Directions 2006 - Is Corporate Responsibility in Your Company's Blood

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Directions 2006 - Is Corporate Responsibility in Your Company's Blood

  1. 1. DIRECTIONS THE FULL REPORT 2006 TRENDS IN CR REPORTING 2005–06 IS CORPORATE RESPONSIBILITY IN YOUR COMPANY’S BLOOD?
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 13. Testing for embedded Corporate Responsibility DIRECTIONS 06 11
  14. 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. 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. 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. 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. 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. 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. 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
  21. 21. My-L iden inh is ta t and ifying su sked wit and opportun stainabil h Sust sectors in ities of ity/CR ris The judging Inve ainable a which companie ks s H inves tment ( nd Resp enderso s S activ t. My-Lin RI) fund onsible n’s panel initia ely in volv h ha sb CR p tives to ed in a een s ma y and ractices encoura number healt a g o hcar mong th e better f My- e ind e ustrie media Senio Linh s Glob r SRI A Ngo al In n vest alyst, H ors ende rson Lucie Em h corpo as a backg co ily ra comm te and conround in co rpor is th unicati s ns at e f consu ons, S umer ha u e o lt in Env ancy. She RI and CR in s el ltanc resp und ironm holds CR the even y CR onsi er of from Im ental T an MS str field yea Fu bilit the respon perial Coll echnology c ate a rs tur y gy nd ex es. respon sible for co ege and is an spe per She work a sibility com rporate d r cia ien ep lis ce t salte m rbaxte unications ort es r Lucie ing in Harril Head of d salterb CR commu axter nicati ons, Em Dir ily ec torO CR sb , Fu a tur nd al es on ati ith ern ks w ate on int or r dd r in w rpo e ne He co dg HaM art RM. chip ing e d tt R P E e sa y u tt i anc f bl p c ng utt an d wa n s Martner, E Ma nsult er o evelo porti es, a Pa UK’s co umb to d al re amm r of cil f KPMG onsibility a n ents anci rogr mbe oun ent Head o sp cli n-fin nce p me ess C lopm and Mike is te Social Re he leads re Corpora nction, whe managing no sura team usin Deve ility s as ore rld B ble ntab roup (CSR) fu programme erformance. a c e Wo taina ccou ing g KPMG’s ’s own CSR p the UK’s elly th Sus D) A ork rm the fi nally he lea ds loping a CSR Mike K R, KPMG for BCS ing w Additio ution in deve across CS Head o f (W port G contrib me for KPM nd Africa – Re m a progra , Middle East tion of Europe y a collabora ctices Kirsty is an Associate Director at ntl curre 5 member pra F&C Asset Management, one of some 2 London’s largest institutional investors with £107 billion under management. She works in the GSRI team where she covers the banking sector and leads the shareholder engagement Kirsty Jenkinson programme on Human Rights. Associate Director, Prior to joining F&C in 2001, Kirsty Governance and Socially spent six years in London and Responsible Investment (GSRI), New York with Goldman Sachs F&C Asset Management nd in grou y and Nick back c He manacoordina has a onsultan igence. he t funct gement es the fu Mike egic c e dil ht rat rcial du years wit first ce Peir nd Head a billio ions for H nd resea nd st me e at com spent fiv tAbility, ment of Mike Directort,aCambridge n ran r He h a ge o enderso ch also , Accoun develop bility the in s a particf SRI fun n’s £1 a ty n y of cli vestmen ular foc ds. NGO ging the account nd later Depu elopme Industr ev r a Hend mate cha t implicat s on u man rporate A1000, aficer of D amme fo its co work, A ting Of Progr 2000 erson in nge and ions e ra expe with ove Dece joine fram ief Ope mbe d h r susta ience wit r a decadr as C inabil ity/C h the e’s Nick R ag Robi enda Head ns Glob of SRI Fu al Inv n estor ds, Hend s erso n companies Jenny works with keholders’ to research their sta ations, opinions and expect iety of working across a var ible industry sectors ons resp er is orate ient UK. er Jenny Dawkins ith Luk corp pat in the g d Jud Pfizer’sility an tegies e-rang in Luk er Head of Corporate for onsib n stra a wid nt dithtakehorld K Ju d of S fize U Responsibility Res earch, resp rmatio inates ageme ees a h Hea tegy, P Ipsos MORI. info coord er eng overs in whic Str a She ehold e and cture are stak grammce stru tions a pro ernan menda rd on gov recom he Boa CR e to t basis mad rterly qua DIRECTIONS 06 19
  22. 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. 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. 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. 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

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