Is corporate responsibility in your company's blood

1. DIRECTIONS
THE FULL
REPORT 2006
TRENDS IN CR REPORTING 2005–06
IS CORPORATE
RESPONSIBILITY
IN YOUR COMPANY’S
BLOOD?

2. Contents
02
Looking for corporate
responsibility behind the label
by Rowland Hill, M&S
01
Welcome to
Directions 06
06
Corporate Responsibility:
more than skin deep?
Lisa Walden, internal
communications
consultant
10
Embedded
Tests
17
Embedded Tests
The winners
33
The panel’s
winners
18 34
The panel
Euro 250 and
FTSE 100 Analysis
35
Euro 250 and
FTSE 100 Analysis
overview 48
About salterbaxter

3. Directions 06
Trends in CR reporting
2005–2006
Welcome to Directions 06, a
A report by salterbaxter
look at embedding corporate
responsibility.
The holy grail of corporate responsibility has been
that this approach to doing business becomes an
Nigel Salter, salterbaxter intrinsic part of a company’s day-to-day operations
nsalter@salterbaxter.com
and decision-making. Much head scratching has
been done over the years to work out how to do it.
Has anyone had a breakthrough?
Lucie Harrild, salterbaxter
lharrild@salterbaxter.com
This year Directions has decided to put some Rowland Hill from Marks & Spencer talks about
of the UK’s largest companies under the the challenges M&S has faced in its quest to
microscope to see if corporate responsibility embed corporate responsibility in the business
is being embedded in the organisation. Has and in the brand. Lisa Walden, an internal
anyone found the secret to injecting corporate communications specialist, gives a view on
responsibility into the heart of an organisation communicating corporate responsibility to
and seeing it circulate into every fibre? employees and ensuring the people
Do the people get it? If it had happened, understand the strategy.
would we know?
After the success of last year’s judging panel
So we have run some tests on a select group we decided we needed an update on who
within the FTSE 100 to see if corporate is reporting effectively, so the panel is back.
responsibility is in their blood – right down Ten experts have studied the FTSE 100 and
to seeing if the switchboard knows what we their findings start on page 18.
are talking about! The tests are not diagnostic
– there are many things a company should And last but not least we’ve researched the
be doing in order to have embedded corporate FTSE 100 and EURO 250 to see what they
responsibility and some of the evidence could have produced this year.
be confidential information – but turn to page
10 to draw your own conclusions. Happy (and healthy) reading!
This year we have two contributors who
bring us the reality of embedding corporate
responsibility.
DIRECTIONS 06 01

4. Looking
for corporate responsibility
behind the label
Rowland Hill
Corporate Social Responsibility/
Sustainability Manager, Marks & Spencer
As you’re reading Directions
‘06 it’s probably fair to assume
that you’re someone who ‘gets’
Corporate Responsibility.
02 DIRECTIONS 06

5. The challenge is that many of the variety is supportive and well intentioned M&S CR team has done a lot of hand-
people with whom you work don’t. Some but in truth only active leadership can holding during the initial ‘getting to
of your colleagues will be CR-agnostic, a ‘cut through’ to the organisation’s strategy. know you’ phase.
minority might even claim to be anti-CR What I’ve learned is that if the senior team
and worst of all are those obsessives aren’t in a position to provide leadership All successful organisations have a clear
who want to use it to pursue their own on CR then you have to go and find it business strategy. You know the sort of
CR agenda. How do you keep everyone elsewhere. Look to the non-executive thing, to be the fastest, cheapest, best,
aiming in the same direction through directors or perhaps the leader of an most reliable, most stylish etc. To my
the good times and bad? important business division. What you’re mind the single most important piece of
looking for is someone who is effective information a CR practitioner can have is
At Marks & Spencer we clearly start within the organisation, ‘gets’ CR and the answer to the question: ‘How does CR
with a huge debt to our heritage in is respected. support our strategy?’ If you can answer
that we’ve always had the ability to this with clarity, knowing which parts
attract ethically minded individuals as Next up is governance and processes. of the CR agenda really matter to key
customers, employees, suppliers and Compared to many organisations M&S stakeholders, along with the organisation’s
shareholders. But over the last decade places a greater reliance on its people strengths and weaknesses I really believe
the retail marketplace has undergone rather than its processes so I won’t dwell that you’re half way there. If the answer
significant change. Expectations and here too long. You need to connect the doesn’t exist within the organisation go
personnel have all moved on and yet leadership of the business with its CR out and start building a consensus about
on the whole we’ve managed to keep performance and ensure stakeholder what it might be. Constructing simple lists
CR moving forward in the right direction. engagement with appropriate responses. of what it does and doesn’t include is a
It hasn’t always been easy and there It’s always easier to motivate people really good starting point. At one point we
have been times when we’ve had if you can identify positive benefits even had every part of the business with
to retreat from the odd battle in rather than the avoidance of risk. We’ve their own little set of pictures showing the
order to win the war. Having tried put in a system with a Board level CR issues that mattered. This kept focus and
most approaches I’ll run through the Committee supported by a CR Forum of prevented wasted energy in responding
techniques that worked the best for us. senior managers and heads of department to passing fads or distractions.
across the business. That said, what we
achieve still depends hugely on the energy
c Leadership is terribly
important... What you’re
and commitment of our people. c Actions speakbehaviour
than words. The
louder
looking for is someone The quality of our relationships with and deeds of an organisation
who is effective within stakeholders is also hugely important.
Much of this is about basic courtesy and
have to match up to the
the organisation, ‘gets’ acknowledging that sometimes the most rhetoric. d
CR and is respected. d unexpected sources can provide valuable
insights into your business. At its best
Leadership is terribly important. In various these relationships can help form and
capacities I’ve worked for M&S for nearly even deliver your future strategies.
a quarter of a century seeing out the old That said, many people in corporate life
family leadership up to the present day. can feel very uneasy about face-to-face
During that time we’ve had both passive meetings with the likes of campaign
and active leadership on CR. The passive groups and over the last few years the
DIRECTIONS 06 03

