CSR, Strategy, Ethics and Governance
Toby Webb, Founder, Ethical Corpora=on and Stakeholder Intelligence. Lecturer, Corporate Responsibility, Birkbeck,
University of London
September 2013
Tobiaswebb.blogspot.com
What is CSR today?
• CSR is about how you run your business when no-‐one is watching
• It covers: Ethics, Integrity, Products, Services, Consumers, Investors, An=-‐corrup=on, Suppliers, Tax payments, Market Ethics, Employees, Civil society and the Environment…
CSR today = Sustainable Business
• Sustainable business does not happen without strategy
• Strategy does not happen without Governance
• Governance does not happen without Ethics
• Ethics do not happen without Stakeholder Engagement
Paul Polman, Unilever CEO
Who are some of the leaders?
Unilever -‐ Ten year journey towards sustainable growth Applies right across the value chain Responsibility for own direct opera=ons Also for suppliers, distributors and how consumers use Unilever brands Underpinning the Plan are around 60 targets
Marks and Spencer Launched Plan A in January 2007, seXng out 100 commitments to achieve in 5 years Now extended Plan A to 180 commitments to achieve by 2015 Ul=mate goal of becoming the world's most sustainable major retailer
Who are some of the leaders?
General Electric -‐ Eco-‐Innova=on as business strategy EcomaginaBon business unit mainstream focus on business innova=on and sustainable industrial products $2.3 billion invested in “Ecomagina=on” products in 2011 Reduced GHG emissions 30% since 2004 Reduced wastewater by 45% since 2006
2011 -‐ Siemens reorganised opera=ons into four core business units: Energy -‐ efficiency in energy produc=on and distribu=on, including oil, gas and renewables Healthcare -‐ supplying technology (medical imaging equipment and healthcare IT) Industry -‐ providing soeware and technology services Infrastructure and ciBes -‐ sustainable technologies (smart grid equipment and rail vehicles)
Who are some of the leaders?
Golden Agri Resources – A model for sustainable palm oil • 2010 -‐ announced ground-‐breaking
deal with The Forest Trust to help prepare for Roundtable on Sustainable Palm Oil (RSPO) cer=fica=on by December 2015
• Engagement with local NGOs for monitoring of sustainable agriculture implementa=on
• Working with Greenpeace and interna=onal NGOs
• Won back business from Nestle and Unilever: Share price went up!
“No deforesta=on” commitment: Now extended to pulp & paper Sister company APP in Feb 2013
Why do they choose to lead?
Unilever Marks and Spencer General Electric Siemens Golden Agri Resources
• Securing supply
• Customer trust
• Low carbon future
• UrbanisaBon
• Market access
How do they engage with stakeholders?
• Dialogue with civil society • Consul=ng experts on
agriculture, trust, ethics. urbanisa=on, climate change, energy futures
• By using guidance and standards
• Listening to their employees
• Watching trends emerge
ISO 26000 Guidance ‘Standard’
Key guidance for CSR and Sustainability
• ISO 26000 • Dow Jones Sustainability Indexes
• FTSE4Good Index • Global Repor=ng Ini=a=ve Guidelines
• OECD Guidelines • UN Global Compact • Transparency Int.
BUT: Guidance not the whole solu=on: You must study your own Risk and Opportuni=es
• Ten year journey towards sustainable growth with 50 tough targets
• Aim to bring safe drinking water to 500 million people
• 2011: Increased propor=on of pornolio that meets highest nutriBonal standards from 22% in 2010 to 25% in 2011
• Aim: Halve the greenhouse gas impact of products across the lifecycle by 2020
• 2020 aim: Source 100% of agricultural raw materials sustainably
• Sustainably sourced raw materials up from 24% in 2011 to 36% in 2012
Unilever: Business Benefits of Sustainability
Siemens and Green Business Strategy
• 2011: Products and solu=ons in Environmental Pornolio generated revenue of €29.9 billion: 41% of total revenue
• Objec=ve: Grow annual revenue to €40 billion by 2014 –with new, innova=ve products and excep=onal growth in fields like renewable energy.
Siemens and Business Ethics
• Huge corrup=on scandal, resul=ng in $1.6bn in fines in 2008
• Company has re-‐organised as a result, beser repor=ng and world class anB-‐corrupBon processes
• Forced by World Bank to spend spend $100 million on an=-‐corrup=on awareness ini=a=ves world-‐wide
How do these examples link to stakeholder engagement?
• Employee engagement drives innova=on and ideas
• NGO partnerships bring science, experience credibility
• CommuniBes have increasing power & influence
• Social media means no company escapes scru=ny
• Big business want a long term vision from Governments: And policies and incen=ves that enable investment and longer term planning: So must lead by example
Social Media means no escape from the public eye
How do CSR and Sustainability improve Business?
• Consumers want to trust brands, not products
• Leading companies turning sustainability into opportunity all over the world: New products / mo=vated people / cost savings
• 9 billion people means less resources and innova=on will be essen=al: Sustainability = risk reducBon
• Corporate roles in changing inefficient systems will be vital: The winning companies recognise CSR is systems change
• CSR and Sustainability = Smarter business
Harvard Business School
Professor Robert Eccles, Harvard Business School
Do other companies make money from CSR and sustainability?
