Directions 2013: Why Being Consistent Matters - Salterbaxter

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Transcript of Directions 2013: Why Being Consistent Matters - Salterbaxter

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NIGEL SALTERDirector, Salterbaxter

BEN TUXWORTHHead of Sustainability, Salterbaxter

THE GOLDEN FORMULABeing authentic sounds like a basic for a modern business or brand, but it’s surprisingly hard to achieve. As stakeholder expectations mount, and the business environment becomes ever more complex, is there a simple formula for getting the action right, and getting the message across?

THE GOLDEN FORMULA

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MEET THE AUTHENTICS

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GOOD PHARMA I0

#AUTHENTIC I2

CORE VALUES I6

MAKE SOME NOISE

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PLUG IN, TURN ON, STAND OUT

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STYLE WITH SUBSTANCE

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INNER STRENGTH

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HOW AUTHENTIC ARE YOU?

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From horsemeat in burgers, to unpaid corporation tax, to the Bangladesh factory collapse, 2013 has been the year in which the gulf widened between the increasingly ambitious positions companies are adopting on social purpose and sustainability, and the all too prosaic failings that keep tripping them up.

What could ethical fashion mean if mainstream brands are sourcing goods from lethal sweatshops? Why should anyone believe a company is responsible if it fails to pay a credible amount of tax? How plausible could claims about livestock chain of custody be, when the final goods contain the wrong animal?

In commercial terms, these were not idle questions: horsemeat fears drove down Tesco’s profits in nine of their 11 global markets. With the death toll at Rana Plaza at over 1,000, many of the high street brands that sourced clothes there are being drawn into expensive remedial action. The discovery that Starbucks had paid only £8.6 million in UK corporation tax since launching in 1998 and none since 2009, while not being illegal, didn’t match

customer expectations. Bowing to consumer pressure, in June 2013 Starbucks acknowledged the need to “do more to maintain and further build public trust,” and paid £5 million in tax.

These big events made the news, but also built the momentum of change already underway in the relationship between consumers, companies and brands, driven by five years of financial crisis, the impact of social media, hypertransparency and declining trust. The consequences for companies and brands are dramatic – challenging some long-held beliefs about the disconnection between the actions of companies and the value of brands.

As businesses and brands compete ever harder on sustainability, being joined-up and convincing in what they say and do about it has never mattered more. But setting out a consistent story for investors, regulators, staff, consumers, stakeholders or competitors is not easy. Differentiated brand and corporate stories, different market places, and different time frames seem to require such different responses that a simple core story can quickly fragment. As social media lay the inconsistencies bare for all to see, companies can end up leaving the impression they don’t have much conviction about what’s really important.

Can a company really have a singular, authentic approach to sustainable business? And what happens when it does? Directions 13: Authentic? takes the temperature of this debate with companies and commentators at the frontline of the quest for authenticity. We launch new research on how the top companies perform against a new definition of authentic, and get fresh insight on the bottom-line impact of both actions and words. And for those looking for an action plan, we map the path to authenticity in five steps.

Being authentic may not be easy, and we’re not setting out to point the finger at inauthenticity because we know that’s just too simplistic. But we do believe that attempts to be joined-up and authentic are a feature of the businesses that are getting closer to their customers, becoming the go-to partners for collaboration and innovation, and most likely to succeed in the transition to sustainability.

For more on the authenticity challenge visit: salterbaxter.com

As ever, we welcome your feedback. Let us know what you think at:[email protected]

DIRECTIONS I3:

WHY BEING CONSISTENT MATTERS

DIRECTIONS 2013 TEAM

NIGEL SALTER Director

BEN TUXWORTH Head of Sustainability

OLIVIA STANDISH Sustainability Team

RICHARD WILSON Design Director

PETE CUTLER Senior Designer

JEFF SUTTON Business Development Director

ANGELA CONFEGGI Account Manager

GARY McCALL Head of Production

LOUISE MOYNA Production Manager

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To ad-man Julian Borra, we’re now living in an era of ‘scratch-card’ brands when “the average Jane and Joe can now easily scrape the shiny surface of a brand to reveal all manner of things beneath – either the gold of product and service experiences, rewards, community and a purposeful and authentic conscience at work to mutual benefit, or toxic shockers, rights abuses, dodgy ingredients, shabby operational impacts, abdication of responsibility or, worst of all, corporate indifference to the suffering or injustices of others involved in their pursuit of profit”.

The consensus is that consumers, despite wanting to trust companies and especially brands, now struggle to do so in the face of a steady flow of damaging revelations about corporate behaviour – and need more reassurance than ever. Ford, one of the companies performing strongly in our survey of authenticity (see page 4), has recognised the game changing effect: “Increasingly, consumers are looking beyond the traditional benefits of a brand. These impulses have created ‘forensic consumers’ who, with a few clicks on a computer or smartphone, investigate whether a company shares their values.”

Get it right, and the commercial benefits can be significant. Clothing brand Patagonia’s famous ‘don’t buy this jacket’ campaign may have seemed a noble but uncommercial gesture – true to the company’s ethos but not a credible business approach. But in fact, Patagonia’s sales increased almost a third during 2012, nine months of which featured their buy less marketing, offering hope that there is a way to engage consumers on some of the less palatable issues facing us all, and still win.

Not surprisingly, lots of people are trying to pin down the rules of success in this new world. Indices abound – tracking either the real sustainability performance of companies, or the way that different stakeholders perceive them, or some combination of the two – identifying the criteria that might define the deeds and appearance of winning businesses.

Though they yield wildly different results, what these surveys drive at in different ways is the authenticity of the sustainability work of the companies concerned – the quality that somehow brings together both action and its appearance. Authenticity sounds good, and everyone wants to be authentic, but what are the rules? How will you know when you get there?

‘Authentic’, from Greek ‘authentikós’ meaning ‘original’, is variously associated with being transparent, consistent, trustworthy, genuine, real, honest, true, sincere, and having credibility. We believe authentic companies are credible in their actions, transparent in their communications, open to challenge and

engagement, consistent in what they say, and have something unique

to offer the world in the social purpose they pursue:

a definition which yields the ‘Golden

Formula’ we explore in different ways throughout this report.

In ‘Meet the Authentics’ on page 4, we put

our thoughts about authenticity to the

test in a new survey – looking at how some of the

world’s leading companies manage the challenge.

It’s a challenge that comes at companies in different ways. For pharmaceutical company Novo Nordisk, the big question is how to be authentic in claiming to be looking for a cure for diabetes when the big commercial opportunity seems to

come from managing it. Troels Børrild explores

this question with Novo’s Susanne

Stormer on page 10.

For drinks company innocent, authenticity starts with values – as a filter on the people they employ, and a hard-edged measure of performance, as Tansy Drake explains on page 16.

SALTERBAXTER’S GOLDEN FORMULA AUTHENTICITY =

CREDIBILITY + TRANSPARENCY +

OPENNESS + CONSISTENCY +

UNIQUENESS

CONSUMERS ARE LOOKING BEYOND THE TRADITIONAL

BENEFITS OF A BRAND. THESE IMPULSES HAVE

CREATED ‘FORENSIC CONSUMERS’ WHO, WITH

A FEW CLICKS ON A COMPUTER OR SMARTPHONE,

INVESTIGATE WHETHER A COMPANY SHARES

THEIR VALUES

Authenticity is also a long-term project, and

for Toyota comes from being true to a vision, and

then living up to it when a hero product – the Prius – makes you the

world’s greenest brand. We explore the challenges this brings with Toyota Motor Europe’s Jean-Yves Jault on page 24.

Meanwhile, the business schools are also tuning into the authenticity debate, and we showcase two new takes on the field: Ashridge’s Kai Peters wonders what makes authentic leaders, on page 30, and LBS’s Ioannis Ioannou has some surprising observations on when to act, and when to talk about it for best commercial effect, on page 20.

And for those companies whose forays into social media make them feel like an embarrassing dad dancing at a teenage disco, Gemma Dodd and Matthew Yeomans have some thoughts about what it means to be authentically sustainable online on page 12.

Ultimately, these different perspectives confirm our view that authenticity

depends on a finely balanced mix of strategic relevance,

good action and strong communication.

For any company wanting to stay in the front rank of sustainability leaders, and gain the commercial advantages that go with it, a focus on being authentic seems to be a

simple but effective strategy.

If you are wondering where this debate leaves your business,

why not take our authenticity test on page 34, where we offer five steps to

authenticity based on our golden formula.

And if you’d like to learn more about building an authentic approach, visit salterbaxter.com

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So what’s going on? Different methodologies, for a start. Some test perceptions, some evaluate performance, some do both, and all in different ways. The differences and the volatility that result are enough to make some companies question the value of engaging. But it’s also true that some companies manage to perform pretty well across the board in these surveys. Unilever, for example, continues to be ranked highly across a number of surveys for their ‘Sustainable Living Plan’. This includes a no.3 ranking within the Globescan/SustainAbility Sustainable Leaders for the third consecutive year, and recognition as an industry leader by Dow Jones in 2012.

Whilst any such recognition is positive, the truth is that many companies manage to present a convincing case for their sustainability credentials to some audiences, but not others. Whether companies try to be consistent across these audiences – and how well they do – is not something the current slew of lists and indices test. Some look at certain stakeholder perceptions of company or brand sustainability performance (Havas’ Meaningful Brands, and Globescan for example), and Interbrand use such perceptions to explore one dimension of authenticity: ‘the perceived credibility of the brand’s environmental claims’. But we believe that authenticity is a more complex proposition, built out of action and communication with all of a company’s stakeholders.