6. Actions speak louder than words. The formulated within the CR team over a and animal welfare groups if we were
behaviour and deeds of an organisation number of years. The concept is that we going to mention them or their campaigns.
have to match up to the rhetoric. In are asking our customers to look beyond In order to ensure that our employees
the long-term, organisations have to be the product that they see in the store and were informed we even launched the
trusted to deliver on their services as consider all of the CR credentials that campaign two weeks early behind
well as to act in the wider interests of we’ve addressed on their behalf. After all, the scenes in our stores and everyone
society. This needs not only to be visible even the most sustainable product will look received a key ring with copies of the
but increasingly to provide the option much the same as the most polluting and planned adverts on them.
for stakeholders to feel empowered by unethical. The difference lies in the way it
participating in something positive. It has been produced and the level of trust ‘Look behind the label’ has given us
can be a community project, recycling in its provider. What made the campaign an accessible means of talking CR with
or choosing the ethical product. so effective, however, were the skills in employees and customers without the
execution provided by our colleagues in technical jargon getting in the way.
Finally there is what I’ll call the Brand marketing and communications. Almost
X Factor. We live in a world of almost nine months before the first adverts Many of the traditional tools that CR
limitless choice and increasing complexity. appeared the groundwork was being set practioners use such as governance,
We can’t possibly review all the detail so by using our customer research combined management and stakeholder engagement
we use brands to help us make choices. with our CR Report to identify the overlaps systems are clearly important. However,
Even within the world of CR reports of high consumer expectations and good our recent experiences suggest that the
the format, content, assurance and M&S performance. best outcomes are achieved by the
even choice of assurance providers CR holy trinity of leadership, strategy
all position our CR brand. Good brand and marketing. This takes CR beyond
management has to be honest. One of
the reasons that ‘Your M&S’ has been
c Even the most sustainable
product will look much the
the specialist functions and cedes
ownership to some unorthodox functions
so successful for Marks & Spencer is that same as the most polluting such as marketing and communications.
it genuinely reflects the way employees In itself this is a challenge but perhaps
and customers see the company. At once and unethical. The difference is the ultimate test of the oft-quoted
you have a means of brand positioning lies in the way it has been 21st century cliché about CR being in
that rings true but also provides direction. produced and the level of a company’s DNA.
For us, part of this has also included what
is effectively a CR sub-brand called ‘Look
trust in its provider. d
behind the label’. The genesis of ‘Look The drafting process required the
behind the label’ was a result of the clear co-ordination of many different business
direction provided by our Chief Executive, functions and we went out and consulted
Stuart Rose, and ideas that had been with stakeholders such as environmental
04 DIRECTIONS 06

7. Our recent experiences suggest
that the best outcomes are
achieved by the CR holy trinity
of leadership, strategy and
marketing. This takes CR
beyond the specialist functions
and cedes ownership to some
unorthodox functions such as
marketing and communications.
DIRECTIONS 06 05

8. Corporate Responsibility:
more than skin deep?
Communicating and embedding a CR strategy internally can
be a bit like using an anti-ageing cream – it takes time for
the results to show and you have to keep rubbing it in.
Lisa Walden
Internal communications consultant,
and ex-Director of Internal
Communications, Prudential
At first, it seemed to go against the But is this enough for employees?
natural order of things. Getting senior Employees have a view of the company’s
managers to buy in to a CR strategy impact on society, the big issues, the
that could challenge the very source stakeholders’ perspective and even the
of a company’s profitability seemed measures used to tackle CR. Surely this
unlikely, if not a fool’s errand. must be positive. But is it enough? No.
Pharmaceutical companies addressing
product safety concerns? Tobacco The internal communications dilemma
producers focusing on youth smoking From an internal communications
prevention? But the angst-ridden perspective, the role CR plays in the
soul-searching battle was won business strategy is key to how deeply
(in most cases). employees are going to absorb the
message. Now we’re into tricky territory.
If that was the public face of the Declaring “it’s part of our strategy”,
organisation, what lies beneath? The means people will start looking for
company will have stated somewhere connectivity – with the brand, product
what is on its conscience and how development, training, customer
prepared it is to do the right thing. communications, and HR policy…
06 DIRECTIONS 06

