Saturday, August 4, 2012

The Co-operative Group: Warts and All?

One company I have found particularly inspiring in the CSR landscape today is the UK's Co-operative Group, and not only because they are headquartered in my home town of Manchester. (They are currently in New Century House, a venue which remains embedded in my memory as New Century Hall because of a teen-idol Bay City Rollers concert I attended there at a very young age, amidst a massive crowd of swooning girls). Another reason to check out the Coop is that 2012 is the United Nations International Year of Cooperatives! Betcha didn't know that, right? There is even a Year of Cooperatives Blog. This initiative is "intended to raise public awareness of the invaluable contributions of cooperative enterprises to poverty reduction, employment generation and social integration. The Year will also highlight the strengths of the cooperative business model as an alternative means of doing business and furthering socioeconomic development." Who knew there was a Year devoted to a business model? I wonder if there will be an International Year of CSR Bloggers one day? Or even better, an International Year of Ice Cream! Anyhow, in the Year of the Co-op, it's fitting that we review the Co-op's report.

The Co-op recently released its latest in 15 years of Sustainability Reports, the 2011 Report, entitled "Inspiring Through Co-operation". Having admired the Co-op over the years for its thorough and award-winning sustainability practices, and robust, transparent and award-winning reporting , I thought it's about time to examine the latest report, and see how many cones the Co-op deserves.

The Co-op describes its report as "warts and all". The origin of this phrase is said to derive from Oliver Cromwell's instructions to the painter Sir Peter Lely, when commissioning a portrait - "Paint me as I am", he nobly demanded of the artist. The Co-op's reporting - warts and all - is therefore an invitation to scrutinize just how many warts the report actually contains. Oliver Cromwell did have quite a few warts -  check out that whopper under his lower lip. 

Oliver Cromwell by Sir Peter Ely, from
The Co-operative Report, as a GRI A+ 116 page report, offers plenty of wart-scope.

The interests of this corporation, once known mainly for its corner-shop-style good value supermarkets, have sprawled into a diversified set of activities, making it the UK’s fifth biggest food retailer, the leading convenience store operator and a major financial services provider, operating The Co-operative Bank, Britannia and The Co-operative Insurance, with other specialist businesses including funeral services and Britain’s largest farming operation. This is interesting diversification for a business which operates only in one country.

The Group operates 4,800 retail trading outlets, employs more than 106,000 people and has an annual turnover of more than £13bn. The fascinating thing about the Co-op, of course, is its business model and governance structure: it is owned by its members - over 7 million individuals and 80 or so Independent Co-operative Societies. It's a sort of business democracy, founded on values of equality and community solidarity which align well with the themes of socially responsible business. Transparency, as a way of doing business, is also something which this type of business model demands, so perhaps it is not surprising that the Co-operative should be getting pretty good at that. The report has a three-part structure: Social Responsibility, Ecological Sustainability and Delivering Value. But first, I started with the end.

79%  Achievement against Targets
Page 113 of the report contains a 2011 Target Overview of the 104 long-term targets set in the Cooperative Group 2012-2014 Ethical Plan. Of these 104 targets, 62 have been achieved and 20 are on track. That's a 79% success rate. The rest are either close to target, behind target, not achieved or dropped. 79% is certainly an achievement and generally, 70%+ scores in most education systems are pretty good, and in some cases, represent the highest ranking available. So the Co-op should get a cone for achieving 79% against a very ambitious program. Clearly much is being done.

