The Ethical Corporation Magazine - December 2001

Issue 1 • December 2001 Free news and analysis at www.ethicalcorp.com
Mark Wade
An exclusive Interview with the founder of the Shell Report
FTSE4Good
Signs of an investment sea change?
Creating Trust
The leading thinkers on CSR and brand management
Plus
Wally Olins
The legend talks to Ethical Corporation
GoodCorporation’s CEO
The options for effective reporting standards
and special interviews with
Rob Lake
Henderson Global Investors
Emma Howard Boyd
Jupiter Asset Management
w w w . e t h i c a l c o r p . c o m
Genoa 2001: Would you like this to happen outside your HQ?

Editor’s notes
W
elcome to the first edition of Ethical Corporation magazine, the first independent by-industry, for-industry
briefing on the business case for corporate social and environmental responsibility. Our objective is to serve
the growing demand for business intelligence from large enterprises about who’s benefiting from imple-
menting ethical practices right through their companies and how they’re doing it.
You can subscribe free to this magazine by simply filling in one of the reply cards inside or by visiting our website
www.ethicalcorp.com.
In this issue we speak to a broad cross section of industry experts and analysts to find out why companies like Shell
and the Co-operative Bank have embraced corporate responsibility and hear the advantages they’ve gained. We’re also
talking to leading thinkers such as Warwick Business School and the New Economics Foundation for a cross-industry per-
spective.
Investors and stakeholders are pushing these issues where it matters - with their cash. Find out what some of the
leading fund managers like Henderson and Jupiter have to say about CSR involvement and what they’re looking for
from your company.
As branding supremo Wally Olins puts it, business has moved to the front pages, and now is the time for you to
address the issues in your corporation.
Let us know if you would like your company to be interviewed for next month’s issue or if you are interested in
contributing an article. Meanwhile, enjoy the first issue!
Toby Webb
Editor
Contents
4 | Wally Olins on ethics and product differentiation
6 | The man from Del Monte, he say ‘good’
7 | Leading think tank NEF gives us its view of profits and ethics
9 | GoodCorporation's CEO gives us the standards lowdown
10 | CorporateCulture suggests 10 steps to CSR success
12 | We speak with Mark Wade, Founder of the Shell Report
14 | Rob Lake, Henderson Global Investors, on global SRI
15 | Warwick Business School on the next generation of executives
17 | FTSE4Good - measuring a sea change in investment? We ask FTSE’s Gareth Parker
18 | Emma Howard Boyd, Jupiter Asset Management, on changing attitudes to SRI
19 | CSR Duo, Richard Aylard and Jordana Friedman, Burson Marstellar
21 | Publish & be praised, by Flag
22 | Ethical brand and that customer base: we talk to the Co-operative Bank
24 | Real Ethics, Robert Jones
25 | New resources - helping you formulate your strategy
3w w w . e t h i c a l c o r p . c o m
December 2001 Ethical Corporation magazine
Ethical Corporation magazine
is published monthly by
FC Group
3rd Floor, Black Lion House
45 Whitechapel Road
London, E1 1DU
United Kingdom
Publisher
Christian Braun
christian@ethicalcorp.com
+44 (0)20 7375 7153
Editor
Toby Webb
toby@ethicalcorp.com
+44 (0)20 7375 7561
Design
Alex Chilton Design
alex@alex-chilton.co.uk
+44 (0)20 7736 5568
© Copyright 2001 First Conferences Ltd. All rights reserved. This document contains original material protected by copyright. No unauthorised use of material
herein may be made without the prior consent of First Conferences Ltd. Ethical Corporation magazine is a proprietary creation and trademark of First Conferences
Ltd. Please note the views of the contributors in this publication are their own and not those of Ethical Corporation magazine.

Can you give us a quick rundown on
your career to date?
I began my career in the advertising industry
and started Wolff Olins with Michael Wolff
in 1965. Wolff Olins has created a number of
very well known brands, Orange, 3i, First
Direct among many others, and has offices
worldwide working with a number of global
corporations.
Omnicom bought Wolff Olins a few
months ago and I left amicably. I am
Professor of Marketing and Branding at sev-
eral universities and I write books and lec-
ture at conferences and seminars.
In a recent Economist article
“Who’s wearing the trousers?”
you stated that “the next big thing
in brands is social responsibility…
It will be clever to say that there is
nothing different about our product
or price, but we behave well.”
Is this something that your current
experience would confirm?
It’s clear to me that the difference between
most products is now negligible – it’s
increasingly about the company behind the
product rather than about the product itself,
especially where you have companies selling
services across a number of areas, like Virgin
or Tesco, for example.
Look at petrol companies – if you think a
particular company’s behaviour is bad, you
can buy from a competitor. If you don’t want
to buy from one company, you just drive
down the street and buy from another. This
can happen almost everywhere that products
are commodities, not in all cases, but in
many.
With individuals like Richard Branson or
Anita Roddick, the company is associated
with the reputation of the person, and vice
versa. The Virgin brand is a manifestation of
what Richard Branson purports to be, and is
therefore inseparable in the consumer’s
mind.
In what ways are corporate social
responsibility and branding currently
colliding?
Look at the way in which Nike and others
have had bad press on ethical business issues
and the way the ‘No Logo’ movement is
treating brands as a scapegoat, an enemy and
a power beyond control. Then you can see
why it is that a lot of people are attributing to
brands a deliberate attempt to manipulate
and control. But you only have to look at
brands like Levis and Marks & Spencer to see
that the customer is still in control. They fell
from consumer favour and suffered because
of it.
Of course, brands are trying to manipu-
late the customer. We live in a world that is
deeply manipulative. Children try to manip-
ulate parents and vice versa. But corpora-
tions and their brands cannot directly control
consumers, however hard they try. The cor-
poration will instead have to anticipate what
consumers want and provide it. Now con-
sumers want to see socially responsible com-
panies. And they will buy their products.
It is in the interests of a corporation to
behave better for market share. Corporations
are increasingly taking this into account.
Is this a gradual change over
the last 10 years, or is there a sea
change happening here in corporate
philosophy?
I think it is a sea change. I can remember 25
years ago, the few organisations wanting a
social audit back then were the very unusual
ones.
Today even the most conservative and
threatened of corporations knows that it has
to do something. It’s becoming part of their
vocabulary, even if they don’t believe in it.
Whether or not they believe in it doesn’t
matter. They will do it not because they want
to but because their share price will go down
if they don’t get involved.
The fundamental of any corporation is
share value. Everything has to be measured
against share value, market share and profit.
Making money by behaving badly will not
work if everyone knows about those that are
doing it. Social pressures are now becoming
sufficiently powerful to make companies
behave better. Business has moved to the
front pages.
BP is projecting itself as a highly respon-
sible social creature. It may or may not be,
but it understands the power of social
responsibility. Exxon are not bothering –
they believe it has no bearing on their profits.
The Exxon attitude is the one that was
shared by most companies in the past. Over
the next 10 years I believe we will see a real
shift to the BP attitude as consumer groups
and the media increasingly highlight compa-
nies’ ethical activities.
Which firms would you highlight
whose practices are taking ethical
considerations into account?
Most companies are starting to try very hard.
Most large European companies like Shell
and BT take this very seriously. Business is
front page news and this means that corpo-
rations and their brands will be pressurised
into doing what consumers wish them to do.
Ethical business practices will become more
significant. s
Ethical Corporation speaks with Wally Olins
4 w w w . e t h i c a l c o r p . c o m
Business has moved to the front pages
Wally Olins advises various
corporations on branding and
corporate identity issues. He is
Visiting Professor at a number of
universities. He has written many
books, including the seminal work
‘Corporate Identity’, and is currently
writing a new book on branding. He can
be contacted on +44 (0)20 7224 2121
i n t e r v i e w

