Profiting from social responsibility

 

IMI Conference: Diageo global chief executive Paul Walsh says corporate involvement in social issues is a form of "enlightened self-interest", writes Una McCaffrey.

While we may not like to admit it, there are a number of prominent business issues that tend to prompt a snooze-fest among the general public. Among these is the fuzzy notion of corporate social responsibility (CSR) - a matter that often seems to translate into little more than lobbing a couple of grand to the local youth club and then placing a few cheesy pictures of smiling children and a large cheque in the local papers.

Of course it doesn't have to be like this, or at least it doesn't in the view of Paul Walsh, global chief executive of Diageo and star speaker at yesterday's session of the Irish Management Institute conference in Co Wicklow.

Mr Walsh spoke on the rather feel-good subject of Corporate sustainability in a changing global market environment, taking advantage of the early-morning slot to keeping his audience alert.

A chat with Mr Walsh suggested, however, that cynicism about CSR, and Diageo's position in particular, might be slightly misplaced.

Unlike many other chief executives, Mr Walsh freely acknowledged that there was self-interest in his company's CSR activities. This is, he said, an "enlightened self-interest".

Mr Walsh said the objective in business was clearly to be successful.

He also believed, however, that companies needed to be aware of all their stakeholders when deciding how to run their affairs. This meant taking cognisance of consumers, investors and regulators and considering anything that could "frustrate" an organisation's future. The next step was dialogue, followed by action. Over time, the whole business would take on more lasting power.

In Diageo's case this follows through in diverse ways.

In Africa, for example, the company supports water charities in areas where it uses significant quantities of water in producing Guinness. This gets over the problem of using up clean drinking water while living beside people whose very access to water is precarious.

Closer to home, money in the Republic has been spent on various initiatives, including the establishment of a pre-vetting initiative for alcohol advertising.

This week, the firm went one step further by providing €1.5 million for new UCD research into excessive alcohol consumption. (Mr Walsh said that in spite of its £1.5 billion (€2.1 billion) market cap, €1.5 million was still "a substantial amount of money" for the company.)

The research aims to discover why young adults misuse alcohol and then to develop science-based interventions to address it.

Crucially, Diageo will have no influence on how the research is conducted and will not see the findings before they are published. Also, UCD and not Diageo will disseminate the findings.

Mr Walsh said the issue was, for Diageo, a simple one. He said the company did not want problems with binge drinking to lead governments to place higher taxes on its products and thus eat into revenues. The UCD research funding is thus the perfect example of "enlightened self-interest", particularly in light of the taxes placed on alcopops over recent years.

In short, Diageo wants excessive drinking - which Mr Walsh believes is practised by less than 2 per cent of drinkers - to become unacceptable, with the help of more research into why it happens. In this way, its popularity could decline, in the same way that drink-driving became less common some years also.

Mr Walsh argued that Diageo should always fulfil its CSR duties in a way that will ultimately benefit shareholders.