Take time to code

Today, when you talk about coding, the younger among us immediately click to coding: "the process of designing, writing, testing, debugging, troubleshooting and maintaining the source code of computer programs". But in the context of CSR and sustainability, we have a type of coding that is just a little different.

If you work for a large company, the chances are you have a Code of Conduct, a Code of Ethics, a Code of Commitment, a Code of Behavior or some sort of Code that frames the way the company behaves and expects its employees to align with. In addition, your company probably subscribes to one or more external codes or standards or frameworks that provide structure and even external validation of your company's activities in the field of corporate responsibility and sustainability. 

Did you ever stop to think just how many codes, standards and frameworks are actually out there? (Don't get me started, that's another conversation.) But yes, there are LOADS. And even more that. This was the case more than ten years ago and it's still the case at present. That's why, when Deborah Leipziger came along in 2003 and provided a comprehensive guide to the most relevant and useful codes, standards and frameworks in The Corporate Responsibility Code Book, it was an iconic piece of work that would be invaluable as companies started the process of navigating where to hang their hat as they develop a responsible business strategy, or understand what it is that makes one code or another more or less helpful or relevant. Recently the Corporate Responsibility Code Book celebrated the publication of its third edition.

Why does a competitor align with SA8000, for example, where another competitor prefers to use the ETI Base Code? What might we learn from the Extractives Industry Transparency Initiative, even if we are operating in a different sector? What are framework agreements and what role do they play in changing the way business gets done? Do the Guiding Principles on Business and Human Rights actually have any relevance for our company and why? Today, the third edition of The Corporate Responsibility Code Book is updated to include new initiatives such as the Guiding Principles on Business and Human Rights and the Gender Equality Principles and updates to the Global Reporting Initiative guidelines, the OECD Guidelines for MNEs, Social Accountability 8000 and many others. Similarly, some initiatives which that have been overtaken by new frameworks and are therefore no longer relevant have been removed.

While it's probably only geeks like me who actually like to read a book like The Corporate Responsibility Code Book, it's usefulness for anyone working in this space cannot be underestimated. And because, as a geek, I find this so fascinating, I couldn't resist talking to Deborah Leipziger, the code guru, to hear a little more from behind the code scenes.

Deborah Leipziger advises companies, governments and UN agencies on corporate responsibility and sustainability. She has advised leading multinational companies on strategic and supply chain issues, as well as a wide range of CR initiatives, including the UN's Global Compact, the Global Reporting Initiative, the UN Environment Programme, the Human Rights Impact Assessment, and Social Accountability International. Ms Leipziger is a Senior Fellow in Social Innovation at the Lewis Institute at Babson, and has taught at the Bard MBA in Sustainability, at the Simmons School of Management, and at Hult International Business School. She is a co-author several books and has served as a member of several boards including the Advisory Committee on Socially Responsible Investment for Aviva (UK), the Center for Ethics at Manhattanville College (USA) and the International Board of Ethos (Brazil). check out her website: here    

The Code Book is somewhat of an icon in sustainability and the general body of knowledge available. Who actually uses the Code Book and what's its value to them?

Deborah: The Code Book is used in many classrooms to teach about sustainability and CSR. I use it to teach my MBA students at Bard. I have heard from many professors that it makes for a very good syllabus and complete course materials. Many college libraries also purchase The Code Book. In addition, companies and law firms also purchase The Code Book for their libraries.

What makes for a good Code of Conduct? 

Deborah: The best standards and codes build upon the knowledge and value of normative and foundation standards, such as those developed by multilateral organizations like the International Labor Organization. A good code of conduct should be dynamic and flexible, while at the same time having staying power. Over the past 25 years, I have worked with many codes and standards. The best codes and guidelines are clear and concise and written with implementation in mind. Strong support from stakeholders is also essential.

In your introduction, you refer to a new emerging vocabulary as an essential part of fostering corporate responsibility. What are the key changes in vocabulary and why is it essential for us to adapt?