G
etting the man from Del Monte to
say yes is not easy. The basis of one
of the world’s most successful
advertising campaigns is Del Monte’s com-
mitment to growing and using only the
finest, freshest produce. The message is simple:
the Del Monte label guarantees quality to
those who consume it. It also implies that the
attentions of the Del Monte man bring happi-
ness to the producers of the foods he chooses.
The case of Del Monte Kenya Limited
(DMKL) showed that getting the man from
Del Monte to say “yes” to spending on the
welfare of his employees and the communi-
ties surrounding his Kenyan plantation had
been more difficult than getting him to
spend on more obvious business interests. At
the time DMKL was owned by the Imerman
South African group, and the commitments
to meeting the highest product standards
were not translated to meeting standards of
employee care. Certainly local communities
did not always cheer the arrival of the Del
Monte man.
In fact, animosity between DMKL’s man-
agement, staff and neighbouring communi-
ties grew to such an extent that by 2000 the
unions, local NGOs and representatives of
the Catholic church combined to organise a
boycott of Del Monte’s products in Italy, one
of the company’s key export markets.
DMKL had drawn criticism from activist
students in Kenya since the 1970s.
Nevertheless, as an export-focussed business,
DMKL did not pay much attention to the
demands of a few local radicals. Why should
they when they paid their 5,000 employees
relatively well, provided social facilities,
including housing, education for employees’
children and healthcare - social goods that
many argue should be supplied by governments,
if not individuals themselves? In addition, a
further 50,000 people in the neighbouring
town of Thika are directly or indirectly sup-
ported by Del Monte’s presence.
Despite such capital outlay and the ben-
efits of the company’s presence, the fact that
this was not enough to head off a boycott of
DMKL’s produce indicates the changed
world in which we live and companies oper-
ate. It underlines that issues of corporate
responsibility relate to how companies treat
local communities, as well as how they treat
their employees. It also shows that corporate
social responsibility is as much about the
way in which companies interact with
employees and communities as it is about
how much one spends.
DMKL did not entirely neglect peoples’
needs, but the wider society, both in Kenya
and later in Italy, felt that the company was
not contributing what it could afford for, and
thus should offer to, its employees and near-
by communities.
The situation reflects the complex, “glob-
alised” world which we inhabit. We are
becoming used to the idea of living in a more
interconnected world, and many changes are
driven by multinational companies which
supposedly roam the world looking for com-
petitive advantage, undermining govern-
ments and national interests.
In response, suggests Mary Kaldor of the
London School of Economics, we see an
increasingly active civil society, making its
claim to regain the space “grabbed” by
multinational corporations. Alternatively, it
may be that as people in developed countries
travel to places and are kept informed of
events around the world, almost regardless of
their occupations, they project this “worldli-
ness” onto their everyday lives.
Whatever the motivation for the growth
of consumer activism and the changing rela-
tions between western societies and the firms
which were once perceived as representing
their interests, the changes are significant.
Companies must fully understand these
shifts to avoid damaging their reputations,
and thus their profits, as DMKL has shown.
The Italian consumer boycott of Del
Monte’s goods was directed against the com-
pany’s Kenyan operations, but the negative
publicity undermined the Del Monte brand
at large. Swift Del Monte Kenya Limited
action appeased its critics. The boycott was
Toby Kent draws upon a specific case of Del Monte in Kenya, recently acquired by Signor Cragnotti’s Cirio
empire, and argues that wherever one sees the responsibilities of business lying, good business sense dictates
that companies address the needs both of their employees and of the societies in which they operate.
CSR investment is not a choice
Toby Kent can be contacted by email
at CSR@tobykent.com
cancelled in April 2001, but the damage
done to the company is more enduring.
Employee and community relations have
notably improved, but profits remain down.
The events at DMKL show that corpo-
rate social responsibility is not simply a lux-
ury in which companies invest when they
feel they can afford it. In a commercial world
in which “the customer is always right”
investing in employee welfare, or social
investment, is almost as much about what
your customers demand you pay as about
what your company feels it can afford to pay.
DMKL has learned from its experiences,
but it was a costly lesson. Had the DMKL
management always listened to the concerns
of employees and local communities they
could have avoided the boycott altogether.
Expensive developments could have been
spread over years as part of company growth
rather than as large, unexpected capital out-
lay, and productivity is unlikely to have been
harmed by better employee relations.
However, responsible action is not worth a
company’s investment if it does not address
the concerns of those you want to impress.
If done well, responsible corporate
behaviour will minimise expenditures that
companies may come to pay as a matter of
expediency. It will also reduce the risk of
internal, client, or consumer conflict. The
DMKL case shows the power of consumers
to influence business decisions. However,
consumers, or customers are not always end
users but may be clients, or other companies
in supply chains. Whoever they are, reputa-
tion matters.
Corporate social responsibility is not
about being nice. The potential to limit
expenditure, maintain or improve employee
and community relations, control risk and
promote reputation means that applying cor-
porate social responsibility strategies is sim-
ply good business sense. s

A
recent article in the Financial Times
(Oct. 8) reported on a forum that
had taken place at Harvard Business
School, the home of globalised business.
Students, it seems, were discussing how cor-
porate social responsibility can help bridge
the gap between have and have-not nations
as one way to reduce terrorism. US business
students, as a result of the horrific events of
September 11th, are now being forced to
consider how their actions impact on society.
Immediately after the attacks, many from
the NGO movement thought that CSR dis-
cussions would be put on the back-burner
and that there would be little opportunity to
continue the dialogue with companies that
has progressed relatively well over the last
few years. Impending layoffs and financial
concerns would surely take precedence over
discussions about CSR programmes and
policies.
In some cases this has proven to be true.
US-based Dole Food Company has just
scrapped its director responsible for CSR
policies, in spite of their commitment to
improving labour standards.
At the same time, since September 11th,
there has been an unprecedented level of dis-
cussion across businesses in Europe and
North America about their impact on socie-
ty. CSR has an even greater relevance today
than it did just two months ago. “The cata-
clysmic events of September 11th are only
likely to intensify society’s scrutiny of busi-
ness… many in the media are arguing that a
certain redistribution of the west’s economic
wealth, rather than redeployment of its mili-
tary power, will be far more effective in
countering further acts of global terrorism”
writes John Griffiths, director of Rocket
Science, a consultancy.
Some of the issues companies are dealing
with are more immediate, such as mitigating
risk in order to renew insurance policies or
coping with the obvious concerns of employ-
ee stress. At the same time, companies are
still having to grapple with long-term con-
siderations and the question of what CSR
will ultimately mean. James Farrar, CSR
Manager at British Airways, for example,
recognises that their immediate social
responsibility is to their staff and to the sur-
vival of the business… “but, over time, what
the brand is and what BA stands for will
change.”
Perhaps less apparent than the immedi-
ate concerns is the more pressing need for
companies to understand the link between
their regular business actions and their global,
social and environmental impacts, in partic-
ular, how they can have a more positive
influence on global poverty and inequality. It
is an opportunity for CSR programmes to
break the PR barrier – that is, to be fully
imbedded in a company’s operations and
outputs.
CSR programmes, to
date, have been based
on the assumption that
they can improve the
bottom line. But as one
corporate leader said
at an Environment
Council conference last
spring, “this is still a
leap of faith”. More importantly, we need to
have a better understanding of how CSR
programmes can actually have an impact on
social and environmental performance of the
company.
Corporate social responsibility emerges,
in part, from a frustration that the corporate
sector yields considerable power and that the
advantages of the free-market, globalised
economy have not necessarily delivered an
equal benefit to all. Those in the south have
become servants to the system, yet fail to
derive sufficient benefits.
CSR programmes were meant to partial-
ly overcome this. But, to date, with few
exceptions, they haven’t led to any signifi-
cant change. BP, well-known for its CSR
programmes, including stakeholder dia-
logue, rebranded itself last year as “Beyond
Petroleum”. Unfortunately, there is little evi-
dence of BP “doing well by doing good”. BP
had to climb down on its rebranding exercise
at its AGM in April, admitting that it could-
n’t commit itself to any serious investment in
renewable energy.
A recent study by the University of
Sussex has found that companies with envi-
ronmental management (EMAS) systems
perform no better in this regard than those
without. And much of social reporting has
resulted in “corporate spin” rather than
improvements to social performance (see
Corporate Spin: the Troubled Teenage Years
of Corporate Social Reporting, New
Economics Foundation, 2000).
CSR cannot save the world, nor can it
completely rebalance the inequities that
have emerged over the last half-century
across the globe. As Oded Grajew of the
Instituto Ethos in Brazil says in a new book,
The Civil Corporation, “If business is so
powerful and now doing so much good, how
come so much is still wrong in the world?”
An embedded CSR programme, however,
can make a difference: to employees; to rela-
tionships with customers; and to suppliers.
And there is also the potential to see greater
benefits of business delivered to the south –
the current servants of global capitalism.
When employees and shareholders are
By Deborah Doane, Head of Corporate Accountability, New Economics Foundation
“Since September 11th there
has been an unprecedented level
of discussion across businesses
in Europe and North America
about their impact on society”
No more global business as usual
Corporate ethics after September 11
7

consulted, they generally don’t agree with
the state of the world. A recent survey by
Powergen found that 77% of respondents
believe that environmental and social per-
formance of the company ranked just as high
as financial performance. “Aligning a com-
pany’s values with those of its employees
makes a more highly motivated and produc-
tive workforce”, says Rob Lake of
Henderson’s Global Investors.
What can companies do? First, they can
commit themselves to open, honest dialogue
with stakeholders – not just those from the
inside. Stakeholder councils provide one way
for companies to formalise this process and
ensure that external factors are taken into
consideration in a company’s decision-making.
The Co-operative Bank, winner of this
year’s Impact on Society award, is intending
to raise a discussion on its website about how
the events of September 11th may have
changed its customers’ views about a variety
of ethical issues, and in turn, to help deter-
mine what the bank’s response should be. It
is proceeding cautiously, however – the
dialogue is intended as a way to determine
what is important to its stakeholders in light
of the events, not a PR exercise to raise its
own profile.
Second, companies must go beyond CSR
as a marketing tool. While it is laudable and
important that many companies are con-
tributing to the disaster relief funds to help
victims of the attacks, it should not be used
as a replacement for more serious engage-
ment with the issues.
Corporate Philanthropy
at BA may have suffered
due to financial con-
cerns, but CSR pro-
grammes will continue
as the need to align
CSR more closely
with governance struc-
tures becomes more rel-
evant than ever before.
A more sophisticated
approach to CSR
engages thoughtfully
with the local commu-
nity as partners in the
process. The implemen-
tation of properly monitored and enforced
labour standards, such as fair wages and living
conditions, should involve community actors
in order to ensure that the best of intentions
are not led astray. A simple signing of a code
of conduct is no longer sufficient.
Third, they should consider how the
endless pursuit of profits benefits a few, often
to the detriment of the majority. Basic servic-
es, such as water and electricity, are now
delivered by private northern hemisphere
companies in many developing countries,
often in an unregulated manner.
How can companies see the benefits of
these services delivered to a larger portion
of the population, in an affordable and
accessible manner? The pharmaceutical
industry’s excessive profits through intellec-
tual property rights means that many in
developing countries have little access to
affordable medicine for highly curable ill-
nesses.
CSR has, to date, failed
to deliver any tangible bene-
fits on a sufficient scale. But
this doesn’t mean that we
should give up on corporate
responsibility. Following a
heightened awareness of
global issues since
September 11th, we should
be giving it more, rather
than less, attention.
Companies that do sur-
vive the short-term crisis will
emerge in a completely dif-
ferent operating environ-
ment – one in which CSR
has the potential to help face
the challenges that will see
them survive over the
longer-term, for the benefit
of the many, not the few. s
“What can companies do? First,
they can commit themselves to open,
honest dialogue with stakeholders
– not just those from the inside.
Stakeholder councils provide one
way for companies to formalise this
process and ensure that external
factors are taken into consideration
in a company’s decision-making.”
For more information visit
www.neweconomics.org
8

