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Slide 1: Corporate Responsibility Corporate Citizenship Corporate Sustainability Sustainability Reporting 2009 Reana Rossouw Next Generation Consultants
Slide 2: Overview • • • • • The basics and definitions Responsibility vs Irresponsibility Sustainability Trends Sustainability in Practice – Case Studies Strategy Development, implementation and integration • Reporting • Frameworks and Compliance
Slide 3: The Basics
Slide 4: Organisations today faces a three fold pressure to succeed: • To be: –More innovative and competitive –More productive and profitable –More responsible and sustainable
Slide 5: Sustainability Reporting …is an organisation’s public account of its economic, environmental and social performance in relation to its operations, products and services. • Note: Organisation includes corporate, governmental and nongovernmental organisations *www.krikor.info
Slide 6: Doing well by doing good - CSI Doing well by being good – CSR Ensuring survival – Sustainable Development
Slide 7: Sustainability Framework Corporate Responsibility Managing risks and impacts across Economical, Social, Environmental dimensions Corporate Sustainability Corporate Citizenship Values, Beliefs, Principles, Policies, Contexts, Definitions Corporate Governance: Compliance, Standards, Frameworks, Principles, Guidelines
Slide 8: CS and the different interpretations • Different strokes for different folks: – To Chinese consumers, the hallmark of a socially responsible company is safe, high quality products – For Germans, it is secure employment – In Thailand, sustainable development is defined as holistic development which involves six dimensions: economic, social, environment, politics, technology and knowledge, and mental and spiritual balance. – In Bolivia, there is a particular emphasis on political dimensions (e.g. good governance and participation) and on the cultural and spiritual identity of diverse indigenous peoples – For Africans it is about proving legitimacy and credibility and ensuring poverty is alleviated – In South Africa what matters most is a company’s contribution to social needs such as healthcare and education
Slide 9: The Definitions
Slide 10: Theoretical Model www.naturalstep.com
Slide 11: What drives business sustainability? Changing Supply: •Natural Resources •Employees •Capital Markets Changing Demand: •Consumers •Stakeholders Changing Rules: •Policy & Regulation
Slide 12: Sustainability’s Influence on Corporate Functions Function Marketing Talent Management Finance Impact Changing consumer interests might lead to missed opportunities. The need to align sustainable consumption and production. Talent pool’s growing interest in working with companies that attend to sustainability. Stakeholders’ demand for increased transparency. Financial markets’ growing evaluation of companies’ sustainability efforts. Eliminating energy inefficiencies in owned operations. Ensuring suppliers’ compliance with a code of conduct. Ensuring access to needed (and limited) resources, such as water and energy. Need to minimize the energy inefficiencies in older technologies. Developing technologies to minimize the need for virgin materials used to provide value to consumers. New regulations with which to comply. The very markets in which companies compete are poised for further change. In some industries, the adaptation of sustainability is paramount to corporate survival Operations Information Technology Legal Strategy
Slide 13: Lets Define… • Sustainability – Meeting the needs of the present without compromising the ability of future generations to meet their own needs • Triple-bottom-line (TBL) – Considers, measures and refers to achieving a balance between integrated (economical) financial, social and environmental contributions and performance to society www.deloitte.uk
Slide 14: Definitions (cont’d) • Corporate sustainability – A business approach to create long term shareholder value by embracing opportunities and managing risks derived from economic, environmental and social developments • Sustainability reporting – Generic term for extra-nonfinancial reporting. Refers to the account an organisation gives to describe its performance on a number of sustainability dimensions such as economic, environmental, social, ethics, governance, product and market responsibility, performances and impacts.
Slide 15: Definitions (cont’d) • Corporate Citizenship (CC) – Considers the rights and responsibilities of companies within a broader societal context relating to: • Managing the enterprise – how efficiently and ethically the company governs, controls and manages its operations • Workplace practices – how it manages its employees, workplace conditions and employment practices • Third party interactions – how it engages external stakeholders in the company supply chain, marketplace, government and community • Environment – how it controls its impact on the environment • Transformation – how South African companies meet their obligations to help all citizens become meaningful economic participants • Product and market stewardship – how it markets, what it produces, how it goes about taking product to market and owning up to the promises made in marketing and product development
Slide 16: Definitions (cont’d) • Corporate governance – Generally refers to the process by which organisations are directed, controlled and held to account. It encompasses authority, accountability, stewardship, leadership, direction and the control exercised in the organisation • Corporate (Social) Responsibility (CSR) (CR) – A good corporate citizen (a responsible one) is one that has comprehensive policies and practices in place. These enable it to make decisions and conduct its operations ethically, meet legal requirements and show consideration for society, communities and the environment. • Corporate Social Investment (CSI) – Refers to a company’s contributions to society and community that are extraneous to its regular business activities.
Slide 17: Definitions (cont’d) • Integrated Sustainability Reporting (ISR) – Relates to non-financial reporting as suggested and outlined in the King Report on Corporate Governance for South Africa – namely reporting on the nature and extent of a company’s social, transformation, ethical, safety, health and environmental management practices and policies. • Most companies in South Africa use the GRI – Global Reporting Initiative as the benchmark for their reporting standards
Slide 18: Definitions (cont’d) • In South Africa, it is expected that the Companies Act will be passed into law on July 1, 2009. The Act will be effective from March 1, 2010. • The new provisions (in the Act) will be based on ‘King III’ which applies to all entities, regardless of the manner and form of incorporation and establishment. • King III recommends that sustainability reporting should – be focussed on substance over form and should transparently disclose information that is material, relevant, accessible, understandable and comparable with past performance of the company – be formalised as part of the company’s reporting processes – have independent assurance
Slide 19: The Concept • It is no longer just about being ethical and fair in our dealings, nor just about managing our social or environmental impacts, nor just about being a good neighbor in our local communities, although all of these are important • It is about turning social, economic and environmental challenges into opportunities for brand/product/process innovation, business development and competitive advantage. • CR is not only central to business strategy but is increasingly becoming a critical driver of business growth
Slide 20: The Drivers The Business Case
Slide 21: Key Drivers • Key driving forces include: – Investor and consumer demands and governmental and public pressure – Particularly important is the support from Socially Responsible Investing (SRI) Indices . – The corporate responsibility movement is now entering a mainstreaming phase aided by standardisation activities such as the GRI, the AA1000 series and the ISO2600 guide. – The field of responsible business strategy and practice is becoming one of the most dynamic and challenging subjects corporate leaders are facing today and possibly one of the most important ones for shaping the future of our world.
