Coal and the iron and steel works that consumed it were, 125 years ago, the foundations of Andrew Carnegie’s fortune.(1) So, his life would seem unlikely to hold lessons for investors concerned about global warming. But it does.

Carnegie’s Causes

The Scottish immigrant had two great causes. Most recognize his name today in the US and UK for his philanthropic investments in vehicles offering opportunities for human betterment: Carnegie libraries, university scholarships, Carnegie Hall, Carnegie Mellon University, teacher pensions (TIAA-CREF), etc.

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Social investors have long been interested in executive compensation. The pay packages of CEOs occasionally attract attention from the mainstream press, too, and the June 12 issue of The Economist weighs in on the issue.

Three different articles consider executive pay, and they follow different paths to the same general conclusion. Yes, the authors agree, it’s possible that companies overpay their executives – especially in the U.S. – but it’s hard to say how much compensation is too much. The first article, “Pay Attention,” includes this sweeping statement:

“It is near impossible, of course, to determine the correct absolute level of executive pay.”

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If a tree falls in a forest when no one’s around, does it make a sound? If a company emits carbon dioxide but saves a forest, has it achieved climate neutrality?

While both companies and outside stakeholders agree that reducing and/or offsetting emissions is a worthy corporate objective, there is no consensus on how to define and achieve this goal.

A new study from Clean Air-Cool Planet and the UK’s Forum for the Future considers climate neutrality and makes detailed recommendations for how to achieve it. Getting to Zero: Defining Corporate Climate Neutrality defines carbon neutrality as a condition in which “a company, or one of its products or services, can have no net impact on climate.”

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On May 16, the inaugural Green Business Summit, sponsored by the Boston Business Journal (BBJ), brought together executives, policy advocates, and investors to discuss how to build greener businesses. The BBJ should be applauded for encouraging companies to face the challenges presented by global warming and other environmental threats. As publisher Michael Olivieri has said:

We see green business practices growing as an increasingly important part of business life. It also represents an important growth industry in the area.

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One of the first socially responsible investment (SRI) screens excluded weapons suppliers from investors’ portfolios; today, however, publicly traded companies don’t just build weapons – they fight wars. Privatized Military Operations (PMO) have been integrated into American missions in Iraq, Afghanistan, and other less-visible theaters worldwide.

Researchers at the Industrial College of the Armed Forces have produced a fascinating in-depth review of PMO in modern warfare. The report, released in 2007, highlights the extent of PMO involvement in the Iraq war. For example, the ratio of private contract employees to American troops in Iraq is 1 to 1.5.

Private contractors now provide services that have traditionally been the responsibility of American soldiers. Some of these are support tasks, such as maintaining barracks and running kitchens. A more worrisome trend is PMO contractors’ performance of core combat functions: building overseas bases, maintaining weapons, and providing security details.

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Last week, Greenleaf Publishing announced the publication of The Difference Makers, a history of the corporate responsibility movement through interviews by Boston College’s Sandra Waddock.

KLD co-founders Peter Kinder and Amy Domini, along with former Research Director Steven Lydenberg, were interviewed for the book.

As Prof. Waddock explains in her introduction, the 23 entrepreneurs she studies “represent a unique perspective on the developments that have taken place around corporate responsibility in the past 20-25 years.”

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How much corporate social responsibility (CSR) is enough? How much CSR reporting is enough?

These questions start from a mistaken notion of what the responsibility of corporations is.

Former Shell director Sir Geoffrey Chandler once said of “corporate social responsibility”: “I know of no phrase which has done more damage to constructive thought or caused greater confusion. It has encouraged the belief that a company’s responsibility to society lies in voluntary philanthropic add-ons, rather than the application of principle to all its activities.” (1)

By Chandler’s light, “how much CSR” questions make no sense.

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There have been at least three interesting developments over the past month in the area of Corporate Social Responsibility (CSR) reporting by companies based in developing countries, or so-called “emerging markets”.

In late January, the Social Investment Research Analyst Network (SIRAN) and KLD launched a report on the state of CSR reporting in these countries, entitled “Sustainability Reporting In Emerging Markets”.

The report, which focused on companies in three sectors in seven countries, was meant not only as a benchmark for the level of corporate disclosure on ESG factors. It was also intended to “create an advocacy campaign to encourage further improvements in sustainability reporting”.

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Recently, I received two queries from a reporter on corporate social responsibility (CSR) and CSR reporting. These were my responses.

Query 1

“Why evaluate companies from the CSR point of view at all? What good does it serve, especially considering the many flaws in CSR research cited below?”

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“Finally, I hope that the great thinkers here will dedicate some time to finding ways for businesses, governments, NGOs, and the media to create measures of what companies are doing to use their power and intelligence to serve a wider circle of people.” — Bill Gates at Davos, Switzerland, “Creative Capitalism,” January 24, 2008

Mr. Gates appears now to be joining the social investing movement. What a welcome development! He wants measures because he wants recognition for these activities, because recognition brings rewards to companies: inspired employees and public approbation. And I would add: social investors investing for the long-term. His speech calls on companies to do what social investors have been asking companies to pay attention to and what KLD has been measuring for many years — the social and environmental impact of corporations, especially on low-income groups.

Microsoft Corporation’s efforts to expand its beneficial impacts for low-income citizens beyond philanthropy into its business model are recent, as Mr. Gates acknowledges in his Davos speech. These efforts are recognized by KLD in our company profile of Microsoft. KLD’s evaluation of Microsoft’s efforts is that the company is not yet a leader in this regard, but it is making a start.

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