Using Internal Benchmarking to drive change on CSR
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Exploration of how Legal & General used internal benchmarking (from an external tool) to drive positive change for CSR.
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Using Internal Benchmarking to drive change on CSR
- 1. valuecs r The Role of benchmarking tools in driving CSR management and performance A Case Study
- 2. Agenda 1. Introduction – Why Benchmarking 2. Legal & General 3. Benchmarking tool – CR Index 4. Benchmarking Results 5. Observations & Assumptions 6. Recommendations
- 3. Introduction – Why Benchmarking
- 4. Introduction - Why Benchmarking? Source: Achieving High Performance: The Value of Benchmarking, Accenture, 2011 Analysis of past performance Current-state assessment Identification of areas for improvement
- 5. Can benchmarking tools drive improvement in CSR management and performance? Introduction -Why Benchmarking?
- 6. Positive correlation between managing CR and Total Shareholder Return Introduction - Why Benchmarking? -40 -30 -20 -10 0 10 20 30 40 50 2002 2003 2004 2005 2006 2007 2008 2009 MeanTSR CRI Companies All-Share Index FTSE 350 For full report see: http://www.bitc.org.uk/resources/publications/the_value_of.html
- 7. How can multinational corporations ensure that global CSR policies are consistently applied in all countries of operations? Global challenge
- 9. Legal & General Leading provider of risk, savings and investment management products in the UK Over 10 million customers in the UK, Netherlands, France and the USA The biggest single Investor in the FTSE 350 All-Share with around 4% control on behalf of their client £442.7bn funds under management (including more than 2,800 UK pension schemes Employer for more than 10,000 employees One of Europe’s largest institutional asset managers
- 10. Legal & General - History 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 L&G established 1836 international expansion (South Africa, France, Australia, USA) 1930 Acquisitions (now L&G America and L&G Netherlands) 1980 Established Legal & General (Pensions Management) and Legal & General Group plc 1970 Acquisition (Legal & General France) 1934 Joint venture Legal & General Gulf and India First 2009 Joint venture CIL 2010
- 11. Legal & General - International Legal & General America IndiaFirst Life Insurance Company Ltd Commercial International Life Insurance Legal & General France Legal & General Netherlands Legal & General Group Legal & General Gulf
- 12. Legal & General – CR Strategy 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CR Strategy and first reports 2005 basis for CR strategy comes from
- 13. Legal & General – CR Strategy 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 L&G Group starts annual participation in the CR Index 2006 CR Strategy and first reports 2005
- 14. Benchmarking Tool – CR Index
- 15. Benchmarking Tool – CR Index
- 16. Benchmarking Tool – CR Index 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 International growth 2009 L&G Group starts annual participation in the CR Index 2006 CR Strategy and first reports 2005
- 17. 0 20 40 60 80 100 120 140 160 180 2007 2008 2009 86 59 170 Total International operating profit [£m] Benchmarking Tool – CR Index 90 10 L&G Group International operations Prospect of international growth caused a need to engage with and understand what the international business units are doing on the responsible business agenda.
- 18. Benchmarking Tool – CR Index 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 International growth 2009 L&G Group starts annual participation in the CR Index 2006 CR Strategy and first reports 2005 First internal benchmarking 2010
- 19. Benchmarking Tool – CR Index CR Index in L&G America CR Index in L&G Netherlands CR Index in L&G France 1… 33%39%
- 21. Benchmarking Results 0% 20% 40% 60% 80% 100% L&G France L&G America L&G Netherlands L&G Group 16% 33% 39% 94%
- 22. Benchmarking Tool – CR Index CR Index in L&G America CR Index in L&G Netherlands CR Index in L&G France 1… 33% 39%
- 23. Baseline Assessment (1st use of the benchmarking tool) Progress Review (2nd use of the benchmarking tool) 18 months • Methodology Benchmarking Results
- 24. Results 18 months later 0% 20% 40% 60% 80% 100% L&G France L&G America L&G Netherlands 16% 33% 39% 63% 60% 54% 2010 2012
- 25. Benchmarking Tool – CR Index CR Index in L&G America CR Index in L&G Netherlands CR Index in L&G France 1… 33% 39%60% 54% 63%
- 26. What can we interpret from the improvement in scores? Benchmarking Results
- 27. Benchmarking Results Corporate Strategy and Integration Board member responsibility for CR Implementation of new policies: Business Ethics Policy, Code of Conduct Introduction of CSR programme Enhanced stakeholder engagement e.g. work with NGOs and trades bodies to develop responsible investment policy