THE AUTHENTICS SURVEY

So just how authentic do ‘sustainability leaders’ appear through their communications? That’s the question the Salterbaxter Authentics Survey set out to answer. Using five dimensions that make up our golden formula for authenticity and we believe apply to every company or brand: credibility, transparency, openness, consistency and uniqueness, we looked at the top 15 performers from Corporate Knights’ ‘Global 100 Most Sustainable Corporations in the World’ list

OLIVIA STANDISHSustainability Team, Salterbaxter

BEN TUXWORTHHead of Sustainability, Salterbaxter

Lots of lists rank companies for their sustainability creds, but which companies manage to tell a consistent story through all their channels? The Salterbaxter Authentics Survey offers some fresh insights.

The annual crop of sustainability rankings yields some odd results. Toyota tops the Interbrand green brand rankings, but is nowhere to be found on Globescan and SustainAbility’s Sustainability Leaders’ survey. Floor coverings company Interface, ever the stakeholders’ darling and at no.3 on the Globescan list, is nowhere to be found amongst the Corporate Knights most sustainable corporations in the world. And Dow Jones Supersector Leaders Air France don’t make it into the top 50 anywhere else.

for 2013, and the top 15 performers identified by Interbrand’s ‘Best Global Green Brands’ for 2013.

For these 30 companies and brands, we carried out a qualitative review of publicly available information, including company statements about strategy, their sustainability/CR report, thought leadership activity, and social media presence. We focused on the global websites and global profiles for each company, rather than regional sources, and we deliberately chose sources from different parts of the business as a means of checking consistency.

Though our survey was inevitably subjective, it has thrown up some surprising gaps on the authenticity spectrum for some of the world’s leading corporations.

MEET THE AUTHENTICS

The eight top scorers, those with a score of 26 or more out of a possible 30, included three automotive; one food industry; one pharmaceutical; one technology; one beauty products; and one energy management company. So it seems authenticity by this measure at least is not confined to any particular industry.

As you’d expect, integrating sustainability into broader strategy and having a clear purpose are becoming the norm for companies that take sustainability seriously, so almost all the companies we surveyed scored well for ‘credibility’.

But for the other dimensions – ‘transparency’, ‘openness’, and particularly ‘consistency’ and ‘uniqueness’ – results are much more variable. Despite having done much of the work to align their business with sustainability many companies struggle to convince across all their communications. Some fail to engage with stakeholders – or at least don’t evidence it within their reporting. Others can’t find a way of presenting their approach that’s in any way memorable or different. Others still have completely different accounts in different channels,

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THE SALTERBAXTER AUTHENTICITY SURVEY

We identified five dimensions of authenticity: credibility, transparency, openness, consistency, and uniqueness, and two components for each dimension:

The dimensions and components were weighted equally, and each component was allocated a score from 1-3 (1 – vague information/no alignment; 2 – some detail included and some alignment; and 3 – significant information/ complete alignment.)

To generate scores we reviewed publicly available information for each company:

• Company statements about strategy • Sustainability web pages • The sustainability/CR report • Thought leadership • Social media presence

We looked only at activity that could be found via global company web pages, reports and social media as a starting point.

Many companies have separate social media accounts for sustainability. Where links or tags directed us to the appropriate accounts, or the account was named after the sustainability strategy, we included them within research. If accounts were not obviously linked to the brand, these were not included.

making it difficult to determine where the commitment really lies.

This kind of authenticity clearly isn’t easy. We’ve taken a closer look at results for three sectors and consider what the scores mean for some of the companies featured, and what kind of changes would make a positive difference.

Automotive With highly visible eco-products in the market place, and ambitious commitments around eco-efficient production, it’s perhaps not surprising that automotive companies often perform well in green brand assessments. But reviewing these same companies with our approach to authenticity produced some interesting results.

Though Honda, Toyota, Ford and BMW may have unique stories to tell about their sustainability ambitions, we struggled to find it on their global websites and in their reports. They all want to develop mobility opportunities, add value to society or become ‘society’s choice’ – but we found little to choose between their claims on these channels. So for defined ambition, they lost points in our analysis’.

Turning to thought leadership activity, Ford, Volkswagen and BMW are all working hard to differentiate themselves. For ‘beyond reporting’ they were all awarded full marks. BMW’s ‘Activate the Future’, Volkswagen’s ‘Think Blue’ and Ford’s ‘Greentopia’ campaigns have an environmental focus, consistent with their sustainability ambitions. But Ford lead another campaign focused on ‘Trust’ which stands out for giving a different, broader platform for engagement.

There’s also a sense that ‘more is more’ amongst the automotives: all producing huge amounts of detail about their sustainability work, making it harder to determine what they think is important – and affecting the ‘transparency’ and ‘openness’ scores in our research. Honda for example present their actions in a huge amount of detail in their five

reports, but don’t say much about targets and their performance, or about how they’ve engaged stakeholders, or their approach to leadership, all of which reduced their scores for transparency and openness in our survey. Toyota, Honda, Nissan and Volkswagen also missed marks for ‘aligned strategy’ because we felt their messages got lost within extensive discussion.

BMW gave more detail on targets, and their presentation of ‘open leadership’ seems to us an example of best practice online. Each pillar to their sustainability strategy touts a relevant employee video statement, drilling into how sustainability is being practised at a different level of the company and

building the sense that employees have a voice and a clear sense of their role in the delivery of sustainability action.

Ford Ford came 2nd in Interbrand’s 2013 ranking and top in our authenticity survey, with full marks for all but one

of our criteria. They made a clear case for their open leadership, stakeholder

engagement, credible targets and detailed plan of action seen throughout publications. Sustainability is well integrated into Ford’s broader strategy which itself responds clearly to the external risks and trends associated with the industry.

But what makes Ford stand out are their thought leadership campaigns and use of social media. For example the recent #FordTrust/ ‘Trust is the New Black’ and #FordGreen/ ‘Greentopia’ campaigns consisted of thought-provoking panel discussion and talks focusing on the changing business environment and consumer expectations. Ford used the campaigns to demonstrate their interest in wider issues affecting global business and society, and remind consumers of their values in the process, with their Twitter feeds supporting further debate online, taking their approach well ‘beyond reporting’ in our survey.

Ford 28 6 6 6 6 4 2Nestlé 27 5 5 6 6 5 14Schneider Electric SA 26 6 5 4 5 6 13Natura Cosmeticos SA 26 6 6 4 6 4 2HP 26 6 5 6 5 4 12Novo Nordisk A/S 26 6 4 4 6 6 5Volkswagen 26 6 5 5 4 6 7Nissan 26 5 6 5 5 5 5Dell 25 6 5 4 5 5 10BMW 25 5 4 6 5 5 13Panasonic 24 6 4 3 5 6 4Johnson & Johnson 24 5 5 4 5 5 6adidas 24 6 6 4 4 4 15Konijke Phillips Electronics NV 24 6 5 4 4 5 7Nokia 23 6 4 4 4 5 9Neste Oil OYJ 23 6 4 5 4 4 4Sony 23 6 5 2 5 5 11Umicore SA 22 6 5 4 3 4 1Danone 22 5 3 3 6 5 8Toyota 21 5 4 6 3 3 1Intel Corp 21 5 4 4 5 3 14Westpac Banking Corp 20 6 4 5 3 2 10Outotec OYJ 20 6 5 4 3 2 12Biogen IDEC 19 6 3 3 4 3 8Statoil ASA 19 6 2 3 5 3 3ASML Holding NV 18 6 4 5 2 1 11Sims Metal Management Ltd 17 6 2 2 4 3 15Storebrand ASA 15 4 4 2 3 2 6Dassault Systemes SA 14 3 2 4 2 3 9

Honda 12 2 4 2 2 2 2

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Being Authentic

Index

Aligned strategy

Clear purpose

Honest conversation

Aligned statements

Open leadership

Engagement

Credible targets

Tangible action

Defined ambition

Beyond reporting

Credibility

Consistency

Openness

Transparency

Uniqueness

Corporate Knights Global 100 Most Sustainable Corporations in the World 2013 Interbrand Best Global Green Brands 2013

MANY COMPANIES MANAGE TO PRESENT A CONVINCING

CASE FOR THEIR SUSTAINABILITY

CREDENTIALS TO SOME AUDIENCES, BUT NOT OTHERS

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Technology Both Interbrand and Corporate Knights have identified technology companies positively for their development of sustainable manufacture and design, and generally they do well in both lists. We also found several technology companies doing well, but for different reasons.

One is their competence and visibility online. One impressive example is Intel’s sustainability Twitter account, @intelinvolved, which boasts a following of 275,000 (and growing) and which they’ve used to raise the profile and engage on issues from forced marriage to water scarcity. Though Intel seem to have the edge, all the other technology companies in our survey are strengthening their social media presence, reminding people of their company values and promoting their achievements, but also showing they are more open to engagement.

All of the technology brands also appear to have understood the importance of tangible and visible action, with five out of the nine companies scoring five out of six for transparency. They’re also good at defining their ambition and communicating it beyond their reports, with most doing well in our ‘beyond reporting’ category. Panasonic, Intel and Sony all present their vision for the future as part of their thought leadership. Sony’s social media presence showcases their ‘FutureScapes’ project, exploring how technology could be part of sustainable living in the future, and helping to position them as an ambitious player in the changes ahead, but Sony’s global website doesn’t provide a link to the venture, which seems a missed opportunity.

