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Our first ever magazine. Appalling layout, but some still-relevant articles!

Our first ever magazine. Appalling layout, but some still-relevant articles!

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Ethical corporation Issue One, December 2001 Ethical corporation Issue One, December 2001 Document Transcript

  • Issue 1 • December 2001 Free news and analysis at www.ethicalcorp.com Plus Mark Wade Wally Olins An exclusive Interview with the founder of the Shell Report The legend talks to Ethical Corporation GoodCorporation’s CEO FTSE4Good The options for effective reporting standards Signs of an investment sea change? and special interviews with Rob Lake Henderson Global Investors Creating Trust Emma Howard Boyd The leading thinkers on CSR and brand management Jupiter Asset Management Genoa 2001: Would you like this to happen outside your HQ? w w w .e t h i c a l c o r p .c o m
  • December 2001 Ethical Corporation magazineEditor’s notes elcome to the first edition of Ethical Corporation magazine, the first independent by-industry, for-industryW briefing on the business case for corporate social and environmental responsibility. Our objective is to serve the growing demand for business intelligence from large enterprises about who’s benefiting from imple-menting ethical practices right through their companies and how they’re doing it. You can subscribe free to this magazine by simply filling in one of the reply cards inside or by visiting our websitewww.ethicalcorp.com. In this issue we speak to a broad cross section of industry experts and analysts to find out why companies like Shelland the Co-operative Bank have embraced corporate responsibility and hear the advantages they’ve gained. We’re alsotalking to leading thinkers such as Warwick Business School and the New Economics Foundation for a cross-industry per-spective. Investors and stakeholders are pushing these issues where it matters - with their cash. Find out what some of theleading fund managers like Henderson and Jupiter have to say about CSR involvement and what they’re looking forfrom your company. As branding supremo Wally Olins puts it, business has moved to the front pages, and now is the time for you toaddress the issues in your corporation. Let us know if you would like your company to be interviewed for next month’s issue or if you are interested incontributing an article. Meanwhile, enjoy the first issue!Toby WebbEditor Contents 4| Wally Olins on ethics and product differentiation Ethical Corporation magazine 6 | The man from Del Monte, he say ‘good’ is published monthly by 7 | Leading think tank NEF gives us its view of profits and ethics FC Group 9 | GoodCorporations CEO gives us the standards lowdown 3rd Floor, Black Lion House 45 Whitechapel Road 10 | CorporateCulture suggests 10 steps to CSR success London, E1 1DU 12 | We speak with Mark Wade, Founder of the Shell Report United Kingdom 14 | Rob Lake, Henderson Global Investors, on global SRI Publisher 15 | Warwick Business School on the next generation of executives Christian Braun christian@ethicalcorp.com 17 | FTSE4Good - measuring a sea change in investment? We ask FTSE’s Gareth Parker +44 (0)20 7375 7153 18 | Emma Howard Boyd, Jupiter Asset Management, on changing attitudes to SRI 19 | CSR Duo, Richard Aylard and Jordana Friedman, Burson Marstellar Editor Toby Webb 21 | Publish & be praised, by Flag toby@ethicalcorp.com 22 | Ethical brand and that customer base: we talk to the Co-operative Bank +44 (0)20 7375 7561 24 | Real Ethics, Robert Jones Design 25 | New resources - helping you formulate your strategy Alex Chilton Design © Copyright 2001 First Conferences Ltd. All rights reserved. This document contains original material protected by copyright. No unauthorised use of material alex@alex-chilton.co.uk herein may be made without the prior consent of First Conferences Ltd. Ethical Corporation magazine is a proprietary creation and trademark of First Conferences +44 (0)20 7736 5568 Ltd. Please note the views of the contributors in this publication are their own and not those of Ethical Corporation magazine. www.ethicalcor p.com 3
  • December 2001 Ethical Corporation magazine inter view Business has moved to the front pages Ethical Corporation speaks with Wally Olins down the street and buy from another. This Today even the most conservative and can happen almost everywhere that products threatened of corporations knows that it has are commodities, not in all cases, but in to do something. It’s becoming part of their many. vocabulary, even if they don’t believe in it. With individuals like Richard Branson or Whether or not they believe in it doesn’t Anita Roddick, the company is associated matter. They will do it not because they want with the reputation of the person, and vice to but because their share price will go down versa. The Virgin brand is a manifestation of if they don’t get involved. what Richard Branson purports to be, and is The fundamental of any corporation is therefore inseparable in the consumer’s share value. Everything has to be measured mind. against share value, market share and profit. Making money by behaving badly will not In what ways are corporate social work if everyone knows about those that are responsibility and branding currently doing it. Social pressures are now becoming Can you give us a quick rundown on colliding? sufficiently powerful to make companies your career to date? Look at the way in which Nike and others behave better. Business has moved to the I began my career in the advertising industry have had bad press on ethical business issues front pages. and started Wolff Olins with Michael Wolff and the way the ‘No Logo’ movement is BP is projecting itself as a highly respon- in 1965. Wolff Olins has created a number of treating brands as a scapegoat, an enemy and sible social creature. It may or may not be, very well known brands, Orange, 3i, First a power beyond control. Then you can see but it understands the power of social Direct among many others, and has offices why it is that a lot of people are attributing to responsibility. Exxon are not bothering – worldwide working with a number of global brands a deliberate attempt to manipulate they believe it has no bearing on their profits. corporations. and control. But you only have to look at The Exxon attitude is the one that was Omnicom bought Wolff Olins a few brands like Levis and Marks & Spencer to see shared by most companies in the past. Over months ago and I left amicably. I am that the customer is still in control. They fell the next 10 years I believe we will see a real Professor of Marketing and Branding at sev- from consumer favour and suffered because shift to the BP attitude as consumer groups eral universities and I write books and lec- of it. and the media increasingly highlight compa- ture at conferences and seminars. Of course, brands are trying to manipu- nies’ ethical activities. late the customer. We live in a world that is In a recent Economist article deeply manipulative. Children try to manip- Which firms would you highlight “Who’s wearing the trousers?” ulate parents and vice versa. But corpora- whose practices are taking ethical you stated that “the next big thing tions and their brands cannot directly control considerations into account? in brands is social responsibility… consumers, however hard they try. The cor- Most companies are starting to try very hard. It will be clever to say that there is poration will instead have to anticipate what Most large European companies like Shell nothing different about our product consumers want and provide it. Now con- and BT take this very seriously. Business is or price, but we behave well.” sumers want to see socially responsible com- front page news and this means that corpo- Is this something that your current panies. And they will buy their products. rations and their brands will be pressurised experience would confirm? It is in the interests of a corporation to into doing what consumers wish them to do. It’s clear to me that the difference between behave better for market share. Corporations Ethical business practices will become more most products is now negligible – it’s are increasingly taking this into account. significant. s increasingly about the company behind the product rather than about the product itself, Is this a gradual change over Wally Olins advises various especially where you have companies selling the last 10 years, or is there a sea corporations on branding and services across a number of areas, like Virgin change happening here in corporate corporate identity issues. He is or Tesco, for example. philosophy? Visiting Professor at a number of universities. He has written many Look at petrol companies – if you think a I think it is a sea change. I can remember 25 books, including the seminal work particular company’s behaviour is bad, you years ago, the few organisations wanting a ‘Corporate Identity’, and is currently can buy from a competitor. If you don’t want social audit back then were the very unusual writing a new book on branding. He can to buy from one company, you just drive ones. be contacted on +44 (0)20 7224 2121 4 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazineCSR investment is not a choiceToby Kent draws upon a specific case of Del Monte in Kenya, recently acquired by Signor Cragnotti’s Cirioempire, and argues that wherever one sees the responsibilities of business lying, good business sense dictatesthat companies address the needs both of their employees and of the societies in which they operate. etting the man from Del Monte to DMKL produce indicates the changed ’s cancelled in April 2001, but the damageG say yes is not easy. The basis of one of the world’s most successfuladvertising campaigns is Del Monte’s com- world in which we live and companies oper- ate. It underlines that issues of corporate responsibility relate to how companies treat done to the company is more enduring. Employee and community relations have notably improved, but profits remain down.mitment to growing and using only the local communities, as well as how they treat The events at DMKL show that corpo-finest, freshest produce. The message is simple: their employees. It also shows that corporate rate social responsibility is not simply a lux-the Del Monte label guarantees quality to social responsibility is as much about the ury in which companies invest when theythose who consume it. It also implies that the way in which companies interact with feel they can afford it. In a commercial worldattentions of the Del Monte man bring happi- employees and communities as it is about in which “the customer is always right”ness to the producers of the foods he chooses. how much one spends. investing in employee welfare, or social The case of Del Monte Kenya Limited DMKL did not entirely neglect peoples’ investment, is almost as much about what(DMKL) showed that getting the man from needs, but the wider society, both in Kenya your customers demand you pay as aboutDel Monte to say “yes” to spending on the and later in Italy, felt that the company was what your company feels it can afford to pay.welfare of his employees and the communi- not contributing what it could afford for, and DMKL has learned from its experiences,ties surrounding his Kenyan plantation had thus should offer to, its employees and near- but it was a costly lesson. Had the DMKLbeen more difficult than getting him to by communities. management always listened to the concernsspend on more obvious business interests. At The situation reflects the complex, “glob- of employees and local communities theythe time DMKL was owned by the Imerman alised” world which we inhabit. We are could have avoided the boycott altogether.South African group, and the commitments becoming used to the idea of living in a more Expensive developments could have beento meeting the highest product standards interconnected world, and many changes are spread over years as part of company growthwere not translated to meeting standards of driven by multinational companies which rather than as large, unexpected capital out-employee care. Certainly local communities supposedly roam the world looking for com- lay, and productivity is unlikely to have beendid not always cheer the arrival of the Del petitive advantage, undermining govern- harmed by better employee relations.Monte man. ments and national interests. However, responsible action is not worth a In fact, animosity between DMKL man- ’s In response, suggests Mary Kaldor of the company’s investment if it does not addressagement, staff and neighbouring communi- London School of Economics, we see an the concerns of those you want to impress.ties grew to such an extent that by 2000 the increasingly active civil society, making its If done well, responsible corporateunions, local NGOs and representatives of claim to regain the space “grabbed” by behaviour will minimise expenditures thatthe Catholic church combined to organise a multinational corporations. Alternatively, it companies may come to pay as a matter ofboycott of Del Monte’s products in Italy, one may be that as people in developed countries expediency. It will also reduce the risk ofof the company’s key export markets. travel to places and are kept informed of internal, client, or consumer conflict. The DMKL had drawn criticism from activist events around the world, almost regardless of DMKL case shows the power of consumersstudents in Kenya since the 1970s. their occupations, they project this “worldli- to influence business decisions. However,Nevertheless, as an export-focussed business, ness” onto their everyday lives. consumers, or customers are not always endDMKL did not pay much attention to the Whatever the motivation for the growth users but may be clients, or other companiesdemands of a few local radicals. Why should of consumer activism and the changing rela- in supply chains. Whoever they are, reputa-they when they paid their 5,000 employees tions between western societies and the firms tion matters.relatively well, provided social facilities, which were once perceived as representing Corporate social responsibility is notincluding housing, education for employees’ their interests, the changes are significant. about being nice. The potential to limitchildren and healthcare - social goods that Companies must fully understand these expenditure, maintain or improve employeemany argue should be supplied by governments, shifts to avoid damaging their reputations, and community relations, control risk andif not individuals themselves? In addition, a and thus their profits, as DMKL has shown. promote reputation means that applying cor-further 50,000 people in the neighbouring The Italian consumer boycott of Del porate social responsibility strategies is sim-town of Thika are directly or indirectly sup- Monte’s goods was directed against the com- ply good business sense. sported by Del Monte’s presence. pany’s Kenyan operations, but the negative Despite such capital outlay and the ben- publicity undermined the Del Monte brand Toby Kent can be contacted by emailefits of the company’s presence, the fact that at large. Swift Del Monte Kenya Limited at CSR@tobykent.comthis was not enough to head off a boycott of action appeased its critics. The boycott was www.ethicalcor p.com 6