9. c
Fabulous newsletters may
pave the way to awards,
but once the excitement,
not to mention the post-
event hangover, has faded,
this starlet of internal
communications won’t
get the message under
the skin of employees.
c
2
(x=y-z)
c For internal to be
communications
(as appropriate) and people (employees).
Thirdly, don’t forget the brand in all this –
employees after the CEO has briefed
or at least communicated with all senior
it is essentially the corporate personality managers in advance.
believable, there has to be a so there has to be a rationale for how
visible connection – even for people’s CR behaviours fit with it. Seeping through
Infrastructure – a set of processes
the cynics – between what’s And another thing – there must be an for communicating specific types of
being said and “how we do agreed principle that silence, if there’s information using specific channels
a crisis, is not an option. (face to face briefing, email, voice
things around here”. d Rubbing in the message
message, text, print, webcast, intranet)
in a standard and consistent way. It is
To be fair, it’s difficult. But that’s not Who and what carries the CR message? the only way to get deep down into
a reason to head straight for the easy Managers and a robust communications an organisation.
option of dropping a CR article into the infrastructure – the very same ones that
company newsletter (we’ll return to this carry the business messages. Why? Because it consistently pumps
point). For internal communications to through the organisation and restates,
be believable, there has to be a visible Fabulous newsletters may pave the over and over again, the same strategy,
connection – even for the cynics – way to awards, but once the excitement, the same connections… until consistency
between what’s being said and “how not to mention the post-event hangover, instils common beliefs and ultimately…
we do things around here”. has faded, this starlet of internal common behaviours. That’s why managers
communications won’t get the message are excluded at the organisation’s peril.
Frankly, it’s just not worth pursuing under the skin of employees.
employees as ambassadors and agents
of CR without absolute clarity about It wouldn’t be unreasonable to suggest c a fully functioning
on
Successful CR depends
three things on where CR fits in the that the bulk of an employee’s source
bigger picture. Firstly, what has it got of influence comes from the manager communications
to do with the business we’re in, the whether we’re talking about acceptable
products/services we provide and
how does it stack up against our need
behaviours or believable information.
infrastructure. d
to deliver profit to the shareholder? So how does an important email straight The number of employees, sites and
Secondly, how do CR targets or measures from the CEO to all employees score on the overall structure of the organisation
fit with the business’ key performance the believability/impact scale? Lower will inform how many channels or even
indicators – financial, customer than the email that goes out to all function-specific infrastructures are used.
DIRECTIONS 06 07

10. The key is it all has to connect, which is function, business segment, site. This How deep are businesses
why often, it helps to have a centralised is essentially a logistics and e-based prepared to go?
internal communications team if an exercise (no surprise there aren’t any Having alert employees is one thing.
organisation is implementing a strategy awards for this line of work). Making every employee an ambassador
that requires behavioural change. and agent of CR is another. It’s probably
3. Three agreements: fair to say that most companies are in
So if successful CR depends on a fully • One with the CEO/business director the former category rather than the
functioning infrastructure, it’s worth (the ultimate in charge): to support latter. However, the CR strategy sits with
checking to see if the following three the infrastructure and not give any the company’s core business strategy and
foundations are in place: senior managers permission to ‘opt employees have to see and understand
out’ (potentially tricky issue). the clear links between the two.
1. Straight-talking performance • One with the Finance Director and
updates: sponsor of transformation programmes: A final thought. It takes months of
• Monthly and quarterly processes to to provide the performance data and constant attention and collaboration
communicate clear tangible progress commentary on time. with senior managers for internal
against objectives/targets. • One with the PR/Marketing/Marcomms communications to effectively carry
• Details on where progress has not Director (the ultimate owners of all a business strategy through an
been made and what’s being done external communications): to guarantee organisation. Adding the complexities
about it. any material or comment going to the of CR to the mix makes it tougher,
• Briefings face to face (or voice) using media and any customer or stakeholder but if the CR strategy is well thought
a handy ‘pincer movement’ (i.e. tell communications is copied/briefed in to through, the infrastructure can bring
all employees their manager has the internal communications before it to life. Without it, the face the
information to brief them in the next it’s released. company projects will be no more
10 days). than a mask.
2.Cascade processes:
• Detailed (specific names in boxes)
processes for how time critical/non
cone thing. Making
is
Having alert employees
time critical announcements are every employee an
briefed in to the organisation (e.g
Stock Exchange announcements, ambassador and agent
redundancies, product recall) – by of CR is another. d
08 DIRECTIONS 06

