Salterbaxter Directions 2008

trends in corporate responsibility 2007/08

directions the full report 2008

If you would like to find out more, please get in

touch:

Nigel Salter [email protected]

Louise Dudley-Williams [email protected]

202 Kensington Church Street London W8 4DP

Tel +44 (0)20 7229 5720 www.salterbaxter.com

We have a strongly held belief that most things could be made better – they just need better insight, brighter ideas, more creative thought. And so our offer to clients is all about creative re-thinking. Re-thinking their entire business proposition; re-thinking their branding, vision and values; re-thinking how they should approach corporate responsibility; re-thinking how they engage with their employees; re-thinking what the web can do for them; re-thinking how to communicate with shareholders.

This approach helps new ideas flourish and breaks boundaries. It sheds new light on old problems and turns some new problems inside out.

Most importantly it helps clients do things better.

The main areas we focus our attention on are: – Brand and reputation – CR/Sustainability – Corporate reporting – Employee engagement – Digital communications

Our clients are extremely varied and include FTSE 100 companies; major multinationals; some of the world’s most exclusive brands; law firms; private equity firms; world-leading educational establishments and independent, entrepreneurial businesses.

CHINA It’s not as blackand white as a panda Page 12

CREDIT CRUNCH Will corporate responsibility crack under the strain of the credit crunch? Page 16

CoNTENTS

09/ Dick SearleChief Executive, The Packaging Federation

11/ Alasdair JamesDirector of Waste, Recycling & Packaging, Tesco plc

13/ Leo Horn-PhathanothaiNational Coordinator, UK-China Sustainable Development Dialogue, DEFRA

04/ Dr Peter CotgreaveDirector of Public Affairs, The Royal Society

05/ Chris CarterDirector of Corporate Affairs, British Sugar plc

06/ Sagarika ChatterjeeAssociate Director, F&C Asset Management plc

BIoFUELS Thirst for fuel vs hunger for food Page 02

17/ David GraysonDirector, Doughty Centre for Corporate Responsibility, Cranfield University

18/ Barry ClavinEthical Policies Manager, The Co-operative Group

20/ David GoddenChief Operating Officer, Land Securities Trillium

ANALYSIS Are businesses making the

shift from CR 1.0 to 2.0? 2

26/ Top 50 European companies

And if you are looking for the analysis tables you usually find at the end of Directions, these are now online at: www.salterbaxter-rethinktank.com /directions/analysis

PACKAGING Are we suffocating under the weight of the packaging problem? Page 08

We are launching the Re-think tank, an online forum for everyone to share their views. Join the debate at:

salterbaxter-rethinktank.com

Cover photography by Lee Funnell at www.graphicphoto.com

Page 08–11 photography by Liam Bailey

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Copyright © 2008 salterbaxterCopyright © 2008 salterbaxterSALTERBAXTER DIRECTIoNS 2008

01

For many years now we have seen businesses starting to do their CR housekeeping. Some big and some small, there have been leaders and criticism of those that are lagging behind. But now things are getting tough. 2008 saw some really hard to handle issues rise to the surface – and it’s not as if tackling sustainability isn’t a challenge in the first place. This year we sense a clear difference: these are issues that aren’t just hard to handle, they are complex, full of paradoxes and beset with conflicting agendas making it really tough for businesses to develop clear strategies or tactics to deal with them. It’s almost as if the work to date has just been the groundwork for the real challenge ahead – and not all businesses will be ready to face up to the scale of this challenge.

To mirror the online world, it’s as if CR 1.0 is over. This is the brave new world of CR 2.0.

So for this year’s Directions we have invited comment from specialists and businesses who are battling with these conflicts, trying to find a way through the maze of economic, social and environmental pressures involved. There are uncomfortable trade-offs at every turn and even some generally held beliefs exposed as myths. The issues we put in the spotlight are: Biofuels – saint or sinner? Packaging – scourge of the developed world or energy and waste saviour? And China – derailing global sustainability or alleviating poverty and implementing world class environmental technologies? Plenty of debate there.

But these issues cannot be debated outside of the context of the economic climate we are operating in – a tough issue itself. So we have also invited discussion on the topic “Is corporate responsibility going to be smashed by the credit crunch?”

To find ways forward businesses need to be communicating about these big issues and inviting stakeholders in to help create solutions – it’s going to be incredibly difficult for them to work this out on their own. But are they ready, willing or able? It’s going to take a shift in their approach from focusing on CR housekeeping to broadening their outlook to true sustainability and how they function amongst shifting economic, environmental and social agendas all around them. This is the shift from CR 1.0 to 2.0 and we’ve researched what the biggest 50 companies across Europe are doing to see if there are any indications of change. We hope you find it illuminating.

We’ve thrown down the gauntlet on how businesses need to engage in the toughest of sustainability issues. And as part of the debate we have launched the Re-think tank. This is a place where everyone can air their views, discuss possible ways forward, find information and network to find partners who are tackling the same things. Discussion and debate is essential for progress, so log on to www.salterbaxter-rethinktank.com to have your say.

NIGEL SALTERDIRECToR,SALTERBAXTER

LUCIE HARRILDhEAD of CR PRACTICE,SALTERBAXTER

SALTERBAXTER DIRECTIONS 2008

Five hundred million cars, one planet. our thirst For carbon intensive Fuels means something has to change. is it possible that bioFuels still hold the answer?

every second Five people are born and two people die. with an extra three mouths a second to Feed, can we aFFord to lose crop growing land to bioFuel production?

02/03

hunger For FoodFor Fuel

people in the world6.7 billion

vehicles on the road531 million

During 2008 we’ve seen biofuels go from the answer to our prayers on transport and climate change, to the pariah of the world’s food supply and agents of rainforest destruction. So which one are they? Well it’s just not that simple.

Crops that take over food-growing land, or cause the clearing of our precious rainforest carbon sinks can’t be a direct substitute to fossil-based fuels. But is that the end of the road for biofuels? What are the alternatives? And after the early rush of enthusiasm, what should a business do with commitments already made? Should others continue to introduce biofuels into carbon management programmes and green transport policies? With a changing agenda, knee-jerk reactions to this issue won’t do the business or the agenda itself any good. But it’s not clear which way to turn – our three contributors shed some light on how they see this issue developing.



04/05

dr peter cotgreave

DireCtor of PuBliC AffAirS, the royAl SoCiety

energy is one of the biggest issues in the uK. how do we meet our growing energy needs while also tackling climate change and doing all of this in a secure environment? it is an incredibly complex problem, yet if you are to believe the hype of various lobby groups you could be forgiven for thinking it is not. Soundbite campaigning has become the order of the day, with each technology in turn pitched as a silver bullet or a catastrophe with ‘evidence’ to back up the case. in this environment it is difficult for policy-makers to make rational decisions based on an assessment of all the evidence.

the current debate on biofuels is a classic example of this. We have seen biofuels presented as a totally green alternative to fossil fuels and massive subsidies thrown at specific crops in some countries. We were then told that biofuels were the main reason for global food shortages and rising prices. the fact is, like most things, it is never that simple. Assessing these fuels is a complex task made even more complicated by the diversity of products that fall under the biofuels banner.

it is this diversity that makes it foolish to decry the technology and call for blanket moratoria. We should be looking to see what practices in the industry are causing problems and seek to replace them with good practice that is also common.

these good and bad practices do not only relate to what crops are being used. We also need to look at where the crops are being grown. Are they displacing food crops, are rainforests being cleared to grow them, can they be used to restore degraded land, are people being exploited in the farming of them and many other factors?

in relation to the increase in global food prices caused by biofuels we have seen estimates that range from 3% through to 75% and the lobbyists on all sides will choose the numbers that best fit their

the considered approach to biofuels technology taken by the uK and eu so far offers hope for the future. Policy must provide industry with a clear way forward so that long-term investment can be directed with confidence to ‘good’ biofuels. industry must in turn ensure that it is responsible in its investment, ensuring that supplies are properly assessed for their overall impact. those who chase the quick and easy profit could destroy the biofuels industry and deprive us of a useful tool in tackling climate change and energy issues.

chris carter

DireCtor of CorPorAte AffAirS, BritiSh SugAr PlC

Biofuels are being introduced throughout the world to address two main issues: climate change and fuel security. Because they are produced from renewable sources like plants or waste materials, biofuels can make a contribution by avoiding burning fossil energy reserves and lessening dependence on oil imports. the relative importance of these two objectives depends where you are. in Brazil and the uSA, biofuels programmes have been introduced mainly for fuel security reasons. in Britain the main driver is climate change, although continued high oil prices may increase future emphasis on fuel security.

Both the eu and uK regard climate change as a key policy issue, and have set ambitious goals to address it. the uK has taken a lead in europe by agreeing a long-term target to cut emissions by 60% by 2050, and supported the eu heads of State

preordained dogma. What is required is rational debate based on all the available evidence. the royal Society recently published a report based on a year-long study that concluded that biofuels have real potential but that we must have the systems in place to ensure that investment is put into the most efficient and sustainable types and practices.

We are at a critical point in relation to biofuels policy. the uK and eu have suggested adjusting the targets, to allow time to gain a greater understanding of the impacts of these biofuels. they have recognised the problems but have not forgotten the fact that there are examples of ‘good’ biofuels which can play an immediate and important part in helping to tackle climate change without triggering other crises.

Biofuels must be part of a sensible debate about energy that looks at all the technologies. that debate must include energy efficiency and seek to address the need to meet energy demand and effectively tackle climate change while not creating other serious problems.

Science and technology underpin most of our lives. electricity, transport, computers, phones, iPods, medicines – without science we would have none of these things that we take for granted. it also offers us the potential to solve many of the problems that we face. Whether it is meeting energy needs, tackling climate change or feeding the world – we need to make our judgements and our policy based on real evidence about the risks and benefits.

12%increase in UK transport emissions, and continuing to rise.

agreement in March 2007 to introduce a renewable energy Directive with binding targets for renewables and biofuels.

transport accounts for one quarter of all greenhouse gas emissions. however, transport is the only significant sector which has not shown a reduction in emissions against the 1990 Kyoto baseline year. on the contrary, transport emissions have increased sharply – by 12% in the uK – and are continuing to rise. the conclusion is clear: unless transport emissions are brought under control, longer term climate change goals will be jeopardised. But can biofuels help? the answer is yes provided they are produced efficiently and sustainably.

on 22 November 2007 lord rooker, on behalf of DefrA, opened the uK’s first bioethanol plant at British Sugar’s Wissington facility in Norfolk with a capacity of 55,000 tonnes/year. this delivers a greenhouse gas emissions saving of 71% reported under the uK’s renewable transport fuel obligation (rtfo), compared to petrol. it is also highly sustainable. Detailed standards governing soil, air, water, biodiversity and social operating practices are set out in a sustainability manual, available for public scrutiny.

