Engaging the Whole Organization in

Corporate Responsibility

Holly Duckworth, PhD Sherpa, Inc.

Mike Wallace BrownFlynn

#CRSummit2016

Introductions

• Previous positions include leadership roles in six sigma, quality and operations at Kaiser Aluminum, TRW Automotive, GE – Aviation, and Lockheed.

• B.S. in Mechanical Engineering from the University of Tennessee, M.S. in Management from the University of Southern California, Ph.D. in Industrial and Organizational Psychology from Capella University

• ASQ certified Six Sigma Black Belt, certified Manager of Quality, and Organizational Excellence, Certified Master Black Belt with ISSSP

• Chair of the ASQ Technical Community on Social Responsibility

• Co-author:“My Six Sigma Workbook” & “Social Responsibility: Failure Mode Effects and Analysis”, and “A Six Sigma Approach to Sustainability: Continual Improvement for Social Responsibility”

Holly Duckworth, PhD

holly@sherpabcorp.com

www.sherpabcorp.com

Mike Wallace, MD, BrownFlynn

mikew@brownflynn.com

www.brownflynn.com

• Managing Director at BrownFlynn, focused on

Strategic Partnerships and Emerging CR / Sustainability Services

• Previous Director at the Global Reporting Initiative (GRI) in Amsterdam and in North America

• Experience in traditional EH&S consulting, M&A Due Diligence and Corporate Responsibility / Sustainability.

• B.S. in Business Administration from Miami University of Ohio; Dual Major: Organizational Behavior & Employee Relations

• Current and past member of ABA Sustainability Task Force, CRA Ratings & Rankings and Responsible Supply Chain Councils, Committee on Supplier Ratings (COSR) and Center for Safety & Health Sustainability (CSHS)

#CRSummit2016

Agenda

American Society for Quality – Social Responsibility Research

• How the Markets Assess Sustainability

• Continual Improvement for Social Responsibility

• Engaging the Whole Organization in Corporate Responsibility

#CRSummit2016

A Connection Between Quality

and Corporate Responsibility

• ASQ

– US TAG for ISO 26000

– Repeated research projects demonstrate strong connection between Quality principles and methods and social responsibility

• ASQ + IBM: 2010

• ASQ + BSR: 2011

• ASQ Integration Guide: 2014

• ASQ + BrownFlynn: 2015

#CRSummit2016

CR Helps Quality

• Stakeholder engagement – Existing CR approaches and best practices for stakeholder

engagement can help quality professionals collaborate and communicate with a wider range of internal and external stakeholders.

• Transparency – CR reporting has innovated a range of standard non-

financial reporting metrics and indicators that quality professionals can use to build more holistic models.

• Systems thinking – CR approaches incorporate the interdependence inherent

in ecosystems and can bring in important aspects of society and environment into business decision making.

#CRSummit2016

Quality Helps CR

• Making hidden costs visible (Cost of Poor Quality)

– Eighty-six percent of CEO’s see “accurate valuation by

investors of sustainability in long-term investments” *as important to reaching a tipping point in sustainability

• Corporate governance (Quality Management Systems and Layered Process Audits)

– The majority of problems are the fault of management, process, or systems, rather than poor workmanship.

• From reactive to proactive (Preventive and Systemic Corrective Action)

– Monitoring approaches when used alone for suppliers will fail to address root causes for social and environmental challenges.

• Employee Engagement (Total Quality Management and Shop Floor Kaizen)

– Including employee voices and promoting an informed, participatory workplace will help to ensure fair working conditions.

*United Nations Global compact 2010 report, “A New Era of Sustainability”

#CRSummit2016

ASQ+BrownFlynn: 2015

Key Findings

• 20 public ASQ Enterprise Member companies

• A clear relationship exists between Public Commitment to Quality and performance on third-party Sustainability evaluations.

• Companies who reference ISO standards demonstrate higher Sustainability performance and deeper levels of transparency.

• Nearly all companies reference Quality when evaluating risk factors to their business.

• The vast majority of companies reference the importance of a full value chain perspective (both upstream and downstream of the organization) as it pertains to both Quality and Sustainability.

• Companies with greater transparency demonstrate better Sustainability performance.

