csr today jan-mar 2013

publisher’s note

January-March 2013 | CSR Today | 1

Are we serious about Corporate social responsibility?

Even as government puts up new company bill that encompasses CSR as mandatory spent, the companies will be required to take CSR in a

more scientific manner. With an aim to improve corporate governance, the government has approved various amendments to Companies Act, including mandatory earmarking of funds by companies for Corporate Social Responsibil-ity (CSR) spending. As per the amendments approved by the Union Cabinet , the companies would also have to give preference to the local areas of their operation for such spending. The companies would have to either implement mandatory CSR spending or “cite reasons for non-implementation” or any short-fall, as per the proposed amendments. One needs to ap-preciate efforts of the government and Indian Institute of Corporate Affairs. Both have been very active in putting up a proper suggestive framework for this bill for the right audiences and for co-ordinating and ensuring that the bill has right contents. Their work will increase many fold in coming years as after passage of the bill, corporates will look towards Government for Guidance for implementing CSR activities correctly and rightly and we hope it will guide them to spend money as per stakeholders’ needs and aspirations. It is so true, as if your stakehold-ers are happy then your shareholders are auto-matically happy! We too would be very happy to assist Indian corporates in ensuring that they not only get to have Global Best Practices but will also be able to show Indian good practices to global CSR fraternity, given our global reach and infrastructural base.

Mandatory or not, one fact remains that we are living in a critical time, where global supply of natural resources and eco-system services are declining dramatically, while demand for these resources is escalating. Businesses

can use CSR and corporate sustainability to produce direct benefits for the bottom line. The companies can achieve operational ef-ficiencies by reducing energy and materials as input factors for production. Wastes can also be reduced and materials can be recycled. These sorts of actions from eco-efficiency can produce concurrent environmental and economic benefits for the company and thereby contribute to stronger financial performance and more positive profitability. Managing potential risks and liabilities more effectively through CSR tools and perspec-tives can also reduce costs. Using corporate responsibility and sustainability approaches within business decision-making can result not only in reduced costs but can also lead to recognizing new market opportunities.

There are various studies that have examined the relationship between CSR and corporate financial performance and most of the evidence suggests that the links are positive. According to a study by Tima Bansal, executive director of the Network for Business Sustainability at Western University’s Richard Ivey School of Business, CSR is significant to a company’s long-term survival. Bansal tracked the progress of 211 firms deemed socially and environmen-tally responsible in the early 1990s over the subsequent two decades. She compared their performance with that of an equal number of companies not identified as responsible. She found that businesses with sound CSR princi-ples – equitable wages, displays of philanthropy, marked efforts to reduce carbon emissions – were more likely to survive that 20-year period. “I don’t think there’s one big company that hasn’t thought about CSR,” says Bansal.

With new company bill coming into force, we need to ask Indian companies if they are ready to take a plunge? Seriously!

rajesh [email protected]

“One fact remains that we are living in a critical time, where global supply of natural resources and eco-system services are declining dramatically”

10 Unilever CEO, Paul Polman: Sustainable sourcing ‘doesn’t have to cost more’

16 The Four Dimensions of Sustainability

21 Case Study: Sustaining the Ecosystem for Water, Wildlife and Community

10 cover story january-march 2013 | vol. 0i | issue 01

SUSTAINABILITY ENVIRONMENT08 17 Thoughts on CSR in India

column by Tobby Webb, Founder and chairman, ethical corporation

CORPORATE STRATEGY 23 Measuring Shared Value

column by melissa scott, consultant, FsG

CSR COMMUNICATION24 How to Benefit from

Authentic CSR? Communicate Authentically!

ESG INVESTMENT29 The Next Step for ESG

Investing: Moving from What and Why to How

CASE STUDY32 BHP Billiton: Linking ESG

Metrics to Executive Pay

ETHICS SUPPLY CHAIN 34 Ethical Sourcing @ Walmart

Audit Process

SUSTAINABILITY INVESTMENT36 Generating a Return on

Investment

CORPORATE TRANSPARENCY 38 Transperancy Leads to Long-

term Sustainabillity

REGULARS 01 Publisher’s note03 CSR News40 Book Review

ADVERTISERS’ INDEx: ONGC Inside Front Cover | Petronet LNG Limited Back Cover

ContentsPRINTER AND PUBLISHER: Rajesh Tiwari

EDITORIALExecutive Editor: Sanjeev VermaCopy Editor: Tinu Joseph

INDIAN CENTRE FOR CSR ADVISORY BOARDPankaj Pachauri, Ted McFarland, Mag. Martin Neureiter, Chandir Gidwani, Lou Altman, Kingshuk Nag, Toby Webb, Anil Bajpai, Nikos Avlonas, Rajesh Tiwari, Satish Jha, Amit Chatterjee, Jitendra Bhargava, Namita Vikas, Dinesh N. Awasthi, Kapil Dev, Dr. Kamal Kant Dwivedi, Sanjiv Kaura

CSR TODAY ADVISROY BOARDRajweer Kapoor, Alok Goel, Seema Tiwari

PRODUCTION, CIRCULATION AND LOGISTICSHardik C CIRCULATION SALESCR Tiwari

HEAD OFFICECSR Today Indian Centre for CSR, 601, 6th Floor, Technocity, Plot No. X4/5 A, TTC Industrial Area Mahape, Navi Mumbai- 400701 (India). Tel: +91 22 2778 8481 / 82 Fax: +91 22 2496 6803 Email: [email protected] Website: www.iccsr.org

REGIONAL OFFICESNEW DELHIRegional Director: V ChopraVice President: Bhanu Pratap Singh

CHENNAIRegional Director: DK Karthikeyan

MUMBAIAssistant Vice President: Chaitali ChatterjeeSenior Manager: Dinesh UpadhyayManager: CR Tiwari

Printed, Published and Edited by Rajesh Tiwari on behalf of Indian Centre For Corporate Social Resposibility, Printed at Jayant Printery, 352/54, J.S.S. Road, Murlidhar Temple Compound, Near Thakurdwar Post Office, Mumbai 400 002 and Published from Indian Centre For Corporate Social Resposibility, 106/A, Nirman Kendra, Plot No.3, Dr. E. Morses Road, Mahalaxmi Estate, Mahalaxmi, Mumbai 400 011. Editor: Rajesh Tiwari

DisclaimerThe publisher, authors and contributors reserve their rights in regards to copyright of their work. No part of this work covered by the copyright may be reproduced or copied in any form or by any means without the written consent. The publisher, contributors, editors and related parties are not responsible in any way for the actions or results taken by any person, organisation or any party on basis of reading information, stories or contributions in this publica-tion, website or related product. Reasonable care is taken to ensure that CSR Today articles and other information on the web site are up-to-date and accurate as possible, as of the time of publication, but no responsibility can be taken by CSR Today for any errors or omissions contained herein.


New Companies Bill focus more on CSR

Microsoft Employees contribute $1 bn for Community

Indian Centre for CSR founder nominated as International Green Award judge

The Companies Bill 2011, approved by the Union cabinet, lays special focus on corporate social responsibility. The Act is likely to be passed dur-

ing the winter session of Parliament. It makes companies answerable towards corporate social responsibility and makes it mandatory for companies with a net profit of Rs 5 crore or more to spend 2 per cent of its profit after tax on CSR, Bhaskar Chatterjee, Director General and CEO, Indian Institute of Corporate Affairs, Ministry Corporate Affairs, said.

Delivering his address at the 13th Annual Greentech Global Conference on Environment and CSR, he said not spending or even failing to report the same in the report to Ministry of Corporate Affairs (MCA) attracts

fine of Rs.50 lakh and even imprisonment of 2 years. The companies are answerable to its shareholders and stakeholders and all those affected by its business. Cheque-book charity where you give a cheque to a temple or an organisation and forget and think that your CSR activity is over is not CSR. Anything done to your employees is not CSR, it is a human resource activity. Anything done by volunteers of your organisation cannot be counted as CSR.

“We will soon have a meeting with the Governor of Reserve Bank of India urging them to make these rules/guidelines also applicable to all the banks in the banking sector,” he said .

CSR News

R ajesh Tiwari, Founder & CEO has been nominated as judge of prestigious International

Green Award. English impressionist, stand-up comic, actor, singer and writer Alastair McGowan is hosting this year’s International Green Awards at the iconic Battersea Power Station. McGowan who is as an ambassador to WWF-UK, part of the global World Wide Fund for Nature , campaigns on a number of environmen-tal issues and thus, the ideal candidate to headline this ‘green’ themed gala evening and sustainability showcase.

The continuing success of the International Green Award, the leading platform for sustainability intelligence, leadership and innovation underlines how important sustainability and responsible business has become globally. These green ‘oscars’ play a crucial role in promoting the principles of environmental responsibility to a wider commercial audience. Awards have always been well placed to act as beacons of innovation and leadership as experts recognise organisations who are paving the way for a more sustain-able future. This award will honour a globally significant recipient individual who has made an extensive and laud-able contribution to sustainability.

Microsoft has announced that its U.S. employees have raised $1 billion in cash since 1983

for 31,000 nonprofits and community organizations around the world. The com-pany is commemorating its 30th Annual Employee Giving Campaign. Sponsorium, a cloud-based community investment tool provider, and SiMPACT Strategy Group, facilitator of LBG Canada, have created a new strategic alliance to address the needs of corporations as they become more

Bhaskar Chatterjee, Director General and CEO, Indian Institute of Corporate Affairs, Ministry Corporate Affairs

involved within their communities. The partnership aims to deliver greater efficiency and analysis into the field of community investment. ConAgra Foods Foundation has released new research about actions to reduce food insecurity. The report, An Overview of the Effectiveness of Various Approaches to Addressing Food Insecurity in the U.S., identifies factors that have the greatest impact on the problem, including the Food Stamp program, the National School Lunch Program, and low food prices.

4 | CSR Today | January-March 2013

CSR | News

Deloitte survey: CFOs playing bigger role in driving sustainability efforts

Walmart strengthens sustainable goals with new initiatives

Nearly one-half (49 percent) of CFOs see sustainability as key driver of financial performance. Two thirds of CFOs say they are involved in driving sustainability

strategies in their organizations, and more than half say their involvement has increased over the last year, according to a global survey launched by Deloitte Touche Tohmatsu Limited (DTTL), Sustainability: CFOs come to the table. The survey – represent-ing 250 CFOs in 14 countries across five continents – provides global insight into how increasingly more CFOs are engaging with sustainability to support their busi-ness goals, and operationalizing sustain-ability to gain a competitive advantage.

“Companies are sitting up and taking notice that sustainability is not just a brand or a corporate responsibility element—it is becoming a key driver of financial performance and the future of business,” says Dave Pearson, Deloitte Sustainability Leader, DTTL. “As such, CFOs have begun to take an active role in driving the execution of sustainability strategies and making key organizational changes within their organizations, such as in-troducing more sustainable technology and deploying environ-ment-friendly policies.” Sustainability seems to be becoming

increasingly operationalized, with the percentage of CFOs and COOs accountable to their company’s boards for sustainabil-ity issues nearly doubling from 20 percent to 36 percent in the past year. As such, CFOs have become focused on a number of sustainable operating practices.

