Management Sustainability at Barclays and CSR Policies - Essay Example

?Management Sustainability at Barclays & CSR Policies Introduction Barclays Plc is one of the very old and leading multinational banking companies with its headquarters in London and worldwide operations. Barclays has weathered the recent international financial crisis successfully. In addition to financial performance, accountability and transparency, corporate social performance of the banking companies is also keenly watched by the stakeholders which include not only the shareholders, employees and customers but also the communities in which they operate and the government. The banking industry should be responsible for proper risk management, upholding business ethics and investor protection. However, their contribution to the society and environment by way of Corporate Social Responsibility (CSR) is important for a sustainable growth and development in the long run. Organizational culture and management According to Yeung (2011, p. 112) the bankers shall establish positive organizational culture and socially responsible mindset in the organization and demonstrate accountability and creditability by reducing risks and enhancing quality of service to customers and community through effective and efficient internal audit. Therefore, the bankers’ primary responsibilities of accountability and creditability are very important. The Salz Review is an independent review of certain Barclays’ processes, business practices and culture.  Anthony Salz who headed the Salz Review Team observed “Despite its turbulent recent history, Barclays has emerged from the financial crisis, somewhat against the odds, as one of the world’s leading banks. But this has been achieved at a cost. Significant failings developed in the organisation as it grew. The absence of a common purpose or common set of values has led to conduct problems, reputational damage and a loss of public trust” (Salz Review, 2013) During the period of financial crises there has been “disproportionate sharing of risk between employees and shareholders became apparent” (Salz Review, 2013, p. 163). The report has also highlighted absence of values, cultural inconsistencies, insufficiency of strong controls, focus on financial performance, but lack of focus on development of its people that led to conduct problems, breach of regulations, investigations, litigations and loss of public trust. Also, the report suggests that Barclays has to re-establish its purpose and values with customer focussed culture by reassessing its governance and risk management. The report concludes that it will need perseverance and consistency at all levels of leadership. (Ibid, p. 164) In response to this review report Barclays (2013b, p. 1) clearly stated “The Board is committed to implementing all of the recommendations and to publishing an account of our progress in doing so going forward” It should also be remembered that the review has appreciated many other positive aspects and stated that the problems faced by Barclays are also industry problems in some ways though Barclays is cautioned about taking comfort from this. Sustainable management and Social accounting Non-financial accounting and reporting developed over years have been founded on the principles of corporate accountability. The society provides capital, resources and patronage for the growth and development of the companies. Therefore, social and economic sustainability are fundamental for the stability and growth of the commercial organizations. Sustainability accounting seeks to quantify the effects of the contributions made by the companies by way of corporate social responsibility. Barclays published 2011 Citizenship Report, its environmental and social performance for the 12th year on 26 April 2012 (Barclaysa, 2013a). The highlights include ?63.5m invested in communities, 73,000 employees involved in fundraising activities and four per cent reduction in C02 emissions, achieved ahead of our 2013 target date. Corporate Social Responsibility forms the basis for sustainable management which enhances the companies’ relationship with the communities through environment and social activities undertaken and the environmental friendly practices followed by the companies in the operation of their businesses. Sustainable management is concerned with the environment and economy taking into account not only the current needs of the communities but also the future generations. According to Friedman’s view of a shareholder theory of the firm (egoistic ethical stance) the organization is responsible to the shareholders who are the beneficial stakeholders. CSR activities from this point of view are not legitimate as they will simply make the business uncompetitive. This view is considered very narrow as it is concerned with the benefit of shareholders only. In 1970, Friedman “referred to corporate social responsibility (CSR) programs as “hypocritical window-dressing,” and said that businesspeople inclined toward such programs “reveal a suicidal impulse” (Time, 2012). Utilitarian theory of Freeman and Carroll based on rights, ethics and justice call for balancing of the interests of the economic, social and environmental stakeholders which include the community and the state. The concept of CSR is broader in nature in this case by encompassing not only ethical principles involved in the business but also philanthropic responsibilities of the companies aiming at sustainable development of the communities of society as well. This is more in line with the current thinking since sustainable development of