The technology companies surveyed tell a good story about contributing to social good by harnessing their innovation capacity. For example Nokia have donated technology to field workers in the Amazon so they can track Dengue Fever breeding hot spots and curb numbers affected by the disease. In doing so they are capitalising on their strengths,

leveraging what the business does well to do good, and making their efforts more authentic in the process.

Panasonic Panasonic are differentiating themselves from their competitors through thought leadership. Panasonic’s development of ‘Smart Towns’ showcase their innovative safety and environmentally friendly technologies: from LED street lights, to invisible security, to solar systems for homes. The buzz around Panasonic’s plans for Fujisawa Smart Town, and plans for public housing with the government of Singapore, has helped them connect with stakeholders and make their Smart Town agenda seem action-oriented and different. As a result they perform well though they have yet to do much to integrate sustainability into their online profile and social media presence.

But Panasonic’s report doesn’t say much about their targets, how they approach leadership and stakeholder engagement, and the voices of either

staff and external are largely absent. We felt Panasonic could do more to demonstrate their sustainability commitment by simply adapting the content of reporting, and increase coverage of sustainability reporting, achievements and debate, via social media.

Extractive and Materials Corporate Knights awarded many of its top positions to corporations from the extractive and materials industries. By their criteria, these corporations have clear, purpose-driven sustainability strategies. They clearly understood the benefits of using their corporate websites to show how sustainability is integrated in the business, giving an immediate sense that sustainability is a part of their broader strategy, and helping them score well for credibility in our research.

But from there the scores decline. On ‘transparency’, Sims Metal Management lost marks as their website and integrated report list achievements for water use,

waste generation and energy and carbon, but give no future targets or reflect on previous successes and failures. Statoil’s website and reporting is inconsistent in the way it deals with progress on environmental and other targets, giving the impression of wavering commitment. Four of the six extractive companies had weaker scores for ‘openness’, failing to offer much evidence of open leadership and stakeholder engagement. Even Schneider Electric, third overall in our list, lost marks for stakeholder engagement, consistently stating its importance, but offering little supportive detail.

Lower scores for consistency in the sector were mainly a result of underdeveloped social media presence. Umicore and Neste Oil have tweeted some sustainability updates but, with limited followings (both around 900), the companies aren’t reaching a significant audience. Other companies in the sector have done little, perhaps feeling there is less pressure to be present than for consumer brands. We believe the growing scrutiny of all corporations in social media – driven in part by their performance in league tables such as Interbrand and Corporate Knights – will make this omission increasingly risky.

Sims Metal Management It ought to be easy to talk a good sustainability story if your main business is recycling. So Sims Metal Management’s score of 17 is surprising. We found that Sims provided little for stakeholders to get hold of: within the sustainability web pages and the integrated annual report, there’s not much on targets, stakeholder engagement or leadership approach. Social media presence is negligible: sustainability tweets aren’t regular and the small following limits the reach of Sims’ sustainability message.

Finding a way to define and articulate their strategy and become more transparent and open about their progress could be good starting points for Sims to engage more people and manage stakeholder risk in the coming years.

THE COMPANIES DOING WELL IN OUR SURVEY SEEM TO HAVE FOUND A WAY TO BE

CONSISTENT IN THEIR ACTIONS AND HOW THEY

COMMUNICATE THEM – TO A WIDE RANGE OF AUDIENCES

GETTING TO AUTHENTIC

This qualitative assessment of some of ‘sustainability leaders’ picked out by Interbrand and Corporate Knights has identified some of the reasons why their sustainability commitments and achievements are not coming across consistently.

Those scoring well in our survey get the basics right, but they also understand the added value of ‘uniqueness’ and are making the most of digital media. The best performers are evidencing relevant thought leadership, and building a vibrant social media presence – though we also found that in general social media is still an underdeveloped means for brands and companies to engage their stakeholders.

Though high positions in sustainability leadership rankings are no bad thing, the value of being authentic is not about moving up the league table. The companies doing well in our survey seem to have found a way to be consistent in their actions and how they communicate them to a wide range of audiences.

What benefit do they get from authenticity? As the boundaries between different stakeholder groups, and between brands and the companies behind them are eroded by digital and social media, one advantage is that it’s simpler to have one approach and one story – that’s as true and relevant for investors as it is for consumers. It may sound obvious, but it’s a demanding path and one that few companies yet follow. Those that do, look well positioned to reap the benefits that looking – and being – authentic can bring.

How authentic is your business? Take our test on page 34.

IT’S SIMPLER TO HAVE ONE APPROACH AND ONE STORY

– THAT’S AS TRUE AND RELEVANT FOR INVESTORS AS

IT IS FOR CONSUMERS

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TROELS BØRRILD Head of Nordic Office, Salterbaxter

SUSANNE STORMERVice President, Corporate Sustainability, Novo Nordisk

GOOD PHARMA

Novo Nordisk has been amongst the sustainability stakeholders’ favourite companies for 20 years or more, with countless accolades

including Corporate Knights’ ‘the world’s most sustainable corporation’ in 2012. No small achievement when it’s part

of an industry regularly rocked by scandal and allegations of corrupt practice. So how does Novo Nordisk stay true

to its mission of ultimately ‘defeating diabetes’ in the midst of a lucrative global diabetes epidemic and eroding trust

in Big Pharma? Troels Børrild talks to Novo Nordisk’s Susanne Stormer,

Vice President, Corporate Sustainability.

TB: Novo Nordisk’s mission is nothing short of ‘changing’ and ultimately ‘defeating’ diabetes. What do you mean by this brand promise?

SS: For our part, there is no doubt: we’re genuinely committed to ‘Changing Diabetes’ as a global leader in diabetes care, but it’s important to understand that there’s a long- and short-term perspective to this. For the long term we’re working on a cure for diabetes – probably the only pharma company in the world that’s doing

so – and for the short term ‘Changing Diabetes’ means making life with diabetes manageable for those people who get diagnosed and must live with this condition for the rest of their lives. It also means providing better access to care for those who need it and currently don’t have it, and it means advocating for healthier lifestyles to prevent diabetes.

TB: How do you prove to the world that your commitment is authentic?

SS: Our mission is evident as a deep-felt commitment and frequent discussion topic in our global organisation. Given our global presence, how that mission translates into a brand promise takes different forms in different market places, but the essence is what inspires and motivates us everywhere we work. It’s the starting point for everything we do, but our mission also helps us to take a long-term approach to value creation. If we were to simply maximise short-term

profits, we probably wouldn’t invest as much in research and development as we do, but rather focus on selling as many units of what we’ve already got in store. Our mission and our brand promise challenges us to always aim higher than that.

When we ask our customers what the best thing we could do for them would be, their first priority is a cure for diabetes, so it can’t affect their families. But they also ask us to make it easier for them to live with diabetes, which is why we’re always looking for ways to make treatment more convenient, such as aiming to develop insulin medicine in tablet form. We know injections are a key factor deterring patients from getting started on effective diabetes treatment, so it would have a massive impact if we manage to successfully develop a tablet treatment. When we first set out on that research investment we expected that it could take decades to develop, which would scare off some companies, but for Novo Nordisk this is part of our brand promise. It’s also an integral part of our strategy to remain a global leader. So it’s not just about doing good, but about staying in business for the long term. And the interesting part about that kind of blue-skies research is that it doesn’t just follow a linear and predictable trajectory; with our latest advances we may be able to develop the treatment in just 20-25 years. That would be a real game changer.

TB: Some stakeholders claim that you and your peers are not doing enough to ensure access to medicines for people in low-income groups and countries. How do you address this concern?

SS: Access to medicines is the key question that we and the industry are faced with. Often the debate is about affordable pricing, but it also has to do with market strategy for entry to, and expansion in, low-income countries.

On the issue of pricing, medical treatment for diabetes is in fact not expensive – on the contrary, it is much more costly to not treat it. We completely understand stakeholder concerns and appreciate that it can be difficult to accept at first glance that we have a gross margin at around

80 per cent. But our sales prices need to reflect the huge R&D investments made in getting the treatments developed and ready for the market. This investment needs to be recovered at a later stage if we are to remain in business and help patients not just in the short term.

On the second issue, we’ve for years followed a strategy to expand access to effective treatments that can address unmet medical needs, also for people in low-income countries. It’s one of the reasons why we maintain a preferential pricing policy and have a portfolio of products. However, we wanted to take up the challenge and set ourselves an ambitious target to show our commitment to patients and other stakeholders to this important issue. So, last year we announced our target to reach 40 million patients a year by 2020, almost doubling our current reach. This can only be achieved by reaching out to more people in those parts of the world where diabetes is growing at epidemic rates. We’re confident that we’ll meet the target, because when we set out towards a goal, our entire organisation is behind it.

TB: How have the critical voices responded to your new, big target?

SS: They’ve actually responded very positively. The stakeholders who have been most vocal about the need to close this gap appreciate a commitment with concrete and measurable targets with a deadline. They can then name and shame you if you fail to deliver on the target. Some stakeholders will always want you to do more and aim higher, but the most important ones have been very positive.

TB: A recent challenge to Novo Nordisk’s position as the stakeholders’ friend came when the public healthcare sector in Greece announced that it was no longer able to pay your bills due to the debt crisis in the country. You replied that you would then not be able to supply your most effective treatments any more. How did this go down with stakeholders – and how do you balance your brand promise with profitability?