As integrated reporting gains momentum, along with a growing number of green credits and incentive measures, CFOs

placed greater importance on sustainabil-ity aspects of reporting. The majority of CFOs reported a meaningful impact from sustainability concerns on both financial reporting – 74 percent – and tax matters – 54 percent.

To further reduce the footprint of company travel and energy use from data centers, CFOs plan to invest in three specific areas: video conferencing (56 percent), data center efficiency equip-ment (52 percent) and electric vehicles (35 percent).

This global survey reveals the growing importance of sustain-ability in operations and its concrete impact on business per-formance. Deepening CFO involvement in – and responsibility for – sustainability issues could well signal deeper shifts within a number of organizations.

Walmart further strengthened its commitment to a sustain-able global supply chain by

announcing a series of initiatives to make the company’s supply chain in the United States, China, and around the world more sustainable.

At an event in Beijing with government officials, nongovernmental organiza-tions (NGOs), academics, suppliers and company associates, Walmart said the company will use the Sustainability Index to design more sustainable products, make its global supply chain more socially and environmentally accountable and responsible, and incentivize merchants to

make sustainability a bigger part of their day-to-day jobs.

“Walmart and the Chinese Govern-ment, along with local NGOs and suppli-ers, have worked together and indepen-dently to find new solutions and models for sustainable growth,” said Gary Locke, U.S. Ambassador to China. “Today’s announcement will help accelerate the good work under way to make affordable and sustainable consumer goods more ac-

cessible here in China and around the world.”The additional initia-tives will build on the broader sustainability goals

Walmart set at the China Sustainability Summit in 2008.

By the end of 2017, Walmart will buy 70 percent of the goods it sells in U.S. stores and in U.S. Sam’s Clubs only from suppliers in the United States, China, and around the world who use the Index to evaluate and share the sustainability of their products. This change will involve suppliers who produce goods in catego-ries where the Index is available.

CSR | News


TCS releases 2011-12 Sustainability Report

RB joins The Sustainability Consortium

Tata Consultancy Services, the lead-ing IT services, business solutions and outsourcing firm released its

sixth Corporate Sustainability Report un-der the Global Reporting Initiative (GRI) 3.1 framework. The report highlights TCS’ perspective on sustainability including cor-porate governance, human resources, cor-porate social responsibility, health, safety and environment management including the activities of its Eco-Sustainability Busi-ness Unit during the financial year April 2011-March 2012.

The TCS Sustainability report has been externally assured and has received an A+ rating check for having reported on a maximum number of parameters. This rating check has been further validated by the GRI.

“Our annual Sustainability Report is a good indicator on the progress we have

made on the various goals we have set across the organization. We continue to drive various environmental and other community initiatives that aim to promote sustainable practices across the organization and our stakeholders,” said Ajoy Mukherjee, Executive Vice President, Head Global HR and Corporate Sustainability at TCS.

Some of the key highlights of the report are:• Achieved 28% decrease in consump-

tion of electricity in terms of kilowatts per person*

• Achieved 31% reduction in per person carbon footprint (Scope 2)*

• Achieved 13% reduction in per person fresh water consumption*

• Achieved 72 % decrease in paper consumption*

• Over 58,362 person hours was spent on volunteering effort in CSR activities

• About 57,90,604 beneficiaries were reached

• Over 11,141 persons were made liter-ate in FY 2012 out of a total of over 200,000 through TCS Computer based Functional Literacy program

• As many as 20,800 farmers were covered through mKRISHI in 8 states of India(*Reductions given are over the baseline

year 2007-08)The TCS Sustainability report 2011-

12 focuses on TCS’ global operations, and on significant economic, environ-mental and social factors that impact the way TCS does business, including its relationships with key stakeholders. The Sustainability Reporting Guidelines of GRI are used to illustrate TCS’ progress and performance in Corporate Sustain-ability activities.

Reckitt Benckiser (RB), a global consumer goods leader in health, hygiene and home, announced today its member-ship in The Sustainability Consortium (TSC), an indepen-

dent global organization that creates sustainability standards for consumer products.

“Successful collaboration between re-tailers, suppliers and producers will enable more transformational change on sustain-ability,” said Frederic Larmuseau, President, RB North America. “We look forward to sharing our knowledge with the ultimate goals of establishing a robust dialogue with our retailers and providing consumers with more sustainable choices.”

“We are excited to be joining other leading companies in the Sustainability Consortium. I look forward to sharing the valuable expertise gained through our lifecycle Carbon20 program and learning from other members’ experiences,” said Dave Challis, Sus-tainability Director at RB. “A lifecycle approach helps us to make balanced decisions about products’ sustainability. It underpins better design, improves supplier impacts and communication with

consumers and is essential to make the most progress with prod-ucts from start to finish.”

Earlier this year RB announced they had hit their Carbon20 target for reducing greenhouse gas emissions by 20% eight years early. This

performance is based on reducing emissions throughout a RB product’s lifecycle, from raw material sourcing to disposal, and is equiva-lent to taking 3 million cars off the road. RB was also recently named to the 2012 Carbon Disclosure Project’s Global 500 Carbon Performance Leadership Index. Other recent achievements highlighted in RB’s most recent Sustainability report include:

• 16% reduction in fresh water usage (per unit of production) versus 2000

• 5.4 million trees planted since 2006 as part of Trees For Change®, effectively making RB’s manufacturing sites carbon neutral

• 23% reduction in accident rate versus 2010 (92% reduction versus 2001)

• 775,000 children reached with Save The Children since 2003 (175,000 in 2011)


CSR | News

PepsiCo, one of the world’s largest food and beverage companies, has announced the India launch of

PepsiCorps, a one-month on-the-ground program that leverages an employee’s business skills to make a positive impact on the world. As part of the program, the PepsiCorps team of eight employees has initiated water conservation projects with Bhoruka Charitable Trust (BCT), Churu district - Rajasthan, which aim to develop a long-term, sustainable solution to tackle the water scarcity challenges faced by the Bhorugram community.

PepsiCorps provides employees with an international business experience that encapsulates PepsiCo’s ‘Performance with Purpose’ agenda, the belief is that long-term profitable growth can be achieved by

delivering a healthier, sustainable future for people and our planet. PepsiCorps gives employees a close-up view of real-world conditions and allows them to apply their business skills and expertise to project work that benefits communities in need around the world. Being part of a cross-cultural and cross-functional PepsiCo team, these employees come away from the program with enhanced leadership skills and on-the-ground insights into societal challenges across the world.

Explaining how PepsiCorps supports the development of future leaders within the company, Sergio Ezama, Senior Vice President, Talent Management and De-velopment at PepsiCo said, “PepsiCorps is all about going beyond your day job to make an impact in the world. Through this project, we hope to develop the leaders of tomorrow by strengthening skills like flex-ibility, adaptability and resilience among the participants. Not limited by geographic

boundaries, PepsiCorps encourages par-ticipants to take on a global mindset and be adaptable by working creatively in resource contained rural areas.”

Talking about the project in Bhorugram, Ezama added, “One of our environmental sustainability commitments as part of ‘Per-formance with Purpose’ is the human right to clean water. In sending a PepsiCorps team to India, we can pass on the skills needed in Bhorugram to conserve water and improve availability in the region.”

PepsiCorps is the company’s first overseas employee skills-based service program. Its pilot project in 2011 entailed working with local Water Boards in Denu, Ghana to improve community access to clean water, boost eco-tourism and teach hygiene in schools. The team of eight

employees proposed sustainable development to local community lead-ers and developed critical professional skills that they brought back to their roles within PepsiCo.

PepsiCo has been lauded for its water conservation initiatives across its business operations and agricultural supply chain around the world. PepsiCo has provided access to safe water for more than 1 million people globally with the PepsiCo Founda-tion and other partners and conserved nearly 16 billion liters of water in 2011 throughout its manufacturing facilities, from a 2006 baseline. In 2009, PepsiCo India achieved a significant milestone, by becoming the first business unit to achieve’Positive Water Balance’ in the beverage world. In 2011, PepsiCo India saved 14.7 billion liters water, which is 8.3 billion litersmore than what it used - taking its Water Positive status in the country to the next level, a fact verified by Deloitte Touché Tohmatsu India Pvt Ltd. This year, PepsiCo received the prestigious Stock-holm Industry Water Award in recognition of its innovative and outstanding water stewardship initiatives.

‘PepsiCorps’ Comes to India newS digeSt

indian Centre for CSR chooses Lavasa to setup its global Centre of excellence in CSR & environment Management

Indian Centre for CsR has signed an

memorandum of understanding to

setup Global Centre of excellence in

CsR & environment Management at

Lavasa. Lavasa is an upcoming interna-

tional city near Pune. The Centre is set

to launch Asia’s first ever Ms Program in

CsR & ethical Management along with

University of Applied science Vienna.

with Corporate social Responsibility be-

ing imbibed by most of the corporate in

its core philosophy, there is dearth

of trained CsR Professional in India

and worldwide.

The course will be taught by interna-

tionally renowned faculty. The first stu-

dent intake is slated for september 2013.

The centre will launch postgraduate

program in environment Management,

Doctoral and Post Doctoral program in

the later part of the year.

Among the first planned hill cities of

India, Lavasa is a lake city with interna-

tional blend. It is set to become a hub of

international education programs. The

Master Plan of Lavasa has been designed

in conjunction with HOK International

Limited, UsA. The plan is based on the

principles of New Urbanism which

conveniences its residents by placing all

essential components of daily life within

walking distance of each other. Besides

this, architectural considerations such

as land character, building frontage and

other design guidelines have also been

taken into consideration while making

the Master Plan.

CSR | News


American Employees prefer a Company with good CSR

Corporate Responsibility (CR) Magazine, in conjunction with Allegis Talent2, announced the

findings of the publication’s first corporate reputation survey which found that 75 percent of Americans would not take a job with a company that had a bad reputation, even if they were unemployed.

CR Magazine commissioned a poll of over 1,000 employed and unemployed Americans to gain insights into how both corporate reputation and transparency can impact job decisions.

“The results of the new survey under-score American’s desire to align them-selves with organizations that do more for society than increase their bottom-line. Even during a time when Americans face many fiscal challenges, most people would rather continue their search for employment than work for a company that has questionable business practices or ethics,” said Elliot Clark, CEO of Cor-porate Responsibility Magazine, which hosts the Forum.

“The survey results demonstrate that there is a cost of bad business behavior, which significantly affects the abil-

ity to attract and retain people. At the COMMIT!Forum, we bring together companies to explore best practices and examine the costs of bad behavior and the endless opportunities that result from ethical business practices.”

The findings also revealed that of the people surveyed that were currently em-ployed, 58 percent would take a job with a company that had a bad reputation if they were offered more money. However, on average, these individuals would only consider the job if offered double their current salary.

In contrast, the vast majority, 87 percent, would consider leaving their current jobs if offered another role with a company that had an excellent corporate reputation. In fact, most people would only require a 1-10 percent salary increase to consider such a move.

“A positive corporate reputation is extremely high on the list of must-haves for the American workforce, especially as they examine career paths or future em-ployment opportunities,” said Randolph Gulian, Executive Vice President/General Manager, AllegisTalent2.

