“UA&P is currently making great strides in its move towards green energy, allowing the University to cut down on electrical consumption while at the same time reducing its carbon footprint.”
Blog Archives
Supply chain transparency: forging better relationships with suppliers
Supply chain transparency: forging better relationships with suppliers
In the aftermath of the horsemeat scandal, what can companies do to manage supply chains and put sustainability at the heart of sourcing?
Global supply chains are long and complex and must be managed correctly to ensure environmental, social and economic sustainability. Photograph: Royalty-Free/Corbis
Findus, the frozen food brand at the centre of the horsemeat saga, last week announced it is taking action to address the shortcomings of its supply chain management. The frozen food giant, whose beef lasagnes were found to contain up to 100% horsemeat, has joined the Supplier Ethical Data Exchange (Sedex), a not-for-profit organisation that allows suppliers to share responsible trading data with retailers and brands online.
With the support of Sedex, Findus will conduct ethical and health and safety audits of its suppliers and then, armed with this information, it aims to manage risks throughout its supply chain, engaging with suppliers to create greater transparency across its global supply network. The move is also intended to help restore trust in the wider food industry.
Retailers have come under intense scrutiny since the explosion of the ubiquitous horsemeat scandal. More than 5,430 Food Standards Agency tests have so far revealed 44 UK products containing horsemeat, putting retailers including Tesco, Aldi, Ikea and Asda under serious pressure to clean up their supply chains.
Supply chain disasters
Lack of visibility and a lack of direct influence over suppliers further down the supply chain can lead to distinct problems: work can be sub-contracted or even contracted directly to suppliers with poor health and safety standards, dismal labour rights records or detrimental environmental practices.
Just last week, it emerged that Zara is under investigation for ‘degrading’ factory conditions in Argentina, where Bolivian labourers, including children, allegedly worked 16-hour days without breaks.
Labels belonging to Inditex (the parent company of Zara), Walmart and Sears were found in the ashes of the latest factory fires in Bangladesh, where more than 100 workers died in factories with appalling health and safety standards.
Elsewhere, Yum Foods!, the owner of fast food giant KFC, says it plans to stop sourcing packaging derived from tropical rainforests, following a scandal that erupted last year over its former supplier Asia Pulp and Paper trashing Indonesian forests to source paper for KFC ‘buckets’.
Similarly, fashion companies have been forced to address the issue of toxic chemicals being used in the dyeing process. The Roadmap to Zero coalition now aims to stamp out harmful dyes from apparel manufacturing.
So, what can retailers do to avert further catastrophes? What are the challenges they face? And where do they start on the journey to greater transparency?
Current state of play
Climate change, more frequent extreme weather, unsustainable farming practices, water scarcity and population growth are taking their toll on global supply chains, sending raw material costs soaring and threatening the security of retailers’ operations.
However, the sheer size and complexity of global supply chains means tackling sustainability is a monumental task. Pinpointing risk is an uphill struggle; retailers can end up inundated with data, and suppliers become reluctant to ‘waste time’ completing check-lists and audits.
The food and fashion industries are leading the charge on supply chain sustainability. With many high profile brands operating in these sectors, criticism of food and fashion supply chains has been severe.
While some companies, including Unilever and Marks & Spencer (M&S), are seeing the commercial benefits of responsible sourcing, globally, there is still a huge amount of progress still to be made.
Clarity of purpose
“Retailers need clarity of purpose,” explains Sedex CEO Carmel Giblin.
“Establishing a code of conduct that sets clear, realistic expectations is vital. Taking a risk-based approach is also important, identifying the high risk areas and tackling these first.
“Getting robust data is great, but retailers must take this further by understanding suppliers’ business challenges, offering support and developing long-term relationships.”
Louise Nicholls, head of responsible sourcing and Plan A at M&S, also stresses the importance of setting clear standards. She advocates taking a pragmatic approach to reviewing supply chain issues, listening to suppliers, providing evidence-based training and highlighting the business benefits of sustainability. Importantly, she says, retailers should lead by example.
Effective communication is all important
‘Telling the story’ of how sustainability links to business growth using real life examples is essential. Suppliers should also be encouraged to tell their story back to their customers, clarifying the progress they’re making on specific sustainability challenges.
The role of collaboration
Nicholls recommends that retailers participate in working groups and joint initiatives, such as the Ethical Trading Initiative’s recent trip to Peru. This saw M&S, Tesco, Waitrose and Co-op meeting with Peruvian stakeholders in the fruit and vegetables sector to discuss common challenges.