Slide 22: Foundations of the business case • An international imperative – The power of multinational companies – Universal rights and standards across developed and developing economies • A national imperative – Conscious effort to address past imbalances and exclusions – The socio economic benefits of a stable, more equitable society • Individual company rationale – it makes business sense – – – – – Strong brand and reputation Employer of choice Market Position Trust of financial markets and increased shareholder value New ‘green’ products/services and new markets • Both risk and opportunity management
Slide 23: What should business be doing • Commit to corporate action – Incorporate long-term measures into a definition of success, targeting profitability that is sustainable, and supported by a responsible record in managing social, environmental and employment matters • Understand the issues – Making operations environmentally and socially sustainable, making society sustainable, selling products responsibly, influencing suppliers • • Use precedent and best practice – Comply with standards, codes and guidelines Embed the right management approach – From board and executive level the authority for sustainability must be devolved throughout the organisation through all processes, systems and operations • • • www.leryco.co.uk Convert risks and opportunities into actions Manage and measure performance Communicate and report
Slide 24: Benefits of Sustainability • Increased profit • Increased access to capital – new sources (investment) • Reduced operating costs/increased operational efficiency (environmental practices) • Enhanced brand image and reputation • Increased sales and customer loyalty • Increased productivity and quality • Increased ability to attract and retain employees • Reduced regulatory oversight • Reducing risk and increased risk management • Competitive advantage • Increased market share
Slide 25: Challenges of Sustainbility • • Managing in an integrated manner the full lifecycle of CR strategy formulation, implementation, evaluation and evolution incorporating stakeholder participation Aligning responsibility strategy to corporate strategy focusing on: – Rationalising and harmonising the economic, compliance, ethical and sustainability dimensions of corporate responsibility and sustainability in the context of stakeholder requirements – Managing non-financial risk, particularly brand, reputation, local licence to operate and to performance instability as an integral part of corporate sustainability management – Integrating eco-design and other sustainability requirements into product and service offerings • • • Managing the sustainability performance requirements into product and service offerings Managing the sustainability performance optimisation process to continually increase stakeholder satisfaction Developing strategic responsibility and sustainability capabilities
Slide 26: Challenges for individual companies • Discussion • How do we define sustainability • What is our language • What matters to us most • What will drive us in future • What are our (company specific, industry specific) future risks and challenges • What is our 2020/2025 vision
Slide 27: Objectives and motivations of sustainable companies • Increased transparency and improved governance aimed at rebuilding public trust and investor confidence • Delivering wider societal value including support for health and human rights improvements and environmental protection • Contributing to regional development and global partnerships for sustainable development • Addressing in a balanced way the concerns of their key stakeholders
Slide 28: Strategic Map Risk Management – regulation and competitive policy Shareholder Value Social Innovation – performance stability – eco efficiency – fair globalisation Corporate Competitiveness Company Law and compulsory regulation Corporate Governance Stakeholder management reputation Corporate Sustainability Sustainable Development Corporate Social Responsibility Social Accountability ethics Voluntary Regulation Investor demands SRI – philanthropy corporate citizenship
Slide 29: Responsibility and Sustainability Pathway Cost Saving Efficiency Resilience New Future Innovation Compliance Reputation Risk Management Connectivity Stakeholders
Slide 30: Responsibility and Sustainability Pathway Revenue Generation New Revenue Streams Innovation Licence to Operate Freedom to Operate Revenue Protection
Slide 31: Framework • Eight core characteristics – Understanding society: understanding the role of each player in society – government, business, trade unions, non governmental organisations and civil society – Respecting environment: considering the cost of natural economics, placing a value on natural resources and calculating benefits – Building capacity: participating in partnerships and creating strategic networks and alliances – Questioning business as usual: challenging the way of doing things and being open to new ideas – Shareholder relations: identifying stakeholders, building relations, engaging in dialogue and balancing demands – Strategic view: taking a strategic view of the business environment – Harnessing diversity: respecting diversity and adapting to different situations – Quality control: feedback on the effectiveness of the CR process, communication and training programs should be an integral part of CR quality management
Slide 32: Driving Forces Investor Demands SRI Government Pressure Green Buying Corporate Responsibility and Sustainability Regulation Consumer Demands Public Confidence Public Pressure
Slide 33: CSR and Sustainability Guides Corporate Responsibility and sustainability implementation Brand and Reputation Management Corporate responsibility and sustainability strategic management Corporate sustainability performance management Innovation, Production, Distribution Social Capital Management Environmental Capital Management Stakeholder Engagement Corporate Responsibility and Sustainability principles, best practices – case studies – trends Reference sector specific CSR/CS Systems
Slide 34: Emerging Frameworks
Slide 35: TBL - CS Framework Industry Social Impact Market Impact Product Impact Clients SUSTAINABILITY SUSTAINBILITY Brand Impact Suppliers Environmental Impact Governance Economic Impact Compliance Transformation
Slide 36: TBL Framework Environmental Key Drivers: Climate Change Escalating operating costs National Energy Efficiency strategy and accord Whitepaper on renewable energy Green Building Council of SA Risks Unquantified supply and cost risks for operations Escalating building operating costs Penalties and sanctions Reputational damage Opportunities: Lower carbon footprints Decreasing operating costs Productivity gains Reputational gains Focus Areas: Water Consumption Fuel consumption Electricity Consumption Waste and Effluent Management Emissions and climate change Carbon trading Environmental rehabilitation Social Key Drivers: Making operations socially sustainable Making society sustainable Selling products responsibly Influencing suppliers Risks: Loss of business due to failure to achieve scorecard objectives Government censure and loss of business Operational restrictions Additional regulations Opportunities: High BEE ratings Business partner of choice Government business opportunities Reputation gains Focus Areas: BEE; Employment Equity and skills development; Workplace conditions and policies; Occupational health & safety Employee wellness; HIV/Aids; Enterprise Development Corporate Social Investment; Ethical consumerism Responsible marketing and advertising; Product pricing Product access; Packaging & Waste; Preferential procurement Product sourcing and traceability
Slide 37: Stakeholder Framework Employee Relations Customer Relations Product Stewardship Product Development Product Access Market Stewardship Supplier Relations Broker Relations Social Impact Product Knowledge Product Management Brand Stewardship Shareholder Relations Community Relations Investor Relations Pricing Practices Marketing Practices Product Distribution/ Marketing Sales Practices Communication Practices Sponsorship & Public Relations Practices
Slide 38: Stakeholder issues Stakeholders Shareholders Employees Key Issues Return on Investment Corporate Governance Salary & Benefits Health & Safety Training & Development Equal Opportunities Communications Price/Value Easy access to products/services/ distribution Quality of product Advertising policy Jobs sustained Payment of bills Technology transfer Tax contribution Local economic impact Transfer pricing policies Charity contributions Community investment Commercial sponsorship Sustainable raw materials Emissions – water/air Energy efficiency Waste management Reduced packaging Recycling Consumers Business Partners Government and Community Environment
Slide 39: Issues Framework Products Services Responsible Investment Responsible Drinking Responsible Consumption Zero Carbon footprint Zero Omissions Recycling Reduction of electricity CS Environment Stakeholders Medical Aid for the poor Medical Aid for retirees Incentives for green/healthy living Employer of Choice
Slide 40: Issues Frameworks www.labnet.co.uk & www. Parlermo.co.uk
Slide 41: Industry Sustainability Frameworks Economical Brand Management Customer Relationship Management Innovation Management Piracy Protection Supply Chain Management Privacy Protection Market Opportunities Price Risk Management Social Business Risks & Opportunities Climate Change Strategy Environmental Policy & management Operational Environmental Footprint Operational Eco Efficiency Packaging Raw Material Sourcing Biodiversity Recycling Transport & Logistics Emissions/Carbon Hazardous Substances Occupational Health & Safety Stakeholder Engagement Standards for Suppliers Access & Impact Products/Services Social Integration Product Quality & Lifecycle Management Responsible Marketing Human Rights & Corruption Capacity Building Corporate Social Investment Environmental
Slide 42: Industry Framework Industry Financial Services Economic •Anti Crime •Brand Management •Customer Management •Stakeholder Engagement Environmental •Business Risks and Opportunities •Financial Products & Services •Business Risks/Project Finance •Environmental Policy •Carbon Footprint •Environmental Policy/Climate Strategy •Genetically Modified Organisms •Reduced Packaging •Raw Material Sourcing •Environmental management systems •Hazardous substances •Eco-efficiency •Volatile Organic Compounds •Climate Strategy •Electro Magnetic Fields •Environmental Policy/Management System •Operational Eco-Efficiency Social •Code of Ethics in Investments/Financing •Occupational Health & Safety •Financial Inclusion •Standards for suppliers Retailers •Customer Management •Health & Nutrition •Emerging Markets •Health & Safety •Standards for Suppliers Media •Brand Management •Customer Management •Lobbying Activities •Product Piracy •Code of Ethics for Advertising •Editorial policy •Ethical Conduct •Protection of Children •Stakeholder Engagement •Digital Inclusion •Impact of Telecommunication Services •Stakeholder Engagement •Standards for Suppliers Telecommunications •Brand Management •Customer Relationship Management •Privacy Protection •Service Development
Slide 43: It’s not all about reporting… It’s about management and business practices.