The Bombay Stock Exchange Ltd (BSE) announced on Friday that it has joined the Sustainable Stock Exchanges (SSE) initiative. The SSE initiative was launched by UN

Secretary-General Ban Ki-moon and UNCTAD Secretary-General Supachai Panitchpakdi in 2009 at UN headquarters in New York City. The BSE has been the first amongst global peers to join five other leading exchanges that have publicly committed to promot-ing sustainable investment practices. Other exchanges include the Brazilian stock exchange BM & FBOVESPA, Egyptian Exchange (EGX), Istanbul Stock Exchange (ISE), Johannesburg Stock Ex-change ( JSE) and NASDAQ OMX made a commitment towards improving sustainability at the Sustainable Stock Exchanges 2012 global dialogue in Rio de Janeiro earlier this year. BSE is also credit-

ed with launching the first-ever live Carbon Index BSE-GREENEX in India, earlier in 2012. The index measures the performances of companies in terms of carbon emissions.

“BSE is committed to working with investors, companies and regulators in playing a transformative role towards enhancing sustain-ability in Indian capital markets. “We are hopeful that this initiative would help us in further introducing a culture of sustainable business practices amongst BSE’s listed companies,” BSE’s Interim CEO Ashishkumar Chauhan said in a statement in Mumbai. The initiative aims at exploring how exchanges can work together with stakehold-ers to enhance corporate transparency and performance on ESG (environmental, social and corporate governance) issues besides encouraging responsible long-term approaches to investment.

iCCSR appointed CSR partner for govt of UP for upcoming Maha Kumbh Mela

Indian Centre for CsR has been ap-

pointed CsR partner for the Govern-

ment of Uttar Pradesh for upcoming

Maha Kumbh Mela. with millions of

devotees visiting this Mela, there is

urgent need for various public utilities

for them. Indian Centre for CsR has taken

upon itself to organize various needs

through corporate sponsorships. Kumbh

Mela, greatest of all gatherings and big-

ger than even Olympics. This time, 2013

Kumbh Mela is being held from 14th

Jan to 10th Mar 2013 in Allahabad, Uttar

Pradesh. 4 times during a month more

than 10 million people will take dip in

holy river Ganga. Apart from a million

taking dip almost daily over a month

long festival. The total visitors expected

to be 70 million over 55 days. The pic-

tures will be beamed to over television

across 180 countries. Maintaining cleanli-

ness at the site and keeping the river

Ganga clean will be indeed a tough and

challenging task and Indian Centre for

CsR has taken up this uphill task.

BSE joins Sustaianbile Exchange initiative

Corporate Responsibility


17 Thoughts on CSR in IndiaThe estimated two millions NGOs in India, the vast majority seem more interested in project cash than campaigning

I’ve just spent nearly a week with the Indian Centre for CSR. It’s been a fascinating experience; my first trip back to India in 16 years. It’s a total

cliche, but much has changed, while much remains the same. Here’s a few random thoughts after a week or so here, two con-ferences and lots of meetings with head of sustainability, CSR, CEOs and senior gov-ernment officials:

1Government, although slow to under-stand what CSR can mean, has been

catching up since 2008, and is set to act. A 2% net profit CSR minimum spend is set to come into law by the end of 2012 (for com-panies making over $250,000 net PA) and that may raise considerable awareness. Or it may just drive further philanthropy. Much may depend on the guidance available. A director will need to be responsible though, and boards will need to demonstrate they have discussed how and where to spend their 2%. It will be a fascinating experiment. State company bosses are already assessed partly on CSR as of two years ago

2There’s a cynicism around the scale of corruption in India. It seems to be

sapping national confidence in solutions. The government appears to be slowly recognising this (see today’s papers in In-dia, for example)

3The media sector, despite growth, has not covered itself in glory in hold-

ing government and business to account. There’s a lack of awareness of the value and processes of investigative journalism

4NGOs seem fairly tame. A few fire-brand political actors and some focused

NGOs are doing good work in putting cor-ruption on the agenda. But from the esti-mated two millions NGOs in India, the vast majority seem more interested in project cash than campaigning

5There’s an inherent compliance men-tality, as elsewhere, when it comes to

international standards related to CSR/sus-tainability. ISO 26,000 and GRI are seen as standards, when of course, they are not

6A national conversation is needed about what Indian CSR, beyond philanthropy,

should look like. Clearly any change man-agement movement will have to be firmly based in Indian culture, history and values

7The political landscape is volatile. So when populism against big business

may win votes, rapid action around CSR is-sues is entirely possible

8The rise of media, social media and mobile/web connectivity means Indi-

ans from all walks of life now know more than ever before. This breeds the cynicism

Toby Webb is the founder and chairman of ethical

Corporation and Member Advisory board

indian Centre for CsR. toby is also co-

founder of stakeholder intelligence ltd. si

provides training, facilitation, advice and

contract research on sustainability to large

companies and other clients. He teaches

Corporate Responsibility at birkbeck College,

part of the University of london, on the Msc.

Corporate Governance & ethics and on the

strategic Human Resource Management

Msc. From 2006-8 Webb co-chaired the

UK Conservative party’s Working Group on

Corporate Responsibility, which outlined

CR policy, some of which the current UK

Government is now implementing.

The super rich Indian oligarchs appear very cut off from the modern CSR debate, as one might also find in Russia. But more and more attention is turning to corporate

power, the notion of the captive state and corruption in general

Corporate | Responsibility


mentioned in point one above, but may also mean spontaneous protests and grow-ing mistrust of business could blow up first. There were corruption riots in Delhi just a month ago over “CoalGate”

9The super rich Indian oligarchs appear very cut off from the modern CSR

debate, as one might also find in Russia. But more and more attention is turning to corporate power, the notion of the captive state and corruption in general. (see new political party focusing only on corruption for evidence)

10The Bombay Stock Exchange, incen-tivised by the UK and German de-

velopment agencies, is setting up a Carbon Index, and is potentially interested in a more holistic, sustainability-based approach

11 Bottom of the Pyramid business models, much celebrated in the

West, barely get a mention at business/aca-demic/government CSR conferences here.

That’s based on a sample of two, but still struck me as curious

12There’s increasingly concern that we have over-romanticised BOP and

small business growth and some suggest we’ve over estimated what SME’s can do to close the jobs gap

13The jobs gap is the issue of the future. Mumbai, for example, likely has mil-

lions of (relatively) economically inactive people. What they will all do for a living is going to be come India’s most difficult CSR issue in the near future

14The culture of bureaucracy here re-mains staggering. Just checking into

a hotel seems to take thirty minutes of form filling. Forms that you know no-one will ever look at again

15Environmental awareness is close to zero. Over a week, having met prob-

ably 50 executives, NGOs, academics and

others, only the Bombay Stock exchange, who are being paid to, mentioned environ-mental issues. The water crisis, for example, is surprisingly under-discussed

16 Slower growth (under 5% now for 2012) may accelerate the agenda. Or

it may hold it back, depending on the type of pressures individual companies feel as a result. My guess is the latter, but it’s hard to say with any certainty

17 Whilst corruption is top of the na-tional and political agenda, big com-

panies are reluctant to sign Transparency International’s integrity pledges. Apparently they don’t feel they can deliver

I should point out that all this is gleaned from a week or so in Mumbai and Delhi. Next time I need to seek out the innova-tions in rural India that I’ve seen before and heard much more about. What’s curious is how little discussed they seem to be in the CSR community here.

Opportunity to showcase your CSr activities by participating in Maha Kumbh Mela 2013

A Not for Profit organization601 | 6th Floor | Technocity | Plot No. X4/5 A TTC Industrial Area | Mahape | Navi Mumbai- 400701 (India) Email: [email protected] | Website: www.iccsr.org

For more details, contact: Delhi: V Chopra: +91 9560 833 833, Pratap bhanu Singh: +91-9910668288

MuMbAi: C R Tiwari: +91 9224593512, Dinesh upadhyay: +91 9930 719 544

Kumbha Mela - one of the biggest congregation of human-beings on earth is participated by more than 6 crore people and will last for 55 days ( from 14th Jan to 10th March). Maintaining cleanliness at the site and keeping the river Ganga clean will be indeed a tough and challenging task. Indian Centre CSR has taken up this challenge. For starter, we have initiated construction of ‘Chemical Toilets’ for the visitors. These are vital to keep river ‘Ganga’ and environment clean during this event. Indian Centre CSR intends to partner with the leading corporates who are brand conscious in this mega project. It would like to collaborate with them in providing these CSR services. Your investment will be duly compensated by allowing you create an appropriate Brand Visibility in line with govt guidelines. You may display your message such “ Your Company- Helping to keep Ganga clean all the times.’ the estimated.

Indian Centre for CSR is a “ Not for Profit Organization.” Indian Centre CSR invites proposal from leading corporates for partnership in construct the sanitation facilities. The facilities like modern, non – traditional toilets can be used for branding purposes. The outside, inside and the roof-top of such toilets would be an effective location for promoting the company and its brands.

Come and seize this unique opportunity to showcase your company and build brand equity by partnering with the official partner of UP Govt.. Please see the copy of UP govt. letter declaring Indian Centre CSR as their official partner for CSR activities. Indian Centre CSR request you to join hands by sponsoring the construction of modern toilet at the venue and using the same for brand visibility.

Indian Centre for CSr along with Government of Uttar pradesh looks forward to your support for “Championing the cause of!Social Returns”.


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You have very ambitious targets on the sourcing of agricultural raw materials: you say that by 2020 your

aim is to source 100% sustainably. However, in the past ten years, you have only managed to reach a 10% share of sustainable sourcing. How will you reach 100%, in particular while your parallel aim is to double your business? Do you honestly believe this is feasible?

It is a very complex thing, for sure. We buy 7.5 million tonnes – about 350 different agricultural materials, that’s a broad

range of raw materials. In order to move that to sustainable sourcing, you need to work with a broad coalition. You need to bring in the knowledge of sustainable agriculture and sourcing, train and edu-cate, set up supply chains and in many cases verify the supply chains

to make sure they are sustainable. So it isn’t that easy, and that is why we tackle it at different levels – as there is no single solution.

Firstly, we help with the ‘big materials’ that we have, such as tea and palm oil. We work with the broader industry coalition to get sustainable sourcing. On palm oil, we have created the Roundtable on Sustainable Palm Oil – manufacturers, retailers and consumer goods companies like ours are all included in this and we try to move the market forward together. So, on the big projects we work with the big players.

On the smaller projects – paprika, tomatoes, purple carrot – it’s a little more difficult. A lot of our projects there are with small farm-ers. One of the things you see in this report is our commitment to integrate 500,000 more smallholder farmers into our supply chain.

“Decoupling business growth from environmental impact is possible and even cheaper than continuing business as usual,” Paul Polman, Chief Executive Officer, Unilever, an Anglo-Dutch multinational corporation that owns many of the world’s biggest brands in foods, beverages, cleaning agents and personal care products. He talks about Unilever’s ‘Sustainable Living Plan’ in an interview with EurActiv’s Outi Alapekkala

Unilever CeO | PaUl POlman

SUStainable sourcing ‘dOeSn’t have tO cost more’

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Currently, one billion people suffer from malnutrition. Unfor-tunately, with the economic crisis, that number is going up. Many people have tried to solve the problem of malnutrition with differ-ent things but linking more smallholder farmers into our supply chain must be part of the solution.

