Climate Denial, Chauvinism and Making Integrated Reports Readable: SAP, BSR and CDP Respond

11 Friday Jul 2014

Posted by Aman Singh in Capitalism 2.0, CSR, CSRwire

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In a recent conversation with SAP’s Sustainability Chief Peter Graf about the company’s second Integrated Report, the conundrum between sustainability goals and economic growth kept coming up. Were the two diametrically opposed? Was the ‘conundrum’ a red herring as Henk Campher recently put it?

Working with the SAP team, we decided to turn it into a live discussion. And along with Graf, BSR CEO Aron Cramer, CDP’s Executive Director Nigel Topping and our partner Triple Pundit, we took to Twitter. For one hour, we discussed the trials and tribulations of pursuing sustainability featuring 232 participants contributing 1,388 tweets and over nine million impressions.

But as is often the case, our panelists were not able to respond to all the questions in the hour. Here then are their responses to all the questions we were unable to answer – some questions have been modified for grammatical purposes.

How does a company reconcile a clear need in the realm of sustainability when it’s not a $$$ win for the company? What mechanisms can be used to overcome this barrier? [from @bradzarnett, @beltwits,@thesustoolkit]

Nigel Topping: “Ultimately sustainability issues are business issues and thus addressing them must change the value story. If it changes the story short term you get a P+L benefit, if long-term then through enhanced quality of earnings, talent retention, market share or some other metric, which can also be converted into an economic measure.

“Sometimes this is easy – reducing energy waste saves money so the GHG reduction may just be sustainability icing on the cake. But this same action may be making the company more resilient in the face of likely regulation. Remember that value creation is part science part art.”

Aron Cramer: “”As things stand today, market structures and incentives don’t make it easy for companies to make the long-term investments that are often needed to work towards sustainability. We all know that for publicly traded companies, markets often push decisions towards the short-term. As such, emerging efforts to redefine financial success with more attention to long term value, such as integrated reporting, are crucial.”

Peter Graf: “If company itself has no economic reason to do so then the only levers I know of are consumer/customer pressure, public pressure or legislative pressure. If those are applied, then what seemed like an ‘externality’ again becomes revenue and cost relevant.”

Most companies see CSR as taxation without representation. What can companies do to circumvent this view and start acting now? [from @Odyamvid]

Topping: “Companies who see CSR in this way are most likely right! And at the same time leaving value on the table precisely because they are stuck in a mindset, which starts with the assumption that CSR is nothing to do with business. We really do need to see the back of woolly CSR initiatives where no one knows why they exist. There must be a value creation story – it could be direct via resource efficiency or risk mitigation or it could be indirect via brand value enhancement, talent retention, building capacity early to respond to expected consumer trends.

“If you can’t find those plausible stories, which you can tell with conviction to your front line staff, then best just to save your money – you are creating a bigger risk by acting in-authentically. Shareholders can rightly criticize you for wasting their money and NGOs can rightly criticize you for not taking issues seriously.”

Cramer: “This reflects an outdated and discredited understanding of CSR. Indeed, sustainability is about aligning strategy with changing operating conditions and not “taxation.” That said, there are issues where companies should be more active in promoting public policy frameworks that create the right kinds of incentives. One great example has to do with supply chain labor issues, on which governments have de facto outsourced the responsibility to enforce labor laws to the private sector.”

Graf: “CSR needs to be perfectly aligned with the strategy and how the company creates value. At SAP we focus on education and entrepreneurship in our CSR projects, because they help us drive long-term success as a business. If CSR is not focused on this type of shared value (value to the company and value to society), then it is only a brand building exercise with little substance.”

How can a corporation reconcile short-term needs of shareholders and longer-term sustainability objectives? [from @greengageEnv]

Graf: “Short and long-term value creation do not need to be in conflict. In essence, it’s a balancing act, like always in business. For example, companies have always balanced investments into the future and current revenues to manage their margin.”

Topping: “Companies need a portfolio of innovation to address different time cycles of the dynamics which exist in markets.”

What role do business leaders have regarding climate denialism by other businesses like the stand taken by the U.S. Chamber? [from @kayakmediatweet]

Topping: “Very few business leaders are climate deniers. Even if they don’t believe the science, they have to respond to the growing level of regulation (22% of global emissions are now subject to a price). Leaders have a responsibility to see major change coming and to get out ahead of it, but not too far ahead!

“Climate change is rewriting the rules in many industries – just look at Tesla outselling BMW in California and with a market cap half of General Motor’s already! Leaders also have a responsibility to manage risk. As Bob Litterman, former Chief Risk Officer at Goldman Sachs keeps reminding us – there is an inevitability about the coming price signal on carbon and the less a company is prepared the harder it will be hit. This is already starting to play out in the oil and gas sector with investors pushing dividend returns instead of risky exploration expenditure.”

Cramer: “Businesses very often see further out than governments do. Businesses also like to innovate. Organized business associations, more often than not, take a lowest common denominator approach that is in fact inconsistent with business interests. Leading companies should use their voice to call for smart regulation and then innovate and compete to succeed. There is a huge opportunity for just such efforts in the run-up to COP-21 in Paris in late 2015: the business voice should be heard, and if it is, companies will help lead the way to low carbon prosperity. Leaders recognize the importance of this step.”

Graf: “I have personally never used climate change as part of the business case for any sustainability project. Not at SAP. Not with customers. Unless you’re in an industry that depends on climate to be stable (e.g., agriculture), the much better way to argue is the cost of energy, and not the implications and risk of climate change. Energy cost is something I have to deal with today, tomorrow and every day thereafter. There’s zero argument around the probability around that.”

Is the biggest challenge for Integrated Reporting adoption around SME supply chains to ensure sustainable business? [from @mbauerc]

Topping: “No, integrated reporting will impact large listed companies primarily – and the way their integrated thinking leads to changed supply chain engagement will impact the SMEs. In many cases this will allow for disruptive innovations from the savvy small guys.”

Graf: “SME’s adopt more sustainable practices because their customers are expecting it from them. The push is coming from the mega-buyers like the retail giants and trickles down the supply chain from there.”

Integrated reporting is great but how do you get people to read it? [from @angryafrican]

Topping: “Make it the story of your business. I hear more and more business leaders explaining how new graduates are interviewing the companies for evidence of integrated thinking, awareness of the systemic challenges faced by society and a coherent company approach that uses the power of the corporation to make good money by adding real value to society. Telling the integrated story starts at recruitment and goes all the way to analyst calls – it will need to become the same story.”

Cramer: “This challenge affects ALL forms of reporting. But a more broad-minded report is likeliest to attract attention: Integrated reporting could ‘save’ reports.”

Graf: “You need a great overarching story (one story, not many), and use video, interactive charts, etc. to make it interesting. Moreover, use social media to promote it.”

When reporting on energy, carbon, GHG, how can we make it relevant and benchmarked? Standalone figures too abstract to mean much? [from @miamiaki,@jackwysocki]

Topping: “At CDP, we help companies benchmark many environmental indicators and practices against their peers – that’s just good practice but of course it requires good data. Benchmarking process as well as output is important to drive learning and change – for example, what percentage of capex is committed to energy efficiency, does this get same or better payback than average? This also helps overcome any lagging perceptions that these metrics are not business-relevant.”

Graf: “We always like to talk in visual explanations. Like ‘SAP consumes the same amount of electricity as a 250,000 people city.’ Or ‘Our customers collectively emit at least one sixth of the world’s man made emissions.’

How has the cloud affected our lives besides our ability to reduce environmental impact? [from @orange_harp]

Graf: “In all the ways that we all experience every day, from music, video, smartphones, millions of apps, social media, social platforms, etc.”

Where do we stand on CSR across the tech industry? Is our personal info staying private? [from @mr_rosenwald]

Graf: “Let me put it this way: I am very conservative about which information I am sharing on the web. The industry is running the risk of losing customer trust. We have to work together to ensure that’s not happening.”

Cramer: “While attention has so far focused on tech companies, almost every business has access to personal information. Companies can look to the principles established via the Global Network Initiative to ensure that this information is treated properly.”

Is part of the gender gap problem that the tech sector is too much of a chauvinistic culture? [How can we] attract women through culture change? [From @angryafrican]

Graf: “I am very proud that SAP has set a target to increase the ratio of women in management positions to 25% by 2017. We have gone up about 3.5% over the last years.”

Originally written for and published on CSRwire’s Commentary section Talkback on May 12, 2014.

Fighting for the Sustainable Consumer: A Conversation on Branding, Economic Growth, Risk & Value Propositions

11 Friday Jul 2014

Posted by Aman Singh in CSRwire

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advertising, Apple, books, brand management, Brand Management, brands with purpose, Business, consumer behavior, CSR, CSRwire, doshorts, Edelman, gap, henk campher, Innovation, Leadership, levis, marketing, Marketing, PR, seventh generation, social media, Sustainability, sustainability, sustainable consumption, tesla, toms shoes, transparency

Do consumers care about sustainability or the sustainable attributes of products and services? Would you book a “greener” hotel if the prices were comparative? Did you start paying more attention to labels after the Rana Plaza fire?

When the discussion turns to issues like purpose, risk and connecting consumers with sustainability, Henk Campher becomes fidgety. The Senior Vice President for Business + Social Purpose with Edelman has been at this for a while. Between working with brands like Starbucks, Levi’s, Best Buy, Abbott Labs and REI and leading the Oxfam International Coffee Campaign, Campher has built a reputation for challenging the status quo while operating within the trenches of corporate corridors.

Recently, he wrote a DoShorts book titled Creating a Sustainable Brand: A Guide to Growing the Sustainability Top Line [get 15% off by using Campher15 in the voucher section] to put some of his strategies and ideas on paper. We sat down for a conversation on the ideas he presents in the book, why he believes that consumers have bought into sustainability, where he sees the PR industry headed as well as his thoughts on separating the chaff from the substance of sustainability claims [Full disclosure: I was one of the reviewers of the book].

