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Fat profits are bad for you

Sun, 6th Jun 2004

THE OBESITY crisis is the sharpest (no, weightiest) test yet of the contradictions at the heart of the corporate social responsibility movement.

It's a striking fact that many large companies involved in the food chain, whether manufacturers or retailers, are among the most admired and feted in the management literature. Coca-Cola is famously the most valuable brand in the world, McDonald's not far behind. Nestle, Pepsi, Kellogg, Unilever, Heinz, Danone and Sara Lee all figure among Fortune 's globally most admired companies: Wal-Mart is No 1 (McKinsey approvingly reckons that, by itself, the world's biggest retailer is responsible for 35 per cent of the impressive efficiency gains made by the entire US retail sector).

Tesco is Britain's most admired company. Cadbury Schweppes and other UK chocolate makers (although none now independent) pride themselves on their staunch Quaker antecedents.

As a glance at any website will show, all these companies make much of their citizenship credentials, sporting value statements, philosophies, social and environmental reports galore. So why do they at the same time compete to load up their products with sugar, salt and fat, which they know will harm their customers? Why do they charge more for healthier products, run promotions to make people eat (and drink) more and, in the case of retailers, pile up sweets at checkouts and hide healthy items at the back?

Why do their executives, who presumably don't beat their wives and want the best for their own children, pride themselves on devising viral marketing campaigns to persuade other people's kids to pester their parents to buy them food that makes them fat? Why do they lobby against regulations that would oblige them to accept the responsibility that they claim through CSR? Why, in short, do companies and individuals set out to damage overall welfare, doing things in business they would never permit themselves in private life?

The answer is that they have been persuaded (fairly easily, it must be said), to subscribe to the idea that in a market economy the sole function of business is to make money for shareholders and that social ambition is a destructive dereliction of that duty.

Thus, companies are 'admired' in the Fortune or Management Today sense because they are very and consistently profitable. The difference between the Marks & Spencer of a decade ago - winner of so many 'most-admired' awards on the trot that one was discontinued - and now is less its ethics than its ability to keep profits moving upward.

Conversely, Wal-Mart, Microsoft (third in the Fortune table) and GE (fourth) have sustained precious little damage to their admiration quotient from their sometimes dubious employment and business methods.

It's the virtue of the House of Commons health committee report on obesity that it makes these contradictions impossible to ignore. The idea that it could be a legitimate function of business to enrich shareholders at the expense of undermining the financial basis of the NHS simply collapses under the weight of its own grossness it fails the test of common sense.

Equally absurd is the proposition that work in the community or support for sport or a symphony orchestra could compensate for behaviour that contributes to the wave of amputations, blindness and heart disease that the committee theatrically predicts, or helps to make today's children's life expectancy shorter than that of their parents.

It's time to recognise such theories for what they are: junk, self-serving and as harmful to corporate health as fat and salt-laden convenience meals are to individuals. Although individuals and communities have undoubtedly benefited from initiatives done in the name of CSR, its essential function is to act as a fig leaf for shareholder-value theories that cause managers to undermine society, delegitimise their own companies and induce corporate and individual schizophrenia.

As the FT put it in an admirably trenchant editorial, food companies now have no option but to swallow hard, embrace the report and reverse their present strategies: cut fat and salt levels, make, label and promote healthier products and wholeheartedly channel their competitive energy into the public campaign for healthier living. In other words, they must put CSR where it belongs - at the heart of the purpose of the firm. Real social responsibility is innovating for the public good anything else is corporate social hypocrisy.

The government has a part to play here. This is a problem in which its own short-termist expediencies are substantially to blame. For instance, the economy-led suppression of school meals and sale of playing fields are panting ponderously home to roost. Appealing to companies' better nature is not enough. Instead, it should grasp the nettle and alter the system conditions by hard or soft regulation to encourage firms to behave well and penalise them if they behave badly - taxing fat, for example. Calling on firms to do more CSR (a policy roundly rejected by the voluntary sector last week) is abnegation.

For a while before New Labour came to power, it had worked up some enthusiasm for a more inclusive stakeholder model of capitalism. In office, it hastily backtracked in the face of massive vested interest and its own bedazzled admiration (that word again) for US enterprise. You were right the first time, chaps - shareholder value can't take precedence over the health (literally) of the wider system of which it is a part. The one thing that can be said in favour of obesity is that it kills shareholder value stone dead.

The Observer, 6 June 2004

 


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