The state of Corporate Responsibility in Europe: 10 trends from the 2011 Responsible Business Summit

The state of Corporate Responsibility in Europe: 10 trends from the 2011 Responsible Business Summit.

Is road safety a relevant CSR issue?

Photo: José Cuervo Elorza @Flickr

The Commission on Road Safety, a Non-Standing Committee of the Spanish Congress of Deputies, has approved unanimously a motion urging the Government to include road safety as part of  Corporate Social Responsibility, in an effort to involve companies in the prevention of work-related traffic accidents. The initiative calls for the Executive to make appropriate amendments in the Law on Prevention of Occupational Risks to include the assessment and the prevention of traffic accidents that occur as a result of work activity or commuting. According to the Committee’s recommendations, companies would have to report on their progresses on the prevention of work-related accidents and carry out studies and evaluations to identify – and fight – their causes. The Committee also calls for the registration of work-related traffic accidents, a better coordination between the private and public entities involved, and security improvements in work-related travel. Finally, it asks for the creation of a “quality label”, awarded by the competent institutions and agencies, which would support the company’s commitment in preventing accidents among their employees. As an incentive for the employer,  the Committee recommends the creation of an annual prize that would reward best practices in the field of occupational health and the quality of the inclusion of road safety plans in the Corporate Social Responsibility strategy of the companies.

This news has been received with mixed feelings in Spain, both by companies and the CSR community alike. One of the reasons, as stated by Professor Antonio Argandoña in his blog , is that this type of initiatives is a distraction from the “really important” CSR topics and that an “award” won’t change anything. According to other comments, it is the role of the Government to deal with road safety. I don’t agree at all with those points of view. I do believe that road safety is a valid material issue for businesses, a clear area of concern for their internal and external stakeholders and has potentially a huge impact, economic, social and environmental on the companies themselves and the society in general. In Spain, businesses lose thousands of working hours each year due to medical leaves of absence related to road accidents, that also cost thousands of lives. Industry research shows that typically workplace injury costs are met 40% by the employee, 30% by the employer and 30% by the community as a whole. The human cost is high, the financial cost as well. Corporate reputation is also affected by employees driving behaviour. Did it ever happen to you to observe a dangerous driver in a company car, or truck, bearing the logo of their employer? What was your reaction? The impact on environment is high too, not only due to bad driving behaviours, generating huge amounts of CO2, but also because of accidents involving dangerous goods or substances. 

In a recent post, CSR expert and author Elaine Cohen, writes that she believes that, in the next generation of GRI indicators, “G4”, “other issues that are not specifically covered in G3, should be considered, such as the issue of road safety and how companies manage employees who spend a lot of time on the road for work purposes, a significant source of fatalities and other accidents which endanger not only employees but the general public“. I couldn’t agree more. Many companies already include road safety in their CSR plans and strategy. Some of them because they are directly or indirectly, related to the transportation industry, or vehicle manufacturers such as Ashok Leyland. Others, because they realize that there’s an opportunity for them to improve their workers well-being while impacting positively other areas such as the environment and public safety. It is much better for an organisation to be promoting a good news safety story such as winning an award, than it is to have to react to and suppress the outcomes of a major incident. Those companies also realize that their initiatives directly impact their bottom line and that they can gain a competitive advantage by being ahead of more reactive organisations.

World Health Organisation data suggests that approximately 1.2 of the 5 million global injury deaths each year are road crashes. It’s clear that road safety is a major social issue. I believe that it is also a business issue. What do you think?

CSR conversations: Guy Bigwood, Sustainability Director

On my quest to the definition of Corporate Social Responsibility and Sustainability, I had lunch yesterday in Barcelona with Guy Bigwood, a Global CSR Professional dedicated to increasing the sustainability of the Meetings and Events Industry, Corporate Sustainability Director with MCI and current President of GMIC, the Green Meeting Industry Council. Guy was busy writing MCI’s 2010 CSR report and preparing GMIC next week conference where he will deliver a series of keynotes, so I really appreciate the time he spent with me discussing their 2009 Corporate Social Responsibility report, sustainability in the meeting industry and CSR in general.

