From fags to oil, you have to believe them: being good is the new growth industry

UK companies are tempting investors with their 'socially responsible' credentials, but the mud still sticks, writes Heather Tomlinson

Gordon Gekko, rest in peace. The fictional banker declared that "greed is good" in the film Wall Street, but he didn't count on the new fashion of corporate social responsibility, or CSR as it is becoming known.

Gordon Gekko, rest in peace. The fictional banker declared that "greed is good" in the film Wall Street, but he didn't count on the new fashion of corporate social responsibility, or CSR as it is becoming known.

Nowadays, you could be forgiven for forgetting that a company's raison d'être is to make money. The wealth of advertisements, literature, conferences, talks and seminars on CSR could give the impression that our large companies are shining beacons of ethical virtue, eagerly forsaking the chance to make a buck to fight poverty and environmental destruction.

Journalists' desks are piling up with glossy brochures filled with smiling African children in schools or endangered elephant species – all helped by the generosity of the company concerned.

KPMG, the consultancy firm, says that 49 per cent of the largest 100 companies in the UK now produce some kind of CSR report, against 32 per cent in 1999, while 89 per cent include some kind of social and environmental information in their financial report.

Companies are shelling out millions to tell the public that they really care about the world we live in. The market for environmental consultancy services, from advice on how companies can be more green to help in promoting a green image, has grown 10 per cent year on year, according to recently published research from ENDS Environmental Consultancy Market Analysis. Annual turnover is now £960m in the UK.

But some pressure groups are questioning whether there is too much talk and not enough action. For example, although Barclays produces a lengthy social and environmental report, incorporating details such as its energy consumption and reduction targets, Friends of the Earth is unhappy that it has loaned money to Asia Pulp and Paper, which is responsible for logging in Indonesian rain forests.

The question of how seriously companies take social and environmental factors has caused a rift between the Institute of Directors (IoD), the business-friendly organisation, and the Institute of Public Policy Research (IPPR), the left-leaning think-tank.

The two groups conducted a survey, asking 500 companies for their views on social and environmental issues. The IPPR collated the research, which revealed that only four out of 10 company boards discuss these subjects, and fewer than a third have a policy for reducing greenhouse gas emissions. The author branded business "hypocritical."

The IoD took exception to the "spin" of this analysis, prevented distribution of the hundreds of reports, and it is now working on its own version.

However, amid the mountains of research on CSR, there is some support for the IPPR's viewpoint.

The consultancy Sustainability is due to publish research on the quality of CSR reports later this month. Despite the explosion in their number and their volume, Sustainability will conclude that the quality of the information has not improved since the reports were last surveyed in 2000.

A separate study by branding consultants Hoop Associates selected 50 large companies in Europe and investigated the coverage of social and environmental issues in the financial report. It found that "too many companies are making claims for corporate responsibility that are simply unsubstantiated in the remainder of their reports". Hoop Associates is particularly critical of Tesco and Vodafone, with the claim that the latter's CSR report "isn't worth looking at".

It might seem strange that praise is often given to BP and Shell, the two UK oil and gas giants. They are not the friends of environmental charities and pressure groups, as fossil fuel consumption both contributes to global warming and damages areas of beauty around the world through drilling and exploration.

So BP and Shell have taken great efforts to improve their ethical image. Both produce CSR reports and shout loudly about their development of renewable and sustainable energy. Shell has committed itself to investing up to $1bn in renewable energy ober the next five years.

But environmental groups question their dedication. "Time and again we find companies like BP and Shell, which love to focus on the tiny details on environmental management, saying they are committed to sustainability and climate change," says Craig Bennett, corporate accountability campaigner at Friends of the Earth. "If they really accept that point, they should have a strategy of getting out of oil and gas. In fact they are putting more effort into exploration and finding fossil fuels than ever before."

The environmental charity is incensed by BP's proposed project to build a pipeline through Azerbaijan, Georgia and Turkey to pump oil from sites in the Caspian Sea to the Mediterranean. It is part of a coalition of 60 pressure groups opposing the plans, which they say will be exempt from the host country's law, have not been fully discussed with local people and could exacerbate conflict zones – charges that are refuted by BP.

Campaigners also dispute the information provided by some companies. Take BAT, maker of the Benson & Hedges and Lucky Strike cigarette brands, which is vilified by anti-smoking groups and shunned by many ethical investors. So it produced a hefty report detailing its views on controversial topics, such as its opposition to under-age smoking and its reassurance that tobacco advertising is only about the promotion of brands.

That didn't wash with its arch-enemy, Action on Smoking and Health (ASH). "On all the issues that really matter, the social report is either cosmetic, evasive or deceitful," says ASH director Clive Bates. "What is shocking is the gullibility of some parts of the ethical investment and corporate social responsibility community. They have blindly lapped up the glossy report and soothing PR without bothering to test if they are in any way related to BAT's real-world operations."

BAT responds by pointing out that this was its first report, and intended to show its serious commitment to CSR.

But hard facts are hard to find on the social and environmental impact of any company's operations. Some blame this on the lack of standardisation of CSR reporting. There is no requirement for what the company has to reveal and how it should do it.

Friends of the Earth wants the Government to make CSR reporting compulsory. It says there is no need for a separate report; it would like to see the information contained in a company's annual financial statement. It also wants facts and figures in the report rather than woolly statements, and standards to be set on a similar basis to accounts. "Why should we not trust companies on their financial accounts, but believe they will voluntarily report on social and environmental issues," says Mr Bennett.

At present, the vast disparity in the quality of reporting reflects the lack of standards in the CSR sector. There are so many indices, benchmarks and studies that the topic is shrouded in confusion.

With the hullabaloo about the alleged hypocrisy of reporting companies, they could question why they bother at all.

"NGOs [non-governmental organisations] can take pot shots at companies who try to do things, rather than the ones who are not bothering," says Peter Mason, editor of The Ethical Performance Newsletter. But he adds that a company should have cleaned up its operations before it does the CSR PR job, because its statements will be held to account by NGOs and the media.

It may say it is not a hard-hearted money-making machine that wouldn't think twice about polluting rivers, enslaving children and lining the pockets of evil dictators in the pursuit of profit. But UK plc will have to work harder to prove it.