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![Strategy and management 3Ethical Corporation • December 2013-January 2014
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There is always the possibility of microscopic levels
of cross-contamination. But consumers are more
concerned about the actual ingredients in products
[than microscopic levels of DNA].
In the end none of our products were affected.
EC: What do your customers want you to do now?
JK: For us, it’s pleasing that our systems have
proved robust and that our supply choices have
been validated. Our suppliers should be congratu-
lated that there was no cross-contamination into our
products.
We need to be able to show our customers that we
have been asking the right questions before an issue
becomes a problem for them. It’s the actions you take
when they are not forced upon you that most give
customers confidence. So our customers asked us
“you were checking, weren’t you?” and we were
able to say “yes, we’ve been doing so for 10 years”.
EC: Your sustainability targets are ambitious. What was
the reasoning behind them?
JK: The reason we created the 20x20 targets is that
we felt as a business that we were doing quite a lot
in terms of sustainability but that we needed a
clearer destination in mind.
If targets are too far off then they don’t galvanise
you into action now. Or they are so big that they
seem impossible to achieve. On the other hand, if
you can plan out how you are going to get there
then they can’t be that stretching. We have given
ourselves time to develop new ways of working –
simply doing more of the same wasn’t going to be
enough.
EC: You are now developing your own certified sustain-
ability standards. Why do you feel you have to do this?
JK: One of our commitments – sourcing with
integrity – is that all of our major raw materials will
be sourced to an independently verifiable standard
on sustainability.
There are a number of standards that are well
recognised by consumers that work well in certain
product areas – good examples are Fairtrade for
coffee, tea and bananas, or Marine Stewardship
Council for fish. And we’ve taken leadership posi-
tions – we are already the biggest Fairtrade retailer
in the world, and the biggest MSC retailer in the UK.
But the existing standards don’t cover all the
bases. If we wait until 2020, many of the materials
we source still won’t have an independent verified
standard.
EC: So what you are doing is filling in the gaps?
JK: Yes, but we also want to challenge the existing
standards. As a participant in so many, we think that
they can go further. Fairtrade, for example, has an
opportunity to be about more than just a fair price.
In fact, it is already. But consumers don’t yet fully
understand that it’s about more than just a fair price
– there are wider issues about ethical treatment of
employees around safety, for example.
The principle means that we need to work with
other parties to develop the standards – something
we will announce over the coming months.
EC: Is this about bringing certification to scale? A big
problem for some other standards is that there isn’t
enough certified produce to meet demand.
Sainsbury’s 20x20 plan
Launched in 2011, the 20x20 plan details 20 stretching
sustainability commitments Sainsbury’s will work to
achieve by 2020.
The commitments are spread across five “values”:
• Best for food and health
• Sourcing with integrity
• Respect for our environment
• Making a positive difference to our community
• A great place to work
The commitments cover issues including lower salt
levels
in food, zero waste to landfill, an absolute 30% reduc-
tion in carbon emissions and sourcing “key raw
materials” sustainably. Sainsbury’s has announced the
development of a new independent sustainability
standard that will certify raw materials that are not
covered by existing schemes.
"We need to
show we have
been asking the
right questions
before an issue
becomes a
problem"
Be a step ahead, but no more
SAINSBURY’S
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minerals. Quam says the impor-
tant thing for Intel and its
competitors is to “keep putting
pressure on the upstream to be
more transparent”.
One thing that hasn’t changed
in chasing sustainability, Andrew
Winston says, is that the effort to
pivot to transformative change
has to start at the top.
Beyond that, Winston and Aron
Cramer agree that, in addition to
top leadership, it is partnerships
that are driving big changes. If as a
society we do switch towards a
clean-energy-driven and sustain-
ably-designed-products economy,
Winston hopes we won’t even
need the terms “corporate social
responsibility” or “sustainability”
any longer.
“Over time, I hope we get rid of
all the buzzwords and merely call
it good business. Managing our
mega changes, whether you call it
sustainability or not, will be core to the business – and
[integrated] into how we design, make and sell
products and services – not managed off in an organ-
isational silo,” he says.
Of course, partnering for progress in the social
and environmental aspects of sustainability isn’t
new. Ceres, for example, now has 25 years of trying
to integrate sustainability into capital markets and
championing the Global Reporting Initiative to
companies. Meanwhile, a partnership of a different
kind, a memorandum of understanding signed in
January 2014 between the Sustainability Accounting
Standards Board and the International Integrated
Reporting Council looks like it will cause some
creative disruption to GRI’s stature with US compa-
nies this year.
One difference in recent partnerships is the
unique solutions corporations are producing, and the
all-inclusiveness they are aiming for. McDonald’s has
made the bold goal of starting a switch to sustainable
beef in 2016. Just defining sustainable beef is a chal-
lenge, let alone creating supplies of thousands of
tonnes of hamburger meat. McDonald’s and its
partners all along the beef value chain are now
tasked first to craft a real definition of sustainability,
working with the Global Roundtable on Sustainable
Beef, and then to figure out how to take action.
Another important partnership is Canada’s Oil
Sands Innovation Alliance, working to accelerate
environmental improvement in Canada’s oil sands
industry. Cosia’s chief executive Dan Wicklum says
the alliance is a “fundamental redefinition” of
collaboration because of the strong governance
structure created and the scope of participating
companies’ contributions. Cosia may not polish the
oil sands industry’s image to all stakeholders, but
already it is showing tangible environmental
technology innovations.
Gathering inequality
During a recent Twitter chat between sustainability
professionals and companies, some top new predic-
tions included continuation of the expanding role of
partnerships; growth in the number of companies
integrating environmental and social goals into
their strategic planning and budgeting; increasing
pressure from social media on companies’ trans-
parency; and competition between reporting
standards and guidelines such as GRI, SASB and
IIRC.
Only hinted at was how growing inequality in
North American, and particularly US society, is a
problem companies are seeing rise in importance.
Inequality might be one of the “sneaker” issues going
forward. The west coast city of San Francisco is an
epicentre, as inequality widens between tech-sector
millionaires and the rest of the local population left
out of that boom. Big buses that freely shuttle Google
employees from Silicon Valley up to the city every
day have become a flashpoint for the tension.
In A Tale of Two Cities, as with all great literature,
there’s a struggle between opposing forces. In the
world of North American business sustainability,
the struggle is between the capitalism of yesterday
and that of tomorrow, with innovation as the
ultimate plot-twisting device.
In spite of the challenges and setbacks, there’s a
pervasive idea here that technology and innovation
will save us, reforming capitalism sufficiently to
usher in a kindler, gentler era. n
9
Growing
inequality in
society is a
problem
companies are
seeing rise in
importance
Briefing: North AmericaEthical Corporation • March 2014
Big brands becoming protester focus
GETTYIMAGES
April Streeter is an associate
with One Stone. A Certified B
Corporation, One Stone has a
global team offering sustainability
consultancy and communications
expertise, based in Stockholm,
Edinburgh, Sydney, Portland and
Washington DC.
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![Strategy and management16
Joe Jimenez, Novartis
Link sustainability
to success
Joe Jimenez, CEO of pharmaceutical
multinational Novartis, speaks to Ethical
Corporation about corporate innovation
and the importance of a sustainable
business approach
How do you link sustainability and
corporate responsibility to your business
strategy? You do a lot of good work, but how
do you mainstream it in the business?
Corporate responsibility has always been and
will continue to be a core part of our business
strategy. We focus our corporate responsi-
bility efforts in two areas: expanding access to
healthcare and doing business responsibly.
We’re applying our expertise in science and
innovation – for example our new malaria
compound KAE609. We are also pioneering
new, sustainable business models, such as our
social ventures initiatives, to help improve
quality of life for those with limited resources.
We are committed to carrying out our
commercial activities with integrity and do so
by upholding the highest ethical standards.
We also aim to conserve natural resources
and limit our impact on the environment.
We’re reinforcing our efforts by integrating
and aligning our corporate responsibility
activities across the company with targets
and metrics we report in our annual report.
Investors care; investors don’t care. We hear
conflicting views. Which stakeholders tell
you they do care about sustainability and
corporate responsibility, and how do they
demonstrate this?
We live in a global economy where corporate
responsibility is not just a “nice to have” – it’s
an expectation. Our customers expect it, our
patients expect it, our associates expect it,
and increasingly, our investors are expecting
it. There’s growing evidence that links corpo-
rate responsibility and sustainability
activities to positive business performance.
Despite the current challenging economic
environment where long-term projects can
be the first to get cut, nearly a third of multi-
national companies are saying that
sustainability is critical to their ability to do
business. Corporate responsibility is more
than just the right thing to do – it also makes
good business sense.
How has John Ruggie’s business and human
rights framework changed how you do
business?
The Guiding Principles and other frameworks
championed by the UN such as the Global
Compact have helped shape corporate
thinking and behaviour. They give us a foun-
dation that is aligned with our values and they
help us sustain a culture that both furthers
business growth and protects and promotes
human rights. We make a point to continu-
ously review our policies and our conduct to
make sure we’re doing our part – and we’re
making good progress. For example, we were
able to secure a living wage for all Novartis
associates [employees] around the world,
making us one of the first companies to do so.
How do you make sure intrapreneurial sustain-
ability and corporate responsibility projects
become real business lines? Can you give us
examples of how you seek out internal
innovation?
We try to foster a culture of innovation and
creativity, and this includes how we
continue to improve as a more responsible
and sustainable company. To encourage
idea-sharing, we recently held our first
company-wide digital global brainstorm
where associates discussed topics that are
important to our business, including corpo-
rate responsibility. One of the questions
raised was, “We’re reaching 1.2 billion
patients each year with Novartis products,
but many people still don’t have access to
quality healthcare. How can we help?” We
heard from associates around the globe who
offered ideas on everything from leveraging
mobile to improve access to creative ways to
improve distribution in remote areas.
Are companies going to have to become much
more vocal – and take action – on public policy
issues in the coming years than in the past?
