The environment, including triple-bottom line reporting and even gender. “Of course.” You say. “I knew that.” You probably did.
We have always thought of technology as the big disruptor, and it has been. But corporate and social responsibility, including the environment, are massively disruptive for businesses, and those directors, managers and investors that don’t get this message are in for a series of nasty, rolling surprises.
The two big corporate disasters of the week, 7-Eleven and Volkswagen, both came to light as a result of a heightened sense of curiosity about whether the words of companies on ethical and environmental issues could be taken at face value.
In this new, disrupted paradigm, ethics matter not just to the ethical, but massively to the investor – Volkswagen is down 30%, and losses are widening daily. It turns out that VW should have written off its multi-billion euro investment in the lied-about diesel engine back in 2008, instead opting for a lie to boost profits.
It is worth noting that the company got away with it for a very long time – 10 years and 11m cars, worth at a guess €275b (11m cars by €25k). People who did know could have sold stock in the company (or bought it), retired on fat payouts and otherwise profited mightily. It may have been worth it for them, although it is bears noting that this is now the subject of a criminal investigation in Germany, so we will see how that ends.
But it’s over now – disrupted, in fact, by environment and ethical concerns which will keep costing the company for years.
Meanwhile, the directors of 7-Eleven are claiming no knowledge of a practice so widespread that any thinking person who ever entered one of these franchises could not help but wonder how the person behind the counter fitted into the so-called “business model”.
No amount of fine legal argument will convince people to reject the evidence of their own senses. It will also affect the stock prices of companies which are perceived by the market as operating similarly – car maker Daimler went down too, though in truth it does not look like it is has done the wrong thing.
The lesson for companies and investors? There is clearly a new disruptive force at play. Intuitively, investors already know this – why else would ethical funds have done so well?
In the connected world secrets are getting harder to keep, and ultimately unsustainable business models cost more to fund, and lose more value faster than those which understand the value of the triple bottom line. Interestingly, it’s the stock prices of companies that are telling us this.
Investing in a better world; Loftus Peak and ESG21/06/2021
Equity Mates interviews CIO Alex Pollak on investing in Global Markets11/06/2021
Growth vs Value: which companies win in a post-COVID world?20/05/2021
Loftus Peak to present at 2021 ASX Investor Day series04/05/2021
Share this Post