'There is a social responsibility gap in the financial industry - and the crisis exposed it'

EFFECTIVE CORPORATE SOCIAL responsibility policies must be good for the company and its shareholders. But they must also be good for the purpose and values of a business.

Getting it right matters enormously, because there is an obvious ‘CSR gap’ in the financial services industry, a gap that was exposed by the financial crisis of 2008.

That traumatic event highlighted three key areas where, in my opinion, policies within the financial services industry fell down.

First, corporate social responsibly (CSR) inspires transparency. It is evident that, had there been a stronger approach and wider adoption of social responsibility across the entire industry, there would have been less room for morally hazardous behaviours.

Second, the scandals that emerged during this period showed vividly and unmistakably that the social responsibility gap does indeed exist among institutions operating in the financial services sector.

And third, closing this social responsibility gap is absolutely essential in terms of regaining public credibility. It must be seen to be driven by a management choice with the end result being a radical change in the way the business is operated – not because of regulations.

While it may sound strange and contradictory, having strong social responsibility policies is not in conflict with a strong focus on profitability – it is actually aligned.

We have evidence of great businesses which have been successful thanks to putting their clients front and centre of what they do, treating their staff well, respecting the environment and helping the communities in which they operate.

But it is crucial that financial services firms actively practice social responsibility, rather than treating it as a communications or marketing exercise.

I don’t believe that sending cheques to charities, for example, can be classified as a CSR strategy. Of course donations are important and better than doing nothing at all, it is often the sole approach for organisations.

Firms need to have the right mind-set and behaviours deeply ingrained within the culture of their organisations. In doing so, social responsibility activities can mitigate risks and contribute to business results, while also enhancing the reputation of the firm.

Three keys

So how best to do this? There are three key aspects.

Let’s start with clients. Each financial services firm will have a slightly different relationship with its clients, thus no two approaches to putting clients first will be identical.

Actions, as they say, speak louder than words. This was well-illustrated when Lehman Brothers collapsed in 2008 and a number of our insurance policies were backed with Lehman bonds.

Our shareholders, even though not required to by any regulations, paid more than €80 million out of their own pockets to substitute healthy bonds for the Lehman bonds.

Another example: in 2006, when interest rates were especially high, we realised clients were struggling with their mortgages. Our rates were already competitive but we chose to cut the spread on our lending to help.

Put simply, a focus on clients comes down to a belief that if you do right by them you won’t go far wrong.

The second strand of a successful strategy relates to your employees. In our case, we offer everything from education courses to crèche and sports facilities.

The financial services environment is so full-on and people spend so much of their lives in the workplace that we focus also on the little things that can make a real difference.

Finally, we have the social and community engagement, including engagement with charities. Again, this is our own experience, but it may well have wider application.

We are involved with children’s charities round the world. This involvement goes far beyond just giving money.

Staff members are released during office hours to help charities, with the majority of them take this up. We sit down with charities to share our competencies, expertise and networking ability.

Of course, we are in a very competitive industry and we need to deliver results. But I believe these three aspects of social responsibility all fit together.

We do not claim to have a secret formula. As I say, there are many in the industry making noteworthy efforts in this area bringing their own distinctive approach.

But it is vital that CSR begins within an organisation, not as a purely external exercise. This is critical if the financial services industry is to regain public trust.

Furio Pietribiasi is the managing director of Mediolanum’s Irish operations.

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