The CEO Statement
Some CEO statements are boring, some are insightful. Some contain meaningful previews of report content, some are just full of cliches. Some use the same old language to say the same old things. Often reporters approach the CEO statement as one of those irritable but necessary pieces of content which the GRI mandates that every report worth its salt should contain. They string together a list of waffly air-bubbles in last year's language and hope it flies. Others take the CEO message as a more serious affair altogether, using it to introduce the real news in the report, highlight areas of both achievement and sensitivity and, perhaps, warts, and create a more convincing representation of the highest level commitment in the company to sustainability. In the Co-op report, CEO Peter Marks's message is one of the better kinds. It's relevant, upbeat, proud without being smug, and picks out just enough highlights to give you the impression that the CEO really does know what sustainability and reporting is all about. Peter Marks says: "This Report charts how we have managed to achieve ... growth with a sustainability performance that I would contest is second to none." Sounds like a guy who doesn't mince words. I give Mr Marks a cone for his opening message. It's inspiring and makes you want to read the report.
The Executive Summary
The Co-op report contains a two-page summary of the rest of the 114 pages. If you have 5 minutes and this is all you have time to read, you end up with a good summary of the report highlights - without any warts, though. It's mainly about inputs rather than impacts, but I don't want to nitpick. I'll give the Co-op a cone for this summary. It's a useful inclusion for busy people (who isn't?) and makes the key messages more accessible.

Performance Benchmarks
Throughout the report, the Co-op provides benchmarks which help to put their performance data into perspective. For example, "In 2011, the Group’s absence rates remained stable at 4% for both the Trading Group and Banking Group (2010: 4%). The 2011 average UK absence rate was 3% and the industry average absence rate in the finance, insurance and real estate sector was 4%." Another example is : "At The Co-operative Bank and Insurance, 91% and 95% of customer complaints respectively were resolved within eight weeks, compared to an average of 86% across the financial
services industry." These benchmarks are rather selective, reflecting, I expect, only those benchmarks which create a positive score for the Co-op, but nonetheless, providing benchmarks and context is a cone-worthy reporting practice.

The War on Waste
A particularly interesting section of the Co-op report relates to waste, where incredible progress has been made. Food retailers are  major players in the food value chain and have considerable influence over upstream and downstream waste in the system. Considering that in the UK alone, it is estimated that 15 million tonnes of food gets thrown away every year, this is something the Co-op, and other retailers, have to take seriously. The Co-op reports continuing reductions in waste generated and waste disposed as well as reductions in primary packaging and increase in recycling. This includes making consumers aware of best food storage methods as well as maintaining the drive against single-use carrier bags. They are making tangible progress.

I couldn't help laughing when I read that the Co-op's own brand toilet tissue is made from waste paper from the Co-op head office. Just think how many people are wiping their bums with what were once important memos from the CEO or financial documents with profit calculations and forecasts. I have to give a cone for the Co-op own-brand recycled-office-docs toilet tissue. I just hope they remember to bleach it in the recycling process, so that the numbers don't stick to our private parts :)

Where Are the Warts?
As mentioned above, the Co-operative Group Report includes intensive detail about everything the Co-op is doing within the vast scope of their diverse business units in the vast range of their business. But, try as hard as I could, I really couldn't find all that many warts. There were seven missed targets out of a total of 104, which, arguably, is not so disastrous, but you have to work hard to find these in this report. There is no detailed summary (only a topline overview) of all the targets and their status,   which would make it easier to assess the actual status of performance at a glance. Instead, the target summaries are located in the various sections throughout the report. This is a de-cone.

What's more,  detailed explanations for missing targets are not always provided, and future plans to revive performance do not include what actions the Co-op will take to drive a change. For example, one target relates to finalizing a new strategy for Public Policy Engagement: This target was not progressed in 2011. Why not?  Don't know. The Co-op says: "Our Political Strategy Working Group met in November 2010 to consider the purpose and define goals, transparency of process and ownership of a strategic political engagement policy. No further progress was made in 2011." Failure to achieve a Trading Group Return on Capital Employed (ROCE) of 12.6% (10.5% achieved) is explained by "difficult economic conditions". Err. What's new? Similarly, a target to Achieve FSC certification for The Co-operative Food’s greaseproof paper by 2011 was not achieved, "despite work with suppliers", and this is rolled into 2012. I think a de-cone is in order for lack of accountable explanations for missed and behind-plan targets.
Coming back to the warts, here's one: Pesticides. While the Co-op has been named as one of the two UK Retailers doing the most to address pesticide use and contamination of food, the fact is that the Co-op allowed the use of prohibited pesticides in 173 cases, more than in 2010. This is explained in the report and action is underway to continue to resolve issues but this sounds like a really important wart to me. I'll give a cone for this.

