Why Investors Should Care About Corporate Responsibility

In the video below, The Motley Fool speaks with Roger Martin, strategy expert and Dean of the Rotman School of Management at the University of Toronto. We discuss why shareholders of a company should care about corporate responsibility. Martin argues that investors should look for the companies that are using their products to express their corporate responsibility, including companies like Starbucks (SBUX -1.02%). 

A transcript follows the video.

The full interview with Roger Martin can be seen here, in which we discuss a number of topics including Bill Ackman, innovation, corporate responsibility, executive compensation, and how to pick out great companies. Martin is the coauthor of Playing to Win, a new book focusing on strategy written with former Procter & Gamble CEO A.G. Lafley.

Brendan Byrnes: You've also done a lot of work on corporate responsibility. How important is that to shareholders of a company, and how do you think potential investors should look at the corporate responsibility of a company when they're considering an investment?

Roger Martin: I think this is a really, really interesting issue which is still being very much sorted out.

I think there is now a rising tide of desire for corporate responsibility among consumers. Until such time as that happened, I just don't think that corporations were going to respond, but I think now consumers care more than they ever have before, so I think getting out ahead of sustainability issues and how you treat your employees is important.

Brendan: We talked about conscious capitalism last time. Companies like Whole Foods (WFM), Panera (PNRA), Starbucks starting to do more of this and, actually, if you look back at it over time, seeing better returns. Is that something that you think other companies will take notice and will start to take off and snowball like that?

Roger: I think they will, and I think what is cool about those examples that you've given are that the expression of their corporate responsibility is through what they actually do for consumers.

Starbucks saying, "You will get a cup of fair trade coffee." Coffee is their business, so I like that better than -- even though I like corporate philanthropy -- than, say, giving money to something that doesn't relate at all to your business. Whole Foods would be a similar story. I think that's going to be the trend.

If I was an investor looking at that I'd say, "Boy, I'd rather invest in a company that's figured out through their business, in a way that supports and enhances their business -- those people drinking a cup of coffee from Starbucks and having confidence that it came from a farmer who's making a decent living -- I think those businesses will prosper."

As an investor, I'd say the consumers will love them, because they're expressing their responsibility through their product. I would look for that kind of corporate responsibility first and foremost.