At a time when biofuels are under the spotlight, this British success story demonstrates that biofuels can make a positive and immediate contribution to tackling the urgent issues of transport emissions and fuel security.

government support is needed to introduce, and enforce, performance standards in the rtfo and renewable energy Directive to ensure that biofuels – from all sources – deliver what they claim to.

To have your say go tosalterbaxter- rethinktank.com/

directions/ biofuels

BIOFuElS

can bioFuels maKe a positive diFFerence? is their impact really understood?

We are at a critical point in relation to biofuels policy. The uK and Eu have suggested adjusting the targets, to allow time to gain a greater understanding of the impacts of these biofuels.

Can biofuels help? The answer is yes provided they are produced efficiently and sustainably.

55,000tonnes per year is the capacity of the UK’s first bioethanol plant.


3 reasons to thinK hard about bioFuels – unless the industry taKes action this year

06/07

sagariKa chatterjee

ASSoCiAte DireCtor, f&C ASSet MANAgeMeNt PlC

in 2006, the capital markets witnessed a series of initial public offerings (iPos) of biofuel companies. Promising high returns, energy independence and a way to reduce greenhouse gas emissions from transport, the fledgling biofuels industry shot to prominence in the City as the latest hot investment. two years on, chastened by a series of profit warnings that have disappointed investors, the biofuels industry has been stunned by an aggressive political backlash, led by environmental campaigners, that has steadily snowballed into a chorus of concerns voiced by united Nations’ food and agriculture officials and the organisation for economic Cooperation and Development (oeCD).

for investors like f&C, who seek to invest in climate change solutions, first generation biofuels producers have become unattractive as investment opportunities. Biofuels present political risks, with speculation that governments may reverse current biofuels-related targets and incentives, and exposure to commodities markets means profit margins are squeezed. in looking at any company involved in biofuels, our three main concerns are:

1 are the carbon savings genuine?Brazilian ethanol, derived from sugarcane,

produces less greenhouse gas emissions than conventional transport fuels, but uS corn-based ethanol has emerged as energy intensive; and in some cases produces more greenhouse gas emissions than are saved. A further concern is the extent to which uS corn-based ethanol contributes to food price inflation; faced with government subsidies for ethanol and protection from cheaper Brazilian imports, uS farmers have switched from producing food crops to producing crops for ethanol. environmentalists have also linked biodiesel based on palm oil with the destruction of tropical

savings than many first generation biofuels. however, second generation biofuels are far from commercialisation and still in the research and development stage, with virtually no opportunities for an investor such as f&C to invest in publicly listed second generation biofuels companies.

f&C’s analysis is that the biofuels industry partly has itself to blame for the political backlash. Companies underestimated the supply chain environmental risks involved in feedstocks for biofuels; they miscalculated political concerns about food security and food price inflation; they mistakenly believed that governments would turn a ‘blind eye’ to negative impacts when devising biofuels targets; and they failed to work together

rainforests and peat bogs – these are critical carbon sinks and in need of protection to mitigate the impacts of climate change.

2 Is the company exposed significantly to political risks? Biofuels crops have been criticised for competing with food crops and contributing to food price inflation, severely impacting the food intake and nutrition of low-income people in emerging markets. Biofuels were discussed at the uN’s recent World food Summit, but countries were unable to reach any agreement on the extent to which biofuels contribute to food security concerns and failed to agree on public policies for tackling this. it remains unclear to f&C to what extent biofuels have contributed to food price inflation, with potential contributory factors including land availability, population growth and speculation. one thing is clear – the lack of agreement among global public policy-makers increases political uncertainty for investors. Meanwhile, campaign groups have questioned how smallholder farmers will benefit from biofuels, and allegations of human rights abuses have surfaced; including forcible removal of farmers to make way for biofuels crops in Columbia, and of slave labour on Brazilian sugarcane plantations.

3 are second generation biofuels on the horizon? oil and gas majors, including BP, Chevron and total, have made investments in second generation biofuels (e.g. lignocelluloses), which may have lower sustainability impacts and offer higher carbon

to find industry solutions to sustainability challenges.Biofuels could be a real climate change solution, but investment must be put into the most energy- efficient and sustainable types.

governments should not throw out biofuels targets, but instead review how incentives and public policies can encourage a sustainable biofuels industry. in addition to Brazilian ethanol, there are other biofuels that offer carbon savings, including biodiesel based on used cooking oil and ethanol from municipal waste. greenergy international is among a handful of biofuels producers managing carbon savings and sourcing impacts proactively; it buys ethanol from Brazil, palm oil from members of the roundtable on Sustainable Palm oil and soy from members of the roundtable on responsible Soy.

in spite of the obstacles, it may yet be possible to create a sustainable biofuels industry. to rebuild public confidence and to deliver sustainable investment returns, the biofuels industry must take action in 2008. f&C encourages companies and government to take the following four key actions before the year end:

1 Governments need to set a clearer political and regulatory framework for a sustainable and competitive biofuels

industry, and remove European and US trade barriers such as tariffs on Brazilian ethanol imports. Governments need to promote investment in new technology, as this will be key to the industry’s success. Biofuels policies must enhance climate change prevention strategies and subsidies should be linked to achieving real carbon savings.

2 The biofuels industry needs to work more closely with governments to promote political objectives on carbon savings,

technology, food prices, food security and international development.

The industry also needs to encourage governments to support easier distribution of biofuels.

3 Global industry-wide standards must be implemented to ensure biofuels have a net positive impact on ecosystems.

This needs to happen fast, as biofuels producers face a profit margin squeeze due to rising commodity prices, and many are sourcing low-cost feedstocks regardless of the long-term environmental damage they cause. The new Roundtable on Sustainable Biofuels presents an opportunity for this.

4 The industry must engage more actively in the public debate about biofuels and demonstrate transparency on carbon

savings and sourcing impacts. The biofuels industry stands at a crossroads and must collectively address public concerns. If companies do not convince the public that they will move towards sustainable business models, they may find that governments change course on the targets and subsidies that are driving their industry’s growth.

FOuR KEy aCTIONS TO CREaTE a SuSTaINaBlE BIOFuElS INDuSTRy

Biofuels producers face a profit margin squeeze due to rising commodity prices, and many are sourcing low-cost feedstocks regardless of the long-term environmental damage they cause.

Biofuels could be a real climate change solution, but investment must be put into the most energy-efficient and sustainable types.

To share your thoughts go tosalterbaxter-

rethinktank.com/directions/ biofuels

BIOFuElS

SALTERBAXTER DIRECTIONS 2008 SALTERBAXTER DIRECTIONS 2008

ARE WE SUFFOCATING

UNDER THEWEIGHT OF THE

PACKAGING PROBLEM?

It has to be said, packaging gets a lot of bad press. Whether it’s plastic bags at supermarkets or over-packaged items using an array of plastic and cardboard, most people have a pet hate linked to packaging. Landfill is full of it, recycling rates aren’t climbing quickly enough – and nobody wants rubbish in hedgerows or on beaches. It feels like we are suffocating under a mountain of packaging waste.

But is it really that simple – is packaging really the scourge of our society? Would we be better off without it? Should other consumer issues be getting more attention? The paradoxes within the packaging debate make it difficult for businesses to explain where efforts should be focused. We’ve asked Dick Searle, Chief Executive of The Packaging Federation and Alasdair James, Director of Waste, Recycling & Packaging at Tesco plc to drill a bit deeper into the packaging paradox – waste creator or waste saver?

Where did all this packaging come from? 50 years ago very little of the packaging that exists today had even been invented. As the affluence of the consumer society increased dramatically, there was a seismic change in the variety of packaging available in all types of materials but particularly in plastics. This was driven by customer demand for a wider range of products and convenience and led to the explosive growth in supermarkets (which wouldn’t exist without modern packaging) – accompanied by moves to weekly shopping as storage facilities in the home developed and packaging enabled product protection including vastly extended product lifetimes. Many brands and sectors were also ‘created’ and defined by their packaging.

Overall, our packaging ‘consumption’ in the UK puts us at number seven in the EU league table and our growth per head is one of the lowest – indeed in the last seven years, packaging growth at 3% is less than one fifth of GDP and consumer spending growth over the same period.

So what are its real environmental impacts? Packaging is highly visible, particularly once it is used. It receives an enormous amount of media and political focus – at a level wholly disproportionate to its true impact. Less than 20% of household waste is packaging and the amount of packaging going to landfill is less than 3% of total landfill. Its carbon footprint is less than 2% of the UK’s footprint and the carbon impact of the wastage that it prevents would be much higher than this figure. The growing use of plastics for load wrapping has also enabled transportation economies as lighter loads are moved.

The whole issue of the material used is highly complex with the first consideration always that the packaging works. Environmental impact covers a range of issues including carbon footprint,

THE PARADOX OF PACKAGING

DICK SEARLE

chIEf ExEcUTIvE, ThE PAcKAGInG fEDErATIOn

So is packaging as big an issue as consumers, the media and politicians seem to think? Particularly at a time when food prices and security of supply are a major issue?

ENVIRONMENTALSAINT OR SINNER?