SS: Yes, that was seen to conflict with our brand promise by some stakeholders. But not in our view. In the specific case we made sure that there was always an effective treatment available to patients while negotiating with the public authorities in Greece. We had to withdraw our newest treatments for a while. We need to care for patients in the short term, but we also need to make sure we make enough profits to be able to invest in the research and development that will allow us to hopefully meet the diabetes challenges of the future and not just the present. And our CEO very clearly explained this position in the media and why we did what we did. People are free to disagree with us, but we have to stand our ground.

Overall, I think we’re actually quite consistent in our messaging from different parts of the organisation – and I agree with you that it is key to be – and be seen – as a company with an authentic social purpose. But I’d prefer to earn it rather than claim it. And if we were to come across as not being true to our purpose, I am certain that our stakeholders would hold us to account and voice their expectations. That, in fact, is an obligation, but also a great motivation.

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Gemma Dodd @SalterbaxterLots of companies are playing in the social media space with their sustainability messages, and a fair proportion of them seem less than clear what it is they’re doing there. So a simple question to start with: why is social media such an important part of sustainability communications?

Matthew Yeomans @Custom CommunicationSocial media and sustainability make perfect bedfellows. When you strip them down, authenticity is central to both sustainability and worthwhile social media. When social media first arrived it changed the rules on transparency – demanding authentic action and holding companies to account very quickly for any perceived failures. In the same way, that’s what sustainability is meant to test – how authentic companies are in pursuing their social and environmental goals.Gemma Dodd @SalterbaxterSo what does that mean for companies

more used to brand communication in the social space? Can they simply adapt how they communicate?

Matthew Yeomans @Custom CommunicationTransparency has become a bit of a cliché, but both social media and the sustainability agenda drive companies

towards it. They cut through the way companies have traditionally looked at brand marketing and brand communications and ask some much

deeper questions about what the business is actually doing – and so transparency becomes very important. Community also becomes vital. While

previously companies and brands preached down at people, that kind of messaging doesn’t work any more – because the companies are no longer up

on the hill, the are actually down among the regular people, and they are having to build community with the very people from whom, for many years, they sought to distance themselves. And finally creativity and collaboration

become essential, because when you look at the amount of noise out there, the amount of content being generated, finding a way to cut

through is crucially important. Gemma Dodd @SalterbaxterCreativity feels a long way off from the ‘press release feed on Twitter’ approach that a lot of companies take to their sustainability efforts on social channels.Matthew Yeomans @Custom CommunicationThat’s true, but it seems to me a massive

missed opportunity. What’s really interesting about sustainability when brought together with social media is that it gives you the opportunity for very powerful creative content and story telling. So combine transparency, authenticity, community, collaboration and creativity and I’d argue that you probably have the perfect combination for successful social media. Gemma Dodd @SalterbaxterSo does it make sense for companies to

treat their social media presence for sustainability separately from their other conversations? Or should they be looking for integration into the social mainstream?

Matthew Yeomans @Custom CommunicationI don’t think there’s a right or wrong answer to that. I think it’s good that sustainability is taken seriously enough by companies that they are dedicating some resource to communicating it via dedicated social media platforms.

Search iPad#AUTHENTICIf it’s not just about likes and retweets, how do you do sustainability in the social world? And how do you get some real return for your efforts? Salterbaxter’s Gemma Dodd talks to Matthew Yeomans.

Gemma Dodd is Head of Digital at Salterbaxter

Matthew Yeomans is Founder of Custom Communication and lead author of the SMI-Wizness Social Media Sustainability Index

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Matthew Yeomans @Custom Communication

We need to see more companies actually getting out there and producing the sustainable work and products that give them the stories to tell. It’s those stories that will be the basis of more compelling conversations, for any kind of audience – whether that’s academics looking for case studies or the Facebook and Twitter audiences who want to get sneak peeks and insights without a deep dive on sustainability. If you’re actually doing something good then it’s much easier to use creativity to tell different stories to different stakeholders.

Gemma Dodd @Salterbaxter

Agreed – but I do think there is a role for social media to be used to involve people on their sustainability journey. But also there’s an opportunity and a need to be transparent about the journey itself. Nobody has completely cracked it yet and to an extent we are all learning how we can get there. So to my mind it isn’t just about creating social platforms, which showcase the stories and the achievements. Of course, there is a role for that, especially to engage consumers and drive brand equity and perception around the sustainable merits of products. However, there is also a crucial role for corporates to create social platforms which invite collaboration with subject specific communities so that they can generate new insights and

avenues which they couldn’t otherwise do alone. Some of our clients are working with us in this way and it is creating huge opportunity for them. Social media seems the very best place for that kind of engagement and collaboration.

Matthew Yeomans @Custom Communication

We’re talking about major corporations that have built their DNA to make money first and worry about everything else second. So turning that super tanker around – into companies that want to be profitable but understand that profitability comes from being energy efficient, sustainable resource users, good to their employees and communities – it’s a big job. There is no company that has really achieved it yet – I’d say even the best companies are only 15 per cent along that journey, and that makes the kind of open engagement you’re describing very challenging for them.

Gemma Dodd @Salterbaxter

Exactly, it’s about looking at the different ways that we can use social platforms. Sure there is an essential role for social to act as another communications channel, providing you get your storytelling approach right and create the right exchange with your audience. But I think there are other roles that social can play for corporates – not least as a collaboration tool, and a place to engage with different communities and make change happen. We are just beginning to understand these different roles for social – and tapping that potential is going to be a big part of the coming years.

The SMI-Wizness Social Media Sustainability Index is available at socialmediainfluence.com/SMI-Wizness/ Talk to us about activating your online community via salterbaxter.com

“ If you’re actually doing something good then it’s much easier to use creativity to tell different stories to different stakeholders.”

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their chosen issue and they use a very different language to the sustainability generalists. We’re trying to find ways to unlock these micro-communities – to open up corporate teams to different people and different perspectives, and to find ways of engaging that will deliver change.

Matthew Yeomans @Custom Communication

To me, the bottom line to do that is that you have to be useful. So the question is: are you actually saying something that conveys value to the people you want to connect with. Beyond the jargon and the buzzwords, what content can you create? And how can you use it to connect with real communities that are interested in specific issues?

Gemma Dodd @Salterbaxter

Are there any companies doing this really well yet, in your opinion?

Matthew Yeomans @Custom Communication

It’s changing fast – three years ago there were just a handful of companies who even understood the importance of communicating sustainability via social media, and realised it was more than a limited set of issues for a niche group of stakeholders. Now there are lots of them – realising that sustainability could become a brand proposition if it can be done in the right, authentic, transparent way. But the telling thing is that there are very few companies who are actually doing what they say they would like to do. The 15 companies that head the SMI index stand out largely because they’re talking about things they actually do, rather than things they would like or hope to be doing.

Gemma Dodd @Salterbaxter

So the action has to come before the conversation?

Gemma Dodd @Salterbaxter

Your recent SMI report cites a lot of organisations for their efforts to engage consumers on sustainability issues. Engaging consumers is crucially important but there is also a role for corporates to engage different audiences as well, don’t you think? Sustainability-aware stakeholders, opinion formers, academics and so on, all have interesting roles to play with corporates too – especially given the innovation challenge that many companies need collaborators to tackle. These people are just as important as consumers but they might need a very different kind of conversation and community.

Matthew Yeomans @Custom Communication

Well it’s worth pointing out that social media isn’t just about consumers or any particular big audience, it’s about the ability to reach niche audiences, to cherry pick, to create communications and interactions based on what people care about. Social media have blown away the idea that only particular stakeholders care about sustainability – and opened companies’ eyes to the fact that – guess what? – there are regular folk out there who wanted to know about it as well.

Gemma Dodd @Salterbaxter

Yes, and we have found lots of evidence to prove that the sustainability audiences on social platforms are made up of lots of different micro-communities. There are of course your sustainability generalists who are crucially important people for consulting with corporates and evangelising on issues. But we’re finding really interesting data on very active communities centred on specific issues – like building skills in communities or water. They are subject-specific, and involved in making change happen on

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CORE VALUES

TANSY DRAKEinnocent

innocent is often cited as an exemplar for its commitment to sustainability. And while it’s something we’ve been hot on since we started we are far from perfect, just at the start of our journey in fact. What we are proud of however, is that it is an inbuilt consideration of all that we do – be it in the office, the supply chain or the final drink on the shelf. We’d like to get to a place where it’s not celebrated as an anomaly in the industry, but common to all businesses and their employees’ attitudes.

VALUES FROM THE START

To ensure that’s the case at Fruit Towers we ensure everyone joining the team shares the innocent values. We have five, which are at the core of the business. We’ve structured our recruitment around them and our first round interviews are purely to filter out those who might not prioritise the same things we do. As Apple’s head of hiring once put it,

By focusing on sustainability from the start, innocent has made authenticity part of its culture and its offer to consumers. It’s a good place to be, argues innocent’s Tansy Drake.

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‘We’d rather have a hole than an arsehole working here’. We agree wholeheartedly and so if we can’t find a candidate with the right initial attitude then we’ll wait until we do. Appropriate skills come second.

innocent’s values were written by the company when it stood at 45 people and there was a fear we were growing too big to guarantee we were all pulling in the same direction. But while there was some finessing, they came pretty easily and are genuinely something everyone buys into.

