The false dilemma of sustainable business

by November 3, 2010

Fabio Barbosa, CEO of Grupo Santander Brasil (Photo: Brasil Economico)

It has long been a criticism of “sustainable business” thinking that good governance and responsible social and environmental practices have costs, and insofar that they do, sustainable businesses must offer lower returns to investors than those offered by their less-burdened competitors. Invest in an “ethical” fund if you feel so moved; we realists will focus on counting our money.

If this criticism is true, no one has told Fabio Barbosa, CEO of Grupo Santander Brasil, the third-largest non-state-owned bank in the country.  Barbosa became well known as the CEO of ABN AMRO REAL (1998 to 2008), when he put social responsibility at the very centre of that bank’s business strategy while leading it through years of rapid growth: in 2002 the bank had about US$10bn in assets; in 2007, $90bn. It was the fifth largest private bank in Brazil by the time it was purchased in 2008 by Grupo Santander. In its October issue, Upsides, a magazine on sustainable finance published by the Netherlands Development Finance Company, features an interview with Barbosa on this very topic (see pp. 14-16):

It is becoming more and more clear that there is no incompatibility between doing business in an ethical and transparent manner and achieving good financial results. This “false dilemma” needs to be eliminated from business talk.

Our social and environmental risk analysis at Santander has shown that, in the long run, companies with adequate environmental policies, well-defined labour relations and a balanced relationship with the community end up achieving more consistent financial results and establishing a more attractive brand name. It is in the company’s own interest to adopt corporate governance policies in line with the development of the country.

For a closer look at Barbosa’s sustainability-centric strategy during his years at ABN AMRO REAL, see Michael Pirson‘s useful and illuminating case study on the company.