a business is linked and closely related to the sustainable development of the community in which it operates. The Salz report (2013, p. 96) has highlighted the Lord George Principles of Good Business Conduct and stated “The core purpose of international financial service providers is to promote global economic and social welfare by aggregating financial resources, converting them into specific services and products and delivering them in accordance with the mandates of their clients, customers and counterparties.” In Response to Salz Review the bank has acknowledged the need for sustainable and values-based culture for the organizational growth. Barclays (2013b, p. 3) stated “We believe that building a sustainable, values-based culture will form the foundation of our long-term success.” Corporate Social Responsibility (CSR) According to Bruntland Report, sustainable development is the 'development that meets the needs of the present without compromising the ability of future generations to meet their own needs'' (earthsummit 2012). There has been paradigm shift in corporate philosophy that assumes social responsibility and uses CSR policy as a means of endearing the managements to the communities for the companies’ sustainable growth and development. The role of banking sector in the economic growth of a country is very crucial. The US subprime crisis and subsequent European financial crisis cast a shadow on banking and financial services industry and the governments had to bail out some of the bigger banks at the cost of public exchequer. The argument that the industrial companies using capital and other resources provided by the society and the environment have responsibility to the society for sustainable development of the communities and environmental protection is eminently reasonable. CSR in a broader sense include elimination of corruption at all levels and fighting against money laundering. Sahoo (2011, p. 5) stated “the approach of CSR is shifting from ethical to statist approach. It is time for the corporate bodies to take proactive steps, rather than allowing the State to define CSR for them or start reacting to the State’s policies on CSR.” Apart from the current social and economical consequences caused due to environmental pollution, quality life of the future generations hinges on what we achieve to-day in environmental front in terms of conservation of natural resources, proper disposal of waste, minimizing greenhouse gas emissions and mitigating the effects of climate change. CSR connotes different meanings under different context for different stakeholders. If it means fair wages and good working conditions to workers, it means timely payment to creditors for the supplies made and compliance with the statutory regulations and payment of taxes to government. The banking sector is not directly concerned with or responsible for environmental pollution to a greater extent compared to manufacturing and other industries. But it has great stakes in sustainable development of industries which in turn depends on development of society since its consumption and savings are the cornerstones for economic development and capital formation. According to Choudhary and Singh (2012, p. 67) “Companies have realized that in order to survive and prosper, they have to contribute to the society as a duty.” In the biannual survey showing shift in corporate attitudes to sustainability conducted by UNEP and Standard and Poor’s Rabo bank of Netherlands with 70% score ranks fourth in the world ahead of several MNEs in manufacturing and other industries indicates that it is the willingness and policies of the companies that matters in environmental commitments rather than type of business. (UNEP, 2006) Elkington’s triple bottom line Salzman et al. (2005, p. 28) stated “The theoretical studies are based on frameworks that aim to explain the nature of the relationship between financial performance (FP) on the one hand and environmental (EP) or social performance (SP) on the other.” Elkington (2004, p 3) focused “corporations not just on the economic value that they add, but also on the environmental and social value that they add – or destroy”. The important elements environment, economy and society are brought into the framework. The shift is from “expansion to conservation, from quantity to quality, from domination to partnership” (Newton & Harte, 1997, p 60). Barclays’ corporate social responsibility policy has been discussed broadly under the following heads by the company: 1. Making Business sense, 2. CSR in the market place, 3. CSR in the workplace, 4. CSR in the community and 5. CSR in the environment (Barclays, 2002). The sustainability ambitions of the company depend upon the awareness among the stakeholders and the involvement of the employees. Bosslemann (2008, p 176) stated “making the shift in practice is likely to be more evolutionary and gradual.” “The influence of shareholders on companies’ decision-making raises the issue of how influential shareholders can actually be in relation to environmental issues” (Tilt, 2007, p. 106) Companies like Barclays in Banking and Financial Services sector can contribute significantly by reorienting their CSR policies towards achieving sustainable economic development in the following lines. Though initiatives taken by Barclays have also been given below for indicative purposes, more focused and systematic approach in this direction along with a system in place for measurement and evaluation of performances against the standards or objectives on a constant basis for taking corrective actions wherever necessary would fulfil its sustainability ambitions. 