Excerpts:

You write that the problem is not that consumers don’t want to purchase sustainable products, it’s that brands are unable to bring sustainability to life for consumers. Tips?

The most common mistake companies make is to lean too far to either the sustainability of the product or focus too much on how it comes to life for the consumer. The sustainability of a product is only one part of the story – the what part of a sustainable brand. To bring it to life for the consumer, you have to balance this with how this relates to them.

It is a delicate balance but extremely important. Think of the what part as showing the consumer the arms, legs, etc. of the product. It only tells them what it is but it doesn’t create a connection. To bring it to life we should show the personality and all the quirkiness of the brand – the how – to help them connect and care about the product.

Sustainable branding is very much like dating – you don’t go on a date because the other person breathes and resembles a human being. No, you go beyond that to try to make a connection with how that person relates to you and how you can build a relationship. It will be nothing more than a brief fling if you don’t have that connection.

The same for a product – you need to become a sustainable brand or else you will remain a cheap date and/or brief fling. The model described in the book is meant to be a guide on how to build this long-term relationship AND an insider’s guide on how to keep the relationship fresh.

Materiality matrices don’t matter to consumers but they’re proving important in helping companies focus. How can they use these to also engage their consumers?

Start balancing your materiality assessments a bit more. Too often the voices of stakeholders heard in materiality assessments are the loudest and not necessarily the most important voices. Activists, NGOs and sustainability influencers are the ones measured and engaged to inform the materiality assessment. But consumer and customer voices are almost completely absent.

Yet, they remain the most important stakeholder – they bring in the money and add to your business top line! Bringing in their voices will help you determine what areas are truly most material to your company and your most important stakeholders. It will tell you where your major threats and opportunities are as it relates to consumers.

Of course materiality assessments suffer from only focusing on the impact of the product on the supply chain. However, that is only part of the story.

As I argue in the book, you can create the most sustainable cigarette but it is still a cigarette. You have to give equal weight to the impact of the product itself. This will help you determine the weaknesses in how something is made as well as the actual impact of the product itself and help you dodge the dreaded claim of greenwashing.

But how sustainable the product itself is only tells you one side of the story.

It tells us what we should focus on when we engage the consumer but not how we should engage them. The next step will vary from brand to brand – determining how sustainability comes to life in the brand. What is the unique value proposition of sustainability in the brand? How deeply is sustainability embedded in the brand identity? How does it show itself to the consumer? Is it disruptive in engaging the consumer or more reserved?

That’s the model I develop in the book – merging the what and how to create a sustainable brand that resonates with the consumer.

Getting used to failure is tough – you offer a healthy dose of how the best of brands have gone through it. Some tips for our risk-averse private sector?

Failure isn’t tough – it is part of being in business.

Companies who say they are risk averse are doomed to fail. They will still be making the same boring product that increasingly fewer people buy in the future. It was a risk to create the first iPod. It was a risk to create Tesla. It was a risk to create TOMS. It was a risk to take Dove to where it is today. Sustainability folks are risk averse because they are selling sustainability instead of selling a business opportunity.

And I don’t mean improving the bottom line. That has been done and there is no risk left there. Sustainability folks need to step out of their box and become part of business from a product and brand perspective and deliver against the consumer opportunity.

But it’s not just the sustainability people. It is also the communications and marketing people. They think throwing more money at advertising, PR, social media, etc. will create the breakthrough they need to survive. That isn’t risk. That is table stakes and nothing different from what your competitors are doing. At best you can hope for a better campaign.

We need these groups to understand how sustainability can add to the simple question people ask when they buy a product or service – why should I give a damn?

The answer is more complex than a pure sustainability story but sustainability is absolutely part of the answer. Communication and marketing people speak a different language than sustainability people and in the book I try to bridge that gap to get them to both speak “business.” And business is all about calculated risk taking.

“We’ve embedded sustainability into the very core of our business.” We’ve heard this classic line or a similar version of it a million times by now. It’s classic PR speak – but is there any organization out there that could truly say that and demonstrate it?

Lies, damn lies and sustainability PR.

My other favorite line is “sustainability is in our DNA.” No it is not. Making money is in your DNA.

Jokes aside, the simple answer is yes there are companies with sustainability at the core of their business. Method, Seventh Generation, Tesla, etc. were created with a specific sustainability goal in mind. They aren’t perfect but it is absolutely at the core of who they are. But a true answer is a bit more complex than that.

In the book I create a framework to show how sustainability can come to life in a brand. Sometimes it is truly at the core but in most cases it comes to life in very different ways. I identify eight ways in the framework– from ignored to designed. Method is an example of a brand that was designed with a sustainability goal in mind – absolutely at the core of their business. A brand like TOMS was inspired by a sustainability challenge while a brand like Dove aligned itself with a sustainability challenge.

In short, sustainability isn’t a simple black and white world and it constantly changes. And sustainability isn’t perfect.

The only cliché that might be right is the “journey” bit. But it is crucial that we acknowledge and show the different ways that sustainability is part of a brand, as it will direct the kind of engagement we should have with the consumer. You can’t just go out and hit the consumer (or anyone) over the head with a “sustainability is core to our business” baloney. No one will believe it. Know how it is part of you and then find a way to express it in a way that is relevant to both the consumer as well as the brand itself.

A few weeks ago, you participated in a Twitter chat we hosted on the confluence of business sustainability and economic growth. How would a “sustainable brand” approach the conundrum?

I think the “conundrum” is a bit of a red herring.

We can absolutely not consume the way we consume at the moment and we have to understand how to create sustainable economic growth. However, economic growth isn’t a problem when it comes to sustainability. The problem is that the way the economy is growing currently is unsustainable. For instance, in the U.S. you have an ever-growing gap between the rich and the poor. A more equal distribution of the wealth created by economic growth needs to happen.

It can be done – look at Germany, gap between CEO pay and average worker pay is much lower, they have a much higher minimum wage, outgrow the U.S. economy with higher taxes, more social benefits for the poor, a balance of trade in favor of them, etc. Everything that pundits say will undermine economic growth is flipped on its head in Germany – and it’s working.

It is only a “conundrum” because of a lack of political and economic will to address the unsustainable elements of the economy.

On the consumption side, the world will be fine if people consume more of the sustainable stuff. TOMS and Timberland instead of cheap knock-offs on the streets. Levi’s and GAP instead of fast fashion. Fresh fruit and vegetables locally grown instead of fast food. A Tesla or Leaf instead of a gas guzzler. Renewable energy instead of coal. Method or Seventh Generation instead of high pollutant chemicals.

There’s no problem if growth is based on more sustainable choices. How do we get consumers to do this? Well, like I say in the book… more sustainable brands that look at product and brand!

You’ve worked with numerous companies on brand development over the last two decades. What has shifted?

Firstly, social media and the connected world have redefined how brands interact with consumers. Twenty years ago, companies owned brands and sold that to the consumer. Today, they are merely custodians of the brand and consumers own it. The more agile businesses realize that the easier it will be for them to be trusted as the custodians of the brand – the more consumers will give them their loyalty.

Secondly, price and quality have become increasingly meaningless parts of a brand. Companies know that it is almost impossible to compete on price and have brand value. They would love to think that there is a huge quality difference between them and their major competitors but there isn’t. For instance, the difference between most cars in the same category is almost meaningless. So how do consumers make their choices? According to the value proposition offered by the brand.

Finally, the ways in which brand value proposition comes to life for the consumer has shifted. The days of the big advertising campaign is gone. Today they want you to not only be part of their lives but also do things that are unexpected and disruptive. Consumers are flooded with information and visual stimuli each day. How you break through all of that clutter is key. And that goes beyond simple shiny objects. You have to build it into your brand identity and value proposition – so it is as much strategic as tactical.

What remains as challenging?

The single biggest remaining challenge is how most companies remain paralyzed by fear without them even knowing it. Companies’ inability to think outside of their walls and being frozen inside those walls are their biggest failures. They are still navel gazing and seeing the world from only their perspective instead of truly understanding the world.

It comes back to the risk question you asked before – you won’t win if you don’t take risks. But so often companies will say they want to win but don’t really have the guts to do it. This is the difference between good brands and winning brands. Like an athlete – Dick Fosbury (go look it up!) changed the world of high jumping because he was willing to by-pass conventional thinking. Apple and TOMS did the same.

Yes you can point out all their faults but they kicked your backside because they weren’t afraid. Why? Because they didn’t look at what you were doing but rather looked at the problem and the consumer and created something to fill that void.

The other major challenge is how shareholders continue to drive company leaders instead of customers. This problem is too obvious to even state but they are so focused on the next quarter and shareholders that they forgot why they even exist. Imagine if they put as much attention to what their consumers truly want.

You work at the unique cusp between classic public relations and responsible brand development. Where do you see the PR sector headed in the next 20 years?

Sustainability will be like digital skills. It will be part of every single part of the PR sector. It won’t be a separate practice anymore but we are still a very long way from achieving that. Too many PR hacks think they can just make it up as they go. Create a cause here and a consumer campaign there. They will get burnt so many times until they move on and the industry really starts to up-skill all of their people.

Remember, agencies are as vulnerable as any of their clients. The hyper transparent world means that any consumer and activist can look at what agency is behind the greenwashing. No one expects perfection but they better start waking up before they are hit by their own BP-style disaster.

My biggest fear is that PR agencies don’t realize that their people are highly under skilled to handle the shifting world and impact of creating a sustainable brand. The industry will be caught out if they don’t start relooking at what they do and whether their people are geared towards the changing world.

And, of course, for them to be a sustainable PR brand, they will need to start asking what the impact of their service is. The model created in this book goes beyond products – it covers services, software, social media and everything else in between.

A main question remains – do you have a sustainable brand?

The answer for the PR sector is the same as with most other sectors – simply, no. But follow the model and you can start creating your sustainable brand. [Grab a copy of Creating a Sustainable Brand: A Guide to Growing the Sustainability Top Line – get 15% off by using Campher15 in the voucher section.]