I
t is difficult to find a dissenting voice in
the current chorus of approval for social
responsibility. The number of convincing
reasons for being socially responsible is
growing and, whether these come from
investors, consumers or employees, most
companies recognise the importance of
addressing social and ethical issues. But once
companies have decided that they want to do
something… what then? Putting these prin-
ciples into practice is the real challenge.
An increasing number of companies are
choosing to adopt one of a variety of stan-
dards on offer that cover various aspects of
social responsibility. Some companies have
obvious key single issues to deal with
because of the business they are in. Chemical
industries, for example, have focussed on the
environment, and clothing manufacturers
on labour conditions. In response to these
concerns, existing standards generally cover
one stakeholder group. The ISO series is
perhaps best known for its quality (ISO
9000) and environmental management (ISO
14000) standards. The demands of health
and safety have created other standards, from
the international OHSAS 18001 to individ-
ual national standards. To meet concerns
over sweatshops and child labour there are
standards such as SA8000 and the UK-based
Ethical Trading Initiative, which focus on
labour practice throughout the supply chain.
However, many companies are now
moving on from dealing with their sector’s
headline issue to respond to the broader
pressure on companies to be all-rounders. It
is not much use to have an outstanding
record on pollution reduction if indecent
work practices are endemic in the supply
chain. Gradually, the fragmented nature of
social responsibility is developing into a
more comprehensive approach that tries to
bring together all parts of the business’
impact on society. In response there are now
standards that offer an overall management
approach, encompassing the key areas of
environment, labour and so on. For multina-
tionals the UN Global Compact provides a
set of principles covering the environment,
labour and human rights to which compa-
nies can sign up.
There are alternatives to common stan-
dards. The most popular is to create a home-
made code of conduct. Companies devise
their own ethical criteria, communicated in
their literature and on their websites directly
to their suppliers and customers. They may
employ certifiers to check their compliance,
but generally this is for internal purposes
rather than as a public audit of their adher-
ence to their own rules. Another more
resource-intensive alter-
native adopted by some
large companies is social
reporting. Again, this is
based on a home-made
code, as the social report
makes public the activi-
ties and progress under
the code and may be externally verified.
Reporting frameworks have been developed in
recent years for this purpose, such as the
AA1000 and the Global Reporting Initiative,
that provide methodologies on social report-
ing and their external verification.
So companies trying to understand what
social responsibility actually means in practice
are faced with a variety of possible solutions.
There are two key decisions of principle to be
made. The first is whether to adopt an exist-
ing standard or devise an own code. Own
codes have the benefit of being tailored to the
business and reflecting the values of the
shareholders, management and, if consulted,
employees and other stakeholders. Common
standards have the converse benefit of being
shared with others and so are perceived as
neutral. Stakeholders and the public as a
whole do not fear that the company has
omitted issues that it finds inconvenient.
Moreover, few but the largest companies can
afford the process of sifting and choosing their
own values or have the expertise to judge
whether they can be monitored effectively.
The second is whether to have inde-
pendent verification. Those against cite the
difficulty of verifying soft issues and the
problems of short-term reviews by auditors
who have not been part of the process of
crafting the values. These arguments seem to
be losing ground to the need for credibility
which independent review can bring. Again
there may be a differentiation by size here.
The vast majority of companies that are not
household names have little hope that we
will take their word for it. The big brands
might have thought differently in the past,
but the ethics of the largest companies have
been called into question in recent years. As
a result, many multinationals have taken
refuge in independent verification, believing
that although openness may expose weak-
nesses, it will also inspire the greater confi-
dence that the whole process is seeking to
achieve.
Every company is different: we all have
different focuses depending on the type of
business we do, the issues we face and our
own organisational culture. But the princi-
ples of social responsibility apply to everyone
– and make business sense for everyone.
Choosing the best way to deal with the issues
of social responsibility depends on what your
company needs and what you can invest, not
just financially, but also in terms of both time
and effort. s
Companies realise why they should be socially responsible, but the question
of how is not so straightforward, says Michael Littlechild
Effectively implementing business
ethics in the enterprise
Michael Littlechild is the CEO of
GoodCorporation. For more information
visit www.goodcorporation.com
"It is not much use to have an
outstanding record on pollution
reduction if indecent work practices
are endemic in the supply chain"

1: Articulate a clear sense
of purpose
First, revisit the purpose of the business. The
purpose should be inspirational for everyone
with a stake in the business. That means it
will probably include a social dimension.
There are very few businesses that do not
make a social contribution. You take away oil
or banking, the utilities or transport busi-
nesses and watch the knock-on effect on
everyone’s lives.
To get to your purpose, ask what the
world would be like without your product or
service. Social aspects of a business mission
is not a superficial aspect of branding. It
should be an accurate representation of your
role or it won’t be credible.
Take Pfizer’s refreshing statement of pur-
pose: “We at Pfizer dedicate ourselves to
helping humanity and delivering exception-
al financial performance by discovering,
developing and providing innovative health
care products that lead to healthier and more
productive lives.”
Within this new sense of purpose is the
concept of balance. Increasingly, sharehold-
ers understand that managing simply to
secure financial results can bite you on the
bottom line.
2: Create a workforce committed
to your purpose
Articulating your purpose gains you at least
two things. First, you communicate a con-
sumer benefit (and win a bit more trust).
Second, you stand more chance of achieving
that rare thing – employees working togeth-
er for a common goal.
But there’s more to it than defining a
direction. There has to be a conscious deci-
sion to create a common culture. Carol
Lavin Bernick took over from Alberto Culver
as Vice Chairman and Director of Pfizer and
realised the company was facing a cultural
crisis. Changes included making an annual
‘state of the company’ address and creating
the role of Growth Development Leader.
She says, “Passion is probably the single
pre-requisite to cultural change… if you’re
not passionate about it, don’t even bother.”
Believe in your product or service but don’t
presume employees will gather round the
flag. Creating a co-operative culture where
employees work together on a shared goal
won’t happen by accident.
A co-operative culture involves a planned
approach, employee involvement, the shar-
ing of best practice and common policies and
processes. When you are on this road, you
won’t simply find it easier to retain existing
employees, you will also become a magnet
for like-minded people.
3: Define “how we do things
around here”
People have a lust for a clear framework of
how to behave. Usually called values, the fact
is there are many ways of defining how you
do things in your business. Shell have their
business principles. Southern Sun Group of
South Africa have defined their top ten
accountabilities to stakeholders. Johnson &
Johnson have a credo. Hewlett Packard have
rules of the garage. The big trick is develop-
ing a framework which makes sense for you.
But there are three critical factors:
• your convictions need to emerge from
your business
• they need to be genuine convictions and
strong enough to remain in place when
tested
• they need to be translated into practice
4: Manage the intangibles
The model of business success has changed.
Past financial success only provides one
dimension of value. Other factors which can
add to the value of a business include a clear
strategy, a strong board, customer loyalty,
employee skills, new revenue streams,
competitive differentiation, reputation and
innovation.
They may be called intangibles, but that’s
not a good name. They’re very tangible. If
you successfully manage values and value
you earn trust.
5: Develop a clear strategy
for corporate social
responsibility
Here’s a prediction. In the next decade or so,
corporate social responsibility will merge
into corporate governance and corporate
reputation. They’ll become the same thing.
In the meantime, it’s not too difficult to cre-
ate your own model for managing CSR.
There are some useful starting points.
For example in the UK there are the
Business Impact Task Force model and the
new GoodCorporation mark.
The trick is to recognise that there is not
With a raft of critics attacking global brands and with businesses waking
up to corporate responsibility, John Drummond suggests ten simple steps
to help organisations win trust
10
How to protect a trusted brand

