1. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 1an tone Su ceiv p add heed bs e t va re l cr he nce ib an y e a ou to lys r c da is y ar y ou eerBUSINESS INTELLIGENCE FOR CORPORATE RESPONSIBILITY AND SUSTAINABILITYTake a look at the corporateresponsibility analysis inside...This pack contains a taster of the kind of analysis we publish every monthin our print magazine and everyday on our website. At the back youll seethe many benefits of subscribing and how much it costs.

2. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 2 2 Ethical Corporation Subscription Sample Pack Ethical Corporation March 2012 EDHARYRALAITS/DREAMSTIME.COM Essayand manufactured capital (either newlycreated or existing capital being circulated Re-booting capitalism: the actionaround the system), accompanied by theunder-valuing of natural, social and human agenda for businesscapital, has led to what the Australian envi-ronmental campaigner Paul Gilding By David Grayson with Melody McLaren described in 2011 as the Great Disruption There are roles for companies and government in devising the future of capitalismin other words when both Mother Natureand Father Greed have hit the wall at once9. S intelligence describes the world today tives from, among others, John Kay, Robert U as VUCA volatile, unpredictable, complex and ambiguous. Any readerReich, Bill Clinton and Jeffrey Sachs3. Simul-taneously, the Economist ran a cover story,Crisis of trustThe perceived under-valuing of natural, reflecting on the big issues facing busi-lead editorial and supplement on the return human and social capital in markets has nesses, governments and civil society mightof state capitalism, with a picture of Leninhelped to precipitate a crisis of trust for both be forgiven for wishing themselves back in on the magazine cover4. business and government. a mythical earlier time when life wasAs well as moral and responsibleIn the 2012 Edelman Trust Barometer, simpler and when we didnt live in such capitalism, others have spoken aboutpoor management, unethical business interesting times. practices and shortcuts that lead to poor Even a cursory Googling session will quality were perceived as drivers of irre- show the intensity of the debate ragingThe perceived under-valuing sponsible business behaviour damaging about capitalism. You dont need to be anof natural, human and socialtrust in business, while failure to regulate Occupy protester or in the US Tea Party to business behaviour was damaging to trust be deeply troubled by current conditions.capital in markets has helped in government. While government was Capitalism is living in interesting times. to precipitate a crisis expected to take action to protect consumers Politicians, academics and activists aroundand society from irresponsible business the world are debating the merits of the capi- conscious capitalism5 and long-termbehaviour, business needed to be seen to talist system, how and if it could be improved capitalism6. Al Gore and his businessaddress these issues directly. and, for some, whether this economic systempartner David Blood issued a Manifesto forHow did we get here? The erosion of should continue to exist at all. Sustainable Capitalism and chose to do trust in business, as well as governments, As an unrecovered political junkie, I am so in the pages of that bible of free-marketcan be traced to a number of interde- fascinated that right-wing Republicans economics, the Wall Street Journal7.pendent factors. should be the ones to pay for and air a 27- Seven yearsago, sustainability Confusion over what capitalism now minute documentary against Mitt Romney,campaigner Jonathon Porritt called for means, and how it manifests itself. Many the Republican front-runner for the presi- capitalism as if the world matters toargue that capitalism as a concept still dential nomination, railing against Vulture ensure a sustainable future. He identified works, but only with fair competition, Capitalism1.five types of capital natural (environ-truly voluntary exchanges, information In one week in January, all three of the mental/ecological), human, social andsymmetry and the absence of externalities. major UK political party leaders delivered manufactured, as well as financial thatAll too often one or more of these condi- speeches on responsible or moral capi- need to be integrated into our accounting of tions do not exist, causing market failure. talism2. The Financial Times ran a series on resources from which we extract value8. Loosening of regulation. The pendulum Capitalism in Crisis with a range of perspec- Arguably the over-valuing of financialswing from the 1980s onwards againstSubscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 3. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 3 Ethical Corporation March 2012 Ethical Corporation Subscription Sample Pack 3 state controls saw politicians encouraged Calls for greater protection and responsible behaviour by powerful interests (commercial and intellectual) to instruct regulators to Thinks the most important role that government should play in business is: exercise a light touch. The power of global connectivity. TheProtect consumers from irresponsible31% business practices uncharted territory of an internet-fuelled global connectivity has transformed howRegulate business activities to ensure companies are behaving responsibly 25% and where we work, created a generation of billionaire ICT entrepreneurs, dramati- Build infrastructure that promotes and facilitates business opportunities 19% cally expanded access to, and the volume of, information; greater freedom to travel,Work to ensure free market access and open competition within industries16%Business trade and talk more freely but also greater can address risk that handfuls of fanatics can terrorise, Give or loan money to business when iton its ownexperiences financial crisis 4% torture and torment the rest of us. Population growth the reality of a Government should not play a role in business4% population of more than seven billion (and maybe nine or 10 billion by 2050), 0510 1520 2530 35 alongside expectations for far higher quality of life. Perceived drivers of irresponsible behaviour: Unsustainable collective aspirations. Poor management (29%) There are no viable solutions for meeting Unethical business practices (28%) the consumption wants and needs of Shortcuts that lead to poor quality (21%) todays generation without compro- mising the ability of future generations to meet theirs, too.Source: Edelman Trust Barometer 2012 Reduced deference to/trust in authority. There has been a healthy decline ofTo be clear, capitalism is the default mode Connection, a St Pauls Institute initiative to unthinking deference, but as a result, aof human behaviour10. But there are many try to re-connect finance and society13. growing trust deficit in traditional insti- varieties of capitalism and these too are notThe Lord Mayor of Londons Restoring tutions governments, big business,immutable, or beyond human capacity to Trust initiative is supported by Cass organised religion etc as the Edelman improve. Business School at City University London, Trust Barometer has identified.You cannot buck the markets, Margaret TheCityUK, Tomorrows Company and No alternative ethical frameworks. ForThatcher famously declared. But markets areBerwin Leighton Paisner14. Mark Goyder, some at least, there has been a welcome the outcomes of vast numbers of humanfounder of Tomorrows Company, has abandonment of unquestioning adher- interactions and relationships and like anycalled for an inclusive approach to business ence to religious or moral teachings, but other interactions or relationships, they arewhich transcends the narrow concept of there is also a collective failure to findshaped by values, social conventions, laws contracts and transactions and instead robust alternative ethical frameworks to(soft and hard), and human wants and needs.inspires people to produce extraordinary guide how we live our lives. results by concentrating on the human What could capitalism 2.0 look like? beings whose needs lie behind everyI reflect on the great waves of change It is evident from the current debates thatbusiness relationship15. These are just some that my mother, now in her 90th year, has capitalism cannot be transformed by anyof the initiatives aiming to humanise already lived through. A child of the Great organisation acting unilaterally. Activistsbusiness and restore trust in its leadership. Depression and ensuing world war. A from governments, business, civil society, As part of this collaborative ethos, leaders young adult of the post-war, never againacademic and religious institutions around of business, as well as other institutions, must welfare state who mid-life experiencedthe world must work together to achieve the pendulum reaction against the viable solutions. overweening state that led to the Thatcher- Restoring trust in business and marketsCapitalism is the default mode Reagan liberalisation and privatisation, andis a central priority and several initiativesof human behaviour the fall of Communism that ushered in the have emerged to address this issue. era of rushed globalisation where markets,Respected City financier and committed be humble and pragmatic enough to recog- science and society metamorphosed way Christian Ken Costa has argued that the nise that each will have only a part of the ahead of governance and ethics couldmarket has managed to slip its moral picture and part of the answer. develop in response. Now, in her old age, moorings11, the capitalist system is fatallyTrust in business and trust in government she lives in an era when the many and not flawed and past its sell-by date and for have been intertwined historically, and there- just the few will insist on helping to rethinkmarkets to work freely, they need somehowfore strategically aligned, sustained action by capitalism and therefore globalisation andto be nurtured and sustained by a moralleaders in both sectors will be needed to development too.spirit12. Costa is leading the London restore confidence in their leadership, as theSubscribe now +44 (0)207 375 7235 ` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 4. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 44 Ethical Corporation Subscription Sample PackEthical Corporation March 2012 Edelman Trust Barometer concludes.What sort of actions can business and government take to re-boot capitalism so as to restore its legitimacy in modern society? And how might such actions be supported by Government can create an "enabling environment" for sustainable capitalism business schools with responsibility for researching, teaching and providing practical guidance for business practice?Government can create an enabling environment for sustainable capitalism through regulation and incentives. How might this be done? Reconnect Working in concert with government, companies can take actions to reconnect stakeholders through dialogue: with investors to promote the companyslong-term purpose and values; with employees to agree long-term organ-isational and individual aspirations; with customers to engage them insupporting shared values; Theres a place at the table for government and business with suppliers and other partners toengage them in co-creating long-term In May 2011, sports clothing companyGSKs investment in more than 200shared value. Puma published the first ever attempt toemployee volunteers despatched to workmeasure, value and report the environ- for six months in NGOs around the world.In his March 2011 call for a radical re-mental externalities caused by a major Although expensive, the programme appraisal of capitalism, B&Q chief executive corporation and its entire supply chain17.ensures this cadre of middle and senior Ian Cheshire opened a high-profilemanagers have a deep understanding of dialogue with his fellow business leaders, asResethow civil society operates and challenges well as other stakeholders, to rethink the Government and companies can reset timethem to be thoughtful about how they can ways companies operate to conserve frames, incorporating a long-term mindsetdrive the behaviour of the organisation to natural resources16. into operations and communicating this tobe in step with society.stakeholders, by: Re-purpose issuing long-term earnings guidance to Rebalance Government and companies can re-purpose investment managers;Government and companies can rebalance business to achieve societal, as well as setting employee and organisation long-power across stakeholder groups, by: commercial, goals and to internalise coststerm value-creation targets; increasing relative power of employees eg currently classified as externalities, by: integrating long-term value creation through ownership and representation on incorporating environmental, social and targets into executive pay and compensa-pay committees;governance (ESG) objectives into organi- tion; increasing relative power of non-execu-sational mission and strategy; structuring shareholder compensation totive directors as stewards of responsible creating accountability at all organisa-incentivise long-term investors.business behaviour and long-term valuetional levels for achieving ESG, as well ascreation;commercial, goals and specifically Speaking at the second Annual Pears increasing relative power of long-termensuring effective board oversight andBusiness Schools Partnership lecture atshareholders over short-term share-governance of their commitment; Cranfield School of Management in Januaryholders; investing resources in achieving ESG 2012, GlaxoSmithKline chief executive Sir recognising and rewarding creators ofgoals; andAndrew Witty called for business leaders tolong-term value, regardless of position in integrating ESG impacts into corporate take the long view of their companies18. organisational hierarchy.accounting and communications.This long-term perspective is exemplified by As part of the operating principles estab-Subscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 5. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 5 Ethical Corporation March 2012 Ethical Corporation Subscription Sample Pack 5 DAVID GALLAHER/DREAMSTIME.COM reducing or minimising risk and engagingMatters/dp/1844071936/ref=sr_1_1?s=books&ie=UTF8 the firms current and future workforce the &qid=1327131918&sr=1-1 2009 data also included new references to the9 Paul Gilding, The Great Disruption How the Climate Crisis perceived benefits of addressing macro-levelWill Transform the Global Economy (2011), sustainability issues and found increased www.amazon.co.uk/Great-Disruption-Climate- support for the benefits of espousing respon- Transform-Economy/dp/1408815419 sible leadership, and business opportunities/ref=sr_1_1?s=books&ie=UTF8&qid=1327133178&sr=1-1 arising from proactive stakeholder engage- 10 David Grayson, Future sustainable growth - Capitalism ment. The implication is that leading that works, Ethical Corporation 10 September 2011, businesses are recognising the circular effecthttp://www.ethicalcorp.com/ communications- of working within and relying upon, ecolog- reporting/future-sustainable-growth-capitalism-works ical and social systems. As ecosystems and/or11 Ken Costa: The City must rediscover its morality, Kamal social systems fortunes rise or fall, so do theAhmed, The Telegraph, 5 November 2011, fortunes of business rise or fall. They have ahttp://www.telegraph.co.uk/finance/newsbysector/ shared destiny. banksandfinance/8872354/Ken-Costa-The-City-must- Free-marketeers might remind them-rediscover-its-morality.html selves that Adam Smith wanted an invisible 12 Ken Costa, Why the City should heed the discordant but also a moral hand. Responsible business voices of St Pauls, Financial Times, 29 October 2011, is not anti-market; it is the best way to guar- http://www.ft.com/cms/ s/0/3cb2bf14-009b-11e1-ba33- antee social consent for and enthusiastic 00144feabdc0.html#axzz1k4lWtml6 embrace of the market. 13 London Connection brings Occupy London and FSA chief Above all, if capitalism is to regain greater together, St. Pauls Institute News 5 December 2011, legitimacy and popular acceptance, andwww.stpaulsinstitute.org.uk/News/London-Connection- become more resilient, capitalists ourselvesbrings-Occupy-London-and-FSA-chief-together have to be more involved not just in 14 Lord Mayors initiative: Restoring trust in the City, rethinking but also in reshaping capitalism. Ihttp://www.cityoflondon.gov.uk/Corporation/LGNL_Servi ces/Council_and_democracy/Councillors_democracy_and David Grayson is director of the Doughty Centre for Corpo-_elections/The_Lord_Mayor/What_the_Lord_Mayor_does rate Responsibility and a member of the Ethical Corporation /restoring_trust.htm editorial advisory board. Melody McLaren is an associate of15 Mark Goyder, Living Tomorrows Company (1998) lished by its founder, the John Lewis Part- the Doughty Centre for Corporate Responsibility at Cranfieldhttp://www.amazon.co.uk/Living-Tomorrows- nership is owned in trust for its employeeSchool of Management. Company-Mark-Goyder/dp/0566080206. members, who share the responsibilities of16 Jo Confino, B&Q boss calls for a radical reappraisal of ownership as well as its rewards profit, 1 When Mitt Romney Came to Town, www.kingofbain.com capitalism Guardian Sustainable Business 24 March knowledge and power19. The partnership2 David Cameron, Co-operatives Bill to help build a fairer 2011, http://www.guardian.co.uk/sustainable- paid out staff bonuses and continued to economy, 19 January 2012, http://www.conservatives.com/business/b-q-ceo-ian-cheshire-capitalism-reappraisal prosper during the recession20, drawing News/Speeches/2012/01/Co_operatives_Bill.aspx17 Puma Announces Results of Unprecedented Environ- political and media attention to its alterna- Ed Miliband, Responsible capitalism, 19 January 2012, mental Profit & Loss May 2011, http://safe.puma.com/ tive business model.http://www.labour.org.uk/ed-miliband-on-respon- us/en/2011/05/puma-announces-results-of-unprece- sible-capitalism, 2012-01-19dented-environmental-profit-loss/ Whats in it for business?Nick Clegg, Responsible capitalism, 16 January 2012, 18 Its good for business for business to be good, Cran- Our business case research with Business in http://www.libdems.org.uk/latest_news_detail.aspx?titlfield School of Management media release 19 January the Community (2011)21 which compares e=Nick_Clegg_speech_on_responsible_capitalism&pPK=2012, http://www.som.cranfield.ac.uk/som/som_appli- business benefits of corporate responsibility 3659d490-82ef-412c-80e6-6dd5240659e0cations/somapps/oepcontent.aspx?pageid=14249&appty reported in 2003 and 2009 shows that as 3 www.ft.com/indepth/capitalism-in-crisis pe=newsrelease&id=4472 4 The rise of state capitalism, The Economist, 19 John Lewis Partnership: Our principles, http://www.economist.com/node/21543160http://www.johnlewispartnership.co.uk/about/our- Adam Smith wanted an5 Conscious Capitalism Institute, principles.html invisible hand but also a www.consciouscapitalism.org/about/ 20 James Hall, John Lewis has come out of the recession moral hand6 Dominic Barton, Capitalism for the Long Term, Harvard fighting, The Telegraph 19 Dec 2009, Business Review, March 2011, hbr.org/2011/03/capitalism-http://www.telegraph.co.uk/finance/newsbysector/ companies have become more adept at for-the-long-term/ar/1retailandconsumer/6844453/John-Lewis-has-come- managing their business operations sustain- 7 Al Gore and David Blood, A Manifesto for Sustainable out-of-the-recession-fighting.html ably, the range of business benefits hasCapitalism, Wall Street Journal, 14 December 2011,21 The business case for being a responsible business, increased.online.wsj.com/article/ Business in the Community and Doughty Centre forWhile the top three perceived benefits SB10001424052970203430404577092682864215896.htmlCorporate Responsibility, March 2011, were the same in each year namely 8 Jonathon Porritt, Capitalism as If the World Mattershttp://www.som.cranfield.ac.uk/som/dinamic-content/ improvingoperational effectiveness, (2007), www.amazon.co.uk/Capitalism-as-If-World-media/ documents/Business%20case%20final.pdfSubscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 6. