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US firms are lagging behind Europe in ethical standards

US firms are lagging behind Europe in ethical standards

Category: Ethical

Updated: 31/10/2008
First Published: 20/09/2007

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

According to a study of corporate responsibility by the independent think-tank Eiris, responsible practices are increasingly being adopted by customers worldwide.

"Twenty-five years ago, very few companies were aware of environmental and social governance issues, let alone developing policies and systems to address them," said Bob Gordon, the report's author and the head of US and Japan Research at Eiris. "Corporate responsibility continues to evolve from what was a mainly philanthropic activity to a more mainstream approach where it is integrated into core business activities."

However, not all companies are adopting social responsibility, as North American companies are lagging behind Europe, although a core of larger companies have started to adopt responsible business practices. The Eiris report shows that European companies tended to be more socially and environmentally aware, due to a sophisticated, responsible investment market, NGO pressure and a strong regulatory environment.

The results:

Nearly 75% of European companies operating in "high risk" countries had a basic or advanced human rights policy, compared with fewer than 40% of North American firms and about 17% of those in Asia.

Japanese companies demonstrated strong performance on environmental issues but need to make progress on other areas to match European levels.

Large firms were more likely to adopt responsible business practices than smaller companies, apparently because of the importance some investors in quoted companies placed on ethical considerations.

62% of the companies studied ensured more than a third of their directors were independent.

More than More than 90 per cent of firms in North America, Britain, Switzerland, Holland and Australia had more than a third of their directors independent, compared with fewer than 10 per cent in Germany, Austria and Japan.

Going forward:

The report concludes that continued growth in responsible investment especially among 'mainstream' investors, driven by a belief that environmental, social and governance issues affect financial performance, is expected to drive greater corporate take up of and reporting on these issues.

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