Tackling industry-wide issues collectively can accelerate the pace of change in a cost-effective way and collaborative industry platforms are becoming increasingly popular. These include the Global Social Compliance Programme, the FMCG forum Aim-Progress and the Electronic Industry Citizenship Coalition.
Empowering the supplier who holds the direct relationship with companies further down the supply chain is also important. Retailers must ensure they ask relevant, searching questions of their first tier suppliers, working closely to make their expectations crystal clear.
When recruiting new suppliers, use credible, industry-standard scorecards, reinforced by mandatory data-sharing on carbon, environmental and social performance.
Engaging positively with suppliers
Retailer collaboration with NGOs and local groups on the ground can be instrumental in communicating more effectively with suppliers.
UK retailer John Lewis has established a sourcing office in India and launched a new bath mat range via its sustainable cotton farming project in Gujarat. This initiative, developed by CottonConnect, is helping to improve the environmental performance of the company’s cotton supply chain while enhancing supplier livelihoods.
HP has recently introduced new supplier guidelines to protect the rights of student and temporary workers in China, while Sony’s ‘Green Partner’ programme defines clear standards for its suppliers of chemical substances, ensuring that only approved suppliers are retained.
Katharine Earley is a freelance copywriter and journalist, specialising in sustainability.
Asia Pulp & Paper – Market pressures tip the balance By Andy Tait
Asia Pulp & Paper – Market pressures tip the balance
By Andy Tait on Apr 2, 2013
Asia Pulp & Paper’s change of heart is good news for forest conservation, but consumers need to keep up the pressure, says Greenpeace’s Andy Tait
In recent years, Greenpeace has helped persuade some of the world’s largest corporations to tackle deforestation in their supply chains, both through hard-hitting confrontational campaigns and through backroom lobbying and collaboration.
In fact, the one often leads to the other. With Kimberly-Clark, we fought a five-year campaign to end its links to destructive forestry in Canada’s Boreal Forest. With McDonald’s, the campaign to end its involvement in Amazon deforestation for soya was short and sharp, as was our campaign against Nestlé regarding the sources of its palm oil. Change within Indonesia’s largest palm oil producer – Golden Agri-Resources, the palm oil division of Sinar Mas – came after a longer fight.
Many of these companies, and others, have become strong advocates for broader action to tackle deforestation across supply chains, partly as a result of our work.
The most recent and perhaps the most unexpected shift has come with our decision to suspend public campaign work against Asia Pulp & Paper (APP) – one of the largest paper companies in the world.
In February 2013, the company announced a new forest conservation policy. The policy commits APP to no further plantation establishment or peatland development on forested land. Underscoring this commitment, APP announced the immediate suspension of all remaining natural forest clearance and peatland development across all concessions that supply it.
APP has not suddenly “seen the light”. Remember that the new policy follows roughly a decade of persistent campaigns from Indonesian and international NGOs. Commercial pressure also played a role, coming from international businesses such as Adidas, Disney, Mattel, Nestlé and Unilever whose customers did not want to buy products linked to deforestation. This decision is based on an assessment that APP can cope without further expansion into forest areas and that this move will end up being a good one for business.
Onus on APP
Only time and on-the-ground evidence of change will succeed in convincing APP’s critics and its former customers that the company is genuinely turning over a new leaf. Unquestionably, the onus is on APP to demonstrate that it is delivering on its commitments and addressing the major environmental and social costs of its operations until now.
Fortunately, at this stage, the signs are positive that APP is serious about implementing its forest commitments. An endorsement by the company chairman suggests that the new policy is supported at the highest level, and the company is investing a lot of money and resources on the ground to oversee the first stage of implementation.
If implementation does succeed, many challenges remain. Until the end of January 2013, APP suppliers were still clearing rainforest. Many social conflicts across the company’s supply chain must still be addressed. Peatland areas previously drained and cleared will continue to emit large amounts of greenhouse gases if management of these areas does not change rapidly.
In this context, at what stage should the international market recognise and reward progress? And if there is no market benefit where is the incentive for the company to change practice?
In the short term, the attention of some campaigns will now turn to APP’s main competitor in the Indonesian pulp sector, April (Asia Pacific Resources International), which continues with the deforestation activities APP has just committed to end. This now makes April the leading driver of deforestation for pulp in Indonesia. And April, like APP, depends on the international market.