11. c
It can take months of
constant attention and
A few live scenarios to consider:
BP – probably the most impressive corporate citizen, provides
a dramatic illustration. The company has made a huge
collaboration with senior investment to address safety concerns and minimise
managers for internal environmental impact, but as the partial closure of the Prudhoe
communications to Bay field in Alaska has proved, being a responsible corporate
citizen has not gone deep enough into the organisation.
effectively carry a business
strategy through an Richard Branson has recently announced a move into
organisation. Adding the environmental businesses, known as the ‘Gaia Capitalism
Project’, starting with a company called Cilion that will make
complexities of CR to the environmentally friendly fuel. The question is, will he expect
mix makes it tougher.
c all employees in the Virgin empire to operate and think in a way
that is aligned to this part of his business strategy – such as
environmentally friendly office systems and practices?
Or will environmental conscientiousness be kept within the
confines of project businesses?
Following its acquisition of Green & Black’s, is Cadbury
Schweppes shifting its brand values to align with those of Green
& Blacks and is anyone telling employees whether they are
expected to behave differently as a result?
To what degree will L’Oréal adopt The Body Shop’s product
development principles or will this business and its beliefs be
ring-fenced from the rest of the organisation? How will Body
Shop people feel about that – especially if the reason they come
to work is because they perceive their employer is aligned with
their own ethical values?
DIRECTIONS 06 09

12. Embedded Is corporate responsibility
Tests
Methodology in your blood?
If it really is running through your organisation’s
veins the symptoms should be recognisable!
We decided to run a few tests on a selection of companies
from the FTSE 100 to see how they are embedding CR. Our
panel of judges picked out the most effective reporters in
their sectors (see page 18) and we have used some of those
as our test group. This isn’t, of course, the definitive guide
to embedding CR but we hope it provides you with an
interesting insight into progress.
If you would like to talk to us about embedding CR please
get in touch!
So the white mice are:
Aerospace & Defence – BAE Systems Healthcare Equipment & Services and Health,
Pharmaceuticals & Biotech – Smith & Nephew
Lucie Harrild Banks – HSBC
Head of CR Communications Household Goods – Reckitt Benckiser
Beverages – Diageo
Media – ITV and BSkyB
Chemicals – Johnson Matthey
Mining – Rio Tinto and Anglo American
Electricity – Scottish Power
Non-life Insurance and Life Insurance –
Fixed Line Telecommunications and
Prudential
Mobile Telecommunications – BT
Lucie Harrild, salterbaxter Oil & Gas – Shell
Food & Drug Retailers – Tesco
lharrild@salterbaxter.com Real Estate – Land Securities
Food Producers – Unilever
Support Services – Wolseley
Gas, Water & Multi-utilities – United Utilities
Tobacco – British American Tobacco
General Financial – Man Group
Travel & Leisure – British Airways
General Retailers – Marks & Spencer
We tested the companies using the questions opposite, focusing on three areas
where an organisation might try to embed CR: strategy and management, brand
and product, and people. First of all we used publicly disclosed information to make
assessments. Then we spoke with the relevant person responsible for CR.
We wanted to see if CR was getting to the heart of the workforce, so decided to
check with the switchboard to gauge whether they had heard of CR (or sustainable
development). So to test the switchboard, we rang the switchboard!
10 DIRECTIONS 06

13. Testing for
embedded Corporate
Responsibility
DIRECTIONS 06 11

14. Embedded
Tests
The results
Key:
= High Embeddedness = Medium Embeddedness = Low Embeddedness
BAE Systems Test Results:
Medium Strategy & Management: High BAE systems have implemented the strategic
and management side of things. It is probably
Brand & Product: Medium unsurprising that CR doesn’t feature in
People: Medium marketing messages but it does in product
development – and defence export legislation
Overall: Medium requires it. Switchboard is run by an external
company and they give a seminar to
employees on CR.
HSBC Test Results:
Medium Strategy & Management: High HSBC’s strategy and management of CR
is constantly improving and has gradually
Brand & Product: Medium brought in more areas of the business and
People: Medium its functions in order to embed CR. Training
is increasing with programmes for new
Overall: Medium employees, graduates and very senior
management. But the switchboard didn’t
understand us.
Diageo Test Results:
High Strategy & Management: High High scores for strategy and management
as well as brand and product – not surprising
Brand & Product: High given the focus on responsible drinking and
People: Medium alcohol in society. There is broad representation
of divisions, functions and geographical areas
Overall: High of the business on its corporate citizenship
committee. Unfortunately the switchboard
wasn’t up to speed.
Johnson Matthey Test Results:
Medium Strategy & Management: High Johnson Matthey seem to be more successful
with embedding CR in the senior parts of the
Brand & Product: Medium company with considered CR management
People: Low and senior staff trained in policy. However
other employees are less aware. But there
Overall: Medium are positive changes happening in the product
development area.
12 DIRECTIONS 06

