The shift from CR 1.0 to 2.0 – the UK horizon

TRENDS AND ISSUES IN THE WORLD OF CORPORATE COMMUNICATIONS

DIRECTIONS SUPPLEMENT

JUNE/JULY 09

CRISISECONOMIC

CUSTOMISEDREPORTING

Our 2008 Directions report examined some of the really tough sustainability issues hitting the agendas of businesses and the media. Salterbaxter identified a trend in CR communications with companies operating in a state of CR 1.0, something that we categorised as a housekeeping approach to corporate responsibility. Businesses are working hard to identify, monitor and manage key environmental and social impacts – but then coming to a halt, or not tackling the ‘elephant in the room’.

In the current climate, where businesses are expected to be more accountable for their impacts in the economic crisis, issues such as energy security and globalisation sit firmly under the heading of corporate sustainability – and here a housekeeping approach is just not good enough. Stakeholders demand for their issues to be addressed and businesses need to communicate their stance on complex challenges. This is the next step we have identified in sustainability: the shift from CR 1.0 to 2.0.

Here we’ve looked at ten of the most responsible UK companies, those that are platinum ranked by Business in the Community*. These leaders have thorough, robust programmes in place already. But what are their communications reflecting? Does the reader go away with a sense of what issues are a priority and why? We based our

research on external communications, a mark of whether businesses are confident enough to talk about their views and prioritise their big issues as an organisation.

The questions we asked…

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

Is the business engaging effectively with stakeholders?

Does the business work through a materiality process to define and prioritise issues?

What this review is not doing… This is not a critique on business conduct. Our aim is to find clarity in approach and look at how this is articulated.

Dan HolmesHead of CRsalterbaxterdholmes@salterbaxter.com

*The BITC CR Index is a benchmarking tool that assesses and compares responsible business behaviour, more details can be found at www.bitc.org.uk

‘Leaders’ should be leading the way. So are these companies putting into focus the issues that matter most to their stakeholders? And is there clarity in their approach?

Welcome to the June/July 2009 edition of Directions Supplement.Following on from our Directions 2008 report, which identified the European companies making the shift from CR 1.0 to 2.0, we now reveal a snapshot of UK CR leaders*. CR 2.0 is the move from CR housekeeping to communicating the issues that matter most. In the current business climate many are questioning how corporate responses to key ethical and environmental issues will fare. Will the recession shift focus away from corporate responsibility or will CR be a driving force for recovery? One thing is for sure, those companies that successfully articulate how they have embraced their more complex issues are leading the field in CR communications.

Directions SupplementJune/July 09

CRISISECONOMIC

CUSTOMISEDREPORTING

2.0Barclays has broadened its focus from corporate responsibility to sustainability. The desired intention being to identify and manage the impacts of most significance to stakeholders across the entire group and ensure that impact management is embedded into business practices. The 2008 Sustainability Report is based on thorough stakeholder identification and materiality assessments. Equally, the depth of commitment to issues tackled is impressive. However, while the approach is thorough – both in terms of identifying issues of importance to stakeholders as well as through provision of examples of work undertaken – it is at times

too selective. More examples regarding how the company responds to feedback (particularly negative) would be useful. This would have been particularly apt for demonstrating responses to criticism of the financial sector on the topic of the economic crisis.

Nonetheless Barclays is a CR 2.0 leader – stakeholders are at the heart of its sustainability strategy. The number of case studies for each issue is notable. However, better use of online tools should be a priority as currently the format does not do the content justice.

Barclays

The aviation sector is facing significant challenges. Can this inherently difficult industry keep afloat, manage its impacts and transform its operations? Long used to tackling problematic issues, such as noise pollution, BAA does not appear to have adapted its corporate responsibility reporting to fully reflect the enlarged scale of its impacts. Whilst the 2008 corporate responsibility report does explore Heathrow’s contribution to the UK economy and airport expansion, it does not put forward a truly convincing case for its continued growth. An engaging online campaign using social media that confronts the questions in an open and honest fashion would better inform

engagement, opening up ongoing two-way dialogue channels with stakeholders around these sensitive issues. As a company constantly in the public eye – due both to the scale of its impacts and the intractable issue of airport expansion – managing public perception and engaging with the right groups is vital to the long-term sustainability of its operations. At present its efforts do not adequately measure up to the size of the challenge.

Highly scrutinised and highly regulated, it needs to upgrade communications to engage with stakeholders in a more meaningful way, so BAA is stationary at CR 1.0 for now.

