24 JUNE 2008

CORPORATE RESPONSIBILITY Distributed by The Guardian

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for its contents

Impacting how business is conducted across the globe

CONTENTSWhat is good corporateresponsibility? 4Local action 5Driving corporate responsibility 6Issues surrounding CR 8Sustainable business 10Telepresence 11Attracting young talent 12CR in the future 13Increased transparency 14

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IntroductionCORPORATE RESPONSIBILITY

Forward-looking companies no longer seesocial and environmental challenges as obsta-cles but as opportunities for innovation andgrowth. In the fast developing field of corporatesocial responsibility (CSR), the focus is shiftingfrom risk management towards a more vision-ary and entrepreneurial approach that seeks tocreate value and identify opportunities forstrategic innovation – for the benefit of business,society and the environment alike.

Responsible business practices can helpcompanies build brands and reputation,attract and retain talent, meet stakeholderexpectations, and achieve efficiency gainsand cost savings. Yet CSR initiatives in theircurrent form are often critisised for the limit-ed value they generate to companies and foroffering only a partial or short-termresponse to the challenge of sustainabledevelopment.

In the globalised world, issues such asdemographic change, global poverty, envi-ronmental degradation or developing askilled workforce for the knowledge-basedeconomy extend across national borders andindustrial sectors. To tackle them effectively,progressive companies are gearing up for aCSR approach focused on innovation andcooperation between companies, govern-ments and the civil society.

It is in this spirit that around 80 globalcompanies and 25 national CSR organisa-tions – including Business in the Communityfrom the UK – have joined CSR Europe, theleading European business network for cor-porate social responsibility. The network wascreated in 1995 by a group of Europeanbusiness leaders in response to an appeal bythe European Commission President JacquesDelors. Over the years, CSR Europe hasdeveloped its activities along with the evolv-ing CSR movement – from raising awarenessfor the nascent concept of CSR to providing

a platform for business-to-businessexchange and concrete cooperation projectsamong companies and their stakeholders.

Today, new CSR approaches are beingshaped for example in CSR Laboratory proj-ects led by companies and facilitated by CSREurope and its national partner organisa-tions. These collaborative projects bringtogether business practitioners, policy mak-ers, NGOs and other stakeholders to shareexperience and explore opportunities forjoint action. The first outcomes of the Labo-ratories will be published by the end of thisyear. These include for example guidebookson diversity or wellbeing in the workplace,online information resources for supplychain managers, and cooperative networksaround employability or education.

To take an example, a Europe-wide initia-tive launched by Microsoft, Cisco, StateStreet and Randstad aims to build the foun-dations for employability and inclusion byproviding access to IT and other employabil-ity related skills to current and future gener-ations and groups at risk. The campaignaims to reach 20 million people acrossEurope by 2010 through partnerships withindustry partners, local public sectoremployment agencies, chambers of com-merce and SME associations. In Portugal,Microsoft and partners have worked withlocal organisations to help over 1,700 unem-ployed textile workers get the IT skills neces-sary in today’s job market. In France, thecompanies leading the initiative have joinedforces with a local NGO in a project whichaims at bringing women over the age of 45back into the workplace.

The employability partnership andaround twenty other Laboratory projectsform a key contribution to the EuropeanAlliance for CSR launched in 2006. Based onthe double commitment of the European

Commissionand the busi-

ness community,the Alliance relieson companies andbusiness networks

to widen the respon-sible business move-ment and drive CSRinnovation in Europe

and beyond. It also stress-es the potential of CSR to contribute to thegoals of the EU’s Lisbon Strategy for Growthand Jobs – sustainable economic growth,more and better jobs, and greater socialcohesion.

The active engagement of companies inthe Alliance and other international initia-tives show that there is a genuine businesscommitment to contribute to sustainabledevelopment. CSR is no longer an optionaladd-on to core business activities. In thewords of Patrick Cescau, CEO of Unilever,“how well and how quickly businessesrespond to the agenda of sustainability andcorporate responsibility will determinewhich companies succeed and which willfail in the next few decades.”

BY KERSTIN BORN, EXECUTIVE DIRECTOR, CSR EUROPE

IN ASSOCIATION WITH

CSR – from challengesto opportunities

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Where once before a companycould expect the public to react rea-sonably well to a page on their web-

site detailing a couple of philan-thropic gifts and a few paragraphsof prose on how they take the envi-

ronment and their social responsi-bilities seriously, today companiesneed to actually deliver something

tangible and transparent.The first advice for any compa-

ny looking to become a better

corporate citizen is to map outwho has an interest in the compa-ny and who the company has aneffect on. When these are com-bined and strategies for improv-ing the effects the company hason all of its ‘stakeholders’ then thetask of delivering this change, andbeing transparent in this delivery,should be put at the heart of acompany’s strategy.

Clear and centralHence, CR Consultant, Joe Griffin,CEO of Blackbird CorporateResponsibility, points out thattoday CR is about blending thesocial, ethical and environmentresponsibilities at the core of abusiness so they are not just ‘bolton’ accessories which can beditched. CR should run through-out the entire organisation andensure the company deals respon-sibly with its staff, customers,local community, shareholders,governing authorities and theenvironment.

“There are a lot of peoplejumping on the green bandwag-on, in particular, and makingclaims that are just ‘greenwash’,where the effects of action areexaggerated, not long-lasting andnot at the core of the company’sstrategy,” he says.

“Companies have got to bear inmind consumers are far moresophisticated now. They want todeal with companies that sharetheir values and they get reallyannoyed when they see a businessmake half-hearted attempts thatdon’t tackle the real issues and seea company act on one issue local-ly without addressing it across allits operations.

“It’s particularly important toyoung people so companieswhich do not take on board theirresponsibilities and are not trans-parent in how they are deliveringon these responsibilities will findthemselves tarred with the ‘uneth-ical’ brush and they’ll find itincreasingly difficult to recruitand keep staff and they’ll start tolose customers at the same time.”