Healthcare costs have grown faster than
GDP for 50 years, and at the same time
demand for healthcare globally is rising. As
a result, governments and other payors are
aiming to cut spending by shifting their
resources to solutions that deliver the most
cost-effective real world outcomes. Part of
the solution is policy reform, but another
important piece is for the private sector to
develop new commercial models that focus
on delivering positive patient outcomes,
instead of just focusing on the transaction of
selling a medicine. We’re applying new
approaches such as risk-sharing pricing
models which link payment to patient
outcomes as a result of treatment. We also
have integrated care programmes which
use a broader and more holistic model that
consider solutions “beyond the pill” to
improve overall health, such as physical
rehabilitation and medical counselling. And
Novartis’ social ventures are unique
business models that help expand health-
care access in the developing world. We
work with local governments, non-profit
organisations and others to help improve
local infrastructure, strengthen distribution
channels and build local capabilities while
still making a profit. This ensures the
sustainability of this approach. n
Jimenez: customers and investors expect corporate sustainability
Ethical Corporation • February 2014
Novartis: fast facts (2013)
Net sales: $57.9bn
Net income: $9.3bn
R&D spend: $9.9bn
Employees: 135,000
Medicines reach 1.2 billion people annually
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The document discusses Sainsbury's 20x20 sustainability plan and CEO Justin King's insights on navigating corporate responsibility in the wake of recent food scandals. It emphasizes the importance of proactive communication and rigorous supply chain integrity to maintain consumer trust. Sainsbury's aims to set clear sustainability targets and develop independent certification standards to address gaps in existing frameworks and to ensure responsible sourcing.
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- 1. BUSINESS INTELLIGENCE FORCORPORATE RESPONSIBILITY AND SUSTAINABILITY Broaden your horizons... This analysis pack contains just a small glimpse at some of the analysis our subscribers have access to. Discover how we can expand your knowledge of the future of sustainable business. Subscribe today - to receive the analysisthat w illenhance yourethicalinitiatives EC – Analysis Pack April 2014 PRINT 30 percent Discount_Layout 1 07/05/2014 18:33 Page 1
- 2. "Had we taken adequatesecurity provisions? Regarding horsemeat, yes" In the two years since Sainsbury’s launched its 20x20 sustainability plan, the UK retail sector has had to deal with the horsemeat scandal and come to terms with ever-more engaged and informed consumers, armed with Twitter accounts. How much progress has the UK’s second largest retailer made in those two years, and what are the high- lights of the 20x20 plan’s latest update? We ask the man at the top. Ethical Corporation: Recently there seems to have been a continuous catalogue of scandals affecting the food retail sector. Do you feel you always have to be on your guard? Justin King: It’s never been any different. Social media means things happen more quickly now. But we can react more quickly too – and we are kept in touch with customers better. A few years ago we’d hear about a developing problem once we’d had a few letters about it. But now people can react to a Twitter feed, and we can respond and solve the problem. EC: Having customers with Twitter accounts must have radically changed your communications strategy. How do you keep up? JK: We had a coffee machine blow up in a store – from a manufacturing error. I happened to be in a board meeting at the time and I received a message from my son saying he’d heard about an explosion at one of our stores. Then as I put my phone down, the news came to us from a colleague, and I was able to say that I already knew! Someone in the store had seen what had happened, tweeted it, and then it had been re-tweeted until my son had spotted it. Luckily no one was seriously hurt but this shows how quickly we need to react to these things. EC: Talking of quick reactions, when the horsemeat scandal broke did you know that there was none in your supply chain? JK: Well, you can’t test every beef burger. I look at it this way: you live in a street, and one of your neighbours gets burgled. You then say to yourself, have I taken adequate security provisions? And our answer in the horsemeat problem was yes. Then, as you find out how that house was broken into, you begin to ask questions to make sure that your arrangements are as good as they can be. But as we’ve been testing for DNA and for country of origin for several years, we could be confident that we were in as strong a position as we could be. A second point is that the problem was in a raw material – recovered meat – that we don’t use as we don’t think our customers would think it was acceptable in a beef burger. Thirdly – and this was the area where no one could be 100% confident – is the problem of potential cross-contamination. If your products are coming from a factory where someone else’s contaminated products have been processed then cleaning regimes may not necessarily save you. CEO interview: Justin King, Sainsbury’s Values that add value By Ian Welsh Shortly before personally launching the recent update to Sainsbury’s ambitious 20x20 sustainability targets chief executive Justin King spoke to Ethical Corporation SAINSBURY’S 2 Strategy and management Ethical Corporation • December 2013-January 2014 Subscribe now and save 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 2
- 3. Strategy and management3Ethical Corporation • December 2013-January 2014 Subscribe now and save 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com There is always the possibility of microscopic levels of cross-contamination. But consumers are more concerned about the actual ingredients in products [than microscopic levels of DNA]. In the end none of our products were affected. EC: What do your customers want you to do now? JK: For us, it’s pleasing that our systems have proved robust and that our supply choices have been validated. Our suppliers should be congratu- lated that there was no cross-contamination into our products. We need to be able to show our customers that we have been asking the right questions before an issue becomes a problem for them. It’s the actions you take when they are not forced upon you that most give customers confidence. So our customers asked us “you were checking, weren’t you?” and we were able to say “yes, we’ve been doing so for 10 years”. EC: Your sustainability targets are ambitious. What was the reasoning behind them? JK: The reason we created the 20x20 targets is that we felt as a business that we were doing quite a lot in terms of sustainability but that we needed a clearer destination in mind. If targets are too far off then they don’t galvanise you into action now. Or they are so big that they seem impossible to achieve. On the other hand, if you can plan out how you are going to get there then they can’t be that stretching. We have given ourselves time to develop new ways of working – simply doing more of the same wasn’t going to be enough. EC: You are now developing your own certified sustain- ability standards. Why do you feel you have to do this? JK: One of our commitments – sourcing with integrity – is that all of our major raw materials will be sourced to an independently verifiable standard on sustainability. There are a number of standards that are well recognised by consumers that work well in certain product areas – good examples are Fairtrade for coffee, tea and bananas, or Marine Stewardship Council for fish. And we’ve taken leadership posi- tions – we are already the biggest Fairtrade retailer in the world, and the biggest MSC retailer in the UK. But the existing standards don’t cover all the bases. If we wait until 2020, many of the materials we source still won’t have an independent verified standard. EC: So what you are doing is filling in the gaps? JK: Yes, but we also want to challenge the existing standards. As a participant in so many, we think that they can go further. Fairtrade, for example, has an opportunity to be about more than just a fair price. In fact, it is already. But consumers don’t yet fully understand that it’s about more than just a fair price – there are wider issues about ethical treatment of employees around safety, for example. The principle means that we need to work with other parties to develop the standards – something we will announce over the coming months. EC: Is this about bringing certification to scale? A big problem for some other standards is that there isn’t enough certified produce to meet demand. Sainsbury’s 20x20 plan Launched in 2011, the 20x20 plan details 20 stretching sustainability commitments Sainsbury’s will work to achieve by 2020. The commitments are spread across five “values”: • Best for food and health • Sourcing with integrity • Respect for our environment • Making a positive difference to our community • A great place to work The commitments cover issues including lower salt levels in food, zero waste to landfill, an absolute 30% reduc- tion in carbon emissions and sourcing “key raw materials” sustainably. Sainsbury’s has announced the development of a new independent sustainability standard that will certify raw materials that are not covered by existing schemes. "We need to show we have been asking the right questions before an issue becomes a problem" Be a step ahead, but no more SAINSBURY’S EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 3
- 4. JK: Our startingpoint is scale. When we decided to go to 100% Fairtrade bananas in 2007, we realised that it would require 70% of all bananas certified as Fairtrade at that time. So we worked with partners to convert the entire crop from the Windward Islands to Fairtrade. It changed the system – meaning that the incremental cost of being Fairtrade came down. EC: What about 2050? Given the climate predictions – not least from the Intergovernmental Panel on Climate Change – for later in the century, how are you securing your supply chain beyond 2020? JK: There isn’t anything that we will do differently in the next five to 10 years that would change on the basis of thinking about 40 years ahead. We believe that, in the foreseeable future, supply chains will not continue automatically to present to us products of the quality, sustainability and affordability that the consumer demands today. And we need to make the right invest- ments now. It’s no good arriving at 2025 and saying, if only we’d thought to start the journey back in 2013. None of the big issues are necessarily imminent, but there are reminders of how close they are. For example, in 2008 Thailand and India temporarily banned the export of basmati rice, for domestic reasons, so there was none coming from these countries to the UK. Because we had a tight supply chain into Italy, which is the other place you source basmati rice, we were able to sell it throughout the period of the export ban. Now if you had said in 2006 that you wouldn’t be able to source basmati rice in two years’ time from Thailand and India, everyone would have said “I can’t imagine the circumstances in which that would happen”, yet it did. EC: So you are thinking further ahead, but 2020 is the convenient target? JK: Yes it’s close enough that we have had to start doing things now, and far enough away so that we can set stretching targets but not ones that are so impossible to achieve that we can’t even begin to think about how to achieve them. EC: What do your customers think? JK: In terms of communicating with customers, if you say that we’re setting targets for 2030 they’ll think that we’re not being serious – kicking into the long grass – or they think there isn’t need for action now. The first product we stopped selling was ray because we only source from fisheries that are on a journey towards sustainability and there are not any for rays. I got a letter from a customer who was seriously saying “as we all know ray is going to be extinct soon anyway, I’d like to eat it until it is”. But if we do something now we can bring about a different outcome. When people believe that an outcome is inevitable they take less action now, not more. EC: So is the answer to carefully lead your customers? Can you go too fast? JK: We mustn’t get too far ahead of our customers. Salt reduction is an example of this. All the evidence is that if you take too much salt out, customers will simply add back in more than you removed. Five years ago we took our bread to an industry-leading position on salt and our customers stopped buying our bread with low-salt and started buying other bread that had more salt than ours had in the first place. The net effect, initially, was that our customers consumed more salt. So you can be a step ahead but you can’t be in a different place altogether. n "We mustn't get too far ahead of our customers" 4 Strategy and management Ethical Corporation • December 2013-January 2014 More sustainable fish on the slab SAINSBURY’S Subscribe now and save 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 4