Deborah: A wonderful question! One of the most lasting contributions of codes and standards is their ability to create clear definitions in a complex field. Guidelines and codes have shaped a lexicon of terms around CSR and sustainability. For example, SA8000 lays out definitions of child labor and trafficking which are helpful for stakeholders and companies. These definitions provide companies with concrete parameters. The UN Guiding Principles on Business and Human Rights uses the terms “irremediable” to define human rights abuses for which there is no remedy, such as a lost childhood spent in hard labor. There are abuses for which there is a remedy, such as providing back pay for wages which were withheld. A few years ago, I was asked to advise Aviva plc on a project they were working on with Forum for the Future to create scenarios for what a sustainable economy might look like in 2050. My reaction was that we do not yet have the vocabulary to imagine and create a sustainable economy in the coming decades. I tackle this in a book I co-wrote with a team at Babson: Creating Social Value: A Guide for Leaders and Change Makers, which came out in 2013. One of the paradigm shifts that I see is companies working to promote social value creation, which includes solving social problems while also creating financial value. Companies need to think beyond being compliant with laws and standards, and towards creating social value through social innovation.

Your last chapter talks about pathways to convergence with ISEAL as an example which brings NGOs together under a broad framework of shared principles. However, what's the evidence that any sort of convergence in the private sector is actually happening? It seems that the world of codes, frameworks, and standards is only becoming more complex.

Deborah: The ISEAL Alliance has brought coherence to a wide range of social and environmental certification systems, creating common frameworks. This has helped to bring credibility and efficiency to certification and labeling standards from organics to fair trade. At the same time, there are many new systems emerging many of which are complex. I think complexity and convergence can coexist.

Did you consider the standard of standards, the emerging GISR? Do you expect GISR to influence the way Codes are used? 

Deborah: I have been following the progress of the Global Initiative for Sustainability Ratings (GISR) for many years. Allen White and I worked together when we were both in the Netherlands and he has been a speaker in my classes for many years, which has allowed me to follow the progress of the GISR first hand. I think the GISR will indeed have an impact on how codes and standards evolve. Perhaps it will be included in a future version of The Code Book.

What's your position on the frameworks used for inclusion in major stock exchange sustainability rankings for example DJSI?

Deborah: Many companies use DJSI as a framework to drive strategy and disclosure. I think the Dow Jones Sustainability Index is an excellent tool for companies. It helps drive performance and serves as a driver for companies to excel. I consider stock exchanges to be pivotal in driving change in the corporate sector. I hope to see more rankings like the DJSI emerge.

What was your personal biggest insight as you were preparing the third edition?

Deborah: I was struck by how much membership has grown for the guidelines and codes covered in Code Book III. When I first began tracking codes and standards, many of the initiatives had a dozen or so members. Now initiatives encompass broad networks of companies. I am also struck by how the field has evolved from aspirational initiatives to complex and brilliant initiatives like the UN Guiding Principles on Business and Human Rights. The Guiding Principles constitute a significant contribution to the field of corporate responsibility, defining the role of the state and of companies in addressing human rights and the need to provide access to remedy when human rights have been abused. The Guiding Principles provide a useful tool for companies working to complete due diligence and to assess where their operations, products, or services might have a potential adverse impact.

Will there be a Code Book IV? 

Deborah: It’s not in the works right now, but it is a possibility. There is a great deal of interest from emerging economies and Code Book III was launched in New Delhi.  

*******

Thanks to Deborah for these insights. Happy coding!


elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise Guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me via Twitter (@elainecohen)  or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine: info@b-yond.biz  

The G4 Anti-Corruption proposals - explained

Ready for more Thematics ? As promised in my last post on the Thematic Draft of the GHG Reporting Guidelines for the new G4 Framework, I will now discuss the Anti Corruption Thematic Draft. And don't worry, its only 24 pages. Surely there won't be too much to say about that! Think again.

(For clarity (and brevity!) (OK, forget brevity, that's not me), I will focus in this post only on the specific disclosures related to Anti-Corruption - not to changes made to the Ethics profile disclosures or the indicators relating to Public Policy and Political Contributions)

The proposed revisions include:

• Disclosure on Management Approach: New disclosures and guidance (Anti-Corruption Aspect, Society Category)
• Indicators
• Specific edits to Indicators SO2, SO3, and SO4 (Anti-corruption Aspect, Society Category)

You can provide your feedback until 12 November 2012, using the G4 Consultation Platform.