one holy grail in CSR but at least seven.
However, that’s for another day. The initial
challenge you have, as Richard Holme and
Phil Watts from Rio Tinto and Shell have
said, is to find your “magnetic north”.
You need to define why you want to man-
age CSR. And that varies from company to
company. Drivers include attracting ethical
investment, compliance, competitive
differentiation, improving reputation and
winning customer loyalty.
6: Create a brand with
personality
There is no reason why common principles
of success should lead to conformity, but they
often do. People articulate their purpose and
values in the same way as others. They fol-
low the same reporting guidelines. They fol-
low the same techniques in eBusiness,
employee communications, financial man-
agement, setting objectives and every other
aspect of business. And that is not a good
way of winning trust. I prefer Madonna’s
advice - express yourself.
People who win trust are open, visible,
engaging and they tend to have their own
personality. That personality is diverse. You
can see it in the buzz as you walk into the
reception of Asda HQ in the UK.
You can see it in the amazing ideas of
Semco of Brazil, who devolve “to the max”.
And you can see it in the words of Ralph
Larsen, Chairman and CEO of Johnson &
Johnson, in their European CSR report for
2000 (that’s an invitation to seek them out).
7: Listen and involve people
in strange new ways
Why is this at 7? The first step to win trust is
to listen. If a company does not have its fin-
ger on the pulse of stakeholder opinion, it
doesn’t have a feel for its corporate health.
And it’s not just about good old fashioned
quantitative and qualitative research.
Look at the recent creation of a consumer
panel by the radio station Classic FM.
Members will be recruited from listeners via
on-air advertisements. As GWR chairman
Ralph Barnard says, the aim is “to meet the
growing need for consumers to have a more
effective voice in broadcasting.”
The truth is that there are a bunch of
new ways of engaging customers. We’re
already seeing more engagement through
digital TV. And for the last few years I’ve
been proposing businesses use their access to
market to move beyond employee volunteer-
ing to customer volunteering for social caus-
es. It’s coming.
8: Manage risk including
risks relating to trust
It’s bizarre that the risk management or cor-
porate audit departments still focus on
financial risk. New corporate governance
requirements in the UK and the new
Company Law Review know that directors
have wider responsibilities.
The sentiment they express is that the
directors have a duty to manage longer term
risk relating to reputation, business probity,
health and safety and social or environmen-
tal issues.
Manage risk effec-
tively and you can head
off chunky financial risk
like more regulation and
legislation, windfall taxes
or consumer boycotts.
My own conviction
is that a new discipline
will emerge called integrity risk manage-
ment. It’s not difficult. It’s applied common
sense. You simply spot the areas where there
is a potential gap between your policy and
your practice and you manage it.
9: Leverage social change
Businesses still tend to think good corporate
responsibility is about managing the foot-
print of their impact on society. But real
progress will be achieved when they use
their muscle to achieve genuine social
change linked to their business. I see a
growth in campaigns which go beyond basic
charitable fund-raising or PR into new terri-
tory – working on a single cause and
campaigns which make a tangible social
difference.
It’s a difficult balancing act, but it can be
done in a way which wins trust and leads to
genuine social and business benefit. There is
nothing wrong with mutual benefit. And
there is nothing wrong with business playing
a social role.
10: Invest in communications
but make it a dialogue
What is the point, I ask, in having a great
story to tell but not telling it? There are won-
derful hidden stories about the contribution
of business. Look at the recent social web
sites of BT and Diageo. There are many hid-
den gems in almost every business.
But even the best don’t invest. They don’t
invest in communications. And when they
do, they make several key mistakes:
• they sometimes forget that people are
interested in people
• they sometimes forget that good
communications are about a dialogue
not about an annual report
• and they sometimes forget that we are
as interested in future plans as past
performance
So what is this? So what are these ten
steps? They don’t add up to PR, corporate
responsibility or branding. So what are we
talking about here? Is it a new concept?
Could we call it sustainable branding or
trust marketing?
You can if you like. I prefer business com-
mon sense. And it isn’t hair-brained wishful
thinking. Many of these actions are taking
place today in businesses of many sizes. Also,
let’s not imagine this is only relevant for
companies. This is as relevant for govern-
ments and not-for-profit institutions. It’s the
way things are going.
Our choice is simple. We can create sus-
tainable businesses which are authentic, aim
for balanced results, behave responsibly and
win trust because they deserve it, or we can
step boldly down a cul-de-sac of increased
consumer cynicism. Where do you want to
be? In the wake or in the vanguard? s
“Passion is probably the single
prerequisite to cultural change…
if you’re not passionate about it,
don’t even bother.”
John Drummond is the Strategy
Director of Corporate Culture.
www.cc-plc.com

What’s your background with Shell?
I’ve been with the group for 22 years. I started
out as a research biochemist in support of
our chemicals business. I was a founder
member and am a current member of the
Sustainable Development Group in the cor-
porate centre of Shell International.
How is Shell going about becoming
a truly sustainability-supporting
company?
Firstly, our commitment to sustainable
development is to contribute to sustainable
development. That means that you need to
manage your operation in a way that is
responsible in terms of respect for the envi-
ronment, of respect for people and of being
mindful of human rights.
You can do that within your existing busi-
ness model in that you can run your affairs
in a way that recognises these broader
responsibilities. In this regard, when you get
oil and gas out of the ground you do it more
cleanly, more safely, more efficiently.
When you refine it you are very con-
cerned about eco-efficiency aspects. And
when you sell the products you try to do it in
the way that is going to involve the lowest
quantity of sulphur, lead, aromatics and so
on. And when you explore in sensitive areas
of the world you do it in a way that respects
biodiversity and the rights of indigenous
people or whatever the particular issue might
be.
That type of contribution to sustainable
development can be done within your exist-
ing business model. On the other hand, you
can also view it as evolving within what I
would call the fourth dimension of sustain-
able development, that of time.
You can say you can use this agenda to
inform the way you evolve your product
portfolio. In our case as an energy major that
would mean a long term evolution away
from hydrocarbons as the basic fuel stock to
renewable or alternative energy sources. So
ultimately one can view that as the goal.
But I also have to be very upfront and say
that we can sow the seeds for that now, we
can bring in the new technologies, we can
help develop the markets and the infrastruc-
ture, but let’s not kid ourselves: hydrocar-
bons are going to remain the mainstay of the
energy scene for at least the next thirty years
and the transition away from them is going
to be a long process.
What are the internal challenges
you’ve faced at Shell? How do
corporate communications,
marketing and corporate strategists
interact in terms of
implementing
socially and
environmentally
responsible
strategies?
I think it operates at a
more fundamental level
that that. The idea is
that we want to take the
concept of corporate
social responsibility
into the decision-mak-
ing process and hardwire it into the systems
and processes on the one hand, and bring it
into the hearts and minds of people on the
other.
It’s a cultural change that we are trying to
engineer as part of Shell’s overall transfor-
mation. So in that regard it’s not just a ques-
tion of individual departments – it’s about
how you bring this into your strategy and
planning, how you bring it into your finan-
cial approvals, how you bring this into the
way in which you motivate and reward staff.
Can you tell us how the
management structure works
at the very top level for strategic
decisions on this within Shell?
We have at the executive level what we call
the Sustainable Development Committee,
which is chaired by Phil Watts, the
Chairman of the Committee of Managing
Directors. This committee comprises of very
senior representatives off the Chief
Executives committees of each of our five
main businesses: Exploration and Production;
Chemicals; Oil Products; Gas; and Power
and Renewables. The committee also com-
prises heads of corporate centre functions
like human resources, finance and legal as
well as company secretaries and us in the
Sustainable Development Group. It meets
twice a year currently and looks at the whole
approach of driving this type of thinking
across our organisation.
Beneath that there is what we call the
Sustainable Development Panel, which
comprises representatives from those same
areas but at a rather more workaday level
who are still very senior but who can roll
Mention corporate ethics and the name of Shell often comes up. We spoke
with Mark Wade, founder of the Shell Report and a key member of Shell’s
Sustainable Development Group, to find out more about the business benefits
and challenges
12
Shell’s Mark Wade speaks with
Ethical Corporation magazine
“We want to take the concept of
Corporate Social Responsibility into
the decision-making process and
hardwire it into the systems and
processes on the one hand, and to
bring it into the hearts and minds of
people on the other”
i n t e r v i e w

What are institutional investors
asking for from Shell today that
they didn’t ask for 5 years ago?
Clearly there has been a very significant
increase in interest in socially responsible
investment funds. This is coming from the
general public who want to make sure that
their money is invested in ways they feel
comfortable with.
It’s also coming from pension funds
which are being managed on behalf of all
sorts of organisations, such as unions and
universities, who are telling their fund man-
agers they want their members’ money
invested in a way they would feel happy
with. There’s no doubt that this is growing
rapidly, but it still represents quite a small
proportion of overall investment in the stock
markets.
When we look at the more mainstream
investors, I think that to a large extent these
considerations are not top of their agenda.
When it comes to making judgements on
companies in this more mainstream area
they’re going to be looking for the most part
at the more traditional measures of predict-
ing future value growth. Nevertheless, our
commitments to CSR and sustainable devel-
opment are seen as neutral in that regard. So
long as we can be seen to perform as an effec-
tive organisation then they will continue to
recommend us.
Of course, you do see the growth in
things like the FTSE4Good indices and the
Dow Jones Sustainability Indexes and
there’s a whole raft of these type of indices
now. Shell is in the FTSE4Good. We’ve been
in the Dow Jones Sustainability Indexes
since their inception and last time around we
were the top sustainability company in the
energy sector. s
their sleeves up and make this happen in a
practical sense throughout the organisation.
Externally we also have the Social
Responsibility Committee, non-executive
external directors of the board of the two
parent companies of the Shell Group, Royal
Dutch Petroleum and Shell Transport
and Trading. This meets on a twice-yearly
basis to review our internal governance
processes regarding the application of Shell’s
business principles, to help shape safety and
environmental policies and procedures and
to shape our commitment to sustainable
development.
Are you feeding the message about
sustainability and responsible
behaviour out to your suppliers?
It’s a mammoth challenge. One important
component is that when we form new joint
venture relationships or contractual supplier
relationships our business principles are
clearly on the table during those negotiations.
We have to be satisfied that the conduct of
that joint venture or contractual relationship
will uphold those principles or operate in a
way which is compatible with them.
That’s the first element and we have right
of audit in terms of HSE and other ways of
ensuring that our businesses are managed
with integrity. That’s the front line if you like.
The second line is more on the hearts
and minds side again, to use our influence to
help people see the business case for corpo-
rate social responsibility such that there is a
willingness to want to go these routes. But
it’s a big challenge and the further you push
the envelope on your supply chain or rela-
tionships the more difficult it becomes.
What are emerging corporate
responsibility issues today for
the energy industry?
In the energy industry, the biggest issue is
that of climate change and companies’
responses to that particular issue. That is a
major challenge, in terms both of how you
address the issue of climate change and of
the impacts that has on the way you manage
your business. You have to look at what busi-
ness opportunities can come from it. For
extractive industries clearly there are other
environmental issues. Biodiversity is of
concern. When operating in sensitive parts
of the world the rights of indigenous people
and the development of social capital within
the respective communities are some of the
main issues with which we will be confronted.
Where are the CSR-related business
opportunities in the future for Shell?
In terms of business opportunities, I think
that depends on the business model. In
a group of companies like Shell we have
hugely different businesses. We have oil
exploration and production, where many
of the relationships are with national oil
companies.
What are the advantages there of CSR?
Well, we’re seen as a company of enormous
technological strength and as an organisa-
tion of great integrity in that we don’t bribe
and take a very strong stand in that area.
Shell has the economic capability to take
very long-term views of emerging energy
systems and have the
economic clout to make
the massive investments
which are often
required to help a coun-
try generate income
from its indigenous
mineral wealth.
So you need to
demonstrate to govern-
ments that you can behave responsibility and
help them meet their strategic energy needs.
You also need to demonstrate that you can do
this in a way which is sensitive to
the environment and to the needs of local
communities. If you can do this then you are
likely to be seen as a preferred partner. In
some of the other business models, such as
business-to-business, you can look at
improving your costs through eco-efficiency.
In some of the business-to-business con-
sumer models you might use an awareness of
society’s expectations for the delivery of goods,
mindful of the environment and respectful of
human rights in their supply chain and pro-
duction.
You need to make sure that your goods
and services are in line with that. If people
are looking for things which are greener,
cleaner and safer, then that can be used
to inform the type of products you would
produce. So there’s a number of different
ways that you can use an understanding of
CSR and where it’s come from in terms of
society’s expectations to deliver business value.
“When we form new joint
venture relationships or contractual
supplier relationships our business
principles are clearly on the table
during those negotiations”
For more information on Shell visit
www.shell.com

