For many companies today, making a profit is no longer enough. The principles of corporate citizenship and sustainable business have permeated strategic and operational thinking and have become an important part of company reporting.
With citizenship and sustainability, comes accountability. Business leaders are recognising that companies will be held to account for their behaviour in a social and environmental context, not only on their financial performance.
That's one reason why many companies have formally adopted policies relating to sustainable development. And this goes well beyond philanthropy.
WHAT IT MEANS
 Business must meet stakeholder concerns
All managers must be accountable
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In part, it's based on a philosophy that says companies and their leaders need to think and behave in ways that will ensure they have the support of their communities if they want to be around for the long term. Care and stewardship of the environment can be just as important.
It's reflected in the term "licence to operate", a theme in the latest sustainability report published by BHP Billiton, the leader in the 2006 Accountability Rating table, a ranking of big companies listed on the JSE.
"We recognise the intrinsic link between sound sustainability performance and long-term business viability," says BHP Billiton CE Chip Goodyear.
In governance pundit Mervyn King's view, corporate citizenship and risk management are directly linked. "A board that ignores a company's non-financial risks could cause the destruction of the company," he says.
Defining terms such as corporate responsibility and sustainability can be difficult and controversial. Many companies invest skills, funds and other resources in social and environmental programmes but find the results difficult to measure or compare against local and international peers.
That's part of the thinking behind the Accountability Rating of large SA-listed companies, published with this survey. The top 52 companies in the FM's latest SA Giants table (which ranks JSE-listed companies by annual turnover) were evaluated and ranked on common criteria developed and applied globally by London-based AccountAbility, a nonprofit institute, with CSRnetwork, a UK consultancy.
The SA Accountability Rating was done by the Unisa Centre for Corporate Citizenship (CCC), in collaboration with the university's College of Economic & Management Sciences and the FM, and was funded by Barloworld.
Companies are scored in six "domains": strategy, governance, stakeholder engagement, performance management, public disclosure and assurance (see box).
The last of these, assurance, refers to efforts the company may have made to have its management and reporting of sustainability issues assessed by an appropriate independent organisation.
This is a relatively common practice among larger global groups that take this process seriously, but much less so in SA. "Only about 10% of the SA companies evaluated have taken the assurance step," says CCC project manager Neil Eccles.
The accountability evaluation provides a high-level but comprehensive assessment of a company's sustainability and related reporting practices.
"The Accountability Rating looks closely at how companies integrate responsible business practices into their core processes, and whether they are able to develop a core strategy that responds to stakeholders' expectations," says CSRnetwork director Mark Line.
The idea that companies and their managers are accountable to diverse stakeholders, and should be run on that basis, is a central theme in the rankings.
"All managers know they are accountable," says CCC director Derick de Jongh. "But when they consider who they may be accountable to, that may affect the way they run their business and how they interact with the various stakeholders."
A company's activities in engaging with stakeholders to understand their concerns, and what's important to them, are an important part of the evaluation. The better performers report in detail on these activities, and may indicate how they responded to stakeholders' concerns.
Disclosure is important. The scores are based only on information in public documents such as companies' sustainability reports. Other documents were considered as well, including annual reports and form 20-f documents filed with the US Securities & Exchange Commission.
If a company is engaging with stakeholders, or includes safety or environmental targets in its performance appraisals, but doesn't say so in its public documents, it won't get the credit.
Admittedly, the reliance on public reports in the evaluation may mean in some cases that quality of reporting becomes more important than substance.
However, the reporting process may itself influence behaviour. "When you set the targets, these big hairy goals, in a public report, it's surprising what does get achieved," says Barloworld senior executive Mark Drewell.
Companies with high scores for accountability may not have unblemished records as corporate citizens.
Energy group BP was first in the 2005 international Accountability Rating. It has adopted a wide-ranging approach towards society and the environment, and has taken leadership positions in areas such as alternative energy and climate change. Yet in the past year BP has been controversial because of leaks from its Prudhoe pipeline in Alaska as well as several other issues.
These setbacks don't weaken the underlying rationale for following the sustainability agenda. "When industrial accidents happen, it's even more reason to take this approach," says Drewell.
Similar thinking is reflected in Sasol's latest 2005 sustainability report. The group had faced various setbacks affecting its reputation, including a poor safety record, and needed to rebuild trust with stakeholders.
Sasol is fifth in the SA Accountability Rating, with a score of 66%. A feature of its report is the detailed description of its engagement with stakeholders.
Criteria applied to locally listed companies are identical to those used in the ranking of the world's largest companies, carried out by AccountAbility and CSRnetwork, and published at the same time in Fortune magazine. The global ranking appears for the third year.
For the first time, however, the rankings have been done for some individual countries or regions. Central Europe, SA and Russia are the first of these, and the average score for the SA list is better than the average for large companies in the comparable global ranking.
Large mining companies, which face considerable environmental challenges and operate in many countries, dominate the top of the SA accountability table.
These include some whose headquarters are outside SA. Top-ranked BHP Billiton, an Australian company, gets the top global score (78,6%), based on common criteria, though it was not in the sample used for the global ranking.
Second in the SA table is Anglo Platinum, with its parent Anglo American, third, Nedbank Group, fourth, and Sasol, fifth. Multinationals tend to do well, as shown by SABMiller's sixth-place ranking.
The strong showing of Anglo American and associated companies underlines the role that may be played by group culture and the tone at the top. Anglo has major stakes in three companies ranked in the top 10: Anglo Platinum, AngloGold Ashanti, seventh, with 54,9%, and Kumba Resources, 10th, with 53,8%.
Companies in other sectors, and many entirely domestic players, do well too - though the performance within groups isn't always as consistent.
Nedbank Group is fourth, with 67,4%, with its parent, UK-based Old Mutual, more than halfway down the table, at 38th, with 25,2%.
Corporate social responsbility has long been part of Nedbank's ethos. But the banking group has increased its efforts in some areas, including stakeholder engagement and disclosure, since it had to call for financial support a few years ago.
"Sustainability, good governance, transparency and comprehensive reporting are integral to building the group's credibility among its stakeholders," says Nedbank CE Tom Boardman.
Short-term insurer Santam is eighth, with 54,7%, and parent Sanlam is 25th, with 40,1%. Barloworld, an SA-based multinational, is ninth, with 54,2%. Massmart, a retailer, is 12th, with 51,3%.
Just as striking is the number of big names, and the low scores, near the bottom of the table.
Mittal Steel, controlled by Arcelor Mittal, the world's largest steel company, is 47th, with 18,9%. Tiger Brands is 51st, with 12,8%.
Naspers, 49th, with 14,5%, is another poor performer in this field despite its aspirations for international expansion. Murray & Roberts, 44th, with 20%, is also interesting from this standpoint.
Bottom-ranked Liberty Holdings (5,2%) is an anomaly; this is a holding company whose only asset is its stake in Liberty Group. The operating company is 34th on the table. There's another anomaly, in dual-listed Investec Holdings and Investec Plc. These are listed separately, and ranked 28th and 29th, but have no separate reporting processes.
Companies that do well in these rankings have tended to align their businesses and reporting practices with international initiatives such as the United Nations Global Compact and the Global Reporting Initiative (GRI). De Jongh says more than half the companies assessed for the SA ranking acknowledge the GRI as the framework for sustainability reporting.
SA companies are also influenced by the King governance codes, relevant JSE listing rules and the industry charters. Eccles says accountability evaluation criteria are adapted to take local conditions into account. For companies operating in SA, employment equity and black economic empowerment (BEE) are important. He says BEE and related issues are relevant in all the domains evaluated. A strong showing with this can make a significant difference.
