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Great. But most companies have adopted a more sophisticated vocabulary. Company reports are littered with buzzwords such as stakeholders, inclusivity, engagement, carbon footprints, renewable energy, recycling and biodiversity. There are graphs showing greenhouse gases, landfill waste and water consumption. The graphs often point the wrong way, despite self-flagellating promises to do better in future, but so what? These reports are for writing, not for reading. Indeed Signet, the jeweller that recycled itself out of Ratners, doesn’t even bother printing the responsibility report that it has worked so hard to produce. Shareholders at next week’s annual meeting will find five pages of ethical and environmental issues in their annual report but must log on to the company’s website to read the full 50 pages dealing with human rights, community involvement and the impact on society.
And what would they learn? That the retailer’s direct environmental impact is relatively low. That jewellery has a very long life and very high recyclability. That Signet’s production of greenhouse gasses is similar to its peers’. And that while it has no direct relationship with the mining companies that extract its raw materials, such extraction requires careful management. No problem there, then — except that Signet is so concerned about being seen as an ugly duckling that it has adopted a Statement of Social, Ethical and Environmental Principles, followed by a Supplier Code of Conduct; it has written a Code of Ethics, devised a whistleblower complaints procedure and signed up to the UN Declaration of Human Rights. Remember that next time you buy a new ankle chain.
When business complains so much about red tape, why is it willingly binding itself in green ribbon? And who is this greenery for? Certainly not the shareholders — hence Signet’s decision not to waste paper telling investors about its environmental credentials. The goodness lobby regularly tries to argue that green companies produce better investment returns, but the facts tend to disagree: this year’s best performing shares are mining companies. Nor is it done for the customers’ benefit. We may tell market researchers we prefer ethically sound products, but we continue to buy on price and quality, not provenance. One FTSE chief executive whose own annual report has become a green fashion victim privately admits that it has neither sold an extra widget nor added a penny to the share price, but says, ‘It goes down well with the staff.’
Fair enough. If the placebo works, keep taking it; a happy staff is an efficient staff. But that’s the point: using less water or energy is efficiency — and that’s what business should be aiming for. There’s no need to wrap it up as saving the planet — and no need to produce separate reports saying that management is doing what it is paid to do.
It certainly makes sense for oil companies to ensure that they avoid pollution, or mining companies to cover their tracks, because in damaging the environment they damage their reputation and thus their growth prospects. Shareholders should be worried if these companies have no policies to avert such calamities. But what are Diageo’s investors to make of the group’s 36-page Corporate Citizenship Report picturing its Earthwatch champions recording turtles in the Volga River delta or collecting data on invertebrates in South Africa? Diageo’s holistic performance report is as green as one of its (recycled) Gordon’s gin bottles.
The suspicion is that directors are being greenmailed into adopting environmentally friendly measures. There is a sub-industry of advisers eager to audit, benchmark and write glowing reports saying that their clients are getting better. No board dares say no, especially when it sees that its rivals have already bought a suit of these emperor’s green clothes.
This corporate emphasis on the environment is a new facet of what used to be called ethical investment. The fashion used to be to shun businesses that produced drink or cigarettes or armaments or whatever puritans were against at the time. And it was those blacklisted companies that led the way in adopting corporate responsibility to try to look greener-than-green. The indices of ‘good’ companies thus welcomed the very water companies that had contaminated our rivers and the oil groups that had polluted the seas on the basis that, despite their lapses, they had improvement programmes.
So this environmental bragging started as greenwash — a public relations strategy to improve a battered image. It became greenmail when the clean companies felt forced to follow. BAE Systems regularly failed the ethical test but now produces a 42-page corporate responsibility report while relegating its financial accounts to just four pages of its annual review. It formed a corporate responsibility committee last year — with Michael Portillo on it — to focus on improving safety, health and the environment. The chief executive Mike Turner, remorsefully reporting on an accident that killed one employee, states, ‘There is no acceptable number of fatalities’ — but hang on, this is a company that builds tanks, destroyers, jet fighters and nuclear submarines.
The low-emission, fuel-efficient, eco-friendly bandwagon is rolling at full speed, but there are still companies jumping on, eager to join the ‘Global 100 most sustainable corporations in the world’ — a list of the worldwide green-and-good that Diageo interprets as being the companies that will still be around in 100 years. Good luck, but P&O and Pilkington were on last year’s list and nevertheless got taken over. If companies want to clock up a century, the best way to do so is surely to produce the healthy profits that allow them to indulge in community engagement. And if the way to make those profits is to cut the energy bill, reduce waste and recycle material, so be it — but that’s what good management is about. It should go without saying that a business tries to cut its input costs: there’s no need to produce a colour supplement saying so.
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