Above and beyondThis notion that CR needs to aphilosophy and a commitmentrunning through an organisa-tion and not just a page of awebsite or a title on one per-son’s business card is beingtaken increasingly seriouslyamong UK businesses, accord-ing to Ken Smith, CSR Directorat Bureau Veritas. He adviseson CR strategies and monitors

Modern CR: From boardroom to shop floorFor companies wishing to be exemplary corporate citizens, the proverbial goalposts would appear to have changed within just the past handful of years.

What is good corporate responsibility?CORPORATE RESPONSIBILITY

However, the values and principlesset down by the Rochdale Pioneersin 1844 are today a perfect blueprint for CSR and they remain thetouchstone for the modern Co-operative Movement.

The Co-operative Group, whichhas interests in Food, Funerals,Travel, Pharmacy, Financial Serv-ices and Legal Services, was one ofthe first major businesses to recog-nise the need to reduce carbondioxide (CO2) emissions and ener-gy consumption in order to helptackle climate change.

The Group first purchased greenelectricity in 1998 and since 2005,98 per cent of its electricity has beenobtained from renewable sources.This is not an insignificant amountas annually, The Co-operative usesthe equivalent of the domestic needsof a city the size of Sheffield.

In addition, the Group has com-mitted to reduce its electricity andgas consumption by 25 per cent by2012 and has initiated a £18mfive-year energy efficiency pro-gramme to ensure it achieves thisambitious target.

Not content with just buying greenelectricity from others, the Group hasa target to generate 15 per cent of itsenergy from its own renewable ener-gy sources by 2012. The Group hasalready begun to deliver on this tar-get through its eight-turbine windfarm on its land in Cambridgeshireand is currently developing twoother wind farms on its own land.

The Group is also a strong sup-porter of micro generation and isactively developing smaller scalerenewable energy projects across itsestate. One of the most high profileschemes was the Solar Tower Projectwhich transformed the 400 ft, 25-storey landmark Co-operative Insur-ance Tower with the installation ofover 7,000 solar panels.

In the wider community, the Grouphas committed £1m to its innovative‘Green Energy for Schools’ scheme isenabling schools across the UK toinstall PV panels at no cost. The Groupfunds 50 per cent of the cost of the PVpanels with the remaining 50 per centcoming from the government’s LowCarbon Buildings Programme.

Solarcentury, the Group’s deliverypartner has completed over 80installations to date across the UKand the 100th school is expected tobe completed within next few weeks.In addition to generating clean, sus-tainable renewable power and cut-ting carbon dioxide emissions theschools receive education and teach-ing materials on renewable energyand climate change.

When 28 weavers from Rochdale set up the first successful co-operative society in the midnineteenth century the term Corporate SocialResponsibility (CSR) had not been coined.

Climate co-operation

� In order to monitor the amount of green energy generated and the carbon diox-

ide (CO2) saved by the solar panels erected on the roof, each school in The Co-oper-

ative’s Green Energy for Schools scheme receives a digital readout meter. Here chil-

dren from Our Lady of Lourdes Primary School, Bury, check out the latest reading.

how well companies are doingin delivering those strategies.

“The UK is a leading light inCR,” he says.

“What we’re finding is thatthis is down to a mix of UK andEU legislation which means thatcompanies then have bench-marks for things such as HR andenvironmental issues which

they can roll out across theglobe and so exceed any localregulation. Apart from legisla-tion, the companies we dealwith are also being driven byconsumers and also access toinvestment. Ethical investmentis growing hugely in impor-tance and so companies don’twant to do things that would cutoff that supply of potentialfuture investment.”

If Smith were asked to pass ona tip on how to improve CR so acompany can get a reputation forexcelling in the field, rather thansimply participating, he suggestscompanies do more to tell theirstaff about its CR strategy and getthem involved.

“We helped devise the criteriabehind a well respected leaguetable of companies and CR,” hereveals.

“Time and time again we gointo a company and the staffare simply unaware or simplydon’t see or feel the measuresthat management are talkingabout. So the companies thatdo good CR or those with agood strategy that actuallygoes to great lengths toinvolve staff and communi-cate CR decision with them.It’s the main area we findwhere there is still so muchwork left to be done.”

Traditionally this has involvedstaff volunteering for local chari-ties and community groups to‘put something back’ into theareas where they work.

Mobile phone operator, O2, forexample, has centred its local CRwork on ‘Its Your Community’, aninitiative through which groupscan apply for grants up to £1000to do something in their commu-nity which will make it a betterplace.

“One of our best examples wasa lady who got a grant to turn anarea between back to back housesin to a communal garden,” saysSimon Davis, Head of CR at O2.

“It got everyone involvedworking on it and then enjoying itand then other streets applied forgrants to give people who don’talways know each other a spaceto meet and relax. The projectscan be for any positive initiativeand we have appointed independ-ent people to go through applica-tions so people can find out if theyare successful within just a monthor two.”

Similarly at Tata ConsultingServices, the IT consulting armof the global company whichowns Corus and Jaguar LandRover, staff are encouraged touse the organisational skills, aswell as fund raising opportuni-ties, to support local good caus-es.

“We have 26 communitychampions dotted around thecountry and they’re tasked withfive local projects which they candecide on,” explains MalcolmLane, Director of CorporateAffairs at TCS.

“They then build up teams intheir communities to work on theseprojects. A good example is anepilepsy charity our people support,by not just fund raising, but whenthey have an event our guys will dothings like arrange the car parkingand act as marshals for the day. Wealso have another project where ourstaff go in to schools in Newham,

London to talk to staff teaching ICTand their students about how the ITindustry works and what it’s like towork within it.”

This area of education is grow-ing in corporate citizenship ascompanies realise that they areprobably best able to serve theirlocal communities through theirown core competence.

BT for example is concentrat-ing on backing up its support forChild Line, the free phone supportservice for children, by teachingchildren communications skills.

“It’s obviously part of our com-petency that we can pass onthrough staff we train to be ableto deliver lessons that give chil-dren the communications skills

they need,” says Dave Hancock,Head of Education and Volun-teering at BT.

“It’s not just getting youngpeople to communicate, whichis important, but crucially weteach them communicationstrategies to say no to tempta-tions, such as drugs, and howto cope with bullying.”