#CRSummit2016

Agenda

• American Society for Quality – Social Responsibility Research

How the Markets Assess Sustainability

• Continual Improvement for Social Responsibility

• Engaging the Whole Organization in Corporate Responsibility

#CRSummit2016

• AIAG 2016 Modern Due Diligence: How the markets are assessing sustainability

© BrownFlynn 2016

#CRSummit2016

Growing Demand

Transparency on

MATERIAL

CR/Sustainability

Information

Investors /

Financers

Employees

Customers

Suppliers

Regulators

Legislators

Boards of

Directors

Local

Communities

Activists/

Advocacy

Groups

Industry

Associations

© BrownFlynn 2016

#CRSummit2016

Expanding Issues

Environmental

Materials

Energy

Water

Biodiversity

Emissions

Effluents and Waste

Products and Services

Environmental Compliance

Transport

Supplier Environmental

Assessment

Environmental Grievance

Mechanisms

Economic Economic Performance

Philanthropy

Market Presence

Indirect Economic Impacts

Economic Inclusion

Procurement Practices

Human Rights

Non-discrimination

Freedom of Association &

Collective Bargaining

Child Labor

Forced /Compulsory Labor

Security Practices

Indigenous Rights

Supplier Human Rights

Assessment

Human Rights Grievance

Mechanisms

Labor Practices

& Decent Work Training and Education

Employment

Labor/Management Relations

Occupational Health & Safety

Diversity & Equal Opportunity

Equal Remuneration for Men

and Women

Supplier Assessment for

Labor Practices

Labor Practices Grievance

Mechanisms

Society Anti-Corruption

Public Policy

Anti-competitive Behavior

Local Communities

Supplier Assessment for Impacts

on Society

Grievance Mechanisms for

Impacts on Society

Product Responsibility Customer Health & Safety

Product & Service Labeling

Marketing Communications

Customer Privacy

Product Compliance

© BrownFlynn 2016

#CRSummit2016

Drive to Materiality

To objectively determine what matters most—by looking up and down your value chain and assessing the perspectives of your internal and external stakeholders. Managing these material topics mitigates risk and/or drives value for stakeholders and your business.

© BrownFlynn 2016

#CRSummit2016

Influence on Definition of Materiality

Please describe how your risk and opportunity identification processes are applied. How do you prioritize the risks and opportunities identified?

The information in a report should cover [topics] that reflect the organization’s significant economic, environmental, and social impacts or substantively influence the assessments and decisions of stakeholders

Disclosure of material sustainability issues is important to investors, companies, regulators, and the public

Is your company publicly reporting the processes and tools used to identify and prioritize critical issues within the sustainability strategy, including a consideration of impact on the company’s business performance (i.e. materiality analysis/matrix)?

© BrownFlynn 2016

#CRSummit2016

ESG Ecosystem

Based on sustainability reporting standards and frameworks, there are 100+ organizations producing lists, rankings, and scorecards of “top companies” and “most sustainable” companies.

© BrownFlynn 2016

#CRSummit2016

Investor Coalitions

© BrownFlynn 2016

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Access to Capital –

supplier/customer relationships

Source: http://www.unpri.org/

© BrownFlynn 2016

#CRSummit2016

Shareholders & Supply Chains

NYC Comptroller influences industry on sustainability measurement, management and performance reporting Comptroller’s Office oversees over $150B in pension investments and seeks long term sustainability of these retirement funds

– Fiduciary responsibility of investing and protecting the Fund for more than 237,000 retirees and beneficiaries and more than 344,000 City and affiliated employees

– Monitors and manages:

• Traditional financial and reputational risks of the Fund

• Alignment with the basic values of the constituents, such as workers rights and environmental concerns

– Recognizes regulatory (i.e., Dodd-Frank) and non-regulatory (i.e., Sustainability Reporting) market developments will have an influence on the resilience of investment portfolio

Evolution of the NYC Comptroller story

July 2012 - “. . . . the New York City

Comptroller’s Office secured agreements from

Apple, Dell, HP and Intel, who agreed to

encourage, and in many cases require, their

major suppliers to issue sustainability reports

encompassing both environmental and social

issues. Together, these firms represent more

than 50 percent of the personal computer

market, making them some of the most

exposed to risk.”

June 2013 – How corporate reporting

improved Microsoft’s supply chain, GreenBiz

December 2013 – Incorporating sustainability

into supply chain management: A look inside

Intel’s approach, GRI Newsletter

November 2014 – NYC Comptroller targets 75

companies in groundbreaking proxy access

initiative, Pensions & Investments

© BrownFlynn 2016

#CRSummit2016

Market & Regulatory Developments

Stock Exchange Activity

International Regulatory & Public Agency Activity

US Regulatory, Public Agency & Professional Industry Activity

© BrownFlynn 2016

#CRSummit2016

Market & Regulatory Developments (Sept. 2015)

© BrownFlynn 2016

#CRSummit2016

Market & Regulatory Developments (Oct. 2015)

© BrownFlynn 2016

#CRSummit2016

Reporting Activity

© BrownFlynn 2016

#CRSummit2016

Reporting & Supplier Activity

Sustainability Surveys IBM Airbus Kaiser Permanente Siemens Marathon Oil British Telecom Boeing Ingersoll Rand Volvo United States Postal Service Walmart BMW Johnson Controls CR’s Top 10 Best Corporate Citizens 2013

Sustainability Training Nike

Puma

Apple

AT&T, Inc.