While there is clear and honest reporting about the status of performance against plan, I couldn't find any other significant warts. This, I suppose, is a good thing. The Co-op is doing everything right. Right ? Or is it a bad thing because they just forgot to add the warts? Overall, the performance of this democratic collective is impressive and their report is certainly a model of transparent performance reporting for many.  But it's generally about positive performance and performance in a positive light. No whopper-wart like Oliver Cromwell's. Perhaps the Co-op should play down the warts thing in the next report. If ya ain't go no warts, why brag about them?

Outcomes are Worth More than Warts
More important than warts, are outcomes. The Co-operative Report is an action summary. It's about what the Group has done, is doing and plans to do. What's wrong with that ? It's not enough. Sustainability is not only about doing things. It's about achieving outcomes. Sustainability is the outcome, not the action. All the Co-op targets are expressed in terms of inputs. Intuitively, we know that many of these inputs lead to desired outcomes, but the Co-op neither articulates desired outcomes nor describes actual outcomes. For example, community investment reporting shows achievement of targets with 10,000 community initiatives supported, profits deployed to address UK poverty and over GBP 7 million  raised for charities Mencap and ENABLE Scotland Partnership. Over 13,000 employees volunteered in the community to a value of over 27,000 days. In total, the Co-op invested GBP 18.9 million in the community. What difference did it make? To whom? What changes in society did this massive investment (benchmarked as almost 7 times higher than other large businesses) achieve or is on track to achieve? I am not suggesting that the Co-op adopt a sophisticated Community SROI measure - these are unsatisfactory in most cases - but some examples of the outcomes of programs which, for example, "help school children improve their numeracy, financial literacy and employability skills" would be worthwhile noting. At some point, the Co-op members should be demanding to know whether the millions invested in the community are effective and not just available. I won't take away a cone for this, as very few companies understand this concept. Investing in the community, for a business, may not be evaluated using the same tools as a financial investment (where ROCE is clearly monitored and reported), but the Co-op and its stakeholders should have some indication of whether this money is being used effectively and how.   

Materializing Materiality
This is another aspect of the Co-op's reporting which would be worthwhile to reconsider in the future. The Co-op report does not contain a materiality analysis or matrix. The Ethical Plan does not explain the process for defining the impressive set of targets that the Co-op is currently advancing. While the Assurance Statement confirms that "nothing came to our attention to suggest that the Report does not properly describe The Co-operative’s adherence to the Principles or its performance" (which include Materiality), material issues that reflect stakeholder concerns are not defined and the report does not differentiate between the more important issues and the less important issues. Instead, each chapter is headed by a section called "Materiality and Strategy" which gives some general background context, but does not define specific Co-op relevant material issues. If the GRI G4 kicks in in 2013 as it is proposed in the current Exposure Draft, the Co-op is going to have to make a comprehensive reassessment of the way it reports, if it wants to remain GRI compliant, by engaging in greater process for defining and reporting on material issues.

No Stories
I might also mention that the Co-op's reporting contains no stories, no case studies and no people. No stakeholder voices, as I call them. Except for a complimentary "expert commentary" from Jonathon Porritt, who, obviously, doesn't focus on warts, only on what the Co-op is doing well. I do believe reporting comes alive with stories and people. It would be nice to see the more personal side of the Co-operative organization and the way people are empowered and energized by this sustainable model  as well as some more balanced stakeholder input. This could lend a little more credibility to this informative (but not entertaining) report.  

Overall, then, The Co-operative gets 6 cones and 2 de-cones, leaving a balance of 4 net cones. That's pretty good in the emerging Cone Award League Table. Next time I go shopping in a Co-op, I will be sure to buy their own brand toilet-tissue. Maybe I will get the batch that was made from all the discarded drafts of the 2011 Sustainability Report :) 

elaine cohen, CSR consultant, winning (CRRA'12) Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices Contact me via   on Twitter or via my business website  (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

1 comment:

Jordi Morrós Ribera said...

Thanks for your meaningful and useful analysis of the report.

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