Similarly at energy providerE.ON Vicky Bullivant, Head ofCorporate Responsibility, revealsthat teaching school childrenabout energy passes on the mes-sage about how energy is deliv-

ered but also how schools andtheir pupils can save energy andcut their carbon footprint.

“We’ve devised a six point planof where our responsibilities lie, toavoid the scattergun approachyou sometimes find some compa-nies take to CR,” she reveals.

“Part of this is delivering ourenergy experience education pro-gramme to schools. It’s apt for usto have our people go out anddeliver energy because we feel wehave a responsibility to keep oureducation programme relevant towhat we do as a company.”

It is an area in which the Co-Op is making an impact at 100schools by topping up the gov-ernment grants, which pay half

the cost of solar panel installa-tion, with the other half, so theschools receive solar power forfree.

“It’s im portant for us becausewe feel it’s vital to show childrenthe benefits of clean energy,” saysDave Smith, Corporate Commu-nications Manager at the Co-Op.

“By targeting schools, we notonly get to cut emissions, we getto influence the next generationas they see the panels gettinginstalled and then learn abouthow vital it is for us all to cutour carbon footprints.”

Education tops theagenda for local action

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Local action CORPORATE RESPONSIBILITY

“ companieswhich do nottake on board

theirresponsibilities

and are nottransparent inhow they aredelivering on

theseresponsibilities

will findthemselves

tarred with the‘unethical’brush ”

Businesses, just like individuals, have a local neighbourhood and so anycompany looking to become a better corporate citizen cannot only focuson global issues, such as emissions reduction, without considering itsimpact on its local environment.

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they avoid doing. As outlined in ourpublication ‘The Materiality Report’this means businesses need to iden-tify and prioritise what is materialfor them, align strategies to theseissues and communicate in credible

ways in order to drive learning andinnovation. This requires a longerterm view of the issues that couldaffect the success of strategy, awider view of the people whoseactions influence performance and

a deeper understanding of the infor-mation necessary for sound deci-sion making.

It is the need for information onsustainability issues to enable deci-sion making that has driven thefocus on transparency and report-ing in recent years. The last decadehas witnessed a significant increasein voluntary reporting on sustain-ability issues. The predicted globaloutput for 2008 is 2,850 reportsaccording to data from Corpo-rateRegister.com, whose archivenow contains over 17,000 sustain-ability reports. This must be wel-comed and there are certainly someexamples of strong sustainabilityreports which provide clear linksbetween core strategy, stakeholderengagement and reporting. Thereare also those which appear increas-ingly credible due to the extent andquality of their external assurance.One such leading reporter is Voda-fone with their clear identificationof material issues and their ‘we said,we have, we will’ framework, sup-ported by credible and thoroughexternal assurance.

However, in many cases sus-

tainability reporting is not deliv-ering what decision makers wantfrom it. There is a lack of consis-tency and comparability of infor-mation, both across time periodsand between companies within agiven sector. There is also a realneed to increase the credibility ofpublic disclosure through betterand more meaningful assurance.This means evaluating whetheran organisation has adequatelyidentified and understood itsmaterial issues, and not simplyverifying data. The current revi-sion of the AccountAbilityAA1000 Assurance Standard isan important step towards bring-ing meaningful assurance into themainstream and in the processbuilding trust in reporting. Ascore strategy aligns more closelywith sustainability issues, we arebeginning to see a move towardsthe convergence of financial andnon-financial reporting whichwill offer some new challenges forbusinesses.

The question still remainsthough, how far can companies getby working alone? Not far enough,

according to AccountAbility’sresearch into responsible competi-tiveness. In labour standards,human rights, water issues andespecially in tackling climatechange, companies need proactiveleadership from host governments,strong pressure from demandingconsumers, engagement with inno-vators and the trust to work withpeers - even competitors - to makeenough progress.

We have recently joined withUNEP to evaluate which countriesare showing real climate leader-ship across all sectors, and whichare just producing ‘hot air’. Itremains to be seen which coun-tries will emerge as the leaders inclimate competitiveness and howthat maps to business success.What we are starting to see is thatleading businesses are aware thatit is possible to create value fromaddressing social and environ-mental issues, but that they canonly achieve this by working incollaboration with other actors.

There are real opportunities forgrowth, but business cannot do it allalone.

From compliance to value generationHigher oil prices, food shortages, climate change and other accountability failures have all playedtheir part recently in focusing the attention of business on sustainability issues.

The Chairman of global brandingagency, Brand Union, believes thisis one of the most fundamentalchanges in the last couple ofdecades and it is leading consumersto exert a massive, and growing,force for positive change on, notjust individual brands, but also thecompanies behind those brands.

“It’s fascinating to see,” he sumsup. “Traditionally companies havehad two brands. There’s the corpo-rate brand that is shown off to thecity and the product brands it ownswhich customers used to buy. Now,though, they need to have a publiccompany brand because peopledon’t draw the line at, say, theirpacket of cornflakes. That brand isjudged by them by the actions ofthe owner’s company and it meanscompanies now need to not only

know how to deal with the city andhow to make products people like,they’ve got to build companies peo-ple like too; they need to understandconsumer ethics.”

Follow my leadThis is particularly true of retailwhere, whilst many would still callfor clearer labelling and more trulygreen and ethical products, con-sumers normally have a widechoice of products. Shoppers areincreasingly expecting to see thebrands behind goods they are con-sidering purchasing provide pro-vide information on whether or notthey are environmentally-friendly,sustainable and ethical.

Hence, to take one example,B&Q has pledged to work towardsbecoming a One Planet Living busi-

ness by ensuring goods on sale canhelp consumers cut their carbonfootprint at the same time as theretailer promises to take action toreduce its impact on global warm-ing. For Jo Kenrick, Marketing andCustomer Proposition Director atB&Q, a recent survey by the compa-ny proved what the retailer suspect-ed, consumers are now doing theirbit at home to recycle and reducetheir impact on the climate and theenvironment and they are notexpecting businesses to follow suit.

“The diy.com survey revealedthat 64 per cent of respondents saya company’s green credentials areimportant to them when consider-ing buying a product,” he says.

