When Will CSR Become BAU for Treasurers?
By Eleanor Hill, Editor
More and more treasurers are getting involved in CSR (corporate social responsibility) initiatives. Not only financing them but also embedding them into treasury processes and spearheading departmental sustainability projects. Nevertheless, CSR is not yet considered ‘business as usual’ (BAU) in many corporate treasury functions. Eleanor Hill, Editor, outlines practical ways in which treasury departments can make CSR part of their DNA, and discovers some powerful incentives for doing so.
Once seen by some as a business obligation or marketing tool, CSR is now widely recognised as an opportunity to innovate, add value, improve risk management, and contribute to long-term growth – by looking after people, processes and the planet. The importance that C-level executives are placing on CSR reflects this evolving outlook.
Research from the Boston College Centre for Corporate Citizenship (BCCCC) found that, compared to five years ago, nearly 75% more companies are now directing CSR from the C-suite . This sends a very clear message about the growing need for corporate organisations to think and act responsibly.
The rise of CSR: evolving drivers
One powerful driver of the C-suite’s focus on Corporate Social Responsibility (CSR) is the issuance of global standards and agreements in this space. As Lance Kawaguchi, Managing Director, Global Head – Corporates, Global Liquidity and Cash Management, HSBC, explains: “Since the UN issued its 17 Sustainable Development Goals (SDGs) in 2015 and the Paris Climate Agreement was negotiated in December 2015, many large corporations have started to make a stand on CSR. In addition, legal and regulatory initiatives, such as the UK Gender Gap reporting guidance, are contributing to a growing focus on being a responsible company.”
Another concrete driver is the expanding business case for CSR, helped by the emergence of “market analysis showing that embracing ESG* (Environmental, Social, Governance) as part of day-to-day operations actually leads to more sustainable business growth over the long term,” explains Peter Jameson, Co-head of Product Management, Global Transaction Services, EMEA at Bank of America Merrill Lynch (BofAML).
He believes that ESG, “should not be seen as a sacrifice or profitability trade-off the business has to make in order to comply with shifting societal expectations.” Indeed, it is now widely accepted that successful CSR efforts can be profitable and make long-term commercial sense. It is also becoming more commonplace for companies to publicly acknowledge the ‘business’ dimension of CSR, not just the positive impacts within society.
Nevertheless, the societal expectations that Jameson mentioned remain a huge driver of CSR activity. As Kawaguchi observes: “Increasing numbers of millennials (Gen Y) and centennials (Gen Z) are coming into the workforce, bringing with them an expectation that their employers should act responsibly.” In addition, “As customers, the Gen Y and Gen Z cohorts also often favour companies that support responsible causes and embrace ethical working practices,” he notes. “With this in mind, it could be argued that all companies need to rethink the way they do business, and their role in the world around them, to continue on a growth path.”
There have been numerous high-profile instances of such strategic ‘rethinks’ in recent years. Proctor & Gamble, for example, famously sold off its most profitable brand, Pringles, in order to demonstrate its commitment to tackling obesity. This is highly relevant for treasurers since “significant changes in business strategies will naturally impact revenues and supply chains, so relate directly back to treasury,” explains Kawaguchi.
“Moreover, corporates would do well to pay attention to the buying behaviours of Gen Y and Gen Z since they are the next generation of investors,” he comments. Leonie Schreve, Head of Sustainable Finance, ING, adds that a “rising number of investors are already growing their sustainable mandates and are actively looking for investments that meet the sustainable standards in the market.”
For issuers, this leads to investor diversification, and in some cases to pricing advantages, she says, whilst attracting shareholders with a strong socially responsible investment (SRI) commitment. And appealing to this SRI investor base is yet another driver of current CSR momentum (see Tideway case study later in this article).
*We use the terms CSR and ESG interchangeably in this article, although there are nuances.
CSR gains ground in treasury
With so much attention on CSR at the top of the organisation, it is no surprise treasury is getting more involved. Despite the lack of research quantifying growth in this area, mentions of CSR in the requests for proposal (RFPs) being received by relationship banks offer concrete evidence of this trend.
“In 2017, we noticed rising interest in this topic among treasurers,” says Axelle Vigo-Lovy, Head of Proposal Management Desk, BNP Paribas Cash Management. “Questions about CSR, such as the bank’s level of commitment to the UN SDGs, were appearing more frequently in cash management RFPs – and we therefore decided to create a formal Sustainability mission within the Cash Management business.”
Vigo-Lovy has taken up this mantle herself, integrating it alongside her existing remit. This is a bold move by the bank, but a welcome one, since treasurers can now access the specialist expertise they require around CSR and cash management together.
And, surprising though it may seem to some, this is an increasingly relevant need for today’s treasurer. Not least because “building CSR into treasury activities is an essential part of a robust future-proofing process,” says Lance Kawaguchi, Managing Director, Global Head – Corporates, Global Liquidity and Cash Management, HSBC. “It’s about understanding how to adapt to the changing operating environment, and supporting the company’s growth ambitions, whilst positively contributing to social and environmental change.”
How can treasurers add value?
Although the treasurer may not directly ‘own’ CSR/ESG within the organisation, Peter Jameson, Co-head of Product Management, Global Transaction Services, EMEA at Bank of America Merrill Lynch, believes that they can certainly be a key influencer – and make a positive contribution to the company’s efforts in this space. In fact, he says that as the ‘banker’ within the company, the treasurer sits at the core of any successful ESG strategy. Furthermore, many CSR projects dovetail neatly with fundamental treasury responsibilities and existing efficiency projects, so even the most time-poor treasurers can get involved.