Corporate responsibility and strategy - A fundamental connection

John Varley, group chief executive of Barclays, does not mince his words when it comes to corporate citizenship.

The message is clear: “The corporate responsibility agenda is fundamental…it is inalienable to strategy,” he told executives at this publication’s recent annual conference on ethical leadership.

Executives may be tempted to act in ways that are irresponsible though lucrative, said Varley. But in the end, bad choices do not pay.

“You’ll get away with that for a while,” he said. “But bit by bit, as the values that bind your organisation together are compromised through irresponsible choices.”

For Varley, the business case for corporate responsibility lies in the importance of values. Long term financial success requires a strong brand. And a strong brand is based on values.

“The brand of an organisation is the outward manifestation of its soul,” he said.

“Soul” is an unfashionable word these days. But for Varley it represents a sense of purpose, commitment and “a drive to serve and to help” – things he believes that people want to see from companies today.

“The people we seek to reach with our brand expect us to be responsible,” he said.

Hand in hand

If he is right, then corporate responsibility should be fundamental to any company’s strategy – especially those with high-profile brands.

Responsible banking is a way for Barclays to show stakeholders that it cares about their concerns and is taking them into consideration when deciding where to take the company.

In February 2006, Barclays announced record financial results. Three months later, the company was ranked third in the annual BITC index.

Varley believes these success stories are complimentary. The BiTC ranking shows that “a strong performance as a corporate citizen does not conflict with strong financial performance,” he said.

The Barclays chief reiterated the concerns of successful companies that people should stop asking whether large corporations are good or bad per se.

For Varley, there is no question. The fact that Barclays sustains over 110,000 jobs, and pays annual taxes of over £3 billion, shows that big companies are a force for good.

Instead debate should focus on “the choices that successful companies make, and how companies use their success to improve the lives of those who are touched by them,” he said.

Varley highlighted areas where Barclays is using its financial clout to address social and environmental problems.

Forward steps

On climate change, Barclays plans to make its UK operations carbon neutral by 2007 – offsetting emissions by investing in projects that use solar power and wind energy.

The bank is a founder member of the Equator Principles – which assess the environmental and social impact of project financing – along with other banks including ABN Amro, Citigroup, and WestLB.

This buy-in from big banks is influencing other sectors, such as governments and construction companies, said Varley. “They realise that financing will be easier to obtain if the project complies with the Equator Principles,” he said.

But campaigners say Barclays could be more transparent about how it incorporates these standards into project finance. For example, by publishing the number or value of projects turned down because of environmental concerns.

James Leaton, policy adviser at the WWF, which is monitoring implementation of the Equator Principles, says: “At the moment it is very hard to assess how their investment portfolio is changing.”

Progress is easier to measure in the area of financial exclusion. Barclays has now opened 380,000 basic bank accounts in the UK.

Barclays has pledged that in rural areas, where it is the last remaining bank, it will not withdraw from these communities, even in the face of unprofitable branches.

And in the developing world, the company is running a pilot microfinance project in the west African country of Ghana.

These projects are a way of linking the bank’s core business to promote social inclusion, according to the company.

Additional reporting by John Russell, deputy editor

Useful link:
www.barclays.com

Barclays in numbers

• $1.5 trillion assets under management.


• $85 billion assets in ethical funds.


• £150,000 invested in microbanking in Ghana.


• 20 years since leaving South Africa, but returning last year with acquisition of Absa.


• Six current project finance projects considered “high risk”.

Source: Barclays CR report 2005