Like most investors, you probably aim for the best possible return when picking potential investments. But as consumers increasingly clamor for companies to embrace social responsibility, good corporate citizenship is becoming a vital part of many companies' success. And it can boost the performance of our portfolios, too.
Corporate Responsibility magazine (CR magazine) recently released its "100 Best Corporate Citizens" list for 2012, in which it rated members of the Russell 1000 large-cap index on 325 different elements related to responsible behavior. In the coming weeks, I'll delve into each of the seven categories that contribute to a company's overall score.
Today, we'll look at human rights, which gets a 16% weighting. The folks at the Gap (NYSE: GPS ) offer a good explanation of how human rights are intertwined with business success: "We know that our efforts to improve the lives of people who work on behalf of our company help us to run a more successful business. People who work a reasonable number of hours in a safe and healthy environment not only have a better quality of life, but they also tend to be more productive and deliver higher quality product than those who work in poor conditions."
Here are the top-rated companies in human rights:
To earn their high scores, the companies above engaged in a variety of good deeds, including making their boards of directors responsible for the company's human-rights policies, having a clearly stated policy on child labor, and not being fined by any government over human rights issues in the past five years.
Signing on and staffing up
Microsoft has committed to the United Nations Declaration on Human Rights, signing its Global Compact. It notes that it employs non-discrimination employment practices, holds its suppliers to high human rights standards, and avoids "conflict minerals" (whose sales finance armed conflicts), among other things. There are always those who assert that companies can do more, but it's heartening that the folks at Human Rights Watch recently lauded progress made by Microsoft, Google, and Yahoo! to protect privacy rights of consumers and Internet freedom of expression.
Back in 2000, protesters were picketing the Gap and petitioning it to improve working conditions for workers in its factories worldwide. Today, it's a top-rated company when it comes to human rights. It notes that its Social and Environmental Responsibility department has about 70 full-time staffers, who partner with hundreds of factory owners, managers, experts, and others.
Johnson & Johnson sees its "greatest areas of responsibility" in "human rights in the workplace, access to health care, and clinical research ethics." It also recognizes the human right of "sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses" and has been working to reduce its water consumption and preserve the quality of water in its regions of operation. The company has also been lauded for its policies and practices related to the gay community, earning top marks for seven consecutive years in the Human Rights Campaign's annual Corporate Equality Index.
Attention to suppliers, too
General Electric, in its Statement of Principles on Human Rights, explains that it respects the human rights of its employees, which include "nondiscrimination, prohibitions against child and forced labor, freedom of association and the right to engage in collective bargaining." It also monitors its key suppliers, many of which are located in emerging economies, holding them to environmental, health and safety standards; prohibitions against forced and child labor; and local wage and hour laws. Interestingly, the company has a 60-page booklet on integrity, offering policies and guidance on issues such as insider trading, safety in the workplace, fairness in employment, privacy, and more.
Among the companies tied for fifth on the list was Johnson Controls (NYSE: JCI ) . In its Human Rights and Sustainability Policy, Johnson Controls affirms the 10 principles of the United Nations' Global Compact, which include ensuring that it's not complicit in human rights abuses, that it eliminates discrimination in employment, and that it upholds the freedom of association and the right to collective bargaining. It notes that, "Our employees are held accountable for complying with such policies. We expect our suppliers to operate in a similar manner, and we have incorporated such language in our supplier contracts."
Earning green while being green
Companies that treat employees well can boost your portfolio. A Goldman Sachs report found that leaders in social, environmental, and governance policies outperformed their peers by some 25%. That's a great motivation for even the most coolly rational investors to take social responsibility to heart. And here's one more great employer to check out: The Motley Fool.
If you're in the market for solid socially responsible candidates for your portfolio, check out the Rising Stars portfolio run by my colleague Alyce Lomax. Out of more than a dozen portfolios run by smart Fools, she was recently in second place.