- 5. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com Novo Nordisk Annual Report 2013 Integrated reporting in good health By Hayley Morgan Pharmaceutical giant leads the way not only with its sustainability but also with its reporting tested approach that is engaging to a varied audience. Novo Nordisk has a wealth of engaging stories to tell, particularly around its symbiotic operations in Kalundborg, Denmark. But the report’s concise edito- rial content is focused on performance, not filler. It was a challenging year for Novo Nordisk, which received a warning from the US Food and Drug Administration, experienced a safety scare around multiple products, and underwent a major product recall. Despite these problems, its sales increased by 12% and operating profit by 15%. These conflicting performance markers are addressed in letters from the chairman and CEO and a four-page section titled “A question of trust”, which delves into the pharmaceutical industry’s ongoing struggle to balance financial performance with social responsibilities. The article is a clever way to address controversy specific to their performance, while connecting it to wider governance issues, and runs alongside an image of a stack of books with titles that are the stuff of PR nightmares, such as “Bad Pharma” and “Deadly Medicines and Organised Crime”. Perhaps a risky way to discuss risk, but daring and effective. While the editorial style of the “Our business” section is engaging, the creativity of the subsection titles confuses the contents page and makes navi- gating an otherwise well-organised report more challenging than it should be. In previous years, performance highlights spanning five years were immediately detailed; this year the reader must navigate through performance summaries and the 2014 outlook first. More confusingly, while the financial, social and environmental statements are provided in the second half of the report, the narrative around how these markers were achieved are hidden in the “2013 performance and 2014 outlook” section at the front. This forces the reader to use the search function to find comprehensive detail of specific activity. Having foregone a separate GRI index, a clear navigation at the front end of the report is particularly missed. Heralded as the most sustainable company in the world by Corporate Knights, Novo Nordisk’s corpo- rate publications are released with a degree of expectation. While the packaging of the 2013 annual report is not the most ground-breaking or creative, the quality of disclosure goes a long way to confirming that the company continues to impress long after Sampras laid down his tennis racket. n Danish pharmaceutical giant Novo Nordisk published its first environmental report in 1994. Twenty years on – and 10 years into integrated reporting – its 2013 annual report reflects decades of sustainability leadership. Readers are invited to complete a survey on the quality of the reporting. While it’s unlikely that Novo Nordisk has been inundated with comments, it’s an unusual feature that shows openness to critique. Novo Nordisk is the world’s largest insulin producer, providing products to more than 24 million people globally. This narrative is illustrated with bright, candid photographs of diabetes patients and Novo Nordisk employees, which (refreshingly for a pharmaceutical company) avoid obvious pathos. As in 2012, the 2013 report cover echoes a magazine layout, featuring snappy headlines such as “Is obesity a disease?” and “One size doesn’t fit all”. But this report is decidedly not a magazine. Its data-driven, content-heavy 116 pages span financial, social and environmental performance and strategy, following AA1000APS (2008) principles, International Integrated Reporting Council (IIRC) guiding principles, and Global Reporting Initiative (GRI) G3 guidelines. This is the first year since 2007 that Novo Nordisk has inte- grated its GRI report into its annual report. Integration can mean more cohesive and clear reporting. It can also mean the opposite. With so much information to cover, providing a snappy narra- tive throughout the report would make it overwhelmingly long, and difficult to navigate. Novo Nordisk’s report is undeniably dense, and fewer than 30 of its more than 100 pages are used to feature case studies and illuminate strategy and risks beyond pie charts and technical summaries. Well pitched Divided into four key sections, the second, “Our business”, is the most engaging. This section reflects the magazine theme hinted at in the cover, in looks and structure. Key details, like the company’s triple bottom line business strategy, regional presence, research, risks and targets are interwoven into thought-provoking articles. These articles cleverly balance scientific detail appropriate for an industry reader while avoiding technical jargon that would alienate a curious stakeholder. Providing a human interest angle to otherwise dry information – for example, a two-page piece on the complexity of insulin production – is a tried and Snapshot Follows GRI? Yes, G3.1 Assured? Yes, by PWC. Materiality analysis? Yes. Assessment process described but no matrix provided. Goals? Yes Targets? Yes. Long-term financial, social, and environmental. Stakeholder input? Yes. Detail of company reputation with external key stake- holders. Seeks feedback? Yes Key strengths? Magazine format brings strategy, KPIs, and targets to life. Chief weakness? Contents page lacks detail. Graphics and presentation do not reflect sophistication of the report. Pleasant surprise? Technical articles engaging and easy to understand. Hayley Morgan is a consultant at Context Europe. hayley.morgan@ contexteurope.com www.contexteurope.com Novo Nordisk has a wealth of engaging stories to tell Review 5Ethical Corporation • April 2014 EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 5
- 6. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com Briefing: North America6 Water is another area where companies get an "F" for effort Looking back, pundits might frame sustainable business in North America in 2014 as “the best of times, the worst of times”. On the side of doom and gloom we have plane- tary conditions; if the globe were an automobile, nearly every warning light would be flashing. And thus far, neither scientific forecasts of our predica- ment nor actual extreme events – from droughts to storms – have prompted powerful action by either the US or Canadian governments or companies. Instead, according to the just-released State of Green Biz 2014 report by Green Biz executive editor Joel Makower, North American business has continued to “tinker” with “incremental changes to their products and operations”. Makower doesn’t pin all the blame on corporations – political leaders haven’t measured up, and neither have consumers, who collectively seem to demonstrate little concern over the fate of the planet’s environment, or its ongoing social ills. Two recent petitions are telling. When Canadian pop star Justin Bieber was arrested for reckless driving, 200,000 Americans signed a petition demanding the US president, Barack Obama, deport Bieber. At the exact same time a petition to investigate how a company released toxic chemicals into the state of West Virginia’s water supply couldn’t get far past 500 signatures. Environmental and social progress by companies could be classified as “stalled” right now, Makower says. It’s the twin demons of short-termism – that addiction to short-term profit and return for share- holders that infuses public companies from top to bottom – and lack of a widely accepted alternative vision for how business can be as good for people and the planet as it is economically successful. Bad news first Short-termism has led top North American compa- nies to maximise profits before anything else, and very successfully. US companies, for example, are right now sitting on a record $1.7tn in cash. The 2013 Climate Counts study of 100 top companies’ climate commitments found that less than half were setting goals deemed adequate to limit climate change effects to even “tolerable” levels. Nowhere is this tension between short-term profit and long-term outcomes more deeply felt than in the traditional Canadian industries of energy and mining, with tar sand exploitation the current hot issue for how to damage the environ- ment, increase carbon emissions, and not win public trust, while simultaneously generating new and needed economic windfall. Water is another area where companies get an “F” for failure. Multinational leader Coca-Cola has seen the wisdom of water-conservation and resilience around water, and behemoth retailer Wal- Mart views water management as a coming issue of focus. But overall, US companies’ water efforts are a trickle rather than a flood. Water use is coming to the public’s attention, albeit slowly. In the US, there has been a recent media spotlight on water use in the fast-growing business of fracking – hydraulic fracturing to extract oil and natural gas. Increased transparency around water is necessary, experts say. The need is not just for disclosure of North American companies’ water Canada and the US Best of times, worst of times By April Streeter Global problems that squeeze businesses’ ability to operate are accelerating, but so too are some companies’ readiness to make transformational change CHRISTOPHEBOISSON Ethical Corporation • March 2014 EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 6
- 7. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com use but also transparency about the ways compa- nies make deals with water suppliers, in order to avoid the label of “policy capture”, or muscling in on water policy. Energy is a slightly brighter spot. There is a growing list of US and Canadian companies, big and small, using 100% green energy for their opera- tions. Oregon-based Intel uses 3bn kilowatt-hours of green power annually. Likewise, tiny Copper Door Coffee Roasters in Colorado gets all of its yearly 1,000kWh from wind power. In addition, energy efficiency and management – making existing resources go further – is the most-productive method of satisfying future energy needs, says the Natural Resource Defence Council. It’s also an extremely popular area of sustainability initiatives – in 2014, for example, the US financial services sector will allot 71% of its sustain- ability spending – $1.3bn – to energy management initiatives. Another good sign is investment banking firm Goldman Sachs describing renewable energy as having a “transformational moment” and contin- uing its $40bn of planned investments in the sector. That’s not enough, however. If US department of energy calculations showing fossil fuel use projec- tions are true, the US and Canada are losing the race to convert to low carbon economies in time to keep global warming below the Intergovernmental Panel on Climate Change’s 2C limit. The headlong devel- opment of natural gas and oil in North America must take a big helping of blame. As Michael Klare, a professor of peace and world security studies at Hampshire College, argues: “The gravitational pull of carbon is immensely powerful.” Large investors are growing wary of the continued rush to develop fossil reserves, which is bringing the issue of stranded assets to the fore. In preparation for 2014’s round of shareholder resolu- tions, Exxon-Mobil and Chevron are among the oil companies that have investors asking for a lot more detail on their thinking around fossil development and climate change. If the world moves steadily to tax or put a price on carbon, how many of these companies’ fossil assets will lose value and be stranded? Conversely, if the world doesn’t move and we face the worst warming scenarios, investors want details on how companies plan to adapt and at what price. Ryan Salmon, senior manager of the oil and gas programme at Boston-based Ceres, sums up the debate: “Is it more resilient and economically feasible to develop the assets and adapt to climate disrup- tions over the longer term? Fossil fuel companies have their own views of the future based on their forecasts for supply and demand. But I don’t think anybody is saying these issues are not legitimate.” Salmon adds that Exxon has already responded to investors with “constructive” discussions. Chasing ‘big pivot’ Pessimists in the sustainability world have the sinking sensation that corporate efforts are too little and possibly too late to deal with the globe’s pressing and acute climate and resource problems. The optimists, however, point to the many large and small companies in the US and Canada that are aware of and working on the big problems. “The best businesses understand that the world is changing rapidly and they need to get ahead of 7 Large investors are growing wary of the continued rush to develop fossil fuels Briefing: North AmericaEthical Corporation • March 2014 Canada – fast facts Area: 9.98m sq km Population: 34.6m (2013) GDP: $1.47tn (2012) $42,300 per capita GDP composition: agriculture 1.7%; industry 28.5%; services 68.9% Export partners: US 74.5%; China 4.3%; UK 4.1% (2012) Import partners: US 50.6%; China 11%; Mexico 5.5% (2012) Electricity generation by source: fossil fuels: 31.8%; nuclear 9.2%; hydro 54.8%; other renewables 4.2% 9.98m km2 34.6m (2013) GDP $1.47tn (2012) $42,300 per capita I services 68.9% I industry 28.5% I agriculture 1.7% I hydro 54.8% I fossil fuels: 31.8% I nuclear 9.2% I other renewables 4.2% US CHINA UK 11% MEXICO CHINA US GDP composition 4.1% 4.3% 74.5% 50.6% 5.5% Electricity generation by source Source: CIA World Factbook EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 7