- 28. Benchmarking Results Community Management Identification of material community issues Establishing and formalizing relations with charity partners Development of targets and monitoring system Better management of volunteering programmes
- 29. Benchmarking Results Environment Management Identification of key environmental impacts Development of environmental policy Introduction of measurement and monitoring system for managing environmental impacts
- 30. Benchmarking Results Marketplace Management Supply chain: Introduction of sustainable procurement policy Set target for managing supply chain Products and services Social and environmental considerations included in product development Improved communication with customers
- 31. Benchmarking Results Workplace Management Regular employee engagement survey New employee wellness programmes Developed and implemented Diversity and Inclusion policy
- 33. Legal & General’s Own Observations Participation in benchmarking project: • New co-operation • Employee Engagement • Better Group-think • Group support BU’s • Better Reporting • More consistent behaviours (and better branding) Observations and Assumptions
- 34. Observations as Assessor (Quasi-Audit role) • Increased resources for CSR • Increase CSR awareness • Increased Employee Engagement • Increased Engagement of board members • Improved transparency • Better external stakeholders engagement • More clarity about business strategy Observations and Assumptions
- 35. What triggered the improvement actions? Observations and Assumptions
- 36. I. Based on the fact that weakens areas identified through the first benchmark have improved, it is possible to attribute some of these improvements to the use of benchmarking tool and competitive forces it created II. It is not possible to accurately confirm what was the actual trigger of each action of improvement and therefore separate impacts of the benchmarking tool from other factors that could have stronger influence on the participants Observations and Assumptions
- 37. III. Internal competition was only created by the CR Index as based on the information from L&G, subsidiaries did not participate in any other benchmarks assessing management and/or performance of CSR and were aware that the benchmark will be repeated in 18 months IV. It is also possible that certain improvement would naturally happen, without the use of benchmarking tool Observations and Assumptions
- 38. Legal and General – Future Plans • In 2012 joint ventures from Egypt, India and Gulf participated in the benchmark • 2014-2015 all subsidiaries and joint ventures will be benchmarked again Discussion
- 39. Recommendations
- 40. Further research is recommended to: • Verify if other benchmarking tools have similar effects on participants • Analyse market circumstances that could influence company management decisions • Compare improvement rates of companies using benchmarking tools and those that don’t • Assess the effect of cultural variables, particularly management approaches Recommendations
- 41. Further research is recommended to: • Determine if benchmarking tools makes change happen faster • Assess the influence of public recognition in external benchmarks on the participants • Identify the role of external influence from benchmarking assessors • Verify to what extent external benchmarking tool is effective when used internally Recommendations
- 42. • Following the use of benchmarking tool, positive changes in the CR management and performance have been observed in all participating companies • Whether all improvement actions are causally related to benchmarking, or only some, is not possible to verify without further research Recommendations
- 43. Your Thoughts ! ? Recommendations
- 44. “Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.” Albert Einstein Thank you
Editor's Notes
- helps leaders define the right strategy for their organization by enabling them to gauge where the organization leads, lags or operates at par with other organizations provides the baseline by which an organization can articulate key issues and a means by which to measure their ability to achieve specific outcomes helps to identify and address the areas that most urgently need improvement In today’s highly competitive and volatile global economy, a long - standing organizational directive for virtually all corporate functions has only intensified: reducing a function’s operating costs while improving the business value the function generates for the larger enterprise. Yet many executives struggle to answer that call because they lack a detailed picture of their function’s performance along key dimensions or, more importantly, how that performance measures up to their competitors and peers. Source: Achieving High Performance: The Value of Benchmarking, Accenture, 2011 http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture_Achieving_High_Performance_The_Value_of_Benchmarking.pdf
- We will try to answer this question based on an example of a multinational corporation.