08/09

SALTErBAxTEr DIRECTIONS 2008 SALTErBAxTEr DIRECTIONS 2008

recyclability, ‘sustainability’, replenishability and weight. not one of these should be the sole determinant of the material used. It is the overall net environmental impact that has to be assessed – providing the pack functionality is correct.

contrary to popular belief, the whole packaging supply chain has been working for decades to minimise the impact of packaging. Most recently, the focus has been on primary packaging but a substantial amount of packaging is used for actually getting the goods into retailer outlets and is never seen by consumers. And most of what is seen as excessive is more to do with gift experience or retail methodology including theft minimisation. The problem is that most consumers look at used packaging with little thought for the role that it’s played in getting goods safely from producer to point of usage and the role it continues to play in preserving products until they are used. Arguably, the biggest area of criticism is fruit, vegetable and meat packaging in supermarkets (mostly in plastics) and yet this represents just 1% of all packaging used. What consumers don’t see is all the packaging used to get goods into store which are then sold loose. A recent survey by one retailer showed that more energy was used in ‘loose’ apples than those pre-packed in fours. And another retailer saw wastage levels double when all their fruit was sold loose – and the environmental impact of that waste was far greater than that of the packaging ‘saved’. And what about all the focus on recycling – and should we countenance the remainder being put into landfill? The packaging industry welcomes the use of recycled materials but the availability of these is constrained by the quality of recyclate currently delivered from the household waste stream. consumer concern is primarily prompted by the apparent lack of facilities in many areas for the collection of waste packaging. The extent to which plastics should be recycled in the UK is a matter of considerable debate – particularly in the context of what makes most environmental sense. Our performance in using unrecyclable packaging waste (mostly plastics) for energy production is one of the poorest in Europe so we shouldn’t be sending to landfill those materials that could be used to generate energy. There is an urgent need for more joined-up thinking between local authority, industry targets and improvements in packaging recycling. So is packaging as big an issue as consumers, the media and politicians seem to think? Particularly at a time when food prices and

security of supply are a major issue? A recent survey by one retailer discovered that twice as many of its customers were worried about ‘excessive packaging’ as were worried about global warming! As a result of modern packaging and distribution methods, food waste in the UK is 3%, where in less developed countries like russia and India, food waste is +40%. With food supply, security and cost at the forefront of most consumers’ minds, packaging is playing a vital role in minimising waste and maximising availability, choice and value. The Government’s obsession with ‘one-trip bags’ as an environmental menace and a totem of the throwaway society is another example of getting it wrong. True, they are very unsightly as litter but they don’t throw themselves away – people do it! Prompting behavioural change is good but leading the public to believe that bags are a major threat to the environment is not – it trivialises a very important debate. A recent Government advertising campaign pointed out that 40% of carbon emissions were linked to household activities such as car use and home heating – massive contributors to the UK’s footprint – and massively more than that of packaging. If the Government wants to see a serious reduction in consumers’ carbon footprints, it needs to stop trivialising the message by focusing on issues like packaging.

As long as consumers want to buy the widest range of goods all day and every day, there will be a need for modern packaging. Without it, there would have to be a return to living styles of 50 years ago. There would be no supermarkets, much less choice, vastly increased product wastage and a general return to austerity experienced only by those of us of more advanced years! The packaging supply chain will continue, as it has for many years, to strive to minimise the impact of packaging whilst continuing to provide the wherewithal for consumers to live as they do. Life is about choices and as long as consumers choose to live as they do now, modern packaging will continue to be an integral and necessary part of their lives. Whether packaging is a ‘Saint’ or ‘Sinner’ will be, like beauty, in the eye of the beholder. But, as a major contributor to the way in which society functions, it’s difficult to see many products which have made a more significant change to consumer lifestyles.

ALASDAIR jAMES

director of waste, recycling & Packaging, tesco Plc

it sometimes feels as if packaging carries the weight of the nation’s environmental ambitions on its shoulders: if we can banish it, we will be cured from every eco-ailment around. of course, this simply isn’t true. without packaging, we would either have to revert to shopping patterns last seen in the 50s or watch climate change accelerate as the increase in food waste sends methane levels soaring.

However, this highly tangible example of waste is important to our customers and, as a responsible – and responsive – retailer, we are doing what we can to reduce it.

we have approached the problem by introducing a simple check-list which allows us to make the best decisions for the environment.

1 Does it do its job? it hardly needs saying but the whole point of packaging is to keep a product in peak condition until it has reached the customer’s home or been consumed. this is why, despite some vocal opposition, we still sell soft fruit in sturdy plastic trays. without them, millions of strawberries, peaches and avocados would wind up in the bin.

2 Can we use less of it? we spend £600m every year on packaging so it is in our interest to keep on finding ways to reduce what we use. this can be a simple case of light-weight wine bottles and tin cans, or rethinking how we package a whole range. last year, we dropped bulky blister packs from our electrical products and used shrink wrap instead. we saved 72 tonnes of mixed packaging as a result.

3 Is there a better material? once we’ve thought about the perfect design, we can think about the best material to make it from. we are trying to increase the amount of recycled content in the materials we buy. for instance, we now sell our freshly baked buns and cakes in clear plastic boxes made from 50% recycled Pet.

4 Can we reuse it? Packaging and recycling should always be considered together. as the Uk government continues to build a coherent recycling infrastructure, we can support them by choosing to use packaging that most councils accept for recycling – such as Pet – over materials like PVc which few can handle yet.

5 What’s its carbon footprint? when thinking about how you pack a product, it pays to look at the big picture, not just the product in isolation. we’ve done a great deal of work recently to understand carbon footprints and know that, while packaging typically makes up a small part of the overall footprint, there are opportunities here to make a real difference. we now receive new world wine in barrels and bottle it ourselves in this country to save thousands of tonnes of glass from being shipped half way round the planet. this new approach is cheaper, more efficient and much better for the environment.

By 2010, we aim to have reduced the packing on all the products we sell by 25%. it is a stretching target but, by stating our ambitions clearly, we know that everyone in our business – and in all those businesses that supply us – can appreciate what we are trying to achieve.

the real challenge now is to communicate to our customers the reductions we are making and why the packaging that remains is essential, and not the whim of unthinking manufacturers or retailers. we must get better at explaining why strawberries sold in a plastic tray are likely to be greener than those without, and we must help them to embrace innovations that may not feel quite right first time, like wine sold in cartons or shower gel in pouches.

there is still a lot of work to be done but it is work worth doing – and our customers will thank us for it.

PACKAGING

The problem is that most consumers look at used packaging with little thought for the role that it’s played in getting goods safely from producer to point of usage.

Whether packaging is a ‘Saint’ or ‘Sinner’ will be, like beauty, in the eye of the beholder.

Householdwaste

of household waste is packaging

Less than

20%

Packaging

of the Uk’s carbon footprint

Less than

2%

Food waste

in the Uk’s supply chain

Only

3%

Is fresh thinking needed to prolong our shelf life?Without packaging, we would either have to revert to shopping patterns last seen in the 50s or watch climate change accelerate as the increase in food waste sends methane levels soaring.

Best before:Waste:Energy:

Price to pay:

Better than before packaging? Would increase dramatically without packaging? Lots wasted on the wrong issues?

Potentially high?

5

To read about M&S’ view go tosalterbaxter-

rethinktank.com/ directions/ packaging

DITCH PACKAGING?NOT AN OPTION

10/11

SALTErBAxTEr DIRECTIONS 2008 SALTErBAxTEr DIRECTIONS 2008

ENVIRONMENTAL DEGRADATION vs ECONOMIC GROWTH IN CHINA:

IT’S NOT AS BLACK ANDWHITE AS A PANDA 80% of the world’s zips and toys

are produced in China YET 58% of Chinese exports come from foreign-invested enterprises

10 million people with no access to electricity BUT by 2020 there may be 140 million cars on China’s roads

The US produces 19 tonnes of CO2 per capita BUT China produces only 4.7 tonnes

106 billionaires in China YET there are 300 million people living below the poverty line China is now building 2 power stations every week BUT it is set to become the world’s largest producer of wind power by 2020

A growing economy

BUT a damaged environment

12/13

LEO HORN-PHATHANOTHAI

NatioNal CoordiNator, UK-ChiNa SUStaiNable developmeNt dialogUe, deFra

China’s environmental crisis has caused much public concern in the West. this is understandable: as the world’s top emitter of greenhouse gases, China’s domestic environmental problems have global impacts, and therefore should concern us all.

but public debate has often been one-sided and vindictive: politicians and the media alike have over-indulged in vilifying China as the number one global eco-delinquent. this narrow typecasting of China as villain is fundamentally misleading and blinds us to the opportunities that China’s transformation presents us with.

China’s environmental ills have been widely documented and reported on. many of the dizzying statistics about China’s air and water pollution, its acquisition of natural resources abroad, and its

When you look at the facts and figures, China’s development rate can be mind boggling. On the one hand, millions are benefiting from an improving economy and opportunities. On the other hand, millions are locked in poverty and oppression and the environmental cost of that developing economy is almost catastrophic.

So how do foreign, responsible business investors reconcile their role working with arguably the most important economy in the modern world, which is also a country of contradictions? there are no easy answers, but leo horn-phathanothai, National Coordinator for the UK-China Sustainable development dialogue, deFra, discusses the changes in China.


Export trade rather than

domestic consumption is driving

China’s growing pollution

China was responsible for

80-85% of global poverty

reduction in the last 20 years

AND the average life expectancy is 72

1.3 billion people live in China

ChINa 14/15

impacts on global commodity markets are well known, and will not be repeated here. Suffice to say that China’s environmental crisis is real and it is planetary in scale.

as a resident of beijing, i am reminded of this almost every day as i breathe in the thick soup of cough-inducing urban smog. it is worth recalling however that air pollution is not a modern Chinese invention: not very long ago (in the winter of 1952) the ‘london fog’ claimed the lives of thousands of people. if one could peer back in time from the london eye, the view in the 1950s would not have been worth the ride!

the broader point here is that China is in the midst of its industrialisation drive, and nowhere has this kind of transformation been a clean one. by 2015 China will have completed its first round of industrial modernisation, by which time it will have reached a level of economic development comparable to most western countries in 1960. in the sixties the environmental movement had only just started to emerge in the US.

in comparative terms the Chinese government is responding much sooner and resolutely to the environmental problems caused by industrialisation. the government’s macroeconomic plan for 2006-10 is the nation’s first to focus on a comprehensive range of sustainable development priorities. China is also serious about meeting the international commitments it has made. the recent White paper on environmental protection in China reaffirms China’s commitment to sign and ratify international obligations. Under the montreal protocol, China has already adopted more than 100 policies and measures to reduce ozone-depleting substances (odS), accounting for half all odS eliminated by developing nations.

Underlying all this is the reality of global interdependency. this interdependency is ecological as well as economic. China is the global manufacturing hub of the world. export trade rather than domestic consumption is driving China’s growing pollution and resource demands. the average Chinese person in fact consumes very little: 48% of Chinese gdp goes to savings. on the other hand, China is the world’s third largest exporter, after the United States and germany.