Slide 44: In the bigger scheme of things… Sustainability and Corporate Responsibility • Acts as a strategic lever • Supports marketing messages & brand values • Supports and underwrites business objectives, business development and business growth • Delivers on shareholder value and wealth • Adds strategic and economic value to the organisation • Creates a new future
Slide 45: Effective CR requires companies to: • Develop guidelines • Build collaborative partnerships • Engage with external stakeholders • Develop indicators to measure progress • Measure results and impacts • Incorporate CR into strategic business decisions and activities • Build social capital among management
Slide 46: Sustainability Trends Reputation vs Risk vs Compliance
Slide 47: What about the recession? • According to a new study from Panel Intelligence, 80 percent of sustainability leaders surveyed (65 execs from Fortune 500 companies) in November say they intend to maintain or increase spending in areas related to sustainability next year. In fact, they reported that sustainability and clean technology spending, as a percentage of corporate revenues, is expected to increase 73 percent through 2010. Another recent study by A.T. Kearney reveals that, as a result of “ecoflation” (based on future analysis of increases in commodity prices, environmental and governmental policy and climate situations), packaged goods companies may expect a reduction in earnings of 19 to 47 percent in the next decade if they do not implement adequate sustainability measures. That’s nothing short of startling. Thankfully, unlike much of the rest of the business world of late, optimism and sound business sense do not seem to be in short supply among corporate responsibility leaders of some of the world’s leading companies. • www.coneinc.com
Slide 48: Sustainability & recession • Responses from 65 sustainability executives of Fortune 500 companies. – – – – – – Sustainability and clean technology spending - as a percentage of corporate revenues - is expected to increase 73 percent through 2010. Eighty-two percent of respondents rated energy efficiency as the most important area of current focus and investment. Corporate spending on sustainable waste management initiatives is expected to grow by 20 percent in 2009, the highest percentage increase of any subcategory. Cost savings, revenue generation and brand strength are the most important drivers of environmental and clean technology initiatives. Nearly 55 percent of respondents observe no financial criteria (i.e. ROI, payback period) when evaluating sustainability projects for their respective organizations. A majority of respondents believe capital remains available for sustainability projects. • • • • Business practices are an additional purchasing influence, as today's savvy consumers are now asking "Is this a good company?" and "What does it stand for?" The environment and economic development are among the top four causes consumers want companies to address, along with health and education Consumers may become activists if companies engage in negative business practices; 85 percent would consider switching to another company's products/services Relevant and compelling communication are key to breaking through www.mckinsey.com
Slide 49: Green is the new black • Sustainability labels, virtual meetings and zero waste are the order of the day • Bottomline - Six Rs – rethink, refuse, reduce, reuse, repair and recycle • Closer tie between Green Marketing and Overall Brand Image • Environmental and social responsibility initiatives will be tied into overall brand communications.
Slide 50: CS crossing the divide • Smart grid takes off – consumers getting serious and off the grid – own water, own heating, own energy, own recycling • Year of the carbon market – While the U.S. hasn’t adopted any federal carbon regulations, 850 U.S. cities representing all 50 states have adopted the standards laid out by the Kyoto Protocol. • Green building sets the code – More and more cities are adjusting commercial building code to lessen the environmental impact of the building. • Banks for the new economy – Motivated in part by the failings of large financial institutions in 2008, banks, particularly smaller firms, will focus on creating long term personal relationships and will invest in things that matter to their members. And right now, members want to bank with sustainable institutions; firms that are showing that they care about their environmental impact.
Slide 51: CS crossing the divide • Green jobs hiring blitz – With more focus on energy efficiency and renewable energy more qualified individuals will be needed to fill empty slots. One study estimated that number to be 4.2 million over the next 30 years. Two sectors expected to lead this job creation are manufacturing and utilities. • Tapping into water conservation – Of the earth’s natural resources, water is one of the most undervalued relative to its diminishing availability. The often easy, but previously overlooked, water efficiency measures are gaining recognition for their ability to save the firm money with little extra cost. • Get on the bus – According to the American Public Transportation Association (APTA), public transit use saw a 50-year high in 2007. Another study found 76% of individuals surveyed support public funding for the improvement and expansion of transit and 80% consider increased investment in public transit as an increase in their quality of life. Millions of government funded dollars are set to expire in 2009, if not used or specific projects began.
Slide 52: CS crossing the divide • Solar’s future luster - While solar installations have predominantly been photovoltaic (PV) systems for home and businesses, utility scale solar farms and concentrated solar thermal plants are set to surge. This growth will be accelerated by an increase in venture capital investment and an extension on the life of federal tax credits. 'Go green’ goes down – Businesses will no longer be able to say they have gone green and have little to show for it. Consumers will want to see the long term sustainable efforts businesses are making. Being green as become more common, which means firms will need to be authentic and internally committed to being sustainable. Biomimicry – a new language, a new future, going back to nature for future sustainable solutions • •
Slide 53: What are people talking about – the Buzz Trend • Global Warming/Climate change • Renewable energy/Alternative fuels • Resource conservation • Carbon Emissions • Pollution • Packaging/Plastic • Transportation • Toxins • Organics www.greenconsumer.com
Slide 54: The future … • THE FUTURE…. – CS will continue to spread across the supply chain and across borders. Climate change, urbanisation, and poverty are global challenges that require global solutions. With their capital, power, and innovative potential, firms have a moral responsibility to help solve these problems. As a result, CS has to consider an ever increasing range of social and environmental factors from around the globe. Finally, globalisation results in an intensified scramble for resources, capital, labour and market share. CS helps companies to raise their attractiveness as a customer, partner, employer, or supplier.
Slide 55: Finding Solutions • CS is no longer just about being good, managing the public image, or improving products: Sustainability and efficiency initiatives save costs and increase the value of the company. The FTSE4Good Index and the emergence of external CS rankings highlight how companies are increasingly assessed in terms of their sustainability and CSR activities. • Solution-oriented CSR is the key vehicle to promote sustainability. CS could be the business blueprint for the future. It will reshape business ecosystems, changing the way companies are organized and engage with their stakeholders. In a customer-driven economy, CSR will be actively managed, an integral part of company strategy, and a hard factor for company success. It will impact the nature of competition, foster the development of sustainability related innovations, and facilitate the emergence of new, more successful, business models. As companies are forced to become more socially and environmentally responsible CSR will move into boardrooms and tighten its influence on decision-making processes. For the future world of business, CS is clearly not a short-term phenomenon, but a trend-driven necessity.