- 8. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com that change,” says Aron Cramer, chief executive of the non-profit Business for Social Responsibility. “At the same time the scale is so big and so broad, they need to collaborate with other companies, work with stakeholders, engage with experts, find solu- tions, and achieve systemic change – and the challenges are so huge.” Huge challenges need not be overwhelming. Many would say it’s about setting good goals and moving relentlessly toward them. But sustainability expert and author Andrew Winston has a different take. Incrementalism, he says, has not taken us far enough fast enough, and the whole idea of sustainability has become siloed inside companies. This necessitates what Winston calls the “big pivot” (which is also the title of his forthcoming book). The recent example of US giant drugstore chain CVS suddenly announcing that it would stop selling 8 The effort to pivot to transformative change has to come from the top Briefing: North America Ethical Corporation • March 2014 tobacco products was a pivot, Winston says. The decision may prove to be detrimental in the short term to the company’s bottom line but allows the CVS brand to be in line with its ultimate mission of supporting consumers’ health. CVS’s stock rose on the news. “It’s hard to make the case any longer that there are limitless materials for companies to draw on. Thus, the scarcity challenge is what companies are going to face most along their value chains,” Winston says. “There’s no single action that creates a big pivot. It’s the sum of the actions that will make your company resilient and able to cope with rising prices and weather extremes.” Sustainable supply chains Making supply chains more sustainable continues to be a big task at many North American companies. This work can be satisfying and fruitful, but is not without pitfalls. In January, Intel announced a mile- stone in releasing its first microprocessors free of conflict minerals. This move took millions of dollars and untold man-hours of investment, and helps the company in upcoming compliance in May 2014 with a section of the Dodd-Frank legislation on financial reform and consumer protection. Intel got much positive press, because the mining of these minerals (especially tin) in African countries is a topic currently on the radar. But resource certification expert Bill Quam says the “bag and tag” certification process in Intel’s supply chain work on conflict minerals may have inherent weak- nesses because it starts from the smelter and not from the mine. He argues that companies need to be careful when making statements about conflict North American company representation 2010 2013 GRI reporters 256 537* DJSI world industry group leaders 0/19 2/24 CDP responses 441 457 CDP disclosure leaders 2/12 29/60 Global Compact participants 171 353 PRI signatories N/A 139 United States – fast facts Area: 9.93m sq km Population: 316m (2013) GDP: $16.2tn (2012) $51,700 per capita GDP composition: agriculture 1.1%; industry 19.2%; services 79.7% Export partners: Canada 18.9%; Mexico 14.0%; China 7.2% (2012) Import partners: China 19.0%; Canada 14.1%; Mexico 12.0% (2012) Electricity generation by source: fossil fuels 75.3%; nuclear 9.7%; hydroelectric 7.6%; other renewables 5.3% 9.93m km2 316m (2013) GDP $16.2tn (2012) $51,700 per capita I services 79.7% I industry 19.2% I agriculture 1.1% I fossil fuels 75.3% I nuclear 9.7% I hydroelectric 7.6% I other renewables 5.3% CANADA MEXICO CHINA 14.1% CHINA CANADA MEXICO GDP composition 7.2% 14% 18.9% 19% 12% Electricity generation by source Source: CIA World Factbook *2012 data as many 2013 reports are not yet published or included in GRI statistics. EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 8
- 9. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com minerals. Quam says the impor- tant thing for Intel and its competitors is to “keep putting pressure on the upstream to be more transparent”. One thing that hasn’t changed in chasing sustainability, Andrew Winston says, is that the effort to pivot to transformative change has to start at the top. Beyond that, Winston and Aron Cramer agree that, in addition to top leadership, it is partnerships that are driving big changes. If as a society we do switch towards a clean-energy-driven and sustain- ably-designed-products economy, Winston hopes we won’t even need the terms “corporate social responsibility” or “sustainability” any longer. “Over time, I hope we get rid of all the buzzwords and merely call it good business. Managing our mega changes, whether you call it sustainability or not, will be core to the business – and [integrated] into how we design, make and sell products and services – not managed off in an organ- isational silo,” he says. Of course, partnering for progress in the social and environmental aspects of sustainability isn’t new. Ceres, for example, now has 25 years of trying to integrate sustainability into capital markets and championing the Global Reporting Initiative to companies. Meanwhile, a partnership of a different kind, a memorandum of understanding signed in January 2014 between the Sustainability Accounting Standards Board and the International Integrated Reporting Council looks like it will cause some creative disruption to GRI’s stature with US compa- nies this year. One difference in recent partnerships is the unique solutions corporations are producing, and the all-inclusiveness they are aiming for. McDonald’s has made the bold goal of starting a switch to sustainable beef in 2016. Just defining sustainable beef is a chal- lenge, let alone creating supplies of thousands of tonnes of hamburger meat. McDonald’s and its partners all along the beef value chain are now tasked first to craft a real definition of sustainability, working with the Global Roundtable on Sustainable Beef, and then to figure out how to take action. Another important partnership is Canada’s Oil Sands Innovation Alliance, working to accelerate environmental improvement in Canada’s oil sands industry. Cosia’s chief executive Dan Wicklum says the alliance is a “fundamental redefinition” of collaboration because of the strong governance structure created and the scope of participating companies’ contributions. Cosia may not polish the oil sands industry’s image to all stakeholders, but already it is showing tangible environmental technology innovations. Gathering inequality During a recent Twitter chat between sustainability professionals and companies, some top new predic- tions included continuation of the expanding role of partnerships; growth in the number of companies integrating environmental and social goals into their strategic planning and budgeting; increasing pressure from social media on companies’ trans- parency; and competition between reporting standards and guidelines such as GRI, SASB and IIRC. Only hinted at was how growing inequality in North American, and particularly US society, is a problem companies are seeing rise in importance. Inequality might be one of the “sneaker” issues going forward. The west coast city of San Francisco is an epicentre, as inequality widens between tech-sector millionaires and the rest of the local population left out of that boom. Big buses that freely shuttle Google employees from Silicon Valley up to the city every day have become a flashpoint for the tension. In A Tale of Two Cities, as with all great literature, there’s a struggle between opposing forces. In the world of North American business sustainability, the struggle is between the capitalism of yesterday and that of tomorrow, with innovation as the ultimate plot-twisting device. In spite of the challenges and setbacks, there’s a pervasive idea here that technology and innovation will save us, reforming capitalism sufficiently to usher in a kindler, gentler era. n 9 Growing inequality in society is a problem companies are seeing rise in importance Briefing: North AmericaEthical Corporation • March 2014 Big brands becoming protester focus GETTYIMAGES April Streeter is an associate with One Stone. A Certified B Corporation, One Stone has a global team offering sustainability consultancy and communications expertise, based in Stockholm, Edinburgh, Sydney, Portland and Washington DC. EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 9
- 10. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com Corporate responsibility cheat sheet By Oliver Balch Ethical Corporation’s analysis of the latest reports and data Business case under scrutiny Fewer than a third of large companies claim to be making a profit from their sustainability programmes, down from around two-fifths in 2010. A survey by MIT Sloan Management Review and the Boston Consulting Group finds the same proportion (32%) are breaking even, while 11% are losing money. A surprisingly high 25% appear not to know either way. Now in its fifth year, the annual Sustainability and Innovation Global Executive Study identifies employee health as the most important social issue facing companies. As for the environmental and economic fields, the 5,300 executives and managers that responded to the survey picked out energy efficiency and competitiveness as priority themes. The findings reveal some worrying mismatches. While 88% of respon- dents agree that climate change is real, only 9% fully believe their companies are prepared for the consequent risks (with an additional 25% “somewhat agreeing”). Likewise, 70% of respon- dents believe sustainability is important or very important for their businesses, yet only around half think their companies are adequately addressing the issue. http://sloanreview.mit.edu Wind tops Spain’s energy mix Wind has emerged as the most impor- tant source of power generation in Spain’s energy mix. At 23% of all energy produced, the output of Spain’s wind farms outstrip that of its coal-fired (14%) and combined cycle (9%) power stations. Nuclear (21%) is the second most important source of electricity in the country, while hydro- electricity now represents a credible 14% (compared with 8% in 2012). Spain’s grid operator Red Electrica De Espana estimates that the introduc- tion of renewable energy during 2013 has reduced carbon dioxide emissions in the electricity sector by 23% to 61.4m tonnes per year. Renewables now account for 42.4% of Spain’s electricity generation. The wind sector achieved a new maximum of instantaneous power of 17.056 MW on 6 February 2013. www.ree.es Boardroom balancing act Women now make up one-fiftvh of FTSE 100 boards, according to figures from Professional Boards Forum BoardWatch. Although it’s the highest figure recorded, the UK’s largest companies will need to increase the proportion by five percentage points (equivalent to 50 seats) to hit the government’s 2015 target. Women now make up one-quarter of non-executives directors, although the figure plummets to 7.2% for female executive directors. A major concern remains the lack of women at the very top, with only four female CEOs in the UK’s largest 100 companies (Royal Mail, Easyjet, Burberry and Imperial Tobacco). Currently 36 companies have 25% or more female board members, with 13 having 30% or more. The highest performer is brewer Diageo (with 44%), followed by Capita (40%) and Royal Mail and Unilever (36% each). The ratio drops for the FTSE 250, which boasts only 15% women direc- tors (comprising 19% non-executive directors and 5% executive directors). One-fifth of the UK’s largest 250 companies still have all-male boards. www.boardsforum.co.uk Cheat sheet10 Ethical Corporation • February 2014 Corporate insights Emissions heading upward, BP says Energy company BP predicts that carbon emissions will jump by 29% over the next two decades. Its recent Energy Outlook report anticipates a 41% increase in energy consumption by 2035. The vast majority (95%) of the projected rise in energy consumption is expected to occur in non-OECD countries. Energy use in these countries will grow at 2.3% per year during 2012- 2035, compared to 0.2% per year in the case of OECD countries, the oil major states. While reliance on coal is expected to fall, fossil fuels over all are still projected to comprise 81% of the energy mix by 2035, a 5% drop on 2012 figures. In terms of power generation, renewables such as hydro and solar will increase from their current share of 5% to 13% come 2035. www.bp.com UK rail passengers happy The passenger satisfaction rate on the UK rail network hit 85% in 2012-13, Network Rail reports. Train punctuality, meanwhile, registered at 90.9% for the same period, marginally down on the 91.6% rate achieved the previous year. The company’s carbon emissions – its own, not those of rail companies – dropped by 4,185 tonnes of carbon dioxide equivalent to a total of 303,078 tonnes CO2e. Clifford Chance’s patchy pro bono record Law firm Clifford Chance gave on average 18.4 hours of pro bono work per lawyer during 2013, the company’s corporate responsibility report reveals. Lawyers in the firm’s American offices gave substantially more of their time (47.4h), followed by the UK (29.4h). Figures for Asia Pacific (7.7h), central and eastern Europe (7h) and western Europe (7.3h) are markedly lower. www.cliffordchance.com Fewer than a third of large companies claim to be making a profit from their sustainability programmes Women now make up one-fifth of FTSE 100 boards Renewables account for 42.4% of Spain’s electricity generation EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 10