As well as coming naturally (having been recruited against them) they are upheld with both carrot and stick. They are empowering – giving every one of us permission to improve things (leaving things a little better than you find them is our shorthand), but we also know we will be measured twice a year against how well we are ‘living the values’. So alongside our personal objectives, staying true to innocent’s values affects performance-related pay.

We believe this three-pronged attention on our values – recruiting the right people, empowering employees to go beyond their day-to-day remit to improve things and placing an emotional as well as financial expectation to work to them – has gone a long way to ensuring our business intentions are genuine. We also believe it’s an important part of why they are also seen as authentic by our customers and consumers.

Careful recruitment and a focus on values take us a long way towards a sustainability culture, but they aren’t enough on their own. So on top of our company-wide commitment to responsibility, we have a team of three committed to driving longer-term projects and strategy. They are supported by champions planted in each bit of the business who have a fifth of their role devoted to sustainability – from the way we source our fruit to the way we pack presents for consumers. All in all, our commitment to making things a little better than we found them is strong at innocent. It flows from left to right, bottom to top.

ENGAGING THE CONSUMER

We’ve always been open, honest and transparent about what we’re up to. From our rPET (recycled polyethylene terephtalate) journey to general stories about sustainability we have not shied away from sharing our thoughts or worrying that it didn’t interest our drinkers.

But like our values, this has come naturally to us. We set the business up making things that we wanted to drink. So we spoke to people like we’d speak to our friends. Or Mum. Or the man in the

newsagent. We talked about the things we were up to and what was important to us.

And that included our impact on the world. We want to tread as lightly as we can. The consistency of that message and that it flows through everything we do has helped make what we say credible, I think. It’s not a campaign or a bit of greenwash designed to ingratiate ourselves with ethically-aware consumers (which rarely works – gladly people are pretty savvy and can see through ‘marketing’ quickly). Instead it is part of our DNA; we are spiritually aligned as innocent Founder Richard Reed would say.

STAYING INNOCENT WITH COKE

In May we sold the majority of our shares to the Coca-Cola Company. As expected, our drinkers and the press picked up on the story and some began to question whether we would lose our distinctive values and approach as a result. But nothing has changed at Fruit Towers. We don’t plan to alter our commitment to sustainability – we’re pleased that, as promised, Coke trust us to run our company and brand in the way that makes it a success. And having the best

people, which to us means folks that live our values and champion being responsible, remains the cornerstone.

In fact we have bigger ambitions for projects since we joined the Coke portfolio. They have helped to enhance our sustainability work by supporting us on two major agriculture projects in Europe. And in turn, we’re already sharing our expertise with them. We see it as a great opportunity to make a bigger impact rather than working in silos. Two sustainability heads are better than one as they say.

We still have a long way to go until we will be satisfied with our efforts – in fact I don’t think that journey will ever end. There are always things that can be bettered. But that being responsible is a central commitment, backed up with passion and resource, is something that fills me with confidence that we will continue to reduce our impact on the planet as we grow as a company. And with scale, you hope we might be able to trigger some industry-wide focus and commitments.

For 10 years innocent has run its big knit campaign – with woolly hats knitted by the public raising money for Age UK (and their European equivalents). So far over four million hats have been popped on bottles and £1 million raised.

IOANNIS IOANNOULondon Business School, www.ioannou.us

business as usual. A substantive action would be that the company also trains their managers on using the Code of Conduct in their day-to-day decisions, or has a certain percentage of women on the Board of Directors, or actually uses renewable energy rather than setting a target to use it, or that the company pursues third-party auditing of their sustainability report.

To assess the different impact of those two types of actions on business

Greenwash has become a byword for the worst kind of sustainability strategy – all talk and no action. But have we thrown the baby out with the green bathwater? There may be some commercial value in talking up your sustainability plans, as long as the real action follows, argues Ioannis Ioannou.

One of the most common complaints I hear from sustainability teams in business is how frustrating it is to see a competitor getting lots of credit for their sustainability programme, despite having done little in practice – and certainly less than they have. The accusations of greenwash fly, but at the same time, the frustration is in part a realisation that these competitors are getting some real value from their better profile – perhaps a positive reputational hit that can have all sorts of knock-on effects, both inside and outside the business, including more momentum for some real action.

CAN IT BE A MORE EFFECTIVE INVESTMENT TO TALK ABOUT WHAT YOUR SUSTAINABILITY

PROGRAMME MIGHT DO, THAN TO ACTUALLY DO

SOMETHING?

All of which raises the question – can it be a more effective investment to talk about what your sustainability programme might do, than to actually do something? I’ve been exploring this question with my colleague Professor Olga Hawn of Boston University, through the lens of what we term ‘symbolic’ and ‘substantive’ action. It sounds complex, but in fact it’s quite simple. A lot of companies out there pursue what we call symbolic sustainability action. Mostly that consists of public reporting of intent to do something. For instance, company X might report that they favour promotion from within, or that they have a CSR committee, or even that they now have a Code of Conduct. These are symbolic actions in that they create the sense and perception of action predominantly in external audiences, despite the fact that – generally – not much changes from

performance, we developed a new empirical methodology that characterises a firm’s market value as a function of its existing tangible assets and intangible resources in combination with its current CSR actions, whether symbolic or substantive. We then identified two sets of policies – one symbolic and the other substantive, and checked the impact on the market value for companies that undertake symbolic, substantive or both types of actions conditional on the level of their existing intangible resources. We looked at 2,261 firms in 43 countries over seven years (2002 to 2008).

REPUTATION CREATES MOMENTUM

What we found is that if you are a company that has already established a high level of intangible resources in terms of sustainability – for example, a good reputation – then chances are that the symbolic action will be more beneficial because it is a lower cost way of maintaining the underlying resources – by confirming and re-enforcing existing expectations. The larger the stock of existing resources, then the higher the

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purchasing decision, the large majority does not. Certification schemes are in reality relatively less significant for consumers than they are to the supply chain. If you certify you’ll probably have a more stable supply chain with less risk. It is not the communications of the certification to the consumer that generates the value but the reduction of the risk and the increase of the quality of the underlying product. Effectively, a certification scheme becomes a valuable engagement tool for companies through which to build long-term relationships, based on trust and collaboration, with their suppliers.

So if telling the consumer about your certification is not likely to drive big

shifts in purchases, why bother? The supply chain knows, so why

communicate further if the benefit is more likely to be realised through a different key stakeholder? There may be more value in communicating product quality, or other CSR

strategies that might resonate or deliver value to consumers

more than a supply chain certification. The symbolic claim

is not really adding any value to the substantive action.

REACHING OUT TO INVESTORS

Investors, on the other hand, need a different approach where alignment of symbol and substance is vital, but strategic relevance is the real test. Investors don’t only care if companies tell the truth. It’s important but it only matters if that truth actually makes sense in the broader strategic context and if it’s truly integrated in the company’s business model. And very often it isn’t.

Investors are often grouped and discussed together as stakeholders, but not all investors are the same. Investors focused on sustainability are more likely to be looking for the things we know drive outperformance: transparency,

impact that symbolic actions have on performance. And the reverse is also true – a company that has already established strong environmental capabilities for example, will likely generate less marginal return from undertaking additional environmental action than a firm that has yet to do much. But if you are a company still relatively new to sustainability, with little action under your belt (i.e. low levels of intangible resources), symbolic action is less effective because you have more to gain by undertaking substantive actions – by actually walking the walk.

What’s also interesting is the effect of doing both. Both making and acting upon your declarations is the most beneficial strategy in terms of market value, and the more the two are linked the better the outcome. Markets are willing to reward you when you announce something and then reward you more when you follow up. The critical corollary is of course that if you declare something without later backing it up with actions, then risks open up from scrutiny and accountability.

COMMUNICATING FOR ROI

What does all this mean for companies wanting to get better at managing perceptions and finding a return from their sustainability work? Since CSR is such a broad and diverse area, and corporate communications resources are scarce, our work suggests that companies need to evaluate when it is worth communicating what they are doing, and to whom, in terms of the likely return.

Ecolabels make an interesting example. We know from consumer research that ecolabels – certification on coffee or tea for example – have an effect on consumer purchasing behaviour, but only a small one. Lots of consumers say in surveys that they would buy a certified product but when it comes to the actual

THERE IS A LOT OF NOISE IN THE SYSTEM, AND LOTS OF

COMPANIES DOING SUBSTANTIVE THINGS

BECAUSE OTHER COMPANIES ARE, RATHER THAN FOR ANY SOLID STRATEGIC REASON

accountability, third party assurance and so on. As I found in another study with Professor Bob Eccles and George Serafeim, of Harvard Business School, such investors tend to have much more focused portfolios and they trade less often, whereas investors with diversified portfolios, trading more often, are more likely to be found in the investor base of more short-term oriented companies.

So there is a growing percentage of investors who are strongly taking into account the long-term thinking of the company, their transparency, and their accountability. But there is of course a significant portion that are not. In the longer term, as more evidence accumulates around the outperformance of sustainable companies, the market will hopefully correct; with the help, of course, of institutional changes, and governmental policies. But we are in a transitional phase where investors are trying to make sense of all of this, with lots of companies making lots of disclosures, and no universal reporting or auditing standards. As a result, there is a lot of noise in the system, and lots of companies doing substantive things because other companies are, rather than for any solid strategic reason. They might be authentic in reporting what it is that they are doing, but true authenticity would also mean deep strategic understanding of the activities they are engaging in.

