Introduction
It is important to note that the modern state of the corporate world, including its environment and sociopolitical elements, can no longer operate with the sole purpose of profitability. Therefore, the notion of financialized management of firms fails to adhere to the agency problem of the current priorities, where the main issue is centered around the inability to focus and strive towards sustainability and social responsibility. It is stated that “not only can financialized firms not create shareholder value over the long term, but their short-term value creation is also mostly due to the ebb and flow created by institutional funds in stock markets, and they do not create a strong economic base for innovation either” (Erturk, 2020, p. 47). In other words, their even dismissal of the core objectives of suitability and social responsibility in order to ensure profit is not a plausible strategy long-term. Therefore, financialized management has only one advantage over responsible one, which is short-term gains.
CSR and Image
The corporate social responsibility of corporations is a key contributor to sustainability and solution towards the issue of financialized management. However, “historic allocation of CSR roles, within departments concerned with communications, public relations or ‘corporate affairs’, tends to reinforce the pull of CSR criteria towards the presentation of the corporate and market image rather than selection and practice of policies geared to substantive change” (Jones & Nisbet, 2011, p.309). In other words, the problem stems from the fact that CSR in many companies serves as another image metric rather than meaningful change. Thus, enterprises will prioritize the exposition of their actions rather than achieving substantive results. In addition, there is a need for the introduction of various evaluation and measurement methods in order to assess the significance of CSR activities conducted by corporate entities. It is stated that “KPIs are the missing link between sustainability and financial markets. They connect sustainability to financial markets by representing indicators to inform these markets” (Hiss, 2013, p. 243). Therefore, the lack of such KPIs results in firms using CSR superficially in order to boost or preserve their company image, which incentivizes minimal investment into the core activity of social improvement and maximal advertisement of one’s so-called accomplishment.
Corporate Business Ethics
Another source of the problem of such attitude towards sustainability and social responsibility is rooted in corporate business ethics. It is stated that “corporate business ethics supports the sovereign, corporate person in the global free markets that have been facilitated by state governments” (Rhodes, 2016, p. 1512). In addition, “the ethical position and practices that support this sovereignty provide a moral justification for corporate freedom and in turn a moralization of corporations themselves” (Rhodes, 2016, p. 1512). Therefore, the fundamental definitions of business ethics fail to hold corporations accountable and adherent to the interests of social wellbeing primarily due to interests manifested in these codes. A more viable and better alternative is democratic business ethics, which is imposed and enforced by the society affect rather than corporate agents themselves. It is written and recorded in a non-corporate language, which makes it more transparent and direct. Such a measure can become powerful in addressing the ineffectiveness of corporate business ethics.
Long-Term Sustainability and Business Model
However, the most effective solution to the issue is ensuring that corporations prioritize their long-term sustainability by changing their business models. In the coming years, “more initiatives undertaken by groups of businesses to protect their long-term interests and the long-term interests of society” (Polman, 2014, p. 5). In other words, CSR and sustainability should not be framed as something that companies are recommended to do without a direct impact on their financial performance. The reframing of the importance of these objectives requires a thorough integration in the business world since it is in the corporations’ best interest to operate in stably growing and developing societies rather than failing ones. Although capitalism brought its own share of benefits to the globe, it “needs to evolve, and that requires different types of leaders from what we’ve had before” (Polman, 2014, p. 1). Such a shift evidently will demand leadership with long-term interests and agendas rather than short-term and arbitrary accomplishments, such as stock price or annual performance.
Stakeholders and CSR
On the basis of the information presented above, it is evident that financialized management of firms results in short-term benefits only and diminishes the significance of CSR. In addition, business ethics cannot promote sustainability and responsibility, and thus, companies need to assess their long-term validity. In modern conditions, large corporations are a powerful factor in the socio-economic development of the world. ESG system is aimed at coordinating interests between managers and shareholders, building positive relations between all stakeholders interested in the effective operation of the company (Schwartz & Cragg, 2017). These include consumers, business partners, company employees, local communities, the media, environmental organizations, authorities, and others. An important component of corporate governance practice is corporate social responsibility.
Therefore, multinational corporations should consider corporate responsibility as a driver of sustainability, which is in their prime interest. They should change their business models and try to reflect the principles of social responsibility as fully as possible in their business strategies. However, some progress must be acknowledged since the annual reports of modern organizations integrate the principles of corporate social responsibility and service to better develop management reporting. The objects of social investment are the structures of healthcare, education, environmental protection, safety, sanitary and hygienic working conditions, and others. It should be noted that the share of corporate structures financing social projects is increasing, while the variety of objects of social investment is also increasing. Social investments of corporate structures have a dual nature, as they are aimed at the simultaneous satisfaction of the needs of business and society (Schwartz & Cragg, 2017). Since in modern economic conditions, the improvement of the welfare of the population and the development of human capital are of particular importance, almost all investments are social.