Therefore, farmers in emerging markets can be self-sufficient with food but also produce a little bit more to form a livelihood and create economies. With our sustainable sourcing commitment, we will reach 500,000 of such small-hold communities.

How will you increase the number of small-scale farmers?For example, in Azerbaijan we are now working with Oxfam on vegetables. We guarantee the supply for our Knorr prod-

uct so that there is a market which will bring these people together in a community.

Don’t forget that we have a global tea business where we source a lot of our tea already from smallholder farmers. We also get gherkins from India and paprika from South Africa in this way and are work-ing with the Tanzanian government on getting a whole corridor of Tanzanian smallholder farmers on board.

The main message coming out of this is that you cannot do this alone. It is good for the economy, livelihoods and for ensuring sup-

ply, and solving broader problems such as malnutrition – but you cannot do it alone.

So you think 100% sustainable agricultural sourcing is feasible in the long-term for a multinational like

yours?I think that there are enough examples in the public domain that make me feel confident that this can be done.

What do your sustainable initiatives mean for the value of your business? I ask this because I have this

perception that if something is done sustainably it costs more – because yields may be lower from the same size of land, for example. I imagine that if you ask a farmer to produce in a sustainable manner, you might need to pay them more to do so, to maintain their income level.

In many cases, it is indeed only a perception that sustainable farming is more expensive. Done well, it actually uses less fer-

tiliser and it doesn’t involve deforestation, which is responsible for 20% of global CO2 emissions. In addition, it often actually gives you a higher yield as well.

Let me give you an example on palm oil: if you get it from de-forested land – obtained through illegal logging – you may get two and a half tonnes per hectare. With sustainable farming, this can go up to ten tonnes per hectare. So it is not necessarily a trade-off that because something is more sustainable, it is more expensive.

Often, because people are better trained, it requires less use of water and other materials for soil.

Ultimately, the prices will be decided by market forces. But you can certainly create livelihoods and have a responsible supply. There will undoubtedly be some challenges along the way where it might be more difficult and you need to make an investment.

When we start small-hold farmer projects, it does cost a lot of money in the beginning. A company like ours can afford that, but you have to make some investments to train people and put the infrastructure in place – all investments you can hopefully share with others.

But on an ongoing basis, small-hold farmers can give us as ef-ficient sourcing as industrial farming does. Frankly, industrial sup-ply alone isn’t enough to supply what the world needs - you need to do both.

How do you plan to communicate your sustainability pledge to consumers?On agriculture, we are one of the founders of the Sustain-able Agriculture Initiative, which we have broadened to the

entire industry.It is very important that we enrol consumers into a sustainable

model. It is not only agriculture; it is all aspects of resource use. There are many different ways of doing this. I think that the most important way is what we are doing: help the consumer by building sustainability into our innovation programme.

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For example, we have a Comfort one-rinse fabric softener where-by the consumer only needs to rinse clothes once. 125 billion laun-dry washes are done each year using our detergents. If you only rinse once – compared to rinsing twice or three times – 500 million litres of water can be saved right there. This is why we say that sustainabil-ity drives innovation. Consumers get a better-performing detergent at lower temperatures. So you save energy as well.

The second thing you need to work on is ensuring consumers have transparent communication. This can be on packages and in advertising. But now, consumers are inundated by many different claims such as ‘bio’, ‘green’ or ‘organic’, and they aren’t always sure of what they mean, so we have to provide that transparency.

Then we also have to provide consumers with choice. Take Lip-ton - we moved it to sustainable tea. We know we cannot charge more for it, as consumers aren’t ready for that. We know that we can-not change its taste, as consumers don’t want that. But if you have sustainable tea as well as having the right price and taste, then con-sumers will buy it.

When we moved with the Rainforest Alliance to sustainable tea, we saw our volumes go up by 8-10% in many places where we did that. So consumers are, in some cases, asking for this already and are ready for it and in some very few cases they are willing to pay for it.

But in general they are not yet ready to pay for this, however, es-pecially with the economic crisis. So it is up to us to provide added reasons for buying, such as by saving energy and packaging and pro-viding a better performance.

Perhaps you don’t charge more for sustainable goods at the moment, but what about in the future?

As global talks on pricing natural resources – such as water and forestry – gain momentum, the trend might drive all prices up in the future, putting sustainable producers at a huge competitive advantage – such avoiding potential extra taxation on unsustainable use of natural resources.

I don’t know what the future will be in terms of taxation and pricing as a lot of factors come into that equation, including

supply and demand, government policies and population growth. So a lot of things ultimately affect the price of a product. The one thing I know for sure is that if we don’t create more sustainable sourcing, then we will not have the source in the first place. By focusing on this, we guarantee that we can continue to feed the world, in my opinion.

I also want to emphasise that sustainable sourcing does not have to cost more.

Sustainable sourcing can be done in a way that is fair to society and has a competitive price. This is what we are trying to say. People think that for something to be sustainable it must cost more money. The reason for this is that the initial sustainable products that came on the market were advertising things and charging more for it.

We are saying a totally different thing - we are advocating inte-grating sustainability into innovation programmes and products as a way of doing business.

We are now moving all Ola’s ice cream cabinets to cabinets us-ing natural refrigerants’ into ones without HFCs, a pollutant, and we have other companies such as Coca-Cola joining – increasing the demand for these cabinets and thus lowering the production cost of these cabinets. In addition, these cabinets use less energy and emit less C02. Consumers are not willing to pay more for that, but if we label cabinets then that will help us.

It doesn’t necessarily cost more money – we have to get out that mindset. We just need to get sustainability into our design and busi-ness model from the beginning.

For example, when you introduce drip irrigation system into small-scale farming you see an increase of 30% in yield and re-ductions in water use of 30-40% – so yields improve and the cost structure for farmers goes down, so it is better for the farmer. For us, it enables us to see what water we can save in our upstream supply chains.

Another example is a new design for packaging deodorants – this helps us to save 15-30% of packaging material and naturally reduces the costs.

In life, many people accept trade-offs. They think that in order to improve their product they need to pay for it. This is not true at all. Going from vinyl discs to digital didn’t increase the cost of mu-sic. If you don’t accept those trade-offs, - that something needs to be more expensive to be better or environmentally friendly - you will find solutions.

It is now time for the world to get out of these pre-conceived no-tions on many of these cases and solve these trade-offs. If you get into an ‘and’ mentality – versus an ‘or’ mentality - where you have better products and lower costs, where you have environmentally-friendly products and offer better performing products to consum-ers: that is the model that will win and is the model the world needs.

It is up to us to work together to overcome the apparent trade-offs of the past. This is what we are really saying with this plan.

Could you expand more on the nutrition part of your Sustainable Living Plan? And perhaps a word

on responsible food marketing.There are three major commitments that we make as a com-pany: the first is to de-couple growth from environmental

impact. The second is to give one billion more people access to health and nutrition. Thirdly, all of our agricultural products will be sourced sustainably by 2020.

A good example of giving one billion more people access to health and nutrition is our hand-washing - 1.3 million children die from infectious diseases like diarrhoea each year. By giving them the chance to use a bar of soap, we can reduce that by 25%. School attendance will then go up 40% because of reduced sick-ness and absenteeism.

So, we are rolling out our hand-washing campaigns from 130 million people to one billion – because we operate at global scale. No government can do that. These are big numbers and we need to do this together.

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It’s the same with nutrition, we make clear commitments. We have been improving our products, using less salt, sugar and trans-fatty acids. But what we are now saying is that we are accelerating the number of products with a positive health profile. In our report, one of our fifty measures taken is to put clear standards behind this.

So, part of the sustainable model is to take in a broader view and not only have sustainable sourcing but to have a socially-responsible model. We are also saying that we will bring 500,000 small-scale farmers into our supply chain, creating economic empowerment opportunities. So we are making social, health and nutrition com-mitments for growth as well as sustainable commitments.

How would you define your role as an industry player in people’s dietary habits? Do you try to affect

them? Do you claim a role in a healthy diet?Absolutely – one of the key things in the world is that you have, on the one hand, malnutrition and one billion people

who don’t have sufficient access to food and on the other hand, at the same time there is an obesity problem. And we are working on both of them.

You first have to deal with malnutrition. We have programmes with the World Food Programme where we provide donations and have reinforcements of products like margarine and Annapurna or iodine in our Knorr bouillon.

Obesity is an area where industry needs to take action together in order to tackle the problem. It has to do with nutritional labelling, the formulation of products, advertising to children, encouraging physical activities.

However, it is overly-simplified to say that food companies can solve this alone. If it takes two-three years to agree on actions at EU level then this does not help. If we have to register products in each EU member states where they are not implementing the European one, then it’s very difficult to get improvements as fast.

We want to be a part of the solution. When we get more people to eat our margarine, we have a reduced intake of three kilos a year

of trans-fatty acids, which we know affect cholesterol and cardio-vascular diseases.

Finland has deliberately decided to consume healthier margarine. It used to have a very high heart attack rate but has now improved, together with exercise and other things. So, the food industry is very much there to find healthy solutions; but together with others.

A lot of our advertising on food goes into changing consumers’ be-haviour for healthier diets. Because if life expectancy was to go down, it wouldn’t be good for anyone. And it has actually increased thanks to the availability of food and the quality of nutrition, not because of other things. So the food industry has played a major role in providing healthier, longer lives.

The issue is now that lifestyles have changed, the food industry takes a responsibility, co- responsibility, to help change consumer behaviour not to get a pandemic of cardiovascular diseases. So that is why I feel very good if more people eat margarine instead of butter – your heart can become three years younger in doing so. So, con-sumer behaviour is an integral part of our plan and more sustainable business model.

Do you feel that you are the best player in the ‘sustainability market’?This is not a ‘race to the top’. Fortunately, there are a lot of re-sponsible people out there. We would like to show that a

company of our size and global footprint not only has the liberty to operate but also the responsibility to do so in a sustainable way. It can be done and it can be done successfully.

To my knowledge, I am not aware of such a holistic plan of any other company of our size. There are many companies that do in-dividual pieces of the puzzle very well. But we really want to lift this up and say that this is a new business model. Our initiative is not just a sustainable project – as tea may be – but is a sustainable busi-ness model for how businesses should operate now and for years to come. And this is why it is social, economic and environmental. www.euractiv.com

one of the key things in the world is that

you have, on the one hand, malnutrition and one billion people who don’t have sufficient access to food and on the other hand, at the same time there is an obesity problem. And we are working on both of them”

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Reducing impact on climate change is a challenge many companies are trying to tackle. Businesses across the globe need to take a leadership role in reducing their carbon footprint. Those that develop a comprehensive

strategy will save money, increase productivity and gain a com-petitive edge over those that fail to make any changes. The good news is many organizations are up for the challenge, though many are unsure of where to begin among the myriad of activi-ties on the table.

This paper proposes a Sustainability Framework to facilitate development of a sustainability strategy. The Framework can be used to evaluate the overall scope of current sustainability initia-tives, and identify and recommend new actions. It can also be used to provide a structure for critical analysis of an organization’s existing sustainability strategy. The approach was developed based

on programs at BT and from partners and suppliers that are com-mitted to making a difference.