“This is also supported by arecent YouGov survey whichfound that 90 per cent of peoplehave become more environ-mentally conscious over thelast five years. Recycling moreat home (86%), using moreenergy saving devices such aslow energy light bulbs (72%),and using fewer plastic bags

(70%) are overwhelmingly themost common measures.”

Price of ethics? 14pMuch of this demand for ethical, aswell as environmental, improve-ments in how goods reach theshelves has come through food anddrink. In a world of instant globalcommunications consumers havebecome acutely aware of the hard-ship faced by workers harvesting,for example, coffee and tea, and theenvironmental impact expandingfarms and plantations can have onthe natural world.

Hence the term Fairtrade is high-ly recognised as is the RainforestAlliance badge which has a strongenvironmental remit to ensure thatthe extra money paid to ensure aproducer gets a fair price is put in toprotecting the environment,improving labour conditions andpromoting more efficient andgreener (pesticide free) farmingpractices.

Costa Coffee was the first Britishcoffee house to sell RainforestAlliance approved coffee andrecently found, through a YouGovsurvey, that more than half of coffee

drinkers favour a café which offersethical coffee (56%) and the majori-ty of people think it is fair to pay anextra 14p per cup for a responsibly-sourced drink.

The lesson companies needto take from such surveys isthat CR is not just an issue thatconcerns campaigners, it is anissue that has gone mainstreamamong UK consumers.

Consumers pushing the needfor better CR“We used to live in a ‘me’ world, we nowlive in a ‘we’ world,” is how branding guruTerry Tyrrell sums up the growth of CR.

Driving corporate responsibility CORPORATE RESPONSIBILITY

These challenges have confirmedthat such social and environmentalissues are strategically crucial tofuture value creation and, ultimate-ly, to business success or failure. It isclear there has been a fundamentaland important shift in the attitudeof many leading companiestowards such issues. It is no longersufficient to have a CSR departmentoperating as a silo and focusingmerely on compliance; sustainabili-ty issues are now strategic and pres-ent real opportunities for value gen-eration.

AccountAbility is a member-based, non-profit global networkwhose mission is to developaccountability innovations toadvance sustainable development.

The challenge of sustainabledevelopment requires business toshift from viewing sustainability asa matter of compliance to one ofvalue generation. The most impor-tant contribution of businesses tosocial and environmental chal-lenges will be in what they do inachieving success rather than what

BY DANIEL WAISTELL, STANDARDS MANAGER, ACCOUNTABILITY

An insight into consumerdemand for clear and accu-rate information when com-panies make environmentalclaims, so real progress canbe separated from so-called‘green wash’, was recentlymade clear when the ASAreleased details for com-plaints against advertisersfor 2007.

The figures revealed that 561complaints were madeagainst 410 adverts com-pared to 117 complaintsagainst 83 adverts in 2006; afourfold increase.

GREEN AD CLAIMS COMPLAINTS QUADRUPLE

“sustainabilityissues are nowstrategic andpresent real

opportunities forvalue

generation”

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Hence, with the dire warning that,depending on our actions, tem-peratures could rise by between1.4 C and 5.8 C this century, com-panies are under increasing pres-sure from governments, staff andconsumers to cut their contribu-tion to global warming.

Certainly Lisa Ashford, Head ofCommercialisation at EcoSecuri-ties, which helps businessesreduce their CO2 emissions, isfinding the push to improve com-panies’ green credentials is a mix-ture of EU legislation and compa-nies voluntarily seeking to belower their impact on the envi-ronment.

“The most important thing isfor companies to seek advice onhow they can reduce emissionsthrough energy efficiency,” saysLisa Ashford.

“When we have helped a com-pany get their emissions down aslow as possible, we can then lookto buy carbon credits to reducethose emissions further. This tends

to be buying credit from projects,typically in the developing world,which are energy efficient and socompanies can buy those creditsof reduced CO2 to reduce theirimpact on the environment.

“It’s crucial to get your ownfootprint down first, though, asyou can only offset 12 per cent ofyour carbon footprint, you can’tjust buy your way in to loweremissions.”

Clean powerThis inability to simply write acheque and use carbon saved in thedeveloping world to negate carbonfootprints in the west, is leadingcompanies to re-evaluate theirenergy policies. Whilst businessesneed energy to remain open andcan only push through so manyefficiencies, many are consider amove to ‘clean’ energy and some,such as McCain, are going as far asinstalling their own wind turbines. The food brand has just spent £15mon three of the country’s most pow-

erful wind turbines as well as awater treatment lagoon. Togetherthe wind power generated by theturbines and the methane collectedby fermentation in waste water, as itis cleaned, will provide 70 per centof the annual electricity needs of itsWhittlesey potato processing plant.

“Wind turbines are ideal forour plant because of the flat con-ditions and the lagoon is amaz-ing,” Bill Bartlett, CorporateAffairs Director.

“It treats our waste water,which is full of starch from thepotatoes and produces methanewhich we collect and use for

power. It’s great because we getclean energy and the environ-ment benefits, not least by usputting back water in to thelocal water system that is clean-er than when we receive it.”

Reduce consumptionMoving to hydro, solar and windpower is helping Dell reduce itscarbon footprint as part of aprocess it hopes will allow it tobecome carbon neutral by theend of year. It has already spent$1.8m on an energy manage-ment system which reduces itpower demands and it also pro-duces recyclable computerswhich consume less than half thepower they did just two yearsago.

“We encourage people torecycle their computers by giv-ing them to a partner weappoint in each country thatwill ensure they are reused or, ifnot, 99 per cent of our compo-nents can now be recycled,”claims Tod Arbogast, Director ofSustainability at Dell.

“We also produce the mostenergy efficient computers.We’ve cut down the power con-sumption of our models by 50 percent over the past two years andwe’re going to cut them again by25 per cent by 2010. We’ve alsodrastically reduced our own ener-gy needs and now believe wehave half the power needs of our

cleanest competitor and our latestfacility is completely power fedby wind, solar and hydro energy,so it’s completely clean and weoffer consumers, at point of pur-chase, to pay for a tree to be

planted to negate the impact ofrunning their computer.”

