TRENDS AND ISSUES IN THE WORLD OF CORPORATE RESPONSIBILITY

DIRECTIONS SUPPLEMENT

AUGUST / SEPTEMbER 09

The emerging stars of sustainabilityAre Nordic companies the new stars of sustainability?

Directions Supplement August / September 09

Welcome to the August / September special edition of the Directions Supplement series. In this issue we provide a snapshot of what appears to be an emerging strength and confidence in the approaches to sustainability being adopted by Scandinavian companies – and they also appear to be more willing than in the past to communicate on the subject. By highlighting the stars from around the region we have collated trends and areas of best practice that we feel are worth mentioning.

And with COP-15 just round the corner we invited our ‘best friend’ agency in Denmark, RelationsPeople, to reflect on the strong social welfare traditions that underpin the region and take a look at the energy sector’s experience of communications around climate change.

Sustainability is obviously not a new concept in Scandinavia. Indeed in many of the regions companies have long been at the vanguard of sustainability thinking and the Nordic sustainability model resurfaces time and again as the style of capitalism that must be imitated to help build a more sustainable future.

But in our experience of working with the leading companies in the region, the approach to communications on sustainability has often lagged behind the reality and not really done justice to the strength of the thinking and the actual activity.

There are lots of very good reasons for this: Government regulation has never really pushed the subject; society’s relationship with business has tended to be fairly positive and trust relatively high; stakeholder groups (where they exist) have not tended to demand too much radical action; there also seems to be a very consistent view that sustainability should be about substance first and communications second (we would share this view); and then there is what several of our clients have referred to as the cultural trait of under-statement and modesty – it seems Scandinavian companies prefer not to blow their own trumpets.

But in our view a lot of this is changing. New regulations in Denmark and Norway. Increased stakeholder activism. The transparency needed around global supply chains. The increased global access to company information afforded by the internet. Several corruption scandals. Increasing consumer awareness of issues and decreasing consumer trust of business. Climate change science. The financial crisis. All of these factors appear to be leading Scandinavian companies to re-think their approach to communications and this is being reflected in more visibility, more transparency and generally more communications noise.

But above all others we think there is one particular factor that is driving this subtle shift in mindset – it’s the market opportunity. There seems to be a growing realisation that the substance-based approach, that has been used up until now, means that Scandinavian companies are well placed to reap the benefits of this long-termism. They’re realising that this substance, when allied to good communications, can now provide competitive advantage.

And those companies that aren’t spotting this opportunity are increasingly at risk of losing out.

Scandinavian companies are globally competitive businesses often working in high impact sectors or innovation-based industries. They must now be at least as adept as their peers at engaging stakeholders around the difficult issues they face – taking an understated approach will no longer do but so many are still doing this.

So it is this gap and this emerging trend that we want to explore. As with their much-admired model of capitalism, Nordic companies have a unique opportunity to rightly stake their claim to being responsible leaders. Effective sustainability communications in a multidimensional, interconnected world is a critical element to realising this advantage.

So we have put some of the biggest companies in Scandinavia under the spotlight and, looking at what we think is great about what they are doing to communicate their sustainability initiatives, we pick out a few of the stars. It could be a one-off campaign, a new strategy, an issue-focused microsite, an interactive case study map, a unique take on grappling with the big challenges, or a great approach to dialogue with key stakeholders. Whatever it is that strikes us as demonstrating this new-found voice and confidence in communications.

Nigel Salter Director salterbaxter

Sweden’s leading companies have, for some time now, been amongst the best and most visible in the region when it comes to sustainability communications. The approaches of the leaders are equal to and in many cases exceed the effort of global peers making this country stand out on the world stage.

The Volvo online report has many entry points for different stakeholders, with tiered information where each page leads you to greater level of detail or external links. All the data in one scorecard at the front of the 40-page report showing the useful economic, environmental, and social data. A blog from managers and polls on different issues are also great features.

The Ericsson report starts with its most relevant issues and these then guide the communications. Features include an interactive case study map and CEO video.

Skanska has a great ‘triple bottom line’ interactive video and timeline showcasing its sustainability history.

SCA’s communications feature an engaging lifecycle brochure. But most importantly the company is clear in identifying the controversial issues that are key to the business.

With a Youtube style climate site containing information around the different stages of

the build up to COP15, Vattenfall has an easy to understand map of where the business is going. It also features many interactive slideshow presentations around key issues, providing useful explanations of the business impacts and processes looking at issues such as CSS and nuclear. Companies around the world could learn a lot from Vatenfall’s approach to sustainability communications.

Electrolux engages well on individual issues with a standalone water savings site – which is actually a product site for an efficient dishwasher! A good example of a company with sustainability well-integrated into its approach.

The TeliaSonera report site is well laid out and gives a good perspective of business operations. Stakeholder assessment of issues and stakeholder engagement are well presented.

H&M takes a transparent ‘no stone unturned’ approach to explaining impacts in the supply chain. The company identifies the top ten non-compliance issues and individuals accountable for achieving targets are named. The stakeholder feedback Q&A section also adds credibility. No doubt that this company is a Nordic star of sustainability.