Mattel

Bristol-Myers Squibb

Campbell’s

Intel

© BrownFlynn 2016

#CRSummit2016

City of Cleveland

© BrownFlynn 2016

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City of Chicago

© BrownFlynn 2016

#CRSummit2016

City of Atlanta

© BrownFlynn 2016

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State of Washington – Dept. of Ecology

© BrownFlynn 2016

#CRSummit2016

U.S. Postal Service

© BrownFlynn 2016

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U.S. Army

© BrownFlynn 2016

#CRSummit2016

White House CEQ

© BrownFlynn 2016

#CRSummit2016

State of California

CIO $91 billion

Procurement $6 billion

Procurement $9 billion

CIO $283 billion

CIO $188 billion

© BrownFlynn 2016

#CRSummit2016

ORGANIZATIONS

Conveners

Advisory Committee

Participants

Sponsor Chair Technical Consulting

Reduce, Reuse, Recycle

The Committee on Supplier Ratings (COSR) – An initiative hosted by the Sustainable Purchasing Leadership Council (SPLC) that aims to use existing ratings and rankings methodologies to manage supply chains - https://www.sustainablepurchasing.org/cosr/

© BrownFlynn 2016

#CRSummit2016

Engaging the Entire Organization

© BrownFlynn 2016

#CRSummit2016

Agenda

• American Society for Quality – Social Responsibility Research

• How the Markets Assess Sustainability

Continual Improvement for Social Responsibility

• Engaging the Whole Organization in Corporate Responsibility

#CRSummit2016

CISR® Continual Improvement for Social Responsibility

– A new framework for Quality Professionals

– Bring the Quality discipline and valuable expertise to CR efforts.

– Ensure that Corporate Responsibility efforts yield meaningful results, NOT glossy marketing spin.

– Influence ability to attract and retain employees, members, clients, customers and investors.

© Sherpa Inc. 2016

#CRSummit2016

Like Six Sigma for Sustainability

– Requires a continual improvement approach

– Achieves incremental improvement through

project work

– Expert problem solvers are deployed as

project leaders

– Uses rigorous statistically-oriented problem

solving methods

© Sherpa Inc. 2016

#CRSummit2016

Six Sigma: DMAIC

• DMAIC is a method used

in the Six Sigma

methodology

• Define, Measure, Analyze,

Improve, and Control phases

• Defined set of objectives and

tools used at each phase

• Projects with discrete start

and discrete end

• Organizational learning

through method training and

project work

CISR: SOFAIR

SOFAIR is a method used in the CISR methodology

• Stakeholders/Subjects, Objective, Function/Focus, Analyze, Innovate/Improve, Report/Repeat

• Defined set of objectives and tools used at each phase

• Projects with discrete start and discrete end

• Organizational learning through method training and project work

© Sherpa Inc. 2016

#CRSummit2016

Stakeholders/

Subjects

Objective

Function/

Focus

Analyze

Innovate/

Improve

Report/

Repeat

Define Measure Analyze Improve Control

The CISR framework differs from traditional Six Sigma DMAIC,

in that we do not begin with PROBLEM DEFINITION.

The CISR Mindset also includes a focus on the POSITIVE.

What are we already doing well?

What is working?

What is the ideal state?

Do more of that….

© Sherpa Inc. 2016

#CRSummit2016

The SOFAIR Method

Stakeholders

And Subjects

Objective

Function

And Focus

Analyze

Innovate and Improve

Report

And Repeat

Continual Improvement speaks to the PROCESS of improvement… ongoing, in all of its forms and areas.

© Sherpa Inc. 2016

#CRSummit2016

Stakeholder and Subjects

• Phase Objectives

– Charter the SOFAIR project

• Business case, problem statement, goals

– Engage in stakeholder dialogue

– Determine process relationships with SIPOS

– Analyze stakeholder needs across all 7

subjects of social responsibility

– Prioritize and measure the current state for all

critical-to-sustainability characteristics

S

© Sherpa Inc. 2016

#CRSummit2016

Objective

• All CISR activity should be linked to the business objectives of the organization

• Organizational goals, objectives, and resource allocation for the SOFAIR project is determined

• Project is chartered

• Tools – Hoshin Kanri

– SWOT analysis

– Ideal Final Result (IFR)

– Narratives

O

© Sherpa Inc. 2016

#CRSummit2016

Function and Focus

• What part of the problem will we work on first?