Slide 56: Fad or Trend? • A new class of consumer* – sustainability consumer – 30% of adults in the US – 40% of adults in Europe – “people who value wealth, the environment, social justice, personal development and sustainable living – Make purchasing and charitable decisions based on their own morals – morals they expect the corporations they buy from to respect – Sustainability consumers are behind the international expansion of organic food sales – Sustainability investors make 50% of all investment decisions and are driving socially responsible investments * www.ethicalconsumer.com
Slide 57: CSR Monitor 2007 – Global Study* • Key Findings – Significant numbers of investors take a company’s social performance into consideration when making investment decisions – 61% – In wealthy countries, social responsibility makes a greater contribution to corporate reputation than brand image – 49% of CSR factors compared to 35% for brand image and 10% for financial management – Companies that ignore social responsibility place market share at risk – 42% will punish socially irresponsible companies – Views and behaviors of opinion leaders indicate that consumers social expectations of companies will continue grow – North American consumers represent the most socially demanding market for companies – Two distinct groups of citizens making up a third of the world are engaged in pressurising companies to assume greater social responsibility – conventional activists and social activists *Mckinsey Research
Slide 58: 2009 GlobeScan Report • Consumers in India, Brazil and China scored the highest -- and those in the U.S., the lowest -- for green behavior among the countries included the Greendex survey conducted by Globescan • Green building is on the rise, spurring new technologies that save energy and money while creating more healthful workplaces. • There is a green race taking place in the automobile industry, with every major manufacturer planning to introduce electric vehicles. • The leading consumer product makers and retailers are starting to rigorously assess the environmental impact of their products using sophisticated metrics, sending signals up the supply chain that tomorrow’s products will need to hew to higher levels of environmental responsibility. www.greenbiz.com
Slide 59: Ethical Consumers • Ethical Consumers worry about… – Organic meat, produce and baby food – Fair Trade coffee, tea, bananas, chocolate, honey – Paper/Timber certified as sustainably managed by the Forest Stewardship Council – Energy-efficient light bulbs and renewable energy – Unleaded petrol and low-sulphur diesel – Recycled paper – Landfill and the management of natural resources such as water, the environment and healthy food
Slide 60: But seriously how serious?* • Marks & Spencer – Plan A – Business wide 500M Pound eco-plan • Carbon neutral, no waste to landfill, extend sustainable sourcing, set new standards in ethical trading and help customers and employees live a healthier lifestyle Tesco’s – “making sustainability a significant driver of consumption” 500 M Pound plan – Developing a carbon counter “carbon calorie” value of all products, introduce green loyalty card points for customers who buy organic, fairtrade and biodegradable products, increase range of energy-efficient goods MacDonald’s health drives pays off – sales growth of 5.8% since introducing new advertising campaign introducing healthy eating and exercise Danone, Kellogg’s, Kraft, Nestle, Tesco, PepsiCo, Morrisons have launched 4m Pound campaign to promote GDA labels (guideline daily amount) for healthier eating – committed to produce more responsible food products Kellogg’s Special K products have become mega brands with over 500m Pounds in retail sales per year – Special K bars 286m Pounds per year – 10 000 steps per day has increased brand awareness and market share by more than 35% - “being a responsible corporate citizen is working for us” * Food Review – February 2007 • • • •
Slide 61: More examples GlaxoSmith Kleine GlaxoSmithKline believes slashing prices and sharing patents will help the one in six people in the world suffering from a neglected tropical disease Walmart Ethical retailing – From Evil Empire to jolly green giant Barclays Reducing the number of unbanked and providing access to affordable credit through its Financial Inclusion programme Unilever Establishment of a sustainable agriculture initiative to secure a sustainable supply of raw materials necessary to deliver the business and its brands. Wolseley The development of an innovative new centre for the building and construction sector to showcase technology and products that are designed to address sustainability concerns.
Slide 62: What is a corporate’s responsibility? What is typically corporate socially responsible behavior and what is not?
Slide 63: Lets Talk: What about Tiger Brands and the R100 million fine? Sasol and the €100m fine?
Slide 64: Industries in the spotlight • • • • • • • • • • • • • • • • • • Tobacco and Liquor Advertising – addiction to nicotine and alcohol (BAT, Distell) Total ban of advertising to children (Youth brands) Kellogg's Obesity amongst world population - McDonalds Consumer Boycotts – Gillette and L’Oreal – animal testing Heinz – tuna fishing nets harming dolphins Lesbian/Gay rights – Phillip Morris – US election campaigns Caterpillar – War in Iraq Nestle, Nescare and Nescafe – from babies to mothers Starbucks – from coffee to drugs Nike and Gap – child labour Coke – anti globalisation – more precious than water Sarah Lee – food porn Enron, Worldcom, Parmalat – internal corruption Cape plc – exploited mineworkers in unhealthy asbestos mines De Beers – Blood diamonds in Africa Saambou, Masterbond. Fidentia and Leisurenet – defrauding investors Banks – excessive credit, exorbitant fees Telkom - monopoly
Slide 65: How may liters of water does it take to make one hamburger? Or 1 tin of coke/beer?
Slide 66: Determining Sustainability
Slide 67: What best describes Sustainable Development/CR/CC in your company? Stage 5 Transforming Strategic The way we define business: Embedded in the corporate DNA Stage 4 Integrated Commitment An integrated concept: TBL, + economic, social and environmental Factors Stage 3 Innovative Coherence Stakeholder Engagement and Management Stage 2 Engaged Capacity Functionality: Philanthropy, community relations Environmental protection Stage 1 Elementary Credibility Just the basics: Jobs, Profit, Taxes
Slide 68: Path to Corporate Responsibility (Harvard Business Review) 5 Civil Stage Collective actions Advocacy Education Practices 1 Defensive Stage Unexpected Criticism Activists, Media, Customers Responds – via crises communications strategy 4 Strategic Stage Realign strategy to address business practices Competitive Edge 2 Compliance Stage Policies, Reputation Management, Risk Management King II, JSE SRI, GRI, BEE, etc. 3 Managerial Stage Standards – Past PR & Communication
Slide 69: Development of Citizenship Outside In/Inside Out Stage 1 Compliant Relating to society: Outside In Issues Management Stakeholder Relationships Transparency Defensive Stage 2 Engaged Reactive Policies Interactive Stage 3 innovative Responsive Programmes Mutual Influence Public Reporting Responsible to Stakeholders Business Case Steward, on top of it Cross functional coordination Stage 4 Integrated Pro-Active Systems Partnership Stage 5 Transforming Defining Unilateral MultiOrganisational Alliances Full Exposure Flank Protection Jobs, Profits & Taxes Legal Compliance Lip service, out of touch Marginal: Staff Driven Public Relationships Philanthropy, Environmental Protection Reputation Assurance Responding to society: Inside Out Citizenship Concept Strategic Intent Leadership Sustainability or Triple Bottom Line Value Proposition Champion, in front of it Organisational alignment Change the Game Market Creation or Social change Visionary, ahead of the pack Mainstream: Business Driven Supporter, in the loop Functional ownership Structure
Slide 70: Defining Sustainability • Discussion – non-negotiables – Senior Management commitment and understanding – Establishing sustainability objectives – Leadership on key issues – Establishing partnerships – Integration of sustainability throughout the Organisation – Sustainability management systems , measurement and reporting – Framework for stakeholder engagement – Enabling innovation – Building capacity – Effective corporate governance
Slide 71: What is good citizenship? What are corporate responsibilities?* • Ethics, governance and acting responsibly • Responsibility towards society • Serving broader stakeholder interests • Good HR Practices and employment equity • Good environmental practices • Product and market stewardship • Focus wider than the pursuit of profits • Assist government with socioeconomic agenda • Ensuring long term business survival *Corporate Citizenship Handbook
Slide 72: Inhibitors of Good Citizenship • Lack of financial resources • Lack of time to understand and implement • Poor awareness and knowledge of the subject area • Lack of skills and understanding of the subject area • Poor management buy-in in the importance of responsible business practices • Employees not interested – see it as a burden • No real business benefit evident to executive management • Poor executive support
Slide 73: Its really very simple …. sustainable and responsible business practices means… • Discontinuing product offerings that are considered harmful but not illegal • Selecting suppliers based on their sustainable business practices • Choosing manufacturing and packaging materials that are the most environmentally friendly • Providing full disclosure of product content • Developing programs that support employee well being • Establishing guidelines for marketing to children • Providing increased access for disabled populations • Respecting privacy of consumer information • Developing process improvements such as eliminating the use of hazardous waste materials • Ensuring everybody can afford your product
Slide 74: Is this serious stuff? Is anyone paying attention to this? • Sustainability strategy and management – Anglo American, Anglo Platinum, Exxaro, Kumba, Liberty, Mondi, Pick & Pay, Santam • Stakeholder engagement – Engen, Sasol, Exxaro • HR management and development, skills development and training, BEE & Transformation – Old Mutual, Rand Merchant Bank, Liberty Group, Absa, Engen Enterprise Development – Anglo Plat & American Customer Care and Satisfaction – Nedbank & Liberty Supply Chain Management – Metropolitan, SAB Emissions, air pollution and carbon footprint – ArcelorMittalo, Exxaro, Mondi • CSI – Absa, Engen • Energy use, efficiency and renewables – Anglo American, Engen, Exxaro • • • •
Slide 75: If its any consolation… It’s a journey. Some of us are starting out Some of us are re-aligning and re-focusing, re-adjusting Some of us are perfecting Some of us are benchmarking already.