  • December 2001 Ethical Corporation magazine No more global business as usual Corporate ethics after September 11 By Deborah Doane, Head of Corporate Accountability, New Economics Foundation recent article in the Financial Times ee stress. At the same time, companies are exceptions, they haven’t led to any signifi- A (Oct. 8) reported on a forum that had taken place at Harvard Business School, the home of globalised business. still having to grapple with long-term con- siderations and the question of what CSR will ultimately mean. James Farrar, CSR cant change. BP well-known for its CSR , programmes, including stakeholder dia- logue, rebranded itself last year as “Beyond Students, it seems, were discussing how cor- Manager at British Airways, for example, Petroleum”. Unfortunately, there is little evi- porate social responsibility can help bridge recognises that their immediate social dence of BP “doing well by doing good”. BP the gap between have and have-not nations responsibility is to their staff and to the sur- had to climb down on its rebranding exercise as one way to reduce terrorism. US business vival of the business… “but, over time, what at its AGM in April, admitting that it could- students, as a result of the horrific events of the brand is and what BA stands for will n’t commit itself to any serious investment in September 11th, are now being forced to change.” renewable energy. consider how their actions impact on society. Perhaps less apparent than the immedi- A recent study by the University of Immediately after the attacks, many from ate concerns is the more pressing need for Sussex has found that companies with envi- the NGO movement thought that CSR dis- companies to understand the link between ronmental management (EMAS) systems cussions would be put on the back-burner their regular business actions and their global, perform no better in this regard than those and that there would be little opportunity to social and environmental impacts, in partic- without. And much of social reporting has continue the dialogue with companies that ular, how they can have a more positive resulted in “corporate spin” rather than has progressed relatively well over the last influence on global poverty and inequality. It improvements to social performance (see few years. Impending layoffs and financial is an opportunity for CSR programmes to Corporate Spin: the Troubled Teenage Years concerns would surely take precedence over break the PR barrier – that is, to be fully of Corporate Social Reporting, New discussions about CSR programmes and imbedded in a company’s operations and Economics Foundation, 2000). policies. outputs. In some cases this has proven to be true. CSR programmes, to US-based Dole Food Company has just date, have been based “Since September 11th there scrapped its director responsible for CSR on the assumption that has been an unprecedented level policies, in spite of their commitment to they can improve the improving labour standards. bottom line. But as one of discussion across businesses At the same time, since September 11th, corporate leader said in Europe and North America there has been an unprecedented level of dis- at an Environment cussion across businesses in Europe and Council conference last about their impact on society” North America about their impact on socie- spring, “this is still a ty. CSR has an even greater relevance today leap of faith”. More importantly, we need to CSR cannot save the world, nor can it than it did just two months ago. “The cata- have a better understanding of how CSR completely rebalance the inequities that clysmic events of September 11th are only programmes can actually have an impact on have emerged over the last half-century likely to intensify society’s scrutiny of busi- social and environmental performance of the across the globe. As Oded Grajew of the ness… many in the media are arguing that a company. Instituto Ethos in Brazil says in a new book, certain redistribution of the west’s economic Corporate social responsibility emerges, The Civil Corporation, “If business is so wealth, rather than redeployment of its mili- in part, from a frustration that the corporate powerful and now doing so much good, how tary power, will be far more effective in sector yields considerable power and that the come so much is still wrong in the world?” countering further acts of global terrorism” advantages of the free-market, globalised An embedded CSR programme, however, writes John Griffiths, director of Rocket economy have not necessarily delivered an can make a difference: to employees; to rela- Science, a consultancy. equal benefit to all. Those in the south have tionships with customers; and to suppliers. Some of the issues companies are dealing become servants to the system, yet fail to And there is also the potential to see greater with are more immediate, such as mitigating derive sufficient benefits. benefits of business delivered to the south – risk in order to renew insurance policies or CSR programmes were meant to partial- the current servants of global capitalism. coping with the obvious concerns of employ- ly overcome this. But, to date, with few When employees and shareholders are www.ethicalcor p.com 7
  • December 2001 Ethical Corporation magazine consulted, they generally don’t agree with as a marketing tool. While it is laudable and to the detriment of the majority. Basic servic- the state of the world. A recent survey by important that many companies are con- es, such as water and electricity, are now Powergen found that 77% of respondents tributing to the disaster relief funds to help delivered by private northern hemisphere believe that environmental and social per- victims of the attacks, it should not be used companies in many developing countries, formance of the company ranked just as high as a replacement for more serious engage- often in an unregulated manner. as financial performance. “Aligning a com- ment with the issues. pany’s values with those of its employees Corporate Philanthropy makes a more highly motivated and produc- at BA may have suffered “What can companies do? First, tive workforce”, says Rob Lake of due to financial con- Henderson’s Global Investors. cerns, but CSR pro- they can commit themselves to open, What can companies do? First, they can grammes will continue honest dialogue with stakeholders commit themselves to open, honest dialogue as the need to align with stakeholders – not just those from the CSR more closely – not just those from the inside. inside. Stakeholder councils provide one way with governance struc- Stakeholder councils provide one for companies to formalise this process and tures becomes more rel- ensure that external factors are taken into evant than ever before. way for companies to formalise this consideration in a company’s decision-making. A more sophisticated process and ensure that external The Co-operative Bank, winner of this approach to CSR year’s Impact on Society award, is intending engages thoughtfully factors are taken into consideration to raise a discussion on its website about how with the local commu- in a company’s decision-making.” the events of September 11th may have nity as partners in the changed its customers’ views about a variety process. The implemen- of ethical issues, and in turn, to help deter- tation of properly monitored and enforced How can companies see the benefits of mine what the bank’s response should be. It labour standards, such as fair wages and living these services delivered to a larger portion is proceeding cautiously, however – the conditions, should involve community actors of the population, in an affordable and dialogue is intended as a way to determine in order to ensure that the best of intentions accessible manner? The pharmaceutical what is important to its stakeholders in light are not led astray. A simple signing of a code industry’s excessive profits through intellec- of the events, not a PR exercise to raise its of conduct is no longer sufficient. tual property rights means that many in own profile. Third, they should consider how the developing countries have little access to Second, companies must go beyond CSR endless pursuit of profits benefits a few, often affordable medicine for highly curable ill- nesses. CSR has, to date, failed to deliver any tangible bene- fits on a sufficient scale. But this doesn’t mean that we should give up on corporate responsibility. Following a heightened awareness of global issues since September 11th, we should be giving it more, rather than less, attention. Companies that do sur- vive the short-term crisis will emerge in a completely dif- ferent operating environ- ment – one in which CSR has the potential to help face the challenges that will see them survive over the longer-term, for the benefit of the many, not the few. s For more information visit www.neweconomics.org8 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazineEffectively implementing businessethics in the enterpriseCompanies realise why they should be socially responsible, but the questionof how is not so straightforward, says Michael Littlechild t is difficult to find a dissenting voice in environment, labour and so on. For multina- own values or have the expertise to judgeI the current chorus of approval for social responsibility. The number of convincingreasons for being socially responsible is tionals the UN Global Compact provides a set of principles covering the environment, labour and human rights to which compa- whether they can be monitored effectively. The second is whether to have inde- pendent verification. Those against cite thegrowing and, whether these come from nies can sign up. difficulty of verifying soft issues and theinvestors, consumers or employees, most There are alternatives to common stan- problems of short-term reviews by auditorscompanies recognise the importance of dards. The most popular is to create a home- who have not been part of the process ofaddressing social and ethical issues. But once made code of conduct. Companies devise crafting the values. These arguments seem tocompanies have decided that they want to do their own ethical criteria, communicated in be losing ground to the need for credibilitysomething… what then? Putting these prin- their literature and on their websites directly which independent review can bring. Againciples into practice is the real challenge. to their suppliers and customers. They may there may be a differentiation by size here. An increasing number of companies are employ certifiers to check their compliance, The vast majority of companies that are notchoosing to adopt one of a variety of stan- but generally this is for internal purposes household names have little hope that wedards on offer that cover various aspects of rather than as a public audit of their adher- will take their word for it. The big brandssocial responsibility. Some companies have ence to their own rules. Another more might have thought differently in the past,obvious key single issues to deal with resource-intensive alter-because of the business they are in. Chemical native adopted by some "It is not much use to have anindustries, for example, have focussed on the large companies is socialenvironment, and clothing manufacturers reporting. Again, this is outstanding record on pollutionon labour conditions. In response to these based on a home-made reduction if indecent work practicesconcerns, existing standards generally cover code, as the social reportone stakeholder group. The ISO series is makes public the activi- are endemic in the supply chain"perhaps best known for its quality (ISO ties and progress under9000) and environmental management (ISO the code and may be externally verified. but the ethics of the largest companies have14000) standards. The demands of health Reporting frameworks have been developed in been called into question in recent years. Asand safety have created other standards, from recent years for this purpose, such as the a result, many multinationals have takenthe international OHSAS 18001 to individ- AA1000 and the Global Reporting Initiative, refuge in independent verification, believingual national standards. To meet concerns that provide methodologies on social report- that although openness may expose weak-over sweatshops and child labour there are ing and their external verification. nesses, it will also inspire the greater confi-standards such as SA8000 and the UK-based So companies trying to understand what dence that the whole process is seeking toEthical Trading Initiative, which focus on social responsibility actually means in practice achieve.labour practice throughout the supply chain. are faced with a variety of possible solutions. Every company is different: we all have However, many companies are now There are two key decisions of principle to be different focuses depending on the type ofmoving on from dealing with their sector’s made. The first is whether to adopt an exist- business we do, the issues we face and ourheadline issue to respond to the broader ing standard or devise an own code. Own own organisational culture. But the princi-pressure on companies to be all-rounders. It codes have the benefit of being tailored to the ples of social responsibility apply to everyoneis not much use to have an outstanding business and reflecting the values of the – and make business sense for everyone.record on pollution reduction if indecent shareholders, management and, if consulted, Choosing the best way to deal with the issueswork practices are endemic in the supply employees and other stakeholders. Common of social responsibility depends on what yourchain. Gradually, the fragmented nature of standards have the converse benefit of being company needs and what you can invest, notsocial responsibility is developing into a shared with others and so are perceived as just financially, but also in terms of both timemore comprehensive approach that tries to neutral. Stakeholders and the public as a and effort. sbring together all parts of the business’ whole do not fear that the company hasimpact on society. In response there are now omitted issues that it finds inconvenient. Michael Littlechild is the CEO of GoodCorporation. For more informationstandards that offer an overall management Moreover, few but the largest companies can visit www.goodcorporation.comapproach, encompassing the key areas of afford the process of sifting and choosing their www.ethicalcor p.com 9