Greenpeace has recently sent letters to April’s chief executive, Sukanto Tanoto, some of its key customers and the World Business Council for Sustainable Development of which, surprisingly, this most unsustainable company is a member.
Indonesia’s pulp and palm oil industries have relied on rainforest peatland destruction for far too long. Forests play a vital role, not just for biodiversity and for the communities that depend on them, but also for storing carbon and thereby protecting the global climate. By continuing to clear rainforests, plantation companies put themselves on a collision course with their customers, consumer-facing brands that have pledged to tackle climate change and to clean up their supply chains.
Zero deforestation policies driven from the consumer side are helping to drive change in supply chains through excluding poor practice and supporting commodity producers that commit to implement more responsible practice. But the landscape remains extremely complex and questions remain about how to link market changes to political policies and governance that genuinely protect forests and reward better industry practice.
Through confrontation and collaboration, NGOs can play a vital role in driving change on the ground and in corporate supply chains. But that market pressure alone cannot deliver change quickly enough for Indonesia and other countries’ rainforests. Ultimately, we need political solutions. And soon.
Andy Tait is a senior campaign adviser at Greenpeace. He tweets at @andyrtait.
Full product transparency is the future of reporting By Ramon Arratia
“Full product transparency is about full accountability across the value chain, not just within a company’s boundaries. It can provide clear guidance on materiality.”
Full product transparency is the future of reporting
By Ramon Arratia on Jan 22, 2013
Reporting on product life cycle impacts is the next step for sustainability reporting
Good corporate reporting is based on the principles of accountability and transparency. When reporting on sustainability, this transparency is greatest when focused at product level. After a decade of corporate responsibility, full product transparency heralds a new era for reporting.
With many – and often most – environmental impacts occurring outside a company’s boundaries, extending reporting from the narrow confines of a company’s own operations to the wider effects of the products it sells demonstrates superior accountability.
This is the ultimate in transparency. It is also of greater relevance to most stakeholders, who are more interested in a company’s products than its facilities.
Accountability across the value chain
So forget reporting at company level. Classic CR reporting is too narrow in focus, and it misses too much. Environment sections of reports are usually limited to the immediate impacts of a company’s operations, perhaps with a nod to managing impacts in the supply chain.
By extending reporting to include the impacts of products throughout their life cycle, companies can demonstrate transparency and accountability across the value chain.
But which environmental impacts, for instance, should a retailer be accountable for – and report on? The environmental impact of a supermarket extends well beyond the doors of its stores to include the impacts of all the products it sells.
These occur before and after the products enter and leave the stores – in their production, their use and their disposal. Yet conventional corporate reporting would largely ignore anything that happens outside of the store.
A traditional corporate report might pick out one or two products as case studies and look at their impacts, but what about the rest? If a company produces environmental product declarations (EPDs) based on life cycle analysis for all its products, this can reveal its overall impact much better than any CR report.
An EPD takes into account the ingredients of a product, its methods of production, and the full environmental impact of each stage of its life cycle.
Double counting is OK
A life cycle approach does, however, raise the issue of double counting. Reporting has been dominated by accountants, and environmental reporting has been developed along financial reporting lines. Company A owns 33% of company B, so it must account only for 33% of the environmental impacts of company B. But does this really work?
For the accountancy profession, accuracy is paramount. In financial terms, double counting is a disaster to be avoided. But for environmental reporting, does it really matter?
After all, the aim is to identify and cut environmental impacts globally. It’s better to over-report these impacts than to miss some out. If they aren’t reported by anyone, they’re not being addressed by anyone.
In this case, double counting simply means impacts are being tackled on more than one front – by the supplier, the retailer and the end-user. That has to be a good thing.
Re-inventing the concept of scopes 1, 2 and 3
Scope 1, 2, 3 thinking has been designed with a focus on the company, not the product. A more sensible reporting protocol would re-define the scope of categories by putting the life cycle of the product at the centre of things, not the profile of the company.
For example, we could keep scopes 1 and 2, and then add the following:
- Scope A: raw materials and supply chain
- Scope B: product transport
- Scope C: commercialisation and/or installation
- Scope D: use phase
- Scope E: end of life
- Scope F: other company indirect impacts such as employee travel
- Scope +: carbon abatement of products and services
Scopes A to E are already being reported separately in the new EPDs that have been agreed for the construction industry. An EPD accounts for impacts before the product gets to the company and after it leaves, rather than just providing a snapshot as it passes through.
Who reads the reports?
CR reports can be useful for sustainability experts and some NGOs. But most customers don’t read CR reports.