SAS has an offset calculator which is a useful, if uninspiring tool. SAS has a good assessment of steps the airline industry can take to reduce emissions.

There’s some original thinking being done in Finland and, for the most part, Finnish companies are comfortable talking about the issues that they are facing. With some world leaders based in the country and also with some industries needing to address some of the most challenging global issues (forestry, nuclear energy, renewables), the approaches and the ambition being demonstrated by some of the companies show real star quality.

With an integrated report and separate environmental brochure, Neste Oil displays that the business is aligned with environmental challenges. It also leads on issues such as sustainable palm oil, clean diesel and vehicle emissions reductions.

Nokia is a great example of a company completely integrating its sustainability principles through the development of an environment-focused product line called ‘Power of We’. It uses an interactive CR map to outline global initiatives across a number of different areas e.g. disaster relief and youth. In partnership with WWF, Nokia has created a young online community talking about various environmental issues.

The highlight of Stora Enso’s site is the quick and easy reader survey facilitating feedback. The company takes an honest approach, for example when talking about fatal accidents.

A great sustainable forestry micro-site and good technical data, but unfortunately communications presented by UPM-Kymmene are a bit dry. More could also be made of the ‘UPM stories’ section covering its big impact areas. And how will it start to develop its position on water?

Fortum has a number of position papers around key issues, such as a separate report exploring how it fits into the climate change debate. There’s also an ambitious new strategy and direction which bodes well for future initiatives and leadership. Lots of challenges and lots of engagement and activity to help address them.

The conversational tone adopted by the SOK Group’s Responsibility Review makes it a great read. And the spirit of the cooperative movement comes through really well.

The Metsäliitto Cooperative CR review is incorporated into its annual report. Although information presented in the report is in depth, the company could benefit from consistent communications, making the most of online.

Sweden

Finland

Even though several world leading businesses with some difficult industrial issues (Statoil and Yara) can be said to also be world class in sustainability, the communications of the companies away from the main spotlight has been generally uninspired and uninspiring. New government thinking on company disclosure in 2009, recent initiatives on the use of government pension funds to incentivise green energy and technology, plus a new approach to taxation on food and drink items which will favour ‘products with health benefits’ all mean that the ground seems to be shifting – fast.

Yara international clearly demonstrates how sustainability solutions are built into the business model. ‘Addressing the food challenge’ is a great example of a company’s use of video content.

Statoil has an engaging online report tackling energy reality issues. With its interactive site, ‘solutions of tomorrow’, it looks at future efforts to reduce impacts and the ‘Hywind’ floating wind turbine is well explained with rich content.

Looking at content, Telenor provides a really strong response to the challenging supply

chain issues found in Bangladesh with a detailed, frank explanation of problems and terminated partnerships.

Pages on issues and impacts from Norsk Hydro are a good example of how impact areas are addressed separately with single sources of information.

Orkla has an online report site that has the look and feel of a printed document. This is disappointing as there is great evidence of lots of dialogue channels for stakeholder groups. The content is there – but Orkla would benefit from making much more of its online communications and demonstrating a more coherent overall group approach to sustainability – admittedly difficult for a true conglomerate, but this is the challenge it now faces.

Unfortunately AKER has taken a simple ‘nuts and bolts’ approach with only a PDF of its CR report online. The strength is in its year-on-year table assessing progress on targets. Also worth mentioning is the transparent explanation of fatalities.

Long associated with innovation in the field of sustainability and the environment Danish companies appear to have an appetite for leadership on these issues. Communications beyond a few leaders had, until recently been limited but the government’s recent requirement for all companies to report on social and environmental issues appears to have raised the bar. Most companies had one or two excellent communications ideas and initiatives – well on the road to obtaining a full suite of tools to communicate their approach to sustainability.

Despite not producing a report Maersk focuses on a range of key issues, such as carbon capture and storage. Some good legwork with content – we look forward to a report that presents this information in an exciting and innovative way.

Unfortunately little more from ISS than a functional explanation of what they do, partnerships and commitments. So much more could be done here.

Novozymes has a well-integrated approach as products are positioned as solutions to big global challenges. Key best practice features are a ‘most-read tag cloud’ and a ‘second life island’ where solutions for the future are showcased. Making full use of 3-D virtual reality environment to communicate, a genuinely innovative example of original thinking although possibly not all entirely effective.

DONG has the shortest report for the sector (only 50 pages!). The introduction of an exchange between the WWF Secretary General and Dong CEO makes a great read.

Arla provides a wordy PDF Report, but this is supported by videos on impact areas and food blogs.

Although Danish Crown does have an environment and climate strategy the sustainability communications is limited to its annual report. It does however have a virtual slaughterhouse tour that is very informative, and actually fun!

Novo Nordisk also integrates its sustainability communications into its Annual report. One of the first companies to use tools such as games and scenarios to explore sustainability issues, this company embodies worldwide best practice.

Every retail unit in the Danske Bank Group launched a local CR site. The Group also produces a CR fact book which is heavy with performance data.

