A8 - Ethical behavior makes good business sense
Companies that behave like good citizens will reap the financial benefits, while failing to do so can cause long-term damage, Andrew Tunnicliffe, chief operating officer at Aon Global Risk Consulting told his workshop.
“Stakeholders such as customers, staff or investors expect firms to show corporate social responsibility. If they don't, people are likely to vote with their feet. This is a critical risk that requires careful management,” he said.
Recent events such as government bailouts for banks and corporate failures had demonstrated that businesses “have responsibilities extending beyond quarterly stock price improvement.
“Even in the heartland of corporate capitalism there is a realisation that they must embrace a sense of responsibility to the individuals, communities and even the global markets they serve,” he said. “Getting this requirement wrong introduces massive reputational risk which is impossible to cover through insurance.”
He cited a number of surveys and research papers that would seem to demonstrate how stock market valuation of organisations considered to be socially responsible investments respond positively to such disclosure. According to research by Morgan Stanley and Oxford Analytica, investment in such companies had been predicted to rise from 5% of the UK stock market in 2001 to 15% this year. He expected the upward trend to continue.
“Ethical behaviour has been shown to be a good investment. Greed, on the other hand, can be counter-productive, as we have seen recently,” said Tunnicliffe
A8 Doing well by doing good (AON)