Consumers and B2C customers are not interested in the company; they’re interested in the products they buy. They want to know about the environmental impacts of the products, and how much carbon, toxicity or recycled content they have. Publishing an EPD provides that information in a validated way. It’s a credible way of substantiating marketing claims.
For example, if you are buying company cars, you no longer have to worry about how many ISO14001 compliant factories BMW has, or what kind of score it has registered with the Carbon Disclosure Project. You simply look at the gCO2/km metric for the cars you’re buying.
And while people buy products, investors buy companies. But investors need to understand a company’s future cash flows, which come from the ability of the company to sell its products.
To understand sustainability risks, looking at the actual impacts of the products that a company sells can provide more insights than the generalities and corporate spin of a company report.
In the car industry, for example, investors need to have a handle on the tailpipe emissions from each vehicle to ensure that the company will still be able to meet impending regulations, or if it will be able to compete with other manufacturers that are rapidly reducing their emissions.
Full assurance
Expensive external assurance of CR reports is used by companies as a way to verify what they’re saying. But many stakeholders find the resulting bland, heavily-caveated statements unsatisfactory.
Full product transparency eliminates the need for this type of assurance, which would be a relief to everyone but the assurers. Product reporting is the ultimate in transparency – clearly showing the environmental impacts of each product. By building third party assurance into the EPD process at product level – for example by auditing the data that goes into creating the EPDs – the classic CR report assurance statement becomes redundant.
What could be more reassuring than a company making a promise to cut the impacts of its products, and then annually publishing its EPDs to show whether those impacts are reducing or not? Certainly not the standard boilerplate assurance statement at the back of a CR report.
The integrated model
There is a big discussion to be had about integrating reporting. Companies are increasingly moving towards this model as a way of demonstrating that sustainability is core to their business. Some people talk about it as the holy grail for CR reporting. But this is still about integrating corporate impacts in a corporate report.
The aim is to show integration of sustainability considerations into the core of the business. And what lies at the core of any business? Its products. Reporting on the impacts of a company’s products can demonstrate true integration in the business.
CEOs often trot out the cliché that “sustainability is embedded in our DNA”, which is easy to say but more difficult to measure. Sustainability is not really in the DNA of any company until the products are zero waste, zero carbon, 100% recycled, contribute to the health of customers, and create socio-economic value across the whole value chain.
Full product transparency is about full accountability across the value chain, not just within a company’s boundaries. It can provide clear guidance on materiality. It also offers a useful analytical tool for investors looking at the long-term prospect of a business, and it does away with the need for bolt-on assurance that has little value.
There is only one way ahead for the environment reporting and it’s full product transparency.
Ramon Arratia is sustainability director at Interface, a position he has also occupied at Vodafone and Ericsson. In this article he draws on content from his book Full Product Transparency: Cutting the Fluff Out of Sustainability
Resource scarcity spotlight: Jochen Gassner, First Climate By Steven Wilding on Apr 2, 2013
“Ethical Corporation: Shared value or sustainability?
Jochen Gassner: Shared value to achieve sustainability.”
Resource scarcity spotlight: Jochen Gassner, First Climate
By Steven Wilding on Apr 2, 2013
A market approach to natural resource management
Jochen Gassner is a Board Member at First Climate Markets AG. His responsibilities encompass the development of international and national VER markets, the design of climate neutral products and services, and the consulting of private and public sector clients.
Before joining First Climate, he worked as Group Environmental Manager at Borealis and as Environmental Consultant for a number of industry sectors. He studied environmental engineering at the Leoben University of Mining and Metallurgy, Austria, and holds a PhD in sustainability research from Graz University of Technology, Austria.
Ethical Corporation: Tell us briefly what it is you do?
Jochen Gassner: At First Climate, we help companies measure, manage and compensate or offset their carbon and water footprints. We are one of the most experienced carbon offset providers in the market. We are now piloting a similar programme to help companies invest in water stewardship projects.
Ethical Corporation: What do you see as the big issues to look out for in 2013?
Jochen Gassner: As a company, we are always looking at the carbon space. The very interesting question right now is where to go after Doha [Climate Change Conference, November 2012]. We don’t see any real commitments yet to reduce greenhouse gas emissions after 2012.
As a German company, we are also watching the energy market as Germany is spearheading a change in its energy system. At the same time, Germany faces an an election year in 2013, so it will be interesting to see how politics influences developments in the energy system.