Currently, G3 has three disclosures on anti-corruption (excluding public policy and lobbying):

CORE SO2: Percentage and total number of business units analyzed for risks related to corruption.

CORE SO3: Percentage of employees trained in organization's anti-corruption policies and procedures.

CORE SO4: Actions taken in response to incidents of corruption.

 

The new proposed Thematic has the same three, with slightly different wording and a lot more guidance on what to report against each one. The new indicators are: 

CORE SO2: Percentage and total number of operations assessed for risks related to corruption

CORE SO3: Information and training on anti-corruption policy and procedures

CORE SO5: Confirmed incidents of corruption and actions taken

Anti-Corruption may hide below the Radar
Remember, that in the new G4 draft, companies will not be required to report on anti-corruption if they have not selected this as a material issue. See my post on the G4 Exposure Draft for an explanation of this. So, unlike today, where every A-level reporter must respond to the Anti-Corruption indicators, in future, any company who does not consider this to be material will happily leave it out. In the Mother of Materiality Matrices Analysis by Fronesys, Bribery and Corruption was found to be only number 33 out of a total of 50 top issues identified as material by 31 leading companies. Given that the average number of material issues listed  per company is 27, Anti-Corruption may just conveniently drop off the radar! (This, I believe, is the single biggest weakness of the G4 proposal - there must be a threshold of basic indicators which all companies should report - and this should include at least some reference to anti-corruption practices.) 

 

 

Don't Forget the Juicy Bits
The Thematic Draft includes detailed explanations and specific details which should be reported against each disclosure, ensuring that reporting companies are not tempted to leave out the juicy bits. In fact, the level of detail required is quite daunting - for example, the disclosure on Management Approach for Anti-Corruption contains no less than 11 separate data elements, ranging from whether the organization has a publicly stated commitment to zero tolerance of corruption (that's an easy one, right? If the company doesn't have one, it sure will by the time  it publishes its report!), to processes to prevent, detect, investigate, respond to and remediate forms of corruption to whether and how the effectiveness of the anti-corruption training for governance body members, employees, and business partners is evaluated (errrr... we evaluate our anti-corruption program as effective if no-one has got caught). There is also another interesting disclosure which I haven't seen many companies refer to: "Report policy and procedures in place to ensure that charitable donations and sponsorships (financial and in-kind) that are made to other organizations are not used as a disguised form of bribery. "

Anyway, back to the juicy bits, let's face it, anti-corruption reporting is not the most fun part of any Sustainability Report. Along with reporting on Governance, the Anti-Corruption disclosures are pretty boring and unimaginative. It's not all that easy to make anti-corruption sound sexy and exciting. In G4, it's going to be much more not sexy and not exciting.

The State of Disclosure on Anti-Corruption in G3
This is a random selection of current disclosures  on anti-corruption:

State Street Bank, 2011 Corporate Responsibility Report

State Street's reporting wouldn't measure up to G4. In fact the company reports partially against the current SO2 and SO4 indicators in this GRI Application Level B+ report.

State Street reports on the existence of an Ethics Office and a Standard of Conduct together with a specific email address for employees to send questions. State Street reports that the Ethics Office is currently updating ethics-related policies, especially Anti-Corruption and that risk requirements were implemented in the UK to respond to the new Bribery Act.

The report contains  a description of a Controls Testing Program in place to analyz risk, and the process for filing of a Suspicious Activity Report in the case of suspected incidents of unlawful activities. All employees must provide annual certification of their compliance with the Standard of Conduct, with 99.9% of employees did in 2011.

All in all, a light-weight disclosure on anti-corruption. State Street is going to have to work hard to be In Accordance with G4, if Anti-Corruption is selected as a material issue. It's could be a lot not more fun at State Street. Except that, Anti-Corruption is not listed as a key material issue for State Street, so it's possible they will not choose to go with the full disclosure anyway. That's a relief for their Sustainability Reporting team, I am sure.