MCI’s journey to sustainability started few years ago, with the company becoming in 2007 the first in its industry to join the United Nations Global CompactMCI is a globally integrated association, communication and events management company with offices in 20 countries and about 900 employees worldwide. Its 2009 Corporate Social Report  describe the initiatives led by Guy Bigwood and his team through 5 majors area: leadership in the industry, employee development and well-being, environmental impact reduction, customer focused initiatives and impact on local communities. What is clear in the report is the involvement of the company’s leadership in the sustainability strategy, something particularly interesting as this topic was quite new to the top management team, but also the leading position of MCI in its industry.Finally,  the initiatives related to the  environment are definitely a major aspect of MCI sustainability strategy. Something I found really great in the report was that it also mentions the key learning points and improvement areas. Guy confirmed for example that there’s a need for key metrics in future reports. Although the 2010 report, due to be released in April, will still be published as a separate report, integrated reporting remaining the ultimate goal, it will contain more KPIs and measurements of the impact of the company’s sustainability initiatives. The specific GRI guidelines for the event industry, which draft was published yesterday, will help.  HR is  also an area where specific indicators, such as employee satisfaction, talent retention, or employee turnover, could be useful too. Guy confirmed that the HR department is definitely supporting the group’s CSR initiatives, something essential as discussed in a previous blog post, with proven results in many of their regions. The MCI Dublin Office, for example, won in 2009 the Irish Independent Great Places to work award. My guess is that the great job done there has something to do with the local employees perception of their work environment. Measuring this through specific indicators, as well as sharing best practices, could help working on employee engagement in the other regions. Guy and I also share the idea that middle-management is a key element of a successful sustainability strategy as discussed in a previous post.

MCI defines CSR as a business strategy which strives for financial viability, in harmony with the planet and its people“.

 Guy and I discussed the current debate around the terminology and the efforts that CSR practitioners are undertaking to come up with a more consistent definition of those concepts. Regarding the debate, I share Alberto Andreu’s idea that the concept of CSR “is broken and that it’s urgent to fix it“. Alberto Andreu, who is Managing Director of Corporate Reputation and CSR at Telefónica and Professor of Organizational Behaviour at IE Business School, also considers that there’s a cultural bias that makes it difficult to get to a consistent definition of CSR on both sides of the Atlantic. I couldn’t agree more. In the US the legal perspective prevails and CSR initiatives are often reduced to the minimum compliance requirements, anything beyond that being “illegal or insincere”, or are only acceptable when they are synonym for philanthropy or charity, while Europe, which seems to be moving towards mandatory CSR reporting, has a broader perspective that involves the development of responsible business practices and a strong focus on the companies impact on their “ecosystem”.

 Alberto Andreu writes that “the line of progress, is in the definition made by the Dow Jones Sustainability Index (DJSI): “Corporate Sustainability – it states – is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments”.

This definition is close to another one that I mentioned in a previous post: SAP’s definition for sustainability: “holistically manage economic, environmental and social risks and opportunities“. As you can see, it seems quite complicated to avoid  “buzzwords” and this is exactly what anti-CSR advocates argue: CSR and sustainability are nothing but buzzwords. Note that their speech is usually not exempt of jargon.

Buzzword or not, what matters is execution. There’s a business case for sustainability, an urgent need for sustainable development, in a world with limited resources, and that requires more than words: strategic, powerful, comprehensive and measurable CSR initiatives.

CSR in one word: Opportunity

It seems quite challenging to describe what CSR is in 140 words or less. But it’s a great exercise. Leon KayeGreenGoPost.com‘s Founder, Features Editor & Lead Writer at Triple Pundit , Business Consultant and Balkans Advocate recently asked the CSR crowd on Twitter to give it a try :  #CSR and #Corpgov in Tweet-Speak: Express Yourself in 140 Characters (or Less!)

I decided not to use one of the many definitions written by others that I’ve read about the topic in last few years. Instead I tried to define it with my own words and came up with the following definition:

CSR= an opportunity for companies to ensure a sustainable growth while meeting the needs & concerns of their stakeholders

I wanted to avoid buzzwords but, in my opinion, the objective of Social Responsibility, including Corporate SR, is to contribute to sustainable development, so I couldn’t leave this word apart. Stakeholders? Well, employees, shareholders, customers, partners, providers, as Todays’ business world is far more interconnected than it was when Milton Friedman expressed its now infamous idea that the only responsibility a business has is towards its shareholders, nobody can deny that the value demanded by customers, employees, job seekers has created a profound market shift that companies can’t ignore. As SAP’s Chief Sustainability Officer, Peter Graf, put it recently, “sustainability is a trend as important as Internet or the globalization itself” and, “it’s here to say”, creating a world of “new winners and losers”.