  • December 2001 Ethical Corporation magazine How to protect a trusted brand With a raft of critics attacking global brands and with businesses waking up to corporate responsibility, John Drummond suggests ten simple steps to help organisations win trust Within this new sense of purpose is the do things in your business. Shell have their concept of balance. Increasingly, sharehold- business principles. Southern Sun Group of ers understand that managing simply to South Africa have defined their top ten secure financial results can bite you on the accountabilities to stakeholders. Johnson & bottom line. Johnson have a credo. Hewlett Packard have rules of the garage. The big trick is develop- 2: Create a workforce committed ing a framework which makes sense for you. to your purpose But there are three critical factors: Articulating your purpose gains you at least two things. First, you communicate a con- • your convictions need to emerge from sumer benefit (and win a bit more trust). your business Second, you stand more chance of achieving • they need to be genuine convictions and that rare thing – employees working togeth- strong enough to remain in place when er for a common goal. tested But there’s more to it than defining a • they need to be translated into practice direction. There has to be a conscious deci- sion to create a common culture. Carol 4: Manage the intangibles Lavin Bernick took over from Alberto Culver The model of business success has changed. as Vice Chairman and Director of Pfizer and Past financial success only provides one realised the company was facing a cultural dimension of value. Other factors which can 1: Articulate a clear sense crisis. Changes included making an annual add to the value of a business include a clear of purpose ‘state of the company’ address and creating strategy, a strong board, customer loyalty, First, revisit the purpose of the business. The the role of Growth Development Leader. employee skills, new revenue streams, purpose should be inspirational for everyone She says, “Passion is probably the single competitive differentiation, reputation and with a stake in the business. That means it pre-requisite to cultural change… if you’re innovation. will probably include a social dimension. not passionate about it, don’t even bother.” They may be called intangibles, but that’s There are very few businesses that do not Believe in your product or service but don’t not a good name. They’re very tangible. If make a social contribution. You take away oil presume employees will gather round the you successfully manage values and value or banking, the utilities or transport busi- flag. Creating a co-operative culture where you earn trust. nesses and watch the knock-on effect on employees work together on a shared goal everyone’s lives. won’t happen by accident. 5: Develop a clear strategy To get to your purpose, ask what the A co-operative culture involves a planned for corporate social world would be like without your product or approach, employee involvement, the shar- responsibility service. Social aspects of a business mission ing of best practice and common policies and Here’s a prediction. In the next decade or so, is not a superficial aspect of branding. It processes. When you are on this road, you corporate social responsibility will merge should be an accurate representation of your won’t simply find it easier to retain existing into corporate governance and corporate role or it won’t be credible. employees, you will also become a magnet reputation. They’ll become the same thing. Take Pfizer’s refreshing statement of pur- for like-minded people. In the meantime, it’s not too difficult to cre- pose: “We at Pfizer dedicate ourselves to ate your own model for managing CSR. helping humanity and delivering exception- 3: Define “how we do things There are some useful starting points. al financial performance by discovering, around here” For example in the UK there are the developing and providing innovative health People have a lust for a clear framework of Business Impact Task Force model and the care products that lead to healthier and more how to behave. Usually called values, the fact new GoodCorporation mark. productive lives.” is there are many ways of defining how you The trick is to recognise that there is not 10 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazineone holy grail in CSR but at least seven. digital TV And for the last few years I’ve . story to tell but not telling it? There are won-However, that’s for another day. The initial been proposing businesses use their access to derful hidden stories about the contributionchallenge you have, as Richard Holme and market to move beyond employee volunteer- of business. Look at the recent social webPhil Watts from Rio Tinto and Shell have ing to customer volunteering for social caus- sites of BT and Diageo. There are many hid-said, is to find your “magnetic north”. es. It’s coming. den gems in almost every business. You need to define why you want to man- But even the best don’t invest. They don’tage CSR. And that varies from company to 8: Manage risk including invest in communications. And when theycompany. Drivers include attracting ethical risks relating to trust do, they make several key mistakes:investment, compliance, competitive It’s bizarre that the risk management or cor-differentiation, improving reputation and porate audit departments still focus on • they sometimes forget that people arewinning customer loyalty. financial risk. New corporate governance interested in people requirements in the UK and the new • they sometimes forget that good6: Create a brand with Company Law Review know that directors communications are about a dialoguepersonality have wider responsibilities. not about an annual reportThere is no reason why common principles The sentiment they express is that the • and they sometimes forget that we areof success should lead to conformity, but they directors have a duty to manage longer term as interested in future plans as pastoften do. People articulate their purpose and risk relating to reputation, business probity, performancevalues in the same way as others. They fol- health and safety and social or environmen-low the same reporting guidelines. They fol- tal issues.low the same techniques in eBusiness, Manage risk effec-employee communications, financial man- tively and you can head “Passion is probably the singleagement, setting objectives and every other off chunky financial risk prerequisite to cultural change…aspect of business. And that is not a good like more regulation andway of winning trust. I prefer Madonna’s legislation, windfall taxes if you’re not passionate about it,advice - express yourself. or consumer boycotts. don’t even bother.” People who win trust are open, visible, My own convictionengaging and they tend to have their own is that a new disciplinepersonality. That personality is diverse. You will emerge called integrity risk manage- So what is this? So what are these tencan see it in the buzz as you walk into the ment. It’s not difficult. It’s applied common steps? They don’t add up to PR, corporatereception of Asda HQ in the UK. sense. You simply spot the areas where there responsibility or branding. So what are we You can see it in the amazing ideas of is a potential gap between your policy and talking about here? Is it a new concept?Semco of Brazil, who devolve “to the max”. your practice and you manage it. Could we call it sustainable branding orAnd you can see it in the words of Ralph trust marketing?Larsen, Chairman and CEO of Johnson & 9: Leverage social change You can if you like. I prefer business com-Johnson, in their European CSR report for Businesses still tend to think good corporate mon sense. And it isn’t hair-brained wishful2000 (that’s an invitation to seek them out). responsibility is about managing the foot- thinking. Many of these actions are taking print of their impact on society. But real place today in businesses of many sizes. Also,7: Listen and involve people progress will be achieved when they use let’s not imagine this is only relevant forin strange new ways their muscle to achieve genuine social companies. This is as relevant for govern-Why is this at 7? The first step to win trust is change linked to their business. I see a ments and not-for-profit institutions. It’s theto listen. If a company does not have its fin- growth in campaigns which go beyond basic way things are going.ger on the pulse of stakeholder opinion, it charitable fund-raising or PR into new terri- Our choice is simple. We can create sus-doesn’t have a feel for its corporate health. tory – working on a single cause and tainable businesses which are authentic, aimAnd it’s not just about good old fashioned campaigns which make a tangible social for balanced results, behave responsibly andquantitative and qualitative research. difference. win trust because they deserve it, or we can Look at the recent creation of a consumer It’s a difficult balancing act, but it can be step boldly down a cul-de-sac of increasedpanel by the radio station Classic FM. done in a way which wins trust and leads to consumer cynicism. Where do you want toMembers will be recruited from listeners via genuine social and business benefit. There is be? In the wake or in the vanguard? son-air advertisements. As GWR chairman nothing wrong with mutual benefit. AndRalph Barnard says, the aim is “to meet the there is nothing wrong with business playinggrowing need for consumers to have a more a social role. John Drummond is the Strategyeffective voice in broadcasting.” Director of Corporate Culture. The truth is that there are a bunch of 10: Invest in communications but make it a dialogue For more information visitnew ways of engaging customers. We’re www.cc-plc.comalready seeing more engagement through What is the point, I ask, in having a great www.ethicalcor p.com 11
  • December 2001 Ethical Corporation magazine inter view Shell’s Mark Wade speaks with Ethical Corporation magazine Mention corporate ethics and the name of Shell often comes up. We spoke with Mark Wade, founder of the Shell Report and a key member of Shell’s Sustainable Development Group, to find out more about the business benefits and challenges What’s your background with Shell? portfolio. In our case as an energy major that cial approvals, how you bring this into the I’ve been with the group for 22 years. I started would mean a long term evolution away way in which you motivate and reward staff. out as a research biochemist in support of from hydrocarbons as the basic fuel stock to our chemicals business. I was a founder renewable or alternative energy sources. So Can you tell us how the member and am a current member of the ultimately one can view that as the goal. management structure works Sustainable Development Group in the cor- But I also have to be very upfront and say at the very top level for strategic porate centre of Shell International. that we can sow the seeds for that now, we decisions on this within Shell? can bring in the new technologies, we can We have at the executive level what we call How is Shell going about becoming help develop the markets and the infrastruc- the Sustainable Development Committee, a truly sustainability-supporting ture, but let’s not kid ourselves: hydrocar- which is chaired by Phil Watts, the company? bons are going to remain the mainstay of the Chairman of the Committee of Managing Firstly, our commitment to sustainable energy scene for at least the next thirty years Directors. This committee comprises of very development is to contribute to sustainable and the transition away from them is going senior representatives off the Chief development. That means that you need to to be a long process. Executives committees of each of our five manage your operation in a way that is main businesses: Exploration and Production; responsible in terms of respect for the envi- What are the internal challenges Chemicals; Oil Products; Gas; and Power ronment, of respect for people and of being you’ve faced at Shell? How do and Renewables. The committee also com- mindful of human rights. corporate communications, prises heads of corporate centre functions You can do that within your existing busi- marketing and corporate strategists like human resources, finance and legal as ness model in that you can run your affairs interact in terms of in a way that recognises these broader implementing responsibilities. In this regard, when you get socially and “We want to take the concept of oil and gas out of the ground you do it more environmentally Corporate Social Responsibility into cleanly, more safely, more efficiently. responsible When you refine it you are very con- strategies? the decision-making process and cerned about eco-efficiency aspects. And I think it operates at a hardwire it into the systems and when you sell the products you try to do it in more fundamental level the way that is going to involve the lowest that that. The idea is processes on the one hand, and to quantity of sulphur, lead, aromatics and so that we want to take the bring it into the hearts and minds of on. And when you explore in sensitive areas concept of corporate of the world you do it in a way that respects social responsibility people on the other” biodiversity and the rights of indigenous into the decision-mak- people or whatever the particular issue might ing process and