BAA

1.0

For the second year running, Co-operative Financial Services has integrated its CR reporting into a group-wide Sustainability Report. This is a combined approach to reporting done well – all too rare at corporate group level. It is split into three main areas – social, ecological and delivering value. For example, in the social section ethical finance initiatives sit logically alongside ethical supply chain measures and community involvement. The only caveat being that the document is not supported by a compelling online presence – a missed opportunity considering the detail and leadership demonstrated. The ‘warts and all’ approach is at times too dense – if only for the amount of ground covered, which could detract from

different stakeholder group experiences. Outside of its report, its campaigns such as ‘Plan Bee’ aimed at helping to save the honey bee, are well supported with online videos and engaging material – demonstrating how its values run through the company.

Co-operative has made the shift to CR 2.0, due to a formula and group-level approach that demonstrates how each aspect of its business is led by the same values. Whilst its membership site is well populated with ethical campaigns, its corporate site could improve the accessibility of information contained in the report or direct stakeholders to the relevant information.

Co-operative Financial Services

2.0

PRODUCTSSUSTAINABLE

INCLUSIONFINANCIAL

The John Lewis Partnership is one of a kind, with a “visionary and successful way of doing business, boldly putting the happiness of Partners at the centre of everything it does”. Due to the structure of the business (employee-owned) we would expect it to engage with its stakeholders and respond to their concerns – and we are not disappointed. Some of the more interesting issues that are identified are supplier relationships and sustainable products. So the complexities involved in tackling these issues are explained and ambitions are also stated. What we’d like to see now is an understanding of the impact John Lewis can have as a business and the rationale for why an issue is important.

John Lewis Partnership’s long-standing commitment to non-financial reporting sets it apart from its competitive field. However, despite the content being excellent, it fails to articulate how the wider issues are central to the business and is therefore still practising CR 1.0. This is unfortunately exacerbated by a site and PDF report that is too dense – hampering access to information.

John Lewis Partnership

1.0

Sainsbury’s identifies its values in its about us section to include a “strong regard for the social, ethical and environmental effects” of its operations. Its five CR principles reflect the key issues faced and these are prioritised following an assessment of significance to the business and their defined stakeholders. Although Sainsbury’s “aim to approach complex issues of responsibility and sustainability in the most responsible way possible whilst also helping to effect positive change”, the issues tackled do not appear to be different from the ‘housekeeping issues’ we would expect to see. For example “operating within strict environmental limits”

should really be a given – a housekeeping issue. The process of defining material issues does not appear to be as robust as we would expect and a clear engagement process is not communicated.

To make the shift to CR 2.0 we would like to see an understanding and clearer articulation of the complexity of some of the issues that this sector faces. There is also a need for communication on the process behind issue prioritisation. On a positive note the Sainsbury’s interactive store displays great use of innovative online tools to bring to life the CR issues within the store environment.

J Sainsbury plc

1.0

Directions SupplementJune/July 09

PRODUCTSSUSTAINABLE

INCLUSIONFINANCIAL

Pearson has fully integrated its approach to responsibility into its business strategy. This customised approach distinguishes the company from its competitors, furthered by great engagement with wider issues.

The company has aligned its combined CR and business message to its role as an education provider and information service. This allows the group to evolve its corporate strategy and expand

into new markets with education and literacy. Initiatives are illustrated through good use of case studies, enabling the reader to drill down to what is happening at ground level with individual companies.

The strategy and vision are a great fit with the company, and the report is supported by good use of online tools. Another CR 2.0 leader.

Pearson

2.0

As a utility company, Kelda is explicit about who its stakeholders are and their importance to the success of the firm. For this reason the company’s impact on communities is central to its CR strategy. Allied to this, Kelda has a diverse set of stakeholder engagement tools. This allows the company to speak from a position of strength about its leadership role in the region it operates in. Performance data is detailed and an appreciation of the wider sustainability context is evident.

Kelda is at CR 2.0 – with strong evidence of continuous stakeholder engagement, a user friendly standalone site with clear signposting of issue areas and the stakeholder engagement tools relative to each issue. Definitely a leader.

Kelda

2.0

Lloyds TSB has integrated CR into its business strategy and has clearly identified its stakeholders and the importance of each group. It has a detailed set of metrics and indicators across all key areas. Customers are central to the business, as are communities.

While the commitment to climate change is perhaps a peer-driven response to other banks taking a lead on climate change (HSBC, Co-operative), Lloyds TSB does grapple with other wider issues, such as financial inclusion, and demonstrates a proactive enthusiasm for providing training for its employees and support for suppliers. A great section of the report is the responsibility scorecard.

Developed with stakeholders, it identifies objectives and activities to enable Lloyds TSB to move forward. Issues such as ‘better distribution of the report’ and ‘improve effectiveness of data collection’ sit together providing readers with a snapshot of its ambitions for further achievements with its corporate responsibility programme.

The full Report and shorter review are easily digestible documents well populated with varied case studies. Online engagement tools are, however, poor. The website is low on detail, merely providing a small number of links to latest reports and policy documents. Better use of the website to communicate progress is required to take it to CR 2.0.