1. Priority lending to renewable energy projects, pollution control equipment manufacturers, companies engaging in production of recycled products and water treatment plants and producers of energy saving equipment and machineries. Barclays assists renewable energy firms in getting access to capital markets and offer strategic advisory services across the sector. The bank has developed products and services for financing low carbon technology as a positive contribution to global warming by reducing global energy footprint. Barclays was also the first major bank to establish a carbon trading desk. (Carbon Capital, 2013, p. 4 & 5) The bank has also financed energy-efficient and micro-generation assets through leases (Ibid, p. 61), created new investment vehicles for LCT and asset management (ibid, p. 63) and invested equity in LCT assets (ibid, p. 64). 2. Providing education loans or scholarships to the students belonging to economically weaker sections of the society. Financial inclusion of the economically weaker sections of the society is important for integrating them to the national mainstream for sustainable development of the societies. This could be achieved only by enhancing the level of education. Barclays’ scheme in respect of funding to postgraduate studies aims to fill up the gap in public spending that is considered a barrier to social mobility (Morgan, 2012). 3. Participating in education, training and social development projects. Barclays supports the Child Social and Financial Education Programme in Thailand, the Philippines, Indonesia, China, Sri Lanka and Vietnam, work with organizations like Save the Children, Half the Sky Foundation, Aflatoun and Shanghai Better Education Development Centre in the areas of education, sports, children’s rights and helps the children affected by war and poverty or orphaned in various countries of the world. (Barclays, 2013c) Barclays’ partners in Africa include Care International UK, Near East Foundation, Plan UK, Women for women international and UNICEF in the areas of poverty and welfare of children, marginal social groups and women in various countries. (Ibid, 2013d) 4. Developing environmental policies in pollution control, energy saving, alternate renewable energy and recycling. Barclays’ Policy adopted in January 2005 envisaged five-point Climate Action Program that include increase energy efficiency, purchase renewable energy, achieve carbon neutrality for its U.K. operations, offer climate products and services to customers, and actively engage in the climate change policy debate. (Cogan, 2008, p. 17) 5. Minimizing fuel consumption in their offices, using energy efficient equipments and encourage employees to use mass transit system. “Barclays has achieved carbon neutrality in the United Kingdom. In addition to this carbon neutrality target, the company has also set an absolute emissions target” (Cogan, 2008, p. 9). 6. Encourage cultural activities and social programs. Barclays sponsors various cultural and social programs in various places in different countries. For example in Vancouver, Barclays has sponsored Manor Computer Basics for Seniors, Barclay Manor West End Book Club, Sports events, and emergency first aid programs for children (City of Vancouver, 2012). United Nations (1987) expressed the need for development of special international banking program for investments in conservation projects which signifies the role of banking sector in sustainable development. Barclays is a prominent banking company in the Dow Jones Sustainability Index. “Barclays is the only financial services organisation to be among the top 25 employers Index every year since it launched in 2005” (Barclays 2013e). In the year 2012 Barclays received several awards which include Triple win business charities award, Lipper fund management award and Disability forum awards. The level of communication and details of CSR activities are very important for making assessment by the public or environmental groups. “For instance, within the financial sector (8), Barclays Bank (no. 8 by size) highlights the amounts and areas where CSR investments have occurred” (Knox et al., 2005, P, 20). Barclays should also focus on international standards and provide necessary training to the employees with a view to improve their understanding, commitment and performance. Sustainable Management: Measurement and Reporting The Global Research Initiative develops guidelines on the reporting of sustainability issues and provides indicators that an organisation can use to measure its economic, environmental and social performance. “Performance Indicators are organized into categories: Economic, Environment and Social. The Social category is broken down further by Labour, Human Rights, Society and Product Responsibility sub-categories” (Global Reporting Initiatives, 2013). But cultural shift is an important factor needs to be discounted in the process properly. Jamison (2001, p 45) states that sustainable development is “an ongoing series of cultural transformations by which the visionary ideas and utopian practices of the environmental movement are working their way into the social lifeblood.” Finding satisfaction in life within the available means need change in social mindset. (Parker, 1996, p 27) GRI has set the foundations for international standards. Reporting Initiative’s recently launched G3 guidelines have taken the international standardization to the next level. “In parallel, the slow, grudging awakening of financial markets is being accelerated by growing concerns around climate