Originally written for and published on CSRwire’s Commentary section Talkback on May 8, 2014.

Carbon Policy: Inside Microsoft’s Efforts to Integrate Sustainability into its Financial Model

09 Wednesday Jul 2014

Posted by Aman Singh in CSR, CSRwire, ESG

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Accountability, Business, carbon finance, carbon offsets, carbon offsetting, careers, climate change, CSR, CSRwire, Disclosure & Transparency, emissions, Environment, ESG, management, microsoft, renewable energy, Social Enterprise, social impact, Supply chain management, Sustainability, sustainability, technology, tj dicaprio, transparency

On July 1, 2012, Microsoft issued a new corporate policy across 14 business divisions in over 100 countries: Every division would now be accountable for its carbon emissions.

Under the Carbon Neutral and Carbon Free Policies, the company put an internal price on carbon, where the divisions pay an incremental price linked with the carbon emissions associated with energy consumption and business air travel. The funds are then used to invest internally in energy efficiency, renewable energy and carbon offset projects globally.

A tad ambitious?

Not at all, believes TJ DiCaprio, Senior Director of Environmental Sustainability at Microsoft.

“We’re following three pillars to achieve carbon neutrality: 1) Be lean through reducing our energy consumption by driving radical efficiency through use of technology, and reduce air travel to internal meetings. Our primary emissions, for example, come from our data centers’ energy consumption. We also monitor and reduce energy consumption from our offices and software development labs. That’s roughly 30 million square feet worldwide,” she explains.

The other two pillars: 2) Be green by investing in renewable energy and carbon offset projects; and 3) Be accountable through cascading an internal price on carbon globally.

The policies also help Microsoft employees band together beyond the usual. “By internalizing the otherwise external cost of pollution, the price of carbon is now part of the profit and loss statement across business divisions. We have now integrated this across the financial structure and engaged the executives and employees on our commitment to mitigating climate change and investing the funds appropriately,” she says.

From Innovation & Efficiency to Sustainability

For a long time, the marketplace has associated the technology giant with innovation and efficiency. Now, the company is vying for a third accolade: sustainability.

Acknowledging the impact the company can have in swaying the entire marketplace, DiCaprio says: “We’re constantly asking how we can lean and green our operations. Where can we not only drive efficiency, but also increase the percentage of renewable energy we purchase. How can we support the supply and demand and how can we drive progress through long-term renewable energy purchase agreements.”

Of course, there are other ways Microsoft is becoming greener. For instance, how can the company that reaches over 100 countries support carbon sequestration in developing countries? “When there is sustainability, education, and jobs – all of these tie together when we’re discussing carbon offsets and supporting low-carbon economic development around the world. In fact, offsets are significantly important in extending our reach and value globally,” she emphasizes.

Carbon Offsets: The Allure for Microsoft

In the last two weeks, I had heard similar sentiments from Barclays and Allianz, both financial institutions with global footprints – and investing significantly in carbon offsets. Why then was offsetting not spreading across more organizations? DiCaprio believes there are multiple factors, not least, a challenge in transparency.

“The market is maturing and we are seeing a more professional approach to using technology to manage and store data as well as established standards. There is a growing confidence in the ability of these projects to meet stiff criteria and standards, and to continue to meet these standards over time as cloud services allows for data to be managed and stored, demonstrating lower leakage. We employ a rigorous approach to our investments,” she says.

And herein comes the alignment, i.e., how DiCaprio’s team is managing its carbon reduction policies as a lever to align its business priorities around how technology can enable transparency, education and sustainable economic development. One of the offset providers Microsoft works with is Wildlife Works – who run the Kasigau project in Kenya– with an emphasis on carbon sequestration, social enterprise, and wildlife preservation. “We have been working with them for a year now. We believe that climate change is a serious challenge, and supporting carbon sequestration through carbon finance supports local jobs and provides new educational opportunities for the youth – making a huge difference in improving lives.”

Scale: Impact Through Leadership

Her only worry: without more private sector involvement, Microsoft’s efforts will remain insular.

“This is an exciting time for the private sector to work across our stakeholders and create corporate policies that make sense for business and help support low-carbon economic development. One of the benefits of setting a carbon neutral policy and an internal carbon fee is to set an example for how a business can run more efficiently, reduce waste and carbon, and address its environmental footprint,” she says.

“The model we have designed is simple and repeatable. The more organizations that adopt a similar model, the better off we will all be. The model is built to align with an organization’s priorities and business strategy while supporting the demand and supply of renewable energy and a low-carbon economy,” she added.

Having recently celebrated the one-year anniversary of the carbon fee implementation, DiCaprio believes it is fulfilling its purpose of bringing together the business mission and a priority of driving efficiency and developing low-carbon economies. While the first year was focused on building the necessary infrastructure to flow through a financial cycle and get the price associated with emissions charged to business units, now DiCaprio also sees the importance of communicating the benefits of the successful model.

“The more we can communicate that carbon finance is a very effective way to integrate the cost of pollution into our economic structure, the more we can help others integrate carbon pricing and the impact of climate change into long-term business planning,” she says.

After all, it’s about taking into account the true cost of doing business.

And DiCaprio’s aspiration speaks to a global sentiment awaiting global acceptance: “We must understand quickly how to tie managerial accounting and the real cost of doing business with traditional financial models. For example, Microsoft pays for energy consumption but it also pays for the cost of offsetting the pollution associated with it. This is the direction we need to follow.”

As the technology company continues its journey, DiCaprio hopes many more organizations will pivot and begin to leverage the “magic of creating and supporting new markets that support sustainability on a global basis.” Only time will tell if once again Microsoft can attract some followers.

Originally written for and published on CSRwire’s Commentary section Talkback on September 12, 2013.

Changing Gears at JPMorgan Chase as a CSR Strategy Evolves

09 Wednesday Jul 2014

Posted by Aman Singh in CSR, CSR reporting, CSRwire

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000 jobs mission, 100, aman singh, Brand Management, Business, clean energy investment, community development, Corporate Governance, CSR, CSR report, CSR reporting, CSR strategy, CSRwire, Disclosure & Transparency, ESG, impact investing, jamie dimon, jobs, jpmorgan chase, Leadership, mark tercek, peter scher, small business investment, social finance, Social Responsibility, Stakeholder Engagement, Sustainability, Sustainability Report, the nature conservancy, transparency, Wall Street, Work culture

In the wake of the financial crisis, your industry continues to face high scrutiny and low trust. How is society better off because of what JPMorgan Chase does?

That’s how The Nature Conservancy CEO Mark Tercek starts off his interview with JPMorgan Chase CEO Jamie Dimon – featured prominently at the beginning of the financial behemoth’s latest Corporate Responsibility Report. While the interview is meant to address the heightened focus on transparency improvements in risk management and operational sustainability, the key idea is to highlight one main issue: trust.

In fact Tercek’s first question is telling of the intent and content of the interview that follows.

To drill deeper and learn more about JPMorgan Chase’s sustainability activities in 2012 as well as how the institution prioritizes intangibles like customer trust, ethics and responsible leadership into its business strategy and operations, I turned to Peter Scher, EVP and Global Head of Corporate Responsibility.

Leveraging all of its Assets to Invest in Communities: A Bank’s Citizenship Journey

“The most important thing we want to convey through the Report is that we’re using more than just our money and resources to make a positive impact. [Our]scale and global reach puts us in a unique position to not just spend money, but use the core expertise of our company and employees to make a difference for our clients and communities,” he started, adding, “We want to focus on using all of our resources to support our communities.”

In 2012, JPMorgan Chase raised and provided $2 trillion in capital and credit for its clients worldwide. It also donated more than $190 million to nonprofits in 37 countries while its employees volunteered 468,000 hours in local communities.

“We’ve helped over 77,000 U.S. veterans find jobs working with other companies through the 100,000 Jobs Mission. We see investments in our community as long-term investments, just like we would look at investments into our business,” Scher explained alluding to CEO Dimon’s quote in the report:

If we can help our clients grow around the world, they will in turn generate the jobs, small business growth and other economic activity that builds strong, vibrant communities and generates more sustainable economic growth and prosperity for all.

But how does that contextualize into day-to-day operations at the bank?

A couple of ways. Our clients and our business are key components of our communities, not just pieces of a balance sheet. For example, some of our clients are municipal governments, hospitals, and healthcare institutions. We help them provide vital services to people,” he said.

“In 2012, we provided $85 billion to nearly 1,500 nonprofit and government entities in the U.S. and around the world. Despite the crisis in Europe, we didn’t pull out of our investment commitments. We continued to provide billions of dollars in credit and financing to European clients – corporate and sovereign. That was a testament to our values as a company and underlined how we approach business. We are part of these communities for the long run.

At the height of the financial crisis in the U.S. three years ago when lending was lean, JPMorgan Chase announced increased lending to small businesses to boost the economy. It made good on that commitment and today is one of the largest lenders to small businesses in the country. “We also hired 1,000 small business bankers to help us find small businesses to invest in. This commitment has increased every year since then – from $7 billion in 2009 to $11 billion in 2010 and $17 billion in 2012,” explained Scher.

Despite the increased lending and a resolute desire to beat a deepening crisis by focusing on core competencies and a community-based approach, 2012 was a tough year for the financial leader.

We had significant trading losses which cost us money and embarrassment – more the latter since we made record profits in 2012. It also showed that we weren’t immune to making the mistakes other companies made. What we were proud of was that we didn’t try to hide any of it or explain it away,” he said.

For example, the bank – after Dimon’s very public apology – made its Control agenda a top priority leading to a re-prioritization of its major projects and initiatives, deploying massive new resources, and dedicating critical managerial time and focus to the effort. Specifically, the bank:

Established a new firm-wide Oversight and Control Group separately staffed and reporting directly to the Chief Operating Officer with the authority to make decisions top down, in command and control fashion.
Appointed a business control officer in every line of business to report jointly to the line of business CEO and the firm-wide Oversight and Control Group.
Staffed every major enterprise-wide control initiative with program managers and oversight group managers, including COOs.
Made it mandatory for the Operating committee to meet regularly with regulators to share information and hear any criticisms.