Significantly, most of China’s exports are primary goods or manufactured products that create heavy pollution and require intensive resource uses. a whopping 40% of China’s energy use goes into its exports. With tighter environmental regulation in the West, the manufacturing of many energy- intensive goods has shifted to China. this means that the West has effectively outsourced much of its energy consumption and pollution often to facilities with lower efficiency and environmental standards in China.

in short, we are getting all the ‘goods’ at a cheap price, while China absorbs most of the ‘bads’ such as pollution and a depleted environment. responsibility, clearly, is shared.

the Chinese government has set specific targets for environment conservation in its current five-year plan, including reduction in energy intensity by 20%, reduction in the emission of major pollutants by 10%, attainment of 20% forest

all this is significant because it means that China has the potential to be a major positive influence on the international scene. by dint of its sheer market size, whatever technology China adopts is likely to become an industry norm. China will be an increasingly important contributor to the setting and protection of global standards. as a heavyweight in global trade and environmental negotiations, China will have a strong vested interest in creating predictable international environmental rules under which its businesses operate, and under which its own goods and services are traded.

there is of course an important moral dimension to the debate that needs to be taken into account. alongside pollution and environmental depletion, poverty reduction has been the most notable output of China’s rapid growth. indeed China has rendered a great service to humanity: without her we would be nowhere near achieving the millennium development goal of halving poverty in the world: China has been responsible for 80-85% of global poverty reduction in the last 20 years.

China’s per capita ecological footprint is still low, at 1.5 global hectares per person, compared to a world average of 2.2, a whopping 9.7 for the United States and 5.6 for the UK (according to the WWF). We should be fair. economic growth is fundamental to China’s future and China has a right to develop.

coverage rate, and treatment of 70% wastewater and 60% residential garbage in urban areas by 2010. these objectives are backed by a raft of measures designed to mobilise massive investment and knowledge transfers from the private sector. these cover legislative change, fiscal and financial incentives, regulatory reform, public private partnerships, training and education, and subsidies to research and development.

perceptive investment analysts such as morgan Stanley’s Stephen roach see in these changes signs of a new ‘commodity-lite’ model of development in China, “in effect retrofitting China’s commodity-guzzling production platform with more commodity-efficient technologies”. the government is indeed stepping up its investment to support this economy-wide environmental upgrading.

the environmental protection industry in particular will benefit from targeted programmes of support aimed at building up specific market segments. Key industries benefiting from policy support include water treatment, air purification, natural gas, hydropower and solar power. these market segments have huge growth potential. deutsche bank predicts the growth of demand for water treatment, waste gas treatment and natural gas will reach 20% per year and that for solar power will be as high as 35% per year.

thus China has become a global laboratory of change and an incubator of technological, design and policy innovations.

We can point fingers and cry foul play, but we’ll have much more to gain from constructive engagement with China. China is hungry for the technology, investment and know-how needed to remedy the damaging consequences of economic growth. responsible governments and smart businesses should see vast opportunities in this.

In short, we are getting all the ‘goods’ at a cheap price, while China absorbs most of the ‘bads’.

On a more upbeat note, China’s environmental crisis is also presenting huge commercial opportunities that the international business and investment communities are just waking up to.


directions/ china


16/17

minutes”. And – one might add – it will then take far longer to rebuild than it did to establish in the first place.

In contrast, in the tough economic conditions that we are likely to experience for several years at least, businesses are going to be looking for every means possible to differentiate themselves from competitors; and to make themselves more attractive to customers and talented employees. And, contrary to popular misconceptions, responsible business can save a firm money – or even make money – rather than necessarily having to create extra costs.

Furthermore, employees whose loyalty and commitment to ‘go the extra mile’ will be even more important to help businesses to get through the lean years, will be de-motivated by any perceived backsliding on the corporate responsibility commitment. Doing good in the good times takes vision. Sticking with it in the tough times, takes vision and determination.

Of course, those companies who do not take their commitment seriously, who have just paid lip-service and treated it as ‘a launch, a lunch and a logo’ – a bolt-on to business operations and not built-in to business purpose and strategy – these companies will probably peel off. They will be no loss. On the contrary, it will sharpen the gap between the committed and others.

For the committed, it should speed up the process of innovation: finding more cost-effective and creative ways of improving sustainability. Already, we are seeing how escalating oil prices are stimulating more smart money to go into green energy projects. Similarly, companies are now trying to find more efficient ways of advancing their commitment to be a responsible business. During the aftermath of the dotcom bubble bursting, some of the big information and communications technology companies chose to give staff unpaid leave, or half-pay secondments to community organisations where they could keep using their skills, with a job to come back to in the business, rather than laying people off. It will be that kind of ingenuity and sharing of the short-term pain that will differentiate the best companies through the recession. Hard times do not have to mean a reversal of long-term commitments to sustainability and business responsibility if managers use their entrepreneurial flair and creativity.

DaviD Grayson

DIrecTOr, DOugHTy cenTre FOr cOrpOrATe reSpOnSIbIlITy, crAnFIelD unIverSITy

various commentators have suggested that the current economic downturn is going to be bad for corporate responsibility. It is just as plausible to argue the opposite: that hard times could improve the embedding of responsible business. How so? businesses which have spent the past decade painstakingly establishing their credentials for corporate responsibility are not going to throw that away lightly. Indeed, aborting their commitment now would create a reputation for being superficial and deceptive about their original commitment. Such a negative reputation, once created, would be very hard to shake off. “It takes twenty years to build a reputation,” says Warren buffet, “and it can be lost in five

With all businesses currently looking at how to survive the economic slump, are corporate responsibility practitioners feeling the heat from the finance department? Or are they being consulted on ways to help the business move forward? Does that mean they can tackle the toughest issues in sustainability or will they be fighting for survival? Will consumers continue to support and champion responsible businesses and look for products that last, or go for the cheapest on the shelf whatever the consequences?

There might well be a bit of all these things in corporate responsibility and sustainability in the short-term future while businesses accommodate the downturn. but where will corporate responsibility and sustainable business practices end up? We get the low down from David grayson at the Doughty centre for corporate responsibility at cranfield university, the consumer view from barry clavin at The co-operative group and the business view from David godden, chair of the corporate responsibility committee at land Securities and cOO at land Securities Trillium.


rethinktank.com/directions/ creditcrunch


DIRECTIONS 2008 DIRECTIONS 2008

18/19

arE ETHiCaL ConsUMErs a FaCTor in KEEPinG sUsTainaBiLiTy on THE BUsinEss aGEnDa EvEn DUrinG THE CrEDiT CrUnCH?

At a time when the global food crisis may have contributed to 100 million people being pushed further into poverty, it is hard to conceive of those informed consumers switching their priorities to marginal cost savings.

For some products, the emotional attachment to the underlying ethical issue has ensured that certain ethical purchases are firmly entrenched for a core constituency of consumers. The uK Fairtrade markets stand at over £500 million and loyalty to the Fairtrade brand for certain purchases (e.g. coffee) is well embedded. At a time when the global food crisis may have contributed to 100 million people being pushed further into poverty, it is hard to conceive of those informed consumers switching their priorities to marginal cost savings. likewise, for consumers concerned about animal welfare, it is hard to conceive of such consumers switching from free-range eggs, purchases of which are now more common than for those produced under intensive conditions.

Inevitably, some will find it more difficult to prosper in a downturn. For example, the organics market, in particular box schemes, may find that they need to convey a stronger emotional or rational argument to secure ongoing consumer loyalty.

With rising energy prices, consumers are already looking at managing their utility and fuel costs more efficiently. In a time of economic prosperity it has been difficult to engage many consumers on the most basic (if not tokenistic) energy efficiency measures: two thirds of people still boil more water than needed in the kettle. Indeed, this is also a reflection of the fact that when money is not scarce, time is valued as a more scarce resource and influences numerous poor sustainability decisions, e.g. it’s so much quicker to use a tumble dryer than line dry.

An economic downturn could refocus consumer minds and spark off the sustainability agenda in many unexpected ways. There is already anecdotal evidence that people are choosing to drive slower to save on petrol, to waste less food (gordon brown will be pleased), or to walk to their local shops. Of course, the vulnerable need to be protected but an economic slowdown could, in many ways, turn out to be good for sustainability. Indeed, we may be moving towards a ‘quality’ agenda and away from a ‘quantity’ agenda wherein as consumers we feel more satisfied by the quality of the food we buy rather than the quantity. And this can only be good for sustainability. However, the bigger risk is that it will be politicians rather than consumers who go into knee-jerk mode and take the opportunity to de-prioritise green issues.

Barry CLavin

eTHIcAl pOlIcIeS MAnAger, THe cO-OperATIve grOup

For the last ten years, when faced with the question “How big can ethical consumerism become?” economists have tended to have a stock response ready: “First, let’s see how it deals with a recession!”

So, as we enter an economic downturn, all eyes are on ethical consumerism and certain reputations are on the line.

predicting the effect the credit crunch will have on ethical consumerism is difficult, because it’s not a situation we’ve had to deal with before. At the time of the last recession, in the early 1990s, ethical consumerism as a market was wholly insignificant: the International Fair Trade Association was in its infancy and brands such as café Direct had yet to be launched in the uK. As such, economists’ reticence reflects, in part, their analysis of charitable giving as a model for ethical shopping. The contention is that they both reflect an economic decision that is almost totally emotional rather than rational, as well as reflecting our propensity to be good when we can afford to be good. charitable giving, unsurprisingly, tends to fall during a recession, as it did in the last recession.

It is probably fair to say that had a significant downturn come earlier in its growth, ethical consumerism may have been dealt a severe blow: consumer awareness of ethical consumerism was low, there was limited availability, often raised prices, and quality was questionable. However, these early issues have been mostly overcome, and advocates of ethical consumerism are quick to point to the growth in sales of ethical products and services over the last ten years, which have consistently outgrown

CREDIT CRUNCH

overall household spend and are estimated to stand at well over £33bn. Though, as economists point out, this has been achieved against a backdrop of relative economic prosperity and still accounts for, at best, just five per cent of overall consumer spend.