Carlsberg has a strong proposition and strategy built around the idea of ‘growing responsibly’. A case study map outlines initiatives across the 3 focus areas of the environment, responsible consumption and responsible supplier management. There appears to be a lot going on and a sense of lots more to come.

Vestas promotes modern energy as its theme with many films which, despite a low level of detail, do a good job of engaging the audience. But given Vestas’ position as a world leader in wind energy, we’d have to say that we’d expect more in terms of communication – this seems to be an opportunity missed.

Norway

Denmark

Branding climate change – a Scandinavian approach

Kristian Eiberg Partner RelationsPeople

Scandinavian countries, characterised by strong social welfare systems, have long been used to their governments taking the lead on sustainability issues. Acting through the legislature, governments have tackled themes from corporate governance to, most recently in Denmark and Sweden, demanding that a large group of companies report on corporate responsibility (CR).

Maybe because of this strong emphasis on public consensus and the ability of government to effectively regulate, Scandinavian companies have not been active in communicating corporate responsibility. There has been no demand from stakeholders to do so.

In Denmark, the regional bank Sparekassen Nordjylland took its first step into corporate sustainability when in 1987/88 it launched the world’s first ethical accounting statement. This approach inspired not only other Danish companies to follow suit, but also gained traction outside Scandinavia. The Danish government played a leading role in deepening CR across Europe as Danish companies were directly approached to contribute and advise on government-backed projects. Ms. Karen Jespersen, then Minister for Social Affairs, took the initiative to establish a National Network of Company Leaders to act as an advisory board to government. Representatives were selected from corporations such as Novo Nordisk, Carlsberg, Grundfos and Oticon as well as from Danish SMEs.

However, CR from a government perspective has largely been focused around creating and maintaining an inclusive labour market – mobilising various parties to address problems of unemployment and social exclusion of marginalized groups.

More recently Scandinavian companies have faced increasing demands to demonstrate commitments to CR and accountability from global markets. This shift towards using sustainability to enhance global competitiveness of Scandinavian firms has been accompanied by legislation. The most recent requires the 1,100 largest companies to report on CR from 2009.

‘Third wave’ corporate brandingToday, leading Scandinavian companies have realised that stakeholders’ concerns are their concerns. And that active listening to stakeholders enhances product innovation, stakeholder relations and corporate reputation. Many Scandinavian companies have put climate change at the centre of their sustainability branding. Making firm commitments and engaging meaningfully with stakeholders as well as exploring potential solutions through communications, these

leaders are at the forefront of corporate branding in theory and practice. We term this ‘third wave’ corporate branding.

Behind creative and skillful communication is serious business. These companies actively seek to influence the markets within which they operate. Carlsberg addresses water supply issues not only because it is a scarce resource, but it’s also a prerequisite for beer production. Novo Nordisk stands shoulder to shoulder with health authorities in tackling diabetes. By openly and actively communicating around these issues, these leaders build engagement and corporate legitimacy in areas of potential conflict.

The energy sector Leading Scandinavian energy companies have engaged in ‘third wave’ corporate branding on climate change and energy policy. Scandinavia has strong, state-owned players that work across the Scandinavian borders. In 2006 Statoil launched a biofuel product supported by heavy consumer advertising. But both their defense of first generation bioethanol and the mismanagement of NGO protests around their misleading marketing were highly criticised. Prior to the UN Climate Summit in Poznań in 2008, Vattenfall launched a global campaign to engage people to sign a declaration that, among other things, called for a global price on CO2 emissions. Vattenfall was met with sharp criticisms of greenwashing. Elsewhere, DONG Energy, has recently run a highly visible campaign focusing on investments in renewable energy sources such as wind power.

Public criticism and accusations of greenwashing are part of the game when commercial companies enter the political scene and engage with these issues and ‘third wave’ corporate branding. If a company wants to engage with stakeholders and take a stand on an issue it must have something to offer. In order to be efficient, climate change communications should by their very nature be controversial to some and appealing to others.

In sum, a tricky dilemma needs resolving. On the one hand, Scandinavian populations have a high regard for those companies associated with corporate responsibility, but at the same time the majority of citizens are skeptical when companies communicate corporate responsibility. Mission impossible? No, but in order to successfully manage the scepticism, companies must make sure that their corporate behaviour in this field is matched by tangible actions, measurable targets and a business-driven approach. The publication of thousands of annual reports in 2010 that will report on responsibility issues will give an interesting insight into the current state of affairs.

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Contact:

Louise Dudley-Williams ldudley-williams@salterbaxter.com Tel: +44 (0)20 7229 5720

Emily Measor emeasor@salterbaxter.com Tel: +44 (0)20 7229 5720

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The Directions Supplements support our main Directions report. The main report is published each year and is now regarded as the UK’s most comprehensive analysis of the trends and issues in CR communications. If you want a copy, call us on the number below or emaildirections@salterbaxter.com

About usSalterbaxter advise companies on strategy, branding, corporate communications and design – providing creative communications for big business issues.We have worked on over 170 corporate responsibility and sustainability projects for more than 50 companies since we started in 1998.

We offer a full range of corporate responsibility and sustainability communications services – from strategy consulting to the design, writing and delivery of printed and online communications. And everything in between.

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