A Framework for Material and consistentCorporate Action The Sustainability Framework may be applied to the economic, social and environmental sustainability of the com-munities in which companies operate. However, for consistency, this paper’s illustrative examples reflect just environmental sustain-ability. Particularly, the examples are drawn from carbon emissions reduction programs.

The Framework has four broad dimensions of potential actions to achieving sustainability. These dimensions are represented by the four concentric circles shown in Figure 1.• Direct Impact – emissions due to the energy consumed by the

company (directly or indirectly) to carry out its activities.

This Framework is intended to provide a consistent model that allows for introspection within a company, comparison with companies within a sector and across sectors and critical analysis from external observers by kevin moss

The Four Dimensions of SuStainability


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• Products In Use - emissions due to the energy consumption of a company’s products and/or services once in the hands of the user.

• Enabled Impact - impact that a company’s products and/or ser-vices have on the energy consumption and emissions of the en-tity that utilizes the product other than the consumption of the product itself.

• Inform and Influence – the opportunity to inform or influence stakeholders on environmental issues and impact of these issues on the stakeholder and on the company.“Greenwash” is a term that is widely used to describe putting a

green façade on otherwise environmentally unfriendly activities. But what really constitutes greenwash? This Framework can go a long way toward differentiating greenwash from a simple failure to be perfect! The indication of greenwash is when an organization focuses its positive actions and associated publicity in a dimension of the Framework that is of limited materiality, but takes no action – or even worse, conflicting negative action – in more material di-mensions. In contrast, an organization that is taking action in mate-rial dimensions but does not yet have a comprehensive program across all dimensions is not guilty of greenwash. It is simply guilty of not being perfect.

Direct ImpactDirect Impact is probably the best known of the four dimensions in this Framework. It is the bulls-eye of the illustration in Figure 1 and represents the direct impact that a company has on environmental sustainability. It comprises the emissions resulting from the energy consumed by the company (directly or indirectly) to carry out its ac-tivities. These emissions are defined by the greenhouse gas (GHG) emissions guidelines, which include carbon emissions resulting from on-site power generation, electricity consumption, fuel usage, travel fleet operations and other activities that are directly carried out by

the corporation or on its behalf. Quantitative objectives can be set, and there are a growing number of consultancies and software pack-ages that specialize in collecting and presenting this data. Measurable objectives can be set using intensity or absolute targets with many organizations now aiming to be carbon neutral by a certain date.

Partly because of these available structural approaches, Direct Impact emissions are where companies often focus their initial at-tention. For example, at BT, using UK reporting guidelines, direct carbon footprint was reduced from 1.6 million metric tons to 0.6 million metric tons between 1996 and 2008. This was achieved through a combination of business process change, energy efficien-cy measures and renewable energy resources.

A significant proportion of that carbon footprint reduction has been enabled by suppliers. This contribution is reflected in the sup-

plier wedge shown in Figure 1. For example, as part of BT’s 21st Century Network design, work with vendors enabled an increase in the operating temperature of network data centers and so a reduction in the energy consumed. (See sidebar ‘Thinking Out of the Box.’) In an-other example, PepsiCo has a comprehensive engagement program with its vendors which includes an annual sustainability summit, sup-port from PepsiCo consultants to develop en-vironmental plans, a vendor questionnaire and a commitment to recognize and reward ven-dor action on sustainability priorities.

ICT1 companies tend to have smaller Di-rect Impact carbon footprints than those in

the transport, manufacturing and energy industries, so why focus so much attention on this dimension of action? Direct emissions reductions provide the experience and mandate for a company to actively work with its customers and other stakeholders on ways to reduce their emissions.

Figure 1: Four Dimensions of the Sustainability Framework

Direct emissions reductions provide the experience and mandate for a company to actively work with its customers and other stakeholders on ways to reduce their emissions


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Products in UseProducts in Use comprises the emissions a company’s products and/or services produce once in the hands of end-users. While the products of some industry sectors, such as the food sector, have little or no energy consumption in use and so produce very minor in-life carbon emissions, others produce significant in-life emissions. The fuel or electricity used to power these products is paid for by the end-user and so is the end-user’s direct carbon footprint. The user has some control over consumption, for instance switching off a computer rather than leaving it on standby, or driving at a slower speed. However, although the consumption may be significantly in-fluenced by the end-user, the manufacturer is very much complicit in the emissions (or other environmental impact) through product portfolio, design and usage guidance.

For many businesses, Products in Use emissions can be far greater than Direct Impact emissions. The 2006-07 corporate social responsibility report from Ford Motor Company shows that its di-rect emissions in 2005 were about 8 million metric tons of CO2. In contrast, Products in Use emissions – through the fuel consump-tion of their on-road fleet across the world – were about 407 million metric tons. For a telecommunications company selling routers and phones, Direct Impact and Product in Use emissions are of a similar order of comparative magnitude to each other.

It may seem counterintuitive, but raising the operating

temperature of the equipment in a data center reduces the

energy consumed. Data center servers, like any other computer

hardware, have specified operating temperature ranges to ensure

effective operation, minimize downtime and optimize life span.

operating outside of these ranges invalidates warranties. But

these temperature ranges have changed little since the early days

of large mainframe computers when data center standards were

established and became the norm. As Bt worked with vendors to

specify its 21CN network design, it challenged vendors on these

operating temperature ranges. Many of the selected vendors

responded positively, allowing the flexibility to raise the operating

tolerances of their equipment by a few degrees without affecting

performance and the warranty. one of the most significant com-

ponents of data center energy consumption is air conditioning,

which ensures ambient temperatures within the ranges specified

by the equipment manufacturers. By increasing the upper end of

those temperature ranges by only a few degrees, air condition-

ing use, along with energy costs and carbon emissions, can be

reduced significantly. the new 21CN network also consolidated

many of Bt’s smaller switch sites in a fewer number of larger sites,

also greatly reducing energy needs. Bt is now working with It

industry sustainability organizations like Green Grid to achieve

broader changes in accepted standards.

Thinking Out of the Box

Where Products in Use emissions are significant, product pro-ducers can take actions to reduce them. For instance, Ford’s sustain-ability report identifies the actions it is taking, such as increasing en-gine efficiency. Today, enlightened ICT companies are working to reduce the energy consumption of their products by giving the end user more control in reducing consumption though features such as standby mode.

As with Direct Impact, suppliers can also play a significant role in reducing the in-use impact of the products they sell. While many companies outsource their product manufacturing, this does not di-minish their responsibility, through specifying energy related design characteristics. For example, early in 2008, BT started a six-month program to replace its entire line of DECT (Digital Enhanced Cord-less Telecommunications) phones with a new line of phones that have about half the energy consumption of their predecessors. This was made possible by working with vendors the prior year on prod-uct redesign. Hence, in the Framework, the supplier wedge intrudes into both the Direct Impact and Products in Use categories.

For industry sectors with little or no impact in this category, fo-cus should remain on Direct Impact emissions.

enabled ImpactEnabled Impact is the third concentric circle of the Framework. In contrast to Products in Use impact, which addresses the energy consumption of the product or service itself, Enabled Impact focus-es on the effect a product or service has on other aspects of energy consumption and resulting emissions.

For instance, BT completed a study with Forum for the Future in 2004, which showed that the rollout of broadband services in-creased the propensity of customers to buy and to use a range of other energy-dependent electronic equipment. While that equip-ment included computers and peripherals not purchased from BT – thus not Product In Use impact – their usage was enabled or even encouraged by the rollout of broadband, hence the term Enabled Impact.

Fortunately, in the ICT sector this increased energy usage is more than offset by a beneficial impact of the ICT industry as a whole. Many papers have been written on the positive Enabled Impact of ICT services2. The best known example is using teleconferencing instead of traveling for meetings. While teleconferencing requires electricity to power it and thus has an associated emissions bur-den, compared to the emissions associated with travel, that burden is small. (See “ICT Sector as an Enabler” for many other examples of enabled benefit in the ICT industry.) Estimates by the Climate Group, GeSi and others of the enabled beneficial impact of the in-dustry range from five to 15 times the burden of the industry. Ac-tions with the enabled dimension are therefore among the most ma-terial ways in which the ICT industry can impact global emissions.

There are many examples of products and services with Enabled Impact benefits outside of the ICT sector, ranging from a lubricant that improves the energy efficiency of a production line to a sophis-ticated process reengineering consultancy service. Opportunities


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for action in the Enabled Impact dimension tend to fall into one of three categories:1. Efficiency improvement of an existing service2. Substitution of a more energy-intensive service3. Environmental services

Inform and InfluenceThe outer ring of the Framework is the opportunity to inform and influence the actions of others for the purpose of reducing negative impact on the environment. Unlike actions taken in the other three categories, informing and influencing people cannot be quantified. However, it is equally as important. A company’s efforts to inform and influence its stakeholders can help remove the hurdles compa-nies sometimes face due to real or perceived limitations placed on them by shareholders and customers. The wrong actions in this area can also be the test of greenwash.

Inform and Influence can be considered with respect to all of a company’s stakeholder groups, including customers, employees, government and shareholders.

Informing the public is probably the most material opportunity me-dia and communications companies have to impact climate change. NewsCorp is one of the best examples of a media company taking a public stance on this. In addition to commitments to reduce their own carbon footprint, NewsCorp has made a public commitment to:

“Engage our employees, our business partners and our audiences on the issues of energy use and climate change.”

Companies with a well recognized consumer brand name also have a significant opportunity to inform customers and sway public opinion by publicizing their own commitments and activities, pro-viding tools, such as carbon calculators, and even providing market-ing incentives for the public to take action.• BT uses its brand in the UK to engage the general public through

a range of tools, including calculators, games and competitions.• Xerox provides a calculator that documents the impact of the

services it provides, which allows customers to make a quick, Web-based assessment of how-to advice on smart ways to make offices greener.

• Nortel’s energy calculator is a more explicit demonstration of energy savings for competitive differentiation.For the employee stakeholder, representative engagement efforts

include grassroots programs, websites and competitions, among others. Walmart has a PRP (Personal Responsibilities Program) which includes encouraging employees to put forward ideas for im-proving sustainability in stores. BT runs a program called Carbon Clubs that engages groups of employees to tackle environmental is-sues in ways that are meaningful to them.

The most engaged companies are educating their people not only on the actions they can take in the workplace, but about those they can also take at home and in other aspects of their personal lives. At BT, staff are encouraged to take action outside of the work-place through a Living Lightly program. HP provides a subsidy and a program to encourage employees to install solar panels at home.