- 11. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com Wetlands withering in China China’s wetlands have shrunk nearly 9% since 2003, new figures show. Asia’s largest economy is home to more than one-fifth of the world’s population, but only 6% of its freshwater resources. According to China’s State Forestry Administration, the world’s most populous country has lost 340,000 sq km of wetlands over the past decade – an area larger than the Netherlands. China has earmarked $660bn to invest in water security projects over the next decade. english.forestry.gov.cn US companies ‘must do more’ Over nine in ten US citizens say companies should implement more sustainability practices, while 63% think that they should “actively pursue” such practices. The findings, in a survey by Hill & Knowlton Strategies, also reveal that only about one-third of the US public believes companies are doing more to combat climate change than they were a decade ago. The findings suggest an appetite for information among US citizens, however, with 62% interested in learning what companies are doing to improve energy efficiency. The most trustworthy means of companies doing this is via third party organisations, say half of those interviewed. Workforce overlooked in climate cuts The rising cost of energy means 92% of workers in the UK are concerned about their domestic energy bills, but only 47% have given any thought to the cost burden faced by their employer. Employers are missing a trick. Engaging their workforce around energy efficiency could save UK businesses £300m per year, the Carbon Trust estimates. The biggest single gain could be in reducing air travel: a 5% reduction in work-related flights would translate into £128m in savings (plus a 1.5m-tonne reduction in carbon emis- sions). At present, however, fewer than one in four employees have ever been asked to help save energy at work, and only 13% say their employer offers incentives to workers that take steps to reduce energy consumption. Three- fifths of employees say they would be more likely to save energy at work if they were praised, with a similar number admitting that they would be equally motivated by financial rewards. www.carbontrust.com Foot-dragging in Hong Kong Companies listed on Hong Kong’s Hang Seng Composite Index are dragging their heels to a worrying degree on climate change. Only 26 of the 216 listed companies analysed by Carbon Care Asia currently measure their carbon footprint. Only five had clear targets, meanwhile. The poorest performers were small-capitalisation firms, with a mere 3% measuring their emissions. www.carboncareasia.com Asia shining in solar power The Asia-Pacific region is predicted to account for around half of all new solar photovoltaic generating capacity in 2014, according to the industry research group Solarbuzz. The vast majority (95%) of the 23GW in anticipated new generating capacity is expected to come from five countries: China, Japan, India, Australia and Thailand. The projected capacity gains mark a 35% increase on the 18GW added in 2013. According to the Chinese Bureau of Energy, China alone aims to install 12GW in 2014, with 8GW to be installed on rooftops, and the remaining 4GW on the ground. www.solarbuzz.com n Cheat sheet 11Ethical Corporation • February 2014 Organisation snapshots Big risks in year ahead Severe income disparity is the most likely risk currently facing the planet, according to the World Economic Forum. On a scale of 1 (least likely) to 5 (most likely), respondents to the WEF’s Global Risk 2013 report gave the issue as 4.22 rating. Next on the list are chronic fiscal imbalances (3.97), rising greenhouse gas emissions (3.94), water supply crises (3.85) and mismanagement of population ageing (3.83). Income disparity also topped the ranking as the risk with the highest potential impact (4.04). Interestingly, water supply crises climb into second place in impact terms (3.98), while chronic fiscal imbalances drop to third (3.97). Also in the top five risks by impact is the diffusion of weapons of mass destruction (3.92) and the failure of climate change adaptation (3.90). www.weforum.org Clean tech requires $1tn a year What’s the bill for fixing climate change through clean tech? Christina Figueres, the United Nations’ climate chief, reckons a cool $1tn a year should do it. Global investment in clean technologies is currently around $300bn. According to Figueres, the world’s biggest pension funds and other asset owners invest less than 2% of the funds under their control in clean energy infrastructure. This compares with about 10-15% directed towards coal and oil. Global Compact axes 107 firms The Global Compact expelled 107 companies in the last six months of 2013 for failing to submit a communication of progress report, the United Nations-backed initiative announced. The expelled companies comprise about 2% of the 4,416 required to submit such a report over this period. During the same six months, 707 new companies joined the Global Compact. www.unglobalcompact.org China’s wetlands have shrunk nearly 9% since 2003 The Asia-Pacific region is predicted to account for around half of all new solar photovoltaic generating capacity in 2014 A 5% reduction in work-related flight would translate into £128m in savings EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 11
- 12. 12 Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com Fair shares Women could take 40% of board- rooms seats in European Union listed companies by 2020 if a vote of the European parliament is anything to go by. The parliament in November backed the plan by 459-148 with 81 abstentions. Under the law, compa- nies would have to ensure that at least four in 10 of their non-executive directors are women, or put in place transparent selection procedures to show that they are not denying women positions because of their gender. Companies that do neither could be sanctioned. However, the law is not final. EU member state governments must agree to it, and they have not yet made up their minds. Ripple effect Greenhouse gas emissions are not the only factor that might make the world’s fossil-fuel reserves unex- ploitable, according to a report from consultants Wood Mackenzie and the World Resources Institute. Key reserves might also be at risk because of water shortages. The report found that half of US shale gas reserves are in areas of “medium to extremely high baseline water stress”, with coal mining in China and oil production in the Middle East facing similar short- ages. Energy industries consume about 15% of global freshwater reserves. Wood Mackenzie’s Sondra Scott says: “With the United Nations predicting a 40% shortfall in global freshwater by 2030, the energy industry is under increasing scrutiny from the government and public on how it uses freshwater supplies.” Analysis: Sochi Olympics Fair games? By Oliver Balch Sponsors of the Winter Olympics have mostly offered a dangerously weak response to damaging stories in the run-up to the Sochi games Excitement is brewing in Sochi. A building site for much of the past year, the Russian city is now nearing readiness for February’s Winter Olympics. Like all global sporting events, the run-up to the games has had its hitches. Fears of a mild winter prompted a stockpiling of artificial snow. A suicide bomber along the coast sparked security concerns. But beyond the usual teething problems, these Olympics seem to have attracted a pecu- liarly large volume of bad news. Russia’s stance on gay rights is perhaps the most obvious. A law passed in June 2013 banning homosexual “propaganda” earned the country worldwide condemnation. This was followed by the arrest of 30 Greenpeace activists two months later on piracy charges, which black- ened the country’s dubious human rights record even further. Despite the XXII Winter Olympics being billed as the most expensive games on record, with a reported budget of $50bn, migrant workers are said to have gone unpaid in some instances. In other cases, there are reports of them having their passports confiscated and having to endure 12-hour working days. Environmental concerns Claims that the games are destroying the envi- ronment have also plagued preparations. Contractors are accused of dumping construc- tion waste illegally, for example, leading to landslides as well as polluted water sources. Green groups maintain that a new road and high-speed railway into Sochi have perma- nently damaged the nearby Mzymta river. Environmental campaigners working to raise awareness of these issues, meanwhile, have faced police detention. This litany of bad news raises serious issues for the event’s corporate sponsors. “Corporate sponsors have a huge stake in making the Sochi games the celebration of fair play and human dignity that all Olympics should be,” says Minky Worden, director of global initiatives at Human Rights Watch (HRW). The US-based campaign group has written to all the major sponsors of the games calling them to “speak up”. Few, predictably, have so far chosen to do so. To their credit, three of the event’s biggest sponsors – Coca-Cola, Dow Chemical and General Electric – have at least agreed to meet with HRW. A further five have offered written responses, including McDonald’s, Procter & Gamble and Panasonic. According to HRW, all eight companies have expressed concerns over the gay propaganda law to the International Olympic Committee. That’s certainly welcome, but it falls short of an open call for the Russian government to repeal the law. As for the other alleged abuses surrounding the games, not a word. Naturally, global companies are wary of becoming embroiled in controversy. They guard their reputations carefully. In the furore currently surrounding the Winter Olympics, therefore, most revert to type and seek to cast themselves and their brands as apolitical. Coca-Cola perhaps goes furthest in publicly declaring that it does “not condone human rights abuses, intolerance or discrimination of any kind anywhere in the world”. Others, such as Panasonic, prefer to focus on the “feel good” factor of the games. The statement “sport is a human right” is as polit- ical as the Japanese electronics brand is prepared to get. Hardly words that will worry the Russian president, Vladimir Putin. The Olympics’ band of corporate sponsors, who cough up a reported $100m each for a four- year cycle of marketing rights, clearly want to remain tight-lipped. Fair enough. Sport, for them, is all about projecting an upbeat image. Even so, they would do well to lobby the relevant authorities behind the scenes. As long as there’s downbeat stories attached to Olympic events, their reputations will be in the firing line. All roads lead to Sochi in February LONNYG/ISTOCKPHOTO.COM Stressful energy source ISTOCKPHOTO EthicsWatch Ethical Corporation • December 2013-January 2014 EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 12
- 13. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com Analysis: management structures Is the future holacratic? By Stephen Gardner No job titles and blurred lines of responsibility. Might holacracy catch on? It has been around since at least 2007, and the principles underpinning it date back to the 1960s, but it has only now hit the big time. Holacracy is a theory of organisations that does away with job titles and instead distrib- utes responsibility among self-governing circles. The Amazon-owned online retailer Zappos recently became the largest company to switch to the system. Its 1,500 people will complete the transition by December 2014. Behind holacracy is the idea that work should be organised around tasks, rather than around the functions within a company. The best way to get tasks done is to trust teams to organise in the way that suits them best. Tasks are delegated to “circles” of people, which are free to self- govern – as long as they get the work done and fulfil the requirements of the upper circle that delegated it to them. New rules Holacracy has been codified by US software entrepreneur Brian Robertson. The rules are set out in a Holacracy constitution that purports to be written in plain English but reads otherwise, advising, for example: “A Linked Entity may add to or amend its Cross Link Role through its own due governance process, and such Role shall further inherit any Accountabilities required on such a Role by a Policy duly operating upon the Linked Entity.” Nick Osborne, a certified holacracy practitioner at Agile Organisation in the UK, says that in a holacratic organisation “the power is in the rules of the constitution” rather than in the hands of individuals. Holacracy is a “third way” between a hierarchical structure and a flat structure. It can in principle be scaled to any size of organisation and makes life more interesting for employees because they can “switch in and out of roles more flexibly”. According to Zappos, productivity should rise because holacracy “enables employees to act more like entrepreneurs and self-direct their work, instead of reporting to a manager who tells them what to do”. Osborne cautions, however, that transition to holacracy is not easy. Companies should expect to lose some workers who find “it doesn’t work for them” – giving up on a hard-earned job title can be tough. The system has also been criticised as too inward-looking. Removing job titles and giving more flexibility might be great for internal morale, but it could also make it harder for customers to know whom they should speak to. Osborne says that to counter this, holacratic companies can publish a roll-call of responsibilities, with details of to whom tasks have been assigned at any one time. Steve Denning, a consultant and author on organisations, says the risk for a holacracy is that it becomes “an inwardly focused, but transparent, organisation” that leaves it to the customer to find out who has a particular responsibility. If the self-governance system turns into death by committee, “the combination of inward-focus plus complete transparency may thus be fairly lethal, as customers will be able to see very clearly that their needs, wants and whims are not being systematically attended to, and will move their business to a firm that is more responsive”. Fortunately for companies everywhere, Zappos has volunteered to be the holacracy guinea pig. Its experience will enable the system’s effectiveness to be judged. EthicsWatch 13Ethical Corporation • February 2014 Millennial thinking Millennials – people born between 1980 and 2000 – have a different set of workplace values from their more profit-driven elders, according to a survey by Deloitte. Millennials believe overwhelmingly that innovation is the key to business growth, and that corporate success cannot be judged on the basis of profits alone, with only 35% considering the purpose of business to be to generate profit. The main challenges millennials in business expect to face are resource scarcity, inflation and ageing popula- tions. Although most millennials (60%) say they work for innovative companies, in some countries there are gaps between aspirations and the extent to which innovation is fostered in reality, leaving millennials poten- tially frustrated. The biggest gaps exist in Australia, France, South Africa and South Korea, Deloitte says. Trust me, I’m a corporation The proportion of people saying that they trust corporations appears to have stabilised at about 58%, according to the 14th annual Trust Barometer from PR consultants Edelman. High trust levels of 70% or more are seen in emerging markets including China, India, Indonesia and Mexico, though consumers there tend to trust foreign corporations from countries such as Germany and Sweden rather than home-grown brands. Developed economies are much more cynical about business, with trust scores of only 43% in France, 41% in Ireland and 38% in Spain. The most trusted sectors are technology and automo- tive, while the least trusted are media and banks. In line with previous Edelman results, NGOs are more trusted than businesses, scoring 64%. But trust in government has plunged – only 44% of those surveyed think they can rely on their political leaders. Traditional office roles can be counterproductive WAVEBREAKMEDIA JACEKCHABRASZEWSKI Not just about the profits, dude EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 13