The received wisdom goes that when money is tight our rational side comes to the fore and pushes emotional attachments, brand loyalty etc. to one side. So the potential for ethical products and services to survive, or even prosper, in an economic downturn, may be reliant on the extent to which they can satisfy these two drivers: the depth of emotional attachment to an issue, or the appeal to our rational side.


directions/ creditcrunch


20/21

sUsTainaBLE BUsinEssEs WiTH EMBEDDED Cr MUsT LooK To THE LonG TErM For THE rEWarDs

DaviD GoDDEn

cHIeF OperATIng OFFIcer, lAnD SecurITIeS TrIllIuM

property and finance have been two sectors hit hard by the credit crunch and the resulting economic crisis that seems to be unfolding before us. It is no secret that the property sector has been feeling the pain of the credit crunch. but at the same time the sector is one of growth in sustainability terms. The past five years have shown a marked increase in the understanding of sustainable building design, the necessity of responsible operations, the value of environmental management and the understanding of the effect buildings have on communities. Of course, as in most sectors, there are pockets of good and not so good practice, and there are varying degrees of understanding of the true value which is added to business through a focus on corporate responsibility and sustainability. Architects and building contractors probably understand the roles they can play more clearly than agents and lenders but on the whole it is a sector whose understanding and therefore its activities are on the up. So do these two trends sit together – an economic slowdown and a commitment to corporate responsibility? The common denominator is value. When a business understands what is meant by corporate responsibility, and can therefore use it as a business decision-making tool for the benefit of all stakeholders (the bottom line included), then the trends sit together. The management team of any business is looking for ways to maximise and build value. The tension comes when those who haven’t discovered the value see corporate responsibility purely as a cost.

A significant part of land Securities’ business is based in the long term – buildings can take 15 years to go from design to occupation. So a retreat from adopting innovative building techniques that will pay environmental and financial dividends when a project is completed is not just the wrong thing to do, it is costly. It is a similar story in other areas of our business: retail parks without engagement with the community would be car parks without customers; offices without a focus on delivering service and developing relationships with its occupants would be costly shells. corporate responsibility is not an add on for land Securities, it is a must have.

but that is not to say there aren’t pressures. We know the value of efficiencies and of working with our customers, but we have to assess carefully the financial and sustainability value of our projects. Many of these pressures are growing around the climate change agenda. The carbon reduction commitment is currently due to come into force in 2010 and will put carbon emissions trading into play for lower energy users. The price of carbon is going to become more and more important to investment decisions. regulation from government on zero-carbon housing and on the use of on-site sources of renewable energy are going to be very difficult to implement economically. So in the current market, property companies are going to have some difficult decisions to make. new and innovative ways of building will be needed. And that is one reason why businesses should not shy away from corporate responsibility and sustainability in a tough market – they are drivers of innovation which provide new ways of generating value for the business.

In the current economic climate, businesses are right to question everything they do to make sure they are ready to face any challenges ahead. but if sustainability and corporate responsibility are genuinely integrated into the business and delivering value, then the commitment to them should remain. That is the view land Securities is taking.

Corporate responsibility is not an add on for Land Securities, it is a must have. But that is not to say there aren’t pressures. We know the value of efficiencies and of working with our customers, but we have to assess carefully the financial and sustainability value of our projects.

The tension comes when those who haven’t discovered the value see corporate responsibility purely as a cost.


rethinktank.com/directions/ creditcrunch


CREDIT CRUNCH

SALTERBAXTER DIRECTIONS 2008DIRECTIONS 2008

So 2008 appears to be the year when CR has become a two-speed affair. Are businesses simply doing housekeeping or are they facing up to some of the tougher, more fundamental sustainability issues?

Unfortunately in a world where issues around climate change, energy security and globalisation sit firmly under the heading of corporate sustainability headaches, the housekeeping approach is not the final solution. Businesses need to talk about where they stand on the more complex challenges that don’t have a KPI attached or a right or wrong answer, and look for innovative solutions. That’s the next step in sustainability – what we are calling the shift from ‘CR 1.0 to 2.0’.

Part of the shift to CR 2.0 is how businesses are working with stakeholders to find a way through the complexities and conflicts thrown up by sustainability. It’s not about single-handedly solving the world’s problems and then putting out a press release, but working through an approach and how they see the future developing.

To get an overview of who is doing what, we’ve done an assessment of the top 50 European companies, as ranked by the FT (March 2008). We based our research on external communications, a mark of whether businesses are confident enough to talk about their views on the big issues as an organisation. And we limited time spent on each company to only a few hours – so if we couldn’t find the key issues within that time then they don’t have very effective communications! Here is a list of the questions we considered and why:

1 Is the business showing signs of embedding corporate responsibility and sustainability into its strategy and articulating where it sees the business value?

If a business has not addressed how to embed corporate responsibility it is unlikely to be moving beyond the housekeeping approach.

2 Is the business engaging with stakeholders? Having a dialogue with stakeholders outside of the business is more likely to provoke a

move to CR 2.0 and encourage businesses to address tough issues.

3 Does the business work through a materiality process to define its issues? Those that do are more likely to spot big issues coming over the horizon, even if they

aren’t ready to tackle them yet.

4 What issues is the business considering? We used this to assess whether the really complex issues are being talked about, or

whether more standard environmental and social impacts were the ones being covered.

5 And lastly, do we think the business is making a shift from CR 1.0 to 2.0?

LUCIE HARRILD

HEAD OF CR PRACTICE, SALTERBAXTER

ARE BUSINESSESMAKING THE SHIFTFROM CR 1.0 TO 2.0?

The following pages provide our overall assessment of the top 50 European companies. We’ve identified the ones that have now made that shift to CR 2.0, tackling the big issues outside of what are now recognised as ‘business as usual’ issues. Here are just some of the companies that have made the shift to CR 2.0, with a few of the issues and impact areas that they communicate as important to them.

NESTLÉ

NUTRITION AND wELL-BEING PACKAGING SUSTAINABLE AGRICULTURE

22/23


ROYAL DUTCH SHELL

DIFFICULT OILCLIMATE CHANGE

GLAXOSMITHKLINE

CONTRIBUTING TO GLOBAL HEALTH PUBLIC POLICY & EXTERNAL AFFAIRS

SO wHAT ARE THE ISSUES BEINGTACKLED?

FINANCIAL CRIME SELLING AND LENDING PRACTICES FINANCIAL INCLUSION

ROYAL BANK OF SCOTLAND

FATALITY PREvENTIONCLIMATE CHANGEBIODIvERSITY

XSTRATA

DIGITAL INCLUSIONRESPONSIBLE USE OF ICT INTERACTIvE GENERATIONS AND CHILD PROTECTION

TELEFÓNICA

GLOBALISATION & LOCAL RESPONSIBILITYDEMOGRAPHIC CHANGE & EMPLOYMENT MEGACITIES,RURAL EXODUS

vOLKSwAGEN


24/25

74% SUCCESSFULLY ARTICULATE wHAT CR OR SUSTAINABILITY REALLY MEANS TO THEIR BUSINESS, GOING BEYOND SAYING THAT IT IS jUST THE RIGHT THING TO DO. 80% HAvE INTEGRATED CR AND SUSTAINABILITY INTO THE ONGOING BUSINESS STRATEGY AND DISCUSS HOw IT wILL ENABLE THE BUSINESS TO BE SUCCESSFUL.

78% ARE ENGAGING wITH STAKEHOLDERS AND INCORPORATING THEIR EXPECTATIONS OF THE BUSINESS INTO THEIR APPROACH.

60% EFFECTIvELY COMMUNICATE HOw THEY ASSESS MATERIALITY.

58% OF REPORTS ARE SUSTAINABILITY REPORTS, 30% ARE CORPORATE RESPONSIBILITY OR CSR REPORTS.

22% OF THE TOP 50 EUROPEAN COMPANIES ARE TALKING ABOUT THE COMPLEX ISSUES OF CR 2.0 AND BEGINNING THE SHIFT.

22%

We set the boundaries and distinguished what we felt warrants being given the mark of CR 2.0. If a business has: not addressed how to embed corporate responsibility; not actively engaged its stakeholders; and not assessed the impacts of the big issues and prioritised tackling them, then it is unlikely to be moving beyond the housekeeping approach. Overall it was found that, although 80% of businesses have integrated sustainability into their business strategy, only 22% of them are effectively communicating their approach to complex issues and making the shift to CR 2.0.

The energy and fuel sector appears to be at the forefront of making the shift. This sector is often in the headlines being challenged on big issues that are both hard to handle and where the potential solutions conflict with each other. How do you secure energy and fuel supplies at the right cost while tackling climate change, safeguarding the environment, operating responsibly and safely, and conducting business in areas of the world that are unstable with risks to the business and the people who live and work there? There are no black and white answers for this sector for certain. And, to make it even more of a challenge, a trust deficit is developing and general society is getting more and more disillusioned with what they are hearing from this sector about what the future holds. So it is encouraging to see some of those companies really hitting CR 2.0 head on and openly discussing the challenges they face.

As we anticipated, the mining sector as a whole is moving toward CR 2.0 with strong CR strategies and engagement in place. Although material issues have been developed following dialogue with stakeholders, some organisations

are still conducting housekeeping – just on a large scale. One key issue addressed across the sector is the impact on communities, with the majority of the companies considering the end of life of their operations. Not only is the environment of the particular site following the closure of the mine considered, but also the economic impact of the action such as the removal of employment and its effect.

However, in other sectors there is less evidence of companies tackling more than just the housekeeping areas. There are some good examples of companies making inroads on embedding CR into their business, even integrating CR concerns into products and services, for example in the life insurance sector. That’s a big step forward and certainly part of a move from CR 1.0 to 2.0. But there are also a significant number of companies that are stationary at CR 1.0.

The banking sector shows signs of tackling some of the hardest hitting issues as identified through dialogue with stakeholders, such as financial inclusion and capability. There is evidence of this sector integrating CR into business strategy, communicating an understanding of the importance they place on it. The current turmoil and accusations of financial irresponsibility would, however, suggest that their collective radar has been switched off. It'll be interesting to see how the sector responds next year!

There is a feeling that a ‘two-speed’ approach to CR is developing: those that are rising to the challenge of really tough sustainability issues, and those that are sticking to incremental improvements in their housekeeping. The overall trend looks like this: the answers to the majority of our questions indicate that there are signs of a beginning of a shift from CR 1.0 to 2.0 as more businesses show signs of embedding CR and sustainability into their strategies. But those who are really tackling CR 2.0 and talking about it are a minority.

