TEL AVIV — "Just because you don't take an interest in politics doesn't mean politics won't take an interest in you..." The famously wry declaration by Athenian orator Pericles from 2,500 years ago may well be just as valid for an increasing number of modern-day companies and corporations, especially in Israel.
Corporate social responsibility (CSR) has recently gained a foothold in the capital market. The new rules of the game force companies to take on social and political commitments beyond the letter of the law. New rating agencies have emerged to evaluate the performance of financial organizations on issues such as professional ethics, environmental protection and employee rights.
Much like credit ratings, social ratings influence public opinion and can in turn determine how much public funding a company receives, the ease or difficulty in executive recruiting, and product sales.
The issue of corporate responsibility first emerged in the early 1970s around international corporate activities in developing countries. "One of the best known issues was the case of 'blood diamonds.'" These are diamonds extracted in Africa by workers toiling like slaves, and later sold in Europe and the U.S.," says Momo Mahadav, CEO of Israeli CSR rating organization Maala. "It was a business activity that never met the standards of international law or certain Western norms."
Later, corporations faced criticism over unfairness towards their customers, poor working conditions, and environmental pollution.
Because of pressure from social organizations over the past two decades, "Most international corporations now have CSR departments that evaluate the company's performance and offer training on corporate responsibility to various departments," Mahadav explains.
Companies that preferred to avoid self-critique contracted with CSR agencies to examine their conduct and produce an annual report rating the company's performance in a range of social, ethical and environmental categories.
In addition to the rating agencies, some organizations publish rankings of the ratings. Forbes, for instance, publishes an annual list of the leading companies on CSR.
An Israeli twist
Groups campaigning for boycott, divestment and sanction (BDS) measures against Israel for its occupation of the Palestinian territories have been increasingly using CSR agencies as a political instrument.
"The new weapons in the arsenal of BDS groups are the corporate instruments," says Gerald Steinberg, a political science professor at the Bar Ilan University and president of the Israeli advocacy watchdog group Monitor, which focuses on the Israeli-Arab conflict.
An electricity company in Gaza City — Photo: Ashraf Amra/APA Images/ZUMA
Monitor recently released a study showing that campaigning efforts by BDS groups have led to the addition of a new CSR criterion — relations with Israel.
"Agencies check whether said company is active in Israel or has business ties with Israeli firms, and this could lower its rating," Steinberg explains. "The main concern is that the Israeli criterion will become mainstream among CSR agencies."
This so-called Israeli criterion is fluid. At times, a company can be downgraded for having any activities in Israel. Other times, the poor rating only comes if that activity is in the West Bank.
Employing Palestinians can also lead to a downgrade of a company's social responsibility rating, even if they work in Israel with their rights protected. Supplying products to Israeli security bodies can also make a company lose social responsibility points.
In November 2014, following pressure from BDS groups such as Association France Palestine Solidarité, French CSR agency Novethic recommended investment institutions divest from HP because the IT company offers computer services at Israeli army checkpoints in the West Bank.
In 2010-2012, the social responsibility committee of Swedish National Pension Funds, the agency advising most of Sweden's state pensions funds as well as 400 private companies, advised not to invest in the French companies Veolia and Alstom because of their involvement in the Jerusalem light rail project.
In 2009, the Norwegian ethics committee ordered the country's pension funds to withdraw their $4.7 million in investments from Israeli defense electronics company Elbit Systems, which supplies surveillance services to Israel's West Bank barrier that has been said to be in breach of international law.
Another way to influence corporate policies is to buy shares, which can garner entry to company shareholders meetings. Interest groups are often able to advance their goals through participation in annual general meetings.
Recently, social and environmental activists — and BDS groups — have been using this tool to lobby for changes in corporate policies. Last year, a South African BDS group purchased shares in retail chain Woolworth so it could vote in the shareholders meeting in the hopes of forcing the company to cancel its trade agreement with Israel. The move was brought to a vote, but failed. But group's coordinator Muhammed Desai said afterward they hope such tactics will be more effective than previous campaigns.
A year earlier, the BDS group and other groups in South Africa bought shares in the international security services company G4S to dissuade it from providing its services to Israeli prisons.
Similarly, BDS groups such as the Palestine Solidarity Campaign have bought shares of British retailer Sainsbury's to pressure it to stop importing Israeli goods, a demand that was discussed at the company's shareholders meeting last July.