Arbogast maintains that notonly does the environment ben-efit but for companies will toinvest now in greener technolo-gy there is the prospect of beingable to use those green creden-tials as a differentiator to gain aserious competitive advantage.

Global warming heats upgreen driveThe Intergovernmental Panel on ClimateChange conclusion that global warmingis, at least, partly the result of man-madefactors is now near enough universallyaccepted by businesses, governments,consumers and academics.

Issues surrounding CR CORPORATE RESPONSIBILITY

“Moving tohydro, solar andwind power ishelping Dellreduce its

carbon footprintas part of a

process it hopeswill allow it tobecome carbonneutral by theend of year”

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Emerging markets in developingcountries represent an importanteconomic opportunity for multina-tional companies, as these make uparound 70 per cent of the world’spopulation. However, the role ofpeople at the “base of the pyramid”– there are around four billion peo-ple with low incomes globally – asconsumers, producers, businesspartners and innovators is oftenignored or undervalued by con-ventional business models.

“Governmentsand other public

and private actorsare opening up tonew approaches todevelopment aid”

At the same time, governmentsand other public and privateactors are opening up to newapproaches to development aidwhich, in its current form, hasbeen insufficient in eradicatingpoverty. Many international ini-tiatives are now looking at inte-grated approaches to develop-ment policy, involving manyactors and exploring also howbusinesses can contribute topoverty alleviation whilst com-

bining the creation of wealth andthe opportunities of sustainabledevelopment.

Base of the pyramid initiativesrequire re-engineering of existingbusiness models and innovativepartnerships with governments andlocal bodies. In India, Unilever haslaunched new products which con-tribute to public health campaignson hygiene and water sanitation,reaching out to 44,000 villages andaround 100 million people. Procter& Gamble has developed a waterpurification product to providefamilies in developing countriessafe drinking water at very low cost.The purifier is sold in small sachets,each cleaning and sterilising 10litres of water, and distributed incollaboration with local NGOs inAfrica, Asia and Latin America.

Providing market access is alsocrucial to helping people who livein conditions of poverty to becomeagents of change and thus benefitfrom the processes of globalisation.Grameen Danone Foods, a jointventure established by Danone andthe Grameen bank in Bangladesh,is designed to create a new jobs inthe local community through theproduction and distribution of ayoghurt product specificallydesigned to respond to the nutri-tional needs of Bangladeshi chil-dren at an affordable price. Foster-ing the development of local eco-nomic activity is also a key goal ofMicrosoft’s Unlimited Potentialprogramme in Uganda, where the

company has partnered with theUN industrial development organi-sation to set up eight businessinformation centres for SMEs.

“Providing marketaccess is also

crucial to helpingpeople who live in

conditions ofpoverty to becomeagents of change”

Efficient synergies betweenpublic and private spheres arefundamental to the success ofthese new business models. Cur-rently, there are only a few pub-lic-private partnerships based onwin-win strategies but there is nodoubt of their potential, particu-larly in areas such as health andeducation. In this context, CSREurope, the leading Europeanbusiness network for corporatesocial responsibility, is facilitatinga “CSR Laboratory” project aim-ing to enhance synergies betweenthe public and the private sectors,accelerate the creation and scale-up of base of the pyramid initia-tives. Led by Danone, Unilever,Microsoft and Vodafone, thisworking group brings togethercompanies such as BT, Nestle,Novartis, Suez and France Tele-

com, and as well as stakeholderrepresentatives from the Euro-pean Commission (DirectorateGeneral for Development andHumanitarian Aid), the WorldBank’s International Finance Cor-poration, ACP Business Facility,and GTZ (Deutsche Gesellschaftfür Technische Zusammenarbeit).

The Laboratory participantswork together to gather informa-tion on existing base of the pyra-mid and development initiatives,analyse barriers and gaps acrossthese initiatives and provide poli-cy recommendations for betterpartnerships. The exchange ofpractical experience helps toidentify concrete areas for cross-sector cooperation and furtherdevelop new business models thataddress socio-economic chal-lenges in a sustainable manner.

Facts and Figures on Baseof the Pyramid* • 4 billion people with per-capitaequivalent purchasing power(PPP) less that US$3,000 per year• Could swell to 6-8 billion over thenext 25 years• Most live in rural villages or urbanslums and shanty towns—move-ment towards urbanisation• Education levels are low or no-existent (especially for women)• Markets are hard to reach, disor-ganised, and very local in nature

* Source: François Maon, Universitécatholique de Louvain

Sustainable business at thebase of the pyramid – a newopportunity for development

Sustainable businessCORPORATE RESPONSIBILITY

Many multinational companies are initiating new busi-ness models and partnerships aiming not only to produceeconomic results but to contribute to sustainable develop-ment and poverty alleviation in developing countries.These “base of the pyramid” initiatives are about doingprofitable business with significant social benefits andwhich respect the environment – for example, providingpeople with low incomes access to products and servicesthat address their basic needs for hygiene, nutrition, edu-cation, mobility, communication and employment.

BY BEN DAVIES, CSR EUROPE

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Telepresence CORPORATE RESPONSIBILITY

Increased transparency will bringincreased scrutiny from organisations’stakeholders, including shareholdersand the media, and companies must faceup to this fact and identify how they aregoing to manage it.

Many leading companies are choos-ing to respond by developing CorporateSocial Responsibility (CSR) programmesto demonstrate how they are drivingpositive societal change. However, thischoice of strategy is often not driven byaltruistic motives, but by commercialforces. The increasing appetite for non-financial data when assessing a compa-ny’s performance means that properlyexecuted CSR can help a business main-tain market share and drive profits.

For example, by considering thepotential implications of the CompaniesAct and Climate Change Bill, as part ofits Risk Assessment, a business candetermine whether the impact of poten-tially sensitive information, such as acompany’s carbon emissions, beingreleased into the pubic domain has thepotential to damage its reputation. Ifthe Risk Assessment concludes that theinformation the organisation will be

legally obligated to release into the pub-lic domain has the potential to impacton the bottom line – a CSR programmewill be required to manage this issue.

