Investing with a conscience, the Richard Branson way
By Scott Phillips (TMFGilla) - January 27, 2012
I’ve just returned from a postponed holiday where I read Richard Branson’s latest written offering ‘Screw Business as Usual‘. Whatever your perspective, Branson is a very impressive businessman. The man who started his business career running a student magazine from the hall of his high school now presides over a multinational empire under the Virgin brand.
Branson has had his hiccoughs, and he’s not everyone’s cup of tea – his penchant for high risk adventures and headline grabbing stunts is well known – but he’s certainly achieved stratospheric success. Forbes magazine has Branson’s fortune estimated at US$4.2 billion, making him the 254th richest person in the world.
A new business model
‘Screw Business as Usual‘ is Richard Branson’s call to action for business to be done in a new, different way. He suggests that ethical business which brings social and environmental benefits is not only morally right, but can also be highly successful by traditional performance measures.
In his view, business can be a powerful tool to alleviate poverty and environmental degradation, both through the creation of new businesses by the world’s poor and also through some new thinking on the part of existing developed-world businesses who adopt more socially responsible approaches.
His theses are in turn that resourceful and motivated people just need an opportunity and some support to use their own entrepreneurial talents to lift themselves and their communities out of poverty; and that established companies in the developed world should think more creatively to come up with plans that grow their business, reduce their costs and have a much lower impact on the environment.
In part at least, it’s hard to argue with Branson’s suggestion. Microfinance providers such as the Grameen Bank and Kiva.org are giving people access to low-cost credit to help themselves out of poverty – with striking success. Grameen and its founder, Muhammad Yunus, we’re awarded the Nobel Peace Prize in 2006.
Established businesses around the world have also seen the benefits of going green and becoming more socially responsible. They are realising significant cost savings coming from energy efficiency and waste reduction and consumers are increasingly including ethical considerations in their purchasing decisions.
Times are already changing
In fact, recent research by MIT Sloan Management Review and Boston Consulting Group found that more than two-thirds of businesses surveyed have sustainability as a key management responsibility and that almost one-third of those surveyed believe the initiatives enhanced their bottom lines.
Consumers are increasingly looking for products which either improve our environment or reduce the damage done. Governments are continuing to legislate environmental protections. As a result, companies who embrace socially responsible practices are not only taking an ethical stand, but are likely to be growing their business and reducing their costs as a result.
What’s an investor to do?
Investors are also confronted with some ethical choices when deciding how to deploy their funds. Many of us choose to ignore the social and environmental impacts of the companies in our portfolios, while others of us go to great lengths to understand the impact a business is having before investing, or will sell once they are no longer comfortable.
Some investors won’t buy tobacco companies; others eschew alcohol and gambling businesses while forestry and mining companies are often problematic. There’s no hard and fast rule as to what is socially responsible, with yet other investors content to invest in any business as long as the company in question is actively working to reduce its negative impact on the community.
Accordingly, there’s no simple list of companies that can easily be trotted out – it’s a largely personal decision. Some fund managers have taken a stab, with some of the largest funds (and many superannuation funds in turn) offering a ‘socially responsible’ option.
I’ll be honest – I haven’t really put a great deal of effort into understanding the broader impacts of the companies in my share portfolio in the past, but Branson’s book has me rethinking my approach.
I’m not likely to buy inferior businesses just on the basis of their social and environmental impact any time soon – no-one benefits from a poor business that goes broke, regardless of its intentions – but my summer reading has definitely reminded me that being a good corporate citizen can be good for business – and good for investors in turn.
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Scott Phillips is The Motley Fool’s feature columnist. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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I’ve just returned from a postponed holiday where I read Richard Branson’s latest written offering ‘Screw Business as Usual’. Whatever your perspective, Branson is a very impressive businessman. The man who started his business career running a student magazine from the hall of his high school now presides over a multinational empire under the Virgin brand.
Branson has had his hiccoughs, and he’s not everyone’s cup of tea ? his penchant for high risk adventures and headline grabbing stunts is well known ? but he’s certainly achieved stratospheric success. Forbes magazine has Branson’s fortune estimated at US$4.2 billion, making him…