Lloyds TSB

1.0

APPROACHLIFECYCLE

PRIORITIES

CLARITY

Although CR is not given any mention within the business principles or ‘About us’ section, Reckitt Benckiser sees sustainability as “the benefits our products and financial performance provide to society; and delivering those benefits in a way that continually reduces our impact on the environment, whilst managing our business in a socially and ethically responsible manner”. Conveying the point that CR is part of how the company does business.

It tackles a total of eight key priority issues taking a lifecycle approach by looking at the impacts associated with products from raw materials to

manufacturing and post sale – suggesting an integrated approach. But disappointingly, the company let’s itself down by its lack of stakeholder engagement and there is no evidence of any assessment of material issues – keeping Reckitt Benckiser at CR 1.0.

On a separate note a really good overview of the reporting process and how data has been put together is provided – reassuring the reader of how well CR is managed through the business.

Reckitt Benckiser

1.0

Encouragingly Scottish Power recognises that adopting a “leadership approach” ensures responsibility for managing CR sits within the appropriate business areas, making CR part of day-to-day business operations.

In a sector beset by controversy with the conflicting objectives of energy supply, price and the environment, Scottish Power states that its stakeholders agreed a need to manage and report “with greater depth and focus on the areas where…business was having greatest impact on

society and the environment”. However what we found in the 2008 CR report was in fact the opposite – 12 focus issues and no presentation of how they are prioritised. Scottish Power does provide an overview of its impacts and issue areas, explains its approach to managing the impact and maps performance over the past year. If only it prioritised its issues and showed evidence of integrating stakeholder feedback into the decision making process – it would then be well on its way to CR 2.0.

Scottish Power

1.0

Directions SupplementJune/July 09

APPROACHLIFECYCLE

PRIORITIES

CLARITY

Some CR 2.0 leaders from 2008 have now propelled themselves further into the world of CR 2.0 with what we see as leading edge initiatives. Here are a few highlights.

Engagement on wider issues emerged as a key trend. Vodafone continues its exploration of the wider issues relating to ICTs and emerging economies, with studies looking at using its influence and reach to improve health and education. The Foundation’s latest report explores the rapidly expanding area of MHealth – the use of mobile phones to help track, measure and assist the delivery of healthcare solutions in the developing world.

By using a range of online tools and communications strategies, 2.0 leaders are engaging with wider audiences and becoming more closely aligned with leading thinking on sector issues. To launch the latest version of its Creating Shared Value Report, Nestlé held a wide-ranging forum exploring global policy debates around food and nutrition. Broadcast live over the internet, the forum’s hard-hitting content dealt honestly with the challenges that lie ahead for governments, private businesses and civil society in confronting critical humanitarian issues.

Other examples of good online engagement include Telefonica’s education social network site www.aula365.com. It provides supplementary learning content for Latin American schoolchildren – backing up its commitment towards closing the digital divide. Royal Dutch Shell’s dialogues are another example of using live online broadcast to engage. The energy company, through live question and answer sessions with its experts, demonstrates leadership and transparency around tough subjects. Elsewhere BASF enhanced the usability of its latest report, providing readers with the ability to manipulate performance data in real-time. These interactive, customisable charts enhance reader experience allowing for a tailored, engaging read.

Another area attracting growing attention is that of reporting on lobbying and public policy activity. British American Tobacco’s latest report has a detailed section covering lobbying and political contributions. And GlaxoSmithKline moves further by listing all lobbying activity and declaring that it has made a commitment to stop contributing to any political parties.

Looking back on some of Europe’s 2008 CR 2.0 leaders…

A two-speed approach to CR…

The two-speed approach to CR, as identified in Directions 2008, is also very much in evidence in the leading UK companies. Only four of the ten ‘leaders’ are leading the way by bringing into focus the issues that matter most to their stakeholders and their business, reflecting a clear approach and having the confidence to communicate their stance on the complex issues. These businesses are identified as ‘platinum’ leaders in CR as they have stringent responsible business practices. We therefore expected to find more in their communications and will look out for further developments in the months to come.

Contact:

Louise Dudley-Williams ldudley-williams@salterbaxter.comTel: +44 (0)20 7229 5720

Emily Measoremeasor@salterbaxter.comTel: +44 (0)20 7229 5720

202 Kensington Church Street London W8 4DP

Tel +44 (0)20 7229 5720 Fax +44 (0)20 7229 5721 www.salterbaxter.com

The Directions Supplements support our main Directions report. The main report is published each year and is now regarded as the UK’s most comprehensive analysis of the trends and issues in CR communications. If you want a copy, call us on the number below or emaildirections@salterbaxter.com

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