I have worked in a lot of different public and private institutions during the course of my own career and have not found one that doesn’t make mistakes. The real test is how we address them. And at JPMorgan Chase, starting with the senior leadership, there was never any effort to hide or explain away our mistakes. In fact, there was a commitment that we were going to use them as an opportunity to become a stronger company,” Scher added.

Building a Culture of Responsibility

Corporate responsibility can be challenging at any company. Particularly for one that belongs to a sector that remains as tarnished for its dealings of the past decade today as it were in 2008. What is JPMorgan Chase doing to shift the mindset and modus operandi of its industry?

Well, we’re starting at home, with our 260,000 employees in more than 60 countries – and we’re letting our employees know how the firm contributes to their communities,” he said.

Are JPMorgan Chase employees driving the demand for non-financial disclosure?

Yes, there’s demand from many of our stakeholders, including our employees, to know how we match up in our actions versus our commitments. We’re also starting to see demand from our clients. The financial crisis really focused people’s attention on what companies are doing and could do to help contribute in a positive way to the community,” Scher emphasized.

“The fact is, if our communities are growing, that’s good for us as a business. More growth means more banking services – and we want to be a part of their future. Besides, clients want to know that companies they work with are responsible and thinking of their impact on society.

Global Footprint, A Comprehensive CSR Strategy

With a substantial community investment commitment as well as programs to rehire military veterans, bolster investment ties among cities in the US and worldwide through its Global Cities Initiative, and impact investing goals – principal investments focused on emerging markets added up to $50 million in 2012, clean energy investments –over $6 billion in clean energy investments in 2012 deployed, the bank is leveraging its global footprint effectively to grow the global economy.

It’s also trying to help address some of the world’s most pressing challenges.

For example, urbanization.

Half the world’s population already lives in or around cities. That’s going to increase to 70 percent in the next few years. That translates into a lot of challenges for what our infrastructure can support: energy, healthcare, water, job creation, etc. And for us as one of the largest lenders for these projects, that has significant ramifications.”

“So we’re trying to use our resources and expertise to help address these challenges. We’re working on understanding how policymakers are dealing with these across the world and trying to bring in some creative thinking to help them shift as the economies transform. We’re also thinking of how we can finance energy exploration and development in a more sustainable way.”

“In the U.S., for example, a lot of these investments have focused on natural gas. We’re identifying best practices and creating a risk assessment framework to help us influence our clients’ policies and procedures and help them conduct their energy operations in a sustainable manner,” he explained.

And how is the bank’s Social Finance arm faring? It launched in 2007 to serve the new and growing market for impact investments – new business models that deliver market-based solutions for social impact.

According to Scher, JPMorgan grew its Social Finance principal investments to nearly $50 million in commitments for funds focused on helping improve the livelihoods and quality of life of people living in poverty around the world, with a particular focus in emerging markets. “In addition to making principal investments, we’re also working to help shape and grow the field of impact investing, by providing client advisory services and data-driven thought leadership,” he added.

At the end of the day, with a Report that runs into 90 pages replete with data, interviews and the makings of a comprehensive CSR strategy, JPMorgan Chase seems to be pulling all the strings it has available to make a positive impact on its constituents – with some appreciable humility thrown in for good measure.

Originally written for and published on CSRwire’s Commentary section Talkback on August 1, 2013.

Stakeholder vs. Shareholder Value: Connecting the Sustainability Dots With Philips, Drexel University & Profits4Purpose

09 Wednesday Jul 2014

Posted by Aman Singh in CSR, CSRwire

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aman singh, cause marketing, corporate citizenship, corporate social responsibility, CSR, CSR communications, CSRwire, employee engagement, ESG, HR, Leadership, philanthropy, phillips, profits4purpose, shareholder value, social media, Stakeholder Engagement, Sustainability, sustainability, transparency, Work culture, workplace giving

Is there a connection between employee engagement and shareholder value?

Several similar questions came up in a recent webinar I facilitated, held in partnership with Profits 4 Purpose with guests Philips and Drexel University. While the question doesn’t have a linear answer – as is often the case with sustainability – it did take us through quite a conversation on connecting engagement with value, how CSR strategies affect business performance, the whole conundrum of measurement as well as what the latest research suggests.

Daniel Korschun, Assistant Professor and Fellow at the Center for Corporate Reputation Management at Drexel University, led the conversation by sharing some of his research with our audience.

“We’re moving into a new phase …since the 1950s we have had a debate about whether more CSR is better than less. While I don’t think this debate has been completely settled, there is general agreement among most practitioners that the core issue today is how we do it, not the quantity. That means we need to concentrate on effectiveness, which is where I have focused my research,” he started.

Employee Engagement: All About Signals

Employees are paying attention to CSR, he said.

And they notice when managers or customers support the company’s CSR initiatives. When they notice this support, they are more likely to develop “feelings of membership with a company.” In its most powerful form, we may begin to hear things like “I am an IBMer or a UPSer.” This feeling of membership then translates into a whole host of measurable outcomes like job performance, intent to stay in the job, or intent to volunteer.

For example, Korschun said he finds that people who feel this sense of membership are 87 percent more likely than others to be among the top performers of their company. And these effects hold even after controlling for pay satisfaction, personality traits, tenure, and work experience. The big lesson then?

Make CSR an open secret! “The more people who are discussing your behavior, the better.”

Have upper management act as champions: “If people don’t feel that management is aligned with your CSR strategy, impact will be muted. Executives don’t need to dictate CSR from the ivory tower but employees must know definitively that their leaders are on the same page, and are committed to social responsibility.”

Encourage contagion across stakeholders: “Engage customers in the same CSR programs as employees? Programs that get customers and employees to join forces (especially on volunteering sites) can create a bond…and that sort of contagion can lead to both happy employees and happy customers.”

Philip Cares: Formalizing Responsibility

Melanie Michaud, Senior Manager for Internal Communications with Philips North America took the baton from Daniel to evidence his data and research with how the practice and implementation of employee engagement maps out across a corporation. Emphasizing that Philips USA did not have a process in place till 2010 to vet requests and manage engagement across the company. “It was sporadic and led by employees who cared about various causes,” she said.

After several acquisitions, the company realized they needed a more formal process to align all its community development work with its business and employee base. That led to Philips Cares, through which, the company focuses on environment, education and health.

With tremendous uptick in the number of volunteers [over 8,000 volunteers] and donations in the 15 months since the program launched, Michaud highlighted the following keys to the success of Philips Cares – crucial for those managing relatively new programs or on the verge of launching one:

Do your research
Have a clear vision
Engage leadership
Have a volunteer tracking mechanism
Align with nonprofit partners
Emphasize local champions
Have consistent program branding
Engage in storytelling
Give employees a voice
Walk the talk

Setting a Global Strategy With Local Impact

So how does Philips ensure its CSR strategy is global in scope while local enough to support its communities?

That’s something we’re continually challenged with. We’re always tying everything back to our vision and mission of improving lives through innovation. We’re also doing some research now about rolling out a program like Philip Cares globally. In some areas there is greater interest than others and we’re currently working out how that will all work out,” Michaud responded.

One of the questions that came up during the webinar was around the survey Philips uses to seek feedback and make changes to its program. Emphasizing that the survey was a work in progress, Michaud said questions revolved around identifying causes, target audiences, types of volunteering activities as well as a bunch of open-ended questions for more elaborate feedback.

Practice vs. Software: Connecting Volunteerism With Impact

For Jason Burns, CEO of Profits 4 Purpose, the task was to connect Korschun’s research and Michaud’s practical perspective to how companies can best measure and track CSR and employee engagement activities. “We’re focused on helping companies make employee engagement simple, innovative and relational,” he started.

What are the key components to capture their attention? Burns summarized his comments in three neat categories:

Inspiring vision with easy execution: “We see a lot of companies starting with the end goal in mind, asking employees to focus on tracking…that’s less than inspiring. As human beings, we desire to be part of something bigger than ourselves so its important we start with a vision.”

Measuring impact: “Excel kills impact…how can we launch a strategy and review it for impact in real time and in alignment with employee engagement, mission and partners? Can we solve a specific problem that fits within the mission of a business? Can we cast a ‘what if’ scenario for employees to be motivated, to make a difference and get involved in a real easy and seamless way?”

Sharing a compelling story: “You’ve executed the strategy, and achieved great impact but why is it important? The most powerful piece for an employee when they volunteer is being part of that impact firsthand. The next powerful piece for those who might not be on the ground is communication, the story. It goes beyond the numbers.”

While the P4P platform helps companies do all of the above in one centralized place, what stood out was the fact that it also leverages the data into meaningful stories, disclosure commitments and filings. As Burns explained, “We saw companies that had the vision but were having difficulty making the management seamless with vendors, contractors and excel sheets. Things were duct taped and often a nightmare and we wanted to open that up to make the process productive and inspiring for all involved.”

Connecting The Dots Between Engagement & Shareholder Value…

But Jason’s iteration of execution versus measurement and reporting brought us back to a core question we began the panel with: how are companies like Phillips connecting the dots between volunteerism, engagement, retention and business growth?

“In terms of definitive links all the way to shareholder value, we have research connecting the steps of a CSR program all the way through. There is, however, no one study out there that links the end point with any one of the steps along the way. My research connects job performance with CSR and others have linked that to shareholder value. So while the connections are there, there is no one study that we can point to,” offered Korschun.

For Philips, it’s still to be determined, said Michaud.

“It is still a bit fragmented but we have moved from a theory to a practical emphasis on measurement and tracking. And the research being conducted is definitely encouraging, albeit complex,” added Burns, highlighting a trend we’ve been seeing on CSRwire as well where researchers are now, finally, being able to grab data on voluntary disclosures and link the connections between measurement, the various threads of sustainability and the question of value.