What’s your involvement in socially
responsible investment?
I’ve been the Head of SRI strategy at
Henderson since December 2000, after 14
years at NGOs such as Friends of the Earth,
Traidcraft and the RSPB. Nick Robins, our
Head of Research, has had jobs in similar
organisations. The work I do now is surpris-
ingly similar to the work I did at NGOs –
working with companies to try to influence
them to embrace SRI and ethical polices.
Henderson’s global investments total just
over £100 billion worldwide and Henderson
has large shareholdings in a large number of
companies, which gives us some influence
over their ethical policies. I believe that the
extent to which business can offer solutions
to some global problems is significant.
Can you give us some background
on Henderson’s investment in SRI?
It started in the late 1970s beginning with
the Joseph Rowntree charitable trust.
Henderson now has over £1 billion in SRI
investments, one of the largest ethical invest-
ments in the UK. We invest for a variety of
retail and institutional clients.
Will the Company Law Review
affect the way these funds are
invested in the future?
The Review will lead to legislation in a cou-
ple of years that will probably require com-
panies to report on aspects of environmental
and social performance. But we are already
asking companies questions about these
issues now, whatever the outcome of the
Company Law Review.
We look at human rights
and socially responsible
investment policies in
all the companies we
research for potential
investment. We make a
point of seeking an
active dialogue with
companies on all the issues of business ethics
in all areas. We try to work out as much as
we can about how companies work.
For example, staff motivation and repu-
tation are all-important to their future value
to us. If we see that companies do not seem
to be taking notice of some of these issues,
we will address this, as any other investor
should, to help them have a full understand-
ing of the importance of socially responsible
investment.
Henderson has a constant dialogue with
companies based on our risk management
strategies to make sure that our funds per-
form and that we have an understanding of
the views of that company and the risks for
our money. We will, of course, ask for
improvements if we believe them to be neces-
sary. We are continually trying to build a more
rounded analysis of companies into our main-
stream investment process.
What are the challenges for
companies you are working with
in implementing ethical practices?
It depends on which sector you are in. In
retail it’s often the developing world. The
reality is that operating in low labour cost
countries has some major ethical challenges
for companies. The reputational risk of
using child labour is very great for a major
high street brand.
For example, currently there is a lot of
discussion about chemicals in the home
being potentially hazardous to consumers.
Companies need to get on top of public
opinion and safety aspects to keep up with
public expectations.
Oil companies have issues of human
rights, security in developing countries and
of course climate change. Mining companies
that work with the military in developing
countries have some major issues they have
to look at.
From Henderson’s perspective,
where do you see this moving in
the next year or two, especially with
an apparant recession coming?
The level of expectation of consumers on all
these issue is rising – companies are going to
be continually pressured to increase standards
and to do things on a voluntary basis.
Expectations will rise and public expectations
will still be there in any recession.
What are the benefits? Well, supply chain
savings, HR savings, R&D savings. This is
quickly turning into a must-have scenario
for companies. There is a sense that interna-
tional companies need to be far more sensi-
tive and show that they are socially responsi-
ble in different countries and that they can
adapt to meet changing public needs. s
Investment fund managers are playing an important role in encouraging
business ethics within enterprises and establishing responsible funds for
investors. Ethical Corporation speaks with Rob Lake of Henderson Global
Investors to find out what institutional investors are looking for from enterprises
Influencing ethical policy
i n t e r v i e w
“What are the benefits? Well, supply
chain savings, HR savings, R&D
savings. This is quickly turning into a
must-have scenario for companies”
www.henderson.com
14

F
ew journalists, politicians, corporate
CEOs or international agency profes-
sionals would bare-facedly reject cor-
porate social responsibility. But every year,
MBA courses in business schools all over the
world are full. Full of ambitious would-be
executives who argue that the “business of
business is business”. Reiterating Friedman’s
1970s utterances about the social responsibil-
ity of business being to make profit, from
which all benefits will ‘trickle down’ to those
who patiently wait, MBA students are most
reluctant to make the business case for CSR.
Foremost they want to be taught how to
make money fast. Indeed, one of the greatest
discrepancies in the evaluations MBA stu-
dents customarily make of their professors
pertains to their appreciation or not of
whether the case for CSR has been made
convincingly or boringly. At Warwick
Business School, learning about CSR is a
compulsory part of every MBA. In some
business schools it is a losing battle to make
one session an optional elective.
Nonetheless, for students or senior execu-
tives alike, to reject CSR is to be oblivious to
one of the most fundamental challenges to
have impacted international business over
the last ten years.
A moral imperative
Over the last decade, foreign direct invest-
ment by international companies in develop-
ing countries has increased tenfold and pub-
lic funding of development assistance has
declined. CSR is now not only a bottom line
issue but also a moral imperative, with
respect to the relationship between business
and its internal/external stakeholders. CSR is
to be sidelined at your peril.
Ethical deliberations are demanding
more time in the boardroom. Business lead-
ers are realising that they need to address
company culture so as to merit an image of
integrity and responsibility. They are also
aware that the ‘external costs’ of their opera-
tions (i.e. the costs of those environmental
and social impacts beyond operating costs
that previously the state or local host com-
munities have absorbed) can no longer be
taken for granted, and over time, need to be
‘internalised’.
Globalisation also means that interna-
tional business is increasingly operating in
areas of conflict. Business can no longer pose
as neutral. There exists a growing imperative
for business operating in
areas where human
rights are infringed to
use legitimate influence
to promote human
rights even outside of
their areas of operation.
At the very least they are
being called upon to
examine whether their presence and their
indirect impacts contribute to, or under-
mine, the development rights and opportu-
nities of their host communities.
Some reflections
I offer the following reflections for those that
still believe there is no business case for CSR
and that companies have no role to play in
contributing to society other than through
profit-making.
Some believe that people will a priori
benefit if business is allowed unbridled to
make profit. This is called the ‘trickle down’
effect. The concept refers to economic meas-
urements of benefits, not equity or well-
being considerations. Furthermore, history
has demonstrated that people living in
poverty, especially indigenous communities
in the vicinity of remote agricultural, mining
and oil operations, have been among the last
to benefit. They have lost faith in the distri-
bution powers of the governments that host-
ed these investments. They now frequently
resort to negotiating directly with business to
secure more immediate benefits in educa-
tion, housing and health – basic develop-
ment rights – and in return they grant what
is tantamount to a local ‘social license to
operate’. This is understandable, and most
companies respond rationally by seeking
dialogue not conflict. Some countries
require this in law, few are aware that such
prior consultation is enshrined in an ILO
(International Labour Office) convention or
in the national constitution of countries with
strong indigenous communities, such as
Colombia. Companies are also recognising
that they must take responsibility for the
wider impacts of their operations beyond
their workforce and the perimeter fence.
With the recent liberalisation of investment
regimes worldwide, governments may have
made downward adjustments in social wel-
fare spending in order to accommodate tax
breaks to attract these foreign investments,
sometimes with strong encouragement from
international financial institutions. Business
is starting to recognise that it has a responsi-
bility to address locally the social impacts
generated as a result of their investment
opportunities. Companies are acknowledg-
ing that they cannot pay their taxes then
sleep easy in the knowledge that benefits will
trickle down, other than through employ-
By Professor Alyson Warhurst, Director, Corporate Citizenship Unit,
University of Warwick, UK
“CSR is now not only a bottom line issue
but also a moral imperative, with respect
to the relationship between business
and its internal/external stakeholders.
CSR is to be sidelined at your peril.”
Educating tomorrow’s executive
The business case for the integration of
corporate social responsibility
15