Slide 76: Standards & Compliance Frameworks & Guidelines Industry Initiatives Refer to Handout
Slide 77: Laws and compliance International Prescribed laws, aspirational principles conventions and standards •Universal Declaration of Human Rights •International Labour Organisation (ILO) Standards •ISO 9000 •ISO 14001 •OHSAS 18000 •OECD Guidelines •Ecocert •Fairtrade and Ethical Trading Initiative •Kyoto Protocol •Equator Principles •AA1000 •Global Reporting Initiative •AA 1000 Series •SA8000 Standard •UN Global Compact •Sigma Guidelines •Dow Jones Sustainability Index •FTSE4Good Index •“Region-specific” Initiatives Local •SA Constitution & Bill of Rights •Companies Act •Basic Conditions of Employment Act •Labour Relations Act •Occupational Health & Safety Act •National Environmental Management Act •Mineral & Petroleum Resources Dev. Act •National Water Act •Directors Fiduciary Duties •Common law & judicial precedent •NOSA grading •National Small Business Act •Environmental Management Act •King II •JSE Listing Requirements •JSE SRI Index •New Partnership for Africa’s Development (NEPAD) Guidelines Transformation Initiatives •Broad Based BEE Act •Employment Equity Act •Skills Development Act •Industry Charters •Preferential Procurement Act
Slide 78: Don’t let it scare you • Select appropriate standards by asking – What material challenges face your company? – Are there any codes or standards that you cannot avoid? – What are the expectations of the marketplace and your shareholders in relation to the management of non-financial issues? – Categorise the standards…which standards relate to the different stages of business management i.e. planning, implementation, accounting and reporting – or categorise according to functional business unit i.e. HR, marketing etc? – Which business strategies and management practices, add value and economic growth and contribute to social cohesion? • In choosing a standard, companies may need to take in more than one context, i.e. the industry, geography, political context, regulatory environment • The chosen standards should further business goals and strategy and improve business efficiency
Slide 79: One step at a time… Governance Report Assurance JSE-SRI; King III, Companies Act GRI – www.globalreporting.org AA1000 Assurance Standard AA1000 Stakeholder Engagement Standard Issues Management Tool www.accountability.org.uk www.cdproject.net Equator Principles (financial) Ethical Trading (retail) Forest Stewardship (paper) Carbon Disclosure Project Industry Standards IT DEPENDS ON WHO YOU ARE IT DEPENDS ON WHAT YOU WANT TO DO/ACHIEVE (Industry)
Slide 80: Industry Based Initiatives • • The rise of industry based initiatives in CSR is one of the major transformations in the landscape of CSR Momentum is growing in developing countries around sustainability issues, and industry initiatives provide an architecture that allows for consultation between – Developed and developing countries – Private and public sectors – Producers, buyers and retailers • Industry based initiatives can be useful in Establishing collective to-do lists Identifying comparative advantages of individual companies Defining roles for individual companies Distributing CSR activities by working in partnership Stakeholder engagement is easier Providing common systems for monitoring, verification, certification and reporting Building consumer confidence and managing reputation risk better than a single company can on its own – Providing economies of scale and access to public funding for structural changes within an industry, within supply chains or regions – Serving as portals for dissemination of information in a coordinated manner – – – – – – –
Slide 81: Global Compact • The UNGC is a multi-stakeholder platform rooted in universally accepted conventions – – – – Human Rights Labour Standards Environmental Principles Anti Corruption Principles • More than 6000 participants in 120 Countries • SA – Sasol, Nedbank, Eskom, etc. 40 signatories • SA – Part of GRI and Sustainability Reporting process
Slide 82: UNGC – Membership Commitments • Leadership commitment (board & management) – Letter to UN • Willingness to engage in continuous performance improvement (set strategic & operational goals, measuring results, communication internally and externally) • Openness to dialogue and learning around critical issues (participate in events local and global, engage in stakeholder engagement and dialogue) • Commitment to transparency, accountability and public disclosure (annual COP – Communication on Progress) – COP – Report against at least 2 indicators • Labour, environment, human rights, anti corruption
Slide 83: UNGC – COP Reports • CEO Statement of commitment • Description of practical implementation of 10 principles (1st year only 2 indicators) • Definition of performance indicators & measurement of outcomes (GRI/ETHOS) • Post on GC website and own plus communication to stakeholders • Verification – external consultants, stakeholder feedback, peer review
Slide 84: Case Study – Global Sports
Slide 85: Case Study – Danisco (2 indicators – 1st report)
Slide 86: Where do we start What is the process
Slide 87: In summary… Allowing external stakeholders to Influence corporate strategy to ensure the future sustainability of the company and all its stakeholders. Its about owning up to your responsibilities Changing and adapting business strategy and operations to support the new responsibilities Its about the learning in the process of becoming more responsible It is a new awareness and consciousness
Slide 88: Managing CR – the process… • Engaging Stakeholders • Embedding citizenship in organisation – Structures and resources for managing corporate citizenship – CEO involvement – Management commitment • Communicating citizenship – Reporting – Referencing codes and standards – Verifying reports
Slide 89: Elements of integration Stakeholder Engagement Management Systems Reporting and Verification
Slide 90: Let’s make it work! • Engaging with stakeholders – By obtaining input and feedback, management systems can be developed and changed • Embed management systems and actions – Developing a framework to translate policy into management systems and actions, and to entrench responsible and considerate behavior across all management structures • Reporting should follow performance – Reporting becomes a logical extension of responsible citizenship practices, using it as a tool to support the process, focusing on issues that are material, setting targets derived from action plans and tracking performance
Slide 91: Sustainability Process 1. Identify Stakeholders 10. Assess, Redefine and re-map 2. Initial Identification Of material issues 9. Measure, monitor And assess performance 3. Determine and define Engagement, objective and scope Stakeholder Engagement 8. Operationalise And internalise learnings 4. Establish engagement Plan & period schedule 7. Understand material Aspects, identify opportunities And risk 6. Build and strengthen capacity 5. Determine and define Ways of engaging that work
Slide 92: Sustainability Process (1) http://www.wbcsd.org/web/images/case/Alcoa/sustainability-process.jpg
Slide 93: Sustainability Process (2) www.fmcg-sustain.com.au/.../approaches/
Slide 94: Sustainability Process (3)
Slide 95: Sustainability Process (4) www.melbournewater.au
Slide 96: Case Study: SAP
Slide 97: • Strategic Sustainability • Strategic Sustainability is: – integral to the business model and fundamental to the business – a source of differentiation, builds organisational reputation with key stakeholders and helps branding – gives a leading edge through innovation, patents, licences, low cost, speed to market and first mover advantage – hard to copy – builds margin and returns via increased prices, lower costs, lower assets; and importantly – it is likely to be specific to the company, in the organisation’s upstream business processes and is often externally focused Tactical Sustainability, on the other hand, is: – an ‘add on’ and does not impact core business – every company can do it. It is not a source of differentiation; it offers no real leading edge (and in the case of carbon will become purely a compliance issue), and is easy to copy by competitors. It does not build margin because all firms use it and customers can compare and bargain. Tactical Sustainability is likely to be generic to the industry, in the organisation’s downstream processes and often internally focused.