hardwire it into the systems well as company secretaries and us in the be. and processes on the one hand, and bring it Sustainable Development Group. It meets That type of contribution to sustainable into the hearts and minds of people on the twice a year currently and looks at the whole development can be done within your exist- other. approach of driving this type of thinking ing business model. On the other hand, you It’s a cultural change that we are trying to across our organisation. can also view it as evolving within what I engineer as part of Shell’s overall transfor- Beneath that there is what we call the would call the fourth dimension of sustain- mation. So in that regard it’s not just a ques- Sustainable Development Panel, which able development, that of time. tion of individual departments – it’s about comprises representatives from those same You can say you can use this agenda to how you bring this into your strategy and areas but at a rather more workaday level inform the way you evolve your product planning, how you bring it into your finan- who are still very senior but who can roll 12 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazinetheir sleeves up and make this happen in a and the development of social capital within What are institutional investorspractical sense throughout the organisation. the respective communities are some of the asking for from Shell today that Externally we also have the Social main issues with which we will be confronted. they didn’t ask for 5 years ago?Responsibility Committee, non-executive Clearly there has been a very significantexternal directors of the board of the two Where are the CSR-related business increase in interest in socially responsibleparent companies of the Shell Group, Royal opportunities in the future for Shell? investment funds. This is coming from theDutch Petroleum and Shell Transport In terms of business opportunities, I think general public who want to make sure thatand Trading. This meets on a twice-yearly that depends on the business model. In their money is invested in ways they feelbasis to review our internal governance a group of companies like Shell we have comfortable with.processes regarding the application of Shell’s hugely different businesses. We have oil It’s also coming from pension fundsbusiness principles, to help shape safety and exploration and production, where many which are being managed on behalf of allenvironmental policies and procedures and of the relationships are with national oil sorts of organisations, such as unions andto shape our commitment to sustainable companies. universities, who are telling their fund man-development. What are the advantages there of CSR? agers they want their members’ money Well, we’re seen as a company of enormous invested in a way they would feel happyAre you feeding the message about technological strength and as an organisa- with. There’s no doubt that this is growingsustainability and responsible tion of great integrity in that we don’t bribe rapidly, but it still represents quite a smallbehaviour out to your suppliers? and take a very strong stand in that area. proportion of overall investment in the stockIt’s a mammoth challenge. One important Shell has the economic capability to take markets.component is that when we form new joint very long-term views of emerging energy When we look at the more mainstreamventure relationships or contractual supplier systems and have therelationships our business principles are economic clout to makeclearly on the table during those negotiations. the massive investments “When we form new jointWe have to be satisfied that the conduct of which are often venture relationships or contractualthat joint venture or contractual relationship required to help a coun-will uphold those principles or operate in a try generate income supplier relationships our businessway which is compatible with them. from its indigenous principles are clearly on the table That’s the first element and we have right mineral wealth.of audit in terms of HSE and other ways of So you need to during those negotiations”ensuring that our businesses are managed demonstrate to govern-with integrity. That’s the front line if you like. ments that you can behave responsibility and investors, I think that to a large extent these The second line is more on the hearts help them meet their strategic energy needs. considerations are not top of their agenda.and minds side again, to use our influence to You also need to demonstrate that you can do When it comes to making judgements onhelp people see the business case for corpo- this in a way which is sensitive to companies in this more mainstream arearate social responsibility such that there is a the environment and to the needs of local they’re going to be looking for the most partwillingness to want to go these routes. But communities. If you can do this then you are at the more traditional measures of predict-it’s a big challenge and the further you push likely to be seen as a preferred partner. In ing future value growth. Nevertheless, ourthe envelope on your supply chain or rela- some of the other business models, such as commitments to CSR and sustainable devel-tionships the more difficult it becomes. business-to-business, you can look at opment are seen as neutral in that regard. So improving your costs through eco-efficiency. long as we can be seen to perform as an effec-What are emerging corporate In some of the business-to-business con- tive organisation then they will continue toresponsibility issues today for sumer models you might use an awareness of recommend us.the energy industry? society’s expectations for the delivery of goods, Of course, you do see the growth inIn the energy industry, the biggest issue is mindful of the environment and respectful of things like the FTSE4Good indices and thethat of climate change and companies’ human rights in their supply chain and pro- Dow Jones Sustainability Indexes andresponses to that particular issue. That is a duction. there’s a whole raft of these type of indicesmajor challenge, in terms both of how you You need to make sure that your goods now. Shell is in the FTSE4Good. We’ve beenaddress the issue of climate change and of and services are in line with that. If people in the Dow Jones Sustainability Indexesthe impacts that has on the way you manage are looking for things which are greener, since their inception and last time around weyour business. You have to look at what busi- cleaner and safer, then that can be used were the top sustainability company in theness opportunities can come from it. For to inform the type of products you would energy sector. sextractive industries clearly there are other produce. So there’s a number of differentenvironmental issues. Biodiversity is of ways that you can use an understanding of For more information on Shell visitconcern. When operating in sensitive parts CSR and where it’s come from in terms of www.shell.comof the world the rights of indigenous people society’s expectations to deliver business value. www.ethicalcor p.com 13
  • December 2001 Ethical Corporation magazine inter view Influencing ethical policy Investment fund managers are playing an important role in encouraging business ethics within enterprises and establishing responsible funds for investors. Ethical Corporation speaks with Rob Lake of Henderson Global Investors to find out what institutional investors are looking for from enterprises The Review will lead to legislation in a cou- using child labour is very great for a major ple of years that will probably require com- high street brand. panies to report on aspects of environmental For example, currently there is a lot of and social performance. But we are already discussion about chemicals in the home asking companies questions about these being potentially hazardous to consumers. issues now, whatever the outcome of the Companies need to get on top of public Company Law Review. We look at human rights and socially responsible “What are the benefits? Well, supply investment policies in chain savings, HR savings, R&D all the companies we research for potential savings. This is quickly turning into a investment. We make a must-have scenario for companies” point of seeking an What’s your involvement in socially active dialogue with responsible investment? companies on all the issues of business ethics opinion and safety aspects to keep up with I’ve been the Head of SRI strategy at in all areas. We try to work out as much as public expectations. Henderson since December 2000, after 14 we can about how companies work. Oil companies have issues of human years at NGOs such as Friends of the Earth, For example, staff motivation and repu- rights, security in developing countries and Traidcraft and the RSPB. Nick Robins, our tation are all-important to their future value of course climate change. Mining companies Head of Research, has had jobs in similar to us. If we see that companies do not seem that work with the military in developing organisations. The work I do now is surpris- to be taking notice of some of these issues, countries have some major issues they have ingly similar to the work I did at NGOs – we will address this, as any other investor to look at. working with companies to try to influence should, to help them have a full understand- them to embrace SRI and ethical polices. ing of the importance of socially responsible From Henderson’s perspective, Henderson’s global investments total just investment. where do you see this moving in over £100 billion worldwide and Henderson Henderson has a constant dialogue with the next year or two, especially with has large shareholdings in a large number of companies based on our risk management an apparant recession coming? companies, which gives us some influence strategies to make sure that our funds per- The level of expectation of consumers on all over their ethical policies. I believe that the form and that we have an understanding of these issue is rising – companies are going to extent to which business can offer solutions the views of that company and the risks for be continually pressured to increase standards to some global problems is significant. our money. We will, of course, ask for and to do things on a voluntary basis. improvements if we believe them to be neces- Expectations will rise and public expectations Can you give us some background sary. We are continually trying to build a more will still be there in any recession. on Henderson’s investment in SRI? rounded analysis of companies into our main- What are the benefits? Well, supply chain It started in the late 1970s beginning with stream investment process. savings, HR savings, R&D savings. This is the Joseph Rowntree charitable trust. quickly turning into a must-have scenario Henderson now has over £1 billion in SRI What are the challenges for for companies. There is a sense that interna- investments, one of the largest ethical invest- companies you are working with tional companies need to be far more sensi- ments in the UK. We invest for a variety of in implementing ethical practices? tive and show that they are socially responsi- retail and institutional clients. It depends on which sector you are in. In ble in different countries and that they can retail it’s often the developing world. The adapt to meet changing public needs. s Will the Company Law Review reality is that operating in low labour cost affect the way these funds are For more information visit countries has some major ethical challenges www.henderson.com invested in the future? for companies. The reputational risk of14 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazine Educating tomorrow’s executive The business case for the integration of corporate social responsibility By Professor Alyson Warhurst, Director, Corporate Citizenship Unit, University of Warwick, UK ew journalists, politicians, corporate company culture so as to merit an image of to benefit. They have lost faith in the distri- F CEOs or international agency profes- sionals would bare-facedly reject cor- porate social responsibility. But every year, integrity and responsibility. They are also aware that the ‘external costs’ of their opera- tions (i.e. the costs of those environmental bution powers of the governments that host- ed these investments. They now frequently resort to negotiating directly with business to MBA courses in business schools all over the and social impacts beyond operating costs secure more immediate benefits in educa- world are full. Full of ambitious would-be that previously the state or local host com- tion, housing and health – basic develop- executives who argue that the “business of munities have absorbed) can no longer be ment rights – and in return they grant what business is business”. Reiterating Friedman’s taken for granted, and over time, need to be is tantamount to a local ‘social license to 1970s utterances about the social responsibil- ‘internalised’. operate’. This is understandable, and most ity of business being to make profit, from Globalisation also means that interna- companies respond rationally by seeking which all benefits will ‘trickle down’ to those tional business is increasingly operating in dialogue not conflict. Some countries who patiently wait, MBA students are most areas of conflict. Business can no longer pose require this in law, few are aware that such reluctant to make the business case for CSR. as neutral. There exists a growing imperative prior consultation is enshrined in an ILO Foremost they want to be taught how to for business operating in make money fast. Indeed, one of the greatest areas where human “CSR is now not only a bottom line issue discrepancies in the evaluations MBA stu- rights are infringed to dents customarily make of their professors use legitimate influence but also a moral imperative, with respect pertains to their appreciation or not of to promote human to the relationship between business whether the case for CSR has been made rights even outside of convincingly or boringly. At Warwick their areas of operation. and its internal/external stakeholders. Business School, learning about CSR is a At the very least they are CSR is to be sidelined at your peril.” compulsory part of every MBA. In some being called upon to business schools it is a losing battle to make examine whether their presence and their (International