London Business School & Harvard Business School research: • Firms with beser CSR performance face significantly lower
capital constraints
• Beser stakeholder engagement and transparency around CSR performance, are important in further reducing capital constraints
• That the rela=on is driven by both the social and the environmental dimension of CSR
"CORPORATE SOCIAL RESPONSIBILITY AND ACCESS TO FINANCE" Available at: h;p://ssrn.com/abstract=1847085
Five ways ethics and governance are linked to CSR and Sustainability
1. CSR and Sustainability cannot exist without Business Ethics
2. Business Ethics cannot exist without good Corporate Governance. Ethics always begins and ends with leaders
3. Good Corporate Governance is now seen by interna=onal investors as part of good management by boards
4. Poor Corporate Governance is priced into share valuaBons by analysts and large interna=onal investors
5. Good Corporate Governance begins with Rule Compliance
Why Transparency Ma^ers
• Compliance with interna=onal best prac=ce in Governance and behaviour expecta=ons = The first step to building investor and stakeholder trust – AnB-‐corrupBon is a vital part of this
• BUT: Compliance alone is not enough!
• Transparency is an under-‐valued method of building trust, both from Markets
Lack of transparency affects trust
Why Transparency Ma^ers
• Responsible ownership is about being accountable to shareholders
• That’s true for businesses in Indonesia too…
• Fact: Investors reward beser managed (governed) companies!
$18 Trillion in Interna=onal Investor Assets
Conclusion: Eight Key Steps to Global Ethical Governance
1. Adopt best pracBce in Interna=onal Corporate Governance
2. Go beyond Compliance: Develop and integrate Ethics 3. Lead from the top of the company on Ethics 4. Use Ethics to build strategy in CSR and Sustainability 5. Engage employees, partners, suppliers and civil
society in strategy and policy development 6. Use engagement to drive innovaBon in Governance,
Prac=ce, Product and Service Innova=on across your business
7. Embed ethics, CSR and Sustainability into your business every day
8. Never forget: Ethics, Governance and CSR are how smart business will be done in the 21st Century
Engaging Employees: The Business Case
• Employee percep=ons of corporate social responsibility have a major impact on organizaBonal commitment
• Contribu=on of CSR to organiza=onal commitment is at least as great as job sa=sfac=on
• Managers at nine out of ten of the UK’s top 50 best workplaces believe corporate social responsibility affects employees’ moBvaBon, sa=sfac=on and loyalty
“9 out of 10 of key barriers to successful change are people related”(PricewaterhouseCoopers)
Employee engagement: The numbers • Engaged employees generate 43% more revenue (Hay Group) • Disengaged workers costs the UK £44bn a year (IES) and the US
between $270bn and $343bn (Gallup) in lost annual produc=vity • Engaged employees have 2.7 sick days per year, rather than
the 6.2 disengaged employees take (Gallup) • Engaged employees are 87% less likely to leave. (Corporate Leadership
Council) • 67% of engaged employees advocate their organisa=ons, compared to
only 3% of disengaged employees. (Gallup) • 59% of engaged employees say “work brings out their most crea=ve
ideas”, compared to only 3% of disengaged employees. (Gallup)
Source: Engaging for Success: enhancing performance through employee engagement, David MacLeod and Nita Clarke, 2009
How do leading companies engage employees in Ethics?
• CSR Champions Networks: HSBC, Alliance Boots, Reed, Accenture, PWC, Novo Nordisk
• Embedding in job func=ons: At Nike, ethics and environmental issues co-‐managed by head of CR and relevant heads of department.
Nike: Head of compliance reports to both head of CR and head of all sourcing
Lessons from Novo Nordisk: Appraisals and the balanced scorecard • Novo Nordisk Employee appraisal
system called 3P: People, Performance, Process
• Includes financial and non-‐financial targets
• Included in staff appraisals, twice a year. At the end of each full year, total performance scores based on performance against CSR targets
• Wide variety of issues included in Novo Nordisk’s balanced scorecard: Those used depend on job func=on
Novo: On qualita=ve measures assessment is made by direct line managers
How leading companies engage CEOs and the board on sustainability
• Link CSR/Sustainability with corporate governance best pracBce: managing risk/providing investor re-‐assurance
• Cost savings: From opera=ons
and the supply chain AND the value for reputa=on
• Real life examples of how managing CSR issues benefits business
• Take them into the supply chain!
Present industry best prac=ce to the board: Talk about winning
Embedding CSR: Six Phases • Phase 1: INSIGHT -‐
stakeholder views, science based understanding of issues, benchmark of compe=tors and peers
• Phase 2: Public commitment of the “headline goal” – reducing carbon by 30%, reducing injuries
• Phase 3: Establish a baseline for today
Embedding CSR: Six Phases • Phase 4: AllocaBng
responsibility for acBon, the business must own the baseline, own the target and own the achievement
• Phase 5: Public reporBng of progress. Revisit what you said you’d do, create the sense of con=nuity and recommitment
• Phase 6: Transparently revisit and challenge the original goal
Key lessons for Governance • Clarify CR roles and
responsibiliBes at board level, CR champion on the board, board-‐level commisee
• ArBculate CR strategy clearly,
reflec=ng board responsibili=es and accountabili=es. Put it in the mission!
• Encourage frank exchange and engagement at senior levels
• Avoid delegaBon of cri=cal decision-‐making that senior leaders need to make
• Join-‐up high-‐level communicaBons, linking to the company’s CR goals, objec=ves and strategy
Conclusions: Embedding CSR
• Champions and cheerleaders are cri=cal: Don’t “outsource” responsibility for CR issues: Manage internally
• Don’t try to eat the elephant all at once: A bite at a =me. Your road map is an invaluable tool.
Conclusions: Embedding CSR • Share stories and skills:
Find ways to enable peer-‐to-‐ peer learning and mentoring
• Avoid the complacency trap: Ethics/CR isn’t something that can be “done” and lee on a shelf – it’s a con=nual part of risk management and market crea=on…
More informa=on: An 80 page management Report on Embedding CSR from; hsp://reports.ethicalcorp.com/reports/
Thank you!
Top Related