Fujitsu has shown its true colours in the Post Office scandal
Its faulty software led to the wrongful imprisonment of innocent people. It charged the Government vast amounts of money along the way. But, hey, never mind about any of that. It turns out that Fujitsu, the IT contractor at the heart of the Post Office scandal, still has an impeccable “environmental, social and governance” (ESG) score.
It has won plenty of plaudits for its commitment to sustainability, to LGBT inclusiveness, and for promoting diversity.
But why would anyone be surprised by that anymore? In truth, the ESG movement has turned into a bogus, self-congratulatory charade, in which the worst kind of companies think they can get away with anything simply because they are “good” or “kind” people.
The Fujitsu scandal should hammer the final nail in ESG’s coffin.
It probably hasn’t been the best week for those staffing the Fujitsu press office. ITV’s brilliant dramatisation of the vicious campaign the Post Office ran against sub-postmasters following the introduction of the company’s IT systems brought a scandal that has been bubbling for years dramatically to life.
Prime Minister Rishi Sunak has already announced plans to exonerate all those wrongly convicted. Paula Vennells, former Post Office chief executive, has handed back her CBE. Liberal Democrat leader Sir Ed Davey, who was postal affairs minister for much of the time that these sub-postmasters were being prosecuted, is under pressure to forfeit his knighthood.
There may well be more shocking revelations in the weeks ahead.
Holding politicians and officials to account is important. But what of the IT giant? Fujitsu looks like a champion of sustainability and diversity. Only last month, its press office released an announcement proudly announcing it had been chosen “for inclusion in the Dow Jones Sustainability World Index, the world’s leading ESG... stock price index”.
This is the 22nd time Fujitsu has been included in this index since its creation in 1999.
And that is not all. The company is also included in the “FTSE4Good” index, designed by the London Stock Exchange to recognise a commitment to ESG, while CDP, representing a network of investors controlling $96bn in assets, rated it “A” for its commitment to climate change and water security.
It scored 100 for the second year in a row on the equality index run by the Human Rights Campaign Foundation for “corporate policies, practices and benefits pertinent to lesbian, gay, bisexual, transgender and queer employees”; Stonewall ranked it among the top 100 employers; and the The Times ranked it among the Top 50 employers for women.
The list goes on and on. When it comes to gay rights, diversity, and protecting the environment, Fujitsu is a global leader. Yet when it comes to sub-postmasters, it now faces accusations of “putting profit before people”.
Perhaps the real question is why we are still surprised by the ESG racket anymore. All too often, when there is a major corporate scandal (though few will ever compare to this miscarriage of justice), it turns out that the company at the centre of it was winning plaudits for its corporate social responsibility.
FTX founder Sam Bankman-Fried was a hero of the “effective altruism” movement even as the crypto exchange was systematically losing track of billions of investors’ money.
Organisations including Coutts have signed up to the UN Principles for Responsible Investment, which incorporate ESG considerations into investment practices.
Yet how responsible is “debanking” those who hold views executives might regard as unsavoury? Unsurprisingly, when Volkswagen was found to have been installing “defeat devices” – software that allows cars to cheat in emissions tests, making them appear cleaner than they actually are – it was winning awards for its commitment to the environment.
The ESG movement increasingly seems to exist in a parallel universe where up is down and left is right.
It would be easy, of course, to dismiss the ESG ratings as nothing more than PR guff. But it is more serious than that. It casts into doubt the idea that investors should focus on the bottom line, by suggesting corporate governance, social impact and environmental damage are of equal importance.
It may allow bad practices to endure for longer than they would otherwise.
However, investment in ESG funds has started to collapse. In 2023, funds defined by their commitment to “responsible investing” recorded inflows of only $68 billion globally, compared to $158 billion a year earlier, and more than $550 billion in 2021.
The overall assets within the ESG industry fell from $35 trillion to $30 trillion last year, according to figures from Bloomberg.
It looks like investors have woken up to the fact that returns, which were turbocharged over the last decade by the soaring performance of the tech industry, and the weakness of the oil price, have started to turn.
Many ESG funds are now underperforming the broader market.
Perhaps they worry that much of it was just “greenwashing” of the worst sort, with companies congratulating themselves on how wonderful they are while treating customers and suppliers poorly.
It is not hard to figure out what companies need to do to be “responsible”. Just make a decent product, charge a fair price, pay your suppliers and staff on time, and file your tax returns.
Oh, and if you happen to be making an IT system that triggers a spike in “fraudulent” activity, perhaps consider whether there are some dots which need connecting, and some tweaks which need making.
Investment in ESG funds is already collapsing, but it’s time to put a stop to it for good. We won’t miss it when it is gone.
