Top Ten Sustainability Megaforces EC Magazine january 2013
ECM Dec-Jan_Layout 1 10/12/2012 16:07 Page 31 Ethical Corporation • December 2012 – January 2013 Briefing: corporate reputation 31 much attention to where the differences are in these Top ten sustainability megaforces emerging markets,” says Galpion. Even if they do, Corporate reputation can hinge on how companies deal with the the risks are still large. Try getting data on customers big challenges. Every business of every size will need to address or even business partners in Liberia or Korea, the following ten sustainability-related issues, according to Galpion suggests. “It’s incredibly difficult.” professional services firm KPMG. The ever-extending hand of globalisation 1) Climate change: Predictions of annual output losses from presents other reputation risks for companies. Of climate change range between 1-5% per year depending on those, land use and resource sovereignty are action taken by policymakers. perhaps the most significant. Agri-businesses and extractive firms are especially vulnerable to attack. 2) Energy and fuel: fossil fuel markets are likely to become more Nowhere is this clearer than in the heated debate volatile and unpredictable because of higher global energy around free, prior and informed consent. Fail to win demand and supply uncertainties, among other factors. over host communities and multi-million-dollar 3) Material resource scarcity: business is likely to face investments can ground to a halt, as Newmont increasing trade restrictions and intense global competition found out with its Minas Conga Project in Peru. for a wide range of material resources as demand from emerging countries increases. Engaging stakeholders 4) Water scarcity: it is predicted that by 2030, the global This catalogue of crises leaves many lessons. Many demand for freshwater will exceed supply by 40%. revolve around effective risk management. A recent 5) Population growth: global population is predicted to be how-to guide by the Doughty Centre for Corporate 8.4 billion by 2032 in a moderate growth scenario. Responsibility on impact identification and manage- ment enumerates the key steps a responsible 6) Wealth: the global middle class is predicted to grow 172% company should take: map your stakeholders, track between 2010 and 2030. trends, clarify material issues, establish an action 7) Urbanisation: by 2030 all developing regions including Asia plan and communicate.* Fail to win over and Africa are expected to have the majority of their inhabi- Nothing too novel there, perhaps. But saying it host communities tants living in urban areas. and doing it are two different things. To return to the and multimillion- 8) Food security: in the next two decades the global food point made by PwC’s Switzer, reputation manage- production system will come under increasing pressure from ment all comes down to understanding stakeholders’ dollar investments (eg) population growth, water scarcity and deforestation. perceptions. That will only come from listening. can grind to a halt 9) Ecosystem decline: the decline in ecosystems is making Stakeholder engagement is very much in vogue natural resources scarcer, more expensive and less diverse, within management circles these days, but how among other impacts. many companies really do it well? Too few. At least, so the litany of reputational crises would suggest. 10) Deforestation: as forest areas continue to decline, compa- Engagement efforts are all too often tokenistic, nies may find themselves under increasing pressure from says Jon Samuel, head of social performance at UK- customers to prove that their products are sustainable. listed mining firm AngloAmerican. “A lot of Source: Expect the Unexpected: Building business value in a companies are doing engagement when they have changing world, KPMG, February 2012. audits, for example, or they’ll have an annual meeting where people can come to the town hall BankTrack spokesman Johan Frijns. “But I am sure it and say their piece. But they don’t really have a will get a lot worse in the years to come.” mechanism for getting into depth.” Another macro business trend feeding into In contrast, AngloAmerican has developed a corporate reputation risk is the focus on emerging rolling engagement approach with mechanisms for markets. This isn’t new. The Bric countries of Brazil, regular dialogue and feedback. Guided by its Russia, India and China have long been in vogue. internal impact measure system, called Seat, it Others, such as Turkey, Chile, Indonesia and South carries out in-depth stakeholder assessments for all Africa, are also hardly new destinations. But the its projects every three years. “If you’re genuinely search for new markets and competitive advantage interested in what people have to say, then you’re is pushing companies to search out pastures new. more likely to pick up their agenda,” Samuel says. This is landing many firms in hot water. “A lot of With that in mind, the company called a halt to companies fail to realise the issues and complexities its Quellaveco project for more than a year. That of these emerging markets,” says Melvin Galpion, gave it the time and space to enter a meaningful head of business intelligence at risk analyst firm dialogue with its local stakeholders. The tactic * How to Identify a Company’s Kroll Advisory Solutions. Corruption and bribery appears to be working. While many of its competi- Major Impacts – and how to are two obvious red flag areas awaiting the uniniti- tors in Peru are finding their projects under siege, manage them, by Mandy ated or unprepared. Wal-Mart’s run-in with AngloAmerican’s social licence remains intact. Cormack, July 2012, published authorities in Mexico is emblematic. The US retail This could, of course, change. As Oscar Wilde’s by Cranfield University School giant stands accused of bribing government officials quote ends, “one can live down anything, except a of Management’s Doughty Centre to gain operating permits. “Most people don’t pay good reputation”. I for Corporate Responsibility.