- 14. Strategy and management14 ALPHASPIRIT EthicalCorporation • February 2014 Leadership risk includes the misuse, mismanagement or abuse of the organisation's coffers The World Economic Forum has just published its Global Risks 2014, a very useful snapshot of risks confronting governments, companies and other stakeholders. Though it targets large systemic risks, in this and other risk assessments there is, however, a gaping hole: the risk of leadership and culture failure. In the 1980s there was Drexel Burnham Lambert and the savings and loan scandals. At the turn of the century we saw Enron, WorldCom, Adelphi and Tyco, to mention just a few. Most recently we witnessed the probably most systemic and widespread series of scandals of them all – the global financial meltdown of the past half-decade. What is a common denominator that runs through all of these scandals? Is it a breakdown in internal controls? A lack of proper laws and regulations? Ineffective board oversight? A poor executive team without a vision? A general counsel, internal audit or chief financial officer asleep at the wheel? They may all have played a role. However, a closer look may take us to another level of risk we don’t talk about much: the failure of leaders, the risk that leaders have the wrong motivations and incentives, the risk that motivations other than the common good of the enterprise are driving CEOs, their hand-picked executive teams and their rubber- stamping boards, to allow excess, short-termism and, in the worst cases, illegal behaviours. But it also goes beyond leadership. It goes to the culture of the organisation. And it may even go to a systemic culture in an entire sector. It is a culture that instead of encouraging a race to the top encourages a race to the bottom. This can best be seen in the financial sector over the past two decades. But it also happens in other sectors. Look at the construction industry, especially in developing countries where the use of the cheapest labour possible without consideration for health, safety and basic labour rights has given rise to a new form of modern day slavery. Look at the retail industry and the supply chain nightmares that have come to light through tragedies such as Rana Plaza. So the answer to the question of what is the least discussed and potentially most devastating risk is the risk of leadership and culture failure. Let’s break that down. Leadership risk is the risk that the top leaders of an organisation misuse, mismanage, abuse or outright loot the coffers of the organisation they owe fiduciary allegiance to. Extreme examples of this risk are unfortunately not uncommon: Milliken, Skilling, Fastow, Ebbers – these are merely those who have been found to have plundered or otherwise abused their positions of power for personal gain. Quiet but guilty? What about the CEOs, CFOs and other executives who have not been investigated, prosecuted and found guilty of any crimes or civil violations? Maybe they’ve been forced out of their positions quietly or in disgrace (and then frequently found another willing corporate home). The names here are many as well: look at the turnover on Wall Street and global financial sector – especially global bank leaders who have been in the cross-hairs of prose- cutors though often not directly investigated, prosecuted or convicted. The GlobalEthicist The biggest risks nobody talks about By Andrea Bonime-Blanc The failure of leaders and the business cultures they encourage can have devastating consequences COLUMNIST: ANDREA BONIME-BLANC Subscribe now and save 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 14
- 15. 15 Ultimately, it isthe board of directors that is accountable for recognising or preventing risk Strategy and managementEthical Corporation • February 2014 Leadership risk is therefore the risk of a top executive either engaging in direct criminal or civil legal violations or engaging in unethical or borderline practices that may come back to haunt not just him or her but the entire organisation. This is a form of reputation risk. So, what then is “culture risk”? We have all heard and read about the importance of tone at the top, the fact that the culture of an organisation is largely determined by its leader setting the parameters for business strategy, business plans and performance incentives. Leaders set the tone not necessarily by what they say but by what they do. Culture trumps compliance every day of the week. Culture and how we do things is way more important than written policy and codes of conduct and what we say about how we do things. Culture risk is the risk that the culture that suffuses an organisation is the culture of a leader who is more narcissist than true leader, more self- enriching than steward of his/her company; someone who may a) not be true to the principle of legal compliance, (b) not be living up to common ethical behavioural standards, or c) be driven by a performance incentive stricture that encourages overly risky or even illegal behaviours. Close links Why are leadership and culture risk so closely inter- related? Every leader, especially when it comes to corporations, brings their own personal style, expe- rience, expertise, history, values (or lack thereof), and approach to strategy, business planning and performance management. This personal package carries a lot of weight and allows the CEO to stamp the organisation with his/her way of doing things. This way of doing things then becomes part of the pervasive culture. So, what can we do about leadership and culture risk? First, recognise it. Executive teams and boards need to recognise that these are critical and material risks to any organisation. Second, prepare for it. Preparation entails dealing with this danger practically and on several levels: • Developing balanced and traceable performance and incentive structures. • Deploying a code of conduct programme that is not a toothless tiger, that is properly resourced, positioned and measured. • Having a robust speak-up culture within the organisation that allows for problems to rise to the top (rather than be suppressed at all levels). Third, take ownership. Ultimately, it is the board of directors that is accountable for recognising, preparing for and preventing this type of risk. As the body that ultimately oversees the CEO’s hiring, performance and firing, pay package, incentives, performance, strategy and risk management, the Dr Andrea Bonime-Blanc is chief executive of GEC Risk Advisory, a global governance, risk and reputation consultancy to boards and the C-suite. She is chair emeritus of the Ethics and Compliance Officer Association, a member of Ethical Corporation’s editorial advisory board, a programme director at the Conference Board and a life member of the Council on Foreign Relations. @GlobalEthicist board needs to look out for and develop checks and balances on the risk of leadership and culture failure. No one else but the board has this power or ability (unless you count government regu- lators or investi- gators or hostile/ activist investors/ shareholders). Other executives are usually beholden to the CEO. The general employee population will act in accordance with the incentives they are given and the culture they perceive (rather than are told about). No set of beautifully printed or digitally deployed values will ever trump the way things actually get done in an organisation. It is the responsibility of the board to deal with leadership risk by: • Properly vetting and selecting the CEO in the first place. • Setting clear parameters on the performance and incentives of the CEO. • Properly gauging the performance management system the CEO has put in place for the executive team and the rest of the organisation. • Understanding the connection between perfor- mance management and financial and other results. • Not being afraid to discipline or dismiss the CEO when circumstances dictate. The board should deal with culture risk by: • Seeing the results of periodic culture surveys (or demanding culture surveys if the organisation doesn’t do them). • Having certain key executives report to the board periodically (in addition to the chief auditor): the head of ethics and compliance; the head of human resources; the head of corporate responsibility; the head of risk management. • Delving into the employee population and the organisation itself from time to time by visiting facilities, talking to mid- and lower-level staff, and generally kicking the tyres. • Engaging in meaningful executive sessions with key members of management. Human nature is such that we will never eliminate egregious behaviour or actions that seeks to cut or even slice through corners. However, when boards do their jobs and hold their CEOs accountable, the rarely considered but material risks of leadership or culture failure will be addressed, understood, ameliorated and perhaps even prevented. n Robust communication channels vital throughout your organisation KIRSTYPARGETER Subscribe now and save 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 15
- 16. Strategy and management16 JoeJimenez, Novartis Link sustainability to success Joe Jimenez, CEO of pharmaceutical multinational Novartis, speaks to Ethical Corporation about corporate innovation and the importance of a sustainable business approach How do you link sustainability and corporate responsibility to your business strategy? You do a lot of good work, but how do you mainstream it in the business? Corporate responsibility has always been and will continue to be a core part of our business strategy. We focus our corporate responsi- bility efforts in two areas: expanding access to healthcare and doing business responsibly. We’re applying our expertise in science and innovation – for example our new malaria compound KAE609. We are also pioneering new, sustainable business models, such as our social ventures initiatives, to help improve quality of life for those with limited resources. We are committed to carrying out our commercial activities with integrity and do so by upholding the highest ethical standards. We also aim to conserve natural resources and limit our impact on the environment. We’re reinforcing our efforts by integrating and aligning our corporate responsibility activities across the company with targets and metrics we report in our annual report. Investors care; investors don’t care. We hear conflicting views. Which stakeholders tell you they do care about sustainability and corporate responsibility, and how do they demonstrate this? We live in a global economy where corporate responsibility is not just a “nice to have” – it’s an expectation. Our customers expect it, our patients expect it, our associates expect it, and increasingly, our investors are expecting it. There’s growing evidence that links corpo- rate responsibility and sustainability activities to positive business performance. Despite the current challenging economic environment where long-term projects can be the first to get cut, nearly a third of multi- national companies are saying that sustainability is critical to their ability to do business. Corporate responsibility is more than just the right thing to do – it also makes good business sense. How has John Ruggie’s business and human rights framework changed how you do business? The Guiding Principles and other frameworks championed by the UN such as the Global Compact have helped shape corporate thinking and behaviour. They give us a foun- dation that is aligned with our values and they help us sustain a culture that both furthers business growth and protects and promotes human rights. We make a point to continu- ously review our policies and our conduct to make sure we’re doing our part – and we’re making good progress. For example, we were able to secure a living wage for all Novartis associates [employees] around the world, making us one of the first companies to do so. How do you make sure intrapreneurial sustain- ability and corporate responsibility projects become real business lines? Can you give us examples of how you seek out internal innovation? We try to foster a culture of innovation and creativity, and this includes how we continue to improve as a more responsible and sustainable company. To encourage idea-sharing, we recently held our first company-wide digital global brainstorm where associates discussed topics that are important to our business, including corpo- rate responsibility. One of the questions raised was, “We’re reaching 1.2 billion patients each year with Novartis products, but many people still don’t have access to quality healthcare. How can we help?” We heard from associates around the globe who offered ideas on everything from leveraging mobile to improve access to creative ways to improve distribution in remote areas. Are companies going to have to become much more vocal – and take action – on public policy issues in the coming years than in the past? Healthcare costs have grown faster than GDP for 50 years, and at the same time demand for healthcare globally is rising. As a result, governments and other payors are aiming to cut spending by shifting their resources to solutions that deliver the most cost-effective real world outcomes. Part of the solution is policy reform, but another important piece is for the private sector to develop new commercial models that focus on delivering positive patient outcomes, instead of just focusing on the transaction of selling a medicine. We’re applying new approaches such as risk-sharing pricing models which link payment to patient outcomes as a result of treatment. We also have integrated care programmes which use a broader and more holistic model that consider solutions “beyond the pill” to improve overall health, such as physical rehabilitation and medical counselling. And Novartis’ social ventures are unique business models that help expand health- care access in the developing world. We work with local governments, non-profit organisations and others to help improve local infrastructure, strengthen distribution channels and build local capabilities while still making a profit. This ensures the sustainability of this approach. n Jimenez: customers and investors expect corporate sustainability Ethical Corporation • February 2014 Novartis: fast facts (2013) Net sales: $57.9bn Net income: $9.3bn R&D spend: $9.9bn Employees: 135,000 Medicines reach 1.2 billion people annually Subscribe now and save 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 16
