This month, Mitun Majumdar, Associate Director at Corporate Citizenship, discusses how the recession is changing the corporate responsibility debate and argues that understanding the economic impact of your company is essential
Last week’s Budget announcement by the UK government puts the economy back in the spotlight. Predicted economic growth of only 0.8% in 2012 and unemployment expected to rise to almost 3 million this year indicates it is going to be another tough year for many in the UK. In some other countries the situation is even worse.
In these tougher economic times, individuals, governments, and communities want to know how companies are creating and sharing wealth. For many, being a good corporate citizen is about going back to basics. People want to know how much tax a company is paying and the number of jobs it is supporting, as well as whether it has cut its carbon emissions. A look at the recent headlines criticising Barclays for tax avoidance schemes and praising Tesco for its plans to create 20,000 jobs are prime examples of where the corporate responsibility debate has shifted.
The economic reality is that companies play a significant role in creating economic value that is shared amongst many stakeholders. Just take a look at a typical company. Its employees benefit from salaries and benefits, shareholders from dividends, the government from taxes, suppliers from payments for goods and services, and communities from charitable and community investment. In addition to a company’s direct economic contribution, there is an indirect economic contribution from the spending of employees and suppliers who generate further economic activity. These positive economic impacts are often more acutely felt when operating in developing markets.
Being able to identify, measure, and articulate your economic contribution can be a very powerful engagement tool. It can also help to identify opportunities for innovation or improvement. The good news is that companies who are interested in understanding their economic impact can start off relatively simply using company financial data to produce a value added statement. In essence they show the flow of money in and out of the business among the various stakeholders including employees, governments, providers of capital and local communities. Companies such as Novo Nordisk, Diageo and SAB Miller have been including these statements within their corporate responsibility reports for a number of years. Whilst others such as Unilever have gone further to publish in-depth studies exploring the social and economic impact of their operations in a particular country. Whether it is a simple cash value added statement or a more in-depth socio-economic impact study, understanding one’s economic impact is firmly part of the corporate responsibility agenda.
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