Social responsibility in dollars and cents

When tech companies want to do the right thing, Ernst Ligteringen is the man they increasingly turn to for advice.

Tech Industry
Ask Ernst Ligteringen of the Global Reporting Initiative what's on investors' minds, and he'll likely say the answer is a lot more than simply dollars and cents.

Ligteringen is chief executive of GRI, a Netherlands-based nonprofit that offers companies help on how to improve their performance when it comes to social responsibility.

Nearly 50 hardware and telecommunications companies around the world use GRI's guidelines, which have been around since 1997. For the most part, the organization has helped companies deal with environmental issues, such as the proper disposal of computer monitors. More recently, however, the group has widened its efforts to focus on problems such as the use of child labor in overseas subsidiaries.

The list of bellwether tech companies relying on GRI guidelines includes the likes of Canon, Hewlett-Packard, Advanced Micro Devices and Intel.

A year or two ago, if it wasn't part of the balance sheet, companies didn't think they had a responsibility to disclose it.

For Ligteringen, this is not just a do-gooder's mission. He says a growing number of shareholders are becoming socially responsible investors. In addition to seeking out profitable returns on their investments, he says, they increasingly want to see more accountable performances when it comes to issues like good corporate governance, the environment and labor relations.

CNET News.com recently interviewed Ligteringen, who is now developing a third version of the guidelines, which GRI expects to release in mid-2006.

Q: What do socially responsible investors care about, and who are they?
A: Investors include pension funds like the city of New York and CalPERS (California Public Employees' Retirement System). They want to select financial investments that are not only good for their members but are also good for the society and environment where their members live.

They also care about environmental and social issues, because those things can also affect the bottom line. A number of important shifts are going on today that are driving these changes. Sarbanes-Oxley, for example, raises the bar for corporate governance. As part of (the act), a company is also obligated to disclose any environmental risks that exist. A year or two ago, if it wasn't part of the balance sheet, companies didn't think they had a responsibility to disclose it. Now it's considered part of their responsibilities.

How does this translate to the technology industry? Is it at the forefront of social responsibility efforts--or dead last?
They have not been at the forefront, as the automotive industry has; or the oil, gas and mining industry; or the apparel industry, with its social impact because of the child labor issues.

Companies that are viewed as exercising due diligence are viewed as a lower investment risk.
But what we have seen now is that the high-tech industry is next in line. Regulations and other issues are causing tech companies to realize that they need to get in gear, and it's the leading companies who are positioning themselves.

Can you name some of the companies from the technology industry that have embraced the concept of social responsibility in their reporting to investors?
Hewlett-Packard has spent a considerable amount of time repositioning itself as a socially responsible company. It has reported its GRI results for the past three or four years. It does one of the most extensive reports and is one of the leaders in its industry. The company, however, has yet to make the claim that its reporting is in accordance with the GRI guidelines.

Intel has used the GRI guidelines three times when producing a social responsibility and environmental report. And for the first time it announced, last year, that it completed its report in accordance with the guidelines and with the highest level of the GRI rating.

Cisco Systems is now exploring using the GRI guidelines in a serious way. In the past, it issued environmental reports based on the GRI guidelines, but it is now moving to broader reporting. Microsoft is also looking at GRI very closely.

What are the differences, if any, between hardware and software companies when it comes to social and environmental reporting issues?
Hardware companies have a number of environmental issues, from the content of the components to the life cycle issues.

We are not a police force.
How are they going to dispose of old computers, or how do they build their computers with particular components that can be recycled? European companies, for example, have to include the cost of disposing, or recycling, the computer in their initial selling price.

The high-tech industry has other issues, too, like the digital divide and what impact that has on companies. This social concern is seen more with powerful companies--because with that power, you have a sense of responsibility.

For example, what is the social effect of Web-based services? The poor often do not have a computer or access to the Internet. Companies are now realizing that they are not just providers of information. Their investors are taking notice of their social responsibility reporting, because companies that are viewed as exercising due diligence are viewed as a lower investment risk than those who don't--especially when it comes to Sarbanes-Oxley.

Has this increased concern among investors over social and environmental issues led to any successful shareholder initiatives passing? For example, some companies face such shareholder initiatives as following the 11 principles of human and labor rights standards for China.
Sometimes we see the percentages go up in favor of shareholder initiatives, but it is still rare for shareholder resolutions to pass. But these actions tend to have an effect on a board and management, who are then alerted to the issue. I have seen some companies become more proactive with social responsibility after this happens.

Are there any egregious offenders of the GRI guidelines?
We are not a police force. There are a number of companies that haven't woken up to taking social responsibility seriously. But most of the time, a company gets into trouble over some of these issues, or it's compounded by something like Sarbanes-Oxley, or there is a close competitor in the sector where an edge is needed. Then the companies become proactive and take more substantial measures to offer solutions for environmental or social issues.  

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