Ethical Corporation: What are your personal priorities in the year ahead?
Jochen Gassner: The key thing for us is to strengthen our role in the global carbon market. Historically we’ve been very active in the compliance carbon markets and we still are, but that marketplace now plays a smaller role than it did a few years ago.
Our focus is therefore moving more towards the voluntary carbon market. Then we’re also piloting other initiatives in the water and renewable energy space. To elevate those to a stage where they are profitable would be a change for 2013 as well.
Ethical Corporation: Do you anticipate any advances on international carbon policy in the future?
Jochen Gassner: The negotiation process certainly needs to be simplified if we are to take this forward. In the near future, we have to see what China is developing in terms of its regional schemes and where the US is heading after the re-election of [President] Obama.
But the big solution is for carbon markets to become like commodity markets of this world, which is off the table right now.
Ethical Corporation: What role do you feel collaboration will play in making a transition towards a more sustainable, low-carbon future?
Jochen Gassner: Companies won’t be in a position to do it alone. The order of magnitude of the challenge means that it needs industry collaboration, as well as governments. The role of government is key because someone needs to take the risk. So look at the German renewable energy system and the role that feed-in tariffs played in that. Without that, we wouldn’t have seen the same growth.
That said, with technological progress, we are moving to a point where some renewables in some parts of the world can be competitive without subsidies, which is when governments need to step out. I think citizen participation is important too. We’re always talking about consumers and what they can do, but I’m convinced that we need input from wider society because without that we can’t make the necessary transition.
Ethical Corporation: Do you think that companies are taking future resource scarcity issues seriously enough at present?
Jochen Gassner: Generally, the corporate sector has been focused on capital costs and labour costs, and not so much on resources because they seem readily available. When it comes to strategic management of scarcity risks, however, we’re only now beginning to see companies getting their heads around the issue.
Resource scarcity will bring with it a redistribution of risks and opportunities. For example, companies in the extractive industry will have to go to places where exploration and production is more risky and expensive.
It’s important to be mindful that there are certain resources that are already scarce. Think about water, fossil fuels, and minerals and metals, for example.
Then consider the rise of the global population by a couple of billion [over the next four decades], which will demand more consumption of these resources all the time. While we’ve seen some decoupling between GDP and resource use over the last decades, we are still in a situation where GDP growth is coupled to the use of resources.
Ethical Corporation: Water is a particular focus of your resource conservation attentions at this time, is that correct?
Jochen Gassner: Yes. It’s obvious, but water is one of the most important resources. It’s almost impossible to replace. We’ve set up a public-private partnership that brings together financiers with corporations with technical expertise and organisations such as the Gold Standard.
The idea is to develop an innovative financing mechanism for water saving, water purification and water supply projects – much like the carbon projects we are financing already. As it is, there are a number of projects in the carbon markets that have a focus on water element, such as irrigation projects.
But there’s no currency to fund these projects, so we’ve been financing them through the carbon. We’re now working on establishing Water Benefit Certificates to fund these projects.
Ethical Corporation: How exactly do you envision these Water Benefit Certificates working?
Jochen Gassner: We see them working very much like the voluntary carbon markets. So, on the one side, you’ve got someone who is willing to invest in a project, and on the other hand you have projects like drip irrigation and water purification that require financing.
We’ll establish a mechanism that allows us to quantify, monitor and verify the water savings of those projects, and will establish a currency that helps us to link financing to the water savings. So just as a Carbon Credit is issued for a tonne of carbon dioxide reduced, a Water Benefit Certificate is issued for each thousand cubic meters of water saved, supplied or purified.
Then, with the market, we’ll attach a value to those cubic metres, and then we’ll sell that saving as a financing opportunity for the corporate community.
Ethical Corporation: Where are you at today with the Water Benefits Certificates?
Jochen Gassner: At present, we’re focused primarily on methodology and concept development. The way forward is to get supply and demand to a scale where we can create the market. We need to build a larger portfolio of projects and identify potential [financing] bodies for the Water Benefit Certificates.
Then we might see something that is similar to what we see today in the voluntary carbon market, with an established market of buyers and projects which are financed by them.
Ethical Corporation: Climate change – mitigation or adaptation?
Jochen Gassner: I can’t say both? Where we stand today, I would hope for mitigation but I think we will need more adaptation.
Ethical Corporation: Name a government to watch on sustainability.
Jochen Gassner: The United States. We’ve had great hopes in Obama to move the green agenda forward. Perhaps he’s got some more freedom in his second term to do that.