Labour Office) convention or one session an optional elective. indirect impacts contribute to, or under- in the national constitution of countries with Nonetheless, for students or senior execu- mine, the development rights and opportu- strong indigenous communities, such as tives alike, to reject CSR is to be oblivious to nities of their host communities. Colombia. Companies are also recognising one of the most fundamental challenges to that they must take responsibility for the have impacted international business over Some reflections wider impacts of their operations beyond the last ten years. I offer the following reflections for those that their workforce and the perimeter fence. still believe there is no business case for CSR With the recent liberalisation of investment A moral imperative and that companies have no role to play in regimes worldwide, governments may have Over the last decade, foreign direct invest- contributing to society other than through made downward adjustments in social wel- ment by international companies in develop- profit-making. fare spending in order to accommodate tax ing countries has increased tenfold and pub- Some believe that people will a priori breaks to attract these foreign investments, lic funding of development assistance has benefit if business is allowed unbridled to sometimes with strong encouragement from declined. CSR is now not only a bottom line make profit. This is called the ‘trickle down’ international financial institutions. Business issue but also a moral imperative, with effect. The concept refers to economic meas- is starting to recognise that it has a responsi- respect to the relationship between business urements of benefits, not equity or well- bility to address locally the social impacts and its internal/external stakeholders. CSR is being considerations. Furthermore, history generated as a result of their investment to be sidelined at your peril. has demonstrated that people living in opportunities. Companies are acknowledg- Ethical deliberations are demanding poverty, especially indigenous communities ing that they cannot pay their taxes then more time in the boardroom. Business lead- in the vicinity of remote agricultural, mining sleep easy in the knowledge that benefits will ers are realising that they need to address and oil operations, have been among the last trickle down, other than through employ- www.ethicalcor p.com 15
  • December 2001 Ethical Corporation magazine ment, to their local host communities would be no need for corporate social invest- tributions to development as defined by spe- through the lifetime of their investment. ment or for charities, but surely there is room cific affected groups. for both while we are striving for a ‘trickle The ‘triple bottom line’ down utopia’. In the meantime, appropriate Students and social policy Some suggest that the greater the competi- consultation and active listening to stake- Finally, it is ironic that MBA students are tive pressure on business the less able they holder needs and concerns should ensure good at scoring points today about the legit- will be to serve wider social goals. But this that the strategies of companies wishing to imacy of NGOs, while their professors prob- misses the fact that, in many countries, gov- pursue responsible practice are tailored to ably protested in the 1960s and 70s about ernments and banks now select companies, local needs. apartheid, the coup in Chile, policy towards award licenses and approve finance on envi- the Sandanista government in Nicaragua ronmental and social track records and not No harm to development and the ‘cuts’ at home in education. Students just on economic grounds. This is the ‘triple I have heard it asserted that companies, today, (MBAs or political scientists), are bottom line’. through being obliged to operate to higher more likely to make a ‘hit’ on the stock mar- Many companies are pushing CSR in the standards, are harming the development ket than hit the streets protesting. supply chain by demanding that their sup- prospects of poor countries on account of They miss the important point about pliers demonstrate ethical and environmen- eroded competitiveness. This seems miscon- why pressure groups exist. NGOs in most tally sound practice. Research is showing ceived on two counts. cases endeavour to speak on behalf of people that the conditions attached to investment First, economic wealth is no longer a sin- (or issues) who, for reasons such as human financing and procurement, which are sensi- gle priority. Rather, broader concerns about rights infringement, have no ‘voice’ – i.e. dis- tive to longer-term political, environmental health, wellbeing and quality of life are as placed communities, refugees, disadvan- and health risks and liabilities, are drivers as important and, in some specific situations of taged groups such as women and children, potent as government regulation in promot- weak government, busi- ing more environmentally and socially ness can deliver these responsible business practice. This in turn more efficiently and "Companies are acknowledging that enhances a company’s competitiveness and directly to local commu- contributes to its acquiring ‘preferred suppli- nities through corporate they cannot pay their taxes then sleep er status’. social investment. easy in the knowledge that benefits Some observers have expressed concern Secondly, communities that there exists pressure from ‘socially and politicians in devel- will trickle down, other than through responsible’ businesses to impose costs they oping countries have employment, to their local host have accepted voluntarily on their suppliers strived hard to achieve and that this is tantamount to unfair busi- high environmental and communities through the lifetime ness practice. labour standards and of their investment." The response here is that, yes, companies not to be considered as can and do set higher and higher standards. ‘pollution havens’. These improved social and environmental Moreover, research suggests that under- endangered species etc. It is through dia- practices, in turn, are quite appropriately dif- taking environmental investment can pro- logue with NGOs that many of these issues fused through the market. As a result, a mote economic, technical and energy effi- are put on the business agenda. number of corporate initiatives in the areas ciencies and savings and reduce costs in the I am definitely not arguing that MBA of human rights, biodiversity conservation long term through avoiding costly retro-fit- students are unworldly or immune from and social development have addressed ting and reducing future liabilities. social responsibility concerns. In fact, the development needs that were not being met Increasingly, some companies consider they most rewarding part of teaching is beginning by governments. have a responsibility to use their legitimate with a class of sceptics and ending with an This view, in a sense, is a corporate paral- influence to promote human rights and enthusiastic group of students who are lel to the argument that we should not give labour codes of conduct as well as improved queuing up for further reading and case money to charities as individuals as this takes environmental standards, as good corporate studies to make the CSR business case. s away the pressure on governments to address citizens. social development. While we might agree Just because we don’t all agree about Professor Alyson Warhurst holds the with the theory, who are we to say that those what is ‘development’, is that justification for Chair of Strategy and International living in poverty and those whose human doing nothing? I should think not! It misses Development at Warwick Business School and is Director of the rights are being infringed today should wait the growing importance to business of part- Corporate Citizenship Unit (CCU), for governments to change tomorrow, or in nership and dialogue with stakeholders and University of Warwick. the case of developing countries that have interested partners that can help companies invited foreign investment in, for the benefits to understand what would actually consti- For more information visit www.wbs.ac.uk to trickle down? In an ideal world there tute improved social performance and con-16 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazineinter viewCreating global benchmarks forcorporate responsibilityEthical Corporation speaks with FTSE’s Gareth Parker to find out more aboutwhat’s driving initiatives like FTSE4GoodCan you give us a little information becomes available. The principles on which indices and funds based on different concepts,on your career to date and current the FTSE4Good indices are based are root- such as technology and growth, in the past fewjob role at FTSE? ed in globally accepted international stan- years. FTSE4Good is possible becauseAs Head of Index Design at FTSE, my dards such as the UN Global Compact and investors are becoming more aware that theyresponsibilities include the design both of the Universal Declaration of Human Rights. can play a role in social responsibility whilst notFTSE’s indices and of bespoke indices for From this foundation, FTSE4Good identi- having to suffer lower financial performance inFTSE’s external clients. As one of the origi- fied three key areas: their investments. The indices aim to expressnal five staff of FTSE, I have undertaken a • the promotion of practices that mitigate international consensus on the principles ofvariety of roles within the company, damage to the environment responsibility to which companies should befocussing on the calculation and manage- • the encouragement of respectful and con- expected to adhere and to establish thesement of indices, the operation of data servic- structive relations with stakeholders principles as a global standard for corporatees and the provision of consultancy services • the support and respect for the protection responsibility.for FTSE’s clients. Managing the introduc- of international human rights.tion of free float of FTSE indices and the FTSE hopes the development of the Do you believe the current politicalplanning and design of FTSE4Good have FTSE4Good indices will encourage and economic situation will have anbeen career highlights to date. investors and companies, as well as the pub- effect on companies strategies for lic, to engage in debate over their socially SRI / CSR? Non-core strategies canCan you give us some background responsible practices. As companies are often be shelved in times of turmoil.on the FTSE4Good indices and the encouraged by investors to adopt socially Have we come too far to go back now?thinking behind them? Is this is a responsible practices, the level of disclosure Business leaders around the world nowcharitable exercise or did the will increase. This will allow the index series recognise that companies enjoying the eco-demand come from investors and to evolve and reflect the changing expecta- nomic benefits of globalisation can alsoFTSE listed companies originally? tions of the market over time. demonstrate a commitment to corporateFTSE created the FTSE4Good index series Information on the companies included in social responsibility. There is a deepeningin response to market demand as there was the FTSE4Good index series is sourced from conviction that a socially responsibleconsiderable interest in, and demand for, a research and analysis conducted by EIRIS approach will enhance the reputation ofrecognised global benchmark for socially and its partners globally, under the direction companies and reduce business risks irre-responsible investors. FTSE4Good provides of the FTSE4Good Advisory Committee. spective of market conditions.a tool for investors to track the performance This research and analysis has been supple- Alongside this, there has been an increaseof a company’s corporate social responsibili- mented by the use of questionnaires. in demand from global investors for corpo-ty against a comparable benchmark in a rate social responsibility issues as an invest-transparent and objective way. FTSE4Good Why do you think corporations ment criterion. In the UK alone there hasis a new and different means of assessing best are approaching you to be listed been a rise in the number of ethical fundspractice in corporate social responsibility. in FTSE4Good? from 34 in 1998 to over 60 now, as well as the Initiatives like FTSE4Good are making amount of investment in these funds - £1.8mThere are various different attempts companies more aware that investors expect in Q2 1998 to £4bn in Q3 2001.at creating a standard for SRI, more than simply good financial perform- This trend is reflected across globalincluding the Global Reporting ance. FTSE4Good allows them to demon- investment markets and has indicated theInitiative. How do these tie in with strate that they are meeting those challenges. need for the market to have a consistent,your objective global standard for global standard by which to judge companies’socially responsible investment? Profits and ethics used to be at corporate social responsibility credentials,The Global Reporting Initiative is likely to opposite ends of the scale. Whats hence the launch of the FTSE4Good series. scontribute to the quantity and quality of data changed in the last decade andavailable and therefore to the growth of where do you see this leading For more information visitFTSE4Good, which will evolve with in the next ten years? www.ftse4good.cominvestors’ standards as more information There has been a vast increase in the number of www.ethicalcor p.com 17