Traditionally, most companies have focused their government interactions on activities that are deemed core to their immediate business. As climate change and other areas of sustainability be-come more top-of-mind, we are seeing that focus broaden. In the UK, for example, a group of prominent companies, including BP, BT, Ford and Barclays, formed a Climate Change Task Force under the auspices of the Confederation of British Industry to present the corporate perspective on climate change to government leaders. Ac-cording to their report:

“The best question for the business community is whether we can be certain that climate change presents a substantial risk; a risk that will have a profound impact on society and the economy? To this the answer is clearly ‘yes’. And so, as with all substantial risks, it is vital to mitigate the danger…. Any response to the threat of climate change requires three components for success. Politicians must give

there are many ways in which ICt services help reduce emis-

sions, and they have the potential to do so much more in the

future. travel substitution is one of the best known, i.e., replacing

in-person meetings with teleconferences and enabling telework-

ing to avoid commuting. other sophisticated travel reduction

opportunitities include:

• Installing wireless devices in vending machines to reduce

required visits from stocking fleets

• Using GPs to improve vehicle routing

• Congestion control in cities to improve traffic flow

• Using the Internet to provide real-time traffic advice to

commuters

Effective It infrastructures have enabled companies to reduce

real estate usage up to 30 percent by creating more flexible work-

spaces, which can serve more employees. such ‘smart buildings’

can also save energy using a range of ICt services. For instance,

electronic monitoring and control of a building’s environment

can enhance the use of natural daylight and external climate.

some systems can also automatically switch off the lights or close

the windows.

the Internet and private networks have greatly reduced the

quantity of paper used for commercial transactions such as bill-

ing and information provision. smart Grid describes a concept

through which user demand, power station supply and pricing

are all connected on a more granular, real-time basis to allow

great improvements in grid efficiency.

the potential benefits of these and many other examples can

be quantified and compared to the carbon burden of the ICt

industry (considered to be 2-3% of global emissions). In fact, the

recent report from Climate Group and Gesi sMArt 2020 con-

cluded that a five-fold benefit could be realized by the industry as

a whole by 2020.

ICT Sector as an Enabler


cover | story

much greater priority to the subject, and not just on an ad hoc basis. Consumers have to be empowered to make the right decisions and need to be given the facts to make informed judgments. And busi-ness must become green to grow.”

This initiative represents a compelling example of the role of business in informing and influencing government in this area.

Informing shareholders is vital to ensure their understanding and support for key actions. For many companies that are active in

this area, this is accomplished through the annual sustainability re-port. The following statement from the 2008 sustainability report of Omron, a Japanese manufacturer of sensing devices and control systems, makes unequivocal the company’s position on a key sus-tainability issue and helps inform the views of the shareholder:

“As reported by the Intergovernmental Panel on Climate Change (IPCC), the fight against global warming is considered to be one of society’s most urgent issues. Reflecting this belief…we are deter-mined to promote anti-global warming measures as our most im-portant management objective…”

Companies often state that they can take only as much action as their shareholders and customers will tolerate over and above what government legislation requires. But those same companies are able to inform and influence those stakeholders. In fact they are often expert at doing that through core competencies in marketing, employee communications, government relations and investor re-lations. Including action in the Inform and Influence category is a critical component of a comprehensive sustainability program.

conclusionThe Sustainability Framework identifies four discrete dimensions of a holistic approach to sustainability. As the examples illustrate, dif-ferent industry sectors have different material impacts in each of the Framework dimensions. The biggest impact of a food and nutrition company is Direct emissions—and much of that might be due to supply chain. The auto industry, in contrast, has its biggest impact through Products in Use emissions. A telecommunications com-pany like BT has the greatest impact through its positive impact on Enabled emissions and a media company like NewsCorp, in turn, through its ability to Inform and Influence the public.

Companies should be able to quantify their impact in each of the first three dimensions and map their activities against the material-ity of that category. Such an analysis will help identify what organi-

zations should be doing and contrast this with what they are doing in each space. The top priorities and gaps will become evident.

The Framework also serves as a tool for testing whether a compa-ny is truly consistent in its approach to sustainability. While action is not required in every category on a specific issue, inconsistent ac-tion across the categories of the Framework deserves careful atten-tion. In most cases, a company should consider starting its activities in the Direct Impact dimension to gain knowledge and experience,

and work outwards from there. Skipping action within a category may be appropriate because there is no impact in that space, but it may also in-dicate lack of commitment.

Also important is inconsistency between ac-tion in the outer ring of Inform and Influence and action in the three inner rings. Action in Inform and Influence that is intended to improve sales or brand, without equivalent level of action in the three inner categories effectively defines green-wash in the environmental sustainability arena.

Companies guilty of this form of misrepresentation present a green façade to their stakeholders, while operating in a manner that pays little or no heed to the actual impact of their actions. Likewise, tak-ing positive action in the central ring(s) while continuing material negative actions in outer rings is counterproductive for the environ-ment and should be called out by stakeholders.

This Framework is intended to provide a consistent model that allows for introspection within a company, comparison with com-panies within a sector and across sectors and critical analysis from external observers. In so doing it strives to add to the tools available to continually improve sustainability within the business world.

1ICT – Information Communications Technology. This terminology is employed to

reflect the increasing interdependence of the IT and telecommunications indus-

tries. Historically separate, both in terms of industry sectors and in terms of func-

tional departments in a business, the increasing interdependence between IT and

telecommunications is evident in the increasing overlap between the industry sec-

tors and the merging of traditional IT and communications departments in many

corporations. This interdependence is reflected in the use of the terminology ‘ICT’.2The most recent and probably most comprehensive is SMART 2020 produced by

GeSI and the Climate Group in June 2008.

About the AuthorKevin Moss has responsibility for implementation

of British telecommunications’ Corporate social re-

sponsibility (Csr) strategy in North America. Kevin

previously oversaw voice and data product man-

agement for Bt Americas, including product strat-

egy, new product development and geographic

expansion across systems, networks, operations

and channels. He maintains a blog with his views

on Csr and an ongoing commentary on the Four Dimensions of sustainability

at www.csrperspective.com

The Sustainability Framework identifies four discrete dimensions of a holistic approach to sustainability


Ambuja Cement, a group company of Holcim, is a lead-ing supplier of cement, aggregates and ready-mixed concrete in India. Ambuja employs approximately 4,500 people. The company operates the Ambu-

janagar cement plant in the Kodinar region of Gujarat, India. The facility has three closed and rehabilitated quarries and six active quarries. To ensure the future availability of the key raw material required for cement (limestone), the plant will be aiming to en-hance capacity at some of its other active mines. The Ambujanagar facility is located between the Arabian Sea and the Gir Sanctuary and National Park, which together are a designated protected area. The Gir National Park provides crucial habitat for the last surviving population of the Asiatic lion.

There have been critical problems of freshwater availability in the state of Gujarat since 1970. The area where the cement plant is located is in a Coastal Regulation Zone. Owing to over-withdrawal

of freshwater and intensive land-use in the Kodinar region, there has been marked depletion of the water table and an associated serious increase in water salinity from the ingression of seawater into the water table. The response Considering the ecological sensitivities of the region and needs of the surrounding communities, Ambuja un-dertook a holistic view of the situation while planning rehabilitation activities in consultation with local communities, natural resource management experts, non-governmental organizations and local authorities. Ambuja has also adopted a landscape approach in ad-dressing impacts of the quarrying activities. The scope of the reha-bilitation activities, has thus been widened to include areas outside the quarries and has focused on the following key issues:• Capturing and preserving freshwater: The Ambuja Ce-

ment Foundation, the corporate social responsibility wing of the company, has implemented several measures to improve water management in the area, primarily through rainwater harvest-

In 2011, Ambuja Cement achieved its target of becoming water positive. This approach has helped the company strengthen relationships with all local stakeholders, which has guaranteed its license to operate in the future

Case study:

sustaining the EcosystEm for Water, Wildlife and community

cover story


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ing, and converting the mined-out pits into artifi cial lakes and wetlands. 165 dams and small barriers have been built to reduce the loss of water through shallow rivers and streams. Other water resource management measures include interlinking rivers and streams, construction of percolation wells, renovation and deep-ening of ponds and runoff diversion systems.

• Quarry rehabilitation through tree planting: As a part of its restoration project, different tree species have been planted as part of the Van Vihar project, the Eco Park Project and the mini Gir project, in the mined-out areas and surrounding zone. Small patches of land are earmarked to grow medicinal plants and fod-der-yielding plants. The company is also planning Jatropha plan-tations, which will serve as a source of bio-fuel in coming years.

• Conserving the fl ora and fauna of Gir: Under the “Mini Gir project”, a large number of tree species native to the Gir For-est are being planted in the reclaimed mines. The company has also supported the conservation of the Asiatic lion (Panthera leo persica), an endangered species.

• Protecting coastal zones through mangrove develop-ment: Since 2009, the company’s Ambujanagar cement plant and Surat limestone grinding unit have been working with the Gujarat Ecology Commission to develop a mangrove area near Surat. State authorities have given 150 hectares of land to the company for the development of mangrove along the Gujarat Coast through the planting of three native tree species.

• Sustaining local livelihoods: Local people are employed in re-habilitation activities such as pit preparation, watering, tree plant-ing, nursery development and construction of water harvesting structures. Simultaneously, to create awareness of medicinal plants, a medicinal herb garden managed by local people has also been developed nearby. Some former pits are reclaimed with fod-der cultivation in partnership with local villages, in order to pro-vide feed for cattle. The water management and mangrove planta-tion projects have also improved the livelihoods of local people by helping to increase agricultural crop yields and fi shing yields.

resultsThe water management program has raised the water table by eight meters, controlled the water salinity problem (Fig. 1) and made quality freshwater easily available to the communities.

Wells, previously dry for at least seven months a year, now con-tain water all year round, which has made it possible for local farm-ers to grow two to three crops per year. Other signifi cant results of the project include: • By March 2012 the company had rehabilitated approximately

330 hectares of area and planted nearly 275,000 trees. It had also completed some special projects, such as the Mini Gir project, where barren and degraded land near the Gir forest has been planted with native trees;

• Local employment opportunities have been generated through all activities and initiatives with benefi ts for the livelihoods of lo-cal people;

• Artifi cially created water reservoirs have enhanced the wildlife of the area, becoming breeding grounds and visiting spots for a large number of migratory birds;

• The fi sh population has increased and Mugger crocodiles (Cro-codylus palustris) have also been recorded;

• A planting density of 3,000 plants per hectare has been main-tained in the mangrove plantation project, which will provide multiple benefi ts, such as fl ood protection, supporting marine life and climate regulation.In 2011, Ambuja Cement achieved its target of becoming water

positive. This approach has helped the company strengthen rela-tionships with all local stakeholders, which has guaranteed its li-cense to operate in the future. The Government of Gujarat is explor-ing implementing similar water harvesting models elsewhere in the state on a large scale, with advice from the Ambuja Cement Founda-tion. This project has helped to demonstrate the importance of tak-ing into account the needs of the local communities and how they may be affected by the state of the environment and its resources. © Ambuja Cement

Figure 1: Salinity regression track, 2001-2009. Tracking by Ground Water and Mineral Investigation Consultancy Centre (GWMICC, Jaipur)

Ambuja Cement undertakes rehabilitation activities at all

its sites, with the objective of mitigating the impacts from

the withdrawal of limestone and water from the area, both of

which are required for cement manufacturing. the Ambujana-

gar plant in Gujarat, located between the Arabian sea and the

Gir Protected Area, restores its mines and surrounding areas to

the degree that it has enhanced the region’s biodiversity and

also helped to address water scarcity and salinity problems

in the region. these outcomes have helped the company to

strengthen relations with local stakeholders, including villagers

and local authorities.

The business case


Measuring Shared ValueMeasuring shared value focuses on the concept of value creation and links social and business results

You want your business to suc-ceed…and you believe in the role of business in addressing India’s pressing social and envi-

ronmental problems. You support the in-clusive growth agenda. This is why you have invested significant resources into pursuing a shared value strategy – using business strategies to solve social problems while si-multaneously bringing your company eco-nomic benefit.

