a greater awareness that companies can no longer put profit above everything else. Businesses cannot simply push profit margins and have unethical, money-making mentalities that they could have got away with in the past.

As consumers, as employees, as human beings, it seems we’re becoming more aware, more knowledgeable, and more vocal in demanding change on equality (gender, diversity, and race – particularly with the Black Lives Matter movement in 2020), as well as becoming more environmentally conscious. Whether this is due to having more insight into how environmentally unfriendly our habits have become, like flying on holiday without thought for the carbon emissions for instance, or we have simply just decided to start thinking about the greater result of our actions, awareness of ‘big news’ issues like global warming have become a huge part of our lives. 

Companies and ethics

Even the bastions of capitalism, Blackrock – the world’s largest fund manager with $7tn of assets under its management, is trying to position itself as a leader of “sustainable”, “ethical”, “green” investing. In January this year, their CEO Larry Fink said of climate change that “climate change represented a risk to markets unlike any previous crisis” and that “their investment conviction is that sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors.” In other words, it makes financial sense to invest in companies that are ethical, and think about climate change.

Issues with companies sustainability claims

But this raises a couple of issues. Firstly, are companies that say they’re investing in the future of our environment actually doing that?  It’s not just issues around “green-washing”, but many companies argue that investment into projects that help them deal with the effects of climate change – i.e. how it impacts them rather than addressing the cause – are part of the “social responsible” approach to our climate emergency.

Already around 3% of global electricity supply, and around 2% of total greenhouse gas emissions, are produced by data centres; around the same as the aviation industry. By 2040 that figure is expected to have increased to over 15%.  Scientists are already warning that we have to hit zero carbon emissions worldwide by this point in time.

Are companies who invest money in building flood barriers around their data centre and taking other steps to protect from flooding caused by rising sea levels extreme weather events, investing in the “green” project?

You’d think the answer was a straightforward no. But you’d be wrong. Companies such as Carlyle, owners of oil companies like Clearly Petroleum, who have done similar works to protect their oil projects, claim these are green investments. 

How can this be right?  What they’re doing is simply business as usual. It does nothing to address the issue of why these flood defences are needed in the first place, yet alone address the issue of pumping more carbon emissions into the atmosphere. Green investment only really has meaning if its funding activities would not otherwise happen.

But secondly, and just as importantly, is the concept of ethical decisions leading to better financial performance the wrong way to look at this? Do we want to make decisions that are more environmentally sound because they’re better for our company profits, or because it is the right thing to do?

Equality in the workplace

Similarly, although many case studies have shown the financial benefits of a diverse workforce and management team especially with the women in tech movement, we don’t seek equality because we want to make more money. And for those that argue if market-forces and making more money drives more environmentally sound decisions in business does it really matter if it’s not a core belief of the company and management; the answer is yes it does.

What happens if in the future it no longer does make sense to think of the environment and the workforce first. Where taking green decisions or having a diverse board might lead to financial underperformance. Would that give companies the “right-thing-to-do” to destroy the environment and mistreat its workforce?

It is clear that financial performance alone cannot, and should not be the driver that helps us meet environmental and social goals. These should be at the heart of companies values and beliefs that are lived and breathed at every level of the company. But if we do believe that decarbonisation and equality is a moral imperative, then we also need to go further. It’s time to establish laws and frameworks to deliver the world that we’d like to see.