Profits with principles

The Royal Bank of Scotland (RBS) has just published its 2006 Corporate Social Responsibility (CSR) report. On its own this makes some good reading. But it is only part of the picture.

A group of NGOs headed by London-based social and ecological justice campaigners Platform have just released another report entitled : The Oil And Gas Bank. RBS & The Financing Of Climate Change. They emphasise that the CSR claims made by RBS are hogwash: as a result of its financing of the carbon-based energy sector RBS is responsible for more greenhouse gas pollution than the whole of Scotland combined.

A business which pays attention to its CSR does not only manage its direct impacts. It also pays attention and seeks to manage and minimise its upstream and downstream impacts. Upstream impacts being those generated by suppliers to the business. Downstream impacts being those generated by users of the services provided.

Banks in Malta have published their annual reports emphasising their ever increasing profits. We are interested not just in the quantum of profits, but more into understanding what is generating them. Contrary to the Milton Friedman dictum, the business of business is not just business. Some of us feel that in business profits and principles can co-exist.

Bank of Valletta has published a separate CSR report. Though welcome as a first step, this report is, however, rudimentary. In particular, its environment section needs to be developed much more and the report as a whole needs to be aligned to the Global Reporting Initiative.

APS, owned by the Church in Malta, has taken an equally important step: It has aligned itself with the European Federation of Ethical and Alternative Banks. This decision is significant although it could have been taken much earlier in view of the fact that the Church in Malta, owning 100 per cent of APS shares, is presumably more interested in principles than profits.

HSBC, on the other hand, refers to its CSR in the chairman's report while Lombard Bank discharges its CSR "by contributions to the well-being of Maltese society". We are further told that Lombard's policies and day-to-day operations are continuously monitored in order to ensure integrity of good CSR, whatever that may mean!

Basic to this discussion is an understanding of what CSR is. If we examine the CSR statements of the main local banks we can reasonably conclude that they limit its significance to channelling a tiny fraction of their profits back to society through the sponsorship of specific projects or causes. This is corporate philanthropy. CSR embraces much more. CSR broadly represents the relationship between a company and the principles expected by the wider society within which it operates. It assumes that businesses recognise that for-profit entities do not exist in a vacuum and that a large part of their success comes as much from actions that are congruent with societal values as from factors internal to the company.

Within this context we would expect the banking system in Malta to address the impacts which the financing of large-scale urban development is causing. Irrespective of the method of operation of Mepa and whether and under what conditions it issues development permits, the banking system in Malta should reconsider its complicity in the destruction of our urban fabric and ecological network. The financing of projects through direct financing or sponsoring bond issues places the banking system in such a position that it is sharing the ethical responsibility for the rape and destruction of our environment. The banks in Malta should listen to public opinion as to what is acceptable development and introduce their own checks separate from those of Mepa in order that environmental impacts be properly evaluated before they associate themselves further with the rape and destruction of our environment.

Our society demands this line of action. It expects that the banking system develops its methods of operation to reflect the changing values of society.

It is clear that not all elements of the Maltese banking system have discarded principles. There is still a glimmer of hope in that part of the system still upholds principles and does not consider profits as its only driving force. Maltese society will reward this stance as the day is fast approaching when we will shift our custom to those banks which uphold our values most of the time. Banks will be held to account for financing the rape and destruction of our environment. Planting trees and sponsoring restoration works is not a substitute.

CSR should not be seen as a marketing tool but as an instrument for the management of risk. We cannot wait much longer as soon there will be pretty little left to protect.

The author is an architect and civil engineer, specialising in sustainability and environmental management.

cacopardocarm@euroweb.net.mt