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 66 Ethical Corporation Subscription Sample PackEthical Corporation July-August 2012 KOSTYANTIN PANKIN/DREAMSTIME.COM Other section content: 40 Corporate trust Sustainability commercialisedassess a starting point for that product. In-house indexes sparkIntegrating sustainability into productdesign takes time, Jones argues. Each stage innovation and profitgate of product development needs to beexamined through a sustainability lens. By Oliver Balch For that reason, Nike has just launched Companies are looking to move beyond niche green products to system-levelthe sourcing and manufacturing sustain- change. Internal indexes are becoming the favourite tool for making that happenability index. The internal ranking systemrates supplier factories according to laboururo 2012 may be over, but the planet is in the roll-out of how they work.conditions, health and safety standards, and Estill counting the cost. Big tournaments spark big kit sales. Kids understandablyRewiring can fast turn into a jumbledaffair, however. Hence, Nikes developmentenvironmental performance. The index, which rolls up into the more want shirts emblazoned with the names of of the pioneering considered design index.comprehensive Nike manufacturing index, their favourite footballer, but that means Launched six years ago, the index lays out a more fabric, more water, more energy, andrange of sustainability criteria for productWere taking key parts of more resource-use generally. designers. (See box.) Nike reckons it has a solution. The US The results have been solid, if not spec- the business and thinking how sports brand recently introduced nationaltacular. The adhesive-free Considered Bootyou rewire them to include team kits made almost entirely fromand the hi-tech Air Jordan XXIII baseball recycled polyester. Shorts and shirt togethershoe made with recycled rubber are twosustainability in their strategy comprise 13 recycled plastic bottles. Thats early innovations.Hannah Jones, Nike 16m recycled bottles in all for last years kit. The example is one of a range of sustain-Sustainable by design seeks to elevate sustainability concerns able designs to have emerged from Nikes About one-sixth (17%) of seasonal footwearalongside traditional supply chain measures labs of late. Flyknit is another. Instead of products now meets the baseline consid-of quality, cost and on-time delivery. using multiple materials to make a shoeered standard, according to Nikes most Nikes goal is to merge these indexes upper, the company has come up with arecent figures. The baseline does not makeeventually, thereby moving the companys process that keeps it to just one. The result is them part of the considered line, but their whole production chain onto a more a lighter shoe, and a lot less waste.scoring helps designers understand andsustainable footing. Such eco-innovations dont appear out of nowhere, says Nikes Hannah Jones. Her job title is a clue to just how central sustain- Considered index ability thinking is becoming at the Nikes considered index is a systems-integrated, online tool for evaluating the predicted environmental footprint of company: vice-president for sustainable a product before commercialisation. business and innovation.The system examines the largest environmental impacts for Nike products, primarily in the areas of waste and the use We run our entire sustainability approach of materials, energy and solvents. The index metrics are based on more than a decade of collecting product-related data. in the same way as we think about innova- Products are assigned a considered score using the index framework based on Nikes known footprint in these areas. tion, she says. What were doing is takingOnly products whose score is significantly better than the corporate average can be designated as considered. key parts of the business and thinking how Nike has recently introduced specific considered footwear and apparel indexes. Its goal is to have all footwear you rewire them to include sustainability in products and apparel products reach 100% baseline standard by 2015. their strategy, in their innovation agenda andSubscribe now +44 (0)207 375 7235 ` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 7. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 7 Ethical Corporation July-August 2012 Ethical Corporation Subscription Sample Pack7 Examples of P&G sustainable product innovations (2010/11) small proportion of what you sell, says Mike Barry, head of sustainable business at M&S.ProductRegion Innovation The companys current objective is for all its food and clothing products to have atSwifferNorth AmericaOptimisation of packaging design delivered a least one Plan A attribute by 2020. ThatSweep-n-Vac significant reduction in overall packaging.could be Marine Stewardship Council certi- fication in the case of fish, for example, orPowder Laundry North AmericaCompaction of powder detergents delivered Fairtrade cotton in the case of T-shirts.Detergentssavings in packaging and energy. What were trying to do with [Plan A]Pantene Nature Western Europe The introduction of plant-based materials attributes is drive ownership across theFusionreduced the use of non-renewable resources. business so that every commercial part of the business thinks Plan A, and has an action planAlways and Latin America, Asia, central Europe, Significant reduction of the polyethylene bagto build Plan A into its product mix, says Barry.NaturellaMiddle East, western Europedelivered an overall improvement.He concedes that the approach prioritises breath over depth. The idea is for individual product lines to accrue sustainability compo-Jones points out: Ultimately what yourather than roadmaps to certain futures. nents over time. Its not a licence for the next want is sustainable products made inMost large companies have multiplebreakthrough idea, but the cumulative sustainable, best-of-class factories. schemes for encouraging more sustainable impact is arguably more significant than anAnother company pursing a similar products. In as much as internal indexes can isolated case of innovation. strategy is the US domestic products manu- pull all these threads together and set aAlready, almost one-third (31%) of the facturer SC Johnson. As far back as 2001, theframework for decision-making, they can be almost one billion food and clothing items company introduced an internal system to hugely useful. that M&S sells each year have a Plan A rank the environmental profile of product White speaks from experience. P&G attribute, according to the retailers recent materials. launched its sustainable innovation products How We Do Business report.The Greenlist index seeks to move category five years ago. The approach seeksThats not to say innovation is no longer beyond mere risk assessment and insteadto generate a line of flagship products that on the cards. M&S sets an action plan for optimise product sustainability, says Cindyhave cut their environmental impact by 10%,each product category area. Senior Drucker, SC Johnsons director of globalmanagers are then incentivised through sustainability.Indexes serve as pointerstheir performance evaluations to meet everFollowing a complex calculation process, more exacting sustainability criteria. every material is given a rating of betweentowards hoped-for solutions, Barry has a piece of advice: if you want zero (worst) and three (best). The lowestrather than roadmaps toinnovation to happen, avoid micro- category can only be used when there is no certain futuresmanaging. Managers should set a vision, viable alternative, and only then with senior provide some parameters and provide management sign-off. without impinging on the products overall rewards for high performance. The nuts[Product scientists] are required to looksustainability profile (see box).and bolts should be left to product devel- at increasing the ranking of the productP&G is seeking to derive revenue of opers themselves. each time it is reformulated, Drucker says. $50bn from these flagship products Internal indexes undoubtedly act as aThis goal of gradual improvement is between 2007 and 2012. With $40bn alreadyhandy instrument for in-house innovation. paying off. When SC Johnson launched its generated, the company is on target. If their impact is to be felt outside the Greenlist approach, fewer than one in fivecompany, however, then they must be (18%) products were classified in the topBreadth over depth shared with suppliers. Nike, SC Johnson two categories. Today, the proportion is Where internal indexes differ from moreand P&G are all committed to that process. more than half (51%).product-centric approaches is in their scope.Ultimately, they must be shared withBy way of example, Drucker