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August 29, 2003
Book Review--The Planetary Bargain: Corporate Social Responsibility Matters
    by William Baue

Author Michael Hopkins' ideas about the global spread of corporate social responsibility are obscured by a lack of precision in revising and updating this book that was originally published five years ago.

A revised edition can be a godsend, updating an important text to renew its relevance. However, the danger exists that the author will simply toss in some new numbers and add some new thoughts without thoroughly examining the text to ensure that all information is current.

This year brings the publication of a revised edition of Michael Hopkins' The Planetary Bargain. The book contends that corporate social responsibility (CSR) is inevitable, and as such its development will be facilitated by cooperation between governments and corporations to promote social responsibility--a "planetary bargain". This basic argument has gained increasing merit since the book was first published in 1998, as the intervening years have seen the meltdowns at Enron and WorldCom.

The concept of social responsibility has also matured significantly in the meanwhile. Mr. Hopkins reflects this transformation by changing his subtitle from Corporate Social Responsibility Comes of Age to Corporate Social Responsibility Matters. He also makes the obligatory mention of September 11 and refreshes his case studies, among other revisions.

However, a close examination of certain sections of the book reveal that important information has not been updated, and the text retains outdated information in the guise of current information. These inaccuracies, unfortunately, throw the value of the revised edition as a whole into question.

Take, for example, Mr. Hopkins' discussion of socially responsible investing (SRI), a key driver of corporate social responsibility. In the first chapter, he cites a 1997 statistic from the Social Investment Forum (SIF) that more than $1 trillion in assets are under management in socially and environmentally responsible portfolios in the US. To update this data, he cites a September 2001 estimate by Cerulli Associates that pegs the value of the world's ethical investment portfolio to be $1.42 trillion. This diversification of sources also serves as an opportunity to point out that estimates vary depending on one's definition of SRI, according to Mr. Hopkins.

Unfortunately, Mr. Hopkins does not stick with the updated number, but rather reverts back to the 1997 SIF statistic each time he discusses SRI subsequently in the text. It is not as if updated statistics are not readily available: both the 1999 Trends Report and the 2001 Trends Report are posted on the SIF website.

"Today, there are more than 40 mutual funds (unit trusts) in the US and another 12 in Canada that use some form of positive or negative screens," Mr. Hopkins writes in the book, without citing his source or method of arriving at these numbers. "Together, they hold upward of US$13 billion, with another US$3 billion invested in targeted social investments, such as community development banks."

One wonders what date "today" refers to: SIF's trends reports state that the 181 screened mutual funds in the US held $136 billion in 2001, the 175 such funds held $154 billion in 1999, and the 144 fund held $96 billion in 1997. Such a stark discrepancy requires some sort of explanation, but Mr. Hopkins supplies none.

Mr. Hopkins also seems to perpetuate canards about SRI in the new edition that may have been present in his earlier edition.

"Simply eliminating companies whose products you do not agree with is half-baked social responsibility," he writes.

Mr. Hopkins seems unaware that SRI also encompasses positive screening, or investing in companies with better-than-average social and environmental performance. He also makes little mention of shareowner action, whereby investors effect change at companies through dialogue with management or by filing shareowner resolutions. Shareowner action has been a component of SRI for over 30 years.

Readers might forgive Mr. Hopkins if this less-than-thorough approach applied only to SRI, which is not his specialty. However, his case study of Nike (ticker: NKE), which focuses on Andrew Young's 1997 independent audit of factory working conditions at the company's overseas suppliers, has a significant gap in it. The case study makes no mention of the Nike v. Kasky case that was recently heard by the US Supreme Court.

The final decision in this case, which was first filed in California in 1998 and cited the Young audit in its brief, will affect CSR reporting no matter which side wins. Mr. Hopkins' book does have an April 2003 citation, which means he could have broached the subject even if his deadline precluded him from writing about the U.S. Supreme Court's June 2003 decision (the case has yet to go to trial). Nevertheless, Mr. Hopkins does not deem the case worthy of any comment.

Reader Feedback
To the Editor:

Mr Baue's review of my book focuses on two areas for criticism, SRI - where he is an acknowledged expert - and Nike/Kasky.

To answer on the SRI, there is no easy way to define SRI. I remember struggling with the different definitions and data at the time. Happily the position has improved, in particular, through the SIF's sterling work in clarifying what is 'social investment' and what is not.

Turning to Mr Baue's other criticism that I didn't cite Nike and Kasky. I was certainly aware at the time but it is difficult to know, in a rapidly changing field, what is important and what can be left until it either runs out of steam (as is the case with Nike and Kasky) or hits the headlines. Meanwhile, social reporting has gathered pace in most large companies around the world showing that free speech has dominated the debate even in the light of much of US press being hijacked by the current Bush administration.

My book actually focused upon defining CSR, suggested indicators to measure the progress of CSR and linked the CSR debate to the on-going globalization debate. I also tried to debunk the 'business of business is business' thesis, a topic that goes on and on as we can see from last week's (01/22/05) 'The Economist' special supplement. I would therefore appreciate it if Mr Baue could please have a look at what I actually wrote.

Dr. Michael Hopkins


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