Thursday, April 28, 2016

7 challenging questions on CSR

I am looking forward to my first trip to Bratislava on May17th to take part in the annual CEE CSR Summit as the guest of the Pontis Foundation - the leading organization in Slovakia promoting CSR, philanthropy and capacity development. The annual CEE CSR Summit is the oldest and largest event on corporate responsibility in Central and Eastern Europe, and is attended by almost two hundred experts on CSR, sustainability, the environment, and human resources.

One of the great things about speaking in different countries is that you are able to spread the word in so many different languages. In preparation for the conference, I was happy to be interrogated by the conference team and by local press. This interview was published recently.....

To spare you the pains of Google Translate, here is the interview in full .. in English. Thank you to journalist Veronika Sokolová for challenging me with these questions:

You are leader of a consulting agency, which focuses on issue of corporate social responsibility. Can you describe your working day? 
If I had a job where I could describe my working day, I would probably look for another job! My days are never the same. One the one hand, I am very hands-on in strategy and reporting projects for clients, on the other hand I try to stay ahead of the curve on the developments in the sustainability world. I do a lot of talking with people to hear about their activities in the sustainability area, and I do a lot (a lot!) of writing. My work includes a host of different activities with clients around sustainability reporting – ranging from interviewing anyone from a CEO to a maintenance manager in a company, taking part in conference calls or client meetings, analyzing spreadsheets, developing concepts, creating narratives, proofing, helping align design to content and supporting PR and comms. A not insignificant amount of time is taken up with preparing offers for client projects or bids for reporting contracts – some of which are successful! 

At a more general level, I spend a lot of time scanning new sustainability reports that come across my radar and reviewing several in detail for publication of expert reviews, for articles for my blog or as part of a benchmarking exercise. Several times a year I find myself preparing for speaking engagements at conferences or running workshops while several times a day I scan CSR news from a range of sources. I always try to make time to check what's happening in my social media channels and try to stay involved as much as time permits. I guide the work of my small team and spend time reviewing the status of their work and planning next steps. Many times a month I speak to people who want to find work in the CSR field or with companies that haven't quite decided how they want to move forward in sustainability and seek general advice. So every day is varied, all days are very full and almost(!) all days are really fun.

Which standard should company follow, to work in accordance to CSR? What are the main criteria or measurements, on the basis of which you report? 
The leading global standard for sustainability reporting is the Global Reporting Initiative G4 Standard. While this presents some challenges, it is a good framework and structures the reporting process well. It is possible to report without using any standard in particular, but the use of a widely known standard such as G4 makes it far easier for users of the report to navigate the content and understand the scope of what's reported. One of the big improvements that the G4 standard introduced over its predecessor versions is the focus on what is called in sustainability jargon – materiality – meaning the most important sustainability impacts of the business. A report should not be what I call a "shopping list" of activities. It should focus on the most important impacts of the company and their relevance to stakeholders. I think we are seeing shorter and more focused reporting today, replacing the very very long (and boring) reports of the past.

The European Parliament imposed a directive which obliges thousands of companies to disclose information about their social responsibility. Is it right to make reporting on CSR a duty for company? Don't you think that this will cause companies, not interested in CSR, to start faking the data for reports? 
Yes, I believe it is absolutely right to legislate for companies to be transparent. I believe the impacts of business on our lives are so broad and so profound that we have a right to know how companies do business. I do not believe that the way to report needs to be prescribed in detail, although some minimum expectations should be set. In this way, companies who want to do more because they genuinely believe this can realize benefits for them can do so, while companies who wish to disclose the minimum can also do that. The experience of the Danish framework of "report or explain" for the 1,100 largest companies that was established several years ago has shown that most companies, once they get on the train, find that they enjoy the ride. There will always be companies who break the law.. for example, the big story of Volkswagen cheating on greenhouse gas emission measurements from their vehicles that was exposed last year. Generally, I do not believe that it is the nature of most companies to deliberately falsify data in order to report positive performance. But I might be naïve. The idea is for us all, as stakeholders of companies, to be vigilant and examine what we are hearing from companies. I always think that sooner or later, the bad guys get caught.

When an entrepreneur sells services and goods and customers voluntarily buy them, logically both of them are better off- it is a win-win situation. Many companies also offer various discounts for disadvantaged groups because it is an advertisement for them. Customers know about it. At the same time, companies use an arbitrator like your agency to prove or certify that the firm brings benefit for society. Why do they do that? Is it kind of PR for them? 
There is a branch of CSR that is called cause-related marketing and it is exactly this. Everyone wins. The business sells, the consumer feels good about having bought a product with added social value and the community or social cause benefits. At the same time, companies have something to put in their CR Report. There is nothing wrong with this – provided everyone actually does win. The social contribution should be something that's meaningful and the way of engaging consumers should be appropriate in relation to the social cause that's being promoted. When Kentucky Fried Chicken made a promotion to support Breast Cancer Awareness, for example, it didn’t go down too well and they were attacked for contributing to the problem by producing food which has carcinogenic byproducts rather than supporting a worthy cause. 