The development of a CSR pro-gramme is another subject entirely, butfrom a reputation management perspec-tive, the key to creating a successful CSRprogramme is credibility. Key Perform-ance Indicators are crucial in terms ofcredibility because they allow a businessto demonstrate that its CSR programmeis measurable. The Companies Act andClimate Change Bill mean that it will nolonger be good enough for a business tosay "we want to reduce our carbon foot-print", instead it will need to publiclystate that it intends to reduce its carbonfootprint by X% by year one, X% byyear two and so on. Consequent reportsand other external information shouldthen report on progress against thoseKPIs.

CSR programmes can also gain credi-bility by securing public endorsementsfrom reputable organisations, like chari-ties, think-tanks and watchdogs, whichcan then be communicated through themedia. This tactic is effective because

the general public are cynical when itcomes to information they receivedirectly from businesses and are morewilling to believe pressure groups andindependent commentators.

At first glance the effect would seem tobe solely felt by listed companies in termsof CSR issues but that is not the case. Thenew legislation requires companies to dis-close more details about their supplierrelationships - for instance, whether thirdparties abide by animal welfare rules.Small and medium sized companies,which supply listed companies, will there-fore need to adapt to ensure their businessrelationships are maintained. This caneither be achieved by developing CSRstrategies of their own or by positioningtheir products or services as somethingthat will help listed companies achievetheir CSR objectives.

For example, one of Fuel’s clients,Teliris, offers a telepresence technology,which allows businesses to have intimate,intuitive and effective interactions overgreat distances, without the need forphysical travel. By engaging with KeyOpinion Formers and receiving endorse-ments from the likes of the Sustainable

Development Commission, Institute forPublic Policy Research and World WideFund for Nature, Teliris has positioned itstelepresence technology as a possiblesolution to any company which has settargets to reduce its business travel car-bon footprint.

The forthcoming Companies Act and draft Climate Change Bill will have a major impact on UKbusinesses as they will make all listed companies duty-bound to report more fully on their corporateand social behaviour.

The Companies Act 2006 received RoyalAssent last November and has the dubiousdistinction of being the largest piece oflegislation ever passed in the UK. It updatescompany law and touches on a number ofareas, including the reporting of CSRinformation. Listed companies will be obliged to includein their annual report a Business Reviewthat covers company performance in newareas. These are ‘to the extent necessary foran understanding of the development,performance or position of the company’sbusiness’, and must include informationabout environmental matters, employeesand social and community issues.Certain elements of the Companies Act werefast-tracked and came into force last year andthe additional provisions will be in force byOctober 2009. A detailed timetable can befound on the Business, Enterprise andRegulatory Reform website.

Climate Change BillThe draft Climate Change Bill, the first of itskind in any country, and accompanyingstrategy, sets out a framework for moving theUK to a low-carbon economy. The Billdemonstrates the UK’s leadership as progresscontinues towards establishing a post-Kyotoglobal emissions agreement.It sets out a vision for how the UK can moveto a low carbon economy including:•Investment in low-carbon fuels andtechnologies, such as carbon capture andstorage, wind, wave and solar power •Significantly more efficient use of energy A recent amendment to the Climate Billduring the current Parliamentty session meansthat listed companies will now have to includeinformation on the amount of carbonemissions they produce in their businessreview, including on-site energy use, businesstravel, fleets and on-site equipment.

COMPANIES ACT

INCREASED COPORATE TRANSPARENCY: THREAT OR OPPORTUNITY? HOW TO MANAGE THE BUSINESS IMPACTS OF THE COMPANIES ACT AND CLIMATE CHANGE BILL

BY JOEL DERBYSHIRE, COMMUNITY DEPARTMENT DIRECTOR AT FUEL PR INTERNATIONAL

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Take recent research from theChartered Management Institute. Ithas long reported that four in fivecompanies regularly reveal theyare having difficulty in attractingthe right calibre of managerial staffand roughly the same proportion ishaving trouble retaining the highquality members of staff they domanage to recruit.

This is the background againstwhich the institute revealed in themiddle of June that a staggeringnine in ten of managerial staff,aged 35 and under, want to workfor a company that does “some-

thing I believe in” and more thanhalf expect to work for a compa-ny with “strong values”.

As Jo Causon, Director at theChartered Management Institutepoints out, for young talentedstaff CR is not the side issue it canbe for some companies.

“There is immense competi-tion to get the best of the coun-try’s young managerial talent,you can particularly see it atgraduate fairs where companieswill go to great lengths to revealtheir CR strategy and assureyoung managers of the future

they’re a good place to work,” shesays.

“Clearly today’s talent wants tofeel a sense of purpose, onlyaround one in ten think their payis the most important thing abouttheir job. There are many reasonswhy good CR makes good busi-ness sense, but with recruitmentit’s very clear. Companies that donot invest in good CR and whodon’t consider their impact on theenvironment, their staff, their cus-tomer and their local communi-ties are going to be behind in therace for the top talent, and theycan’t afford to be.”

Studying CRCorporate Responsibility is nowbecoming such a part of businessculture that universities are reactingto demand, from both students andbusinesses, to produce graduateswho are well-versed in the field.

This has led Nottingham Uni-versity to devise an MBA courseto include a specialism in CR aswell as making business ethicscore to its MA and BA courses inbusiness.

“There has been, what I like tocall, a socialisation of markets andour students and the businesses

that want to employ them nowhave corporate social responsibil-ity high up on their agendas,”says Jeremy Moon, Professor ofCSR at Nottingham University.

“So we ensure we teach CSR as alot of our people may not beemployed directly in CSR roles, buthaving those skills is definitelybeing increasingly seen as anadvantage. Companies are realisingthat a commitment to good CSR is ameans to attract talent because peo-ple want to work for companies thathave a long term strategy for howthey do business, not least of allbecause it affects how they treattheir own staff. We’re increasinglyfinding that the top talent will beattracted to companies that encour-age staff to volunteer and then alsooffer a good work and life balanceso, for example, they’re more flexi-ble about women coming back towork after pregnancy. It’s beneficialfor companies and the staff becausethe companies attract high qualitystaff and they don’t lose thatknowledge base.”