Where does this leave companies trying to communicate a long-term view? From an investor perspective, the Unilever example is interesting. CEO Paul Polman actually discouraged hedge funds from having ownership of Unilever, and sure enough their share went from 15 per cent in 2009 to 5 per cent in 2012. Making such a choice inevitably requires trade-offs, but the trade-offs may not be as bad as you think. Short-term investors need share volatility to make money. By losing them the volatility reduces, giving the company a bit more of the flexibility needed for long-term strategy to work.

BRINGING SUBSTANCE AND SYMBOL TOGETHER IN REPORTING

There are lots of barriers to transparency: it’s both challenging and expensive to put the metrics in place for environmental and social performance, particularly with the quality and accuracy that is typical for financial data. In a downturn most companies revert to being focused on more traditional elements of financial performance. Sustainability is also something that companies are only beginning to understand and requires levels of transparency and accountability way beyond what they were used to in the past.

That’s why I believe integrated reporting is going to become an increasingly

significant test of how well companies are aligning strategy, substance and symbol, and an increasingly valuable tool in the hands of investors. Integrated reports represent a step change in transparency: cutting through the

narrative and pictures of sustainability reporting with a much harder test of

performance: disclosure that truly integrates a company’s financial performance with its environmental and social performance. A form of reporting that requires a deep understanding of the company’s strategy within the economic context but also within the social and environmental context, in a holistic way. This approach signals to an investor that the business really understands the risks and the potential opportunities that arise from ESG factors but also communicates the ways in which ESG factors are integrated into the business model. Together with a more rigorous approach to materiality, integrated reports set a much higher bar than sustainability reports. And if a firm aims to reach this bar, this is already a signal that there is a substance there.

Ioannis Ioannou’s paper ‘Do Actions Speak Louder than Words? The Case of Corporate Social Responsibility (CSR)’ is available at papers.ssrn.com

BOTH MAKING AND ACTING UPON YOUR DECLARATIONS IS

THE MOST BENEFICIAL STRATEGY IN TERMS OF

MARKET VALUE, AND THE MORE THE TWO ARE LINKED THE BETTER THE OUTCOME

DIRECTIONS 2013 SALTERBAXTER

BEN TUXWORTHHead of Sustainability, Salterbaxter

JEAN-YVES JAULTGeneral Manager, Corporate Communication, Toyota Motor Europe

PLUG IN, TURN ON, STAND OUT

On the one hand, it means things can get tougher in theory. On the other, the more other brands communicate on hybrids and other green technology, the more customers become educated and attracted to this new mobility. In fact, the hybrid market in Europe grew by 45 per cent between 2012 and 2013. Last year, we had a 65 per cent share, and so far in 2013 our share has grown to 75 per cent. So, having more players doesn’t mean less business for Toyota. We have a considerable lead in creating, developing, selling and servicing vehicles with petrol-hybrid technology. We have sold more than 5.5 million hybrids worldwide since 1997. That’s a long experience. You don’t

How did Toyota become the world’s greenest brand with the world’s best selling green car – and how does the company live up to its sustainability credentials? Ben Tuxworth talks to Jean-Yves Jault of Toyota Motor Europe.

BT: You’re just back from the Frankfurt Motorshow. BMW launched the i8, and others are taking some bold positions on their eco-credentials. What does it mean for you?

JJ: We fully respect our competitors, and what we say is “Welcome to the club.”

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market a hybrid like a conventional vehicle. The sales process is also different. And you need the credibility that comes with customers’ recognition that your hybrid cars are just as reliable, if not more, than your ‘normal’ cars. We’re now focused on bringing more emotion to our hybrid offering, playing not just the rational card but putting forward the peace of mind, the enjoyment of a different way of driving – and the fun, through our engagement in the World Endurance Championship with a hybrid.

BT: Consumers identify Toyota as green mainly because of the Prius. Does such a hero product make it harder or easier to position the rest of the business?

JJ: The Prius is a tremendous brand asset. For many people, it is ‘the’ green car. It has a long history, excellent brand recognition, and symbolises our early realisation that developing a car for the 21st century that would be 50 per cent more fuel efficient than a conventional car at the time, was one of the keys to our long-term success as a company. But Prius was only the beginning for us. Since then, we have developed our hybrid portfolio, aiming to have our Hybrid Synergy Drive powertrain available in every vehicle by 2020. To date, we have more than 23 hybrids for sale in 80 countries and regions worldwide. And between now and 2015, an additional 15 new or redesigned hybrids will be added, including a Fuel Cell hybrid car. So, hybrid is becoming synonymous with ‘the alternative way to drive’, whether it’s a B-segment Yaris, a C-segment Auris, or any of our Lexus vehicles. At the same time, we have improved our hybrid technology, following our principle of continuous improvement or kaizen. We are working on our fourth generation hybrid system, and with each of the previous generations, we’ve improved fuel economy and emissions by 10 per cent, improved output by 30 per cent, and decreased cost by more than two-thirds. Finally, we also brought hybrid to the World Endurance Championship last year, where we competed head-to-head with Audi – we finished a very respectable 2nd and 4th at this year’s Le Mans 24 Hours

race. Our hybrid technology is the basis for our entire map of the mobility of the future. In this map, you have small, pure electric vehicles for short distance driving in urban centres. In the middle are hybrids and plug-in hybrids, which offer excellent fuel economy and versatility of use, without any range anxiety. And at the other end will be hydrogen fuel-cell vehicles – they will ultimately offer the same range as conventional cars today, around 500 to 700 km, quick refuelling, and no emissions other than water vapour. Our hybrid technology underpins all these different solutions.

BT: Prius is a remarkable story – not least because you knew it would be a 20-year investment before seeing any return. Do you think Prius happened because of something fundamental about Toyota? Or could it have happened anywhere?

JJ: I’ve been working at Toyota for close to 18 years now, in various functions. Much has been written about, ‘The Toyota Way’, and our Toyota Production System. I would pick three elements, which make this company somewhat different: ‘Long-Term View’, ‘Challenge’ and ‘Perseverance’. I remember reading an interview with former Toyota Chairman Hiroshi Okuda in the French newspaper Libération, in 2002. He was answering a question about shareholder value and whether it was relevant for Toyota. He said

“one has to give back returns to shareholders, but also to employees and society as a whole. I would like for shareholders to obtain happiness, but long-term happiness. That is, for me, the only true corporate governance.” In other words, as manufacturers, we must focus on the long term and not be subject to the diktat of quarterly earnings reports. In everything I have ever done at Toyota, my peers, my bosses, my Japanese colleagues have always asked me: “what is your long-term plan?”

Challenge is equally important. It means “don’t be afraid to give yourself an ambitious target”. It’s OK if you miss that target ultimately – what matters is that by setting yourself such a difficult, almost ‘impossible to attain’ objective, you will move mountains in the process and achieve much more. It’s OK to fail, as long as your goals were worth it and you learnt something in the process. I think the Prius story is such a story: the leaders of the time had a vision – a fuel efficient car for the 21st century. They started working on Prius around 1993. They had many trials and tribulations, but they persevered with the challenge and eventually came out with the first Prius. Then, they did not stop: they kept on refining it, and with a bit of luck (Leonardo Di Caprio and Cameron Diaz’s appearance at the Oscar ceremony in a Prius did help a bit), it became a market success.

BT: Does Prius raise consumer and stakeholder expectations of Toyota across the board? Do you have to be the greenest company for everyone, in everything?

JJ: Today, customers are not just customers but also citizens. So when you make decisions, take actions or communicate, it’s important to be coherent. Toyota’s environmental focus is not just on developing and making cars with lower tailpipe emissions. We take a 360-degree approach, from design to purchasing to logistics and production, all the way to sales and after sales. Our environmental charter applies to all areas of the company. But it’s important not to be ‘green’ just for the sake of it. Our true

focus is on green growth. Without a sound business model, any green initiative won’t be sustainable. Take the example of EV. We’re ready with the technology, but the market doesn’t seem to be mature yet. In the current state of battery technology development, there are still many constraints such as high cost and low efficiency, which means limited range or increased weight and price. Customers aren’t prepared for that trade-off. So, we keep working on advanced battery technology. Meanwhile, we believe the plug-in hybrid is probably the most sensible solution for the next few decades if we want to make a significant positive environmental impact in the short term. We think it’s better for the planet to sell millions of hybrids and plug-ins than a few EVs, even if those are zero emission.

BT: Does the relentless consumer focus on cost make it harder to position what’s valuable about Prius and the eco-credentials of your vehicles?

JJ: The early adopters generally spend more to get the best environmental technology available. But you’re right, the average customer is only prepared to spend so much on a car. That’s a given. Brand value can help bring that up – the more desirable a brand is, the bigger the potential to reach a good sales price. Brand is about emotion – what kind of benefit, beyond the rational, does one get from the brand. The other component is cost – and it’s our job to bring it down. At the start of a new technology, incentives can and do help. But our business model cannot be based on them. So we work on bringing down the cost of our technology so that we can offer it at a competitive price – this is especially critical for a mainstream brand like Toyota. Today, you can buy a Yaris Hybrid for roughly the same price as a diesel equivalent, at a comparable level of equipment. We’ve reached a hybrid tipping point in Europe. Around 40 per cent of our sales of Yaris and Auris are hybrids, and one in four cars we sold in Western Europe so far this year is a hybrid. We believe that innovation, together with emotion, is a good recipe.