change” (Sustainability, 2006). Companies are using various tools for sustainable management practices. “The AA1000 Standard provides management tools that can be used to structure a management process that is both socially and environmentally responsible” (Proofit, n.d.) Tha management of Barclays has prepared Barclays Citizenship Report 2011using the principles of Inclusivity, Materiality and Responsiveness to meet the requirements of AA1000AS in accordance with ISAE 3000. Ernst and Young (2012) state that Barclays has achieved increased completeness of energy consumption data, engage with stakeholder groups as part of its approach to citizenship, its Community Investment programme has been revised in 2011 to align more closely with the citizenship priorities and has committed to work across all levels of the business to build employee understanding of the link between citizenship and commercial success. Sustainability balanced scorecard (SBSC) The Balanced Scorecard is a system of indicators for performance measurement and a strategic management system. Environmental and social aspects can be incorporated into the system. Centre for Sustainability Management (CSM), (2011, p. iii) stated “The SBSC helps to address different environmental and social aspects with regard to their relevance for strategy implementation and execution at the business unit or company level. Moreover, it can be used as a tool of sustainability accounting and reporting.” BSC has primarily four perspectives: 1. financial perspective, 2. customer perspective, 3. internal process perspective and 4.learning and growth perspective. (Weber and Schaffer, 2000, p. 3) The important areas covered under the fourth perspective are organizational infrastructure, technology and the climate for working. (Kaplan and Norton, 2001, p 76) Source: Farrell (2003) “There are four themes to provide a way to segment strategy:         Build the franchise,         Increase customer value,         Achieve operational excellence and         Be a good corporate citizen.” (Farrell, 2003)   There are two types of performance indicators. Kaplan and Norton (1997, p. 28) distinguish them as leading and lagging indicators. Lagging indicators available post performance will be useful in evaluating the achievements. Strategy and Vision are central themes in BSC, not control that keep the companies moving forward (Kaplan and Norton, 1992, p. 79). Environmental and social features of SBSC could be integrated into the already existing conventional scorecard. (Figge et al., 2002, p. 281). Criticisms on approaches by the corporate companies to CSR “Governmental powers are waning and in any case nation/states’ reach is insufficient to handle global scope of responsibility or problems” (Waddock, 2006). In this background, CSR becomes more relevant and important. But, there have been criticisms on corporate companies approach to CSR. Chaudhuri (2012) stated that Barclays was driving up food prices at the cost of world’s poor people and an award was conferred on Barclays by Greenpeace and Berne Declaration that can affect its image. According to Fineman (2001, p. 21), the companies attitude in practice towards sustainable development has been pragmatic and reassuring but, ethically purged. “The use of sustainable development in a business orientation becomes problematic where that orientation obscures other issues and demotes environmental action to only shallow and reformist dimensions” (Eden, 1994, p. 167) Companies’ strategies have largely aimed to leverage their CSR activities for marketing without long term commitment. Elkington (2010, p.525) observed “Capitalism and sustainability, however much we may wish it otherwise, do not make easy bedfellows.” According to Reynolds and Yuthas (2007, p. 62) CSR reporting should involve interaction between the companies and its stakeholders rather than communication about past by the companies. The assurance standards like AA1000 focus on accuracy of the data and the accounting systems without any analysis on its impact on stakeholders materially (Adams and Evans, 2004, p. 99). Cooper and Owen (2007, p. 649) observed that the “forms of disclosure offer little in the way of opportunity for facilitating action on the part of organizational stakeholders, and cannot therefore be viewed as exercises in accountability.” For the CSR initiatives of Barclays to be more successful, interaction between the management and the stakeholders is essential. Gao and Zhang (2006, p. 722) suggests “that social auditing through engaging stakeholders via dialogue could be applied to build trusts, identify commitment and promote co-operation amongst stakeholders and corporations.” Conclusion Financial performance and the environmental performance need to be balanced for sustainable development in the long run by the corporate companies. The perspectives in relation to environment, economy and society should be seamlessly integrated into the framework for effective implementation of the policies. For creating awareness among the employees about the tools or applications available and used in the organization training is essential for efficient and sustainable management. The benefits of CSR activities in terms of reduction of labour turnover, retention of employees, customer loyalty, brand equity and availability of capital from the satisfied investors could far outweigh the cost involved in the long run. 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Balanced Scorecard and Controlling: Implementierung Nutzen fur Manager und. Controller – Erfahrungen in deutschen Unternehmen. Gabler: Wiesbaden. Read More