ment, to their local host communities
through the lifetime of their investment.
The ‘triple bottom line’
Some suggest that the greater the competi-
tive pressure on business the less able they
will be to serve wider social goals. But this
misses the fact that, in many countries, gov-
ernments and banks now select companies,
award licenses and approve finance on envi-
ronmental and social track records and not
just on economic grounds. This is the ‘triple
bottom line’.
Many companies are pushing CSR in the
supply chain by demanding that their sup-
pliers demonstrate ethical and environmen-
tally sound practice. Research is showing
that the conditions attached to investment
financing and procurement, which are sensi-
tive to longer-term political, environmental
and health risks and liabilities, are drivers as
potent as government regulation in promot-
ing more environmentally and socially
responsible business practice. This in turn
enhances a company’s competitiveness and
contributes to its acquiring ‘preferred suppli-
er status’.
Some observers have expressed concern
that there exists pressure from ‘socially
responsible’ businesses to impose costs they
have accepted voluntarily on their suppliers
and that this is tantamount to unfair busi-
ness practice.
The response here is that, yes, companies
can and do set higher and higher standards.
These improved social and environmental
practices, in turn, are quite appropriately dif-
fused through the market. As a result, a
number of corporate initiatives in the areas
of human rights, biodiversity conservation
and social development have addressed
development needs that were not being met
by governments.
This view, in a sense, is a corporate paral-
lel to the argument that we should not give
money to charities as individuals as this takes
away the pressure on governments to address
social development. While we might agree
with the theory, who are we to say that those
living in poverty and those whose human
rights are being infringed today should wait
for governments to change tomorrow, or in
the case of developing countries that have
invited foreign investment in, for the benefits
to trickle down? In an ideal world there
would be no need for corporate social invest-
ment or for charities, but surely there is room
for both while we are striving for a ‘trickle
down utopia’. In the meantime, appropriate
consultation and active listening to stake-
holder needs and concerns should ensure
that the strategies of companies wishing to
pursue responsible practice are tailored to
local needs.
No harm to development
I have heard it asserted that companies,
through being obliged to operate to higher
standards, are harming the development
prospects of poor countries on account of
eroded competitiveness. This seems miscon-
ceived on two counts.
First, economic wealth is no longer a sin-
gle priority. Rather, broader concerns about
health, wellbeing and quality of life are as
important and, in some specific situations of
weak government, busi-
ness can deliver these
more efficiently and
directly to local commu-
nities through corporate
social investment.
Secondly, communities
and politicians in devel-
oping countries have
strived hard to achieve
high environmental and
labour standards and
not to be considered as
‘pollution havens’.
Moreover, research suggests that under-
taking environmental investment can pro-
mote economic, technical and energy effi-
ciencies and savings and reduce costs in the
long term through avoiding costly retro-fit-
ting and reducing future liabilities.
Increasingly, some companies consider they
have a responsibility to use their legitimate
influence to promote human rights and
labour codes of conduct as well as improved
environmental standards, as good corporate
citizens.
Just because we don’t all agree about
what is ‘development’, is that justification for
doing nothing? I should think not! It misses
the growing importance to business of part-
nership and dialogue with stakeholders and
interested partners that can help companies
to understand what would actually consti-
tute improved social performance and con-
Professor Alyson Warhurst holds the
Chair of Strategy and International
Development at Warwick Business
School and is Director of the
Corporate Citizenship Unit (CCU),
University of Warwick.
www.wbs.ac.uk
tributions to development as defined by spe-
cific affected groups.
Students and social policy
Finally, it is ironic that MBA students are
good at scoring points today about the legit-
imacy of NGOs, while their professors prob-
ably protested in the 1960s and 70s about
apartheid, the coup in Chile, policy towards
the Sandanista government in Nicaragua
and the ‘cuts’ at home in education. Students
today, (MBAs or political scientists), are
more likely to make a ‘hit’ on the stock mar-
ket than hit the streets protesting.
They miss the important point about
why pressure groups exist. NGOs in most
cases endeavour to speak on behalf of people
(or issues) who, for reasons such as human
rights infringement, have no ‘voice’ – i.e. dis-
placed communities, refugees, disadvan-
taged groups such as women and children,
endangered species etc. It is through dia-
logue with NGOs that many of these issues
are put on the business agenda.
I am definitely not arguing that MBA
students are unworldly or immune from
social responsibility concerns. In fact, the
most rewarding part of teaching is beginning
with a class of sceptics and ending with an
enthusiastic group of students who are
queuing up for further reading and case
studies to make the CSR business case. s
"Companies are acknowledging that
they cannot pay their taxes then sleep
easy in the knowledge that benefits
will trickle down, other than through
employment, to their local host
communities through the lifetime
of their investment."
16

Can you give us a little information
on your career to date and current
job role at FTSE?
As Head of Index Design at FTSE, my
responsibilities include the design both of
FTSE’s indices and of bespoke indices for
FTSE’s external clients. As one of the origi-
nal five staff of FTSE, I have undertaken a
variety of roles within the company,
focussing on the calculation and manage-
ment of indices, the operation of data servic-
es and the provision of consultancy services
for FTSE’s clients. Managing the introduc-
tion of free float of FTSE indices and the
planning and design of FTSE4Good have
been career highlights to date.
Can you give us some background
on the FTSE4Good indices and the
thinking behind them? Is this is a
charitable exercise or did the
demand come from investors and
FTSE listed companies originally?
FTSE created the FTSE4Good index series
in response to market demand as there was
considerable interest in, and demand for, a
recognised global benchmark for socially
responsible investors. FTSE4Good provides
a tool for investors to track the performance
of a company’s corporate social responsibili-
ty against a comparable benchmark in a
transparent and objective way. FTSE4Good
is a new and different means of assessing best
practice in corporate social responsibility.
There are various different attempts
at creating a standard for SRI,
including the Global Reporting
Initiative. How do these tie in with
your objective global standard for
socially responsible investment?
The Global Reporting Initiative is likely to
contribute to the quantity and quality of data
available and therefore to the growth of
FTSE4Good, which will evolve with
investors’ standards as more information
becomes available. The principles on which
the FTSE4Good indices are based are root-
ed in globally accepted international stan-
dards such as the UN Global Compact and
the Universal Declaration of Human Rights.
From this foundation, FTSE4Good identi-
fied three key areas:
• the promotion of practices that mitigate
damage to the environment
• the encouragement of respectful and con-
structive relations with stakeholders
• the support and respect for the protection
of international human rights.
FTSE hopes the development of the
FTSE4Good indices will encourage
investors and companies, as well as the pub-
lic, to engage in debate over their socially
responsible practices. As companies are
encouraged by investors to adopt socially
responsible practices, the level of disclosure
will increase. This will allow the index series
to evolve and reflect the changing expecta-
tions of the market over time.
Information on the companies included in
the FTSE4Good index series is sourced from
research and analysis conducted by EIRIS
and its partners globally, under the direction
of the FTSE4Good Advisory Committee.
This research and analysis has been supple-
mented by the use of questionnaires.
Why do you think corporations
are approaching you to be listed
in FTSE4Good?
Initiatives like FTSE4Good are making
companies more aware that investors expect
more than simply good financial perform-
ance. FTSE4Good allows them to demon-
strate that they are meeting those challenges.
Profits and ethics used to be at
opposite ends of the scale. What's
changed in the last decade and
where do you see this leading
in the next ten years?
There has been a vast increase in the number of
indices and funds based on different concepts,
such as technology and growth, in the past few
years. FTSE4Good is possible because
investors are becoming more aware that they
canplayaroleinsocial responsibility whilst not
having to suffer lower financial performance in
their investments. The indices aim to express
international consensus on the principles of
responsibility to which companies should be
expected to adhere and to establish these
principles as a global standard for corporate
responsibility.
Do you believe the current political
and economic situation will have an
effect on companies strategies for
SRI / CSR? Non-core strategies can
often be shelved in times of turmoil.
Have we come too far to go back now?
Business leaders around the world now
recognise that companies enjoying the eco-
nomic benefits of globalisation can also
demonstrate a commitment to corporate
social responsibility. There is a deepening
conviction that a socially responsible
approach will enhance the reputation of
companies and reduce business risks irre-
spective of market conditions.
Alongside this, there has been an increase
in demand from global investors for corpo-
rate social responsibility issues as an invest-
ment criterion. In the UK alone there has
been a rise in the number of ethical funds
from 34 in 1998 to over 60 now, as well as the
amount of investment in these funds - £1.8m
in Q2 1998 to £4bn in Q3 2001.
This trend is reflected across global
investment markets and has indicated the
need for the market to have a consistent,
global standard by which to judge companies’
corporate social responsibility credentials,
hence the launch of the FTSE4Good series. s
Ethical Corporation speaks with FTSE’s Gareth Parker to find out more about
what’s driving initiatives like FTSE4Good
Creating global benchmarks for
corporate responsibility
www.ftse4good.com
i n t e r v i e w