15. Scottish Power Test Results:
High Strategy & Management: High Scottish Power’s activities in the renewables
market give it a lead in the brand and product
Brand & Product: High area with periodic marketing to support it. And
People: Medium as you might expect it has strong CR strategy
and management but the employee awareness
Overall: High programmes aren’t sufficiently powerful.
BT Test Results:
Medium Strategy & Management: High Whilst BT run internal communications
programmes for CR, the switchboard weren’t
Brand & Product: Low connected. But the strategy side of things is
People: Medium well integrated. An ad-hoc approach has been
applied to products being developed with CR
Overall: Medium issues in mind. But this might change soon.
Tesco Test Results:
High Strategy & Management: High Tesco have some impressive employee
communications activities across the
Brand & Product: High organisation, which have paid off – and the
People: High switchboard knew exactly what we were
talking about. Product developments and a
Overall: High range of external and internal communications
back up the CR strategy and management.
Unilever Test Results:
High Strategy & Management: High Unilever has committed to significant
strategic leadership on CR. It is incorporated
Brand & Product: High into product development and features in
People: Medium advertising and marketing – “we don’t play
with your food”. Internal communications
Overall: High play their part too, but it hasn’t reached the
switchboard yet.
United Utilities Test Results:
Medium Strategy & Management: High Strong strategy and management plus
activities in renewable energy are positive
Brand & Product: Medium for United Utilities. Advertising and sales
People: Low messages are given a light touch in terms
of CR as is employee communications and
Overall: Medium it hasn’t reached the switchboard.
Man Group Test Results:
Medium Strategy & Management: High Man Group has put a lot of thought into
the structure of managing CR and it will be
Brand & Product: Medium interesting to see how that pays dividends
People: Medium in the future. It can be a bit hard to grasp but
there is focus on how CR is integrated in the
Overall: Medium products. There is a wealth of information on
the website and the intranet but switchboard
are none the wiser.
DIRECTIONS 06 13

16. Embedded
Tests
The results
Key:
= High Embeddedness = Medium Embeddedness = Low Embeddedness
Marks & Spencer Test Results:
High Strategy & Management: High As we’ve heard earlier in this report, M&S are
working hard and creatively to embed CR and
Brand & Product: High convey it via the M&S brand. It is paying off.
People: Medium But interestingly the switchboard weren’t well
versed which unfortunately makes you wonder
Overall: High if shop floor can do justice to all that hard work.
Maybe that’s the next area that needs focus.
Smith & Nephew Test Results:
Medium Strategy & Management: Medium Smith & Nephew have a bit of a sector
advantage – they have to factor in CR when
Brand & Product: High designing products to provide economic
People: Low and practical benefit to the healthcare
professionals. Plus marketing is heavily
Overall: Medium regulated. But it is missing a trick when it
comes to communicating with employees.
Reckitt Benckiser Test Results:
High Strategy & Management: Medium Reckitt Benckiser may score a medium for
strategy and management via this methodology
Brand & Product: High but believes its hands-on approach works better
People: High in its flat structure. It is working for internal
communications, the switchboard talked about
Overall: High the CR training they receive.
ITV Test Results:
Medium Strategy & Management: High ITV uses its intranet, the Watercooler, to
give regular updates to employees on what
Brand & Product: Medium is happening around the CR activities, and
People: Medium it gets plenty of attention. Viewers are
surveyed on CR issues, aligning the brand
Overall: Medium with the relevant issues. It seems integration
is developing, if not fully embedded.
14 DIRECTIONS 06

17. BSkyB Test Results:
High Strategy & Management: High BSkyB is using its significant customer reach to
roll out CR-relevant messages such as energy
Brand & Product: High efficiency and climate change. The CR strategy
People: Medium and management provide the company’s CR
framework and a taskforce of CR champions
Overall: High help to embed it through the business. As with
most companies we tested, switchboard drew
a blank.
Rio Tinto Test Results:
Medium Strategy & Management: High Rio Tinto is creating strong management
structures and the stewardship programmes
Brand & Product: Medium mean CR is well integrated in the product area.
People: Low However internal communication stays within
the upper layers of the management structure
Overall: Medium so there is little embeddedness there.
Anglo American Test Results:
Medium Strategy & Management: High Anglo American has integrated CR through its
management structures and into all the stages
Brand & Product: Medium of its projects from feasibility to responsible
People: Medium closure. It doesn’t really do advertising but
internal communications use various means
Overall: Medium to tunnel CR into the organisation, though it
seems to have bypassed switchboard.
Prudential Test Results:
Medium Strategy & Management: High Effective CR strategy and management mean
Prudential leads from the front and it makes
Brand & Product: Medium every effort to communicate financial products
People: Medium clearly to its customers, educating them on
financial planning. Some employees are given
Overall: Medium CR training but it isn’t everywhere.
Shell Test Results:
Medium Strategy & Management: High Shell, as you would imagine, has all the
management structures in place. And a
Brand & Product: Medium significant amount of its product development
People: Medium takes sustainable development into account.
Whilst there are some very positive employee
Overall: Medium training and communications programmes,
they exist in isolation.
Land Securities Test Results:
High Strategy & Management: High Land Securities has developed its CR with
a focused approach to its strategy and
Brand & Product: High management, positive communications
People: Medium programmes and green building techniques.
Unfortunately the switchboard didn’t pick
Overall: High up those messages.
DIRECTIONS 06 15