 

AMD's Corporate Responsibility Report 2011
 

This GRI Application Level A report, the company's 17th CSR Report, is 116 pages long. AMD confirms to reporting fully against the current SO indicators on Anti-Corruption
 

SO2: "AMD’s Internal Audit Department performs comprehensive risk analyses (including regarding corruption) of all AMD sites/departments." It is not clear if this is every year, and the description of internal audit procedures does not really address this. In G4, a much fuller response to this indicator will be required, including the criteria used for risk assessment for corruption, whether risks related to external stakeholders, and the operations identified as having high risk and what the risks are.

SO3: AMD's response is: "All employees worldwide receive copies of and training on AMD’s Worldwide Standards of Business Conduct, which includes strict anti-corruption provisions. Training typically takes about one hour per employee and must be completed during the employee’s first 90 days of service." In G4, this wouldn't cut it. The disclosure would have to include all forms of training and information on anti-corruption, including the number of business partners informed and the percentage of business or purchasing volume that these partners account for as well as the Board and Management members which are identified as high risk and the type of training they received, for example, web-based, in person or general or specialized training. I think the GRI Working Group forgot to add that the company should report whether lunch was served during the training and what brand of coffee was provided.

SO4: AMD has got this covered in G3: "The response is AMD is not aware of any incidents during or related to 2011." G4 contains several more points in this indicator, but of course, if there were no incidents, there's nothing more to say. It's probably worth avoiding corruption in your business just to avoid the endless details you would have to include in the Sustainability Report to be In Accordance with G4 on Anti-Corruption.

AMD reports only four material issues, and none of them are Anti-Corruption. Looks like this Thematic Revision may not be too useful, in that case.
 

The Ford Motor Company's 2011/2012 Sustainability Report

 

This is Ford's 13th Annual Sustainability Report at Application Level A of the GRI Framework. The report is online with a downloadable summary, and Ford claims to respond to the SO Anti-Corruption indicators in full. The Disclosure on Management Approach is also noted as being reported in the Sustainability Governance section, though a search on this page reveals no mention of the word Anti-Corruption, as well as on the page on  Ethical Business Practices, which is noted as containing responses to SO2,3 and 4. This page also contains no specific reference to Anti-Corruption.

Reference is made to the Ford Code of Conduct Handbook, which is available in 14 languages and all employees must certify they conform every year. Ford assesses compliance with the Code of Conduct through internal audits. This level of disclosure barely meets the requirements for the current G3 framework, let alone G4. In fact, this report, which is self-declared at Application Level A, in the area of Anti-Corruption at least, would not make the grade. Ford will have more work to do on its 2014 report to be In Accordance with the new G4 guidelines on Anti-Corruption.

Ford's Materiality Analysis, which always has one of the longest list of material issues you can find in any Sustainability Report, also does not specifically include Anti-Corruption as a material issue. Sorry, Thematic Revision.

When is Anti-Corruption Material?

Actually, I found it hard to find a good example of where Anti-Corruption is stated as a top material issue.That's probably not so surprising. Identifying this as a top material issue could be interpreted as the company being plagued with corruption. Not the kind of impression most companies want to leave with their stakeholders. It's much easier to go with climate change and diversity.

Symantec's 2011 Sustainability Report includes Anti-Corruption so far down the bottom of the long list of material issues that it almost falls off the edge of the matrix and actually does fall off the edge of the report.

Wipro India's 2010 Sustainability Report, on the other hand, has two Materiality Matrices and one of them contains Anti-Corruption.

Wipro has a Code of Business Conduct and Ethics (COBCE) which is "is socialized at multiple points of an employee's lifecycle – it is first covered as part of the induction program of new hires and subsequently every employee has to take an online test annually to assert his familiarity with the tenets of the COBCE". Wipro states "We have a zero-tolerance policy for noncompliance with the COBCE,especially on non-negotiable factors – e.g., child labor, anti-corruption,etc." Wipro also discloses a case of financial embezzlement that was committed by a junior level employee during the period from November 2006 to December 2009. After investigation, it was decided that the amounts embezzled were not material, but changes such as enhancing segregation of duties and implementing stronger password controls to access financial systems were implemented. This particular case has an unfortunate consequence: "The employee directly involved died after the embezzlement was discovered."