BT: How does the sustainability proposition you make to consumers and others vary across different markets? Can you be consistent?

JJ: It’s more a question of timing. Around the world we are recognised for two strengths – quality and reliability; and environmental technology. In developed markets, such as Japan, the US and Europe, environmental aspects are much more important societal issues and drivers of customer behaviour. In emerging markets, we still lean more on our quality and reliability reputation. But that will change – probably faster than we think – and when it does, we will be ready to deploy a range of environmentally-friendly vehicles in these markets. China is already signalling that it intends to encourage green mobility. We believe it is part of our responsibility as a global corporate citizen to provide clean mobility to the millions of future customers who will soon have access to mobility – otherwise, the environmental impact of the growth of automobile sales in the next 20 to 30 years will outweigh the benefits to those societies. We’re already producing Prius in China and we’ve recently opened and expanded an R&D centre there to develop vehicles for that market – even if at present, Chinese customers prefer conventional cars.

BT: With concepts like the Toyota home energy management system in development, it feels like there will be a big communications challenge in positioning Toyota as a provider of energy solutions rather than a car maker.

JJ: Viewed from Europe, Toyota is known mainly as an automotive company. But in Japan, Toyota is involved in several non-automotive businesses – housing, financial services, e-commerce, marine, biotechnology, robotics and afforestation. The home energy management system is a natural evolution of two areas of Toyota’s business: the upcoming rise in plug-in vehicles, and our housing business, which provides prefabricated homes equipped with solar panels. With the rise of pure electric or plug-in hybrid vehicle sales, the problem of managing peak power demand will be significant. So we’ve started developing smart homes, vehicle-to-home communication, and a smart data centre to monitor energy consumption and usage, weather conditions, and pick the best time to charge vehicles or using the energy stored in the car’s battery to power your dishwasher. Car companies will have to become providers of mobility in a broader sense in the future, and the demands on us will go beyond the pure automotive product. Partnerships will be an important part of tackling these technological challenges: helping us set-up new charging standards, as we are doing in Japan with other car companies; or helping us envisage how private and public transport will work together, as we will start doing in Grenoble next year; and helping us share the tremendous investments necessary to develop future technologies, as illustrated in our new partnership with BMW.

BT: You’re the world’s greenest brand, with the world’s best-selling hybrid vehicle. Where do you see Toyota in 10 to 20 years’ time?

JJ: We hope that we will be able to continue bringing smiles to our customers’ faces – this will be the result of many other things going right, and it will be our biggest reward. Whether we are Number 1 or not, is not our focus. That should be the result of being the best in quality, customer satisfaction, environmental technologies, and bringing value to our stakeholders.

PRIUS WAS ONLY THE BEGINNING FOR US. SINCE

THEN, WE HAVE CONSIDERABLY DEVELOPED

OUR HYBRID PORTFOLIO, WITH THE AIM OF HAVING OUR

HYBRID SYNERGY DRIVE POWERTRAIN AVAILABLE IN

EVERY VEHICLE BY 2020

WE TAKE A 360-DEGREE APPROACH, FROM DESIGN

TO PURCHASING TO LOGISTICS AND PRODUCTION,

ALL THE WAY TO SALES AND AFTER SALES

DIRECTIONS 2013 SALTERBAXTER

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DIANA VERDE NIETOFounder, Positive Luxury

Sustainability and luxury may sound like opposites, but the fashion industry is finding ways to make them complement each other, argues Diana Verde Nieto.Fashion, with its connotations of high consumption, novelty and rapid turnover may sound like the last place you’d look for true sustainability, particularly at the luxury end of the market where excess has been a major part of the offer. But like other industries, the brands behind luxury are facing up to the challenge of sustainability and the changing values of their customers. Luxury is being redefined. The ‘new’ luxury is a paired-down, less conspicuous version of its elder, lavish, bling incarnation. And along the way, it is reacquainting itself with its traditional values of timelessness, durability and exquisite craftsmanship – the new rules of luxury that any advocate of sustainability could get behind.

CSR has been a good start for their sustainability journey, but to reap the rewards of using sustainable methods, the luxury industry needs to communicate these efforts to the consumer in ways that suggest transparency and added value.

BADGES OF TRUST

For luxury goods brands, finding ways to bring sustainability into the proposition is still challenging, and as with other sectors, trustmarks are playing an increasingly important role. They are a way of letting the consumer know, at a glance, that a product comes from a brand they can trust, and an immediate way of communicating a company’s environmental and ethical standards.

There are of course hundreds of labels and accreditation programmes for sustainability, but they still tend to focus on limited aspects of how a brand operates. Fair Trade or the Rainforest Alliance focus on aspects of the supply chain and business model; other badges relate to energy performance or recyclability. My aim when setting-up Positive Luxury and our Blue Butterfly was to create an interactive trust mark that looks at a brand’s overall performance. The Blue Butterfly is awarded to brands that have a positive impact on both people and the planet, and we aim to guide the consumer away from inadvertently funding companies with poor sustainability performance towards more positive purchases.

The future for luxury brands is bound up in sustainability. They will not be described as ‘ethical brands’ as these characteristics will be inherent within every brand that survives. The choices made now by the luxury industry will determine who it is that sinks or swims.

Diana Verde Nieto is the Founder and CEO of Positive Luxury, positiveluxury.com

Under these new rules, two types of consumer are emerging and changing the way fashion works. One is the wealthy consumer who might previously have commissioned three £30,000 bespoke outfits per season, and who is now only requesting one, and making it work hard throughout the season by recycling it for different occasions, albeit with some new accessories. The idea of wearing the same outfit twice might have filled the contemporary fashionista with horror ten years ago, but now the taboo has lifted and it is becoming unsavoury to show such excess.

The second consumer profile is the Generation Y shopper: recession-riddled eco-educated young people who see thriftiness as their greatest asset. Flagrantly mixing high street with haute couture, these millennials are more likely to shop in sales and only drop large sums of money on statement pieces that boast versatility. They are also creating a new trend in consumer purchase in which heritage brands are disregarded for newer ‘clean-slate’ brands that are sustainable from the outset, use simple consumer-facing dialogue and because of their authenticity on digital platforms are seen as far more accessible and engaging.

COMMUNICATING THE NEW LUXURY

Despite these changes under way in the fashion industry, and the many initiatives focused on improving the social and environmental performance of supply chains, there is still surprisingly little information available to consumers on where their money goes and where the product comes from. But consumers are catching on, and recent incidents such as the collapse of the Bangladeshi garment factory have brought issues of transparency to the fore. As a result, we’re beginning to see higher consumer demand for products that are transparent and traceable. Companies such as De Beers diamonds are pioneering transparency that is as clear as their stones. With an entire website dedicated to their sustainability credentials,

managing their mining environment, their work ethic and maximising the value of diamonds to producer nations, consumers can purchase their diamonds knowing exactly where they have come from, the processes they go through and that their environmental impact is minimised. No blood-diamonds here.

With companies such as De Beers leading the way, others in the luxury sector are bringing their sustainability programmes out from the store room and into the shop window, and the consumer is being encouraged to dissect the product. Stella McCartney is innovating eco-products for the 2013 collection, including biodegradable shoes that decompose when composted, and faux fur made with over 50 per cent vegetable oil. Watchmaker IWC is launching its own corporate social responsibility website as an addition to its retail site. Fashion house Jaida Hay has a ‘Follow Your Garment’ feature online.

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KAI PETERSChief Executive of Ashridge Business School

What’s the connection between personal and organisational authenticity? Kai Peters explores.As companies pursue

purpose-based strategies for

sustainability, they face the very real challenge of

how to create working environments in which these

values are actually manifested. In seeking to create

shared sustainable value across an entire corporate eco-system, the interests of the entire supply chain and of all other stakeholders must be aligned.

This challenge is real and recognised. We have conducted a number of studies at Ashridge over the past five years in which we have surveyed chief executives around the world. In one survey of 200 CEOs, 76 per cent stated emphatically that it was important for leaders in their own organisations to have the skills, mindsets and capabilities to lead in a holistic manner, but that only 8 per cent believed that these attributes presently existed in their own organisations. In a follow-up

study with 800 CEOs, 88 per cent indicated that developing the required skills and abilities necessitated role modelling the desired behaviours and educating everyone in the stakeholder community appropriately.

The CEOs involved identified three broad clusters of skills needs. The first was context, including an understanding of customer needs, legislation, resources scarcity and competitive behaviour. The second was complexity – coping with ambiguity and trade-offs, learning from mistakes, and developing the capacities to deal with ethical dilemmas. The third cluster, connectedness, was about understanding diversity, developing a shared vision with stakeholders, and raising issues of responsible management with staff.

Identifying needs such as these is relatively simple, but meeting them is of course much more challenging. In a series of articles and most recently in the book, Steward Leadership, we have set out to identify both the enablers and stumbling blocks for achieving authentic, sustainable leadership.

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and biological processes, but through internal reflection and insight, and the rate of change is not predictable. As psychologist Angela Pfaffenberger puts it: “a certain type of person appears to be more likely to progress in development. Individuals who achieve higher ego states are likely to have higher intelligence, socioeconomic status and education. They are resilient, flexible, and more liberal. They show an inclination towards self-exploration, curiosity and experimentation, and they value novelty”. From our work, these latter individuals are more able to engage on a journey in which critical information is noticed, questioned, validated and utilised to challenge and ultimately change assumptions. This leads to ethical decision making, and true engagement with authenticity and sustainability.