Corporate social responsibility involves the fulfillment by the business sector of obligations to society in accordance with the law, and moreover, these are voluntary expenses of companies for social policy, moreover, these expenses exceed the levels of mandatory expenses for these needs established by tax, labor and other legislation. In accordance with the strategic stage of organizational learning, companies take into account socially significant issues in their management strategies and begin to spend more money on social projects in order to get the benefits of a corporation as becoming the first mover and increasing economic efficiency in the long term (Schwartz & Cragg, 2017). This coincides with the consolidation strategy for the development of public expectations, where standards of social responsibility of organizations appear, the observance of which by business is voluntary.
Part 2
The selected company for the given assessment is Thermo Fisher Scientific Inc., which is a biomedical device manufacturer which develops high-end technology for biological, chemical research as well as medical activities. The CSR analysis will be based on the company’s latest report on its CSR activities in 2020. It should be noted that ThermoFisher Scientific is a prime example of highly rated ESG companies in the world due to its inherent business model. For example, it is stated that “CSR Hub puts Thermo Fisher in the 90th percentile for responsible ESG practices” (Thermo Fisher Scientific, 2020a, p. 7). Therefore, it is an ideal company to assess whether its CSR initiatives are effective and meaningful or adherent to the Halo effect and narrative purposes.
The Halo Effect
It is important to understand that there are no significant underlying delusions in regard to business performance. For example, it is stated that “managers, journalists, professors, and consultants – commonly think contribute to company performance are often attributions based on performance,” which constitutes the Halo effect (Rosenweig, 2014, p. 83). In other words, the given delusion confuses the notions of correlation with causation, where one connects certain indicators with performance as causative instead of investigating other plausible reasons. One such example of the Halo effect takes place when customer orientation is attributed to company performance, where the former is based on managers’ opinions or perceptions of the customer (Rosenweig, 2014). Therefore, it is critical to avoid adhering to the single explanation of highly complex factors, such as performance.
Business Data
Although one might assume that the impact of such forces is isolated to a few companies and the selected one is not under the influence of the effect, the inaccuracy of data interpretation is highly common in the business world. Lego is an example of how the company “shifted its strategy, it failed to execute, it had a slow culture, and it suffered from a cumbersome organization” (Rosenweig, 2014, p. 160). In other words, “if a company continues to flounder and the new executive is eventually dismissed or canned or replaced, one day someone will write that Lego, just like Kmart, made the classic errors” (Rosenweig, 2014, p. 160). Therefore, the impact of the Halo effect and attribution of specific factors to the performance can have a significant impact on a business’s success. It can and might already be affecting the selected company by changing the strategy on the basis of inaccurate data interpretation.
When it comes to the analysis and assessment of critical business data, it is important to factor in three key elements. These include calculative approaches, proper and accurate data manipulation for correct presentation, and sound and plausible narratives (Leins, 2018). In other words, all three steps must be followed and conducted accordingly in order to ensure that the end result is positive. All of the illustrated aspects of business data interpretation are relevant in regards to the ESG approach of a company valuation. Since the latter is a rather novel method of viewing companies for their sustainability and social responsibility, it is critical to avoid the Halo effect when discussing its relation to performance. It is especially critical to be careful of the potential external forces, such as the ESG bubble, which might be altering the general performance indicators across all ESG positive enterprises due to a flood of investment (Temple-West, 2020). In other words, there is a possibility that the selected company might be affected by such influences, which is why it is evaluated as such.
CSR Initiatives of Thermo Fisher Scientific
2020 was the year when Thermo Fisher Scientific was able to demonstrate its real impact on its ESG initiatives since the COVID-19 pandemic required measures, which relied heavily on biomedical research and healthcare. In order to analyze the company in accordance with ESG metrics, it is important to briefly overview its ESG issue identification. Thermo Fisher Scientific claims: “the four-step materiality process mapped ESG issues based on both their importance to Thermo Fisher’s business success and their importance to our stakeholders” (Thermo Fisher Scientific, 2020b, p. 10). In other words, the company identifies all the potential issues and engages stakeholders in the valuation and scoring process, after which it reviews these problematic areas and prioritizes them into tiers. It represents an adherence to the goals of good health and well-being of the United Nations’ 17 goals (United Nations, 2022). The strategic focus areas revolve around product quality and safety, community engagement and development, diversity and inclusion, talent management, and climate change (Thermo Fisher Scientific, 2020b). Therefore, the company has a structured and organized approach towards advancing its CSR initiatives.
The COVID-19 crisis was and still is a major social health problem, where Thermo Fisher played a significant role in helping with research and virus identification. The first visual image and first genome sequence of the coronavirus were retrieved by using the company’s products. In addition, a wide range of PCR tests, including quick ones, are dominated by Thermo Fisher products. Therefore, the company’s impact on public health is substantial and cannot be dismissed. However, these contributions are the direct result of the business model and industry in which the company operates. Thus, it is also required to assess whether or not the company is involved in additional activities which are not necessarily interconnected with its products. When it comes to inclusion and diversity, Thermo Fisher allocated a $30 million investment fund for underserved populations in order to aid with STEM education (Thermo Fisher Scientific, 2020b). The Just Project helps African American youth to obtain education in STEM as well by ensuring “safe reopening of historically Black colleges and universities” (Thermo Fisher Scientific, 2020b, p. 8). All of these efforts adhere to the goals of quality education, gender-reduced inequalities, and decent work and economic growth of the United Nations’ 17 goals (United Nations, 2022). It also appeals to the gender equality goal because most of these regions lack proper education for girls. Therefore, there is a clear impact on diversity and inclusion.