• Deployment of systems thinking

• Defines a very narrow focus for the project

• Tools

– Internal and external contextual analysis

– Life cycle analysis

– Process flow analysis

– QFD

– Theory of constraints

– Pareto analysis

F

© Sherpa Inc. 2016

#CRSummit2016

Analyze

• Finding the relationship between organizational decisions and actions to stakeholder impact

• Risk analysis for potentially irresponsible decisions and actions – Risk assessment

– FMEA

• Causal analysis for corrective actions – 5-why’s, cause and effect analysis

– Hypothesis testing

– Regression analysis

A

© Sherpa Inc. 2016

#CRSummit2016

Innovate and Improve

• Innovate where incremental improvement

does not allow for goal achievement

• Cross-functional, creative solution

generation

• Tools

– TRIZ

– 7-ways

– Prioritization analysis

– Project and change management

I

© Sherpa Inc. 2016

#CRSummit2016

Report and Repeat

• Transparency and accountability through

public reporting

• Continual improvement approach

– We are never finished

• Tools

– Internal scorecards

– External sustainability reporting frameworks

• GRI, IR, SA8000, SASB, CDP, EICC, etc.

– Communication and culture change strategies

R

© Sherpa Inc. 2016

#CRSummit2016

Agenda

• American Society for Quality – Social Responsibility Research

• How the Markets Assess Sustainability

• Continual Improvement for Social Responsibility

Engaging the Whole Organization in Corporate Responsibility

#CRSummit2016

The Untapped Resource

• Most CR initiatives have very few full time, dedicated resources

– Yet the supply chain and investor relations risks loom large

• Quality and Continuous Improvement Professionals are the untapped resources

– They are plentiful and at all levels of the organization

– Their methods and systems align with CR efforts

– Engagement in CR efforts can help to retain and develop Quality talent

#CRSummit2016

Case Studies

• Approximately 200,000 employees

• 7 employees dedicated to sustainability or corporate responsibility

• 8,000+ employees Six Sigma trained

• 3,000+ employees with Quality roles

Automotive OEM Tier 1 Supplier • Approximately 10,000

employees in NA

• 2 employees dedicated to sustainability or corporate responsibility

• 1,000+ employees Six Sigma trained

• 700+ employees with Quality roles

#CRSummit2016

Engaging the Whole Organization in

Corporate Responsibility

• Moving from theory to practice

– Train all employees on CR basics

– Allocate a small percentage of Green Belt and Black Belt work to CR performance improvement with CISR

– Integrate CR processes in the Quality Management System

• Policy, procedures, audits

– Teach Quality risk assessment and preventive action techniques to CR professionals

#CRSummit2016

Thank You!!

• Questions?

#CRSummit2016

Introductions

• Previous positions include leadership roles in six sigma, quality and operations at Kaiser Aluminum, TRW Automotive, GE – Aviation, and Lockheed.

• B.S. in Mechanical Engineering from the University of Tennessee, M.S. in Management from the University of Southern California, Ph.D. in Industrial and Organizational Psychology from Capella University

• ASQ certified Six Sigma Black Belt, certified Manager of Quality, and Organizational Excellence, Certified Master Black Belt with ISSSP

• Chair of the ASQ Technical Community on Social Responsibility

• Co-author:“My Six Sigma Workbook” & “Social Responsibility: Failure Mode Effects and Analysis”, and “A Six Sigma Approach to Sustainability: Continual Improvement for Social Responsibility”

Holly Duckworth, PhD

holly@sherpabcorp.com

www.sherpabcorp.com

Mike Wallace, MD, BrownFlynn

mikew@brownflynn.com

www.brownflynn.com

• Managing Director at BrownFlynn, focused on

Strategic Partnerships and Emerging CR / Sustainability Services

• Previous Director at the Global Reporting Initiative (GRI) in Amsterdam and in North America

• Experience in traditional EH&S consulting, M&A Due Diligence and Corporate Responsibility / Sustainability.

• B.S. in Business Administration from Miami University of Ohio; Dual Major: Organizational Behavior & Employee Relations

• Current and past member of ABA Sustainability Task Force, CRA Ratings & Rankings and Responsible Supply Chain Councils, Committee on Supplier Ratings (COSR) and Center for Safety & Health Sustainability (CSHS)