So this is the year that sustainability got tough. At present, too few of the top 50 European companies are effectively communicating on how or why they are tackling the most complex issues. There are no more easy choices, but the business case for tackling these challenges is strong. It will not be an easy task, but businesses need to learn from others within their sectors and be willing to take on the challenge to make the shift in this testing time.

CHANGING FROM CR 1.0 TO 2.0 INvOLvES COMPANIES TACKLINGTHE CONFLICTS THAT wILL AFFECTTHEIR BUSINESS


Sector Page

AUTOMOBILES 26

BANKS 26

ELECTRONICS & EQUIPMENT 28

FOOD & CONSUMER GOODS 28

GAS, WATER & MULTIUTILITIES 29

INSURANCE 30

MINING 31

OIL & GAS 32

PHARMACEUTICALS 34

TELECOMS & TECHNOLOGY 34

TOBACCO 35

ANALYSIS CONTENTS

ANALYSIS BY SECTOR AND FT EURO RANKING


26/27

VOLKSwAGENVolkswagen’s sustainability communications are an example of absolute best practice, tackling the key material issues for this sector and considering issues much larger than it. The communications, based on these issues, are well thought out, easy to understand and to the point. This approach is embedded as ‘doing business as usual’ and is being used to form long-term strategy. Throughout the website and sustainability report, stakeholders’ expectations are referenced and the resulting actions described. Volkswagen is looking at all aspects of its operations and the possible implications. Dialogue is transparent and frequent with use of success stories and, more unusually, the disclosure of problems. Globalisation, and the challenges and opportunities this presents, is one of the issues looked at in depth.

DAImLERDaimler is at a relatively early stage of incorporating sustainability into its business, with a sustainability committee established in July this year. It is currently working on embedding sustainability as part of business strategy rather than a separate consideration. Although the communications look very impressive with a magazine, interactive report and downloadable report all entitled ‘360 Degrees’, the issues are unfortunately relatively introspective, and the analysis isn’t quite as comprehensive as 360 degrees would suggest. It would be interesting to understand how Daimler has analysed its material issues and whether this process involved its stakeholders. Daimler would also benefit from making communications more open and transparent with information easier to find as well as being more comprehensive. It’s a good start, but Daimler has a long way to go to be in the same league as Volkswagen.

HSBCHSBC has a sustainability strategy, which recognises that its continued financial success depends on the way it manages and addresses issues material to the business. It also shows an understanding that these ‘non-financial’ issues need to be integrated into the way HSBC does business. Following various initiatives to engage with stakeholders, climate change, forestry, and sustainable lending and finance are the issues identified as key impact areas. A number of ‘key sustainable issues’ are identified and broken down by customer group. This is

FT EURO RANK AUTOmObilES21

FT EURO RANK AUTOmObilES30

FT EURO RANK bANKS

4

INTESA SANPAOLOCommunications are focused on the formation of the new group. Although working towards CR 2.0 status by tackling both housekeeping and thorny issues, the structure of issues is a little unclear. The current report is split into an economic report and social report – the social section looks at all stakeholders and the banks’ responsibilities, and the economic section sheds light on the banks’ value adding capacity. And online you will find information on environmental objectives. Perhaps a simple explanation of this could be the challenges in bringing together the focus of the two major banks and communicating it as one? A section identifying the issues that are most important to stakeholders is developed to discuss how the business rationalises the way it tackles them with a section on ‘improvement objectives’. If volume is anything to go by then clients and customers are the main focus. The need to assist customers in the investment sector and the protection of savings is identified as a top priority. Although such issues are identified, they are not really discussed in depth.

UNICREDITO ITALIANOAnother example from the banking sector that has a clear focus on communicating value added, ‘expressing in monetary terms the relationship between the business and the socio-economic system with which it interacts’. A little unsure of its understanding of reasons for tackling certain issues, the group makes statements such as: ‘during 2007, the media and the public focused their attention on global climate change and UniCredit Group stepped forward to address this vital issue’. The group appears to be working on a process where it can define priority areas through internal analysis of its impact on stakeholders. For the 2007 reporting period, focus was placed on ‘The Art Experience’ described as a ‘formative year for the bank’s international activities in culture’ – this is part of its aim to ensure all employees understand what is required for long-term sustainable growth, including the issues most material to stakeholders.

FT EURO RANK bANKS26


inconsistent as on the website issues identified are related to customer groups. Although some very hard issues are addressed, this inconsistent approach to the prioritising and rationalising of some 14 issues leaves the reader unclear as to how or why issues are being tackled.

BANCO SANTANDERAlthough there is little information within the online CR web pages, there is a good overview of where sustainability fits into the business structure. The map of sustainability focuses on business operations, where issues are addressed in order to ensure the continued success and stability of the business. The materiality study with detailed analysis of the financial sector’s main reputational risks determines which issues are addressed. These appear to be those that have impact on the ‘confidence of society in the bank’ leading the reader to question whether the integration of CR into the business is really apparent? Given the current climate in the industry, it is fair to say responsible financial advice to customers is one of the key issues the bank needs to address, however the bias of stakeholder engagement towards customers, and the frequent mention of reputational risk results in a lack of communication on its wider responsibilities.

BNP PARIBASIt seems to be a trend within the banking sector that a large part of the CR report is focused on the structure of the business units with BNP Paribas at the forefront. The reader finds little on the approach to sustainable development and issue areas until page 76 of a 211-page report! Although the group’s responsibilities are identified as integral and ‘rooted in its founding values’, there is unfortunately little if any understanding of the key impact areas. Communications with stakeholders are merely listed and there is no clarity on reasons to engage. In fairness it appears to be a work in progress and the bank does have a committee responsible for identifying the challenges for the following year – let’s hope that big issues will be part of this!



BBVACR is discussed on equal par with corporate reputation so at first it’s a little dubious as to whether the business will show any understanding of moving away from compliance to tackling the hardest hitting issues. But encouragingly, BBVA communicates a really good understanding of stakeholder expectations and the issues that are prioritised. The bank also shows good progress on integrating CR into the fabric of the business with a strategy and business model demonstrating that all group activities are aimed at ‘building a future’. Although the web structure is based on the ‘major issues’ affecting the business, as identified by stakeholder expectations, there is no clear rationale for why they are prioritised in that order. The issues also appear to be general housekeeping issues with ‘customer focus’ and ‘financial inclusion’ being the first two impact areas identified.

SBERBANK OF RUSSIAWith minimal communications on CR issues, the bank is primarily committed to domestic and international programmes to further develop social welfare. Reporting as part of the annual report only, there is no indication of the business tackling any hard-hitting issues; in fact even the housekeeping is a bare minimum.

ROYAL BANK OF SCOTLANDThe current CR report is titled ‘10 issues that matter most’, with a website following the same structure. CR is central to the way the business is managed. This is reflected by the identification of both the areas where they can have the most impact, and the issues that can make the most difference to RBS. Senior management also appear to have a clear understanding of the risks these issues present. There is clear rationale behind how these hard to handle issues are prioritised, emphasising that RBS is clearly at level CR 2.0. From large-scale quantitative opinion surveys to small, local sessions on issues, the bank has a sound stakeholder dialogue process in place which reassures that this is not a passing trend but a way of doing business. Watch this space next year though.




HSBC » CONTINUED




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SIEmENSCR is part and parcel of Siemens’ core values and driven from the top. Communications appear to be promising, stating high aims of being the ‘Best-in-Class’ in CR – although unfortunately there is no real explanation of how or what this actually means. There is evidence of understanding stakeholder expectations – but little evidence of engaging with them in any dialogue. Compliance is identified as its ‘number one priority’, followed by climate protection and education. Siemens insist that managers and employees must comply with all regulations. Could this be identified as a priority purely as a result of recent media attention, or an example of a business tackling a hard to handle issue? In their own words this ‘program should not be understood merely as a response to past actions, but is aimed at achieving long-term changes in the thinking and behavior’ of Siemens managers and employees. Responding to media attention or tackling a thorny issue – this is a difficult one to judge!

ABBThe language used to define CR and sustainability makes it difficult to understand what issues are a priority for ABB. Sustainability is referred to as balancing economic success, environmental stewardship and social progress to benefit all stakeholders. With little mention of strategy, it’s not clear if sustainability or CR is integrated into the business at all, even though CR is identified as one of seven priority areas that form the issues of focus. Priority areas are also fragmented. Attention on the high impact issue of climate change, has no clear rationale behind it, and gets lost amongst the other priorities which are more general – like CR itself!

NESTLÉNestlé’s ‘Creating Shared Value’ approach for 2008 gives a good insight into how it is integrating sustainability into the business – in short how sustainability brings value to shareholders and stakeholders, and is not just a bolt-on to operations. By virtue of its supply chain, Nestlé is tackling some significant issues around sustainable agriculture, energy and biofuels, water supplies and nutrition. Interestingly, it is putting those tough issues into a global context in its report, discussing the complexities around the issues before describing its own actions. So Nestlé is developing an approach that both embeds sustainability into the business while also

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EDFEDF isn’t articulating the pressing conflicts in the energy sector in the same way as Suez and E.ON are, but it is looking at big issues. It references its activities in stakeholder engagement and discusses how the sector needs to develop over the next few years. However, housekeeping issues dominate the report and the articulation of big global issues that are full of complexities is lacking. Although tackling such issues as fuel poverty is important, there is more EDF could be doing. EDF does demonstrate in its business strategy and values that sustainability is an integrated part of the business. So a lot of very positive sustainability work going on but perhaps without the complexity and context that others in the sector are clearly thinking about.

E.ONThis sector is beset by controversy and E.ON hits this head on – it confronts the conflicting objectives of energy supply, price and environment, the negative public and stakeholder opinion it receives and the technical complexities of the various types of energy the sector provides. However, although the report appears to be hard hitting it doesn't actually get to grips with the issues as we had hoped. Stakeholder engagement is mentioned quite often but it comes across more as the company justifying its actions, rather than giving much exposure to the views of the stakeholders themselves. The bold communications approach of talking about the paradoxes in the energy sector is confined to the report – it would be great to see a more integrated set of communications in the same vein to engage a broader audience. E.ON is still at CR 1.0 but with the relevant issues being raised, we are hopeful to see them moving to CR 2.0 in the near future.