…Regardless of the Economic Climate…

What does the research then say about the impact of CSR programs on shareholder perspective and behavior irrespective of the economic climate? [Audience question]

While Korschun said he wasn’t aware of any studies that have looked at the influence of economic climate on how CSR drives value, “we generally find that for customers, the effects are clearest when most other product features are at parity. This suggests that CSR might become a little less important for consumers during a recession, when price becomes more critical.”

He added: “However, for employees, the company is a big part of their identity. So as long as a person feels fairly secure in their job, CSR should still have a similar effect. Putting this together, I would conjecture that ROI might drop a bit overall during a recession, but the drop would be uneven across stakeholders.”

…And Company Performance

“The weight of the evidence in academic studies suggests that there is a small positive effect of overall CSR on overall company performance. In my view, each company will have programs that are more and less effective. Since employees can express their commitment to the company in many ways, it is very difficult to put an ROI figure on any single program. The best way to measure it is usually to choose a couple of outcomes that are critical to shareholder value and then examine the link between CSR program(s) and these outcomes,” Korschun offered.

Final word on the erstwhile ROI of social contributions and impact?

For Michaud, this is a toss-up.

“We have some of the basics in place about measurement but I think qualitative measures are as significant. They’re really the next level of ROI. Of course, media stories help as well but we’re this is a discussion that is really ongoing for us.”

“A lot of companies are surveying employees and getting positive results. Now we need to work on finding the stories of impact,” added Burns while Korschun recommended systemic thinking:

I ‘d like to recommend [to companies] that they start with the goals. If one of your business challenges is employee retention, start with that and work backwards. Ask yourselves what is the right program that can have social/environmental impact and create business value at the same time?

Download the slides.

Originally written for and published on CSRwire’s Commentary sectionTalkback on June 25, 2013.

Decoding Nestlé Waters North America’s Sustainability Journey: Environmental Villain or Facts vs. Emotions?

09 Wednesday Jul 2014

Posted by Aman Singh in CSR, CSR reporting, CSRwire, ESG

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aman singh, Brand Management, Business, corporate social responsibility, CSR, CSR reporting, CSRwire, Disclosure & Transparency, environment, Environment, ESG, extended producer responsibility, heidi paul, kim jeffery, nestle waters, nestle waters north america, Net Impact, packaging, Philanthropy, recycling, shared value, Stakeholder Engagement, Supply chain management, Sustainability, sustainability, transparency, water conservation, watershed management

When a company labels its Annual CSR Report as Creating Shared Value, you have to stop and wonder if they’re responding to the latest buzzword in the market or leveraging its potential by truly embedding it into their reporting and cultural framework.

In its third cycle, Nestlé Waters North America’s [NWNA] latest Creating Shared Value Report attempts to accomplish the latter. Among its headlines:

What the company is doing to advance recycling in the U.S.
The company’s path to achieving a zero-waste future
Its continued efforts to be the most efficient user of water within the beverage industry

To gain some firsthand perspective and background on these goals and the accompanying challenges for North America’s largest seller of bottled water, I reached out to EVP for Corporate Affairs Heidi Paul [Join us for a Twitter Chat today, June 18th, at 1:00pm ET to connect with Paul directly at #SharedValue!].

Among my questions: how does the company balance criticism for selling bottled water while promoting healthy choices, what it is doing to shift its supply chain and use of plastic, its well-acknowledged work in the area of Extended Producer Responsibility, and how her team plans on including consumers in its drive for sustainability.

Defining “Shared Value”

Paul started the conversation by setting the record straight on the company’s definition of what’s quickly gained momentum as a replacement for CSR: Creating Shared Value.

“We define CSV as a strategic way to achieve triple bottom line sustainability. In other words, be financially, environmentally and socially sustainable. At the end of the day, Nestlé seeks to create shared value in those areas where we can make the most impact and that are material to our business. Globally, that is in the areas of Nutrition, Water and Rural Development. For our bottled water business in North America, our focus is on healthy hydration, packaging responsibility and watershed management.”

Has the terminology helped NWNA’s citizenship team – 28 people strong across the company – integrate its sustainability goals more effectively within its business units?

“It has done wonders. When you’re looking at philanthropy unconnected to business, it is not really sustainable. CSV focuses our engagement on the three critical topics and asks the whole company to see what can be improved for society and ourselves. We get the benefit of input from our supply chain, employee groups, community partners, etc.,” she said.

Coding the Impact of Bottled Water

Let’s get to NWNA’s main product then: bottled water. Does it feel the twinge of irony every time that is said in the same sentence as “shared value”? Paul chose to answer that with some data:

“Seventy percent of what Americans drink – according to the Beverage Marketing Corporation – today comes from a package, not from a cup or the tap. In fact, our research indicates that if people don’t have access to bottled water, 63 percent say they will buy some other beverage from a package instead, often a sugared or caloric drink with a greater environmental impact.”

“We play a key role in increasing Americans’ consumption of water, which is the healthiest beverage choice. As the data indicates, there is a crucial role that bottled water plays in consumer choice. Everywhere there is a high-calorie sugary, packaged drink available; we want to make sure there is water as well,” she emphasized.

Does the company’s sales data support Paul’s emphasis? “The volume sales increase for 2012 for the bottled water industry was 6.2 percent. And per capita consumption reached nearly 31 gallons, up more than 5 percent from 2011. Further, 51 percent of people who stop drinking sugared soft drinks are switching to bottled water. In fact, bottled water is outselling sugared soft drinks in grocery stores in eight major markets across the country,” she supplied.

At the end of the day, Paul believes, the company’s job is to talk about why bottled water is a choice – an amply available one – and why it should be available anywhere packaged beverages are being sold.

Is Nestlé Waters North America’s Business Model Sustainable?

That brought us to the next obvious thread: the plastic being used to produce the bottles. Recalling a keynote given by former NWNA CEO Kim Jeffery at a Net Impact conference years ago, I asked Paul how the company handles its fiercest critics regarding its use of plastic.

In a jungle of facts, fiction and emotions around environmental issues, Jeffery confronted the audience back in 2009 with a firm and resolute stand: we sell bottled water and we are doing everything we can to make that process sustainable.

Where there was a finality of “take it or leave it” to Jeffery’s remarks four years ago, Paul took a more nuanced approach to respond.

“Limited resources need to be used again and again. We have taken the mantle of becoming part of that solution. The larger point is there are billions of servings of beverages being sold everyday in some sort of package. Some populations are getting most of their calories from bottled drinks. And every time they choose water over a different drink, they’re making a more healthy and environmentally friendly choice,” she said.

And is a goal of reaching 60 percent recycling ambitious enough considering the climate and environmental challenges we face?

“At the time we were setting the goals, the nation was at a 28 percent recycling rate for PET plastic and thought that a goal to double that rate was ambitious and would require big changes. We had a lot to learn. We began to study recycling programs and the patchwork of policies and systems that were in place but were not moving overall recycling rates very much. There are big opportunities for increasing recycling by improving collection in public places, business and industry and in urban residential buildings. Today, however, there is no money going to fund this expansion of infrastructure.”

“There is also the issue of competing systems. Bottle bills for example do raise the recycling rates for bottles and cans, but actually reduce the efficiency of curbside because it is taking the most valuable commodities, which reduce the revenue, potential from curbside. Our goal was to work with others and find the most efficient system with the highest impact,” she emphasized. “

Environmental Villain or a Case of Facts vs. Emotions?

Of course the plastic of the bottled water we consume is bad for the environment. But so is almost every other product and consumer packaging we use in our day-to-day lives as study after study has shown.

Turning the argument on its head though, would we be wasting as much or filling up landfills as quickly as we are if we didn’t have the choice of bottled water to begin with? Where does consumer choice end and producer responsibility kick in?

Identifying that as another area for impact, Paul picked up:

“If bottled water isn’t available, people routinely purchase another packaged drink, one with calories and with a heavier environmental footprint. The availability of bottled water in times of natural disasters, where often tap water can be compromised, also creates a role for bottled water that goes beyond most product categories. Bottled water provides a reliable second source of water in these situations – that’s something everyone in our company is proud of.”

So when your business model is set around selling a product that is healthy and encourages nutrition while understanding and targeting its impacts through a well laid out sustainability strategy – as Jeffery succinctly put it in his exit interview with Greenbiz Publisher Joel Makower earlier this year – is it fair to be labeled an environmental villain?

Perhaps, perhaps not.

The Challenges of Sustainability

As Paul reiterated, the journey of tackling facts vs. reality has been full of challenges and continues to be an uphill task. “Like anything else, our work in the area of recycling, water conservation and reducing our social and environmental footprint has been a constant education,” she said, citing the lack of modern and efficient recycling system as one of the company’s top challenges.

“Not too many people understand the current system in place. There are numerous questions like who is funding what, how does it work, who are the middle men, how do we get to the next stage, where can we build in efficiencies, etc. And if the goal is to accept our responsibility as a producer to recycle efficiently toward a goal of zero waste, then we need answers to these questions.”

“We’ve always said we’re open to options, and so far the option that we have seen with the highest potential to be low-cost and efficient is a well-constructed EPR system, run by industry. What makes this complicated is there are a dozen different ways EPR has been implemented globally. Many of those are not efficient. This uncertainty about the ability to do it “right” makes others in the dialogue want to take more of a “wait and see” approach. Even if you convince people who, done well, EPR in the form being proposed is the best solution, there are doubts about implementation across the board,” she said.

Other challenges?

Consumer vs. Producer Responsibility

Paul cited the potential of collaboration in building more sources for wind and solar energy, as well [“we’re not there yet but this is definitely on our radar”].

There is also a need for collaboration in the area of water stewardship. “Improving watersheds will require collaborations among the various stakeholders within a watershed, be that users, scientists, environmental groups or government. Nestlé Waters North America manages the watershed areas around the 40 springs we use that are overseen by our 10 Natural Resource Managers. We have also made a commitment to collaborate on two watershed projects per year,” Paul said.

