What Does It Take To Be an Ethical Corporation?

In this past week Covalence (a Swiss company) released its annual Ethical Reputation Ranking of 581 multinational companies. Applied Materials was #77 on this list and technology companies dominated the top of the list with IBM at #1, Intel at #2, Xerox at #9 and Dell at #10. The list is created by collecting data in 45 separate criteria, covering labor standards, international presence, joint ventures, environmental impact of production, product environmental risk, and humanitarian policy.

What is the significance of lists like Covalence's EthicalQuote™? While making fine distinctions between hundreds of companies in diverse industries is undoubtedly difficult, these types of rankings are a key component of socially responsible investing or "SRI." SRI investors attempt to encourage corporations to improve their practices in the areas of social, environmental and governance. Of the roughly $25 trillion invested in the U.S. marketplace today, approximately $2.7 trillion is invested in SRI funds.

The larger question raised by these rankings and the SRI funds that use them is what is the social responsibility of corporations? Milton Friedman, the noted economist, famously stated that "the social responsibility of business is to increase profits" (see Friedman’s entire 1970 essay here). A more modern view of corporate responsibility is that an enterprise can profitably sustain itself by improving the lives of its employees, the communities where it operates and society at large (see additional definitions here).

At Applied Materials, we aspire to do something more than simply succeed as a business, we hope our nanomanufacturing technology can "offer a cleaner, brighter future to people around the world." Please take a look at our 2009 Citizenship Report and let us know what you think about our performance.