That’s the reason why I’m using the word “opportunity“. Compliance is not a strategy, going beyond business is,  and it’s also a fantastic opportunity for companies to manage successfully the new market shifts around value creation: value demanded by stakeholders as previously said, value delivered by the company through its products and its supply chain and the value graded by financial markets, governments and NGOs. Companies that fail to see CSR as an opportunity simply won’t survive.

CSR…misunderstood and necessary.

If “to be great is to be misunderstood”, as the poet said, then CSR is definitely one of the greatest things in the world.

Aman Singh, in her great blog about CSR, recently wrote a post with a provocative title: “In the Classic Battle of CSR vs. Sustainability,  We All Lose” in which she was discussing the results of a recent survey showing that MBA students didn’t seem to care for Social Responsibility. She asked a very relevant question: “Is this an  issue of stakeholder differences or once again a case of the age-old contest of terminology, i.e., what IS the difference between CSR, sustainability and corporate responsibility?”

The very same day an article in The Economist, mentioned in another great blog post by Davidcoethica, described how Milton Friedman’s views on CSR were perceived around the world, showing that “the world’s most Friedman-friendly country is the United Arab Emirates”, with 84% agreeing with his famous assertion that “the social responsibility of business is to increase its profits.”

The word “social” probably contributes to the confusion.  Anti-CSR advocates, ironically on both sides of the ideological spectrum, Milton Friedman’s followers and anti-capitalism movements, focus on the word “social”, arguing that companies are legally bound to maximise profits to shareholders and that corporations can only be ‘socially responsible’ if they are being insincere. And who wants to work for such a company?

Working for a company engaged in sustainability strategies seems a lot cooler than working for a company that promotes ethics and socially responsible business practices. But actually, beyond the words, the objective of corporate social responsibility is to contribute to sustainability and sustainable development, as defined in the Brundtland report, “a development that meets the need of the present without compromising the ability of future generations to meet their own needs.” As businesses are the main consumers of world resources, human and natural, and the world economy moves increasingly closer to the limits of its resources, companies have no other choice but to act responsibly. How can companies contribute to sustainable development? By integrating social and environmental concerns in their business operations and in their interactions with their stakeholders, according to the EU definition for CSR or, as a the software company SAP puts it in its sustainability report, “holistically managing economic, social and environmental risks and opportunities.”

This definition is closed to the one that Alberto Andreu Pinillos, Global Director of Reputation, CSR, and Sustainability at Telefónica, used in a recent interview for this blog: the DJSI’s definition for Corporate Sustainability: “a business approach that fosters value creation in the long-term for shareholders, taking advantage of the opportunities and the effective risk management, related to social, economic and environmental development.”

We have to get used to the “semantic battle” around sustainability – a buzz-word? – CSR – an oxymoron? – Ethics – boring?

In my opinion the debate around those concepts also help to make them more visible. The issue though is that spending too much time debating the terminology and concepts is a distraction from what really matters: execution. CSR and sustainability are no longer a “nice to have” for companies. It’s a “must have” and more importantly a “must do”.

See, the war is not between CSR and sustainability…CSR contributes to sustainability..big time!

 A real issue, in my opinion, is the gap between “embracers” and non-embracers. The recent Sustainability and Innovation Global Executive Study, a collaboration between MIT Sloan Management Review and the Boston Consulting Group warns that a gap has grown “between companies that embrace sustainability-driven strategy and management” and companies that don’t. That’s a real issue.

The S-Word, CSR 2.0 and the Creation of Shared Value.

