Last week, the Financial Supervisory Commission (FSC) suggested that Taiwanese banks might adopt the Equator Principles to review their loans made to projects involving Ting Hsin International Group as the food conglomerate faces allegations of selling adulterated cooking oil products.
Some banks said they have implemented the Equator Principles to fund only projects that can be developed and operated according to sound social and environmental standards, while others said they would follow suit in the face of growing public concerns about the negative impacts of Ting Hsin products on community health and food safety.
Unfortunately, the moves by banks to identify and manage social and environmental risks associated with their project financing come relatively late by international standards. If they had taken such actions much earlier, they would have helped protect consumers from unethical businesses such as Ting Hsin that produce and sell bad products that damage their health. However, better late than never. It at least shows that local banks now feel a sense of social responsibility.
The question is: Why would banks want to stop funding projects that could provide them with stable interest income and potential business opportunities? The answer is that, like most arguments about why we need companies to install mechanisms that mitigate their economic, social and environmental impact, if corporate executives acknowledge that companies have obligations that go beyond the firms and their owners, the idea of corporate social responsibility (CSR) is actually a value-generating strategy. In other words, companies’ responsible practices are more likely to pay off.
Even though some companies may present socially responsible operations with an eye on future profits or aim to gain public praise rather than developing a sustainable business model, it at least demonstrates a recognition that good corporate citizenship is not necessarily anathema to long-term profitability.
Theoretically, companies are driven by a mandate to maximize profit, which in a positive cycle would naturally generate jobs, benefit suppliers, give customers the products they need and reimburse firms’ investors. However, societies are now demanding that companies do more, especially in ways that could benefit their communities.
Last month, the FSC announced a new policy: The nation’s listed companies in the food, chemicals and financial sectors are required to issue CSR reports annually, beginning next year, so the public can better understand their investment strategy, products and remuneration policy, as well as the potential impact of their operations on society and the environment.
Many believe that the effort to present the progress of CSR implementation in annual reports will give companies an incentive to improve competitiveness and win public trust, and that honoring companies with socially responsible practices would help instill corporate ethics and improve the standing of Taiwanese firms in the eyes of their trading partners around the world.
However, it is to be hoped that recognizing companies with good CSR policy will not be used to “greenwash” the image of bad companies, especially those that employ double standards and take advantage of weak laws in emerging economies. Moreover, people should demand that violators of CSR policy be subject to heavy fines and the harshest punishments from the authorities. There is also a need for the government to draw up legally binding regulations on corporate accountability agreed upon by the corporate sector.
The latest food scandal has sparked a national drive to boycott all Ting Hsin products and brands, and prompted prosecutors to detain several Ting Hsin executives. Companies must certainly be liable for their crimes, and the government could use this opportunity to amend food safety legislation and enforce compliance of CSR, as most people have already lost trust and do not believe that companies will voluntarily conduct business in a morally acceptable way.
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