cites airFocus on single product lines, and youll getindustry competitors too. Work is currently freshener Glade Refresh Air. SC Johnsonsa few exceptional eco-products and a lot ofunder way at the Sustainability Consortium to lab technicians switched from liquid petro-dross. Set your sights on systems change,agree some universal, rather than company- leum gas to create the products spray, to and a pan-portfolio improvement should bespecific, definitions of sustainable products. compressed nitrogen. In so doing, they the result.Such moves are welcome, according to drastically cut the amount of volatileThats certainly the vision of Marks &Stephanie Draper, director of change and organic compounds produced.Spencer. The UK retailer is looking to inte- system innovation at Forum for the Future.Peter White, global sustainability director grate aspects (what it calls attributes) of itsInternal indexes are helpful as a vehicle for at US consumer goods company Procter & Plan A strategy into every single productasking different questions of a product, she Gamble, admits that internal indexes are over the coming years. concedes. not perfect. Product innovation is a work-What we want to avoid is creating a little Yet what wed like to see over time is in-progress. In this context, indexes serve as eco ghetto where youve got a fantastic ethicalsome standardisation of these indexes so we pointers towards hoped-for solutions,range in the corner of your shop but its acan compare products. ISubscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 8. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 88 Ethical Corporation Subscription Sample Pack Ethical Corporation May 2012 CEO interview: Paul Polman, Unilever Sustainable living gets top billing By Toby Webb, with research by Oliver Balch At the end of 2010, Unilever launched a series of ambitious targets under the banner of its Sustainable Living Plan. The man driving that plan is Unilever chief executive Paul Polman ost chief executives have their sustainability way beyond RSPO standards and committed to a no M patter these days. They can talk as confidently about Scope 3 carbon emissions as they can aboutdeforestation policy on a much tighter timeframethan Unilevers 2020 target.Polman knowshe cant discounted cash flow valuations and the like. Polman is not one for boasting, though. Thats act aloneYet few understand the subject as much as Paulpartly a character thing. Hes refreshingly self- Polman. Under his watch (hes been chief executive effacing; not one of your stereotypical alpha-male of Unilever since January 2009), sustainability haschief executives. His job, as he sees it, is to make found its way to the very heart of Unilever s everybody else successful. decision-making and strategy. But his note of caution goes beyond naturalWith the launch of Unilevers Sustainable Livingmodesty. There are timescales to consider for one. Plan in 2010 and his personal trumpeting of decou-Unilever is only 12 months into a ten-year commit- pled growth doubling economic growth whilement. Polman is conscious that theres still a long halving environmental impact Polman has really way to go. He also knows that eking out environ- laid down the gauntlet. So how is the companymental efficiencies will be a whole lot easier in Year faring?One than Year Ten.Unilever:The Dutchmans verdict is measured. Good in brief progress across the board, he says. He cites a fewBig commitments Unilever is one of the early wins. Sustainable agriculture, for example.The sheer size of Unilevers commitments weighs worlds biggest suppliers Nearly one-quarter (24%) of all the agricultural on him. To meet the companys goals on health, forof fast moving consumer materials bought by Unilever are now sustainably instance, Unilever will need to annually incorporategoods with operations in sourced. Thats up from one-tenth when the plan50 million new people into its highly successfulmore than 100 countries was launched.handwashing awareness programme. I dont think and sales in 190. Or take palm oil. By the end of 2011, 64% of all weve had ever had a year where weve added 50 Consumers buy 170bn Unilever palm oil purchases were sustainably million people, he admits. packets of Unilever-made sourced. The figure should hit 100% by the end of Theres one other salient fact that keeps Polmans goods every year, and its 2012, three years ahead of Unilevers target date. rhetoric understated: he knows he cant act alone.products are used more Campaigners such as Greenpeace dispute this, Sure, the Sustainable Living Plan gives Unileverthan 2bn times a day. however, pointing out that the body that runs themuch to be getting on with internally. Within five It has more than 171,000 standard for sustainable palm oil, the Roundtableyears, for example, the companys 171,000 employees, and on Sustainable Palm Oil, does not yet meet the stan- employees have pledged to send zero waste togenerated sales of dards of, for example, Nestles arrangement with landfill. But the key changes, Polman says, will46.5bn in 2011. Golden Agri Resources, a supplier that has goneonly ever happen when working with others onSubscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 9. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 9 Ethical Corporation May 2012 Ethical Corporation Subscription Sample Pack9 the macro issues. For the Unilever head, a collaborative approach is obvious. Thats not to say its easy. Take defor- estation. Polman set out Unilevers stall back in 2009 by calling for a global moratorium on tropical rain- forest deforestation. For that to happen requires governments, multilateral organisations, business groups and individual citizens to get on board. That means working with people at different levels of speed and under different constraints. Banging heads, in less diplomatic language. Polman knows the difficulties of coalition- building only too well. For a decade or more, Unilever has been a leading proponent of sustain- ability roundtables. Some, like fisheries and tea, have made ground. Others, such as soya and sugar, are taking their time. Nothing will shake Polmans conviction that part- nership is the way to go. How do you feed a billion people who are still going to bed hungry? he asks. Answer: not by any one company going it alone. It is very clear that we need to work at industry level across the total supply chain for solutions.Paul Polman: biography The approach is paying off. Indonesia, for Paul Polman, 55, became chief executive of Unilever in January 2009. Netherlands-born, before joining example, has recently signed up to a two-year mora-Unilever as CEO he was chief financial officer and head of the Americas at Nestl. Before that, he worked torium on deforestation. A number of globalfor 27 years at Procter & Gamble, rising to the position of group president for Europe. He was elected to commodity traders have also expressed theirDow Chemicals board of directors in February 2010. He is married with three children. support for the temporary ban. Campaign groups, of course, are sceptical that it will be enforced. it [sustainability] successful outside. Keep moving Most seem to need little convincing. Unilever ran Not that Polmans happy to let things tick along. an employee survey in the wake of its Sustainable Unilever currently runs a host of award-winning Living Plan launch. The jump in its organisational child health programmes with Unicef and Save thehealth outstripped all the other 8,000 companies in Children in Africa, for instance. Even so, tens ofits benchmark group. thousands of Africans are still dying every day fromNext come suppliers. The big players pose few infectious diseases. Thats totally unnecessary,problems. Most are huge companies in their own Polman says. He went to Africa to see how the right. And Unilevers buying power is such that Unilever companys partnership efforts could be scaled up. most are quick to fall into line. Goals such as sustain- SustainablePolmans mild manner and talk of participative able packaging and product redesign wont happen Living Plan approaches should not be mistaken for a lack of overnight, Polman admits, but happen they will. Launched in November 2010, ambition. At heart, hes a visionary. Yes, he believesthe Unilever Sustainable strongly in grounding sustainability in the Beyond tier 1 Living Plan commits to everyday. Its important to do the things that you Much harder is engaging the tens of thousands ofabout 60 targets between are able to deliver on, he says. Yet he acknowledges small suppliers further down Unilever s supply now and 2020. Key targets that sticking within the bounds of existing knowl-chain. Three-quarters of the worlds population still include: edge wont redress the worlds most pressingworks in agriculture or related services. Working helping more than problems. with the likes of the Ethical Tea Foundation andone billion peopleIn that sense, Unilever s sustainability plan isRainforest Alliance, Unilever is experimenting with improve their health intentionally designed to stretch people. Auda-production models in its tea operations that are both and well-being; cious is the word he likes to use most: It goes economically viable and socially advantageous for halving the environ- beyond what many companies would call CSR. Its small producers.mental footprint of the really about [building] an equitable and sustainable Consumers, meanwhile, present an additionalmaking and use of its business model, he adds. array of challenges. For starters, theyre a fickle products;To make that model a reality, Unilever has a bunch. They profess a preference for ethical sourcing 100% of its checklist of the people it needs to persuade. First off products, yet its price, quality and value thatagricultural raw materials are employees. As Polman puts it: If you dont havegovern their shopping decisions.sustainably. your employees on board, its very difficult to make Polman has no illusions in this regard, saying:Subscribe now +44 (0)207 375 7235 ` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 10. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 10 10 Ethical Corporation Subscription Sample Pack Ethical Corporation May 2012 Arguably the real test of his commitment to sustainability has been his like it or lump it attitude to Unilevers shareholders Highlights: Unilevers Sustainable Living Plans progress report Sustainable palm oil: target of 100% covered by Green Palm Certificates to be reached in 2012,99 problems? three years ahead of schedule.We all understand that when a consumer buys some- commitment to sustainability has been his like it or Sustainable sourcing:thing, the product needs to perform. Its all very well lump it attitude to Unilevers shareholders. 24% of total agriculturalsaying that our ice-cream cabinets have natural refrig- There are so many shareholders out there and raw materials now beingerants, he says, but the companys Magnum stillwith many different objectives, and for any CEO to sourced sustainably, needs to be priced right and to taste good.try to please every shareholder is not likely to result compared with 14% Consumers are not willing to take a lot of extra in a successful enterprise, he says. in 2010. steps to figure out how to live better, he says. YouPolman works Unilevers Sustainability Living Nutrition: more than have to make it easy for them. With that in mind, Plan into almost every investor meeting. He refuses 90% of UnileversUnilever has designed a consumer-engagementto be bullied by the ridiculous short-termism of leading spreads nowapproach it calls Five Levers of Change. The leversthe market. As a result, Unilever no longer issues contain less than one- in question are intended to make sustainabilityquarterly forecasts. third saturated fat. understood, easy, desirable, rewarding and ulti-Not that investors are complaining. Under Renewable energy:mately habit-forming.Polmans leadership, Unilever has delivered a total 100% of electricity boughtPolman is also a big fan of contextualisedshareholder return of 68% over the past three years. in Europe is now fromcommunications when it comes to consumers. The With figures like that, he could wear a bright purple renewable sources. company is currently marketing a series of productssuit to work and no one would worry. Safe drinking water: in South Africa that require less energy to cook. We Thats unlikely to happen. Polman is a steady 35 million people have dont talk so much about carbon emissions, he pair of hands. His future vision for sustainability gained access to safestates. Instead, we talk about saving so many rands may be hugely ambitious, but his approach is drinking water fromon your energy bill.methodical and free of bluster. This soft-spoken Pureit water purifiersThat just leaves investors. Many a chief execu- Dutchman knows what makes business tick, both since 2005.tives resolve has wilted in the face of this scepticaltoday and tomorrow. Others in the CEO club wouldbreed. Not Polman. Arguably the real test of his do well to listen. ISubscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 11. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 11 Ethical Corporation July-August 2012Ethical Corporation Subscription Sample Pack11 Standards council was persuaded to restructure the organisation to become a limited company. The battle for AccountAbilityWhen Sunny Misser, a sharp-suited former PricewaterhouseCoopers man from By Mallen Baker New York, took over in late 2009 he had no The long-running standoff between AccountAbility and stakeholders of thesuch reservoir of trust to draw from. You AA1000 sustainability standards continues. Can some structural changes and newcould hardly have pictured a starker appointments ease the tension?contrast with Zadek, and in Misser you had someone who unashamedly promoted aighteen months ago, explosive disagree- absorbed into other operations, such as themore commercial approach. Ements over the future of standards thinktank AccountAbility burst into viewGlobal Reporting Initiative (GRI). AccountAbility was a membershipNow the new AccountAbility has emerged. It focuses on three areas: advisory when its own standards board collectivelyorganisation, with individual and corporateservices, research, and standards. In 2010, resigned, and the organisations managementmembers, and AccountAbilitys forays intoAccountAbility reported a turnover of 3.3m, issued an open letter attacking the proprietycommercial consultancy had created with a profit of 189,000. It has offices in New of a number of board members and certaintensions with some of its members even York, London, Dubai, So Paulo, Washington disgruntled employees of AccountAbility. DC, Johannesburg, Zrich and Riyadh. The A bewildering series of claims andcompany lists its specialist sectors as financial counter-claims followed. A central fearAccountAbilitys transformationservices, pharmaceuticals, energy and extrac- emerged that the organisation, recentlyhas caused a number of tives, telecommunications, consumer goods, under new management, was taking a more and food and beverages. commercially minded course that created astakeholders to go ballisticIt has a newly formed advisory council conflict of interest for the guardian of theincluding Sir Mark Moody-Stuart, the extrac- AA1000 standard. before management changed hands. Astive industry veteran whose CV includes And today the war being fought in theearly as 2007, the organisations annual leadership roles at the Global Reporting Initia- name of better stakeholder engagementreport disclosed that those members whotive and UN Global Compact. It has a website rages on. So what has actually happened in had established businesses providing reportyou would associate with a budding profes- the interim, and is there a constructive way assurance using AA1000 feared the potentialsional firm rather than what some used to forward that will preserve the impact of the for the host body to exercise an unfairconsider a slightly ramshackle campaigning good work of the past? advantage against them.organisation. AccountAbility was set up in 1995 with the The transformation has caused a number aim of progressing the professional practiceActivist backgroundof stakeholders to go ballistic. of social and ethical accounting, auditing and While former AccountAbility chief executive A group of concerned former partici- reporting. At that time, it had the vision of Simon Zadek has his critics, he was widely pants set up an AA1000 User Group forum becoming the professional body for account-viewed as an intellectual driving force in the hosted on LinkedIn. It became the place ability practitioners as the sector matured. movement, and with his heart and soul very where intemperate claim and counter-claim It created the AA1000 set of standards much in the same place as the activist could be exchanged in public in an occa- covering assurance and stakeholder engage- community. The tensions and argumentssionally astonishing way, and it produced ment. The early versions were over-complex,were already there, but he had a reservoir ofan executive of people tasked by that but included key principles that have sincetrust to count on, which came to bear forcommunity to find a way forward. become commonly recognised as useful and instance when the organisations advisoryAt its urging, AccountAbility agreed inSubscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 12. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 1212 Ethical Corporation Subscription Sample Pack Ethical Corporation October 2012 June 2011 to set up, an interim standards board (ISB) to oversee things while it could regroup and put a more enduring process in place. It established an independent nomination committee chaired by Roger Adams of the professional accountancy body ACCA, a figure respected by both sides. This group then identified who should be on the new board.The ISB was chaired by Anant Nadkarni, vice-president for group corporate sustain- I no longer considered AccountAbility to be an appropriate steward of the standard Paul Scott, corporateregister.com ability at Tata. It included a number of people who had been involved with AA1000, including some of those associated with the LinkedIn group. Judy Kuszewski, one of the LinkedIn group interim executive committee, says: We did consider it a success when Account- Ability agreed to form the interim standards board to replace the one that resigned, and Stakeholders have accused AccountAbility of a lack of engagement in the past the nomination committee which Roger Adams was chairing. But it hasnt, to date, be able to put the standards in their pocket to the fact that the proposed board for the resulted in independent governance.and walk away with them. The committeenew company would have a majority for In fact, the board became increasinglywas behaving as though it was separate tomembers of the AccountAbility manage- divided as members of the LinkedIn groupthe body that had set it up, he says.ment team, therefore undermining its claim demanded specific guarantees and becameNadkarni is frustrated that the conflictto be independent. frustrated at what they saw as slow actionobstructed progress. Such standards as And they became increasingly angry by and lack of communication.AA1000 need to be co-created. They