Which industries are leading? And
which are way behind?
Difficult question, as different industries
have different environmental and social risks
associated with them. Our job in the
research unit is to identify those companies
in a sector which show strong environmental
and social performance. We carry out a
rolling programme of sector surveys, with
the aim of seeing who the leaders and lag-
gards are.
It is also part of remit to encourage the
laggards to improve their environmental per-
formance.
How seriously are ethical funds taken
in the City?
In the UK, retail SRI funds have grown to
£3.7 billion in little more than a decade.
Recent pension fund legislation, requiring
pension fund trustees to disclose whether
they take account of social, environmental
and ethical issues, has also given the indus-
try a boost.
July 2001 also saw the FTSE4Good
Indices, a new family of indices covering the
UK, Europe, USA and the world, go live,
once again raising the profile of SRI.
How much is SRI becoming an issue
in standard funds?
Following the introduction of the pension
fund regulation in the UK, we are beginning
to see SRI embraced by all shareholders. For
example, some of the SRI specialists are
introducing voting policies specifically on
SRI issues, such as a commitment to vote
against the annual report of a company
which fails to produce an environmental
report. These policies apply to all the assets
managed and not just to those in screened
mandates.
We have recently had a review of institu-
tional investment in the UK called the
Myners Review. Its support for greater trans-
parency and for investor activism could also
lead to a growth in SRI.
Do you believe that some in the city
are looking to discredit these funds?
The City’s attitude to SRI is changing. Most
notably, UBS Warburg in their report
Sustainable Investment (Aug 2001) states
that it believes changing public sentiment,
new laws and the launch of ethical bench-
mark indices will encourage product innova-
tion and growth.
Are you seeing different SRI trends
emanating from different countries?
The growth of SRI in the UK is part of a
worldwide trend. One example of this is the
growing number of social investment
forums, such as UK Social Investment
Forum (UKSIF), around the world. UKSIF,
the UK’s membership network for socially
responsible investment, was established 10
years ago - the latest, ASrIA (“SRI” in “Asia”),
will be launched in early November 2001.
And, to respond to the growing interest
in SRI across Europe and the need therefore
for pan-European information and network-
ing, five social investment forums in Europe
have got together to create the European
Sustainable and Responsible Investment
Forum (Eurosif). Funding for Eurosif ’s ini-
tial work programme is being provided by
the European Commission.
Are corporations fearful of negative
investment consequences of
non-responsible behaviour?
We have noticed that in recent years compa-
nies are responding much more promptly to
our requests for information on their envi-
ronmental and social performance. I believe
this relates to the growth of SRI in the UK,
and in particular to the introduction of the
pension fund disclosure regulation.
Can you give us an insight into the
level of commitment to actively
improving their environmental or
social performance companies need
to demonstrate to convince your team
that their commitment is serious?
Jupiter’s SRI funds invest in two types of
companies: those that are solving an envi-
ronmental problem; and those that are min-
imising their impact on the environment.
For companies in the second category –
best in class companies – we are identifying
those companies which are demonstrating
sector leading environmental and social per-
formance. Whilst there are certain universal
indicators which are relevant for all companies
(such as introducing environmental man-
agement systems and publishing CSR reports),
other key performance indicators may only
be relevant to certain sectors. For example, in
the retail sector we would look for the devel-
opment of codes of conduct for suppliers,
whereas for the housebuilding industry would
like to see use of brownfield sites and high
energy efficiency in the houses they build.
We are looking for a commitment to con-
tinuously improve their environmental and
social performance from all companies that
we deal with.
As an integral part of protecting
brand strength, do you believe that
ethical business policies will be an
important part of all corporate
strategy in the future?
In a world in which financial value increas-
ingly depends on intangibles like brands and
management quality, over time it may make
more sense to look at social, environmental
and ethical performance to assess future
financial prospects, as well as looking at tra-
ditional indicators.
I believe that companies have to be increas-
ingly mindful of the reputational risk associat-
ed with mismanagement of their environ-
mental and social performance. Companies
with strong brands are consequently the
most vulnerable to a reputational shock. s
Jupiter Asset Management manages a number of well performing green
funds. Ethical Corporation speaks with head of environmental research,
Emma Howard Boyd
18 w w w . e t h i c a l c o r p . c o m
Ethical funds and the City
i n t e r v i e w
www.jupiteronline.co.uk

What is currently driving corporate
social responsibility initiatives
within large companies?
Aylard: A whole range of things, but there
are three I would single out, first of all pub-
lic attitudes, which are changing fast in a
number of areas. Even if you look at the way
parents bring up children, if I allowed my
children to do the things my parents allowed
me to do 30 or 40 years ago, I wouldn’t be
regarded as a responsible parent, even
though at the time they appeared perfectly
fair and reasonable. So I think standards are
going up all the time.
The second thing is the importance of
corporate reputation. Companies stand or
fall on the strength of their reputation, and
being publicly arraigned as being irresponsi-
ble is a pretty good way to lose a reputation.
The third thing is the information revo-
lution, where we’ve got more and more peo-
ple knowing about everything. It’s not true
that everyone knows everything about all
things that are going on around a company,
but what it does mean is that almost anybody
who really wants to find out about what’s
going on in a company can now do so. There
aren’t any really effective hiding places any-
more in the days of the internet revolution.
How do public attitudes towards
corporate behaviour differ in the
US and the UK?
Aylard: Well, we’re into sweeping generali-
sations here. Even just looking at the UK, we
have different attitudes amongst different
groups of people. But certainly, when NGOs
have done focus groups with their members
and with the people they want to attract to
becoming members, one of the themes that
seems to strike a chord is that companies
have a role in making the world a better
place, to put it as simply as possible, and that
companies need to be seen to be making the
world a better place as well as making prof-
its, paying taxes, employing people and
doing all the sort of conventional things that
one expects of a business.
Friedman: In a society as large as the US
inevitably public attitudes are shaped by a
multitude of factors, one of them being
NGOs and their environmental and human
rights agendas, consumer rights and other
agendas. But I get the sense from having
worked on these issues in the UK for six
years that in the US the public attitudes
towards CSR are less shaped by NGO factors
and more by issues that seem to affect the
public on a daily basis.
The first issues of a CSR nature that, to
my mind, really captured and galvanised the
public in the US were
environmental issues in
the early 90s and also,
perhaps even more so,
issues around human
rights and labour rights
that were affecting tex-
tile and shoe manufac-
turing firms and the
retailers of those products in the US. The
public in the US began to realise that they
actually had a certain amount of purchasing
power and that they could affect corporate
policy by exercising that power.
Are NGOs going to have a harder
time after the September 11 attacks?
For example, the site made reference
to earlier, the Families Against Bush
site, has suspended campaigning in
the wake of this attack. Has
September 11 taken the pressure off
business leaders in terms of CSR?
Aylard: No I don’t believe it has. I think the
first thing to say is that I think Chris Rose is
quite right to suspend Families Against Bush
and I think an awful lot of us who would
support broadly speaking the NGO position
on Kyoto would think he’s done the right
thing. And quite clearly in the short term
people’s attention is elsewhere. But in the
longer term, I think it would be hard to
believe that issues of ethics and environmen-
tal and social progress would be less impor-
tant in the aftermath of September 11 than
they were before.
I think that there’s going to be a greater
emphasis on the connections between causes
and effects, between a decision taken on one
side of the world and the consequences and
impacts on people living on the other side of
the world. And whilst at the moment the
spotlight is very much on government
action, I don’t believe it will stay there and I
think the role of the global business commu-
nity will come under the spotlight and that
when it does it will be important for compa-
nies to be able to demonstrate that they are
responsible players in society and that they
are actively engaged in things that strength-
en the fabric of societies around the world –
really part of the solution and not part of the
problem.
Friedman: After September 11 it will be
very difficult for any company to divorce its
day-to-day business operations from the
articulation of its values. And perhaps for the
NGO community they see that business, as a
very obvious target of these attacks, is per-
haps more vulnerable than they thought it
Ethical Corporation spoke with Richard Aylard and Jordana Friedman, Directors
at Burson Marstellar’s Corporate Responsibility Unit, about the thinking on both
sides of the Atlantic on CSR and corporate advantage
“After September 11 it will be very
difficult for any company to divorce
its day-to-day business operations
from the articulation of its values”
Nobody’s laughing now
i n t e r v i e w
19

was and more in need and open to engage-
ment from the NGO community. So I am
quite hopeful that this event will provide an
opportunity for greater cohesion between the
business and NGO communities in the US
and probably globally.
Aylard: If we’re all in this together when it
comes to fighting global terrorism I can’t see
why we aren’t all in this together when it
comes to fighting climate change. They’re
different orders of threats, but they’re both
threats.
How do Wall Street and the City view
ethical investment?
Aylard: The whole subject of ethical invest-
ment has been creeping up the agenda for a
number of years. A few years ago if you men-
tioned it in the City, a lot of people would
laugh. I don’t think anybody’s laughing now,
even if they aren’t all regarding it as being
particularly important or moving up their
personal agenda.
But I do think that a simple barometer of
how these things are going is that confer-
ences on this subject in the City are now
being very well attended. The whole concept
of ethical investment is moving away from
just the specialist socially responsible invest-
ment funds which are looking to make
investments either in particularly responsible
companies or to avoid what they would
regard as particularly irresponsible compa-
nies and it is now moving out to being a
filter that is applied right across all invest-
ments to see that CSR, if it’s not handled
properly by a company, is a significant risk
and if it’s done well, there are significant
boosts to reputation.
So they are beginning to be able to look at
it in line with the usual metrics they use to
assess a company. This is slow progress.
There are no great breakthroughs but year
on year I see it moving up on a steady basis.
The amounts invested in specialist funds are
going up and the degree of scrutiny that is
being applied across the board is increasing.
Friedman: Some of the leading social
investment funds such as Domini Social
Fund perform at the same level as the S&P
500 and, of course, there are funds that are
smaller and more targeted that actually
demonstrate performance above and beyond
the S&P. For a very long time social invest-
ment funds had the reputation of not deliv-
ering as much financial value as more gener-
al funds, and that view is changing.
The emergence of indices like the
FTSE4Good or the Dow Jones
Sustainability Indexes is putting additional
positive attention on the social performance
of companies, and the audiences for these
kinds of indices are the financial analysts.
There are more and more mainstream com-
panies that are following the indices. They
want to know which companies are on them
and how they’re being measured and are try-
ing to benchmark themselves against the
companies on those indices. That kind of
exercise wasn’t going on five or ten years ago,
and certainly not on the part of multination-
al companies.
How important is responsible
corporate behaviour for staff
recruitment, morale and retention?
Aylard: I think it’s very important. It’s sur-
prising the number of companies that say to
me when we’re looking at which stakehold-
ers they should be in discussion, “Oh, I don’t
think our staff are very interested in this.”
And actually, when they do start looking at
what the expectations of their staff are, they
suddenly find that it matters an awful lot to
them. So it does matter and not just in the
classical company where the story is that the
father goes home at night and his little boy
asks him, “Daddy, why do you spend all day
making pollution?” People do actually care.
They want to feel involved. They want to
believe in what their company is doing. And
CSR can play a major part in that. There is
plenty of anecdotal evidence that companies
that have found themselves in trouble over
social and environmental issues have effec-
tively been punished by not being able to
recruit the brightest graduates. The top peo-
ple in any one year can work anywhere they
like and they’re not going to want to tell their
friends that they’re going to work for a com-
pany that’s just been involved in some mas-
sive pollution incident or some potential
human rights abuses.
How do you see CSR progressing
over the next few years?
Aylard: It is something that is very much
moving up the corporate agenda and it’s par-
ticularly moving up the chief executives’ cor-
porate agenda. It’s something that more and
more companies are having to come to terms
with in different ways. It depends very much
on the nature of their business. Some have
been engaged in it very actively for a number
of years, either because they’ve had a partic-
ular problem or because their business has
particular impacts.
I see it moving away from being primari-
ly about corporate philanthropy and a few
nice-to-have programs that look good in the
annual report or form the basis of a CSR pro-
gram and moving toward being the way a
company does business, looking at all its
impacts on society, trying to maximize the
beneficial impacts and minimizing the neg-
ative impacts.
So it’s going to be moving away from the
fringes of what a company does and more
into the mainstream. A few companies have
placed it firmly in the mainstream. An awful
lot more haven’t really got to grips with it in
the modern sense of its being about the way
you run your business and about good busi-
ness other than about what’s going to be our
charity of the year and where shall we put
the money from the trust fund, which has
tended to be the case up to now in a lot of
companies.
Friedman: One dimension of CSR that I
see taking off in the near future is that of pol-
icy engagement and policy dialogue, namely
the constructive engagement of companies
in partnership with governments, multilater-
al institutions and NGOs to address global
challenges like poverty, the negative aspects
of globalisation and human rights abuses
and be increasingly called upon to use their
influence, access and resources to improve
situations not only in the communities in
which they operate, but also beyond. We’re
already starting to see their working on a
policy issue in the area of, for example, AIDS
and HIV awareness raising and financing for
drugs. Up until very recently, pharmaceuti-
cal companies were very resistant to making
AIDS drugs more available on a wide basis
at lower prices. But more and more pharma-
ceutical companies are being pressurised to
be more sensitive to the global challenge of
AIDS and HIV. s
20