CR is a way of doing business, it shouldn’t be a separate charitable project, so using marketing and gaining some good PR from CR is fine.. as long as it's appropriate, balanced and transparent. 

You have a lot of experience, how does the process work? First, customers start to look for, let's say, ecologic goods and then companies adapt their corporate values or rather companies bring new trends and educate their customers? 
I am not sure I buy that argument that mass consumers are driving the change in demanding sustainable products from companies and I certainly don't think we have anywhere near a critical mass of consumers that are prepared to buy "sustainably" sourced products at a price premium. I think the dynamic comes more from company innovations which impact the entire competitive landscape, and governments, NGO's, academics, investors, sustainability experts and entrepreneurs who keep the conversation going about what's good for consumers and create new pressures to support collective efforts to meet sustainability standards. Did Toyota produce the first hybrid car because consumers asked for it, or because they could, and take a reputationally-positive leadership position at the same time, increasing awareness and expansion of consumer demand rather than being driven by it? Did General Electric form Ecomagination, now a multi-billion dollar business, because consumers asked for it or because it was the right business opportunity "with benefits"? 

I think it is the professional movement that creates innovation targeted to address a social or environmental challenge or opportunity that moves the needle, and this in turn creates the demand. Having said that, there are examples of where consumer influence has changed the behaviour of corporations or led to innovation such as the new sharing economy of AirBNB and Uber that show how consumers can change markets in different ways. 

How many agencies like yours are currently operating in this sector? Is demand for such reports more in Western society, where companies may afford to invest more to CSR? 
I couldn’t guess how many Sustainability Reporting consulting firms there are … there are different types of firms that specialize in different aspects of sustainability consulting, with or without reporting, and there are other branding, communications and PR firms that compete for a slice of the reporting business. Our business is not PR or comms-driven, we are expert in the way companies can progress the sustainability agenda and report their impacts and performance professionally and transparently. Sometimes reports that have too much of a PR spin without enough sustainability substance do not succeed in building trust, which is the objective of every report. The idea is not to gloss the language and embellish the stories but to present a balanced picture in an engaging way. 

Reporting has steadily increased over the past 20 years and is continuing to do so. The cost of producing a report can be modest or highly invested. I don't think it's always about what companies can afford, it's about what they want to achieve. 

U.S. universities tend to refuse money from tobacco companies which want to contribute to various research. Are there any ways for tobacco and alcohol companies to make a better reputation, according to CSR standards? 
This is a tricky one. CSR today has evolved to refer to the positive impact a company has on society through its core business and not just through initiatives to save energy or volunteer in the community. If you subscribe to this view, the core impact of a tobacco company on people's health and even on the cost of healthcare as result of tobacco-related diseases is not so positive, whichever way you look at it. Therefore, many would say that a company in this sector has no business talking about corporate responsibility as its core product causes undisputable damage. 

However, a different view of CSR relates to how you do business – irrespective of the product you sell (provided it's legal), the focus is on doing your business in an ethical and responsible way – responsible marketing, energy management, treating employees with respect and more. In this case, tobacco, alcohol and all companies in controversial industries can do business in a positive manner and often go to great lengths to prove that they are doing so. 

The problem with the first argument is where you draw the line – tobacco damages people's health but so do the products of many other industries – foods that can lead to obesity, addictive drugs, toxic chemicals used to make toys or clothes… not to mention energy intensive industries that contribute to climate change and are the indirect cause of many health problems. San Francisco became the first state in the U.S. to ban the sale of plastic bottles – but I don't recall seeing that it banned the sale of cigarettes….There are laws banning many harmful products – but I am not aware of a country that bans cigarette sales. (Update: It seems that Turkmenistan has actually banned sales of all tobacco products) I believe tobacco companies have long since realized that they can never have a positive reputation – in my view, their efforts will always be about having a less-bad reputation. By behaving as responsible citizens in every other way and achieving high scores in many sustainability rankings and indices that measure sustainable companies, and by reporting as transparently as they can on everything but the harm that smoking causes, they manage to mitigate some reputational damage.

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   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine:  

Thursday, April 14, 2016

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   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine:  

Friday, April 1, 2016

Common principles of materiality: April Fool!!!!