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making the point that its sustainability work is more than housekeeping, but there isn’t always a black and white answer to the issues they are tackling. There is definitely room for more but it will be fascinating to see how Nestlé progress this as it’s looking like the beginnings of a real shift from standard CR 1.0 to embedded and challenging CR 2.0.

UNILEVERUnilever does describe sustainability as an integral part of the way it does business and a crucial factor to growth, and indeed to even existing as a business. The general sense of sustainability being embedded in the business is quite strong. And through the supply chain and the sustainable agriculture initiatives there are some really difficult issues being tackled – water, biofuels and palm oil to name a few. However what is missing is the context – why they are tough issues, how the agendas change and how Unilever navigates a path through that. Otherwise it feels more like a list of initiatives and achievements rather than a dialogue with stakeholders about how the business is sustainable. This is a tough one. Based on actual activity in the business we know that Unilever is at CR 2.0. But its communications don’t reflect this – so for now it has to be CR 1.0.

L’ORÉALThere is some level of articulation of CR at a strategy level but any sense of integration or embedded CR is lost when you find the actual approach relies on the housekeeping of environmental and social impacts of the operations of the business. So the big issues in this sector don’t really feature – things like the perception of beauty, teenage anorexia and the choice of models. L’Oréal do feature diversity as a significant issue and rightly so, but the context of why it matters so much in this sector and why they should be leaders isn’t well explained – apart from mentioning that there isn’t just one type of beauty in the world. L’Oréal could go a lot further with its sustainability approach, go beyond monitoring operational impacts and really tackle societal pressures in the sector. Especially given that it has The Body Shop to learn from!


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SUEzSuez is upfront about five big and complex issues that the energy sector is facing, with a monster document of pages upon pages of box-ticking information. Other communications primarily consist of uninspiring web pages. Suez is on the journey, however it needs to work a lot more on its communications approach. The initial pages of the report are interesting though and put Suez amongst those energy companies battling with the complexities of its sector and how to balance conflicting economic, environmental and energy policy pressures. Interestingly, stakeholder engagement isn’t presented as much more than standard activity. Perhaps more engagement would push it along that journey a bit faster.

IBERDROLAIberdrola has a lot of sustainability work happening on the ground and is also showing signs of integrating it into the business strategy, with commitments to sustainable development and renewable energy. But the communications do not show signs of the business wrestling with the really tough issues in sustainability. And the report is such a long document that it stops communicating with the reader and just discloses activity. There is factual information about energy policy in Europe but the connections between that and the company’s views gets lost.

RwERWE doesn’t seem to have tackled its sector- specific issues in the way E.ON and Suez have – it’s still quite a predictable approach, focused on identifying straightforward material impacts and not getting across its thoughts on the big issues. In fact the company openly declares it is struggling to keep pace with society’s demands and the loss of confidence in energy suppliers. No doubt there is plenty of work going into managing operational impacts but in comparison to others and in light of what this research is looking into, RWE rather fades into the background.


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ENELENEL communicates sustainability in a few ways – in a lengthy report, online and in a stakeholder report. In fact, stakeholder communications are extensive and there is an interesting tool to gather stakeholder feedback that is then disclosed in the report. But ENEL is operating a housekeeping approach, however hard to manage some of the impacts are. It does recognise the challenge of energy supply, price and environment and how difficult balancing those demands is – but it is a reference not a strategy. So ENEL is not in the same league as some in its peer group.

ALLIANzAllianz addresses materiality and stakeholder engagement in a clear and logical way. Plus it integrates the issues it has identified into products and services, displaying an embedded approach – key topics are the impacts climate change and demographic change have on the insurance sector. And these are of course key concerns. There is an underlying sense of the difficulty in tackling these issues and the lack of a black and white answer, but no real discussion about the complexities or how Allianz decides on its approach. It feels like Allianz is more at the CR 1.0 end of the scale than CR 2.0 – but there is definitely material to work with.

INGING engages with stakeholders, considers a variety of issues, and has evidence of sustainability being incorporated into business strategy and embedded into products and services. It recognises the importance of engaging employees. All positive, but unfortunately this is only evidence of being stationary at CR 1.0. There are some really big challenges in sustainable finance and investment that aren’t easily solved and it looks like ING isn’t ready to get out there and talk about them. So there is an opportunity for this business, if it is ready to take it.


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ARCELORmITTALAs a new organisation, ArcelorMittal is at the beginning of its CR communications and approach. It is the only mining company to opt for a CR rather than sustainability report. With the recent merger of Arcelor and Mittal Steel in June 2006, management appear to have made CR a priority for the new business to create a strategy and commitments befitting a world leader. In terms of its approach, this is an example of strategic best practice with excellent communications on stakeholder engagement and the establishment of benchmarks to measure against in future. 12 commitments have been established through its materiality assessment so it remains to be seen whether these will be tackled with the appropriate level of depth. It’s not made the shift to CR 2.0 yet, but we have high hopes for this company on the basis of its strategy – and everything appears to be moving quickly in the right direction.

RIO TINTORio Tinto reports on its sustainable development activities in the form of a review contained within the annual report. Although there is much reference to the materiality process, key issues or priorities are difficult to establish among all the topics covered on both the corporate website and printed report. Strategy is described in detail but there is little information on the results. Rio Tinto admits it does not report on all of its material issues – claiming it will publicly communicate on them if enough external interest is received. Communications would benefit from being more transparent with regards to Rio Tinto’s operations. For example, providing the actual criteria used to determine whether a site is suitable for development rather than describing a process that is used would be more meaningful.

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AxAAXA’s communications really focus on embedding sustainable development into the business – obviously that is very important and the report covers a lot of information about product developments, tackling environmental protection and health for example. However, this research is looking for evidence of going beyond that. And there is some – recognising the difficulties of the economic climate and changes in demographics for the insurance industry, recognising that financial protection and sustainable development go hand in hand. But that recognition is not translated into views. There is little evidence of stakeholder engagement and with a long report and straightforward web pages, communications are generally not very engaging either. So some interesting work but to reach CR 2.0 there is more to do.

GENERALIGenerali very much takes the housekeeping approach, although granted with a strong focus on meeting stakeholders’ needs. The report is lengthy and it is hard to get a sense of how issues are prioritised, materiality or even the impact the business approach is having. Compared to the others in the sector, it is very underwhelming.



ANGLO AmERICAN Safety and health are major issues for the organisation as targets for zero harm aren’t being met. However, the company is clearly aiming to lead this sector by aiming for best practice policies on the big issues it is tackling. Although sustainability is clearly embedded in the company strategy and it does engage with stakeholders, information is missing on how the issues have been established and prioritised. If Anglo American can demonstrate this, it will shift to CR 2.0.

xSTRATAFrom HIV and Aids to biodiversity, community impact, water and air emissions, Xstrata has addressed a range of material issues in its communications. Reporting is well documented with good disclosure, score cards and targets on all of their issues. It has engaged with its stakeholders in order to form the material issues and prioritise these accordingly. Above all there is a high level of transparency throughout the report, information is easy to find and simple to understand. However, it could be argued that these material issues should be part of doing ‘business as usual’. Xstrata has the right process in place to establish these issues but we’re keen to see them developed in future to consider wider impacts. As Xstrata currently does not report on the impact of its supply chain we would expect to see this made an immediate priority.

BHP BILLITONBHP Billiton has created logical and easy to follow communications on sustainability on both its website and report. Information is accessible, provided in detail and also summarised – important for readers looking for an overview. Stakeholders are clearly identified and have been engaged with to establish key issues. Of particular interest is the section entitled ‘what others say’. BHP Billiton invited sustainability peers to provide their perspectives on its key issues and level of response. It is likely we will see this style of communication more often in future as it supports trust and transparency.






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GAzPROmGazprom produces an environmental report – not that surprising given the nature of the business and the huge impact it has on the environment. Although saying that, there is no evidence of an understanding of how CR fits into the fabric of the business or the real impact of its operations. Little evidence of understanding of the complexity of the issues that need to be addressed was found. It goes without saying that social issues wouldn’t be addressed in this type of report – but upon reviewing the website nothing could be found there either. Various environmental issues are described but there is little evidence in its communications of how they are either prioritised or linked to the business strategy. There is little reference to stakeholders of the business and no dialogue appears to be in place to identify the thorny issues that this business should be paying attention to.

ROYAL DUTCH SHELLCommunications are well structured and the user gets a clear sense of the prioritised issues. Top line information on an issue within the report is further backed by detailed content online. Sustainable development is identified as the ‘right thing to do’, good for the business and helps ‘meet the world’s growing need for energy in economically, socially and environmentally responsible ways’. Issues of focus are those that will enable the business to create value and reduce operational and financial risk. It sees no trade-off between being profitable and responsible, understanding the need to identify, assess and manage impact on stakeholders. Shell goes through a process of opening itself up to an external assessment to judge whether it selected the most important topics to report on this year, how well these hard-hitting issues were dealt with and how it responded to stakeholder interest. Shell is clearly on track, from use of an ‘auditable content selection process’, to tackling the hardest issues hitting the industry. Communications effectively prioritise the issues that are most material to the company, and of greatest interest to Shell’s stakeholders, in addition to covering one of the most significant topics facing our world – climate change.

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ENI2007 is identified as an important year for ENI as sustainability has become an integral part of corporate processes. Importance is placed on qualifying for indices such as DJSI and FTSE4Good. Great use of interactive features online allow ENI to explain its ‘conceptual model of sustainability’ where social development and environmental protection are part of the long-term benefits that it can provide to the communities in which it operates. ENI communicates how being responsible can contribute to the efficient management of an organisation – however it’s unclear whether CR is identified as an add-on or part of the fabric of the business. It can only be assumed that the importance placed on each identified issue is reflected by the order in which they appear in communications. ENI may well be tackling hard-hitting issues such as climate change but unfortunately it is not clear to the reader why it is doing so.

ROSNEFTSustainable development appears under the ‘Social Issues’ tab of Rosneft’s website navigation, emphasising the types of issues prioritised. The CR strategy and initiatives (explained in a very long report!) are more based on donations and charitable giving than specific long-term initiatives or programmes. Given the nature of the business the reader would expect more environmental issues to be considered or communicated as important. However, it is fair to say the issues tackled do match up to what they consider CR to be. The business strives ‘to achieve not only high production and financial results, but also to make a considerable contribution in development and prosperity of the country and improvement of living conditions of its citizens’. They also consider stakeholders to be shareholders, company employees and their families, population of the regions of presence, and society as a whole.