Responsible execsCertainly executive search firm,Warren Partners, is finding it isbeing increasingly asked to find top

level managers who have CR quali-fications and experience as compa-nies realise that to trade responsibly,particularly in reducing a compa-ny’s environmental impact, theonly way to push through change isto have CR represented on theboard.

“A number of high-profile UKbusinesses have recently appoint-ed dedicated CR directors to over-see and enforce their company’sstrategies,” explains Joëlle War-ren, Managing Director of WarrenPartners.

“Within these industries, theCR director has gone from beingregarded as something of a box-ticking role to a powerful, high-profile position that can have asignificant impact on the brandreputation and bottom line of theorganisation.”

With executive search firmsbeing asked to find CR staff atdirector level, and universitiesteaching the subject to give theirstudent a competitive edge, it isclear that not only are young man-agers expecting to work for a com-pany with strong ethical values,they are increasingly likely to beattracted to the roles of shapingand executing that CR strategy.

Green or mean? Whichwould you rather work for?There are many statistics bounded around to sum up the importance of CR but some are moretelling than others.

Attracting young talent CORPORATE RESPONSIBILITY

Now that Corporate Responsibility is firmlyon the business agenda and a fastbecoming a central guiding principle toconsumers’ purchasing decisions, thenotion that businesses need to behave asgood corporate citizens seems destinedto become more of a mainstream partof everyday life.

Certainly Melissa Davis, founderof CR consultancy, True Brand-ing, believes the days of CRbeing mistakenly equated tosimply raising money for localcharities, and going no further,are soon destined to be con-signed to the history books.

“I think we’ll see a move awayfrom people confusing good CRwith philanthropy,” she says.

“The problem with philan-thropy is that, whilst it’s obvi-ously good to give to charitiesand help people in need, if it’snot central to what a companydoes, then it might be somethingthat’s easily lost when there arecut backs, which is worrying aswe are potentially on the start ofan economic downturn.”

The future of CR, to Davis, willbe centred on the term becomingpointless because good CR willjust be expected by consumerswho will shun companies who arenot responsible. As this starts tohappen, she believes there will bethree elements coming together.

“For CR to become a normalprocess that just happensthroughout a company, and not aspecialist department, you’ll seethree things starting to happen,”she continues.

“First business will need tointegrate CR across everythingthey do, and this will be socialas well as the green and envi-ronmental issues. Secondly,businesses will start to collabo-rate on best practice so theycan learn from one another andget standards as to how compa-nies in their sector shouldbehave. This should hopefullysee the process extended outfrom large companies to SMEs.

“Thirdly, CR will need to beauthentic, it’s not enough to talkabout it and to draw attention toa particular project, whilst otherareas are ignored, such as the

clothes store that unveiledits green range only for themedia to discover some oftheir other clothes werebeing made by children.”

Profit and CR?The next few years are going tobe crucial in the development ofCR because, as Terry Tyrrell,Chairman of global brandingagency, Brand Union, pointsout, at a time of potential eco-nomic difficulty, shareholdersand customers with ethics couldend up opposing one another.

“It’s a fascinating time and Ireally do wonder how long thecurrent model of valuing com-panies through their sharehold-

er value can last,” he reveals.“No matter what is happening inthe economy, companies havestill got shareholders and thoseshareholders still want to get adecent dividend and they wantto see the share price increase.

Everybody likes hearing the‘we’re giving something back’message but you have to won-der what will happen whenCEOs are under fire for not beat-ing last year’s dividend. Howwell people will accept the mes-sage about CR then?”

This is not that Tyrrellbelieves shareholder value isnecessarily more importantthan CR and that the two arealways going to be mutuallyexclusive but he predicts that ifthere is an economic downturnthere will be friction betweenCR and profits. However, he

also makes the point thatthose companies that are con-sidering acting irresponsiblyshould look at what has hap-pened recently to notableexamples of companies whichdisplayed poor corporateresponsibility.

“We’ve seen it happen to acouple of banks that werebedrocks of the financial worldand it happened to Andersen and

then Enron, that has to be themost obvious example; in themodern world, companies candisappear overnight,” he says.

“Big companies used to bethought of as invincible butthat’s no longer the case. Therereally is nowhere to hide anymore if a company gets caughtout doing something itshouldn’t and the fall fromgrace, today, is almost instant.”

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CR in the future CORPORATE RESPONSIBILITY

“thosecompanies thatare considering

actingirresponsibly

should look atwhat hashappenedrecently to

notable examplesof companies

which displayedpoor corporate

responsibility”

In a global economy where businesses are now judged by their responsible attitude towards the environment,worker health and safety and social performance, ExxonMobil believes modern companies need to look beyondfinancial figures when calculating success.

It recently published its Corporate Citizenship Report for 2007 which shows that by improvingefficiencies across its global business it reduced greenhouse gas emissions by 5 million tonnes. That isthe equivalent of taking 2.5 million cars off Europe's roads.

Plus the marine vessels used to ship its oil around the world set a new record by not spilling more thana single barrel of oil throughout the entire year for the third year in a row.

Whilst this makes for impressive reading, the company is equally as proud of its work in protectingthe health and safety of its work force. Last year marked the company’s best year on record with just one‘lost-time’ incident for every 4.3 million work hours.

Whilst these are figures ExxonMobil would point to in underlining its commitment to being what itterms ‘a better company, a better employer, a better neighbour and a better corporate citizen’, the feelingswere shared by GovernanceMetrics International. It placed ExxonMobil in the top one per cent ofcompanies in corporate governance with a 10 out of 10 rating.

The company believes this is testament to its commitment to a disciplined, results-orientated approachto corporate citizenship as a means to deliver long-term, sustainable value for its customers andshareholders, as well as protect employees and make a positive contribution to local communities as wellas the environment.