And what about NWNA’s consumers? How does the company leverage its brand to shift consumer behavior?

“In the 1970s, recycling meant ‘putting it in the bin.’ Today, this is old news. What motivates people now is when they understand its benefits. If a consumer recycles a water bottle after use, the greenhouse gas impact of that bottle is estimated to be reduced by more than 15 percent.”

“Also, we need to close the loop on what happens to the bottles after they are recycled. They are not trash; they are a resource that can be used again and again. Right now our 50 percent r-pet bottles in our Arrowhead, Deer Park and Resource brands shows consumers what happens when they recycle. It becomes a new bottle. The visibility of this message on our bottles helps us tell the story that we need much better recycling to become a more sustainable world.”

The company’s top challenge moving forward?

“At the end of the day, you want zero impact, but is that possible? Our challenge is to keep finding those ways to improve when it feels like you’ve reduced the impact to the minimum,” she said, finishing with a flourish: “You need to find the next frontier every time – that’s the goal. And the challenge.”

Originally written for and published on CSRwire’s Commentary section Talkback on June 18, 2013.

Examining The Sustainability of the Royal Bank of Scotland: Facing Your Demons

09 Wednesday Jul 2014

Posted by Aman Singh in CSR, CSR reporting, CSRwire

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banking, corporate governance, CSR, CSR report, CSR reporting, CSRwire, Disclosure & Transparency, economy, employee retention, ESG, Ethics, finance, HR, Leadership, leadership, materiality, stakeholder engagement, Sustainability, sustainability, transparency, voluntary disclosure, Work culture

The finance sector continues to ride on the coattails of what started as a severe decline in trust, market performance and profits in 2008. And Royal Bank of Scotland [RBS] was no exception, facing its own share of customer distrust and instability as well as a government bailout.

However, in its most recent CSR Report, the bank – as compared to its contemporaries – makes a marked effort to address these concerns and makes a public promise to examine its “financial stability, our customers, the way we use the resources around and the practices that we have.”

What really piqued my interest was the press release issued by the bank, which right from the headline – Royal Bank of Scotland Extends Meetings with Biggest Critics – told me change was afoot.

I caught up with Duncan Young, Deputy Head of Sustainability who is also in charge of producing the bank’s annual CSR Report. We began with an obvious question – I couldn’t hesitate – about a specific statement in CEO Stephen Hester’s quote that highlighted the Report’s very first page: What will it take to “build a really good bank”?

Aspirational Goals: “Building a Really Good Bank”

“There’s been debate about how aspirational that statement is…and a recognition that the sector has had a difficult time in recent years. We want to regain the trust of our customers and wider stakeholders – and we’re not going to become a really good bank till we do that,” he explained, adding: “We’ve spent the last few years working to make the bank secure and stable again. And made fairly significant progress. But as we go through the process of regaining trust with wider society, we think we need to deliver the kind of solutions that equate with us being a good bank.”

Fair enough. But what does an overarching statement of “becoming good” involve for an organization that serves a cross sector of business and consumer populations?

“We have significantly enhanced the remit of our Group Sustainability Committee this year. They will now cover wider reputational issues, impact on customers as well as U.K. industry practices, where too often, in the past customers were taken for granted. Today, we want to put customers at the heart of what we do to make sure we don’t make those mistakes again,” he said.

As for the committee’s expanded remit, “The committee will operate at the board level with full support from our leadership. Members will meet six times a year to review its larger mandate, which now includes conduct, culture and reputation, a very current issue for the industry.”

Underlining this is of course a sense of loss. As Young put it, “We are well aware that we have suffered heavily since the financial crisis and need to rethink how we work with our customers.”

“After the crisis, we were bailed out by the taxpayer. Our fundamental goal since has been to make the bank safe and secure. We’re getting there. Our loan to deposit ratio – traditionally held as a good measure of a bank – was at 140 percent at one point. Now we’re down to 100 percent, which is deemed to be a measurable sign of a stable bank,” he said.

“We’ve also repaid key aspects of government support. But it’s important that we focus on maintaining a culture now that ensures past mistakes do not recur. We have a much stronger focus on conduct risk and our engagement efforts are making sure the bank’s leadership are much better placed to pick up on issues of market behavior, reputation risk and have an understanding of what customers’ expectations are from us. That’s another reason why we have significantly increased our disclosures,” Young emphasized.

Transparent Leadership: Engaging With Critics

So how does the company plan to address and interact with its critics?

“We have had a program where the sustainability committee meets with our biggest external critics where they can make the case about their interests in how we operate directly to the executive team. Last year, we held three engagement sessions with 14-15 separate groups attending. This year, we transparency at RBS will have six more. In fact, even as we talk, committee members are meeting with a few organizations to discuss cyber security and its impact on the bank and our customers,” offered Young.

The leverage and stature of the committee has proven an important approach in increasing the bank’s stakeholder engagement, according to Young, because of the members’ ability to represent critical points of view and risks directly to the leadership. “This ensures that our top leadership does not lose sight of our key stakeholders and the dialogue informs their decision-making and specific business-related outcomes,” he added.

The CEO Speaks

Another first for the bank: Publishing a Q&A with its CEO that makes a mighty honest effort at addressing issues like trust, stability, its lending practices as well as the 2012 LIBOR rate-fixing scandal. Highlights:

On sustainability:

“Our long-term success will be determined by how well we understand our customers and communities, and how well we can service their needs in a responsible way. 2012 was a very challenging year for the sector, but it certainly served to underline that point.”

Lending to small businesses:

“It’s a difficult environment at the moment. Ongoing economic uncertainty has unsurprisingly driven down demand from businesses. SME loan applications were down 19% from 2011. Nonetheless, we continue to provide significant support to customers. RBS advanced more than £74 billion to UK businesses and homeowners in 2012. We’re approving a higher proportion of loan applications than ever – 93% in the last quarter of 2012.”

Royal Bank of Scotland CSR Report

The impact of the LIBOR rate-fixing scandal:

“There is no place at RBS for such behavior. That’s why we’re determined to correct the control and risk management failures that originated in RBS during the financial boom years, of which attempted LIBOR manipulation is an example. This is a painstaking task, that’s been undertaken over several years and we can’t detect and solve every problem as fast as we would like. The aim is to create a safe and secure RBS that serves customers well and that, in the right way, creates value for those who rely on us.”

On customer trust:

“Staff don’t set out to serve customers poorly, but banks too often had other priorities before the crisis. They saw customers as a means of making money.”

On executive pay:

“The investment banking bonus pool has gone down by 20% on last year, despite operating profits in the markets division being up by nearly 70%. In fact, since 2009 our investment banking bonus pool has shrunk by more than 70%. We’ve also increased transparency around pay. But there’s a balance – we need high quality people if we are to achieve the goals we set out in 2008. So we must deliver reform, while not making the business unmanageable.”

Regaining Trust with External Stakeholders…

The report’s materiality map, worth a look by anyone interested in disclosure and how it can increase shareholder value and business performance, shows customer trust as the bank’s number one material risk. I asked Young how his team was planning to address this:

“Stakeholder engagement is one piece. We make our senior leaders available to the media, release quarterly disclosure and take advantage of public forums to explain where we’re taking the company, how we’re working on renewing customer trust and engaging with enterprise,” he said.

Other efforts include programs like “Working with You” where relationship managers spend a minimum of two days a year working with their clients to get a real understanding of those businesses, an accreditation scheme to ensure our bankers are suitably skilled and qualified, and simplifying our product range to make life easier for our High Street customers.

“It’s not just about the products but also how we offer them. We have to acknowledge that we’re operating against the backdrop of a tough regulatory landscape and immense pressure. The repercussions of offering the wrong products in the past continue to be felt across the organization and we have to get this right,” he added.

…And Employees

What about the bank’s internal culture? With massive layoffs having made headlines not too long ago, Employee retention at RBS what is Young’s team doing to retain and attract top talent? “Despite all the changes and the restructuring, our employee engagement measurements stack up very well. We’re quite pleased, for example, with our ongoing commitment to demo gender diversity at the executive level. We’re not at the optimum point but we’re getting much better at employing more women,” said Young.

Take a look at the report and you see Young’s sentiments reflected right from Page 1. It is commendable that the bank, despite its difficult regulatory environment and consumer marketplace, is facing up to its critics, shifting its cultural rotunda and putting programs in place that can ensure 2008 does not repeat itself. As Young put it, the report manages to “strike a realistic tone and successfully acknowledges that we did have a difficult year.”

After all, we’ve gone hoarse advocating to reporters that they mustn’t view CSR/sustainability Reports as yet another marketing document but as a piece of disclosure that is tied to materiality, engagement and business performance.

Final words? “If people read nothing more than the first 15 pages, they would get a good oversight of our challenges and how we’re responding. That’s mission accomplished for us,” offered Young.

Originally written for and published on CSRwire’s Commentary section Talkback on May 15, 2013.

Access to Medicine, Transparency & Ethical Governance: GlaxoSmithKline’s 2012 CSR Report

09 Wednesday Jul 2014

Posted by Aman Singh in CSR, CSR reporting, CSRwire, ESG

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avandia, carbon, clinical trials, community development, compliance, CSR, CSR report, CSR reporting, CSRwire, Disclosure & Transparency, Environment, ESG, Ethics, ethics, glaxosmithkline, governance, health care, paxil, Social Impact, Supply chain management, Sustainability, sustainability, Sustainability Report, transparency, vaccines, work culture

When a company is manufacturing critical need medicines and popular consumer products, how does it address increasing access to innovative products while managing its energy use?

On the launch of the GlaxoSmithKline’s 2012 Corporate Responsibility Report – a comprehensive read at 75 pages – I caught up with Director for Global Corporate Responsibility Clare Griffin for some updates.