STATOILHYDROAlthough StatoilHydro appears to be primarily driven by the need to create shareholder value, the group does clearly communicate the need to consider CR as a factor in helping it remain competitive and efficient. Unfortunately, reasons for focus on particular issues, aside from the direct business benefits rather than the responsible thing to do, couldn’t be found. Climate change, the first priority, is identified

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BPBP’s materiality matrix is very thorough and emphasises the issues that help deliver the business strategy. Those that ‘have attracted a high level of public exposure and awareness’ are also considered very important for inclusion in the current report. However, BP’s communications on CR are confusing as it is difficult to distinguish between what is identified as housekeeping issues and those felt to be the hard to handle issues. There is no doubt that BP has a clear understanding of its most material issues – however, due to the structure of the communications the most significant are not brought to light.

TOTALIt is quite difficult to work through how Total defines and ranks the issues most material to the business. Going by the structure of the communications there appear to be many. Perhaps the focus on biofuels, on the landing page of the CR section where the reader finds a special publication on work in the area, is an indication of the importance placed on the issue. With only generalised statements, the importance of each issue is not really addressed. It’s not clear how Total defines CR although it does communicate an understanding of the need to secure the longer-term future of energy, and hence the existence of the business, explaining the need to focus on biomass and solar energy processes, along with evidence of investment areas. All in all the reader is left unclear as to what the business is tackling and why.


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as a serious challenge for the industry – and one which also ‘represents new business opportunities’. But StatoilHydro does appear to see the real value and reason for engaging with stakeholders with a section of the reporting dedicated to the initiatives in place. Although tackling some thorny issues, it doesn’t explain much more than the business benefits of doing so. Clarity in its communications would help this business make the shift to CR 2.0.

BG GROUPFor BG Group, CR stands for its core approach to business and how it integrates business principles into practice. Communications clearly show how CR is integrated into business processes, discussing stakeholder engagement programmes and value through to corporate governance. To determine which issues to focus and report on, BG Group undertakes a thorough risk and impact assessment. Due to the nature of the business it is no surprise that climate change is defined as the number one priority and one that the group identifies it can actively tackle. Although hard to handle issues are a priority for the group, unfortunately it does not distinguish the importance between these, and those that are general housekeeping, as through the materiality assessment, it also considers ‘working to high standards’ and ‘stakeholder engagement’ as key issues. Taking good steps in the direction of CR 2.0 but still at 1.0.

LUKOILThe sustainable development report is found within the social section of Lukoil’s very unstructured website. Placed within the ‘About Us’ section, Lukoil defines CR as supporting long-term economic growth, social stability, prosperity and progress in the regions where it operates. Its issues of focus are also very broad with only ‘social and environmental’ issues identified. Aside from priority areas identified as health protection and safety of personnel and communities in the areas where Lukoil operates, there is little evidence of the business tackling the hard issues facing the sector. For now this company is stationary at CR 1.0 and needs to engage with its stakeholders to appreciate what is expected of the business and where its responsibilities lie.



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ROCHERoche is aware of the importance of stakeholder engagement and it is an integral part of its business strategy. However, there appears to be a gap between the company strategy and its approach to addressing material issues within its communications. Strategy has been formulated without evidence, or disclosure, of considering external stakeholders’ expectations. Material issues were established at the start of the year and Roche has begun collecting information on each. Although ‘relationship with stakeholders’ is considered a material issue, which we would argue should be part of doing business as usual. Next year, we hope to see Roche conducting its materiality assessment with all its stakeholder groups and taking the next step towards CR 2.0.

NOVARTISIt was difficult to find all CR information for Novartis as the communications are a little fragmented. There is a corporate citizenship section contained within the annual report, a separate corporate citizenship review, a microsite, policies and guideline documents. Further information is available on specific topics as brochures and case studies, and there is also a separate performance report. The result is confusion, much repetition and difficulties in finding complete information. Although there is evidence of stakeholder engagement and identification of material issues, coverage seems lightweight and standard for the sector. So the next step for Novartis is to streamline all this information, make the content easier to find, and delve into these issues.

GLAxOSmITHKLINECommunications show evidence of material issues being tackled head on. GSK examines its contribution towards global health, ethical conduct, and access to medicines. However, the real strength is that GSK looks in-depth at each issue and discloses far more than its competitors. It has transparent communications across all its issues. A prime example of this is the voluntary disclosure of GSK’s political donations and the reasons behind them. GSK’s latest CR report entitled ‘Answering the questions that matter’ also does exactly what its title proposes. It is obvious that GSK is working on building trust in the organisation through this transparent disclosure. The result is incredibly engaging communications that really do answer the questions that matter.

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TELEFÓNICATelefónica approaches a wide range of issues relating to the organisation. Activities are clearly not only for the financial benefit of the company. Telefónica is actually trying to promote responsible progress. Issues such as ‘the digital divide, accessibility, use of ICT and child protection’ are all explained clearly with transparent information on performance and targets. This responsible approach is clearly embedded in all aspects of the company and its communications. The result is easy to understand, relevant and engaging. A great example of a company that has taken the steps to CR 2.0.

NOKIAAt first glance the communications on the website appear well laid out, simple to find, with an easy to navigate online report. Once you scratch the surface of the content, you find a wealth of information hidden beneath the surface. Nokia is doing some great work here but could do with communicating these activities in a more obvious way. Its accessibility micro site is a prime example of this: great content but hard to find. Engagement with stakeholders is referenced throughout its communications and key issues are thorough and relevant as a result. Although Nokia has established its material issues, these are mainly issues that we would expect to see as doing business as usual – considering the environment, supply chain and human rights. Accessibility as its priority goes beyond this and is considered in depth. Is the business at the next stage? Almost, but not just yet.

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SANOFI-AVENTISSanofi-Aventis has great communications on its sustainability issues which give a really positive impression. Unfortunately, an in-depth read shows this work is at a relatively early stage and much more needs to be done just to get up to speed tackling the issues that matter, let alone going beyond them. A thorough materiality analysis has been performed, however Sanofi-Aventis has not managed to tackle all these issues, of which the end of product life cycle and influence on law-makers are two examples.

BASFFor the first time, BASF has combined its financial and sustainability report into one publication. The result is evidence of a coherent, integrated strategy that sits within the business principles. Within its communications, BASF has identified its key material issues and has produced information on these through the report, the website and short videos as well. Stakeholders’ considerations have been considered with regular engagement evident. The work investigating demographic change is well thought out and relevant. BASF is considering the much wider reaching issues and has a strong sustainability strategy to ensure its future.

VODAFONEVodafone has taken a clear, transparent approach to CR communications. All communications have been designed to be easy to understand and easy to follow. The strategy too, has been simplified with the business as a whole applying ‘One Strategy’ as opposed to different techniques in different markets. Vodafone applies a simple strap line to its material issues ‘we said, we have, we will’. This simple breakdown means that its progress is easy to understand and can be tracked over the years. This open and transparent method of communication really works for Vodafone and is the highlight of all its CR communications.




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FRANCE TÉLÉCOmFrance Télécom is the company behind the brand ‘Orange’. For this reason, expectations were high for France Télécom’s CR communications. Although its work ticks all the boxes, the messages are a little flat. Stakeholders are clearly being engaged with throughout the business and are an integral part of company strategy. The establishment of its material issues is thorough and considers all stakeholders, however the outcomes are introspective issues rather than the further reaching impacts we were looking for. The report would also benefit from disclosure on feedback and priorities for the organisation.

DEUTSCHE TELEKOmDeutsche Telekom, the name behind T-Mobile, is currently reviewing its CR practice and realigning responsibilities. As a result, it has published ‘Facts & Figures’ which is an interim report for 2007. Deutsche Telekom has a long way to go in terms of its CR communications, although it has been reporting on these issues since 1996. Hopefully, this is what Deutsche Telekom is working on and we can hope to see the full report next year. There is a fair amount of work to be developed if it wishes to be in the same league as its competitors. However we are hopeful as the organisation intends to ‘develop a CR strategy, which takes into account the needs of society, the market and our stakeholders in equal measure’.

BRITISH AmERICAN TOBACCOThe most interesting part of BAT’s communications is a Q&A section of the recent report where the CEO addresses the question that everyone wants answers to. ‘How can a tobacco company be sustainable and is CR used as a PR spin?’ BAT is open for dialogue with all of its stakeholders to debate the highly controversial issues it needs to be addressing and there is evidence that it is. Working with various scientific bodies and health communities, it is working towards developing and introducing potentially reduced-risk products, identified as its number one priority. Its sustainability agenda also addresses the key issues of concern around business operations, as well as the issues related to the nature of the products. BAT has no problem addressing general housekeeping issues, although the thorny issues are definitely much harder to handle for a business of this kind, so it warrants the mark of CR 2.0.


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If you would like to find out more, please get in touch:

Nigel Salter [email protected]

Louise Dudley-Williams [email protected]



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CHINA It’s not as blackand white as a panda Page 12

CREDIT CRUNCH Will corporate responsibility crack under the strain of the credit crunch? Page 16

CoNTENTS

09/ Dick SearleChief Executive, The Packaging Federation

11/ Alasdair JamesDirector of Waste, Recycling & Packaging, Tesco plc

13/ Leo Horn-PhathanothaiNational Coordinator, UK-China Sustainable Development Dialogue, DEFRA

04/ Dr Peter CotgreaveDirector of Public Affairs, The Royal Society

05/ Chris CarterDirector of Corporate Affairs, British Sugar plc

06/ Sagarika ChatterjeeAssociate Director, F&C Asset Management plc

BIoFUELS Thirst for fuel vs hunger for food Page 02

17/ David GraysonDirector, Doughty Centre for Corporate Responsibility, Cranfield University

18/ Barry ClavinEthical Policies Manager, The Co-operative Group

20/ David GoddenChief Operating Officer, Land Securities Trillium

ANALYSIS Are businesses making the

shift from CR 1.0 to 2.0? Page 22

26/ Top 50 European companies

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PACKAGING Are we suffocating under the weight of the packaging problem? Page 08

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SALTERBAXTER DIRECTIoNS 2008

Salterbaxter Directions 2008

Business

Transcript of Salterbaxter Directions 2008