18. Embedded
Tests
The results
Key:
= High Embeddedness = Medium Embeddedness = Low Embeddedness
Wolseley Test Results:
High Strategy & Management: Medium Judging by the scores it’s a hands-on approach
that’s having an effect. Wolseley have interesting
Brand & Product: High
programmes such as the Sustainable Building
People: High Centre, a showcase for renewable building
materials, and promote energy saving and
Overall: High sustainable timber products. Switchboard
weren’t sure of the terminology but once it
was explained were quite knowledgeable about
office-based activities.
British American Tobacco Test Results:
Medium Strategy & Management: High CR and tobacco have always been controversial
bedfellows and BAT is clearly thinking hard
Brand & Product: Low about how to embed CR in its strategy and
People: Medium management. But the product is the product
and BAT does not see the corporate brand as a
Overall: Medium vehicle to carry CR messages. Employees are
surveyed on CR but that hasn’t reached them all.
British Airways Test Results:
Low Strategy & Management: High There are the management structures in
place to embed CR at BA but it seems they
Brand & Product: Low haven’t fed throughout the organisation as
People: Low yet. CR is rightly represented by activities on
the environment, health and safety and the
Overall: Low community, and employees are told about
these, but that won’t equip them to champion
CR as a business strategy.
16 DIRECTIONS 06

19. Embedded Overall the companies we tested faired quite
Tests well. Though they use a range of approaches
and CR programmes to do it, they all recognised
The winners
that CR must be embedded to be effective.
Interestingly of the 23 companies we tested,
only three switchboards were familiar with
corporate responsibility. Of the companies
achieving high scores, we felt these five stood
BSkyB out (in alphabetical order):
Using its huge customer
network to communicate CR
Diageo
Includes all geographic
areas and business
functions in CR thinking
Marks &
Spencer
Making CR a definite
brand value
Tesco
Extensive employee
engagement activities
Unilever
A good all rounder and
willing to advertise
DIRECTIONS 06 17

20. Top FTSE 100 The panel is back
companies
by sector
Methodology Last year Directions moved on from just recording
the reporting activities of major companies and a
judging panel gave their opinions on how effectively
the FTSE 100 report on corporate responsibility.
With 49 of the FTSE 100 producing detailed reports there is
now no denying that corporate responsibility reporting is here
to stay. Now it is a question of how effective those reports
are. The one-size-fits-all approach of one huge report looks
like it might have had its day as 59 of this group use various
combinations of web based and printed information to
communicate values and activities. These refinements need
to continue and progress for organisations to reach a point
where they are really communicating effectively.
So here we have a new set of willing volunteers to give their
views on who is up to what this year. As before we set some
loose ground rules but gave the individuals a pretty free rein
to let us know what they think does and doesn’t work.
Rules 1. The assessments should be based on information on
company websites or in public reports available up to
and including 18 August 2006.
2. The panellists are encouraged to be forthright
3. The panellist’s decision is final (but please feel free
to get in touch with us if you’d like to discuss it)
4. The panel aren’t actually doctors!
Please note the panellists’ views are their own personal views and not necessarily
those of their organisations or of salterbaxter
FTSE 100 list taken from the Financial Times, 31 March 2006
18 DIRECTIONS 06

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DIRECTIONS 06 19

22. The sectors Sectors Page Sectors Page
Aerospace & Defence 20 Healthcare Equipment & Services and
Banks 21 Health, Pharmaceuticals & Biotech 27
Beverages 21 Household Goods 27
Chemicals 22 Industrial Metals 28
Construction 22 Media 28
Electricity 23 Mining 29
Fixed Line Telecommunications and Non-life Insurance and Life Insurance 29
Mobile Telecommunications 23 Oil & Gas 30
Food & Drug Retailers 24 Real Estate 30
Food Producers 24 Software & Computer Services 31
Gas, Water & Multi-utilities 25 Support Services 31
General Financial 25 Tobacco 32
General Industries 26 Travel & Leisure 32
General Retailers 26
BAE Systems is the only company in this corruption within BAE and media reports
Aerospace & sector that publishes a full CR Report. relating to bribery. However, this makes for
Defence: Smiths Group and Rolls-Royce focus primarily
on environment, health & safety and therefore
slightly uncomfortable reading when they raise
more questions than they answer.
fail to address many of the key issues for this
BAE Systems sector such as business ethics, human rights All three companies report comprehensively
ARolls-Royce and lobbying. on environment, health and safety – showing
Smiths Group clear performance trends. The quantitative
V As in previous years, BAE has continued targets published by Smiths Group and
to make stakeholder feedback central to its Rolls-Royce demonstrate a mature approach
Panellist: report. There are detailed comments from to reporting in this area.
Emily Osband external experts in four key areas – ethics,
employees, lobbying and education – followed
by the company’s response. This format
obviously works best when the external
reviewer provides challenging and insightful
commentary. The section on lobbying makes
for a good read with Robert Barrington, Director
of Governance and Socially Responsible
Investment F&C Asset Management, highlighting
strengths and weaknesses of the company’s § And the winner is:
approach. The Q&As get top marks for honesty
– drawing attention to a government inquiry BAE Systems
into allegations of false accounting and
20 DIRECTIONS 06