Looking Ahead: GSK Switches Focus

For the first time the report, while focusing on the company’s 2012 performance, also includes a set of 23 forward-looking commitments across GSK’s business. The first thing that caught my eye in the report was the framework used to connect the firm’s vision with its business mission, assets, purpose and bottom line [see below]. How did the team use this chart to define CR’s focus at GSK?

“Lots of companies say they don’t have separate CR strategies; that they are completely embedded, etc. But how can you demonstrate that integration? This chart, for us, is a good way of explaining how CR is interwoven into our business. We have our business assets, our people, our priorities, our values, which leads us to create innovative products and drive access where people need it the most,” she explained.

“That’s the vision we want to create. We believe that if responsibility is absolutely integral to how we do business, we will deliver sustainable business growth for shareholders and benefits for our other stakeholders,” she added.

It’s all interrelated.

“For example, in the world’s poorest countries, our Developing Countries and Market Access (DCMA) operating unit has a clear objective to increase access to medicines and vaccines, while expanding our market presence and ensuring our business is sustainable for the long-term. This model is increasing our volume sales while increasing access to essential medicines and vaccines.”

Transparency, Pricing & Carbon: Challenges Ahead

“We will see through the implementation of our commitments on transparency of clinical trials data, continue with our commitments on pricing, and look to further harness manufacturing technologies to improve our carbon footprint,” writes GSK CEO Andrew Witty in the report.

Lots of promises in that one statement, I asked. How will these be implemented?

“We have a pretty diverse product line. Although pharmaceuticals are the majority, we also produce vaccines and consumer healthcare products. To improve our carbon emissions, we first invested in mapping our carbon footprint. For example, we found out that Amoxicillin, a very popular antibiotic, is the third-largest contributor to our carbon emissions due to the manufacturing process,” she said. “Our green chemistry team in Singapore has found a different way to produce Amoxicillin through using an enzyme instead which will cut carbon emissions from this process by 36,000 tonnes and reduce waste by 2,400 tonnes as well.”

Similarly with Horlicks, a popular malted milk drink: “We are working to further enhance an Indian government program aimed at modernizing milk production, and looking at introducing alternative energy generation, for example low-carbon biomass energy generation using waste wood to replace coal. Essentially, we are focusing on where we believe we can have the biggest impact,” she added.

Creating Access: Sharing Data From Clinical Trials

As for the transparency piece, while GSK has shared the summary results of all of its clinical trials – whether positive or negative – on a website accessible to all since 2004, the firm has committed to going further and now making anonymized patient-level data available to researchers.

“We’re setting up an independent panel which will review each request to make sure it is appropriate and will be using the data for valid scientific reasons. We also want the researchers to share their results back with the scientific community. We hope this initiative will be of value in developing and catalyzing a wider approach in the industry,” she explained.

Ethical Standards: Reinstating a Culture of Responsibility

Our discussion would not have been complete without taking into account, GSK’s rough tidings last year with the U.S. government. With the firm having to pay $3 billion to the U.S. government to settle allegations of unethical misconduct – failure to include information, etc. – in its sales and marketing practices around drugs Paxil and Avandia, several questions arose about the company’s corporate governance, accountability and sales practices – how do you move forward, I asked.

The company has taken significant steps to move beyond that, responded Griffin. “We have implemented a new incentive compensation system (Patient First) for our professional sales representatives who work directly with healthcare professionals in the U.S. The new system eliminates individual sales targets for these representatives as a basis for bonuses, and instead bases compensation primarily on sales competency, customer evaluations and the overall performance of their business unit,” she said.

The company has also brought together different Codes of Practices across regions and business units to create one Global Code and introduced standards that reinforce clear distinction between scientific dialogue and promotional activities. “These new standards govern the way we engage in scientific activities, such as advisory boards, publications, scientific congresses and medical education,” she said.

Other steps: A Corporate Ethics and Compliance Program for all employees, strengthened training programs, setting up an anti-bribery and corruption initiative and setting in motion disciplinary actions when needed.

“The 23 forward-looking commitments cut across the four areas of GSK’s responsibility: Health for all, Our behavior, Our People and Our Planet. It was important that we picked a time frame that is close enough that the current cadre of employees will be the people delivering the commitments while giving us enough time to create sustained change,” Griffin emphasized, alluding to the firm’s 2015 and 2020 goals.

Goals & Commitments: Highlights from 2012

So what were some of the year’s highlights for GSK?

The potential to bring around 15 new medicines and vaccines to patients over the next three years
3.5 million pounds invested in R&D
5 million pounds invested in the Tres Cantos Open Lab Foundation in Spain to fund research on solutions for diseases in the developed world
A concentrated focus on creating access, including monitoring the influential Access to Medicine Index, that measures what pharmaceuticals are doing to bring more medicines to more people [GSK won the top spot for the third time in 2012 although Griffin was quick to point out that “the index is a measure of what we’re doing, not the reason why we’re doing it.”]
A number of commitments around transparency established in 2012 including participating in the All-Trials Initiative, marking the next level of details on releasing results of GSK’s clinical trials.

What’s next?

“In 2013 we will continue to focus on innovation, access, and operating with transparency across the business. Specifically we will work to see through the implementation of our commitments on transparency of clinical trials data, continue with our commitments on pricing, and look to further harness manufacturing technologies to improve our carbon footprint,” finished Griffin.

Originally written for and published on CSRwire’s Commentary section Talkback onApril 16, 2013.

SAP’s 1st Integrated Report: From Sustainability to Integrated Thinking

09 Wednesday Jul 2014

Posted by Aman Singh in CSR, CSR reporting, CSRwire

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CSR, CSR report, CSR reporting, CSRwire, culture, Disclosure & Transparency, employee engagement, energy, ESG, ghg, governance, health, iirc, integrated reporting, leadership, paul druckman, retention, sap, Stakeholder Engagement, Supply chain management, Sustainability, Sustainability Report, transparency, voluntary disclosure

Using Integrated Reporting as a catalyst for integrated thinking.

That’s how Peter Graf, SAP’s Chief Sustainability Officer expressed the firm’s decision to replace two reports – the annual report mandated by the law and submitted to the SEC indicating the company’s financial performance and the sustainability report , voluntary in nature and showing its non-financial performance– by one Integrated Report for 2012.

While Integrated Reporting is a fairly new trend – The International Integrated Reporting Committee [IIRC] website hosts a total of 41 Integrated Reports since 2011 – it’s not surprising.

As the trend of CSR and sustainability reporting grows – due to multiple factors including a recessionary economy, dwindling resources, emerging conflicts in supply chains and a better connected world – logically, Integrated Reporting is the next step for any organization truly attempting to be as transparent as possible about its financial and non-financial challenges and performance.

Shift in Engagement: From Sustainability to Integrated

At SAP, the impetus for the shift was the realization that “we needed to engage within our organization on a different level” according to Graf. “We have been reporting on our sustainability performance since 2008. The report has grown in sophistication over the years and we even won several awards in the last two years for our report’s interactive nature, etc. So technically, we could have continued on that road,” he added.

Last year, CSRwire collaborated with Graf and his team on a webinar to launch SAP’s new interactive report. Complete with social media buttons, comment sections and multimedia options, the report could be customized and perused in multiple ways depending on your agenda. The report was well received – and in a span of an hour we received over 30 questions from a very engaged audience. [Join us for a webinar with Peter Graf, IIRC CEO Paul Druckman and others today at 11am ET]

SAP set a trend last year, so why the shift again?

Connecting the Dots: The Bigger Picture

“We have been measuring key performance indicators [KPI] on the financial and non-financial side for quite a while. But one day, we started to put them all on a white board trying to draw connection lines between them. Before we knew it, the chart was pretty full. We started to do research both internally and externally , to better understand and compute those relationships. Suddenly it became clear, just how interconnected non-financial and financial performance indicators really are,” he explained.

“When I heard about Integrated Reporting for the first time, I got excited. But then I thought: It’s going to be a very long process to achieve the integrated thinking that must be portrayed in the report. I viewed the Integrated Report as an outcome. However, over time our team reached the conclusion that instead of waiting for the right engagement at SAP to happen, we should use the process of producing an integrated report as the forcing function to drive the necessary engagement,” Graf added.

“In its integrated report, SAP lays out the interdependencies between financial and non-financial indicators,” said Graf. Proof points like: an increase or decrease of one percentage of SAP’s retention employee retention at SAP rate saves/costs the company 62 million euros. And since 2007, a peak year for energy consumption at the company, SAP has avoided 220 million euros ($285 million) through energy conservation efforts.

“When these kinds of relations appear between financial and non-financial indicators, they do more than make the business case for sustainability. They serve as the catalysts for an integrated corporate strategy.” said Graf.

While the entire report is available online, a parsed version – “we kept out customer stories but retained all other ESG data and metrics” – is submitted to the Securities & Exchange Commission.

SAP’s 2012 Performance: Key Highlights

So what will you find in the integrated Report this year?

For one, retention was up [94 percent in 2012] as was diversity, i.e., the number of women in management [an increase of one percent from 2011 to 19.4 percent].

The goal: to reach 25 percent by 2017.

Total energy consumed stayed stable at 2011 numbers while revenue increased by 17 percent and emissions per Euro in revenue and per employee were reduced for the sixth year in a row. Overall emissions were slightly reduced, in spite of the company adding 9,000 new employees in 2012. Finally, the use of renewable energy increased from 47 percent in 2011 to 60 percent in 2012.

Also intriguing to me was a section, which detailed SAP’s People Strategy.

I asked Graf what the strategy involved – and how did they measure the outcomes besides retention and diversity?

“Having a sound strategy around people is essential in a company that solely relies on its employees to create value. Thus our ability to compete is highly dependent on our human resources and it’s impossible to separate that from our financial performance,” he said.