In my previous post, I reacted to the fact that Advertising Age had named sustainability one of the “jargoniest jargon” words of 2010 that they “wish you would stop saying.” Although I agree that some of the vocabulary used by sustainability practitioners is actually jargon, I didn’t agree at all when asked to stop using the “S word” : Here you go. SUS-TAI-NA-BI-LI-TY.
There’s undoubtedly a need for a better definition of what sustainability actually means and the same goes for the acronyms usually related to this concept, such as CSR – Corporate Social Responsibility – sometimes amputated of its Social part, CR – or ESG – Environmental Social and Corporate Governance.

As one of the ambitions of this blog is to be a space that helps clarifying the concepts, I recently asked several key actors in this field to share their definition of sustainability.

Alberto Andreu Pinillos, Global Director of Reputation, CSR, and Sustainability at Telefónica, one of the world major operators in the telecommunication sector, leader of the Dow Jones Sustainability Index (DJSI) in its sector, for the second year in a row, in 2010, says that its company “likes the DJSI’s definition for Corporate Sustainability: a business approach that fosters value creation in the long term for shareholders, taking advantage of the opportunities and the effective risk management, related to social, economic and environmental development’.

This definition provides to Telefónica the guiding principles to define and execute its corporate sustainability strategy.

1. Managing risk: according to Alberto Andreu the objective of this “defensive strategy” is “to minimize the negative impact” of the company’s global activities: supply chain, integrity, privacy, data protection, health & safety, electromagnetic emissions, etc.”
2. Managing new opportunities: here, the objective of what Alberto Andreu describes as an “offensive strategy”, capable to “generate more revenues related to social business”, is to “maximize the positive impact” of the business, “putting special focus on green ICT, accessibility ICT for handicapped & elderly people, and reducing the digital divide.”
3. Managing stakeholder engagement, through “the implementation of social programs (conducted mainly by Telefónica’s Foundation), developing social networks, and working with the stakeholders to build the digital agenda.”

But one of other reasons why some commentators tend to affirm that the terminology around CSR and Sustainability is jargon, is that, on top of a lack of clear definition, there’s still many ongoing discussions and debate around the concepts themselves. Which, in my opinion, is a very good thing.

HBR CREATION OF SHAREDVALUE

For example, in this month’s Harvard Business Review, Michael E. Porter and Mark R. Kramer, in an article that explains “how to reinvent capitalism—and unleash a wave of innovation and growth by Creating Shared Value, write that “creating shared value (csv) should supersede corporate social responsibility (csR) in guiding the investments of companies in their communities.
According tho them “CSR programs focus mostly on reputation and have only a limited connection to the business, making them hard to justify and maintain over the long run. In contrast, CSV is integral to a company’s profitability and competitive position. It leverages the unique resources and expertise of the company to create economic value by creating social value.”
The authors give an example that illustrates quite well their CSV approach: fair trade purchasing. ‘Fair trade aims to increase the proportion of revenue that goes to poor farmers by paying them higher prices for the same crops. Though this may be a noble sentiment, fair trade is mostly about redistribution rather than expanding the overall amount of value created. A shared value perspective, instead, focuses on improving growing techniques and strengthening the local cluster of supporting suppliers and other institutions in order to increase farmers’ efficiency, yields, product quality, and sustainability”.

Another example is what Alberto Andreu, Global Director of Reputation, CSR, and Sustainability at Telefónica calls “CSR 2.0”. ‘Doing new business with social impact” – he says – requires the creation of “an external ecosystem”. “For instance”, he explains, “to launch new ICT solutions for disabled people you must create an external network with governments, NGO’s, civil organizations, employee associations…”. That’s what he callsCSR 2.0, because you can’t do these kind of business on your own, you need a complex ecosystem. CSR 2.0 is doing things with others, through a network.”

Alberto Andreu says that, in 2011, one of Telefónica‘s priorities is to “better link CSR to new business opportunities” and for that, “supporting social entrepreneurs to maximize the positive impact of our business on the community” will be key. The main focus areas for the company will be “green IT and the development of ICT solutions for handicapped & elderly people.”

This approach echoes what Porter and Kramer describe in their HBR article, when they write that shared value is not about personal values. Nor is it about “sharing” the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value. In the Fair Trade example one of the clear benefits of a shared value approach is that “this leads to a bigger pie of revenue and profits that benefits both farmers and the companies that buy from them”.