Slide 98: What Should You Do? • Develop Capability: – Sustainability is becoming more important. Organisations need to develop the capability to scan the external environment for changes in legislation, pressure from key customers, consumers and competitors, cost increases in key inputs, technology opportunities, etc. • Bottom Line Focus: – During this economic crisis, economic performance is even more important. Set sustainability strategies with higher expectations of economic benefits and focus on those sustainability initiatives that attract customers and consumers, and address costs, without being capital intensive. • Link to Business Strategy: – Consider how your approach to sustainability aligns with your overarching business strategy and differentiates your offer and market position from your competitors. The more strategic your approach, the greater the benefits will be. • • Set Targets: – Research / develop targets, measures and controls and report regularly. Resource Appropriately: – If you have a sustainability strategy, allocate good people, assign clear responsibilities, clarify priorities, coordinate/simplify the multiple initiatives , and share/replicate successes. • Build Capacity: – If you don’t have a sustainability strategy, educate managers and seek out best practice (including results), pilot various approaches and demonstrate results, audit key areas to identify improvement opportunities, prepare a strategy to prioritise and coordinate the overall approach.
Slide 99: Design and execute an implementation plan • • • • • • • • • • Develop objectives and communicate objectives (communications) Review organisational structure to provide for new processes and systems (human resources) Create committees for specific development areas, and ensure it is part of job descriptions. Reward systems should also be developed. (management) Business planning must be modified to reflect new priorities Management information systems must be enhanced to reflect new information requirements (information technology) Marketing activities require enhanced market research efforts, which influence the way products are designed, produced, packaged, marketed and promoted (marketing & sales) Production processes and operating procedures must be assessed against regulations, industry practices or new standards (production) Regulatory requirements must be identified (corporate affairs) Managers responsible for procurement must reassess (buyers) their choice of suppliers, to ensure sustainable and responsible objectives are being met right throughout the supply chain Financial planning should consider capital requirements for process changes and the effect of new mechanisms (finance) It involves the whole organisation!
Slide 100: Implementation Groups • Define governance structures and management systems – The Board + Committees – Board structure, accountability, remuneration – Board composition Stakeholder management – Identify stakeholders – Engaging stakeholders – Identifying stakeholder requirements – Responding to stakeholders concerns Reputation Management – Identify and assess issues influencing reputation – Conduct Corporate Reputation Audit – Evaluate shareholder and stakeholder activism issues Risk Management – Identifying, evaluation, managing and monitoring material risks pertaining to sustainability – Implementing governance and risk management plan Reporting on material risks and progress on measures www.volkswagen.com • • • •
Slide 101: Process • Sensitising – becoming aware of the issues • Discovering – becoming aware through experimentalism – small projects and concrete projects • Embedding – linking structure and strategy with systems • Routinising – linking CR to the company’s core competencies
Slide 102: Develop a supportive corporate culture • Re-training may be required • Exposure to new stakeholder groups may be required • The importance of change and the impact of change needs to be explained to all levels within the organisation • The lead must come from senior executives and the board
Slide 103: Develop measures and standards of performance • Industry charters, BEE scorecards are already public measurement tools, others will have to be developed Other compliance issues both global and local reporting initiatives need to be studied to ensure relevance and appropriateness of reports Industry specific sustainability initiatives need to be evaluated: – – – – – Clothing Industry (Ethical Clothing) Retail Industry (Fairtrade) Mining Industry (Kimberly Process) Petrochemicals & Manufacturing Industry (Kyoto Agreement) Liquor Industry (Dublin Principles) • •
Slide 104: Embedded • For CR and sustainability to become part of the business, Sustainability company leadership must – Take ownership of the consequences of corporate behaviour and the company's interconnectedness in society – Understand the broad social and environmental risks, challenges, opportunities – Understand the possible progression and consequences for the company of economic, environmental and social impacts – Drive appropriate responses as an integral part of the core business strategy and long-term value – Embed CR into corporate value systems
Slide 105: Developing a strategy • Benchmark locally • Benchmark globally • Benchmark against industry • Benchmark against competitors • Benchmark outside the industry www.cadbury.com
Slide 106: Effective Sustainability Management • Be sure to get approval and buy-in from the executive • Appoint a champion to drive the process • Engage senior management and make them understand the rational for the company’s sustainability agenda • Make sustainability issues relevant for the management team in the context of their business operations • Ensure that they are involved in co-creating the companies sustainability policies, criteria and measures • Fine-tune, with management a population of sustainability measurement indicators that are appropriate and relevant for the business • Agree on targets against which to be measured in relation to each sustainability indicator • Embed the process in the organisation’s management system in a rigorous and structured way • Measure, monitor and provide feedback on a regular basis
Slide 107: This is going to cost money… • Indicators of performance – Realistic levels of expenditure (how much?) – Expenditure within the definition of CR & CS – Continuity of expenditure – Staff participation – Partnerships – Stakeholder participation – Application of non-cash resources – Reporting on outcomes – Reporting on business benefits www.dfic.co.uk
Slide 108: Stakeholder Engagement
Slide 109: Stakeholders Customers Owners Employees Media Consumers Suppliers Shareholders/ Investors Local Communities Corporation Financiers Society Local Authorities Provincial Government Future Generations National Government Lobby Groups Environment
Slide 110: Stakeholder Engagement and Management • Identify all stakeholders • Find out what are the imperatives • Define the key drivers (needs and expectations) • Enter into dialogue • Understand the challenges, obstacles and conflicts • Develop indicators of performance • *www.stakeholdermap.com
Slide 111: Coca Cola Stakeholder Engagement Methodology *www.cocacola.co.uk
Slide 112: Key Challenge 1. Failure to identify and engage with stakeholders is likely to result in sustainability reports that are not suitable and, more damaging, that lead to poor performance by (a) damaging customer satisfaction and perceptions, (b) adversely affecting employee motivation and morale, (c) damaging relationships in the supply chain, and (d) possibly compromising an organization's reputation with the wider community. 2. Balancing stakeholder expectations in a way that does not compromise the long-term sustainability of the organization.