“First, we want to hire more diverse people. We believe more diverse groups innovate better. Second, we want to nurture our talent through clear development plans, challenging assignments, social media, e-learnings, etc. And finally, we want to leverage employee engagement as a decisive factor. So we measure retention and diversity but also engagement, which is a core and central KPI in driving our overall performance in the future,” Graf added.

Measuring Employee Engagement: Critical to Business Performance

So what contributed to a drop in employee engagement in 2006-2009?

“I believe there are various reasons that led to a decrease in engagement during that time. Most important, however, is how we made it back to the high engagement scores of today: When economic growth came back after the recession, the leadership of the company changed, a compelling innovation strategy for growth was established, the company was given the purpose of helping the world run better to improve people’s lives and overall we enjoyed strong and continuous revenue growth as a result. So, a combination of issues got us into low engagement scores and a combination of things got us back on track.”

SAP also measures a Business Health Culture Index. Does that measure the company’s engagement quotient and connect it with business performance?

“We use this index to measure the health of our employees. There are four times as many stress-related illnesses in the intellectual property industry as compared to other industries. So we use data from eight questions [purpose, leadership, recognition, empowerment, rewards, stress levels, compared to people my age I feel more/less healthy] to understand where we stand and what we need to do to take care of our employees.”

In 2012, SAP’s Health Index stood at 66 percent, a one percent increase since 2011 and significant growth since 2008-2009.

Integrated Reporting: Check. What’s Next for SAP?

With all the data and metrics dancing around in my brain, the only question left to ask was, what’s next?

“On the one side, we recognize that integrated reporting is an early trend and that we certainly have to continue to improve and learn. On the other side, we have the ambition to lead, even if this means that we may make a mistake that followers might be able to avoid,” said Graf.

“The next steps clearly are to continue to move away from just having a sustainability strategy to making our corporate strategy more sustainable. This requires an engagement with leaders across SAP that we have not achieved before moving to integrated reporting,” he added.

His recommendations for companies who might be complacent with limited voluntary disclosure or perhaps hesitant to mix the voluntary with the mandatory?

“As soon as people recognize that integrated reporting helps companies understand and grow the way how they create value at their core, , it will pick up. More and more people know this intuitively today but when someone connects all the financial and non-financial numbers with each other, then the big picture emerges,” he said.

SAP’s Integrated Report 2012 is available at www.SAPIntegratedReport.com.

Originally written for and published on CSRwire’s Commentary section Talkback on March 25, 2013.

Practicing CSR: Edelman’s 2012 Corporate Citizenship Report Reveals Tough Love

08 Tuesday Jul 2014

Posted by Aman Singh in CSR, CSR reporting, CSRwire

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Brand Management, Business, CSR, CSR report, CSR reporting, CSRwire, disclosure, diversity, Edelman, human rights, iirc, john edelman, Leadership, marketing, PR, pro bono, supply chain, Sustainability, transparency, voluntary disclosure, volunteerism, work culture

When a PR and marketing firm publishes a corporate citizenship report, there’s a tendency to view the results – and the commitments – with a pinch of salt. After all, they’re traditional masters of spin. Right?

Wrong, says John Edelman, the namesake PR agency’s managing director for global engagement and corporate responsibility. Here’s how Edelman’s press release describes the firm’s commitment to corporate citizenship:

“Some call it corporate social responsibility. Others call it sustainability. For Edelman, global citizenship resonates most as a term describing the larger responsibility business has to society. The firm recognizes its place in the world as global citizens, local offices and individuals.”

“We’re incredibly pleased [that] we were able to provide over $5 million in cash, non-cash (volunteerism) and in-kind giving in FY12 to the communities in which we operate. Giving back has always been a big part of our agency’s heritage and helping our communities is just one of the ways in which we can be responsible global citizens,” John added in a recent conversation over email.

So what does the report detail beyond the private firm’s green commitments and philanthropic donations?

Human Rights & Supply Chain

Reminding me that citizenship at Edelman has only been a global function for two years, John pointed to two major accomplishments. “The introduction of our human rights policy and our supplier code of conduct. When I started in this role, we began to see more and more client requests and requests for proposals (RFPs) in regard to our citizenship policies. Our development of these two policies in FY12 is directly related to stakeholder expectations of Edelman as a global company,” he wrote.

The firm also joined the Supplier Ethical Data Exchange (Sedex), a web-based platform and registry where companies report on CSR-related initiatives around business and labor practices, health and safety and the environment.

For the past two years, the firm has used the GRI framework as a baseline for its CSR reporting. In 2011, the firm also became “one of 80 companies to join the International Integrated Reporting (IIRC) pilot program…as part of our commitment, our report reflects elements of the Integrated Reporting framework, such as identifying our capitals and transforming that capital to value.”

Challenges of Setting CSR Goals…

I have often said/written that the challenge of contextualizing what corporate social responsibility means for the service-based industries is uniquely harder than the consumer products sector. Not that the pressure is any less, as evidenced by the increasing numbers of CSR reports publishing in the last two years, but I do believe that B2B firms must dig deeper to identify – and fulfill – their responsibility to society, employees and the environment.

What’s been a unique CSR challenge for a firm that relies on its talent and has an immense global presence?

According to John, “the environmental initiatives and goals have been the most challenging.” He explained:

“The biggest contributor to our carbon footprint is business travel, which accounts for 73 percent of our emissions. Business travel for client-facing projects is a key part of what we do every day. Other industries and companies have more control over Scope 1 and Scope 2 emissions and can achieve reductions through direct actions. Given that we need to travel to service our clients, it’s harder for us to control our Scope 3 emissions. While we understand this challenge, we still need to work towards reducing our GHG emissions.”

“To that end, we are working individually with each hub office on setting a greenhouse gas reduction target and implementing practices such as increasing usage of video-conference facilities and purchasing 50 percent recycled paper.”

And it’s not just setting the goal that’s been hard.

…And Implementing CSR Programs

Implementing new programs across the firm’s markets has been a challenge as well, he said. “We want to be a guiding force without being too prescriptive. We want to empower our employees around the world to implement and take part in citizenship initiatives with the understanding that they need to balance these with their regular workload,” he added.

John points out the inherent paradox that organizations like Edelman must tackle: how do you compel employees to volunteer and donate their time, money and skills while expecting them to manage a full workload and often, as is common in the PR world, 60-80 hour work weeks?

Ultimately it comes down to the committed few, driven by their passion and subjective understanding of their society and environment.

Disclosure: Led by Demand for Transparency

Since inception, Edelman has been a proudly private company. So why bother reporting on its non-financial goals? Especially when their service/product is often perceived in the market as spin?

It all comes down to being transparent, says the veteran marketing executive.

“Transparency has never been more important and we strongly believe that whether you’re a private or public company, you must be accountable for everything you do. Being transparent is part of how we operate and it’s necessary for us to report on the progress and challenges of our citizenship journey.”

As an example he pointed me to a section of the report, which highlights that the firm’s carbon footprint at “15,518 metric tons CO2e [had] actually increased since our last footprint period.” “We provide explanations for that increase, such as improved data-capture practices and control data quality, particularly on business air travel,” he said.

CSR: Business Opportunity?

Which leads to another question: As a PR agency, what was the motivation behind launching the Business + Social Purpose division – led by the legendary Carol Cone – beyond the obvious business opportunity with companies evolving from cause marketing initiatives into more robust CSR strategies?

“It was clear that we wanted to ‘walk the talk.’ Working with clients on sustainability and citizenship is certainly a business opportunity, but beyond that, we needed to evolve and integrate our own practices. This is what we tell our clients: sustainability and citizenship should be integrated into the overall business,” he said.

Has the client-driven practice impacted cultural behavior and the firm’s organizational hierarchy?

“We have partnered with our Business + Social Purpose (B+SP) team members since we established Global Citizenship as a functional department. This partnership was important because citizenship was a new function, and we wanted to access the expertise of our people to evolve our own Global Citizenship capability.”

“As an example, we involved our B+SP team in our materiality analysis to prioritize our FY12 report topics. Through this analysis, we added an entire section on engaging with our clients, as a result of the dialogue with our B+SP members.”

Walking the talk? That at least is the objective, he said.

“We talk about the importance of the inside matching the outside, and the idea that your employees are your best ambassadors. Citizenship is an integrated part of our overall corporate strategy and having a unified message and integrated approach to it is imperative for effective impacts on our business and society, rather than having a siloed approach where citizenship sits on the periphery of the company’s strategy and operations.”

CSR Reporting: The Ultimate Reward

The ultimate reward of having a CSR strategy is when you can use the reporting function as a reflection on your organizational practices and improve them incrementally. As Edelman helps other organizations weave their way through and inculcate CSR into business strategy, it is important that the firm use the same philosophy internally.

“In the long-term, citizenship needs to be further integrated into our overall management systems. We have been making incremental progress year to year….During year one, we established a foundation; during year two, we have established some goals. In year three, we hope to develop metrics around CSR performance and eventually, we hope to create a citizenship scorecard that can be integrated into our management systems,” informed John.

How does the firm measure the impact it is driving with its clients?

“We believe it is important to measure impact of citizenship by looking at internal and external measurements. In addition to contributions to the bottom line, such as money saved by reducing greenhouse gas emissions and hours and value of volunteerism, it is important to measure employee engagement, such as employee recruitment and retention.”

“Now that we have established goals in some of these areas, we will next develop metrics to assess employee engagement and impact. In an effort to drive a deeper level of employee engagement, we created the Community Investment Grant program, which provides any full-time employee around the network with the opportunity to apply for funding to support a nonprofit organization where they volunteer or serve on the board.”

And let’s not forget the external piece, he reminded me.

“Any citizenship initiative must be tied to producing public engagement behavior outcomes which are at the core of Edelman’s business strategy such as building deeper communities, building trust, adding commercial value, and changing behavior.”

Holistic CSR goals, got it.

Originally written for and published on CSRwire’s Commentary section Talkback on September 21, 2012.

In Good Company: Singh on CSR

~ Connecting the dots between Business, Society & the Environment

Tag Archives: transparency

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