Wipro also reports the number of complaints received through their Ombudsman process, and in 2010, 451 complaints were received of which 3% related to fraud or financial impropriety.

Would Wipro's reporting stand up to the rigor of G4? I could not locate a response to indicator SO2 - number of operations assessed for risk of corruption, and the disclosures on training would not pass the SO3 sub-clauses. SO4 is covered with the case of embezzlement, but the new cases arising in 2010 are not explained in detail. In other words, Wipro's reporting of this material issue is not significantly more extensive than companies who do not state Anti-Corruption to be material, and disclosures do not meet the requirements of the current G3, let alone G4.

One more point: the Difference between Ethics and Anti-Corruption

Generally speaking, if companies have a Code of Ethics, and this includes prohibition of corruption, and companies make sure that employees sign off on the Code of Ethics (after some training, perhaps), is this an adequate response to the question of corruption? Is ethics training enough to cover off anti-corruption? The answer is probably generally not.

 

The revised G4  Definition of Corruption is as follows:
"Corruption is ‘the abuse of entrusted power for private gain’ and can be instigated by individuals or organizations. In GRI’s Framework, corruption includes practices such as bribery, facilitation payments, fraud, extortion, collusion, and money laundering. It also includes an offer or receipt of any gift, loan, fee, reward, or other advantage to or from any person as an inducement to do  something that is dishonest, illegal, or a breach of trust in the conduct of the enterprise’s business. This  may include cash or in-kind benefits, such as free goods, gifts, and holidays, or special personal services provided for the purpose of an improper advantage or that may result in moral pressure to receive such an advantage."

  

There is a very good paper written on Corruption, published by FSG Social Impact Advisors - it's well worth reading.  Some highlights from this paper:

• Corruption is estimated to cost $2.6 trillion annually, an amount equal to more than 5 percent of global GDP. Each year, over $1 trillion is paid in bribes; not only do these payments undermine fair competition and affect the profitability of businesses operating globally, but they also divert crucial public resources away from their legitimate uses, denying citizens essential public services such as education, clean water, and health care.
• Emerging markets have higher corruption.
• Almost two-thirds of executives have experienced some form of corruption.
• Corporations today largely treat corruption as a legal and risk-management problem requiring a compliance-driven approach. Ethics and compliance officers typically do not view external anti-corruption efforts as part of their jobs, nor do CSR executives often seek to address this social problem.
• Global or industry-wide anti-corruption initiatives are frequently toothless, inadequate in size, or nonexistent. Compared with other social issues that affect business, corruption has not received a proportionate level of attention.

In other words, a Code of Ethics has a very broad brief and contains many clauses ranging from privacy of information to equal opportunity to protection of company assets and more. Ethics training may not cover anti-corruption comprehensively enough. Ethics training is often broadscale and minimum (completion of an online module), and may not specifically go deep enough for those who are at highest risk of corruption. An example of training in the area of money-laundering, one of the defined forms of corruption,  can be found in the 2011 Sustainability Report of the Landesbank Baden Wurttemburg:

" ...all of our employees who conduct transactions or whose jobs involve initiating and establishing business relationships (such as opening bank accounts and securities accounts, assigning safety deposit boxes) are trained through an educational program at their workplace. In addition, compliance officers are assigned to the various divisions and sales departments to personally support our staff in their money laundering prevention activities directly on site."

A Thematic Conclusion
The GRI G4 proposed disclosures on Anti-Corruption are comprehensive and rigorous in detail - perhaps overly so. The Disclosure on Management Approach clauses and the detailed responses to SO2, SO3 and SO4 are probably more than most of us want to know and it's questionable whether they add to our assessment of an organization's true capabilities in managing corruption risk. If perfect is the enemy of good, then these Anti-Corruption disclosures might just be in enemy territory. 