  • December 2001 Ethical Corporation magazine inter view Ethical funds and the City Jupiter Asset Management manages a number of well performing green funds. Ethical Corporation speaks with head of environmental research, Emma Howard Boyd Which industries are leading? And Do you believe that some in the city that their commitment is serious? which are way behind? are looking to discredit these funds? Jupiter’s SRI funds invest in two types of Difficult question, as different industries The City’s attitude to SRI is changing. Most companies: those that are solving an envi- have different environmental and social risks notably, UBS Warburg in their report ronmental problem; and those that are min- associated with them. Our job in the Sustainable Investment (Aug 2001) states imising their impact on the environment. research unit is to identify those companies that it believes changing public sentiment, For companies in the second category – in a sector which show strong environmental new laws and the launch of ethical bench- best in class companies – we are identifying and social performance. We carry out a mark indices will encourage product innova- those companies which are demonstrating rolling programme of sector surveys, with tion and growth. sector leading environmental and social per- the aim of seeing who the leaders and lag- formance. Whilst there are certain universal gards are. Are you seeing different SRI trends indicators which are relevant for all companies It is also part of remit to encourage the emanating from different countries? (such as introducing environmental man- laggards to improve their environmental per- The growth of SRI in the UK is part of a agement systems and publishing CSR reports), formance. worldwide trend. One example of this is the other key performance indicators may only growing number of social investment be relevant to certain sectors. For example, in How seriously are ethical funds taken forums, such as UK Social Investment the retail sector we would look for the devel- in the City? Forum (UKSIF), around the world. UKSIF, opment of codes of conduct for suppliers, In the UK, retail SRI funds have grown to the UK’s membership network for socially whereas for the housebuilding industry would £3.7 billion in little more than a decade. responsible investment, was established 10 like to see use of brownfield sites and high Recent pension fund legislation, requiring years ago - the latest, ASrIA (“SRI” in “Asia”), energy efficiency in the houses they build. pension fund trustees to disclose whether will be launched in early November 2001. We are looking for a commitment to con- they take account of social, environmental And, to respond to the growing interest tinuously improve their environmental and and ethical issues, has also given the indus- in SRI across Europe and the need therefore social performance from all companies that try a boost. for pan-European information and network- we deal with. July 2001 also saw the FTSE4Good ing, five social investment forums in Europe Indices, a new family of indices covering the have got together to create the European As an integral part of protecting UK, Europe, USA and the world, go live, Sustainable and Responsible Investment brand strength, do you believe that once again raising the profile of SRI. Forum (Eurosif). Funding for Eurosif ’s ini- ethical business policies will be an tial work programme is being provided by important part of all corporate How much is SRI becoming an issue the European Commission. strategy in the future? in standard funds? In a world in which financial value increas- Following the introduction of the pension Are corporations fearful of negative ingly depends on intangibles like brands and fund regulation in the UK, we are beginning investment consequences of management quality, over time it may make to see SRI embraced by all shareholders. For non-responsible behaviour? more sense to look at social, environmental example, some of the SRI specialists are We have noticed that in recent years compa- and ethical performance to assess future introducing voting policies specifically on nies are responding much more promptly to financial prospects, as well as looking at tra- SRI issues, such as a commitment to vote our requests for information on their envi- ditional indicators. against the annual report of a company ronmental and social performance. I believe I believe that companies have to be increas- which fails to produce an environmental this relates to the growth of SRI in the UK, ingly mindful of the reputational risk associat- report. These policies apply to all the assets and in particular to the introduction of the ed with mismanagement of their environ- managed and not just to those in screened pension fund disclosure regulation. mental and social performance. Companies mandates. with strong brands are consequently the We have recently had a review of institu- Can you give us an insight into the most vulnerable to a reputational shock. s tional investment in the UK called the level of commitment to actively Myners Review. Its support for greater trans- improving their environmental or For more information visit parency and for investor activism could also social performance companies need www.jupiteronline.co.uk lead to a growth in SRI. to demonstrate to convince your team 18 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazine inter view Nobody’s laughing now Ethical Corporation spoke with Richard Aylard and Jordana Friedman, Directors at Burson Marstellar’s Corporate Responsibility Unit, about the thinking on both sides of the Atlantic on CSR and corporate advantage What is currently driving corporate companies need to be seen to be making the quite right to suspend Families Against Bush social responsibility initiatives world a better place as well as making prof- and I think an awful lot of us who would within large companies? its, paying taxes, employing people and support broadly speaking the NGO position doing all the sort of conventional things that on Kyoto would think he’s done the right Aylard: A whole range of things, but there one expects of a business. thing. And quite clearly in the short term are three I would single out, first of all pub- people’s attention is elsewhere. But in the lic attitudes, which are changing fast in a Friedman: In a society as large as the US longer term, I think it would be hard to number of areas. Even if you look at the way inevitably public attitudes are shaped by a believe that issues of ethics and environmen- parents bring up children, if I allowed my multitude of factors, one of them being tal and social progress would be less impor- children to do the things my parents allowed NGOs and their environmental and human tant in the aftermath of September 11 than me to do 30 or 40 years ago, I wouldn’t be rights agendas, consumer rights and other they were before. regarded as a responsible parent, even agendas. But I get the sense from having I think that there’s going to be a greater though at the time they appeared perfectly worked on these issues in the UK for six emphasis on the connections between causes fair and reasonable. So I think standards are years that in the US the public attitudes and effects, between a decision taken on one going up all the time. towards CSR are less shaped by NGO factors side of the world and the consequences and The second thing is the importance of and more by issues that seem to affect the impacts on people living on the other side of corporate reputation. Companies stand or public on a daily basis. the world. And whilst at the moment the fall on the strength of their reputation, and The first issues of a CSR nature that, to spotlight is very much on government being publicly arraigned as being irresponsi- my mind, really captured and galvanised the action, I don’t believe it will stay there and I ble is a pretty good way to lose a reputation. public in the US were The third thing is the information revo- environmental issues in lution, where we’ve got more and more peo- the early 90s and also, “After September 11 it will be very ple knowing about everything. It’s not true perhaps even more so, difficult for any company to divorce that everyone knows everything about all issues around human things that are going on around a company, rights and labour rights its day-to-day business operations but what it does mean is that almost anybody that were affecting tex- from the articulation of its values” who really wants to find out about what’s tile and shoe manufac- going on in a company can now do so. There turing firms and the aren’t any really effective hiding places any- retailers of those products in the US. The think the role of the global business commu- more in the days of the internet revolution. public in the US began to realise that they nity will come under the spotlight and that actually had a certain amount of purchasing when it does it will be important for compa- How do public attitudes towards power and that they could affect corporate nies to be able to demonstrate that they are corporate behaviour differ in the policy by exercising that power. responsible players in society and that they US and the UK? are actively engaged in things that strength- Are NGOs going to have a harder en the fabric of societies around the world – Aylard: Well, we’re into sweeping generali- time after the September 11 attacks? really part of the solution and not part of the sations here. Even just looking at the UK, we For example, the site made reference problem. have different attitudes amongst different to earlier, the Families Against Bush groups of people. But certainly, when NGOs site, has suspended campaigning in Friedman: After September 11 it will be have done focus groups with their members the wake of this attack. Has very difficult for any company to divorce its and with the people they want to attract to September 11 taken the pressure off day-to-day business operations from the becoming members, one of the themes that business leaders in terms of CSR? articulation of its values. And perhaps for the seems to strike a chord is that companies NGO community they see that business, as a have a role in making the world a better Aylard: No I don’t believe it has. I think the very obvious target of these attacks, is per- place, to put it as simply as possible, and that first thing to say is that I think Chris Rose is haps more vulnerable than they thought it www.ethicalcor p.com 19
  • December 2001 Ethical Corporation magazine was and more in need and open to engage- demonstrate performance above and beyond Aylard: It is something that is very much ment from the NGO community. So I am the S&P For a very long time social invest- . moving up the corporate agenda and it’s par- quite hopeful that this event will provide an ment funds had the reputation of not deliv- ticularly moving up the chief executives’ cor- opportunity for greater cohesion between the ering as much financial value as more gener- porate agenda. It’s something that more and business and NGO communities in the US al funds, and that view is changing. more companies are having to come to terms and probably globally. The emergence of indices like the with in different ways. It depends very much FTSE4Good or the Dow Jones on the nature of their business. Some have Aylard: If we’re all in this together when it Sustainability Indexes is putting additional been engaged in it very actively for a number comes to fighting global terrorism I can’t see positive attention on the social performance of years, either because they’ve had a partic- why we aren’t all in this together when it of companies, and the audiences for these ular problem or because their business has comes to fighting climate change. They’re kinds of indices are the financial analysts. particular impacts. different orders of threats, but they’re both There are more and more mainstream com- I see it moving away from being primari- threats. panies that are following the indices. They ly about corporate philanthropy and a few want to know which companies are on them nice-to-have programs that look good in the How do Wall Street and the City view and how they’re being measured and are try- annual report or form the basis of a CSR pro- ethical investment? ing to benchmark themselves against the gram and moving toward being the way a companies on those indices. That kind of company does business, looking at all its Aylard: The whole subject of ethical invest- exercise wasn’t going on five or ten years ago, impacts on society, trying to maximize the ment has been creeping up the agenda for a and certainly not on the part of multination- beneficial impacts and minimizing the neg- number of years. A few years ago if you men- al companies. ative impacts. tioned it in the City, a lot of people would So it’s going to be moving away from the laugh. I don’t think anybody’s laughing now, How important is responsible fringes of what a company does and more even if they aren’t all regarding it as being corporate behaviour for staff into the mainstream. A few companies have particularly important or moving up their recruitment, morale and retention? placed it firmly in the mainstream. An awful personal agenda. lot more haven’t really got to grips with it in But I do think that a simple barometer of Aylard: I think it’s very important. It’s sur- the modern sense of its being about the way how these things are going is that confer- prising the number of companies that say to you run your business and about good busi- ences on this subject in the City are now me when we’re looking at which stakehold- ness other than about what’s going to be our being very well attended. The whole concept ers they should be in discussion, “Oh, I don’t charity of the year and where shall we put of ethical investment is moving away from think our staff are very interested in this.” the money from the trust fund, which has just the specialist socially responsible invest- And actually, when they do start looking at tended to be the case up to now in a lot of ment funds which are looking to make what the expectations of their staff are, they companies. investments either in particularly responsible suddenly find that it matters an awful lot to companies or to avoid what they would them. So it does matter and not just in the Friedman: One dimension of CSR that I regard as particularly irresponsible compa- classical company where the story is that the see taking off in the near future is that of pol- nies and it is now moving out to being a father goes home at night and his little boy icy engagement and policy dialogue, namely filter that is applied right across all invest- asks him, “Daddy, why do you spend all day the constructive engagement of companies ments to see that CSR, if it’s not handled making pollution?” People do actually care. in partnership with governments, multilater- properly by a company, is a significant risk They want to feel involved. They want to al institutions and NGOs to address global and if it’s done well, there are significant believe in what their company is doing. And challenges like poverty, the negative aspects boosts to reputation. CSR can play a major part in that. There