23. Banks, perhaps more than any other sector, Bingley and Northern Rock to, say, Barclays
Banks: can feel that they are caught between a or Standard Chartered, is not particularly
rock and a hard place on CSR reporting. constructive.
Alliance & Leicester While strict compliance requirements and
Barclays client confidentiality restrict information Consequently, I think it’s helpful to consider
Bradford & Bingley flows, increasing public scrutiny of a sector the sector in a few sub-groups. Alliance &
HBOS representing 20% of the FTSE 100, and Leicester gets my vote among the ‘UK-focused’
wielding undisputed influence over the global institutions for an easy-to-read yet detailed
HSBC economy, means that the days of relative report that goes beyond a review of its
Lloyds TSB secrecy are well and truly over. philanthropic activities and tackles CSR in its
Northern Rock ‘Marketplace’. Standard Chartered and Lloyds
Royal Bank of Scotland Thankfully, banks are rising to the challenge TSB also deserve a mention for pioneering
Standard Chartered with many now finding a balance in CSR concise and punchy Corporate Responsibility
reporting that both informs stakeholders and ‘Reviews’ which are heavy on numbers, targets
protects commercial activity. This involves and results. However on balance, HSBC comes
Panellist: reporting on the indirect impacts of their out as overall winner for a report that sets its
Kirsty Jenkinson lending and other commercial activities as approach to Sustainable Development firmly
well as their direct impacts. While there is within the Group’s overall strategic goals.
more to be done, most banks now make clear It grapples with the wide range of issues –
differentiations between, for example, the from corporate governance, sustainability
environmental performance of their branch risk, Equator Principles implementation and
networks and how they assess environmental treating customers fairly, to diversity, HIV/AIDS
issues when writing business. and carbon neutrality – facing a bank of its size
and international reach today.
All this being said, the actual content of CSR
reports still varies considerably from bank
to bank, as does progress in identifying and
managing sustainability related risks and
opportunities. To a large extent this reflects
both the different range of products and § And the winner is:
services that the banks offer, and the
geographic reach of their business. For this HSBC
reason, comparing companies like Bradford &
V
All three companies prepare a CR report Firstly their report provides outcome and
Beverages: and all commission an external assurance performance evidence, such as the number of
programme. Whilst some CR issues are complaints made to the Advertising Standards
Diageo common to all three companies in the sector, Authority and the proportion of advertising
SAB Miller others such as water shortages and HIV/AIDS spend focused on responsibility messages.
Scottish & Newcastle tend to be more specific. This is generally This effectively moves the report on – from
reflected in the CR reports. SABMiller one based on commitments and initiatives,
addresses a number of CR issues, giving to one which more clearly demonstrates the
equal space and emphasis to each one, whilst business benefit of good CR performance.
Panellist: Diageo and Scottish & Newcastle focus on
Matt Haddon responsible drinking as their key issue. Secondly the Diageo report is broader,
covering a wider range of issues such as the
Responsible drinking, as in 2005, is the company’s economic impact, employees and
dominant issue for the sector in 2006. All governance practices. It is a more complete
three companies recognise the issue and non-financial performance report.
the importance of their role in promoting
responsible behaviour. They also detail
management processes and initiatives they
have put in place, examples of memberships,
research, policy commitments and best
practices.
§ And the winner is:
Diageo though, goes a notable step further Diageo
than the others, and is awarded first prize.
DIRECTIONS 06 21

