The evolving corporation: the role of stake-holders; Part 2 of a series.

• Author: Assadourian, Erik
• Position: Bank industry (environmental policy

IN APRIL, JPMorgan Chase, the third-largest bank holding company in the United States, announced that it would adopt a comprehensive environmental policy. The policy will improve its own internal practices, such as reducing greenhouse gas emissions and increasing use of recycled paper. More importantly, it will also create strict criteria to guide JPMorgan Chase's lending decisions. Now the bank will take into consideration environmental impacts (as laid out in the Equator Principles) when evaluating loan requests of over $10 million from the mining, forestry, oil, and gas industries, as well as all other loans of over $50 million. Moreover, it will no longer finance projects in environmentally sensitive ecosystems and will encourage clients that emit large amounts of greenhouse gases to design plans to reduce or offset emissions.

JPMorgan Chase is actually the third U.S. bank to "green" its lending practices, following on the heels of America's two largest, Citigroup and Bank of America. It's no coincidence that the three largest U.S. banks--collectively holding assets of almost $4 trillion--have made such sweeping changes recently. The changes follow years of aggressive efforts by nongovernmental organizations (NGOs), investors, and activists.

Stakeholders, including NGOs, investors, and activists, as well as communities, labor, and consumers, are playing an increasingly important role in improving corporate behavior. Some NGOs are using tactics of direct confrontation. Others have been working for years to create partnerships with companies in order to help them green their production, often in ways that actually save them money. As well, the investor community is taking an increasingly active role in encouraging corporations to consider not just the next quarter's earnings but also the long-term financial risks of failing to address broader social and environmental issues. Together, these are proving key strategies in compelling corporations to internalize the environmental and social costs that are often ignored in the mad race for profit.

INCITING A RACE TO THE TOP

Corporate managers face many daily pressures, and improving social and environmental records (often in ways that don't directly enhance the bottom line) is not generally their highest priority--until their corporations suddenly become the targets of bad publicity from a coordinated group of activists. With corporations spending a half trillion dollars each year to create positive images through advertising, a sudden storm of negative publicity from the actions of thousands of coordinated activists can swiftly raise environmental issues to the top of managers' action-item lists.

This fear of public shaming--and the connected loss of profit and stock value--are what makes these "corporate campaigns" so successful. Unlike traditional campaigns against companies, such as boycotts, labor strikes, and litigation (which remain important but often have limited objectives), corporate campaigns treat the targeted company more as a lever of change than as an end in itself. When a coalition of NGOs and investors led by the Rainforest Action Network (RAN) targeted Citigroup, the goal was to reduce overall exploitation of natural resources. But RAN didn't target mining and logging companies--which are not in the public eye and depend on continued extraction to survive--pouncing instead on the financial institutions that capitalize the mining and logging companies. Unlike them, banks spend billions to...