is of globalisation and human rights abuses So they are beginning to be able to look at plenty of anecdotal evidence that companies and be increasingly called upon to use their it in line with the usual metrics they use to that have found themselves in trouble over influence, access and resources to improve assess a company. This is slow progress. social and environmental issues have effec- situations not only in the communities in There are no great breakthroughs but year tively been punished by not being able to which they operate, but also beyond. We’re on year I see it moving up on a steady basis. recruit the brightest graduates. The top peo- already starting to see their working on a The amounts invested in specialist funds are ple in any one year can work anywhere they policy issue in the area of, for example, AIDS going up and the degree of scrutiny that is like and they’re not going to want to tell their and HIV awareness raising and financing for being applied across the board is increasing. friends that they’re going to work for a com- drugs. Up until very recently, pharmaceuti- pany that’s just been involved in some mas- cal companies were very resistant to making Friedman: Some of the leading social sive pollution incident or some potential AIDS drugs more available on a wide basis investment funds such as Domini Social human rights abuses. at lower prices. But more and more pharma- Fund perform at the same level as the S&P ceutical companies are being pressurised to 500 and, of course, there are funds that are How do you see CSR progressing be more sensitive to the global challenge of smaller and more targeted that actually over the next few years? AIDS and HIV s .20 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazinePublish and be praisedThe benefits of a clear, concise communications strategy for corporateresponsibility far outweigh the cons, argues Kate Crawford of Flag recently met a senior manager from a high salary to meet their needs than a company opportunity for the charity to benefit and aI street retail company. We discussed her board’s reluctance to produce a corporatesocial responsibility report. It wasn’t the cost or that would pay a higher salary but has a poor overall reputation. With reputation such an important issue for your potential and exist- doubt cast over BA’s commitment to the pro- gramme. This could have been avoided with effective communication between thethe work involved that put them off. Nor was ing employees, does it make sense to keep department that decided to run the charityit that they didn’t want to expose the company quiet about what you’ve been doing on CSR? programme and the department responsibleas a poor performer – far from it. In fact, the Publishing CSR information reassures for putting items in seat pockets.company in question had been running a your investors that you’re taking responsibil- Integration is a key word in CSR com-highly commendable ethical trading pro- ity for your environmental and social impacts munication. Not only is it important togramme with its suppliers for years. The prob- and that you’re unlikely to be hit with a huge ensure an integrated approach from the var-lem was that they didn’t want to shout about environmental liability claim or a customer ious departments involved, it is also vital thatthe CSR programme, they just wanted to get boycott because you employ child labour. It your communications campaign is integrat-on with it because ‘it’s the right thing to do’. also encourages your company’s inclusion in ed across different media and different audi- That’s one of many reasons I’ve heard for ethical funds and indices. Tesco was very ences. Don’t expect to reach all your stake-not communicating on CSR. Others include publicly excluded from the FTSE4Good holders with a single document – it’s notnot wanting to attract attention from NGOs, index in July because it had not communicat- going to happen. Identify your key stake-lack of demand from stakeholders and reluc- ed its commitment to CSR. The company holder groups and tailor communications totance to be seen to be taking credit for a com- rectified this with a new CSR website in each of their needs, thinking about the issuesmunity programme that was initiated by staff August (to be fair, the site was in the pipeline they’re interested in, the formats that arerather than the company’s management. before the FTSE4Good exclusion was most useful to them, the language they’ll Whatever their reluctance, executives announced) and in September Tesco was understand etc. Bear in mind that there willshould recognise that the business benefits of included in the index. With the value of eth- be overlap between your stakeholder groupswell-produced CSR communications far ical investment in the UK at around £4 bil- – for example, employees are often share-outweigh the costs. lion and rising, you can consider your CSR holders too – so there should be consistency Firstly, there’s the benefit to your compa- communication budget money well spent. of key messages, look and feel across the dif-ny’s reputation. While a glossy greenwash Then there are the improvements in CSR ferent materials you produce in order tobrochure can do more harm than good, an performance, and the related financial gains, avoid confusion or cynicism.honest, transparent report will support your that occur when awareness is raised not only And don’t forget your internal audience –company’s reputation as a responsible cor- through the distribution of communication if your employees see an externally focusedporate citizen. And it won’t give NGOs materials, but also through their production. CSR report when you have neglected toammunition with which to attack you. One of the benefits of producing a CSR communicate your achievements internally,Greenpeace targets companies that hide the report most frequently cited by corporate they’ll dismiss what they read as PR thatskeletons in their cupboards and fail to CSR managers is that the data-gathering doesn’t reflect what’s really going on in theengage with their stakeholders, not those process requires input from departments company. What’s more, most of the dialoguethat publish honest, accurate, ‘warts ’n’ all’ that otherwise rarely think about CSR. It is that your stakeholders have with your com-information. Of course, there’s little point often this process more than any other that pany isn’t through a printed report or a web-communicating unless your company is puts CSR squarely on the agendas of HR, site, it’s through interaction with yourengaging in CSR activities and actively try- finance, facilities management, marketing employees. If you fail to communicate oning to improve performance. But that’s not and other departments. CSR internally, you are restricting yourto say you should wait to communicate until The involvement of these different employees’ abilities to pass on CSR informa-you’ve tackled all your social and environ- departments is critical to successful CSR tion to your external stakeholders.mental impacts – you’ll be waiting a long communications, as an otherwise excellent This all sounds like a lot of work, and Itime and missing opportunities to improve CSR campaign can be undermined by an won’t lie to you – it is. But the benefits ofyour reputation all the while. inconsistent message from another part of effective CSR communication are so great Secondly, there are recruitment and the company. On a BA flight recently I was and varied that they easily justify the timeretention benefits. A recent survey by the impressed to hear that the company was col- and effort put in. sCherenson Group found that almost 80% of lecting donations for a foreign aid charity. For more information on Flag visitemployees would rather work for a company When I felt in my seat pocket for the collec- www.flag.co.ukthat has an excellent reputation and pays a tion envelope, there wasn’t one – a lost www.ethicalcor p.com 21
  • December 2001 Ethical Corporation magazine inter view Ethical finance – a path to profit The Co-operative Bank has doubled its customer base in recent years. The bank believes this increased business is due to their well-known stance on business ethics and socially responsible investment. We spoke with Simon Williams, Director of Corporate Affairs, to find out more large rise in the number of accounts From the beginning it has been our cus- and profits in the last 5 or so years. tomers’ ethical stance. The line-by-line pol- How much has this been down to icy was developed in full consultation with your ethical stance? our account holders prior to its launch in The Co-operative Bank has reported record 1992. We understand that ethics are not set annual and interim results on 15 consecu- in stone but that issues change over time. tive occasions dating back to 1994. The That is why have been back to our cus- bank has never claimed that ethics alone tomers on two subsequent occasions to sells bank accounts. We know customers are ensure the policy continues to reflect their also looking for competitive products, first views. In December we will again be send- class service and convenience when choos- ing a questionnaire to all our customers ask- ing a bank account. However, what our eth- ing them for their views. We then propose to ical stance does do is differentiate us from publish a revised policy to coincide with the the other players in the very crowded finan- tenth anniversary of our policy in May 2002. cial services market. A cost benefit analysis produced for this Was communication of a updated year’s Partnership Report shows that up to corporate philosophy initially 18% of the bank’s £96.3m pre-tax profit in a problem? From those early the year 2000 can be reasonably attributed lessons you must have learned to its ethical and ecological policies. This which internal staff communications cost benefit analysis takes into account the procedures work well. annual cost of the bank’s turning away Obviously internal communications were The Co-operative Bank’s ethical business on ethical and ecological grounds, and remain an important issue for the bank. policy is now nearly 10 years old. together with associated What can you tell us about its ori- overheads (more than gins and about why the Co-operative £2m), the premium “The Co-operative Bank has reported Bank decided to take an ethical paid to purchase green record results on 15 consecutive stance ahead of most companies? energy (around £50K) When we asked customers in the late 1980s and green air condi- occasions dating back to 1994. The why they banked with us, many said it was tioning systems bank has never claimed that ethics because we were ethical. Although we were (£500K) and the time part of the Co-operative Movement, which and money provided for alone sells bank accounts. However had co-operative principles dating back to community investment our ethical stance differentiates us the Rochdale Pioneers of 1844, and we had (£2.5m). In 1992 we taken a stance against apartheid in South had fewer than 1.5m from the other players in the very Africa in the early 80s, we had done little to customer accounts. crowded financial services market.” promote our “co-operative difference” at Today we have more this stage. than 3m. We therefore decided to ask 30,000 cus- Initially we had to explain to staff what our tomers if they thought we should adopt an How are the decisions made when ethical policy was about and how it affected ethical stance and an overwhelming majori- it comes to making policies on their daily work. All staff completed what ty (84%) said yes. issues such as animal testing? we called an Heritage Culture and Values Is this something that is discussed course, which helped to place our ethical The Co-operative Bank has seen a at board level? stance in the context of the bank’s position 22 www.ethicalcor p.com
  • December 2001 Ethical Corporation magazine we will and will not do business with. We believe all bank cus- tomers should know what hap- pens to their money whilst it is in the bank. Therefore all banks should publish their own state- ments. To date, some banks have moved nearer to our position on some issues, but their motivation for doing this has not always been the same as ours. The threat of legislation to hold com- panies, and ultimately their banks, responsible for the cost of rectifying any damage caused by pollution has been a big incentive for banks to consider the envi- ronmental impact of their cus- tomers’ activities. Do you believe there is a major sea-change happening here inwithin the wider Co-operative sector. Today - a ban that was subsequently given consid- corporate philosophy or could thisour ethical stance is part of the induction erable debate on radio and TV programmes. kind of stance be put aside in acourse for new staff. recession? We have now established ethical advo- What about publicising your We believe we have a sustainable formulacates groups in key locations, which enable stance and work in this area? for business success that will not be knockedstaff to get involved in the promotion and One of the challenges for compa- off course by a downturn in the economy. Adevelopment of our policy. nies is to publicise effectively their report we published last year entitled “Who current activities to make customers are the ethical consumers” shows that justOn your website you state that your and the media aware of what they over half of the population have bought acustomers helped in the ban on the are doing already. What is the product and recommended a suppliersale of cosmetic products tested on Co-operative Bank’s experience? because of its responsible reputation at someanimals. Can you elaborate on this We have never been afraid to tell people time in the last year.and let us know how the bank was about our ethicalinvolved? stance. We do not thinkFrom the outset our ethical stance has stated there is any point in “A third of consumers are seriouslythat the bank will not invest in, or provide having a position on concerned with ethical issues whenfinancial services to, organisations involved issues if you are not pre-in the testing of cosmetics on animals. pared to explain what shopping and a quarter have Whilst we cannot claim that it was sole- that position is. We have investigated a company’s socially due to our actions that the testing of cos- recently used our web-metics on animals has now been banned in site to encourage cus- responsibility at least once”the UK, our highlighting of the issue cer- tomers to join a debatetainly played a part. on GM food. This has proved very popular, A third of consumers are seriously con- In 1996 we ran a famous advertising with hundreds of customers taking part. cerned with ethical issues when shoppingcampaign that featured a model holding a and a quarter have investigated a company’spot of anti-ageing cream in a typical cosmet- Do you believe that your competitors social responsibility at least once. Thereforeics ad pose. However, in the bottom left in the UK banking market are look- we believe that ethical consumerism is nothand corner the picture is torn away to ing at your success and beginning a passing fad but is becoming more andreveal rabbits confined in a laboratory. The to copy your model? more mainstream. Obviously, as the leadingadvert carried the headline “We don’t invest We are still the only clearing bank to publish ethical bank, we can only benefit from thisat face value”. This ad was banned by Vogue an ethical stance, which tells customers who trend. s www.ethicalcor p.com 23