Ethical Corporation: Corporation tax: higher or lower?
Jochen Gassner: That all depends on where we’re talking about.
Ethical Corporation: Corporate responsibility impact: Obama or Xi Jinping?
Jochen Gassner: I guess the answer again would be both. If I had to choose, maybe Xi Jinping just because of the magnitude of China and what it now means for the global economy. It’s imperative that they embark on the agenda as well.
Ethical Corporation: Shared value or sustainability?
Jochen Gassner: Shared value to achieve sustainability.
Jochen Gassner will be speaking at the Responsible Business Summit, 7/8th May 2013, where he we be discussing how to create and implement a business model to reflect water, food and energy shortages.
CSR: why there’s a difference between shared values and shared value
CSR: why there’s a difference between shared values and shared value
By basing CSR on social issues at the core of their business, companies can create social benefits and financial returns
Posted by
Valerie Bockstette
Thursday 4 April 2013 10.15 BST
Walmart has valuable sustainability strategies in one part of its business but faces allegations of unethical standards in another. Photograph: ROBERT E. KLEIN/AP
In the 2011 Harvard Business Review article “Creating Shared Value,” Michael Porter and Mark Kramer argued that “shared value is not about personal values.” Indeed, we often hear people confusing the terms “shared value” and “shared values”, mistakenly thinking that the concept advocates that corporations should let the values of stakeholders drive their strategies and actions.
In fact, in the context of shared value, the term “value” refers to creating worth – societal value in the form of progress on social issues, and economic value on a financial statement. However, while it is important to keep this distinction in mind, it is also true that shared values (in the sense of guiding principles) can be critical to companies’ ability to create shared value.
Why is it important to differentiate shared value from shared values? By donating to charitable causes, companies provide resources to help strengthen communities and lend a hand in times of need. However, given the myriad of issues that could benefit from more resources, the choice of which causes to support with corporate philanthropy is often driven by personal values.
Much corporate giving today comes from employee gift-matching programmes, which are allocated based on the values of the employees and the related causes they support. Moreover, often CSR decisions are driven by the values of stakeholders (by asking “what do stakeholders care about?”). This is certainly one way to pick societal issues on which to engage, but not the path that shared value describes.
Shared value starts from a different premise. It argues that addressing societal issues can be directly and measurably in companies’ own economic interests. In shared value, issues are addressed not based on personal values or the moral convictions of stakeholders. Rather, issues are identified through hard-headed analysis of how a company’s strategy and operating context intersects with key societal needs.
Nevertheless, while values and moral convictions should not determine which societal issues companies address, shared values are fundamental to creating shared value for several reasons.
First, companies that identify and embrace a social purpose are more successful at creating shared value. Often this is done by redefining the business. For example, the Finnish company Kemira has redefined its business from industrial chemicals to water solutions; IBM has moved from offering IT services to managing the world’s precious resources; and Eli Lilly and Company has shifted from developing medicines to improving the health of people in low and middle income countries.
Creating a new or reviving an age-old mission statement for a business on a piece of paper or a website is one thing. Rallying tens of thousands of employees around this new mission and bringing about a true mindset shift is another. When business operations are underpinned by a strong values system and decisions or actions are always considered in relation to the founder’s values, this purpose shift and the recognition of societal issues to address can happen more easily as founders of companies typically set out to meet a societal need, not to meet quarterly earnings targets.
Second, a lack of consistent values across a company can undermine shared value creation. We’ve seen examples of companies such as Walmart creating tremendous shared value in one part of their business, only to face allegations of unethical standards in another. While shared value does not mean that all companies become solely dedicated to societal good overnight, one would hope that companies pursuing a shared value agenda are not causing undue harm at the same time. A strong corporate values system, which is espoused both widely and deeply in a company, can help ensure that shared value is not jeopardised by questionable practices elsewhere in the firm. For example, creating innovative banking products for underserved markets in one department, while rigging Libor in another.
Finally, we know that cross-sector partnerships are essential to developing and implementing shared value efforts. However, for such partnerships to be fruitful, companies, government agencies and not-for-profit organisations must share a common vision for how and why each party is at the table. For companies, that means recognising the primacy of a non-profit’s mission or a government’s duty to its citizens, rather than simply seeking a “halo” effect in the absence of meaningful social progress.