Slide 113: Stakeholder engagement should inform future business strategies • It assists with priority determination • Confirms material risks • Set sustainable development policies and objectives • Developed by internal stakeholders in response to external stakeholder expectations • Responses to stakeholder issues through policies and strategies must be clear, concise and measurable – determine level of aggregation www.gsk.com
Slide 114: Determining Risks, Impacts, Targets Materiality
Slide 115: Determine Risks
Slide 116: Materiality, Impact & Risk www.kovet.hu
Slide 117: Materiality (1) www.segro.com
Slide 118: Materiality (2) www.merck.com
Slide 119: Materiality (3) www.intel.com
Slide 120: Materiality (4) www.omron.com
Slide 121: Risk Profiles (5) www.gtnews.com
Slide 122: AIG Risk Profiling (6) www.aig.com
Slide 123: Core - Basic Working with indicators (1) Specific - Basic Marketplace •Customer complaints about products and services •Advertising complaints upheld •Upheld cases of anti-competitive behaviour •Customer satisfaction levels •Provision for customers with special needs Environment •Overall energy consumption •Water usage •Solid waste produced by weight •Upheld cases of prosecution for environmental offences •CO2/greenhouse gas emissions •Other emissions (eg Ozone, Radiation, SOX, NOX etc.) •Net CO2/greenhouse gas measures and offsetting effect Workplace •Workforce profile by Gender •Workforce profile by Race •Workforce profile by Disability •Workforce profile by Age •Staff absenteeism •Number of legal non-compliances on health and safety and equal opportunities legislation •Number of staff grievances •Upheld cases of corrupt or unprofessional behaviour •Number of recordable incidents (fatal and non-fatal)including sub-contractors •Staff turnover •Value of training and development provided to staff •Perception measures of the company by its employees •Existence of confidential grievance procedures for workers Community •Cash value of company support as % of pre-tax profit •Individual value of staff time, gifts in kind and management costs Marketplace •Complaints about late payments of bills •Average time to pay bills to suppliers •Proportion of suppliers and partners screened for human rights compliance •Proportion of suppliers and partners meeting expected standards on human rights •Perception of the company's performance on human rights by its customers •Proportion of company’s managers meeting the company’s standards on human rights within their area of operation •Perception of the company’s performance on human rights by its employees Environment •Use of recycled material •Percentage of waste recycled Workplace •Pay and conditions compared against local equivalent averages •Workforce profile compared to community profile for travel to work area for gender, race, disability and age •Perception of the company's performance on human rights by its employees Community •Perception of the company's performance on human rights by the local community
Slide 124: Working with indicators (2) Core Advanced Marketplace •Social impact, cost or benefits, of the company’s core products and services Environment •Environmental impact over the supply chain •Environmental impact, costs or benefits of companies core products and services Workplace •Impact evaluations of the effects of downsizing, restructuring etc. Community •Impact evaluations carried out on community programmes •Perception measures of the company as a good neighbour Specific Advanced Marketplace •Customer loyalty measures •Recognising and catering for diversity in advertising and product labelling Community •Project progress and achievement measures •Leverage of other resources
Slide 125: Fast Track Learning
Slide 127: Corporate Responsibility Mistakes • Lacking vision – It is not about “where are we now and what might we do about CR”. – It is about “where do we want to be in 10 years time” – Then it’s about “what and how do we need to change to bring about our vision for the next ten years” • Oblivious to the scale of required change – The magnitude of change, the required new creative and innovative thinking is not about selectively modifying existing business practices – It is about new, more responsible and smarter ways to create shareholder value and wealth • Sub strategic – It is not a staff function at a sub-strategic level with little connection to the strategy of the business, its core competencies and capabilities or management know-how – It requires an understanding of the significance of the range of issues that contribute to CR and the ways that it may affect business. This means to address the possibility of changing systems in the core of the business, changing incentive systems, changing the focus of decision-making, and management systems in the core of the business while implementing CR projects in specific business units
Slide 128: CR Mistakes (cont’d) • Unsophisticated view of CR – Many companies do not separate the two roles of CR – protecting the assets of the firm and providing a basis for the creation of new value • Inability to hear outside voices – CR demands new views from a range of stakeholders. With no clear distinction between value protection and value creation, it is not easy to engage stakeholders in appropriate ways, to ask them appropriate questions and to listen, understand and adhere to their suggestions • Sticking with old managerial competencies – Few have recognised that the competencies required in the past may not meet the needs of the future. I.e. stakeholder engagement, product development, environmental management, risk management are new management skills development areas • One worldview approach – Many CR programs, focus only or a company’s home country specific compliance requirements. This does not do justice to the real difference between CR agendas across countries, or specific communities and stakeholders. Excessive uniformity is an almost universal mistake in CR.
Slide 129: CR Mistakes (cont’d) • Uneven approach – Making substantial commitment and achieving good CR performance in some divisions, or business areas, while other parts of the company might view it as irresponsible. E.g. many companies have made carbonneutrality pledges without tackling other big CR issues such as child labour or unsafe working conditions. – In doing so they often create the impression that their CR are driven by image considerations rather than a deep-seated conviction that requires CR as a core business asset. • Non-participative management – Many CR programs have been formulated and implemented through topdown directives, not matched by the requirements to make CR a part of company culture and procedures. – Best practice requires companies to manage CR through a network of ‘change champions’ but this is rarely practiced • Failure to see CR as innovation – The failure to see that CR is best practiced on a continuous innovation process that links CR to a company’s business model. Many companies are seeking to be more innovative for competitive reasons, yet few regard their CR programs as directed to value protection or value creation or as innovation in its own right.
Slide 130: Working with actual reports and strategies Practical Session
Slide 131: Best Practice Awards and Recognition
Slide 132: Accountability Rating • Top 10 – 2006 – – – – – – – – – – BHP Billiton Anglo Platinum Anglo American Nedbank Group Sasol SAB Miller Anglogold Ashanti Santam Barloworld Kumba Resources • Top 10 – 2007 – – – – – – – – – – BHP Billiton Sasol Lonmin Anglo American Nedbank Group Anglo Platinum Gold Fields Barloworld Anglogold Ashanti Santam
Slide 133: Accountability Rating • Assessed according to – Strategy, Governance, Performance Management, Stakeholder Involvement, Public Disclosure, Assurance • Key Trends – Materials sector – mining, chemical, metals and glass, oil and gas – best performing sector – Followed by Financial sector (38%) and industrial sector (35%), retail/FMCG sector (29%)
Slide 134: SA – Accountability Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BHP Billiton Anglo Platinum Anglo American Nedbank Group Sasol SAB Miller Anglogold Ashanti Santam Barlowworld Kumba Resources Harmony Gold Massmart Holdings Aveng Sappi Impala Platinum Holdings Telkom SA Absa Group Pick & Pay Stores Standard Bank Group Woolworths Holdings MTN Group Bidvest Group Gold Fields Metropolitan Holdings Sanlam 78.6 70.1 69.4 67.4 66.0 61.6 54.9 54.7 54.2 53.8 52.9 51.3 49.1 48.9 48.4 48.0 46.6 46.6 45.7 45.1 43.0 41.7 41.7 41.1 40.0 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Edgars Consolidated Stores Richemont Securities Investec Ltd Investec Plc Unitrans Firstrand Group AECI Allied Electronics Group Liberty Group Network Healthcare Holdings Imperial Holdings JD Group Old Mutual Nampak Datatec Super Group Dimension Data Holdings Shoprite Holdings Murray & Roberts Holdings New Clicks Holdings Steinhoff International Holdings Mittal Steel The Spar Group Naspers Remgro 39.7 38.8 38.1 38.1 37.4 37.0 36.4 35.5 34.8 32.8 31.7 30.1 25.2 24.9 24.1 24.0 22.6 22.5 20.0 19.3 19.0 18.9 16.9 14.5 13.0
Slide 135: SRI Index • High environmental impact classification – 2006: Anglo American PLC, Anglo America Platinum Corp Ltd, Impala Platinum Holdings Ltd, Oceana Group Ltd, Sasol Ltd, Tongaat-Hulett Group Ltd – 2007: Anglo American, Anglogold Ashanti, Aveng, Gold Fields, Group Five, Highveld Steel, Illovo Sugar, Merafe Resources, Sasol, Tongaat Hulett • Medium environmental impact classification – 2006: Edgars, Medi Clinic, Telkom, Woolworths – 2007: Massmart • Low environmental impact classification – 2006: Liberty, Nedbank, Remgro – 2007: Absa Group, African Bank Investments • Set criteria to measure environmental, social, corporate governance and broader economic practices - Also consider policies, management, performance and reporting
