CSR trends, strategy, ethics and the business case

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CSR, Strategy, Ethics and Governance Toby Webb, Founder, Ethical Corpora=on and Stakeholder Intelligence. Lecturer, Corporate Responsibility, Birkbeck, University of London September 2013 [email protected] Tobiaswebb.blogspot.com
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A presentation looking at trends, drivers, actions, strategy and business ethics, why they matter, who does them well and what the business case is today

Transcript of CSR trends, strategy, ethics and the business case

Page 1: CSR trends, strategy, ethics and the business case

CSR,  Strategy,  Ethics  and  Governance  

 Toby  Webb,  Founder,  Ethical  Corpora=on  and  Stakeholder  Intelligence.  Lecturer,  Corporate  Responsibility,  Birkbeck,  

University  of  London    

September  2013    

[email protected]    

Tobiaswebb.blogspot.com  

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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…  

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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  

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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  

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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)    

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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  

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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  

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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’  

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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  

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•  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  

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Unilever:  Business  Benefits  of  Sustainability  

               

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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.    

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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  

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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  

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         Social  Media  means  no  escape  from  the  public  eye  

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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  

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                         Harvard  Business  School  

Professor  Robert  Eccles,  Harvard  Business  School  

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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  

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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    

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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  

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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  

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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  

 

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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)  

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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    

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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    

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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    

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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    

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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  

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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  

   

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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  

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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.  

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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/  

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Thank you!