- 17. Social intrapreneurs challenge their organisations, challenge the statusquo to develop commercially attractive sustainable solutions In a recent Ethical Corporation essay – A view from the crossroads, published in October 2013 – David Grayson highlighted the need for “much more transnational, cross-sector collaboration if we are to tackle the urgent sustainability challenges which now loom, Everest-like, before us”. To achieve this goal will require engaging the creative powers of people in business, as well as the public and not-for-profit sectors, on a large scale in order to create a “tipping point” – described by Malcolm Gladwell in his best-selling book of the same name1 – for widespread action to address social and environmental goals. Gladwell argues that ideas spread through the existence of specific “types” who “tip” human behaviour in particular ways – sales people, connectors (brokers) and mavens (individ- uals able to see meaning, patterns and the big picture from seemingly random information). Business leaders interested in helping sustain- ability practices reach a “tipping point” would do well to tap the talents of such individual types in their organisations and the extended cross-sector networks through which they operate. Intrapreneur opportunity Beyond simply increasing the number of people in their companies engaged with sustainability issues, business leaders may wish to improve the quality of that engagement as well. Those who want to move beyond compliance or risk-mitigation in managing their social, environmental and economic impacts (corporate responsibility) and also systemically find business opportunities (corporate sustainability) need to engage the full range of their employees’ talents. Almost certainly, among these employees will be a small number who will have entrepreneurial ideas that will simultaneously add value to the company and contribute to sustainable development; and who will be prepared to take the initiative – often in their own time. We call these people social intrapre- neurs: people within a large corporation who take the initiative for innovations that address social or environmental challenges while creating commer- cial value for the company. They are looking to create what Harvard strategy guru Michael Porter describes as “shared value”. Typically, social intrapreneurs are going against the grain. They are challenging their organisation, ques- tioning the status quo to develop and implement commercially attractive sustainability solutions. Hence another description: corporate provocateurs. Often, at least initially, their intrapreneurial activity is not part of their job. This is why some social intrapreneurs talk of their day job and the job that they do in their spare time: “moonlighting” for their own employer. Social intrapreneurs are responsible for, among other things, the creation of microinsurance products (Allianz); the start-up of a business unit within a global parcel delivery corporation to improve operational efficiency while ameliorating climate change impacts (DHL); the reduction of an international brewing company’s production costs to improve competitiveness in developing countries through partnerships with local growers (SAB Essay Creating a tipping point for social intrapreneurism By David Grayson, Melody McLaren, Heiko Spitzeck There is an opportunity for a multistakeholder approach that can promote better sustainable business practices through social intrapreneurism Strategy and management 17Ethical Corporation • February 2014 ORLANDOFLORINROSU Subscribe now and save 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 17
- 18. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com Miller); micro-energy projects within a major energy generation corporation to boost productivity and address poverty in developing countries (EON); ethically produced sustainable product lines at a landscape paving company (Marshalls); and the development of a commercially viable business unit within an engineering consultancy to address sustainable development (Arup). All these projects exemplify “corporate social opportunities” – corporate initiatives that create both commercial and societal benefit (Grayson and Hodges, 2004)2 . Over the past two decades, social entrepreneurs such as Muhammad Yunus and his Grameen bank have been heralded for creating social benefits based on business thinking. During this time an international architecture to raise awareness of, and support for, social entrepreneurs and social enter- prise has emerged, thanks to the pioneering work of a number of individuals and organisations. Prominent among these have been Bill Drayton and the Ashoka Foundation he created; the Avina Foundation; Klaus Schwab, founder of the Davos World Economic Forum, through whose Schwab Foundation social enterprise has featured at the WEF; Jeff Skoll and the Skoll Foundation, which in turn has created the Skoll Centre for Social Enter- prise at Oxford’s Said Business School, and the annual Skoll World Forum on Social Enterprise; and John Elkington and Pamela Hartigan, with their book The Power of Unreasonable People (2008). It has taken more than two decades for social entrepreneurism to be widely recognised. It took Yunus’s Grameen Bank more than 20 years to reach seven million customers. Compare that to M-Pesa, a mobile payment system launched by two social intrapreneurs at Vodafone in Kenya, which reached 17 million people within the first four years. If we want to scale good ideas quickly, promoting social intrapreneurism makes sense. Is it possible for the socialisation of the idea of, and development of good practice in, social intrapreneurism to be accelerated? Sales force One of the factors driving increased awareness of social entrepreneurism was the interest of the Schwab Foundation and discussion of the topic at the World Economic Forum. Already, social intrapreneurism has been discussed in Davos in 2013 and in the WEF China 2013 meeting. Undoubt- 18 If we want to scale good ideas quickly, promoting social intrapreneurism makes sense Strategy and management Ethical Corporation • February 2014 Could social intrapreneurs build on the work of entrepreneurs such as Muhammad Yunus? EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 18
- 19. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com edly, regular further discussion in such forums, where many of the global elite and global opinion- formers – an ideal “sales force” for promoting a “shared value” ethos – meet to share and develop ideas, would help to speed up awareness-raising as participants and journalists covering the event spread the messages they have heard. This is starting to happen with regular coverage in blogs and media such as Guardian Sustainable Business, Fast Company, Forbes and the Huffington Post. A few individual consultancies and corporate responsibility coalitions are starting to help compa- nies to explore how to create an enabling environment. This process could be accelerated if a group of leading multinational companies could be persuaded to commit publicly to social intrapre- neurism, and to a joint action-learning programme where they would share their experiences and chal- lenges and explore potential solutions for creating an enabling environment for social intrapreneurism in their own organisations. Such an action-learning research club would carry greater credibility and profile if it were co- ordinated by a high-profile organisation such as the WEF; one of the leading corporate responsibility coalitions such as Business for Social Responsibility or the World Business Council for Sustainable Development; leading business schools; or a global consultancy. Ideally, such collaboration would optimise the latest online information and communications tech- nology to facilitate the capture, storage and retrieval of good practice; and the emerging learning would be made publicly available via the internet and subsequently through capacity-building training programmes for corporate heads of learning, talent development, innovation, HR, strategy, new business development and others. Already CSR Europe has teamed up with Ashoka and the BMW Foundation to raise awareness of, and capacity for supporting, social intrapreneurism among their corporate members and national CR coalition partners. ‘Connector’ events and networks Connecting innovative companies and individuals committed to cultivating, supporting and promoting social intrapreneurism through networks and coali- tions can play a powerful role in creating a “tipping point” for social intrapreneurism. Ideally, in parallel with this awareness-raising and capacity-building for companies, there would be increased promotion to potential social intrapre- neurs themselves. This could be through further competitions and award schemes like the League of Intrapreneurs. There are now about 50 Impact Hubs with a further 50 expected to be operational by 2015. More Impact Hubs around the world could be running courses and clubs for social intrapreneurs. Student organisations such as Aiesec, Oikos International and Net Impact, and student-run conferences such as Emerge (hosted at Said Business School, Oxford) and the annual Doing Good and Doing Well Confer- ence on responsible business at IESE (Barcelona) could be profiling social intrapreneurs regularly. Net Impact and Oikos International are global student networks aiming to bring sustainability into management education. Aiesec also has some interest groups on sustainability. Their alumni are a natural source of social intrapreneurs as their members are convinced that business can be used as a positive force for good, and many of them are looking for careers with positive impact. At their universities they have already learned change- making skills in trying to convince university administration to integrate sustainability into the courses they offer. Net Impact has several professional chapters for alumni. It is possible some of these individuals may be aspiring or emergent social intrapreneurs. Apart from encouraging them, Net Impact might profile such members to inspire others. By making social intrapreneurism a regular theme of their conferences, publications and activi- 19 A few consultancies and coalitions are helping companies create an enabling environment Strategy and managementEthical Corporation • February 2014 GETTYIMAGES EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 19