Slide 136: Others - SA Results • SA Companies on the Dow Jones Sustainability World Index – African Bank Investments Ltd, Investec Ltd, Nedbank Group Ltd, Bidvest Group Ltd • Good Governance Awards – Focuses on remuneration practices, corporate ethics and integrity, risk management, BBBEE and transformation • Overall Winner - 2006 – FirstRand Group – 2007 – FirstRand Group
Slide 137: SA Sustainability Reporting Rewards • Ernst & Young Excellence in Sustainability Reporting – 2006: Sasol (1st), Anglo American Platinum (2nd), Bidvest (3rd), BHP Billiton(4th), Kumba Resources(5th) – 2007: Sasol, Barloworld, Massmart Holdings, Nedbank Group, Absa Group, Telkom, Kumba Resources, Anglogold Ashanti, Edgars Consolidated Stores and Aspen Pharmacare Holdings. – Focuses on sustainability context, report content and boundary, triple bottom line impacts, report quality and effectiveness, assurance and credibility • ACCA South Africa Awards – Anglo Platinum, Spier (1st runner up), African Bank & Sasol (jointly 2nd runner up), Woolworths (best improved report), Massmart (best newcomer) – Focus on completeness, credibility, communication
Slide 138: Reporting
Slide 139: Reporting Process
Slide 140: Why report? • • • • • • • • • In response to pressure from advocates and communities related to specific events or business practices It is an effort to strengthen the reputation and market competitiveness, Maintain the ‘licence to operate’ Demonstrate a serious commitment to a code of conduct to which organisations subscribe Maintain and strengthen trust with community and advocacy groups, investors, consumers and other stakeholders Link disparate functions such as finance, marketing, R&D and operations into a more strategic vision and operation, opening new conversations that pave the way for discovery and innovation Identify trouble spots and unanticipated opportunities, in supply chains, among customers, communities or regulators, or in the areas of reputation and brand management Access and measure the value of sustainability practices in the organisation in relations to the organisation’s overall business strategy and competitiveness Reduce share price volatility and uncertainty occasioned by surprise, untimely or incomplete disclosure
Slide 141: From Annual Report to Sustainability Report • Annual financial reports now need to include environmental, social and economic impact and not just focus on publishing of historical financial results. – Description of commitment to economic, environmental and social goals – Performance against benchmarks, targets and industry norms – Major challenges for the organisation in integrating financial performance with environmental and social performance – Percentage of board directors that are independent, non-executive directors Profitability – Increase/decrease in retained earnings at the end of the period, used to calculate return on average capital employed – Total recycling and reuse of water – Organisation’s indirect economic impacts Taxes and subsidies – Subsidies received broken down by country or region – Total sum of all taxes of all types paid broken down by country or region • •
Slide 142: Reporting (cont’d) • Corporate social responsibility policies – Externally developed voluntary charters or principles to which the organisation subscribes – Policies and/or systems for managing upstream and downstream impacts – Approaches to stakeholder consultation and frequency – Awards received relevant to social, ethical and environmental performance • Restrictions – Descriptions of policies including child labour – Descriptions of policies, guidelines and procedures to address the needs of indigenous peoples – Amount of monies paid to political parties and institutions whose prime function is to fund political parties and candidates
Slide 143: Reporting (cont’d) • Director liability and future expectations – Explanation of whether and how the precautionary approach or principle is addressed by the organisation – Status of certification pertaining to economic, environmental and social management systems – Explanation of the nature and effect of restatements of information provided in earlier reports and the reasons for such restatements – Description of policy for preserving customer health and safety during the use of products and services
Slide 144: Reporting (cont’d) • Key performance indicators for balanced scorecards – Percentage of materials used that are wastes – Direct energy use segmented by primary source – Standard injury lost days, absentee rates and fatalities • Preferred supplier standards – Percentage of contracts that were paid in accordance with agreed terms – Descriptions of policies, guidelines, corporate structure and procedures to deal with all aspects of human rights – Performance of suppliers relative to environmental requirements • Tradable permits – Greenhouse gas emissions – Use and emissions of ozone-depleting substances – Significant environmental impacts of transportation used for logistical purposes • Voluntary regulations and standards – Location and size of land owned, leased or managed in biodiversity rich habitats – Changes to natural habitats resulting from activities and operations and percentage of habitat protected or restored – Voluntary code compliance, product labels or awards with respect to social/and or environmental responsibility that an organisation is qualified to use or has received
Slide 145: Linkages between sustainability and financial reporting • Sustainability reporting complements financial reports with forward looking information that can enhance the report and the understanding of key value drivers such as human capital formation, corporate governance, management of environmental risks and liabilities and the ability to innovate • It shows an understanding of the external environments (products, labour and capital markets and regulatory structures) in which the company conducts its business • It assesses the elements that underpin the company’s competitive advantage (through cost leadership and product/service differentiation and the formation of intellectual capital) • It is about disclosing known future uncertainties and trends that may materially affect financial performance
Slide 146: Reporting Research* • Many reports still do not address relevant core business issues • Many reports fail to address the biggest sustainability issues such as sector-specific impacts and global issues such as dependence on fossil fuel, human rights and labour issues • Mainstream investors are developing a genuine interest in sustainability reporting as a means to evaluate long term prospects • Local, national and global priorities and the needs of a broader group of stakeholders need to be reflected in reports – many reports do not show evidence of adequate engagement with stakeholders, reports need to move away from a summary of corporate priorities • Communication needs to be thorough and new media present many opportunities to interact with stakeholders • External assurance is the only way to ensure credibility in the future *www.corporateregister.com *acca.com
Slide 147: Key Trends - Reporting • Learning curve – Many reports stress that they are taking the first steps in integrating environmental, social and economic factors into company policies and operations or that they are just learning how to do sustainability reporting. Reports are full of short stories on different company projects or programs but include few numbers Most reports do not indicate how information was collected Several reports provide little meaningful data The absence of targets means that the progress made towards sustainability cannot be measured Most rapports seem to be put together by communications team and contain little more than broad policy statements and in some cases reference to global agreements and events Few reports show how input from different stakeholders has improved performance Reports tell only one part of the story, and failure to get external verification supports the notion that the report is an attempt to ‘greenwash’ the message • • • • • • • Anecdotal (little data) – Data collection – – – Level of detail Targets Credibility – Stakeholder participation – – Honesty and admitting limitations
Slide 148: Hot topics in reporting • • • • • • • Financial Analysts – How do corporate reporters seek to engage the financial world? Verification & Assurance – The GRI will drive market demand, but how can real value be added? Supply Chain – As value webs globalize, how can they be made transparent? Emerging Economics – Who is reporting on – and in – less developed regions? Economic Bottom Line – Beyond financial accounting, what economic information do we want? Brands & Reputation – How does reporting link to corporate and brand reputation and value? Governance – What are the appropriate roles for boards and top executives?
Slide 149: Industry focus on Reporting* Financial Sector – Encourage socially responsible lending in emerging markets, growth of sustainable asset management, credit and insurance activities • Consumer – food & beverage/ trade & retail – Poor labour standards in supply chains and food safety, issues associated with obesity and consumer health • Oil & Energy – Climate change, verification of GHG emissions • Chemicals & Pharmaceuticals – Polluting and hazardous incidents, affordability and access to medicines, patent challenges • Heavy Industry – Indigenous employment, gender balances, • Telecoms & ICT – Digital divide, impact on public policy, life-cycle analysis of products *KPMG report on CR Reporting •
Slide 150: Emerging Reporting Frameworks • Triple Bottom Line Framework – Economic, Social, Environmental Context • Stakeholder based Framework – Issues, expectations, targets, indicators context • Internally based Framework – Marketing, Communications, Compliance Management – supply side, sell side context • Topical issue based Framework – Industry issues – Blood Diamonds – Cleaner Fuels, Climate change, etc