Porter and Kramer also write that “companies must take the lead in bringing business and society back together“, emphasizing that shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. The solution, they say, lies in creating economic value in a way that also creates value for society by addressing its needs and challenges. “Businesses must reconnect company success with social progress.”

Alberto Andreu definitely sees the connection between company success and social progress when he describes the strategy of the company and the results so far. “CSR 2.0, he wrote in a paper for the Reputation Institute of London, in may 2010, “requires identifying new income sources with a positive impact on social development, new ways of reducing costs, as well as understanding the impact of responsible behaviour on margins and customer satisfaction.” Corporate Responsibility is not something new at Telefónica that released its first CR report in 2002 and when asked about the results of Telefónica’s effort in this domain, Alberto Andreu says that he’s particularly proud that his company is leading the DSJI for the second consecutive year but he also gives two examples of how CR activities effectively contribute to the company’s profitability:
1. One of the major impact of the company’s CR effort, he says, is that they “give the company a premium price on the market”, adding that “companies included in the DJSI have delivered a premiun of 0.48 pp on the markets vs those companies not included in DJSI, in a 8 years series.”
2. Furthermore, he explains that “some years ago, the company did an internal research to link their financial metrics to CSR and corporate reputation”. The conclusion they reached was that “the behavior of these financial indicators explained 11 percent of the variations produced in the corporate reputation”; “That is to say, he explains, “the variations that are produced in the client’s perceived reputation impact Telefonica’s financial results.”

According to Porter and Kramer, the new paradigm they describe, reconnecting company success with social progress, “will require leaders and managers to develop new skills and knowledge—such as a far deeper appreciation of societal needs, a greater understanding of the true bases of company productivity, and the ability to collaborate across profit/nonprofit boundaries.”
For Alberto Andreu, these new managers will also have to be change managers” inside and outside their organization.

You can follow Alberto Andreu on Twitter at @aandreup

2011: The Year Of “The Sense Of Purpose”?

  

“People without a sense of values can make a great deal of money, but they will have an ache in their heart”.

 With this quote by Jack Ma, one of the contributors of this month HBR special report, let me wish you a happy sustainable and responsible 2011!

  

2011: The Future of Work

In a special report, The HBR agenda 2011, published by the Harvard Business Review this month, two dozen business and management leaders explain what projects they’ll take on in 2011.

The contributors address a broad range of topics; most of them related to the future of work, as well as leadership issues, such as succession planning, the decision-making process at CEO level, or the management of new forms of teams, multicultural or highly flexible like the “sand dune teams” described by Harvard University Professor J. Richard Hackman.

  http://hbr.org/web/extras/hbr-agenda-2011/j-richard-hackman

 

 

2011: The year of the $300 house?

Vijay Govindarajan’s “$300 house project” and his agenda to make it happen, which he shares with a contagious passion, is definitely a great read.

http://hbr.org/web/extras/hbr-agenda-2011/vijay-govindarajan

  

 

 

 

 

 

 

 For further information, I strongly recommend to check the project’s official website  http://www.300house.com/ .

 

2011: The awakening of “a sense of purpose in our companies”?

Two contributions, in the HBR special report, focus particularly on Sustainability and Corporate Social Responsibility.

First of all, Daniel H. Pink, the author of various books about the changing world of work, wonders if companies “have reached the limit of the profit motive” and asks if “the path out of our economic doldrums” will come from the “awakening of a sense of purpose in our enterprises” rather than a “tighter focus on profits, processes or productivity.”

 http://hbr.org/web/extras/hbr-agenda-2011/daniel-pink

2011: Celebrating the Year of Sustainability in China?

One of the other contributors of the HBR special report, Jack Ma, Founder and CEO of China’s Alibaba Group describes the effort that his company is undertaking to drive a sustainability strategy that can benefit not only to the Group itself but to China in general.

http://hbr.org/web/extras/hbr-agenda-2011/jack-ma

“A company our size has a responsibility to do the right thing” writes the founder of the Alibaba Group, which employees around 20000 people in about 60 countries, adding that “people without a sense of values can make a great deal of money, but they will have an ache in their heart”.

