Corporate Governance and Social ResponsibilityHSBC International Firms and Corporate Social ResponsibilityCorporate governance has gained unprecedented prominence in recent years. The phenomenal growth in social power and influence of corporations equally contributed to them taking responsibility for balancing their own interest with those of the societies and the natural environment in which they operate. CSR is an important part of corporate governance because it helps satisfy the needs of all major stakeholders. Multinational companies must address social, environmental, and economic demands from stakeholders, as well as financial demands from shareholders.
CSR is a governance issue, which means it belongs to directly on the board’s agenda. Both domestic and international companies now face growing pressure to give stakeholders a role in corporate governance, to more transparently disclose social, environmental, and economic policies, to shift many of the previously treated voluntary policies or programs of CSR as mandatory, and to be more responsive to the growing interest by the financial community in the link between shareholder value and non-financial corporate performance (Luo 2007, p. 211). The purpose of this paper is to investigate and conduct an in-depth analysis of reasons why these corporations are showing so much interest in CSR and corporate governance.
It will also identify strategic issues involved in addressing CSR issue and evaluate them from various theoretical perspectives. Environmental ConcernsThe strong connection between financial and social performance stimulated managers to pay greater attention to corporate communication and business ethnics (Tulder & Swart 2006, p. 139). According to Idowu & Filho (2008, p. 154), the great majority of the companies that issue a CSR report are international companies. This shows that the companies that are more active in the field of CSR are those with a wider range of activities.
It appears that international companies are more influenced by new trends and also the need to demonstrate a good social and environmental behaviour in order to be sustainable. Moreover, majority of these organizations are private, which in combination with the above mentioned behaviour leads to the conclusion that the companies that are innovative in CSR are those that belong to private individuals, and their activities surpass the borders of their home country. In an attempt to categorize the CSR behaviour of international companies, the category that appears to be of vital importance is the environmental impact of the companies. HSBC or the Hongkong and Shanghai Banking Corporation, the largest banking and financial service organizations in the world, claims that they have long-standing commitment to the environment and operate efficiently and making wise lending decisions as much as possible to lessen the environment affect of their business activities.
HSBC is currently one of the leading financial companies who are concern with climate change because they believed it is the single largest environmental, social, and economic challenge that could impact their customers, employees, and shareholders.
By improving the banks operation, incorporating sustainability into purchasing decisions, reducing energy, water use, and carbon dioxide emissions, HSBC avoids the direct environmental impacts of their businesses (HSBC 2008, p. 1). In 2005, it became the first major bank to become carbon neutral and currently contributing zero net carbon dioxide into the atmosphere in its worldwide operations. Moreover, it is currently developing it Climate Change Centre of Excellence and taking part in Carbon Disclosure Project to facilitate dialogue between shareholders and corporations on carbon emissions and climate change.
In the hope to make a real difference in addressing climate change and improving sustainability, HSBC launched a five year $100 million partnerships with world-class environmental charities in 2007 to tackle the threats of climate change (HSBC 2008, p. 1). HSBC also knows that demand for socially responsible investments or SRI has increase substantially in recent years, especially in Europe, the US and more recently in Asia. As a result, HSBC has a small SRI team of five based in Paris, comprising analyst, and marketing and fund managers.
HSBC claims that its SRI team has a programme of ongoing meetings with a large number of companies on social and environmental issues. By the end of 2004, HSBC had some US$1 billion in ethical and SRI assets (Hopkins 2007, p. 219).