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CSR trends, strategy, ethics and the business case

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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

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CSR trends, strategy, ethics and the business case

  1. 1. CSR,  Strategy,  Ethics  and  Governance     Toby  Webb,  Founder,  Ethical  Corpora=on  and  Stakeholder   Intelligence.  Lecturer,  Corporate  Responsibility,  Birkbeck,   University  of  London     September  2013     Tobias.Webb@stakeholderintel.com     Tobiaswebb.blogspot.com  
  2. 2. 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…  
  3. 3. 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  
  4. 4. 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  
  5. 5. 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)    
  6. 6. 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  
  7. 7. 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  
  8. 8. 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’  
  9. 9. 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  
  10. 10.                 •  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  
  11. 11. Unilever:  Business  Benefits  of  Sustainability                  
  12. 12. 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.    
  13. 13. 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  
  14. 14. 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  
  15. 15.          Social  Media  means  no  escape  from  the  public  eye  
  16. 16. 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  
  17. 17.                          Harvard  Business  School   Professor  Robert  Eccles,   Harvard  Business  School  
  18. 18. 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  
  19. 19. 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    
  20. 20. 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  
  21. 21. 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  
  22. 22. 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  
  23. 23. 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)  
  24. 24. 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    
  25. 25. 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    
  26. 26. 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    
  27. 27. 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    
  28. 28. 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  
  29. 29. 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      
  30. 30. 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  
  31. 31. 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.  
  32. 32. 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/  
  33. 33. Thank you!