  • December 2001 Ethical Corporation magazine Real ethics By Robert Jones, Wolff Olins t’s time to think about ethical business in Think of the John Lewis Partnership, under the umbrella of the big idea. It can go I a new way. It shouldn’t be a duty, an imposition, an add-on. It needn’t be high-minded. But it should be as natural as Britain’s most famous employee-owned retailer. The partnership was set up in the 1920s to help prevent the Russian Revolution wherever the money is. Virgin started with a record shop and moved into air travel, financial services and mobile phones. breathing. from happening in Britain. Its aim was to Long-term commitment, sustainable dif- Too often today, the motivation to be eth- dissolve the opposition between owners and ferentiation and strategic flexibility. Three ical is external. Companies tackle social workers to create a non-adversarial business. things that do more than anything else to responsibility after a recent disaster, or to The model has worked well, and made guarantee a company a future. So an organ- prevent a future disaster, or to conform to money, for 80 years. isation, by pursuing an ethical purpose from government regulations. The motivator is Think of IKEA, founded in the 1940s the beginning and from the heart, can secure fear of getting it wrong. to make good design available to the many, its own future. And the response companies make is not the few. Or Apple, aiming to make There are lots of ways to try to be ethical. often peripheral to their business. They computers human enough for everyone to The least convincing is corporate philan- sponsor an education initiative, or form a use. Or Virgin, whose big idea, or ethical thropy and, at its worst, that cynical thing partnership with a charity. All very well, but purpose, is about championing the consumer called cause related marketing. This is the it makes little difference to the vast majority in the face of big complacent incumbent most superficial (and, sadly, the most com- of their activities. The motivator here is companies. merely wanting to look good. These organisations have a big Rarely, in other words, does ethical busi- idea, beyond shareholder profit. They “While others bribe customers ness come from within. Rarely does it start at don’t always shout about it: they sim- the heart of the organisation, or pump ply get on with what they do. But they with loyalty cards, John Lewis through its every artery. have an ethical purpose that captures and IKEA customers keep But there are exceptions. the imaginations of people inside and Some organisations have always thought outside the organisation: employees; coming back because they about their social impact. They’ve always customers; investors; and the media. love the thing the company had an ethical as well as a commercial pur- And their big idea wins them pose. This ethical purpose may not be partic- long-term people commitment. stands for” ularly high-minded, or deeply moralistic. It While others bribe customers with probably isn’t about saving the environment, loyalty cards, John Lewis and IKEA or fighting for social justice. But it is, never- customers keep coming back because they mon) approach to ethical business. theless, ethical. It’s about making a positive love the thing the company stands for. Better is to run initiatives that improve impact on society. Apple has good years and lean years, but the organisation’s impact on society: projects Think of the Quaker businesses in its customers stay loyal through thick and that cut out CFCs, for example, or child Britain, people like Cadbury’s and Rowntree thin. labour. But they’re often piecemeal and may in chocolate, or Clarks in shoes. These busi- This kind of long-term commitment is have unintended consequences: in many nesses, and many others like them, were invaluable. It’s worth tens of millions of countries, for instance, child labour is a vital founded by Quaker businessmen to achieve pounds of advertising. But a big idea does contributor to a family’s income. social as well as commercial aims. They even more. It gives organisations something The best approach is to stand for some- weren’t limply philanthropic: they were that no-one can copy. It’s the one kind of dif- thing and live up to it: to find a big idea and hard-headed and very successful enterprises. ferentiation that isn’t replicable. Plenty of make that the driving purpose of the whole But they did think it important, for example, people sell flat-pack furniture, but there’s company. s to sell good unadulterated chocolate, or to only one IKEA. train their staff, or to build well-designed And there’s yet more that a big idea can houses near their factories for people to live do for a company. Because a big idea is big- Robert Jones is a Consultant Director of Wolff Olins and Author of “The Big in. And they found that pursuing these kinds ger than the thing the company does, the Idea” published by HarperCollins. of goals actually made them, in the end, company can change what it does. It can Contact him at pr@wolff-olins.com more profitable. move into new markets, offer new services, 24 www.ethicalcor p.com
  • Your offline, print and online information resource!Ethical Corporation conferences, corporate social responsibility. puts it, “the difference between most prod-magazine and website Who’s leading the way in the big vertical ucts is now negligible – it’s increasinglyEthical Corporation conferences are the pre- markets? What are your competitors doing? about the company behind the productmier meeting place for business leaders And how can you get your company involved rather than about the product itself.”embracing ethical corporate practice. Our at the right price, for the right return on your In Europe and the US, ethical and greenEthical Corporation Europe 2002 conference, investment? funds are taking off, making good returns onto be held on April 25-26 2002 in London, We’ll show you how, with expert analysis, investments for their clients, both individualwill be packed with case studies from across intelligence and case studies from companies and institutional. We’ll be putting the topindustries on corporate ethics and the bot- that are already doing it. You’ll find up-to- managers on stage at our conferences for youtom line. We’re also in the US next year, with the-minute information at ethicalcorp.com, to find out what investors and stakeholdersa high-level business strategy conference completely free of charge. want and how you can deliver it.Ethical Corporation USA 2002 in June. Make With so many similar products and com- Increasingly, asset and fund managersa note in your diary, these are events you modities on offer to your customers, how do want to know more than ever about howwon’t want to miss! you set yourself apart from your competi- your company operates before they buy equi- Over the page you’ll find the preliminary tors? ty. Fund managers are under pressure fromprogramme for our European conference Adopting a corporate code of practice is customers to make sure the money is goingnext year – email christian@ethicalcorp.com just the start. Implementing that code from to the right places, and they are open toif you want to take part or register early for a the top down is a mammoth challenge, but advising companies on how to do this.discount. consider the opportunities for your sales tar- As Rob Lake of Henderson Asset If you would like to speak at an Ethical gets in being seen as the company everybody Management, which has over $150 billion inCorporation conference, please call wants to do business with. Ethical managed assets, told us, “Henderson has aChristian Braun on +44 207 375 7153 or on Corporation magazine and ethicalcorp.com constant dialogue with companies based on1 800 814 3459 extn. 275. Or email him at are where you’ll find out how companies our risk management strategies to make surechristian@ethicalcorp.com across industry are becoming just that. that our funds perform and that we have an If you would like to contribute to the Ethical Corporation conferences are where understanding of the views of that companymagazine or website, please email the Editor, you’ll hear the answers to your questions – and the risks for our money.”Toby Webb, at toby@ethicalcorp.com and find out who’s already seeing the bene- How do you position yourself to take fits reflected in their share price. advantage on all the advice and analysisEthical Corporation magazine Being a preferred company only really that’s on offer from leading companies? Youand ethicalcorp.com makes a difference when your products come to us for the latest information on whoEthical Corporation magazine and ethical- become the product of choice of new and is doing what. And remember to bookmarkcorp.com, launched in October 2001, are existing customers who don’t normally come ethicalcorp.com – the place you’ll find whatpacked full of original articles, white papers, back to the same place on the shelf every you need to know and up-to-the-minuteinterviews and case studies on corporate time. information on formulating your ethicalethics and the business opportunities within As top branding consultant Wally Olins strategy.Ethical Corporation Conferences – Get ahead, stay aheadEthical Corporation magazine and www.ethicalcorp.com - the business case for cor-porate responsibility. Take advantage, do good and learn how to keep that customercoming back for more…
  • December 2001 Ethical Corporation magazine Ethical Corporation Conference 2002 c o n f e r e n c e p r o g r a m m e “The business case for corporate social responsibility” 2-day Conference: April 24-25 2002, London Masterclass: April 26 (Warwick Business School CCU) Day 1, April 24 2002 Chairman’s Address Keynote Speech: Your corporate reputation is everything Balancing reputation management with operational delivery is key. Hear how a major European company is doing this and still delivering the goods Keynote Speech: Ethical reputation and practice - the last commodity differentiator Find out what your customers are looking for, and hear about proven ways to deliver it Networking, Exhibition & Refreshments break - Meet the speakers!! Case Study: Asset and fund managers – what do managers and their clients want from your company? Tips on what asset managers are seeking from enterprise from a senior asset management executive Networking lunch & Exhibition Case Study: Successfully managing the command chain - from the top down and the bottom up How do you manage the message internally? And what systems do you need in place to keep your ear to the ground for opinion, practice reports and new ideas from within? Find out here Case Study: Integrating ethical practices with your suppliers Don’t get caught out by a weak link in the chain – hear how a major European company is working with its supply base and what other industries can take from its experiences Networking, Exhibition & Refreshments break - meet the speakers!! Panel Discussion: Building goodwill – what programmes should you adopt? Goodwill is vitally important in a downturn and can save your sales. Learn about what your company needs to do to create it in the minds of customers, stakeholders and employees Panel Discussion: The risk to reputation of getting it wrong – our cross industry panel discusses ways of minimising your risk Implementing a solid social responsibility programme is not easy – find out how to avoid costly mistakes from our expert panel of cross-industry experts End of Day 1 & Networking Drinks Day 2, April 25 2002 Chairman’s Address Keynote Speech: The business benefits of integrating CSR into a major European enterprise Hear from a top European company about the benefits and challenges of effective corporate responsibility integration Keynote Speech: Effectively managing stakeholder relationships for corporate advantage Satisfied stakeholders are the key to running an effective organisation – find out how to keep them in the loop and how new opportunities can emerge from dialogue Networking, Exhibition & Refreshments break - meet the speakers!! Case Study: How NGOs can really help you formulate a realistic strategy NGOs can present a formidable opponent to your company if you don’t include them in relevant planning - hear how out- side organisations can advise you before an issue becomes polarised! Case Study: BT - Business and communication channels – get the message across, effectively! A unified communications strategy is essential, but not easy – hear from a leading expert how a well-planned online and offline communications strategy can save you £££s and get your message out there Speaker: Tom Dowdall, Head of Group Business Practice & Corporate Policies, BT Case Study: CSR, human resources, and recruiting and retaining the best management talent – what are employees seeking from you? Companies with bad reputations find it harder to recruit and retain the best talent - hear what the top MBA graduates and executives are looking for in your company! Conference Ends Confirmed speakers: Alyson Warhurst, Professor of Strategy & International Development, Warwick Business School Tom Dowdall, Head of Group Business Practice & Corporate Policies, BT Edward Bickham, Executive Vice President, Anglo American plc 26 www.ethicalcor p.com