- Companies which consistently manage & measure their corporate responsibility outperformed their FTSE 350 peers on total shareholder return in seven out of the last eight years. They also recovered more quickly in 2009 compared with their FTSE350 and FTSE All-Share peers. Question is partly answered. There are certainly correlations here. Highlight that there have been many studies that have identified correlation with performance on CR benchmarking tools and improved financial performance: DJSI FTSE4Good Diversity Employee Engagement L&G Study Difficult to track causation, but we have an interesting and slightly under-developed take on it. What about tracking business units for financial performance as they use internal benchmarking. Gives us a nice control group. Etc…
- Why we’ve chosen multinational corporation as an example? Globally operating companies are facing additional challenges while integrating CSR in their operations. Besides the obvious factors such as cultural differences, language and terminology barriers, regulatory environment, etc, there are also local issues and local stakeholders expectations to be met. MNCs has to simultaneously generate profits for shareholders and make a positive contribution to the multiple stakeholders in the countries where they conduct business
- http://www.legalandgeneralgroup.com/about-us/heritage/ 1836 L&G established offering insurance for legal professionals and only from 1929 started offering insurance for all professionals and management of pension funds (general) 1969 asset value of over £1 billion 2013 market cap of over £13 billion, responsible for investing £463 billion worldwide 1970 1980 aquired the US-based Government Employee Life Insurance Company, William Penn Life Insurance Co. of New York (now L&G America) and the Dutch branch of Unlike Assurance Group (now L&G Netherlands)
- L&G developed it is CR strategy in 2005 The basis for the CR strategy comes from some work by FTSE Group (2005), called “Rewarding Virtue (PDF, 3.6 MB)”. This work suggests that the role of a Board in a company is to look for constructive ways for the company to solve external market failures (social, economic and environmental) through its operation and strategy. http://csr.legalandgeneralgroup.com/csr/cr-strategy.html http://uksif.org/wp-content/uploads/2012/12/BITC-INSIGHT-FTSE-2005.-Rewarding-virtue-effective-board-action-on-corporate-responsibility.pdf
- This was time when company started working on the first CSR reports and also started participation in CSR benchmarks, including the CR Index
- Developed by Business in the Community in consultation with businesses in 2002, Benchmark and annual ranking of leading companies in managing corporate responsibility in a systematic and integrated way Online survey supported by detailed guidance notes Self-assessment process supported by evidence, signed of by the board and independently validated Business in the Community
- LGG has been instrumental in sponsoring the 2010 research by BITC and Ipsos Mori showing that companies using the CR Index to consistently manage and measure their corporate responsibility outperform their FTSE 350 peers on total shareholder return (TSR) in seven out of the last eight years. Further, the TSR of these companies recovered more quickly in 2009 compared with that of their FTSE350 and FTSE All-Share peers. Financial business case caused that CR agenda became even more important for L&G.
- CR Index Use internal benchmark to compare performance and management practice of all subsidiaries against: Each other The group Sector peers participating in the CR Index
- CR Index Use internal benchmark to compare performance and management practice of all subsidiaries against: Each other The group Sector peers participating in the CR Index
- We used the data from the first benchmarking exercise as our baseline. CR Index framework is comprehensive enough to collect information about CR management processes and related to it performance. By conducting the second benchmark we collected new data with information about implemented in the last 18 months practices and performance. Comparison of scores and analysis of changes in CR management practices and performance In this way we identified many great examples of improvement. Some areas which in the first benchmark were highlighted as gaps became areas of strength. We analised this information further to understand the impact on the company
- CR Index Use internal benchmark to compare performance and management practice of all subsidiaries against: Each other The group Sector peers participating in the CR Index
- Remind them about correlations.
- There are many changes in CR management and performance which happend in the participating in the benchmark organisations. There are actions not related to CR Index question set and therefore it is not likely that the benchmark played any role in the decisionmaking proces. On the other hand, there are many examples of actions that CR Index is asking about. Finding out what is expected from responsbile businesses through the question set as well as lerning that peers are doing it, might motivate companies to take action and implement such practice. Here are only few examples, which can be mapped against specific CR Index questions, questions where entities improved scores significantly. Legal & General France now have a CSR programme and a Non-Executive Director (M. Jean Amiel) overseeing progress for this part of the Group L&G America developed and published new Business Ethics Policy addressing business and accounting practices, political contributions and conflict of interest among others. L&G Netherlands uses Governance principles – code of conduct for all employees.
- As a result of the benchmark L&G France not only identified financial education as a material issue, found partner to work with but also developed a targets for 2013: Work with IMS Entreprendre pour la Cité to provide Financial Education programmes to young people via Legal & General France.ix L&G Netherlands works closely with CSR Netherlands, NGO that inspires, unites and strengthens businesses and industries to progressive steps in the area of corporate social responsibility (CSR). L&G France wanted to continue addressing community needs that employees are passionate about. This led to setting up a customer and employee charitable foundation with the help of the NGO “Fondation de France”. Based upon an employee and customer vote, it will be investing funds into issues of children and or the disabled. Similarly more strategic approach to volunteering as well as better monitoring of ongoing activities enabled better control and planning. Also new target has been introduced by the L&G Group: deliver 1,750 working days of volunteering into communities to develop employees. In 2013 the target not only was achieved, but also exceeded - 2,247 working days of volunteering in 2013 in UK, US, Dutch and French businesses. Volunteering programme brought back to the organisation useful information. It improved understanding of material areas of the market including how customers cope with ill health, get access to housing or generate an income
- For instance L&G Netherlands introduced new environmental policy that focus on: reduction of paper through using marketing materials and policy document in an electronic format, and where it is not possible using FSC certified paper energy usage – focus on raising awareness about using electricity and purchasing electricity on a green tariff reducing CO2 emissions from transport – company promotes use of public transport and allow employees work from home (for this purpose Teleconferencing facilities are available). In 2009 none of the participating companies measured their CO2 emissions or waste generated. Now everything is measured and appropriate programmes have been introduced to reduce the impact on environment.