cannotwhat they saw as the failure to act on In November 2011, when the AA1000 be produced by one group alone, they needpromises a fact stressed by members of the Stakeholder Engagement Standard was ready to be co-created to meet common aims. executive committee to Ethical Corporation to have its final draft published, members of and the absence from the dialogue of the the group went ahead and published it first onBuilding alternativeshead of standards, Kurt Ramin, and chief an independent website that failed to mention AccountAbility produced a white paper on executive Sunny Misser. AccountAbility but claimed authorship by thegovernance for AA1000 in June 2012 whichLiv Watson, one of the founders of the AA1000 Technical Committee (still online at the proposed the setting up of a separateXBRL standard on electronic business time of writing at http://aa1000ses.net). community interest company (which carriesreporting, had been brought into Account-Naturally this raised questions of intel-specific safeguards under UK law that it Ability at the same time as Ramin to help lectual property, and whether the group must be focused on community benefit, notput the standards on track. She left after had gone too far. Some saw it as one of a private profit). The standards would beonly a few months, frustrated at what she series of outrageous moves by the critics vested in this company, and it would be runsaw as the apparently unbridgeable gap that displayed bad faith. at arms length from the commercial opera- between AccountAbility and its critics. ISB chairman Anant Nadkarni says that tions of AccountAbility, even as it receivedIf [AA1000] is going to have trust in the such action was completely unheard of, in some financial support from it.marketplace, she says, we need to have all his time of involvement with groupsInitially this seemed that it might answerthe standard open and free of any conflict of such as GRI, Social Accountability Interna- many of the concerns. But members of the interest. The infrastructure issue needs to be tional and the Global Compact. SomeLinkedIn group were critical of the fact thatresolved. I dont think a lot of people will people were arguing that because they are the plan was being driven through withoutadopt the standard until this is the case, and passionate about this area, they wanted tothe full agreement of the ISB. They pointedothers will simply move in to fill the space.Subscribe now +44 (0)207 375 7235 ` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 13. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 13 Ethical Corporation October 2012Ethical Corporation Subscription Sample Pack13IMPAKPRO/ISTOCKPHOTO.COM through a round hole, and theres a consensus Adams herself is not undaunted by the that we can get enough people to the table to task, but believes that the AA1000 standard create an alternative. Were looking for ais still worth fighting for. She recalls with platform where KPMG, PwC and WWF couldpride her involvement back in the late 1990s all contribute, leaving their badges outsidewhen, she says, she had a sense of working and focusing on the common task. alongside the leaders in the field. My first priority, she says, is stake- Concerns addressedholder engagement and sorting out the Sunny Misser still believes there is everything governance arrangements with the new to play for and maintains having consid-standards board. I know were not going to ered the feedback from what he describes as please all of the people, but we can do more. the entire stakeholder universe that theShe believes that, in the face of some- majority of concerns are being addressed. times fierce criticism, the AccountAbility We have created a community interest team has been able to put some of the company, and the transfer of the intellectual baggage behind it and move forward. property of the standards is under way. WeIn an echo of Anant Nadkarnis comment are adding another non-AccountAbility on co-creation, Adams acknowledges this appointee to the board of the company, andis not a task she can do alone. We really are happy to add a further one to put the need those who want the standards to work management team in the minority.to help make them work. We have a nominating committee for the new standards board chaired by SAIAn AccountAbility solution founder Alice Tepper Marlin and we canSeveral people supportive of the LinkedIn state quite unequivocally that Account- group who asked not to be named Ability does not, and will never, doexpressed anxieties about the breakaway assurance work off the standards in compe-group being set up, which they said ran the tition with those stakeholders that do. risk of having its vision defined by what it We have done everything that has beenwasnt rather than what it was. They still asked of us. believed that the best resolution would be Is he worried about the foundation of a for AccountAbility to sort things out, for all rival group? Misser shakes his head. He that time was short and trust low.And others have begun to add their firmly believes, he says, that it is best forThis perhaps is the group that Adams voices to the chorus. Posting in the LinkedIn AA1000 to be supported by a stable organi-will need to win over in the quest to put the group, Paul Scott of corporateregister.com, sation, with established processes, able to last two turbulent years in the life of AA1000 which has held the inventory of companies bring in the highest-calibre resources with a behind it. using AA1000, said: In April this year I gavesolid financial input.And although it is clear that some of the notice to AccountAbility that we would notWhat about the criticisms of lack ofgripes could go away easily if AccountAbility be continuing with this [arrangement] engagement and communication? Misserstarted to deliver promised changes to a The reasons I gave were, among others, that agrees that this area has not been a success. speedier timetable, some genuinely tricky Outreach and relationship building haddilemmas will remain. Most specifically is it not been one of the head of standardspossible for a for-profit company to be asso- It is clear that some of thestrengths, and Ramin has since left Account-ciated with a public-good standard without gripes could go away easily ifAbility, Misser says. (Though, at the end ofthe take-up of the standard being affected? AccountAbility started to deliver September 2012, Ramin is still listed on theCompanies that historically acted as a companys website as a special advisor.)catalyst for standards, such as B&Q and the promised changes to a speedierThe group is now placing its hopes on a Forestry Stewardship Council over 20 years timetable new appointment in that particular hot seat ago, accepted that the value of the standard Professor Carol Adams. Adams, who was that it was completely independent. I no longer considered AccountAbility to be was on the interim standards board, hasBut then, other standards bodies, such as an appropriate steward of the standard.been involved in AA1000 since the early GRI and Social Accountability InternationalTalk in the LinkedIn group has moved days, and a number of the critics had offer a range of commercial services in towards the possibility of a new rival initia-unaware of her impending appointment relation to their standards. And so it comes tive. As yet there are no specific proposalsidentified her as one of those supportive ofdown to where the grey ill-defined lines lie about how this might be formed. AccountAbility who carried a good track that mark the extent of what AccountAbilityJohn Aston, managing director of Astonecorecord and credibility. can do before it becomes an obstacle to the Management, says: Weve given a team the She will come in with the brief, says future success of the AA1000 standards. chance to play but they havent performed.Misser, of picking up the ball where it hasThe answer to that one can only be Were going to stop trying to put a square pegbeen dropped. discovered as events unfold. ISubscribe now +44 (0)207 375 7235 ` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 14. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 14 Pressures still on for Asia Pulp and Paper By Eric Marx Campaigners continue to notch up victories against the paper and packaging producer APP, but its a giant company with a huge customer base and the rainforests trees are still fallingorce the Riau pulp mill to shut down, unfurl thementalists were taking on the fantastically rich Fbanner and try to hold off the police as long as possible: for the 12 Greenpeace activists hoistedWidjaja family owners of the powerful Sinar Masconglomerate whose patronage relationships ran atop the 40-metre-high loading cranes, the intentdeep into the heart of the Indonesian government. was to take the battle to the frontline of IndonesiasNevertheless, three years later, the situation has forestry war.changed. Environmentalists now appear to have theThe aim was to achieve a lockdown at least forupper hand as a slew of big international, western- one day at Asia Pulp and Papers largest mill on facing companies drop the now toxic APP brand the island of Sumatra, and send a message to world whose name conjures up forest destruction and the leaders gathering at the December 2009 Copen-eradication of orang-utan and tiger habitats. hagen Climate Summit. By first pressuring Unilever and Nestl intoForest Destruction: You can stop this, read the cancelling palm oil contracts with APPs sister banner.company Golden Agri Resources also part of theBeyond those in the environmental community,Sinar Mas empire forest campaigners successfully however, few noticed, and among those who did, eliminated one of the two chief industrial drivers of few thought there would be much impact. Due to the rainforest destruction. Golden Agri chief executive nature of illegal logging and the lack of transparency Franky Widjaja is said to have seen the writing on within the industry, it is very difficult to identifythe wall: go out of business or submit to credible chains of custody. And by targeting APP environ-, third-party monitoring.Subscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 15. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 15 Ethical Corporation Subscription Sample Pack 15USO/ISTOCKPHOTO.COMpeace has become particularly adept at combiningwell-documented allegations with hard-hittingcampaigns that shatter APP certification claims anddeftly implicate some of their biggest customers. In the process, the NGO community hasconcretely impacted how companies understandtheir link to forest and habitat destruction. Anascent FSC-certified timber industry has come ofage, while post-consumer recycled content andalternative fibres are beginning to provide realoptions. A case in point is the recent pledge byKimberly-Clark to have 50% alternative fibrecontent in its supply chain by 2025. Still, deforestation in Indonesia has yet to be Asia Pulp andslowed to any meaningful degree, causing some toquestion whether the ultimate aim will be attained.Paper hasAt stake are millions of hectares of wildlife habitatbecome notoriousand carbon-rich peatland, and time appears to berunning out. for greenwashing its activitiesGreenpeace campaigningThese days, when an APP client is targeted byGreenpeace, the chief executive tends to respondwithin days. If the target cannot immediately shiftsuppliers, pledges are made and companiesengaged to enable a change of course.Thats what happened to Xerox, which has had aglobal policy in place since 2002 not to use APPproducts, but was discovered this year to have madepurchases from an APP subsidiary whose fibrecontent contained ramin, an internationallyprotected tree species traced to the logyards ofAPPs Indah Kiat Perawang mill.Also caught red handed in the year-long investi-gation begun in 2011 were National Geographic,Wal-Mart, Acer, Barnes & Noble and Danone, toname just a few. All have since pledged to sever allcontacts with APP but its the discovery of Xeroxs,continued APP dealings that served to warn othersBut as for APP this strategy only caused the, of the seriousness of whats at stake. company to dig in its heels. APP has become noto-I think this particular case demonstrates that its rious for greenwashing its activities, going so far as not enough to make commitments, says Andy Tait, to hire high-priced PR firms and lobbyists to wage a senior Greenpeace campaign manager who has multi-million-dollar campaigns countering activist worked on the Indonesian forestry campaign since charges. In May 2012, for example, news leaked that2008. You then need a system of due diligence to former UK trade minister and European commis-check that policies are properly implemented. Xerox sioner Peter Mandelson had been advising APP and got caught out. If they had been policing their policy attending meetings on the companys behalf.implementation, that wouldnt have happened.Rumours are that APP chief executive TeguhThe critical thing is to always check where your Widjaja is embarrassed by his younger brother and, materials actually come from, supply chain experts having lost face, is now unable to even consider say. In this case, it is about who is providing the reaching a deal. Others say APP is hemmed in by apulp or packaging to your suppliers. Do the tremendous debt burden linked to an ill-advisedhomework and implement policies that, first, help expansion plan.to ensure you dont end up contributing to defor-Whatever the case, one thing is clear: in the estation and, second, support responsible decade-plus since they began campaigning, environ- procurement of products such as paper and pack- mentalists and human rights activists have evolved aging. Then set up due diligence to make sure the into a formidable global front. Among them, Green- policies are implemented.Subscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 16. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 16 16 Ethical Corporation Subscription Sample Pack Ethical Corporation October 2012 GREENPEACE / BAS BEENTJES 15 years of activism Though the Indonesian forestry war was launched in the late 1990s, environmental campaigners have come of age only in the past few years. After two failed engagements with APP by WWF and Rainforest Alliance, a much larger and more focused phase led by Greenpeace has begun to seriously damage the pulp and paper giants customer base. There is now a unified front of local and global NGOs that are standing up to compa- nies like APP, says Michael Stuewe, a US-based WWF scientist. There has been a great evolution in data collection and communications technology available to campaigners that has brought about ever greater transparency on deforestation events. But on the ground the situation is as it was in the late 1990s: APP and its peers are continuing to drain tropical peatlands and deforest elephant and tiger habitats. Timeline:Greenpeace targets the Colonel 1998The Indonesian president Suharto falls and a new breed of local NGO activist floods in to begin researching and documenting the countrys2008 Unilever supports moratorium against Indonesian palm oil one month illegal logging practices.after Greenpeace Dove Onslaught(er) campaign. 2000-2Campaigning against APP begins with reports from the Centre for2010 Nestl signs palm oil moratorium after launch of Greenpeace Kit-Kat International Forestry Research, Friends of the Earth, WWF andcampaign and pledges broad commitments to tackling deforestation. Greenpeace linking international finance institutions to APP and its illegal 2011 Sinar Mas palm oil subsidiary Golden Agri Resources signs agreement with logging practices.The Forest Trust pledging support for sustainable palm oil; aims for zero 2002APP products blacklisted from UK; Xerox announces global policy banning deforestation footprint and certification from RSPO of all plantations by 2015. the use of APP products. 2011 Mattel implements new policy on wood fibre, pledges to increase amount 2004WWF rejects APP sustainability plan as it does not protect high conserva- of recycled paper and boost use of FSC wood three months after Green- tion value forests (HCVF) and owing to distrust of the companys pledge peaces Barbie Its Over campaign. to switch to plantation wood by 2007.Jan 2012 In partnership with Rainforest Action Network, Levis pledges to stop 2004NGO Robin Wood persuades Metro Group to cancel APP contract.purchasing from APP. 2004Eyes on the Forest coalition of Indonesian campaigners is founded by Feb 2012 WWFs Dont Flush Tiger Forests campaign targeting 20 US supermarket Friends of the Earth and WWF, establishing a common reporting platformchains carrying APP tissue brands, Livi and Paseo. enabling the synchronisation of investigations across dozens of NGOs.March 2012 Greenpeace Ramin Paper Trail report documents APP paper mill mixing 2005Greenpeace and Friends of the Earth link APP to illegal logging in Cambodia illegal ramin logs and links them to 11 companies including Xerox, and Yunan province of China.National Geographic, Danone, Wal-Mart, and Barnes & Noble. 2005APP enters five-year partnership with Rainforest Alliance to identify, May 2012 Greenpeace campaign KFC! No Good for Rainforest and Frying the Forest protect and monitor HCVF in several concessions.in China and India marks a shift towards consumers in developing countries. 2007Rainforest Alliance terminates agreement with APP after determiningJune 2012 Kimberly-Clark pledges that 50% of wood fibre currently sourced from continued clearance of HCVF.natural forests to come from alternative fibre sources by 2025. 2007FSC revokes APPs certificate because of continuing destruction of HCVF. June 2012 APP releases Sustainability Road Map, which is subsequently rejected by 2007Staples cuts ties to APP. WWF and Greenpeace. Largely as a consequence of NGO campaigning where their stuff was coming from.and investor pressure, 87 global corporations Implementing these policies is not an easydisclosed their forest footprint in 2011, accordingundertaking. It takes an investment of resources, "Companies suchto Forest Footprint Disclosures 2012 annual review. says Comolli, citing Kimberly-Clark as a visionary as Staples and That was an 11% increase over the previous year, company whose alternative fibres commitment mayindicating a greater awareness of risk, but not neces- yield big changes in the industry. Mattel had no idea sarily the implementation of action plans to reduce As reported by Ethical Corporation, Kimberly- where their stuffthose impacts. Of the 357 global companies Clark will shift to bamboo and leftover wheat straw,approached by FFD, a quarter took up the challenge.potentially moving 350,000 tonnes of pulp demand was coming from"I work with big companies and it takes a while towards alternative fibres. Bamboo plantations are Mark Comolli,to educate these people on their actual impact, saysplanned for the south-eastern US where growingMark Comolli of the Rainforest Alliance. Comolli conditions are ideal and existing pulp machinery Rainforest Alliancecredits the APP campaign with compelling hugecan be easily adapted.buy-in to the Rainforest Alliances SmartSource Currently there exists no commercial-scalemanagement programme where, previously,pulping facility for wheat straw in North America,companies such as Staples and Mattel had no ideaaccording to Neva Murtha, a campaigner withSubscribe now +44 (0)207 375 7235 ` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 17. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 17 Ethical Corporation October 2012 Ethical Corporation Subscription Sample Pack 17 EDSTOCK/ISTOCKPHOTO.COM Canopy, an environmental group advising Kimberly-Clark on alternative fibre sourcing. Canopy has identified more than 1m tonnes of annual demand among printers and publishers, enough to keep five mills working. We think thats just the tip of the iceberg, says Murtha. Real alternatives now exist across all product lines, Comolli says. And for companies wanting to dive into their supply chains, there are customisable sourcing plans backed by internal IT solutions and a host of on-the-ground forestry experts in nearly every corner of the world. Its one thing for a company to put a letter out to suppliers and its another thing to say we have proof validated by an independent organisation that your results are real, Comolli says. There are also very important economic issues at play. Big money is at stake, and for a company like Mattel the decision to totally disengage from APP was hardly trivial. In the case of KFC, the subject of an ongoing Greenpeace campaign, Comolli says there isnt any other packaging business being developed at thePeter Mandelson: operating behind the scenes for APP moment. So what are they going to do? he asks. They cant just quit doing business. large presence in India and China. Complicating matters is the breadth of the APP KFC is destroying the habitat of the last network. Though it is a consumer-facing company, remaining Sumatran tigers for potato wedges and 12- APP often floods the market with competing brandspiece buckets of extra crispy chicken. Its disgusting, in a way that doesnt seem to make any businessstates a recent campaign linking the companys sense, says Robin Averbeck, a campaigner withthrow-away packaging containers to Indonesian Rainforest Action Network. Part of this is them rainforests. An online campaign and parody website hiding from the campaign and trying to disguisedepicting Colonel Sanders with a raised chainsaw are that this is, in fact, APP. reported to have hurt KFCs image.A great many US publishers were getting their KFC is said to be in talks with Greenpeace, but fibre from APP printing presses in China, Averbeck short of shutting down the paper mill, how might says. Rainforest Actions campaign launched in 2009APP and Greenpeace reach some kind of detente? has peeled away much of this support, while in a Theres so much bad blood between the two adver- recently launched WWF campaign targeting two saries that Ardie says he believes there may not be a APP tissue brands, Livi and Paseo, 17 of 20 targeted way to find common ground. US supermarkets cancelled their orders.Tait says a third-party-monitored, time-bound Though progress is being made, only when inter-sustainability action plan might work, but wouldIn May 2012, national companies fully vet their supply chains willdepend greatly on the specifics. It would depend on APP pledged to environmentalists truly have the leverage they need. credibility of their commitments, the choice of third That tipping point hasnt yet been achieved, saysparty, and the transparency of the reporting againstbecome almost Arian Ardie, a former APP sustainability manager any commitments made. wholly reliant on who left the company in 2005. The customers thatIn May 2012, shortly after Greenpeaces KFC are leaving are not necessarily the ones that have the campaign launch, APP attempted one moreplantation fibre greatest overall volume, he says. They still haveoverture. It pledged to become almost wholly reliantby 2015 their customers in Asia, especially in China, and to on plantation fibre by 2015 a pledge covering both some degree in Japan and the Middle East. its own concessions and those of its independentpulp wood suppliers and announced a plan for New strategy adhering to High Conservation Value Forest (HCVF) In relentlessly continuing with its campaign against standards. APP has since named outside experts to APP and its customers, Greenpeace and other NGOassist it in this work but campaigners say that unless groups say they have no choice but to continue toAPP commitments are sufficiently credible, these apply pressure. Greenpeace alone claims more thanpartners cannot possibly succeed. 60 companies have now suspended purchases. The process of engagement with independentKFC remains an important target, owing to its suppliers is, by its nature, very different from APPSubscribe now +44 (0)207 375 7235` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 18. EC Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 18 18 Ethical Corporation Subscription Sample Pack Ethical Corporation October 2012JEREMY SUTTON-HIBBERT / GREENPEACE APP: a turbulent history Recently dubbed Indonesias richest man with a net worth of $12bn, Eka Widjaja is the founding patriarch of Sinar Mas Group whose holdings boast palm oil, pulp and paper, property, banking, energy and infrastructure and, more recently, mining. Now 89 and retired, he is said to have handed the business over to his children, in particular Teguh, Muchtar, Franky and Indraw who each look after a major component of the sprawling business empire.APP, a cornerstone of the business, ran into severe debt trouble in 2001 and has sought to offset its problems with new opera- tions in southern Sumatra, China and Papua New Guinea.Logs from the clearance of Indonesias rainforests, including peat swamp forests, are estimated to have accounted for about 20% of the fibre pulped in APPs mills between 2007 and 2009. APPs facilities in Indonesia and China produce packaging papers and products for many global brands across sectors, including food, electronics, cosmetics, footwear, cigarettes and toys.Sumatras vanishing forestsThe division is responsible for about 40% of Indonesias total pulp production and is said to have ambitions on becoming the NGOs leverage one-sided information in order to worlds largest paper company.attack a companys valuable corporate brand, and thereby achieve the NGO campaigns goals. In Timeline: short, we think the campaign is not fact-based. 1984 APP builds its largest pulp mill in Sumatras Riauprovince, ground zero for the pulp and paper industryRainforest harvestingand home to the islands highest deforestation rate. Forest campaigners insist their continued focus on 1994 APP builds pulp mill in Jambi, Sumatra.APP is warranted. They report not yet seeing any 2004 A group of major creditors in APPs 2000 bankruptcysuspension of natural forest harvesting from manyinclude HCVF protection and sustainable operations intoof the rainforest areas supplying APP Moreover,.an amendment of their debt restructuring agreement plans by APP for whats purported to be one of thewith APP.worlds largest pulp mills in south Sumatra 2005 APP opens pulp mill in Hainan, China.province hardly portends a new business model. "The burden of 2007 Riau and National Police stop all logging operations byGiven its enormous size, analysts say there is noproof is on APPAPP in Riau to investigate illegal logging.way APP could source enough plantation fibre to 2008 Indonesias corruption court sentences a senior official keep the mill running at a profit. to demonstrateof the Pelalawan district in Riau, Sumatra, to 11 yearsThe burden of proof is on them to demonstrate suspendedin prison for corrupt practices while issuing licences suspended operations in natural forests while doingto APP.this audit, says Lafcadio Cortesi forest campaignoperations in 2011 The Indonesian president announces a two-yeardirector for Rainforest Action Network. The new millnatural forests"moratorium on the issuance of new concessions on will be a watershed for the government and for APPpeatlands and in forests. However, it only covers areasto see if, in fact, they can do business differently.Lafcadio Cortesi,of primary forest and peatland outside existingGreenpeaces Tait criticises APP for trying to Rainforest Actionconcessions. spend its way out of trouble through an extraordi- Network 2012 APP is sued by US Bank and JPMorgan in New York andnary greenwash campaign that cost millions ofChicago for $1bn for default on debt repayments relateddollars at a time when it could have come clean andto its 2000 bankruptcy.invested in better plantation management. Their strategy has failed miserably, as we can see with the owned concessions, says Robert Arnott, via email,range of international customers that they have lost from Cohn & Wolfe, the agency handling global PRin the last few months, Tait says. for APP since 2010. In order to ensure successfulWhat should worry APP is that as time goes on, implementation, there has to be a detailed assess-less and less campaigning is needed to convince ment of the impact of changes in policy and companies to suspend purchases from APP . operations. Both APP and the independent supplier Tait maintains it is possible for APP to change its must consult with a wide variety of stakeholders. business model and become reliant on plantation Inevitably, this will take more time.fibre. But that requires an immediate change ofTom Tevlin, president of Canadian-based Green- direction, backed by third-party verification, he spirit Strategies, a marketing firm that has long adds. If APP doesnt do that, whats left of handled APP promotions, tells Ethical Corporation:Sumatras forests are in big trouble. ISubscribe now +44 (0)207 375 7235 ` www.ethicalcorp.com/subscribe @ subs@ethicalcorp.com 19. 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