Moreover, the company conducts its ESG initiatives in regard to the economic improvement of social structure. Thermo Fisher reports that “in 2020, we added more than 2,500 new manufacturing jobs worldwide. Of these, entry-level positions are often a good fit for students directly out of high school, technical school or community college” (Thermo Fisher Scientific, 2020b, p. 9). In other words, there is a clear impact on the affected communities as well since it provides highly protective STEM jobs to these populations. The main reason why such a measure is helpful is that “these good-paying opportunities help tackle the under- and unemployment crisis facing underserved young adults who might otherwise find themselves both out of school and out of work” (Thermo Fisher Scientific, 2020b, p. 9). When it comes to STEM jobs, the average “salary for entry-level STEM jobs requiring a BA or higher is $66,123 compared to $52,299 for non-STEM jobs. This difference of around $14,000 represents a 26% premium” (BurningGlass, 2021, para. 8). These efforts constitute the United Nations’ 17 goals of sustainable cities and communities (United Nations, 2022). In other words, the created positions provide a social ladder to improve the economic state of these disadvantaged communities since the jobs are not mere low-wage ones.
In the case of climate change-related CSR initiatives, Thermo Fisher Scientific has undertaken three major measures to aid the fight against global warming. The core focus is put on “protecting the planet, starting with reducing our carbon footprint” (Thermo Fisher Scientific, 2020b, p. 9). Firstly, the company sources “renewable electricity through a mix of utility contracts as well as on- and off-site generation” (Thermo Fisher Scientific, 2020b, p. 9). However, the geopolitical location of its branches as well as local legislation and incentives affect the degree of implementation since “in Germany and the United Kingdom, where we have the greatest concentration of sites in Europe, we now power 100% of our operations with green energy” (Thermo Fisher Scientific, 2020b, p. 9). Thus, these efforts adhere to the climate action goal of the United Nations’ 17 goals (United Nations, 2022). Secondly, the company produces a wide range of intricate analytical instruments to combat climate change since they help to improve the overall understanding and precision of knowledge. Thirdly, the company actively develops environmentally friendly products by reducing the presence of plastic in its devices.
CSR and External Changes
The growing interest of buyers in how the product is created and what will happen after its use pushes the companies, including Thermo Fisher, to rethink their marketing strategies and green positioning. There is a trend of cooperation not only between the state and society but also with the modern business community, which leads to a mutual influence on each other, thereby pushing the development of social and eco-practices and changing the structure of supply and demand in the world market. There is a correlation between manufacturers’ compliance with environmental legislation and their environmental initiatives and such an economical category as demand (Schwartz & Cragg, 2017). Thus, the goal is to define the role of environmental strategy and compliance for Thermo Fisher, which will ultimately lead to a conclusion about the possible impact of environmental balance and manufacturers’ environmental initiatives on consumer demand for relevant products. Extended responsibility for producers and importers of products and packaging refers to a corporate and ethical regulatory mechanism whereby Thermo Fisher seeks to ensure that product is disposed of after packaging has been used and products have become unusable.
It should be noted that an effective social policy allows the company to realize its basic needs for survival, security, and sustainability, as well as aid its communities and environment. In turn, this increases the trust of society, investors, and shareholders in the company and thereby increases the competitiveness of the business. The socially responsible business contributes to the creation of a favorable social environment for the company in the long term and more stable development. Corporate social responsibility, corresponding to the specifics and level of development of the corporation, is a certain concept that reflects a voluntary decision to participate in the social life of society, including a set of obligations that are developed in a coordinated manner with stakeholders, carried out at their own expense, aimed at the implementation of internal and external social programs that ensure the development and reputation of the corporation, the possibility of expanding constructive partnerships with the state and business partners (Schwartz & Cragg, 2017). One of the effective tools for managing social responsibility in the new conditions of corporate development is corporate social reporting, which should be a public tool for informing all stakeholders about how and at what pace the corporation is implementing its strategy for economic sustainability, social well-being, and environmental stability.
Compliance with the CSR strategy and the development of an environmentally responsible business affects not only external interest aimed at creating economic conditions for the transition to a circular economy and recycling of waste but also corporate interest. Environmentally oriented entrepreneurship that complies with the law and shows interest in development in the field of environmental protection is not a purely economic category in the form of receiving certain bonuses and ratings, but also larger social and moral, since the choice of the consumer depends, among other things, on how the manufacturer cares about the environment (Schwartz & Cragg, 2017). Such unity of goals, such as government, business, and consumer, ultimately determine the future of all humanity, developing environmental initiatives of producers and thereby increasing consumer demand for related products. Thus, today, social and environmental responsibility at Thermo Fisher Scientific is an established sustainable development format that meets the interests of both business and society, which should be developed and expanded.
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