- L&G America set target for improvement: improve the depth of relationships with NGO’s to improve our sustainable supply chain standards. L&G America introduced Sustainable Procurement Policy and is actively engaging key suppliers in conversation about sustainability management and performance (e.g. XPEDX, Cigna Insurance and Dell).ix As a result all purchases are made based on the environmental criteria, e.g. renewable/recycled office products, cleaning products, and energy efficient equipment. Products and services New approach for developing new products including social and environmental considerations. L&G Netherlands developed a target for it: deliver a Customer Interest First Programme in Holland by informing and working with customers concerning product development, communication and customer service.ix With a view of exceeding clients expectations company follows the Insurance Code and Governance Principles of the Association of Insurers.
- Wellness and engagement To help measure the working environment, L&G runs now an independent global employee survey. Following the assessment, L&G America introduced Annual Employee survey. The results helped identify that employees need a wellness program to help them achieve the right balance between work and home. Existing Employee Assistance Programmes has been replaced by MY LIFE MY HEALTH programme. It now includes annual flu shots, seasonal Dermascan screenings to pinpoint sun damage, vision testing including Glaucoma screening, pulmonary function testing, "Stress Management 101", "Quick and Easy" similarly attracted employees on the move searching for nutritional, 20 minute meals, quick and healthy snacks, and desk-ready exercises. Employees have access to a calendar of upcoming on-site seminars, links to health related newsletters and external sites for information on healthy eating and proper exercise. Similar programme has been introduced in Netherlands. MY LIFE, MY HEALTH in L&G Netherlands resulted in home-working being offered to all employees. This programme focused on absenteeism prevention and led to sickness absenteeism improving by 1.4% (1.7% 2013 compared to 3.1% in 2012).ix L&G Netherlands also encourages healthy behavior among employees through participation in Muscles for Muscles CityRun Hilversum. In 2013, L&G included three new territories for employee survey; Netherlands, Gulf and CIL in Egypt. Employee Learning and Development All entities offer great learning and development programmes. Following the assessment they are offered based on the personal development plans. For instance L&G America offers training courses available through The Learning Network with courses geared towards both professional and personal growth and tuition reimbursement program. Also available are behaviors event, the Future Leaders Programme, industry sponsored courses, external seminars and college/university tuition reimbursement. Diversity Based on the gap analysis received after the benchmarking assessment, L&G America developed and implemented Diversity and Inclusion policy.
- sharing knowledge and experience from embedding responsible business practice in their operations discovered areas where cooperation between entities, can be beneficial for all engaged employees in joined up thinking about CR supported development of action planning across the group reviewed current activities and prioritised next steps led to enhanced support from the group, e.g. organizing workshops for all entities increased the scope and accuracy of the L&G Group public reporting and initiated CR reporting in the business units improved the consistency in applying global policies
- Allocation initial resources for CSR – finding employees who could collect data on top their everyday duties Increase in knowledge about CSR of employees engaged in the project and inspired to take action – change perception of CSR, that it is only about corporate philanthropy Engagement of board members in the benchmarking project and interest in the CSR agenda – personal involvement resulted in stronger commitment for improvement (buy-in) Improvement in transparency – first disclosure through Group CSR reports and own websites Better external stakeholders engagement – established partnerships with NGOs, etc., More clarity about future directions – established objectives for various policies, first targets for the identified material issues
- At this stage we don’t know, and because of the correlation problem we may never know, but we have a few theories that we might be able to test. Also should identify some bias in myself – I could harldy be called a dispassionate observer.
- Changes in scores Guided by company statement, we believe that the benchmarking exercise was a driver for improvement but it is also possible that some other, not identified as part of this study market circumstances, caused changes within the organisation. It is possible that some market factors had greater impact on L&G business units and therefore triggered actions for improvement.
- Without further research it is not possible to determine what improvement actions would have taken place without the use of benchmarking tool. May simply be the Hawthorne Effect?
- Discuss what L&G plan to do and flag it as an interesting data set for further analysis. What else?