The Chinese Group, founded in 1999, is a family of Internet-based businesses that includes business-to-business international trade, online retail and payment platforms and data-centric cloud computing services. The scale of the company is quite impressive; it’s like Ebay for business to business (B2B) transactions, like Amazon for business to consumer (B2C) transactions, like Paypal, with an escrow function, like Google for affiliate marketing, and they also run China Yahoo! and are expanding into many other areas.

One thing that I found remarkable is that Alibaba decided, 2 years ago, to ban trade in shark fins on all its sites which was a particularly difficult decision in the local cultural context. I read the HBR article the very same day I watched for the first time the amazing documentary “Oceans”. The movie is a wake-up call. It shows how beautiful life is in the Oceans, but it also explains how fragile it is. There’s a sequence where sharks are being brought out of the sea and their fins cut off just to be used for soup. The bodies are subsequently thrown back into the sea meaning that these sharks have been condemned to death.

http://disney.go.com/disneynature/oceans/

After reading the HBR article I decided to find out more about the Group’s sustainability and CSR activities. I checked its website and read its 2009 Annual Report, as the company, unfortunately, didn’t produce any separate Sustainability or CSR report. The amount of CSR information provided in the Annual Report is quite light with only 4 pages dedicated to this topic for a total of 152 pages.

 http://img.alibaba.com/ir/download/201004/E_2009AnnualReport.pdf

However, it doesn’t seem to be because the Group hasn’t been involved in this area. On the contrary, browsing the web I found quite a lot of activities that deserve to be highlighted.

Alibaba in the Community

Alibaba is engaged in the development and support of local communities through its Ali-Loan program, introducing proprietary credit scoring models developed by the Group to facilitate loans made by their partner banks to our customers in China. Since the launch of Ali-Loan, the Group say they have facilitated more than RMB6 billion of loans to more than 3,000 of their customers.

Talent Incubation

It also provides e-commerce and management training and education services for small businesses and individuals in China through both offline learning centers and an online learning platform.

 Community Volunteerism and Sichuan Earthquake Relief

 The Alibaba Group says that it encourages employees in its Group companies to become active in community service programs.

After the tragic Sichuan earthquake in May 2008, Alibaba reacted immediately by sourcing urgently needed goods that were key to the rescue efforts, launched an online campaign for donations from its employees and members of its websites and formed a relief team made up of employees and volunteers from outside the company.

The team made a number of trips to Sichuan to provide first-hand earthquake relief and delivered a large shipment of stationery supplies donated by employees which benefited nearly 1,000 local students. As winter approached, the team also organized a clothing donation drive for the earthquake victims and Alibaba waived the membership fees for supplier members based in the earthquake areas, in order to help them get back into the business of providing jobs and economic stability to their communities.  

 Environmental Protection

Alibaba.com has been promoting environmental issues from within the organization by running a series of campaigns under the name “Orange Alibaba, Green Earth”. The campaigns aim to promote energy and resource conservation by its employees. The company also launched a “Tradeshow Alliance Environmental Protection Fund” in October 2007 to promote environmentally friendly and energy-efficient tradeshows. The proceeds were donated to the China Environmental Protection Foundation.

In the HBR article Jack Ma writes that employees who demonstrate “a commitment to the environment might merit a better parking place”, which is, undoubtedly, in China’s crowded cities, an outstanding employee benefit. But, if I may suggest an alternative, rewarding employees’ commitment towards environment with free or subsidized electric bicycles or “e-bikes”, would be more consistent with Environmental Protection, rather than encouraging employees to commute to work by car.

In May 2010, the Alibaba Group announced that it would begin in 2010 to earmark 0.3 percent of annual revenues to fund efforts designed to spur environmental awareness and conservation in China and around the world.

Integrity and Compliance

Finally, in its company website, Alibaba Group, says it’s committed to the highest standards of business conduct in its relationships with each of its stakeholders, including its customers, suppliers, shareholders and other business partners. This commitment is reflected in the Alibaba Code of Business Conduct, requesting employees to conduct all business with outside parties in a manner that reflects the Group values of integrity, fairness and trust.

In the HBR report, Jack Ma writes that he believes that, “in China, environmental change will come about only through education.”

With an average employee age of 27, like many companies in China, the Alibaba Group has a great opportunity: through its corporate sustainability strategy and CSR activities, it can infuse strong values that will shape the future of the company’s, and the country’s, workforce and leadership.