The best way for most companies to handle this will be to establish a separate multi-year Anti-Corruption Policy, covering all the Management Approach Disclosures and part of SO2 on the way risk assessments are conducted, downloadable from the corporate website  This leaves the actual annual Sustainability Report to refer to this policy and report only those specific instances, percentages and numbers occuring in the reporting period. Assuming, of course, that Anti-Corruption is material for the organization. Who determines materiality? Well, that's another story. I have talked a little about this in my previous G4 post, but I will surely come back to it as a core determinant of effective sustainability reporting.


In the meantime, go and treat yourself to you an ice-cream. (I am glad the GRI doesn't issue guidelines about ice-cream consumption. My report would be 937 pages long!)

Yes, it was as delicious as it looks!

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 www.twitter.com/elainecohen   on Twitter or via my business website www.b-yond.biz  (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

I have now joined the future

Guess what ! I have now officially become a member of the future.
I participated yesterday in what was for me a very futuristic experience - yes - you guessed .. a WEBINAR!! I like to think i am a computer-literate techie sort of person, but to date, I have resisted all these millions of webinars and things, mainly because of the hassle factor (getting hooked up), the earphones factor (flat ears) , the poor connection factor (crackles, buzzes and beeps) and the half-sentence factor ( hello, welcome to.................. today............will discuss .................important to note that ....................very significant as you can see on slide 3 that....................) . But the temptation of hearing code-guru Deborah Leipziger was too great to resist. So, albeit a little late (10 yr old daughter needed mom to buy her hundreds of $$$$$ of clothes for her birthday party at the weekend), I accepted the CSR International invitation to join the first in the impressive line-up of webinar events scheduled until the end of 2009 (this is great forward planning - unlike my local culture where planning more than 3 hours ahead causes chronic migraine)

Deborah Leipziger is the first lady of corporate, industry and cause-related codes of conduct and ethical standards. Her Code Book created order and understanding of the relevance and importance of framing conduct expectations and existing best practices. A sort of Code Bible. Amen.

How is this connected to Reporting ?
No CSR report today is complete without reference to a Code of Conduct and in many cases, declaration of a string of external codes that the corporation adopts. My guess is that on average, companies have about 5 or more different codes they try to observe in their businesses.
A quick look at some CSR reports proves me mainly right:

• ExxonMobil 2007: corporate code(s) of conduct , global responsible care charter, global compact, voluntary Principles on Security and human Rights, millenium development goals, ILO convention on Indigenous peoples
• Westpac Banking Corp 2008 : UNPRI, principles for doing business, Equator Principles, ASX principles on Good Corporate Governance, sustainable supply chain managment code of conduct, GRI, UNEP Finance Initiative, CEO Water Mandate
• Sony 2008: Sony Group code of conduct, EICC code of conduct (only 2 ? did i miss a few?)
• Diageo 2008: Global compact, Dublin Principles, Business charter for sustainable development, CEO Water Mandate, internal codes of ethics, GRI

The harmonization of codes was one point raised in the discussion - though a key part of the value of the Code is the process by which it was created. So maybe we need lots of processes but less codes ?

Anyway, back to the view from the top - few insights from the guru:

• ISO 26000 is not cutting-edge but it is broad and covers most of the range of CSR issues . It is right to go the guideline route and not the certification route, though certification at a national level in local language could be an opportunity. Some national certification bodies are already starting to consider its use - Portugal and Denmark for instance.
• Sectorialization is becoming more popular and useful as a tool for different industries such as the electronics industry, automotives, forestry, financial sector tools such as the Equator Principles.
• Training is essential to ensure application and assimilation of codes - this is often underestimated
• Impact analysis including gathering of base line data is often overlooked but is an important tool in understanding both the effectiveness of the code and the unintended consequences of implementation.

In response to my question, What about a code of conduct for CSR professionals or are we exempt? there was a knowing smile and an admission that the cobbler forgot to make himself a pair of shoes, or whatever the saying is. There was the question of how do you define a CSR professional . Right now, as long as its polite, I dont mind. :-)

Anyway, i have to end this blog post now as i have to go off and write another code....

Thanks to Deborah and to Wayne Wisser, CSRI founder and webinar maestro

elaine cohen is the joint CEO of BeyondBusiness, a leading reporting and social-environmental consulting firm based in Israel. Visit our website at: www.b-yond.biz !