Korean companies are taking their social responsibility more seriously, and their activities are playing an important role in the community whilst increasing company profits.
Consumer awareness of environmental issues and ethical practices has created a market that supports socially responsible companies. Take the Body Shop. The brand has thrived as a result of their ethical and eco-friendly image. Conversely, BP oil stocks were severely affected as their green-image took a battering in the Gulf of Mexico oil spill. Failure to manage environmental risk factors can lead to dreadful publicity resulting in poor sales.
Corporate Social Responsibilities (CSR) encompasses labor-management relations, employment issues and fair-trade with contractors, fulfilling environmental obligations and conservation. It is not cynical to link CSR to profits, quite the opposite. If companies are aware that their actions result in increased sales then surely they will continue those practices; as this profitable behavior is beneficial to society, all the better. The Federation of Korean Industries’ 2006 survey revealed that 75% of the top 120 companies in Korea engaged in CSR projects, with the primary motive (81.4%) being to improve the company’s image.
The link between CSR and profits is evident in the latest annual ESG results published by Korea’s Corporate Governance Service. ESG stands from Environmental, Social and Corporate Governance [ESG] Evaluation; the three terms serve as the criteria for investigating listed companies’ social responsibility.
The results show a clear divide between those firms who practice CSR and those who do not. A staggering 575 of the 668 companies (86%) scored ‘weak’ or ‘very weak’ on the index. And of the three categories measured, firms were least aware of environmental issues.
But the leaders in the CSR table are also the most successful businesses. The top companies were KB financial group, SK Telecom, POSCO (Pohang Iron and Steel Co.) and Hynix all receiving top score’s of ‘very good’, whilst family favorite Samsung and LG electronics garnered a ‘good’ along with 38 others.
The top rated companies are among Korea’s 20 largest companies and have reported generous profits amidst a tumultuous time in the economy. KB financial group reported a January-March net profit of 758 billion won, while Hynix remains the world’s second-largest manufacturer of computer memory chips
The steel giant POSCO participates in CSR activities around the globe including constructing welfare centers in Mexico and providing facilities in India. Their profit surged by 60.3% during 2010 as sales increased by 20.9%.
Korea’s largest mobile carrier, SK Telecom reported a net profit rise of 48% for Oct-Dec 2010; their efforts in corporate social responsibility have been published as a Harvard Business School case study for MBA students.
KB Financial Group touts their CSR activities proudly on their website, we ‘endeavor to become the most respected and beloved corporate citizen that actively carries out its social responsibilities’.
The motivation behind these activities may not be entirely altruistic but if public pressure for corporate accountability forces companies to act in environmentally and socially conscious ways, so be it.