Similarly, governments and NGOs must acknowledge that social progress can drive a company’s competitive advantage, and profitability is enabler of social impact. As Anne Mulcahy, chair of Save the Children, has said: “I knew that, if we could tap into more synergistic opportunities for corporates and non-profits, we could greatly enhance the sustainability of economic activity, and build its positive impact on communities in the most challenging parts of the world.” If non-profit and public sector partners place companies solely in the “philanthropic cheque-writer” camp and judge corporate profits as somehow antithetical to social good, the collaboration will not lead to shared value for either side.
Shared values are not the same as shared value, and the two concepts should not be confused. However, articulating a social purpose at the corporate level, adhering to a set of common principles across business units, and agreeing a common vision for partnership across sectors can set the stage to create significant benefits for society and returns for companies. Those are values we should all share.
Valerie Bockstette is a director at FSG.
China column: When in Rome … By Paul French
China column: When in Rome …
By Paul French on Apr 2, 2013
With China’s overseas interests expanding rapidly, its corporations are receiving lessons in a concept still foreign to many: business responsibility
I’ve often moaned in this column that Chinese companies have, by and large, not yet had to face up to adopting corporate responsibility as integral to their business processes.
They are aware of corporate responsibility and they often make claims to be instituting appropriate strategies. However, most of what passes for corporate responsibility in China is actually simply donations – philanthropy – and invariably to one or another cause or organisation favoured by the central government. Companies that stay within the line and donate to “safe” causes and “official” organisations effectively amass house points with Beijing.
Sadly, and especially in these days of economic recession in the west and straitened budgets, many western companies have followed suit and decided that, in China, simply writing a cheque to a local charity or government NGO (the infamous gongos) is the easiest way to both tick the corporate responsibility box and win friends and influence people in high places.
However, as China’s corporations grow, so they are growing increasingly outwards.
Chinese companies are acquiring western assets and brands – Shanghai Bright buying Weetabix or Geely Motor buying Volvo for instance – or becoming involved in projects overseas, mining and construction primarily. According to Beijing, the Chinese invested in 4,425 overseas enterprises in 141 countries and regions in 2012, with a total direct investment of $77bn, an impressive year-on-year growth of 29%.
As Chinese firms continue to do this they are running up against communities and local governments that have corporate responsibility embedded in their culture and expect the newcomers to adapt.
Chinese construction companies have proved surprisingly good at winning contracts and then building in accordance with local specifications and regulations.
The China State Construction Engineering Corporation recently built the University of South Carolina’s west quad living and learning centre. The specifications from the university were tight and the construction team stuck to them. The result? The building has received the silver-level certification of Leadership in Energy and Environmental Design (LEED) from the US Green Building Council. Similar plaudits have been awarded to Chinese constructed buildings in Singapore and elsewhere.
Trouble underground
However, mining has been a much more contentious area, where Chinese companies have found themselves faced with protests from local communities and officials. Away from home – unable to deal with local protests in the way they might in China, unable to control local journalists, bloggers and activists – companies have found themselves far more exposed.
In Chile, for instance, Chinese copper miners have faced protests from the local community accusing the Chinese miners of environmental damage. Similar incidents have occurred at copper mines in Zambia and Burma. China, of course, consumes 40% of the world’s copper, so it’s an important commodity to Beijing.
In virtually all of these cases the Chinese companies have been woefully inadequate in dealing with the media, local activists and the blogosphere. They have simply never previously had to engage with protestors, and they don’t have the skills.
So now Chinese companies going abroad, likely to encounter these sorts of situations, are receiving guidance and training before they leave.
Launching new guidelines in Beijing, Yao Jian, a spokesman for the ministry of commerce, said: “When investing abroad, most Chinese enterprises understand the need to protect the environment, obey the laws of the host nations and actively fulfil social responsibility. However, some enterprises are not experienced in the work of environmental protection, social responsibility and need the guidance of the Chinese government.”
The new guidelines are the product of the commerce and environmental protection ministries – they stress a range of corporate responsibility obligations when operating outside China, including environmental protection, adhering to local labour rights and corporate responsibility.
There are many case studies in the guidelines. For instance, China Metallurgical Group is featured for having provided free medical services to local villagers at its mining project in Saindak in Pakistan. This costs $50,000 a year but has, apparently, greatly improved relations locally. After problems in Zambia, the China Nonferrous Metal Mining Group openly pledged not to lay off workers, a move that immediately eased tensions at the mine.
Everyone involved in the surging number of Chinese investors and companies moving abroad accepts that there will be problems in the future. The Beijing government is now mulling legislation that means that if Chinese companies break local laws abroad, avoid local taxes, or infringe labour rights, they could be punished and fined at home where their major assets are. This would essentially enforce corporate responsibility abroad.
