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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From within the world of SRI, one gets the impression that a key aspect of global supply chain management is how to uphold and improve labor standards for workers producing the things that you and I use every day.

Human rights groups, labor unions, social investors, international organizations, academics and a number of companies have spent years on this question, and there are now annual conferences devoted entirely to labor rights in supply chain production.

So when I came across a brochure recently for the upcoming Tenth Annual European Supply Chain & Logistics Summit 2008, to be held in Germany in May, I was surprised to find almost no mention of labor standards. I was even more taken aback when I saw that scheduled speakers include company representatives from industries, such as technology and electronics, that have been hit by allegations of supply chain labor violations.

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Jonathan Dee’s article, “A Toy Maker’s Conscience“, which appeared in the New York Times Magazine at the end of December is a must read.

First, it’s a generous yet clear-eyed portrait of Baruch College professor Prakash Sethi, a defining force in the movement for corporate accountability for more than 35 years.

His story is one of the great ones in our business, but it has gone, largely, unheralded. And Jonathan Dee has gotten both the story and Prof. Sethi’s voice right.

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An update to Liz Umlas’ July post: Mandatory CSR?

In September 2007, Ethical Corporation noted that Malaysia was also putting laws in place around corporate social responsibility (CSR) (and in September 2006, that country’s stock exchange began requiring public companies to report on CSR-related initiatives). Here is the link to the article in Ethical Corporation.

Time and time again, I see people on my side of the corporate social responsibility debate claim that “originally” corporations only came into existence for a “public purpose”.

Some go on to argue that we should reinstate that qualification. Others think we should assume the requirement still exists and impose higher levels of social responsibility on companies.

While history does not support the claim of a golden age when corporations came into being to serve a “public purpose”, it does not prevent society from imposing one now.

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