Yet, sometimes you wonder: Are we ac-tually creating shared value? You think you are, the strategy makes sense, but you can-not really demonstrate it. And you never have a convincing answer when that ques-tion comes from your CFO at the end of every reporting cycle.

This question is the single most impor-tant hurdle to more widespread adoption of shared value strategies. Only when there is a clear business case that shows how mak-ing progress against social objectives links to standard measures of business success, such as revenues, costs or market share, will companies – and investors – around the world realize the potential of shared value and contribute to developing sustainable and scalable solutions to the world’s tough-est problems.

The answer to the question requires mea-surement. Measuring Shared Value: How to Unlock Value by Linking Social and Busi-ness Results, illustrates how leading com-panies – including Nestlé, IHG, Intel, Co-ca-Cola and many others – are measuring shared value, thereby unlocking new value.

Take Novo Nordisk, for example, that identified the high and growing burden

of diabetes in China as a core social issue closely linked to its business as a global leader in insulin medications. The company believed that helping to improve the health system and diabetes care in China would ul-timately benefit the bottom line and started implementing a shared value strategy in the early 1990s. From the beginning, Novo has closely monitored progress against key shared value indicators, such as the number of physicians trained and patients educated, and tracked overall health impact, to con-tinuously revise its strategy to focus on the most effective interventions. At the same time, it has followed progress against the expected business results, such as insulin sales and market share. This approach has proven highly successful: In the last two de-cades, the company has increased its market share from below 40% to 63% in the second largest insulin market in the world. Novo has successfully analyzed and learned from these results in order to apply a similar strat-egy in the Indian market.

Measuring shared value focuses on the concept of value creation, linking social and business results–making it different from most existing approaches to social and en-vironmental performance measurement by companies. From our experience, wide-spread confusion exists among business executives about the role of the different ap-proaches and thus on where to focus their measurement and reporting activities. By distinguishing the purpose of shared value measurement from tracking sustainability, compliance, reputation and long-term so-cial, environmental, or economic develop-ment impact, we hope to increase clarity

and, in doing so, contribute to the global effort around ”integrated reporting.”

The report identifies the key steps in the shared value measurement methodology and explores how to:• Anchor measurement in strategy

– shared value measurement leads with a business case, and states the intended business and social impacts

• Unlock value from shared value measurement – by understanding the interdependency between social and business results, companies can discover opportunities for innovation, growth, and social impact at scale

• Distinguish the purpose of shared value measurement from estab-lished CSR/sustainability and so-cial impact measurement approach-es – shared value measurement goes beyond the fragmented reporting of fi-nancial social and environmental results, to link social progress to business success

• Deliver new insights to investors from shared value measurement – a clear economic scenario for the business case in solving social problems removes investor skepticism

• Apply pragmatic approaches for tackling shared value measurement execution challenges – grounded in strategy, shared measurement prioritizes those measures that will drive future strategy and innovationAs companies progress with shared

value measurement, we anticipate further insights to be shared, for example through FSG’s Shared Value Initiative, among oth-er forums.

melissa scott consultant, fsg

corporate strategy

csr communication


How to Benefit from Authentic csr?communicate Authentically!Companies have an opportunity to influence consumer perceptions if they are able to communicate their social responsibility efforts more effectively

Consumers prefer socially respon-sible companies and want to buy their products. However, far too many companies’ good inten-

tions are lost in today’s marketplace because those corporations fail to communicate their good works to their stakeholders, including customers, shareholders and suppliers.

That’s one of the conclusions from the recent Corporate Social Responsibility Perceptions Survey conducted by Burson-Marsteller, Penn Schoen Berland and Landor Associates. The survey showcased compelling evidence that good corporate citizens increasingly have the upper hand with consumers, as long as they commu-nicate their social responsibility. However, many companies that are authentically practicing CSR are not leveraging those ac-tions very well, resulting in consumer con-fusion and lost opportunities to win share of hearts and pocketbooks. Specifically, the survey found:

“Companies have an opportunity to in-fluence consumer perceptions if they are able to communicate their social respon-

csr | communication


sibility efforts more effectively. Just 13% of consumers report having read about a company’s social responsibility agenda on its website – but 75% of those who have done so indicated that it made them more likely to purchase products or services from that company.”

Burson-Marsteller managing director for corporate responsibility, Eric Biel, re-ported that companies need to combine a strong social responsibility program with an effective communications strategy.

“While many consumers may not be precise in how they define terms like ‘cor-porate social responsibility,’ they do have a clear sense of how they expect companies to behave. They expect companies to offer high-quality products at good prices and to explain how they treat their employ-ees well, give back to their communities, and respect the environment,” added Biel. “Those companies that can clearly articu-late how they advance these values to con-sumers can achieve real benefits for their brands and their overall reputation.”1

Many consumers may not be able to spe-cifically define CSR, so it behooves a com-pany to help educate customers as part of a marketing communication strategy. The ed-ucation about the nature and advantages of CSR is best begun internally via corporate communications in order to create support for ongoing and extended practices, includ-ing that need for customer awareness.

so, what exactly Is “csr”?Companies must determine their own stan-dards for acting in a socially responsible way, or as a “good corporate citizen,” by adhering to not only the financial bottom line, but a “triple bottom line” with concern for people, planet and profits. In addition, they must also take responsibility for help-ing consumers understand the meaning of corporate social responsibility.

Since many organizations focus their efforts on the increasingly prolific area of environmental or green issues and work primarily toward “sustainability,” consum-ers are increasingly aware of environmental or “green” issues and are learning to com-mit to purchasing from companies who

are showing consideration for finite natural resources, such as forests, or the currently top-of-mind issues of oceans and oil. How-ever, selecting to print collateral on post-consumer waste paper, mandating strict recycling practices in their businesses and demonstrating greater environmental con-scientiousness – such as reduced emissions and water conservation – are just a part of CSR. Consumers also need to understand that sustainable corporate thinking and ac-tions can also be applied to human resourc-es by engaging in fair trade and promoting worker safety and diversity.

Companies whose brands incorporate broad sustainability and who communi-cate alignment with social responsibil-ity are attracting more and better-qualified employees:

“…nearly 50% of 18-24 and 25-34 year olds are more likely to take a pay cut to work for a socially responsible company—a much higher percentage than any other age group. However… in a year where there seems have been so much responsi-bility expressed, especially in light of the earthquake in Haiti, only 11% of Ameri-cans say they’ve heard corporate CSR com-munications.”1

Why – What’s in It for the company…and the consumerCause-related marketing was the buzz phrase of the ‘80s and ‘90s, and provided a platform for companies to tout their philanthropic side. Programs such as Mc-Donald’s Ronald McDonald House or Whirlpool’s partnership with Habitat for Humanity helped align those companies with specific causes. Given equal price and

value, most consumers will more often se-lect the brand associated with a cause, so communicating those alliances and con-tributions is still beneficial – both to the brand and the charity.

“The [Corporate Social Responsibil-ity Perceptions] survey found that 70% of consumers are willing to pay a premium for products from socially responsible compa-nies. In fact, 28% are willing to pay at least $10 more.”1

Now, however, consumers are looking deeper than just reviewing a company’s charitable contributions. Using social me-

dia and Web searches, individuals can both explore the realities behind the brand’s mes-sages and share their opinions with other consumers about what they perceive to be the true nature of a specific company.

The most conscientious consumers have been given many labels by research com-panies – “Deep Greens” or “Enlighteneds” – and play a key role in the marketplace both with their purchasing power and their power to influence others through word-of-mouth, and now, thanks to social media, “digital word-of-mouth.”

The Natural Marketing Institute’s name for this top percentage of the population who pursue a Lifestyle of Health and Sus-tainability is the “LOHAS” consumer. This market segment is focused on health and fitness, the environment, personal develop-ment, sustainable living and social justice, and is estimated to make $209 billion in purchases in this space annually.2

But in addition to appealing to the pow-er of the purse, companies practicing CSR stand to gain in many other proven ways.

In her book, SuperCorp – How Van-guard Companies Create Innovation, Prof-

70% of consumers are willing to pay a premium for products from socially responsible companies. In fact, 28% are willing to pay at least $10 more


csr | communication

its, Growth and Social Good, Rosabeth Moss Kantor says, “Corporate social in-novation and entrepreneurship combined with corporate diplomacy [represent] a shift from ‘spare change’ to ‘real change’.”

“Values and principles, which includes respect for people and concern for the envi-ronment, contribute to numerous capabili-ties: sensing opportunities and innovating; enhancing customer success and value for end users; making effective acquisitions; at-tracting and motivating top talent; working collaboratively to react or change quickly; and tapping the potential of an extended family of business partners for new ideas or market reach. These companies attempt to raise social and environmental standards in the countries in which they operate and also within their own workplaces, which tend to be flexible and family-friendly as well as increasingly diverse and greenori-ented. Overall, they derive benefits in both innovation and execution.”3

The “vanguard companies” profiled in her book, which range from P&G to IBM, Publicis to Diageo, may not be perfect, but their pro-social stances and actions have helped them weather – and in fact sail through – many storms for the greater good of their companies and the world itself.

One example showcased by Moff Kantor is how P&G dedicated 10 years of R&D to the creation of a water puri-fication product, only to find out that its commercial prospects ultimately seemed unpromising. However, given that the ef-fort felt consistent with the company’s goals at that time, the team that worked on the project was driven to persevere. As a result, when the 2004 tsunami and earth-quake struck Asia, P&G was able to deliver nearly one billion glasses of drinking water for the victims, earning praise from NGO partners, the media, governments, as well as the employees themselves.

The Legal rewardsSome companies implement a CSR pro-gram simply as “avoidance behavior” – the avoidance of litigation, regulation and even prosecution. As described in Michael Levine’s 2008 article, “The Benefits of Cor-

porate Social Responsibility” on law.com, some companies without CSR programs have faced certain risks. “Such risks include: lawsuits under the Alien Tort Claims Act, and related class action litigation; govern-mental investigation by federal and state labor departments; project finance/invest-ment contract issues; and the receipt of shareholder resolutions on labor, human rights, supply chain and sustainability is-sues, among others.”

The Financial rewardsThe power of the consumer purse or the arm of the law aside, there’s a correlation be-tween CSR and financial performance es-tablished via such metrics as the Dow Jones Sustainability Index and others.

From its inception in February 2005, the Global 100 Most Sustainable Corpora-tions has achieved a total return of 23.67%, outperforming its benchmark (the MSCI All Country World Index) by 334 basis points per annum to January 25th, 2010.

Many groups work to measure a compa-ny’s corporate governance and sustainabil-ity efforts as a way to support investors and public interest, such as the WME (World’s Most Ethical Companies) list. Ethisphere says they take into account seven factors for rating a company’s ethical stature:

1. Integrity Track Record & Reputation2. Corporate Citizenship & Responsibility3. Internal System & Ethics/Compliance

Program4. Executive Leadership & Tone from

the Top

5. Innovation6. Corporate Governance7. Industry Leadership

The Global Reporting Initiative (GRI)4 – the most widely used sustainability re-porting framework – enables companies to measure and report their economic, environmental and social performance. It provides a means for companies to be transparent and share benchmarking infor-mation to help support a common goal of improvement and sustainability among all companies worldwide. The GRI also pro-vides investors with factual data so that they can make proper decisions.