So, apologies for a few weeks of radio silence on the CSR Reporting Blog... sometimes that little thing called life just takes over .... but this April Fool's Day joke was too good to miss. It's the publication of the Statement of Common Principles of Materiality of the Corporate Reporting Dialogue in March 2016 which I just noticed yesterday via a Facebook post from eRevalue

The Corporate Reporting Dialogue is the consortium of the biggies or wannabe biggies in corporate disclosure:
  • CDP
  • Climate Disclosure Standards Board
  • Global Reporting Initiative
  • International Accounting Standards Board
  • International Integrated Reporting Council
  • International Organization for Standardization
  • Sustainability Accounting Standards Board 
It was established in June 2014 as "an initiative designed to respond to market calls for greater coherence, consistency and comparability between corporate reporting frameworks, standards and related requirements".

So, after almost two years of dialogue, where, we might be inclined to ask, is the greater coherence, consistency and comparability? Aside from more and more connections and linkages and principles and frameworks and standards and indicators and pseudo-dialogue... there is little evidence of coherence, consistency and comparability.. on the contrary, there is more evidence of three different c's: confusion, complexity and conflict. And just to make life fun, yet another document on materiality that looks like more of an April Fool's Day joke than an intelligent response to the needs of reporters and their stakeholder communities appears proudly on our screens. 

The document is billed as responding to "market demand" in "clarifying reporting concepts". It starts with a full page introduction to Materiality... which, when boiled down into a couple of sentences, essentially tells us what we already know: what's material is different depending on who you are talking to, and, what is only a bit material now maybe a lot material in the future. Therefore, no-one has a "one-size fits-all" (sic.) definition of materiality but there is a "foundational principle" which is: "material information is any information which is reasonably capable of making a difference to the conclusions reasonable stakeholders may draw when reviewing the related information."

Note here that the reference is to "reasonable" stakeholders. Later this is explained as excluding from the reporting focus a "single or atypical stakeholder or one who is behaving unreasonably or irrationally". I wonder what this means? I know all stakeholders weren't created equal, but surely there is some element of stakeholder inclusion that suggests that by definition, a stakeholder (group or individual)  is affected by and affects the business of a corporation and therefore has the right to hear and be heard? Who judges what behavior is unreasonable or irrational enough to merit exclusion from the playing ground? GRI's definition of stakeholders does not exclude unreasonable or irrational stakeholders:

So, apart from the fact that companies are encouraged to play nice with nice stakeholders, there's nothing new in this introduction and it kinda reinforces what most of us have already known for a long time - that materiality without due process is subjective, self-serving and manipulable and no-one really wants the inconvenience of proving otherwise.  This document makes no reference to the process by which materiality is determined... only what materiality is or should be. As fundamental as materiality is to all things sustainable and reporting, we might have expected that the most invested minds in reporting thought-leadership today might have been able to come up with something more substantive.

Moving quickly onto the document's presentation of the principles. Oops. No principles... just (another) Introduction, Concepts and Application.

Six concepts are presented. I can distill five of them down to the following from the mumbo-jumbo technobabble of this coherent, consistent and comparable (not) document:
  • Report materiality to your most important stakeholders (only) and assume they understand
  • Leave out stuff which is not material
  • Every company will have to decide how much detail to add in or leave out
  • It's OK to include stuff which is not material, as long as it doesn't hide what's material
  • Materiality is relative - depends on the context
  • Even if a new standard defines something as material, if the reporting company's stakeholders don't think its material, it's OK to ignore it 
I challenge you to read the six concepts in full original technobabble and see if you can distill them down to even fewer words, or even, identify anything ANYTHING that is remotely different, new, enlightening or helpful in all of this.

Then there's the application. There are five points of guidance which I have distilled down into English:
  • Materiality requires qualitative judgment, but if it's law, the law prevails
  • Managers decide what's material but should take primary stakeholder (investor) input into account  
  • Relevance of materiality changes over time, so if you've said it once, you can probably ease off in the future
  • If you are making estimates when reporting material impacts, take into account the views of your reasonable stakeholders
  • When disclosing material information, if you can't measure it, it doesn't count 
Then there are 4 pages of comparison of materiality definitions and approaches by Corporate Reporting Dialogue participants - a sort of copy-paste-plus of what's already out there.

So, I am wondering, apart from wanting us to have a laugh on April Fool's Day, what earthly purpose does this document fulfil and what are corporate reporters supposed to do with it? More importantly, if it takes two years of meetings, lunches and open dialogue to deliver this, frankly I think everyone should go back to their own corner and campaign for fragmentation, differentiation and splendid isolation. Unless the lunches are unbeatable.

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   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Need help writing your first / next Sustainability Report? Contact elaine:  
Related Posts with Thumbnails