So what does the research about personal authenticity mean for corporate or organisational level authenticity? First, it means that making sweeping statements about corporate level values without engaging with the leadership and staff throughout the organisation is a sure path to failure. Second, it means that while many people within an organisation can develop their levels of maturity and achieve higher levels of development, others will always struggle with more complex and sophisticated ethical and sustainability challenges. Lastly, and conclusively, it means that ongoing education, engagement and reflection with staff as well as with the critical organisational stakeholders and customers is critical to the development of sustainable, authentic organisational leadership and brand level communications. To be believed, the stories organisations tell must be true, consistent and authentic.

Kai Peters is the Chief Executive of Ashridge Business School in Hertfordshire. He is co-author, together with Kurt April and Julia Kukard, of Steward Leadership: A Maturational Perspective published by the University of Cape Town Press (2013). He also writes extensively on strategy, leadership and learning.

UNILEVER SUSTAINABLE LIVING PLAN

Unilever is pursuing authentic and steward leadership to create shared value for the organisation and society. An annual Sustainable Living Plan progress report sets out progress toward their 10-year strategy which aims to improve the health and well-being of a billion people and source 100 per cent of raw materials sustainably. Since these initiatives are driven both by a moral duty and a business opportunity, management development at Unilever is working hard on integrating shared value creation and sustainability throughout the organisation by, for example, encouraging R&D to innovate, and all employees to understand sustainability and to engage with their stakeholder communities including suppliers and consumers. A central component in this endeavour is the sustainable living lab, an initiative to build the debate and action both within and outside Unilever on the key challenges to sustainable living.

INTERFACE FAST FORWARD TO 2020

Interface designs, produces and sells modular flooring systems, with manufacturing locations on four continents and offices in more than 100 countries, and a vision to become ‘the world’s first environmentally restorative company’ by 2020. Supporting this ambitious endeavour, Interface’s ‘Fast Forward to 2020’ is a comprehensive education programme which has been running since 2004. Employees must have participated in certain levels of the programme, and where appropriate passed a graded assessment, to be eligible to be considered for promotion to more senior roles.

Interface facilitates a network of sustainability champions called Ambassadors, drawn from across all business functions and regions. Ambassadors act as a network of change agents within the organisation. They are offered regular inspirational sessions through the year, and are expected to develop their own sustainability projects, supported by an internal communications platform.

Level 1 is for all employees, embedded in the induction process and covering key issues around sustainability and Interface’s strategy and approach. Level 2 is a one-day programme with customised content for marketers, sales, operations, human resources and other functions. The focus of the programme is on building knowledge around sustainable development and what it means for the business. Participants focus on the personal question: ‘How do I contribute to Interface’s vision of being the world’s first environmentally restorative company by 2020 as an individual? What does this mean for my part of the business and my role?’ Participants must pass a test and complete an assignment, developing a proposal for a sustainability project, many of which have been implemented by the company. Around 50 per cent of staff have participated in Level 2, including all team leaders, all senior management, all sales, marketing and communications executives and all sustainability ‘Ambassadors’.

Level 3 is a two-day course for selected individuals, mostly from amongst senior staff and Ambassadors. Alongside further skill development, participants undertake their own research into future trends that will impact the business, and debate the complex choices that come from issues such as nuclear power or the role of business in alleviating poverty. Assessment is via an assignment and an assessed mock television interview, carried out and filmed by a tv journalist.

In Steward Leadership, we’ve set out a nine-component framework to provide a definitive perspective on what authentic, steward leadership looks like:

1. Personal Mastery: creating what you want from your life and work

2. Personal Vision: the purposefulness of personal direction and commitment to getting things done

3. Mentoring: paying attention to, and acting on, the needs and development of others

4. Valuing Diversity: seeking out and working with varied voices

5. Shared Vision: creating shared value with stakeholders

6. Risk-taking and Experimentation: openness to new ideas

7. Vulnerability and Maturity: understanding the limits of your knowledge and perspectives

8. Raising Awareness: communicating the centrality of sustainability

9. Delivering Results: action and not only talk

Different leaders and managers fall onto different points on a steward leadership maturity scale. A number of factors appear to be key to achieving greater maturity and a more holistic and authentic perspective. The educational theorist Jean Piaget developed a framework which investigates these issues. He found that as individuals mature in their understanding of their own internal worlds, their outlook with the external world matures as well.

Research suggests that the combination of normal life experience and biological maturational processes such as brain development and hormone development are very important, but plateau at a relatively conventional level.

Achieving significant levels of authenticity are driven not by external life experience

The authenticity literature has its conceptual roots in philosophy, humanistic psychology and positive psychology. Two important elements need to be highlighted from this body of work. First, while frameworks and policies are, of course, important, what gets done in organisations is something that is decided upon by managers – thus by individuals in the actual organisation. This means that corporate authenticity can only be built by developing a whole host of individuals who embody a holistic perspective. Secondly, authentic leadership or steward leadership means placing community and society ahead of the self. This is philosophically the exact opposite of so much of Western economic philosophy, which puts the pursuit of enlightened self-interest front and centre.

At a granular level, many factors that support authenticity and a sustainable perspective are inherently human. In another Ashridge study, this time of 210 MBA students who were asked to write about authenticity from their own experience, self-knowledge and reflection emerged as key. It appears that we simply know what the right thing to do is when we think about it. Respondents spontaneously identified confidence, compassion and trust, and openness and honesty as the preferred approach to the ethical situations in which they find themselves.

But the flipside of this simple recognition of the right thing is the tendency to ‘conform to the expectation of others’. Other significant stumbling blocks included the pursuit of material wealth, fear, and the influence of organisations and of the workplace. As individuals we seem to think the right thoughts and want to make the ethical decisions, but the workplace and the social environment of the organisation can be the primary blocks to authenticity.

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DIRECTIONS 2013 SALTERBAXTER

CREDIBILITY

Aligned strategy: is your sustainability strategy fully integrated into your business strategy? Do you publish an integrated annual report, and/or make direct reference to sustainability commitments within your core company profile, to underline that impression?

Clear purpose: does your sustainability strategy have a clear social purpose? Do short- and long-term targets support the strategy? Do you refer back to your overall purpose and vision across all platforms?

TRANSPARENCY

Credible targets: do you set out detailed targets for delivering your sustainability promises? Do you simply state performance or do you evaluate your achievements against previous targets?

Tangible action: do you set out a convincing action plan for achieving the targets you have set?

HOW AUTHENTIC ARE YOU?With increasingly complex value chains, growing pressure on resources and shifting stakeholder expectations, it may not even be clear what the right thing is from day to day. But some companies seem to navigate the difficult waters of authenticity with relative ease. To us, they do so by focusing on five key dimensions of both action and communication. But how does your business check out?

OPENNESS

Open leadership: is sustainability being driven at different levels of your company? Do your reports and online communications carry the voices of employees explaining how your sustainability strategy is part of their job, not just something for a CEO or presidential statement?

Engagement with stakeholders: does stakeholder engagement come across as a priority? Are there detailed examples of stakeholder engagement given? Do you give evidence of how you’ve responded to issues raised?

CONSISTENCY

Open conversation: are you using different media to reach out and share objectives and aims, experiences and achievements?

Aligned statements: is there a consistent message across all platforms? Are the same themes prioritised in your sustainability report, online, in social media and in your thought leadership activity?

UNIQUENESS

Defined ambition: is your stated aim unique, memorable, compelling? Is your aim to lead on a specific issue? Do the commitments you set out and your performance make a unique contribution?

Beyond reporting: reporting helps track performance. But are you helping to set the future agenda around your social purpose by developing thought leadership? Are you campaigning or raising awareness of specific issues, collaborating with NGOs or academics to advance thinking on the issues at stake?

No company is getting all this right, all the time, and as Directions 13 has explored, some of the companies that lead the world on sustainability still have some authenticity blind spots. But we believe more focus on the hallmarks of authenticity can help any company manage its real and reputational risk, improve its relationship with stakeholders, employees and consumers, and ultimately position it for commercial success.

To learn more about being authentic, visit salterbaxter.com

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DIRECTIONS 2013 SALTERBAXTER

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Our clients include: Absolut adidas GroupAllianzAnglo AmericanArcelorMittalBPBSkyBBUPAC&ACoca-Cola EnterprisesDMGTDe BeersFriesland Campina GlaxoSmithKlineHarrods

InterfaceLaing O’RourkeL’OréalLEGO GroupMaersk GroupMarks & SpencerMondelez InternationalMorrisonsNokia O2 / TelefónicaPhilipsReckitt BenckiserRSAStandard CharteredToyota Europe

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Salterbaxter works where business strategy, sustainability and creative communications meet, creating strategies and stories for some of the world’s leading businesses and brands. We help business perform better, communicate better and deliver better long-term outcomes. We call this Ideas for Better Business.

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2001 Trends in CSR reporting

2007 Cutting through the noise of the climate change debate

2003 Trends in CSR reporting

2009 Mapping the landscape of European CR

2006 Is CR in your blood?

2004 Trends in CSR reporting

2005 Best in show of this year’s crop

2002 Trends in CSR reporting

2008 Sustainability gets tough

2012 Profits from purpose

2011 Opportunity in the new age of uncertainty

2010 The Innovation Edition

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