- 20. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com 20 Strategy and management Ethical Corporation • February 2014 ties, student organisations such as Oikos Interna- tional and Net Impact could further raise awareness of the idea of social intrapreneurism, build networks and potentially create learning collateral that local chapters could use. Members could also be suggesting social intrapreneurism as a topic for classes, to their faculty. The world’s business schools could be including courses on social intrapre- neurism in their MBA and specialist masters programmes, as well as in specialist executive lead- ership programmes. Supporting individuals Being a social intrapreneur, especially in the early stages, can be very lonely. Capturing and dissemi- nating more practical advice and tips like the League of Intrapreneurs Cubicle Warrior Toolkit, and creating more peer-to-peer learning and support networks like the League of Intrapreneurs Lab and Aspen Institute’s First Movers programme, and sharing curriculum and case-studies online, could also accelerate adoption of social intrapre- neurism. Many of the social intrapreneurs and their projects we have met have teamed up with external partners such as NGOs that have been crucial to their success. For these external partners, social intrapreneurs can be another route to increase their own impact substantially and to extend their reach. Gib Bulloch – a leading social intrapreneur who founded Accenture Development Partnerships writes: Most large charities or NGOs will have tens if not hundreds of thousands of supporters each giving $10, $20, $50 or more each month as part of their commit- ment to a cause they are passionate about. Some will work in the public sector, some in the non-profit sector. But many will work in the corporate sector. And of them, a handful may even be latent social intrapre- neurs – people who are well networked internally. Who know the rules of the corporate and when to bend or even break them. They know that influence doesn’t always mean you’ve memorised the hierarchy of an organisation chart. They know how to cut corners to get things done and are willing to take career risks for a cause they are passionate about. The smart NGO CEO will consider less about chasing philanthropic dollars – more about how to mine their donor database for the latent social intrapreneurs – the herds of latent “Trojan horses” residing deep undercover in the corpo- rate world, awaiting a cause and a call to action.3 Imagine a group of innovative social enterprises and charities either individually or as a consortium offering some tailored, experiential management development placements with them for selected high-flyers from their corporate partners and other multinationals. Or those same social enterprises and charities with entrepreneurial ideas related to their core mission, using social media to help them talk directly to supporters working in relevant multina- tionals and encouraging them either to take up the ideas themselves or find co-workers who might relish such an intrapreneurial challenge. Imagine too a “dating service” for social intrapre- neurs and external partners (NGOs, international development agencies etc) working in the social intrapreneurs’ areas of interest: a model suggested by Meg Jones who works for the International Trade Centre, a joint agency of the UN and the World Trade Organization, mandated to help SMEs in developing countries achieve export success. NGOs might consider identifying and targeting their members/supporters working for multina- tional companies and encouraging them to explore social intrapreneurial ideas relevant to the work of the NGO. NGOs might also work with existing corporate partners to run experiential learning programmes like the GSK Pulse or IBM Citizenship Corps that might stimulate social intrapreneurs within the corporate partners. Indeed, NGOs may already be working with key individuals in their corporate partners who might have, or be encouraged to develop, social intrapreneurial ideas, with the help of the NGO. International development agencies have long recognised that it is better to teach a community to fish than to give them fish, and that, therefore, business and broader economic development is fundamental to sustainable development. Indeed, engaging business more systemically has been one of the major themes of discussions on the Sustain- able Development Goals which will follow on from the Millennium Development Goals in 2015. Providing early-stage funding to support proof of concept, as the DfID Challenge Fund did for Vodafone’s hugely successful mobile money M-Pesa service in Kenya, could be an effective way of fast- tracking economic development. Do agencies like US AID already have a funding mechanism that could potentially be used to support social intrapre- neurs? Are there any existing, effective promotion mechanisms to bring such a fund to the attention of potential applicants? Developing ‘mavens’ We recognise this is a fast-developing field and one that would benefit from further research. As researchers ourselves it might be seen as special pleading to recommend further research. However, we do believe that the proposed efforts to raise awareness, promote, capacity-build and share emerging good practice about and for social intrapreneurs will be greatly enhanced if accompa- nied by action research. There are a number of researchers internationally who might be invited to help refine and develop a relevant research agenda, perhaps under the auspices of the Academy for Business in Society. How might a supporting architecture for social intrapreneurism develop? Imagine a world in which: The world's business schools could be including courses on social intrapreneurism Gib Bulloch EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 20
- 21. Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com light-touch coordination and strategic direction of efforts to go further and faster. Could an existing international foundation extend its remit to promote social intrapreneurism? Alternatively, is this a ready-made opportunity for a high-net-worth individual looking to achieve positive societal impact at scale, to create a new venture to promote social intrapreneurism as, for example, the Skoll and the Schwab Foundations have promoted social enterprise? To create the “tipping point” we seek, our imperative is clear: we need to bring together sales people, connectors and mavens for social intrapreneurism. n 1 Gladwell, Malcolm, (2000) The Tipping Point: How Little Things Can Make a Big Difference. London: Little Brown. 2 Grayson, D, and Hodges, A, (2004) Corporate Social Opportunity: 7 Steps to Make Corporate Social Responsibility Work for your Business. Sheffield, UK: Greenleaf. 3 Bulloch, Gib (2013) Harnessing the Herd – Could Social Intrapreneurs represent a “Trojan Horse” strategy for charities. Business Fights Poverty (March 24, 2013). http://community.businessfightspoverty.org/profiles/blogs/gib- bulloch-harnessing-the-herd • Corporate responsibility coalitions run awareness- raising and good practice sharing for member companies; and potentially include a social intrapreneur category in any CR awards programmes they might run. • Business schools teach social intrapreneurism as part of any change-maker courses they might run for MBA students; and offer master-classes and executive education programmes in creating an enabling environment for social intrapreneurism. • Social innovation Impact Hubs and equivalent centres around the world offer development programmes and peer support to aspiring and new social intrapreneurs. • The League of Intrapreneurs or a similar grouping develops as an open-source, online centre of excellence, offering case studies, how-to advice, signposting to further help, match-making to potential social intrapreneurial “buddies” and access to online and face-to-face training programmes. • International development agencies are willing to consider co-funding viable social intrapreneurial proposals and pump-prime capacity-building initiatives. Each of these things could happen organically. There are, however, opportunities to provide some 21 International development agencies have long recognised that it is better to teach a community to fish rather than to give them fish Strategy and managementEthical Corporation • February 2014 This call to action is adapted from “Social Intrapreneurism and all that Jazz” by David Grayson, Melody McLaren and Heiko Spitzeck, to be published by Greenleaf Publishing in March 2014. Innovation and cooperation breed business success and development opportunities EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 21
- 22. 22 Subscribe now andsave 10% – call +44 (0)20 7375 7235 or email subs@ethicalcorp.com The 2013 UN Global Compact/ Accenture CEOs survey finds that while 93% of business leaders see sustainability as a real challenge to the future of business and 78% see it as a route to business growth and innovation, more than two-thirds think that business is not doing enough to address global sustain- ability challenges. The explanation for this contradic- tion is the lack of a business case. Only a third of the 1,000 respondents believe that they have found a business case for sustainability. A large majority of CEOs (83%) are of the view that more effort is required by regulators to provide the necessary enabling environment. Clearer policy and market signals to support green growth were demanded by 85%. According to the Sloan MIT 2013 Management Review, published in December 2013, business faces problems at several levels. These include a worrying gap between perception of the sustainability challenges and business’s response or preparedness. Take climate change, for example. At a personal level, 88% of respon- dents believe climate change is real and 79% judge it to be a risk to polit- ical and social stability. Turning to the business implications, well over half believe that climate change is a risk to their business. Only a third, however, believe that their company is prepared for climate change risk. Looking at the social, environ- mental and economic pillars of sustainable development as a whole, a similar pattern emerges: 70% of executives think that sustainability issues were either “significant” or “very significant” but only half of respondents assessed that their firms were “largely” or “fully” addressing these issues. On the question of whether their company has developed a “clear business case” or “proven value proposition” for its approach to sustainability, nearly two-thirds of respondents in the Sloan/MIT study replied in the negative. Based on annual findings since 2009, the Sloan/MIT data suggests that only a third of companies (37% in 2013) believe they have identified a business case – a figure similar to that found by Accenture. Tipping point Both studies support the conclusion that while some companies have been able to harvest the low- hanging fruit, it appears that (as the Sloan/MIT report puts it) a “crucial inflection point” has been reached, where companies are unable to move to the next level without help. The Sloan/MIT report recom- mends more industry-led measures. All the evidence, however, suggests that we have long since reached the limits of what voluntary action alone can achieve. The limited business-wide uptake and impact of most voluntary standards speaks for itself. We will not have a business case for sustainability unless it is hard- wired into the regulatory landscape. At the macro-level, two main changes are required across the board. Firstly, there now needs to be a more open, sustained and positive debate in support of regulation. Here, the need to align short-term human behaviour with long-term human interests must be paramount. Business and media share a responsibility for helping design a mix of carrot and stick regulations based on measurable positive sustain- ability impacts, and for taking the case to the public of the need for some- times tough and expensive measures to safeguard our common future. The narrative that “we can’t afford it” is a nonsense that must be challenged, including by the finan- cial sector. With all the evidence suggesting that it will cost us more to adapt to collapsing and changing natural systems than to avert those disasters, it is time for business (and not just the insurance industry) to give a value to the assets at risk and to define how the business case for a green and sustainable economy can be made. Secondly, reporting of environ- mental, social and governance performance needs to be made the norm and expectation, not the exception. Sustainability won’t be mainstreamed until it is made a conscious part of the business, whether as an incentive or an obli- gation. Recent progress on this by the EU is encouraging. This means that all large organi- sations must be required to measure, assess and disclose their sustain- ability policies and impacts, and how they plan to respond to emerging sustainability challenges. Equally, institutional investors and ratings agencies should be required to take this information into account. And in all these matters, it is in business’s interests to lead rather than be forced to follow. n Paul Hohnen is an Amsterdam-based consultant who advises, speaks and writes on global sustainable development issues. He is an asso- ciate fellow of Chatham House and a member of the Ethical Corporation advisory board. By invitation: Paul Hohnen Smart rules will spur business action A better regulatory environment is required to help companies to hit sustainability targets, says Paul Hohnen Clear regulatory signals please We have long since reached the limits of what voluntary action alone can achieve IVCANDY BY INVITATION: PAUL HOHNEN Strategy and management Ethical Corporation • March 2014 EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 22
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- 24. Subscribe now and gain accessto ourvirtual libraryfullofexpertCSR insight Current subscribing companies include: Here’swhat a few of our current subscribers have to say... “Ethical Corporation is a valuable and comprehensive resource on the global state of affairs in corporate responsibility” – Dave Stangis, Vice President, Corporate Social Responsibility, Campbell Soup Company “Ethical Corporation magazine is one of the most valuable resources of business information on sustainability” – Joaquim Croca, Head of Corporate Responsibility Performance & Reporting, Vodafone Group “Ethical Corporation bring together the best in business to make a difference” – Jeff Swartz, Former CEO, Timberland “Ethical Corporation is an excellent tool for gathering stakeholder intelligence for Toyota’s CSR Risk monitoring system” – Stefan Crets, General Manager, CSR, Toyota Motor Europe “The essential source of critical analysis on corporate responsibility” – Richard Ellis, Group Head of CSR, Alliance Boots And many more... Join them in our global ethical community by subscribing today at an exclusive 10% discount. EC – Analysis Pack April 2014 PRINT 10 percent Discount_Layout 1 07/05/2014 18:31 Page 24