24. All of these companies see CSR, and ICI is straightforward, provides clear
Chemicals: particularly the environmental component of performance data and again is of an easy
CSR, as an opportunity rather than a cost and to read length and a somewhat easier to
BOC talk about future income streams from that digest format.
ICI source. Additionally occupational health and
Johnson Matthey safety features very strongly both in terms of Johnson Matthey also has clear data, easily
the targets set and also in the narratives from understood, and even confirms support to
the CEOs and Chairmen. This is quite right ILO conventions and the Universal Declaration
given the hazardous products and processes of Human Rights.
Panellist: with which they are all involved and the
Mike Kelly ambitions set, such as a target of zero But the winner is Johnson Matthey, because
reportable accidents introduced by Johnson they also talk about difficult issues such as
Matthey or BOC’s simple zero incidents and animal testing.
injuries is admirable.
Now what do they all think about REACH?
The length of the BOC report is great and (the EU regulatory framework for the
proves you don’t have to destroy a couple Registration, Evaluation and Authorisation
of forests every 12 months to produce an of Chemicals)
effective document. Although it covers all the
main areas, the report is in danger of under-
selling what they are doing, even though it
gives a nod to GRI, the ABI, the UK’s Combined
Code and the provisions of the US Sarbanes
Oxley as well as the UN Global Compact.
It would be good to see future reports building § And the winner is:
on the use of diagrams to communicate targets
and data, enabling the reader to easily gauge Johnson Matthey
performance improvements.
Hanson reports online, and is strongest in (looking to improve the ecological footprint of
Construction: the area of health and safety, where it gives buildings and the living standards they enable)
trends on performance data showing sustained and contributing to sustainable communities
Hanson improvements. It would be strengthened by is particularly impressive. Wates also deserves
disclosing the targets set for future years. special mention for its initiative to employ
The rest of the information is largely policy people aged 35 plus who are long-term
Panellist: statements, although it does make the unemployed, ex-offenders and parents
link between its training initiatives and the returning to work. The inclusion of strategic
Jenny Dawkins business strategy, references to senior priorities, performance targets, stakeholder
management involvement and gives a few dialogue and accreditation schemes such as
interesting case studies. Investors in People and ISO 14001 are also
common strengths in these reports which
There are a few role models for more Hanson could emulate.
comprehensive reporting among the
construction companies outside the FTSE 100.
Companies like Lafarge, Barratt and Wates
produce standalone sustainability reports, and
tackle their core business impacts in areas such
as waste minimisation, using local suppliers and
local employees to contribute to local economic § And the winner is:
development, and responsible purchasing e.g.
sustainable timber sourcing. The coverage of Hanson
the overarching aim of sustainable construction
A
V
22 DIRECTIONS 06

25. Overall, reporting in this sector could be more somehow to make a connection with
Electricity: imaginative when it comes to the design and the reader. The stakeholder engagement
layout of reports. Future targets are not always information is chiefly focused on government
British Energy Group reported and apart from Scottish Power, and the investment community.
Drax Group reporting on stakeholder engagement is limited.
International Power International Power contains a lot of repetition
Scottish and Southern Energy Scottish Power’s Issue Briefings are in direct from the previous report. It highlights a few
Scottish Power response to stakeholder feedback; these and philanthropic endeavours but there is no
the individual performance summaries make hook into the core business. The stakeholder
it easy to navigate through key issues. engagement programme seems this time to
The concise Summary Report provides a be limited to employee consultation.
Panellist: good punchy overview, while those wanting
Judith Luker more detail can turn to the full Community Drax Group’s report is the weakest in this
and Environment reports, which slightly category, with a narrow focus on environment
confusingly also contain summary sections. and H&S and limited accountability. It is,
however, nice and short!
A Scottish and Southern Energy’s report is
diligent, if somewhat dense. It raises some
V important issues, including appropriate sales
and marketing techniques and the sector’s
role in reducing total energy demand. Extra
marks also for linking corporate responsibility
objectives to directors’ remuneration.
§ And the winner is:
British Energy Group responds to feedback
from the previous report, and the document Scottish Power
is neat and concise. However, I felt it failed
Perhaps more than any other major sector in Vodafone has also continued the steady
Fixed Line the FTSE, telecoms continue to be buffeted by evolution of its CR strategy and reporting,
Telecommunications the strong winds of technological change and
regulatory intervention. 02 is now part of the
with particularly good sections on the positive
contribution that mobile can make for emerging
and Mobile Spanish Telefonica group – although, for now, it markets, and on how the group is managing
has maintained a high standard of separate CR the growth of potentially anti-social content
Telecommunications: reporting. In addition, Cable and Wireless has (such as adult content and gambling) on its
fallen out of this year’s review; let’s hope that networks. Its “We said… we have… we will”
BT the corporate turnaround currently underway mantra also provides a strong spine around
will also extend to its CR programme. which to present performance on its priority
Vodafone
indicators.
That leaves the two telecoms behemoths,
BT and Vodafone, whose disclosure this year One area where CR disclosure could improve
Panellist: highlights two of the wider themes impinging is in the area of business ethics and marketplace
Nick Robins on the responsibility agenda: first, how to conduct. Telecoms is an extremely concentrated
manage the dance between the standalone market, bringing intense regulatory oversight,
report and an in-depth website, and second, with the potential for new interventions (such
how to connect transparency on CR with as from the EU over roaming charges) as
disclosure through the annual report. well as investigations into anti-competitive
behaviour. BT does have a short section on
BT has made a refreshing contribution this year “competing fairly” which is welcomed, and
with its Changing World: Sustaining Values it would be great to see greater attention
V report, which effectively conveys the company’s to this from Vodafone next year.
strategic CR priorities and performance in a
mere 18 pages – providing a snapshot of how it All in all, a good crop.
is anticipating future trends. This is backed by
a comprehensive website that enables analysts
to drill down to the detail. What is equally
impressive is how issues of reputation, § And the winner is:
employee motivation and social responsibility
are dealt with in the main body of the BT
shareholder-directed annual report.
DIRECTIONS 06 23