I
recently met a senior manager from a high
street retail company. We discussed her
board’s reluctance to produce a corporate
social responsibility report. It wasn’t the cost or
the work involved that put them off. Nor was
it that they didn’t want to expose the company
as a poor performer – far from it. In fact, the
company in question had been running a
highly commendable ethical trading pro-
gramme with its suppliers for years. The prob-
lem was that they didn’t want to shout about
the CSR programme, they just wanted to get
on with it because ‘it’s the right thing to do’.
That’s one of many reasons I’ve heard for
not communicating on CSR. Others include
not wanting to attract attention from NGOs,
lack of demand from stakeholders and reluc-
tance to be seen to be taking credit for a com-
munity programme that was initiated by staff
rather than the company’s management.
Whatever their reluctance, executives
should recognise that the business benefits of
well-produced CSR communications far
outweigh the costs.
Firstly, there’s the benefit to your compa-
ny’s reputation. While a glossy greenwash
brochure can do more harm than good, an
honest, transparent report will support your
company’s reputation as a responsible cor-
porate citizen. And it won’t give NGOs
ammunition with which to attack you.
Greenpeace targets companies that hide the
skeletons in their cupboards and fail to
engage with their stakeholders, not those
that publish honest, accurate, ‘warts ’n’ all’
information. Of course, there’s little point
communicating unless your company is
engaging in CSR activities and actively try-
ing to improve performance. But that’s not
to say you should wait to communicate until
you’ve tackled all your social and environ-
mental impacts – you’ll be waiting a long
time and missing opportunities to improve
your reputation all the while.
Secondly, there are recruitment and
retention benefits. A recent survey by the
Cherenson Group found that almost 80% of
employees would rather work for a company
that has an excellent reputation and pays a
salary to meet their needs than a company
that would pay a higher salary but has a poor
overall reputation. With reputation such an
important issue for your potential and exist-
ing employees, does it make sense to keep
quiet about what you’ve been doing on CSR?
Publishing CSR information reassures
your investors that you’re taking responsibil-
ity for your environmental and social impacts
and that you’re unlikely to be hit with a huge
environmental liability claim or a customer
boycott because you employ child labour. It
also encourages your company’s inclusion in
ethical funds and indices. Tesco was very
publicly excluded from the FTSE4Good
index in July because it had not communicat-
ed its commitment to CSR. The company
rectified this with a new CSR website in
August (to be fair, the site was in the pipeline
before the FTSE4Good exclusion was
announced) and in September Tesco was
included in the index. With the value of eth-
ical investment in the UK at around £4 bil-
lion and rising, you can consider your CSR
communication budget money well spent.
Then there are the improvements in CSR
performance, and the related financial gains,
that occur when awareness is raised not only
through the distribution of communication
materials, but also through their production.
One of the benefits of producing a CSR
report most frequently cited by corporate
CSR managers is that the data-gathering
process requires input from departments
that otherwise rarely think about CSR. It is
often this process more than any other that
puts CSR squarely on the agendas of HR,
finance, facilities management, marketing
and other departments.
The involvement of these different
departments is critical to successful CSR
communications, as an otherwise excellent
CSR campaign can be undermined by an
inconsistent message from another part of
the company. On a BA flight recently I was
impressed to hear that the company was col-
lecting donations for a foreign aid charity.
When I felt in my seat pocket for the collec-
tion envelope, there wasn’t one – a lost
opportunity for the charity to benefit and a
doubt cast over BA’s commitment to the pro-
gramme. This could have been avoided with
effective communication between the
department that decided to run the charity
programme and the department responsible
for putting items in seat pockets.
Integration is a key word in CSR com-
munication. Not only is it important to
ensure an integrated approach from the var-
ious departments involved, it is also vital that
your communications campaign is integrat-
ed across different media and different audi-
ences. Don’t expect to reach all your stake-
holders with a single document – it’s not
going to happen. Identify your key stake-
holder groups and tailor communications to
each of their needs, thinking about the issues
they’re interested in, the formats that are
most useful to them, the language they’ll
understand etc. Bear in mind that there will
be overlap between your stakeholder groups
– for example, employees are often share-
holders too – so there should be consistency
of key messages, look and feel across the dif-
ferent materials you produce in order to
avoid confusion or cynicism.
And don’t forget your internal audience –
if your employees see an externally focused
CSR report when you have neglected to
communicate your achievements internally,
they’ll dismiss what they read as PR that
doesn’t reflect what’s really going on in the
company. What’s more, most of the dialogue
that your stakeholders have with your com-
pany isn’t through a printed report or a web-
site, it’s through interaction with your
employees. If you fail to communicate on
CSR internally, you are restricting your
employees’ abilities to pass on CSR informa-
tion to your external stakeholders.
This all sounds like a lot of work, and I
won’t lie to you – it is. But the benefits of
effective CSR communication are so great
and varied that they easily justify the time
and effort put in. s
The benefits of a clear, concise communications strategy for corporate
responsibility far outweigh the cons, argues Kate Crawford of Flag
Publish and be praised
For more information on Flag visit
www.flag.co.uk

From the beginning it has been our cus-
tomers’ ethical stance. The line-by-line pol-
icy was developed in full consultation with
our account holders prior to its launch in
1992. We understand that ethics are not set
in stone but that issues change over time.
That is why have been back to our cus-
tomers on two subsequent occasions to
ensure the policy continues to reflect their
views. In December we will again be send-
ing a questionnaire to all our customers ask-
ing them for their views. We then propose to
publish a revised policy to coincide with the
tenth anniversary of our policy in May 2002.
Was communication of a updated
corporate philosophy initially
a problem? From those early
lessons you must have learned
which internal staff communications
procedures work well.
Obviously internal communications were
and remain an important issue for the bank.
Initially we had to explain to staff what our
ethical policy was about and how it affected
their daily work. All staff completed what
we called an Heritage Culture and Values
course, which helped to place our ethical
stance in the context of the bank’s position
The Co-operative Bank’s ethical
policy is now nearly 10 years old.
What can you tell us about its ori-
gins and about why the Co-operative
Bank decided to take an ethical
stance ahead of most companies?
When we asked customers in the late 1980s
why they banked with us, many said it was
because we were ethical. Although we were
part of the Co-operative Movement, which
had co-operative principles dating back to
the Rochdale Pioneers of 1844, and we had
taken a stance against apartheid in South
Africa in the early 80s, we had done little to
promote our “co-operative difference” at
this stage.
We therefore decided to ask 30,000 cus-
tomers if they thought we should adopt an
ethical stance and an overwhelming majori-
ty (84%) said yes.
The Co-operative Bank has seen a
large rise in the number of accounts
and profits in the last 5 or so years.
How much has this been down to
your ethical stance?
The Co-operative Bank has reported record
annual and interim results on 15 consecu-
tive occasions dating back to 1994. The
bank has never claimed that ethics alone
sells bank accounts. We know customers are
also looking for competitive products, first
class service and convenience when choos-
ing a bank account. However, what our eth-
ical stance does do is differentiate us from
the other players in the very crowded finan-
cial services market.
A cost benefit analysis produced for this
year’s Partnership Report shows that up to
18% of the bank’s £96.3m pre-tax profit in
the year 2000 can be reasonably attributed
to its ethical and ecological policies. This
cost benefit analysis takes into account the
annual cost of the bank’s turning away
business on ethical and ecological grounds,
together with associated
overheads (more than
£2m), the premium
paid to purchase green
energy (around £50K)
and green air condi-
tioning systems
(£500K) and the time
and money provided for
community investment
(£2.5m). In 1992 we
had fewer than 1.5m
customer accounts.
Today we have more
than 3m.
How are the decisions made when
it comes to making policies on
issues such as animal testing?
Is this something that is discussed
at board level?
22
Ethical finance – a path to profit
“The Co-operative Bank has reported
record results on 15 consecutive
occasions dating back to 1994. The
bank has never claimed that ethics
alone sells bank accounts. However
our ethical stance differentiates us
from the other players in the very
crowded financial services market.”
i n t e r v i e w
The Co-operative Bank has doubled its customer base in recent years.
The bank believes this increased business is due to their well-known stance
on business ethics and socially responsible investment. We spoke with
Simon Williams, Director of Corporate Affairs, to find out more

The Ethical Corporation Magazine - December 2001

The Ethical Corporation Magazine - December 2001

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