[10월호, 2020년] Internalizing the social and environmental externalities – 5기 강인구

Are corporates truly concerned about the environment and sustainable growth?

After decades of careless profit-minded development, we are currently living in a world of increased awareness of environment and sustainability. More firms have shifted towards clean energy and effective waste management in response to the deteriorating environment. Corporate Social Responsibility (CSR), which is defined as self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public (definition from Investopedia.com), has become prevalent among firms and has left investors and the public morally satisfied. Such trends question how much CSR activity is truly philanthropic.

The iPhone 12 apple event had just been announced (2 days ago when this post was first written). For the first time, it has decided to drop the charger and wired headphones from the regular iPhone boxes. To the delight of environmentalists, Apple claimed that such removal had been to prevent electronic wastes. While this may be so, such actions seem to be more driven by cost reduction or maybe both. We, most certainly, cannot identify the intentions behind such decisions. However, we can identify the impacts of such decisions.          

It brings us back to the main question, “Are firms truly concerned about the environment and sustainable growth?”.

[Picture 1] Value Balancing Alliance e.V (non-profit organization)

From https://www.value-balancing.com/

In the Korea Herald Business Forum 2020, a non-profit organization called Value Balancing Alliance (VBA) was introduced for its presence in the business world. VBA exists to “create a global impact measurement and valuation standard for monetizing and disclosing impacts of corporate activity. The standard will further provide guidance on how these impacts can be integrated into business steering.” While the modern corporation had only been concerned about the accounting standards and financial statements, VBA added values into social and environmental activities into the impact statements. Hence, these standards internalize the impacts or the results of CSR activities of the firm. We are then able to see the bigger picture of the firm’s involvement in sustainable activities. The impact statement extends from the original input and output-based reporting to include outcome and impact then represents these values as in monetary figures.

[Picture 2] Impact statement 2019 BASF

Founded in July 2019, VBA e.V has only existed for a little more than a year; but large firms and organizations have joined and agreed to the given standards. When such standards are utilized more widely, we will be better able to assess firms that are actively participating in sustainable development. As hopeful it is, there are still worries of fraud as there are accounting frauds and measures aligned to prevent such frauds. Nevertheless, it definitely will be a big step towards sustainable growth in the corporate and financial industry.

[Picture 3] Members of Value Balancing Alliance e.V

This blog is not intended for advertising/promoting/defaming any of the firms mentioned in the article.

Reference:

BASF impact statement 2019 https://www.basf.com/kr/en/who-we-are/sustainability/we-drive-sustainable-solutions/quantifying-sustainability/we-create-value/impact-categories.html

Value Balancing Alliance e.V homepage https://www.value-balancing.com/

How to Measure Corporate Social Value (Christian Heller, CEO of VBA e.V VP of BASF) 04:43:30 ~ 05:18:00 https://www.youtube.com/watch?v=nEupQUE2IG0