RBS and the return of the “socially useful” business

Social capital: banking on change? Social capital: banking on change?

Bankers haven’t got the greatest reputation right now.

You might find it improbable, then, that it befell a banker today to make the case for why banks should make it their business to support society.

And not just any banker, from any bank: the boss of corporate banking at RBS, Chris Sullivan.

But Mr Sullivan hit the nail squarely on the head. When asked by the Evening Standard, as part of its brilliant campaign to tackle youth unemployment in the capital, why RBS had decided to back the cause and offer 16 young people job opportunities, Sullivan answered:

“We need to rebuild trust so that banks are seen again as socially useful organisations.”

“Socially useful” is an interesting choice of words. It raises important questions about the relationship between businesses and the society in which they operate. In particular relation to banking, it recalls, Chairman of the FSA, Lord Turner’s controversial Mansion House speech in 2009, when he said:

“Yes, financial services form a vital industry and source of high-skilled employment.  Yes, the City will continue to play a key and vibrant role in the UK economy.  But not everything that a financial system does is socially useful; and sometimes bits of it can get too big and it would be better for society if they got smaller.”

The speech generated acres of media coverage for calling into question the ‘human uselessness’ (to paraphrase another top banker, Stephen Green) of an industry that had, prior to the crisis, been not so much drunk, as incapacitated, by its own self-importance.

Financial collapse pressed the reset button. And showed that no business can grow ‘too big for society’ without before long being brought back down to reality with a bump.

Naturally, social usefulness implies an opposite – social uselessness – which is anathema to any business. It’s a concern that seems to be on other companies’ minds, too.

Being on the wrong side of society has its risks, as RBS knows all too well. But get your business on the right side of society, and you’ll do well by doing good.

However, not all businesses approach social investment in the same way. To my mind, businesses tend to adopt one of three approaches:

  1. Social Appeasement: One-off gestures of corporate goodwill; can be sincerely meant, with positive outcomes, but nonetheless peripheral to what the business does in the main. This is the territory of corporate philanthropy
  2. Social Alignment: Being in step with and sensitive to society’s needs and concerns, but typically viewed through the prism of communications; not necessarily a bad thing, sensitivity to strong social views can be the engine of progress
  3. Social Innovation: Turning a profit by tackling a social need, which might be as a social enterprise or form of social business; but equally, might occur within areas of a mainstream business that is creating shared value for investors, suppliers and society

With 72 percent of the UK public believing businesses should solve social problems, it will be interesting to see which route successful businesses opt for.

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