Right now Chinese firms are on a steep learning curve – but then 10 years ago overseas investment by China was close to zero. The curve was never going to be anything but steep.
Paul French has been based in China for more than 20 years and is a partner in the research publisher Access Asia-Mintel.
Embedding sustainability in management processes: How to eat the elephant
Embedding sustainability: How to eat the elephant
By Judy Kuszewski on Feb 25, 2013
A focus on steady progress is central to properly embedding sustainability throughout a company’s functions
A typical corporate responsibility programme may begin in one of many ways. For instance, a successful pilot project. Or a high-profile commitment or target. A well regarded sustainability report may give rise to a carefully executed management initiative.
But as diverse as these examples are, what do they have in common? They can all serve as the basis for a bigger effort at embedding corporate responsibility in your company. Embedding corporate responsibility means knowing you’ve done the work to ensure everything your company does, makes and says is influenced by your goals and values. Embedding is the difference between a successful one-off project and a sustainable company.
Perhaps in a perfect world, we’d all follow a logical and methodical process for pursuing sustainability, probably beginning with identifying material issues, setting targets, developing a roadmap, and so on.
But the truth is, most companies find themselves with a mix of things that respond to different needs and pressures in different geographies or parts of the business. There is often little design evident in the company’s approach beyond the individual programmes and initiatives – which may in themselves be very well conceived but fail to leverage their success and their impact.
Impossible?
Moreover, the whole corporate responsibility and sustainability project can appear very daunting for even the best-prepared team. It can seem as though the scale of the challenge is immense, the problems beyond the ability of a single company to affect. In other words, impossible.
There’s an old saying that may be useful here: how do you eat an elephant? The answer: one bite at a time.
Any unpleasant imagery about snacking on protected species notwithstanding, it’s a useful touchstone for anyone embarking on a complex, long-term and often subtle process of changing attitudes, finding new ways to understand and measure performance, and dealing with stakeholders.
Ethical Corporation’s recent report – How to embed sustainability and corporate responsibility in management processes – provides bite-sized food for thought across the whole process of developing and embedding sustainable business across a company’s operations. It provides hundreds of examples of good practices from real companies, based on dozens of interviews with leaders.
The report looks at a range of embedding practices and a series of corporate functions, to help practitioners see how their efforts can be most effectively scaled across their company, to meet their own unique needs.
Where to start?
So which bite comes first? The simple answer to the question of where to begin the embedding process is to begin where you are.
So if your company has a particular interest in targets, Ethical Corporation’s report provides a foundation to work on target-setting and implementing across a variety of business operations.
On the other hand, if you are particularly focused on the company’s supply chain, the report shows what embedding steps you can take across the whole of that function. This allows multiple entry points for companies of all sizes and stages of familiarity, and gives you the ability to play to your strengths.
Among the many insights we gained in the research for this report, a few high-level lessons stand out.
Sustainability and corporate responsibility needs both champions and cheerleaders. While it’s essential to be able to draw on specialised expertise where available, there also needs to be a shared basic understanding and commitment across the company. If sustainability or corporate responsibility is seen as the job of the “CR department”, you’re in trouble.
Don’t close off your options too early. Often, companies face the temptation to limit the scope of their efforts in a bid to keep things simple. In those cases, you may find yourself with a set of initiatives that won’t address what you really need them to. If you must begin with a limited scope in order to gain early acceptance, you will need to keep in mind the gaps that need to be closed as you go forward.
Help others to see the bigger picture. Use of tools such as road maps can help colleagues understand where the company is going, as well as where it stands today. This is essential to maintaining motivation.
Share the wealth. Sharing stories, building skills and tapping into employees’ latent desire to make a difference in the world. Corporate responsibility can be a powerful motivator and source of enthusiasm, as well as a driver of creative success.
Job done? Think again. Complacency is a great temptation in any endeavour, where a successful roll-out may lull people into believing that the hard work is over. Risks constantly evolve, as do demands through the value chain and relationships with stakeholders.
But at the same time, sources of value and innovation are constantly emerging as well, and sustainability can help unlock this value.
Judy Kuszewski is an independent writer and consultant on sustainable business. She led the research and writing team on the recent Ethical Corporation report “How to embed sustainability and corporate responsibility in management processes”.
Center for Social Responsibility of the University of Asia & the Pacific 