The 2007 Corporate Citizenship Report can be read at www.exxonmobil.com/citizenship

EFFICIENCIES TAKING 2.5 MILLION CARS OFF EUROPE'S ROADS Promotional feature

CR in the future

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Ever wondered about thosecharitable contributions yourcompany makes every year?Perhaps you have one or morecommunity investment pro-grammes that are a little tooremote or obscure to get to gripswith. Do they have the desiredeffect? Do they create lastingand sustainable benefits? Or doyou feel trapped by long termfunding commitments of proj-ects that will collapse if yourcompany’s support is with-drawn? Perhaps the value of theinvestment diminishes before itreaches its target? Could the

investment produce highervalue yields than the capitalamount allocated? Does theworthy cause need money at all,or would it fair better with spe-cialist skills and competentmanagement? Well you’ll neverknow the answer to any of thesequestions unless you undertakean economic impact assessment(EIA).

There is a vast array of alterna-tives to handing over a chequeperiodically to a cause that no onewould deny as being justified andworthy of association. However, ishanding over that cheque the best

course of action for both the causeand your company’s CorporateResponsibility profile? Perhaps aninvestment could form part of awell-planned programme of sup-port involving other donors. Oftenthe objectives of the funding couldbe better defined and theirachievement more easily meas-ured. You really need to quantifythe effect your company’s invest-ment is having. Do everyone afavour and subject your charitabledonations and community invest-ments to an EIA.

An EIA is not an academicappraisal couched in language

that is difficult to comprehendand even harder to take decisionson. It is a practical methodologythat estimates the real social andeconomic returns of your compa-ny’s CR investments. It will high-light where funds are being wast-ed or producing low yields. It willindicate the current sustainabilityof the investment and how thiscan be improved. It will certainlyshow how the returns on invest-ment can be enhanced, bothdirectly and indirectly. Mostimportantly it will help establishmonitoring protocols so thatyour company can more easilymeasure the benefits year afteryear and report these to its stake-holders with confidence.

EIAs are rapidly becoming arequirement of certain indices

Assessing the economic benefits ofsocial investments

Increased transparency CORPORATE RESPONSIBILITY

such as the Dow Jones Sustain-ability Index and will increasinglybe demanded by astute sharehold-ers and the managers of ethicalinvestment funds. So don’t wait tobe asked and please don’t wait foryour well-intentioned expendi-ture to be publicly criticised. Con-duct an EIA today and stay onestep ahead of the ever inquisitiveand sceptical critics. In doing so,the recipients of your generositywill experience enhanced benefitsthrough improved efficiency andefficacy, and the avoidance ofunintended negative conse-quences that unwittingly blightsso many aid projects. An EIA willafford you the opportunity ofcomplete control of you CRexpenditure and the benefits itgenerates.

BY JANE FIONA CUMMING, ARTICLE 13

Increasingly companies that havebuilt up a reputable brand namecan have it destroyed by theactions of a factory owner theother side of the world in just a fewseconds. The major issues areensuring staff in factory and onfarms are paid a living wage, are ofthe legal working age, have accessto health treatment and shelter andare not bonded to work for anemployer. The latter issue can be abig problem, particularly in India,where someone can take out a loanwhich they pay off by working foran employer. If they die, the debtcan be carried on to their children,forcing them to work to pay offfamily debt.

Codes of conductHence maintaining a responsiblesupply chain is one of the overrid-ing issues facing modern business-es, points out Jo Daniels, DeputyDirector of the Market Place at thecharity Business in the Community(BITC), which seeks to promoteethical trading among its mem-bers. With consumers increasinglyattuned to the plight of workersaround the world, detrimentalheadlines can have a huge effecton a brand.

“Controlling the supply chain issuch a massive issue for companiesbecause increasingly what is amistake by a factory owner or asub contractor is seen as a contra-

vention by the main brand,” sheexplains.

“The public are rightly horri-fied if they hear of child labourmaking their clothes, or someother abuse, so companies needto make it clear to their suppliersthe standards that are expected ofthem and inspect them to ensurethey are being maintained.”

Companies have several optionsfor guidelines which are universal-ly accepted. There is the UN Con-vention on Human Rights, guide-lines laid out by the InternationalLabour Organisation as well as theEthical Trade Initiative. These tendto agree on the major points thatthere should be no bonded or child

labour, health and safety standardsshould be met and employeesshould be allowed to associatefreely and collectively bargain forwages and improvements to work-ing conditions.

Not just abroadA major point Daniels makes toBritish businesses and BITC mem-ber is that it is tempting to thinkresponsible trading is about cur-tailing abuses in, say, Chinese fac-tories whereas a lot of the problemsare closer to home, particularly asthe credit crunch starts to bite.

“The feedback we’re getting isthat whilst everyone thinks of thisas a problem a few times zonesaway some of the worst offendingfactories and businesses are in theEU and even in Britain,” she says.

“So, it’s not just an issue of for-eign factory visits. Also, the hugeissue for business right now in thesupply chain is payment. Big com-panies are seeking to delay payingsuppliers so they improve their owncash flow but it can have a devas-tating effect on smaller supplierswho are expected to wait longerthan before for payment.“It’s an issue we’re urging big busi-

nesses to be responsible on by notbeing unreasonable and alsoensuring they do not do businesswith a small company that is soreliant on them that their late pay-ment, or seeking another supplier,could cause that company to closedown.”

Whilst there is no definitive eth-ical guidance on how long a com-pany should wait before payingsuppliers, BITC points out itbelieves 45 days is an averagewhich companies should worktowards matching or beating.

Guiding principlesThe Ethical Trade Initiative is abody which provides guidelines onworker treatment which compa-nies can sign up to as a pledge theywill work towards ensuring therules are adhered to in their supplychain.

The ETI Base Code has nine found-ing principles:

1 Employment is freely chosen2 Freedom of association and col-lective bargaining3 Safe and hygienic working con-ditions4 No child labour5 Live wages are paid6 Working hours are not excessive7 No discrimination is practised8 Regular employment provided

Supply issues impact brands’ CR In the age of globalisation it should not come as a surprise to businesses that just as they are ableto flex a supply chain that can span several continents, consumers and the media also haveinstant global communications that will spread stories of transgressions within seconds.