Corporate social responsibility: hard choices on soft issues; Pro-environmental announcements from global giants like General Electric and JPMorgan Chase have spotlighted corporate social responsibility. Yet, there's no mandate to promote such issues in the U.S., where some companies are clearly more proactive than others. Meanwhile, Europeans have brought "green" issues to the forefront

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Date: July-August 2005
From: Financial Executive(Vol. 21, Issue 6)
Publisher: Financial Executives International
Document Type: Article
Length: 4,855 words

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Between 1917 and 1925, Henry Ford oversaw creation of the gigantic Rouge River plant in Dearborn, Mich. A marvel of engineering at the time, it was the birthplace of millions of Model As and Model Ts; its "vertical integration" approach, novel for the era, allowed all the raw materials for the cars to be assembled at one place. At its peak in the mid-1930s, it employed a virtual city of 100,000 shift workers.

But Ford's smoke-belching wonder carried a heavy environmental cost. By 1986, The Detroit Free Press called the Rouge River a "sewer for a metropolis, discharge drain for industry, dumping ground for junk and garbage" and went on to declare that "the Rouge River has become so polluted that a cleanup seems unthinkable."

Fast forward to late 2000, when William C. Ford Jr., Ford Motor Co.'s chairman and Henry's great-grandson, watched as reconstruction of the giant plant began under a new mandate: to create the most environmentally friendly facility possible. New features included the world's largest "living roof" of plants, solar and fuel-cell technology, grassy swales below and porous paving to help with wastewater management, trellises and the planting of thousands of trees.

Bill Ford, who has championed environmental causes, has also spoken repeatedly about improving Ford's fuel emissions and wider environmental stewardship. But Ford is struggling financially--its credit ratings were lowered to "junk" this spring by some credit rating agencies, along with General Motors Corp.'s--and its best-sellers are the light trucks and sports utility vehicles (SUVs) that are among the worst environmental offenders.

Simply put, the green face that Bill Ford wants to paint on the family legacy will not be easy to realize. The new Rouge plant is a statement, but the larger mission would require reengineering costs that simply may not be feasible. Yet, the company, through its chairman, clearly wants to tell the world's investors and markets that its commitment to the environment is so important that it is worth pursuing, despite its troubled finances.

"Bill Ford has said, by his own admission, that the company has not met the targets he had set," notes Aron Cramer, CEO of the nonprofit group Business for Social Responsibility. "That's very instructive; it shows where the hardest tradeoffs are."

Other statements and actions by major multinationals have brought new focus on the issue of corporate social responsibility (CSR) and corporate "sustainability," where a skein of questions has emerged. How important is it to investors, and is it worth the cost? Is weak CSR a threat to the company's stock, and its future? Is a proactive position on the environment and issues like workers' rights, diversity and product safety the leading edge or the bleeding edge?

As C-level executives, CFOs will be among the top managers helping to answer those questions, and there are no easy answers. Pressure from institutional investors and shareholder activists has been building, yet it's no simple matter to link more attention and spending on CSR issues to improved financials or a better stock...

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Gale Document Number: GALE|A134301007