Chaotic misplaced whining of pampered yet unemployable middle class youth or justified expression of outrage at a political system that has for years favored its corporate citizens over those made of flesh and blood; regardless of your views on Occupy Wall Street and whether it will accomplish anything, it is clear that the now weeks-long protest demonstrates exasperation on the part of SOME of the US and (as evidenced by solidarity movements worldwide) global population with the perceived influence which financial institutions have over government. Outside the masses huddled in Zucotti Park, it is generally acknowledged that the financial services sector has a reputation problem. In a recent Harris Poll, banks ranked just ahead of airlines amongst Americans asked whether an industry is ‘doing a good job’.
So who cares? Why should banks worry how they are viewed by the average American? These are especially valid questions if a majority of your lending is to large corporate clients and institutions rather than Mom and Pop small business loans or mortgages. Even if individual consumers detest banks (and can’t distinguish investment banks from other parts of the financial services sector), they too need access to credit and other financial services to function.
Last week, my colleague Matt Beaumont made a great point about Occupy Wall Street by relating it to a concept we often discuss with our clients in both financial services and other sectors: the social license to operate.
For an industry and individual companies within it to survive and flourish, the markets and societies in which they operate have to approve, or at least condone, their activities. When this ‘social license’ is restricted or revoked, the industry becomes less profitable and more difficult to operate or survive within. As an example, I encourage you to look at Altria, nie Phillip Morris, as an example of a company that had to substantially rethink its business model and very identity as its social license to operate grew more restricted in recent decades.
There is already substantial frustration in the United States with banks, their fee structures, and their perceived influence over the federal government. Movements such as Occupy Wall Street only add additional oomph to the reputational headwinds blowing against the financial services sector. Should these winds grow strong enough, they may eventually sway regulators to rethink policies and result in outcomes that are unfavorable to the banking industry.
Where does sustainability come in? Essentially, it is an element of good corporate citizenship that, combined with other behaviors, helps to maintain and enhance an industry’s social license to operate. We’ve often had clients remark that regulators on both sides of the political will ask them about their green lending activities in meetings or interviews that are not specifically tied to energy or other environmentally-intensive subjects. We’ve also seen this in our direct experience with public sectors leaders, both in the US and in Asia. Regardless of party ideology or agenda, no leader wants to be seen directly as anti-environment (remember that BP now considers itself Beyond Petroleum and not even Sarah Palin wants to completely disband the US EPA).
In short, a commitment and demonstrable contribution toward a more sustainable future can help banks and other organizations to cultivate a more favorable environment in which to operate. There are other important elements to consider (you can’t charge usurious fees, for instance), but building a better future certainly helps to maintain the social license to operate; a license which Occupy Wall Street reminds us is necessary.