“Many organizations find that financial reporting alone no longer satisfies the needs of shareholders, customers, communities and other stakeholders for information about overall organizational performance.

The term ‘sustainability reporting’ is synonymous with citizenship reporting , so-cial reporting , triplebottom-line reporting and other terms that encompass the eco-nomic, environmental and social aspects of an organization’s performance.

What are the benefits of reporting?For reporting organizations, the GRI Reporting Framework provides tools for: management, increased comparability

and reduced costs of sustainability, brand and reputation enhancement, differentia-tion in the marketplace, protection from brand erosion resulting from the actions of suppliers or competitors, networking and communications.

Values and principles, which includes respect for people and concern for the environment, contribute to numerous capabilities: sensing opportunities and innovating; enhancing customer success and value for end users

csr | communication


For report users, the GRI Reporting Framework is a useful benchmarking tool, corporate governance tool and an avenue for long-term dialogue with re-porting organizations.”4

The GRI is a valuable tool for investors, stakeholders and financial analysts and cer-tainly can make an impact on those consum-ers who read the reports. In a reader survey:

“Ninety percent of readers said their views of a company had been influenced by reading its sustainability report. Of these, 85 percent reported a more positive percep-tion of the organization.”5

Even the principles established for sig-natories of PRI (Principles of Responsible Investing) – an advisory group on responsi-ble investing that was spawned from a think-tank coordinated by the United Nations

Environment Programme Finance Initiative (UNEP FI) and the UN Global Compact includes reporting as a criteria5:

Principle six of the PRI asks each signa-tory to ‘report on their activities and prog-ress towards implementing the Principles’…

6. We will each report on our activities and progress towards implementing the Principles.Possible actions [include]:…• Communicate with beneficiaries about

ESG issues and the Principles• Report on progress and/or achieve-

ments relating to the Principles using a ‘Comply or Explain’ approach1

• Make use of reporting to raise aware-ness among a broader group of stake-holdersAnd, the 2009 CRD Analytics white

paper on indexing sustainable investing de-scribes a surge in reporting:

“According to an in-depth research re-port conducted by KPMG, the number of large multinational companies reporting corporate responsibility (CR) data has ris-en dramatically over the last three years. …There seems to be an increased awareness that enterprises at all levels will need to ele-vate the quality of their ESG measurement, validation and reporting mechanisms. The number of top tier management consult-ing and accounting firms, such as KPMG,

PwC, IBM, Deloitte and McKinsey staking their claim in the Corporate Responsibility and Sustainability business helps validate the market maturity.”

However, reporting alone is not enough to ensure that all stakeholders are well in-formed. It’s clear from the GRI survey of its own readers that communicating good corporate citizenship should go beyond fil-ing reports:

“… Over 450 respondents [to the GRI reader survey] indicated that they do not currently use sustainability reports. They feel they have more direct means to com-municate with companies to meet their information needs and that reports are too lengthy or not valuable to them.

A majority of those who typically don’t read reports said instead they ‘use public media as a key information source for any issue relevant to the companies [they] follow.’”6

Or, many rely on having “direct contact with the company” or “discussions with other parties engaged with the company (such as employees, suppliers, etc.).”7

This means to help “raise the bar” higher, and to influence conscious choices while educating employees and investors, mes-saging must include increased and targeted corporate and marketing communications beyond annual or quarterly reports.

AT Kearney’s Green Winners report (2/09) cites a major media company that embedded ESG principles from the UN Global Compact “into daily business practices and applied to supplier codes of conduct, company policies and compli-ance procedures…among other areas. The company issues an annual corporate responsibility report and widely shares its code of ethics and business conduct…The company has reduced its carbon emissions by 13% since 2003 while scor-ing in the top quartile for corporate gov-ernance practices on the Goldman Sachs Sustain List.”

“Most companies do not target their CSR communications at specif-ic audiences. The result is their CSR activities have minimal influence on their corporate brand or on consumer

purchasing behavior.” – United Nations Environment Program

For green brands in particular, Annie Longsworth, sustainability practice leader for Cohn & Wolfe says:

“As consumer demand for information and knowledge on green increases, brands also need to become more sophisticated about how they communicate their compa-ny and products. Transparency is critical, as are credible spokespeople and authen-ticity, which can be demonstrated through product labeling and ingredient disclosure, among other strategies.”

So what is a corporation supposed to do to ensure their CSR activities are influenc-ing their brand or consumer purchasing? Even a company like Seventh Generation, known for its recycled paper products, for which social responsibility has been built in from the ground up, must continue to “walk the walk.”

“…The stand these companies take on a social issue is not a result of their business, but one of the reasons (if not the reason) they are in business.” – Rachel Simmons, “Social Brand Capital: The Loyalty Nucle-us of Corporate Social Responsibility”

ZipCar, the innovative car-sharing ser-vice, has dedicated itself from the onset to efficiency and environmentalism and pro-vides an excellent example of living its mis-sion. The firm aims to “enable simple and responsible urban living” and apply that to its business strategy and corporate gover-nance as well. Its business plan of blanketing a city or a campus with a concentration of cars usually means an easy walk to pick up a rental, reducing the need for shuttle buses or taxis to a rental car office, for example, which reduces emissions and fuel usage. The firm sees its service as complementary, not competitive, to public transportation and provides clear, factual information on environmental and cost benefits.

“90% of our members drove 5,500 miles or less per year. That adds up to more than 32 million gallons of crude oil left in the ground – or 219 gallons saved per Zipster.”(http://www.zipcar.com/is-it/greenbenefits)

ZipCar takes its mission further than the business plan, though. The management


csr | communication

strives to embody social responsibility and find ways of making positive changes in communities and society. That may mean donating a ZipCar to a local family facing devastating property loss, contributing to local food drives, or building employee/client teams of bike riders 25 people strong, from the CEO down, to ride for causes like cancer research.

Chief Marketing Officer Rob Weisberg explains:

“It’s just part of what we do. We try to live those ideals of enabling and encour-aging simple responsibility so the brand speaks for itself. We do good things, and that attracts like-minded people. It’s why we even describe our members (‘Zip-sters’) as ‘people who want transporta-tion solutions that are good for the planet and easy on the wallet.’ We don’t blow our own horn as much as explain really clearly right on our Web site how car-sharing is more responsible, and then we all try to act responsibly ourselves, per-sonally and professionally.”

But what about a conventional brand that is working to make its good practices known? In our digital society, it’s best to be proactive by making slow, steady con-tinuous strides in establishing a company’s social conscience and actions. It is part of building a trusted brand and thus essential that CSR communications not be window-dressing, but instead factual, authentic in-formation about activities that stem from the brand’s genuine mission.

For example, PUMA, the sporting goods company best known for its foot-wear and athletic apparel, recently issued a news release about its next big step in an ongoing commitment to corporate so-cial responsibility.

“For a long time our mission has been to become the most desirable Sportlife-style company. With this next phase of our sustainability program, we have evolved our mission to be the most desirable and sustainable Sportlifestyle company in the world,” said Jochen Zeitz, Chairman and CEO of PUMA. “Through PUMAVision and our puma.safe program, we have al-ready started to reduce our carbon emis-

sions, curtail wasteful transportation, recy-cle and reuse available materials, use water sparingly and become paperless.”

While the average consumer might not immediately associate PUMA with sus-tainability, the news release will certainly increase awareness of this 10-year effort. The key, as mentioned, is authenticity and factual backup, and the release provides de-tailed information that should stand up to the scrutiny of a conscious consumer and educate others at the same time:

“PUMA’s longstanding work and efforts to improve social, labour and environmen-tal standards throughout its operations date back to 1999…and realized several successful large-scale initiatives such as sourcing of raw materials through the Cot-ton made in Africa campaign to … the opening of the industry’s first carbon neu-tral head office.

…The next milestone in PUMA’s mis-sion to be the most desirable and sustain-able Sportlifestyle company in the world is the introduction of an innovative pack-aging and distribution system for PUMA products that will reduce the paper used for shoeboxes by 65% and carbon emissions by 10 tons per year…” 8

In summaryDue to a climate of more vocal, socially conscious consumers, brands that can authentically make CSR claims and revise their branding to include that messaging stand to benefit, as long as they continue to educate and inform consumers of the specific advantages.

There are, of course, best practices for managing press and consumer percep-tion, and different rules apply based on each media platform. For example, tap-ping social media channels requires a con-versational style and offers an opportu-nity to “humanize” the people who make up the brand.

Working to create genuine relationships with a more personal style is paramount in building trust when commenting on or contributing to blogs, or engaging on so-cial networks like Facebook and Twitter. One need only look at the recent Facebook

scuffle between Nestle and Greenpeace to see how essential transparency and authen-ticity are in one’s communications (http://blogs.bnet.com/businesstips/?p=6786). Providing valued, informative content re-mains vital as the complement to any out-reach, now that consumers have greater access to research and information on the products and services they buy.

By creating a consensus and understand-ing among internal stakeholders – HR, PR, legal, finance and marketing – of the value and approach to promoting a company’s socially responsible activities, each depart-ment, as well as the organization, can ben-efit. From attracting better employees and more investors, to withstanding legal as-saults and accusations, generating increased sales and building a better brand image, corporate social responsibility should be embraced throughout the organization and wellpresented to all its stakeholders on a consistent basis.

references1 corporate Social Responsibility Perceptions

Survey, conducted by research-based con-

sultancy Penn Schoen Berland in partnership

with brand consulting firm Landor associates

and strategic communications firm Burson-

marsteller, released march 2010. a slide sum-

mary of charts from this survey is available at:

http://www.slideshare.net/BmGlobalnews/

csr-branding-survey-2010-final

2 http://www.lohas.com/about.html See also:

http://www.nmisolutions.com/r_lohas.html

3 Supercorp – How Vanguard companies create

innovation, Profits, Growth and Social Good,

Rosabeth moss Kantor © 2009 crown Business

4 http://www.globalreporting.org/Home

5 http://www.unpri.org/principles/

6 “count me in” Readers’ take on Sustainability

Reporting, 2008

7 Global Reporting initiative Readers’ Survey

http://www.globalreporting.org/currentPriori-

ties/GlobalReadersSurvey/nRQ4.htm

8 See http://www.prnewswire.com/news-releas-

es/pumas-new-packaging-and-distribution-

system-to-save-morethan-60-of-paper-and-

water-annually-90729789.html for complete

details in the Puma release on PRnewswire

© PR newswire


The Next Step for ESG Investing: Moving from What and Why to HowESG is based on assessing the financial risk of ESG factors and strives to evaluate the way in which companies address and mitigate their ESG risk factors

by daniel t. allen

The implementation of Environ-mental, Social and Governance (ESG) factors has evolved to a point where it may be possible

to begin to develop standardized principles and methodologies that quantify ESG re-sults. These results are the manifestations of efforts by companies to improve per-formance long term by becoming increas-ingly sustainable. This development would represent the critical “how” component of the process.

To date, a great deal has been made of “what” needs to be done and “why” it needs to be done but the difficulty of ad-dressing how to quantify ESG criteria has largely been ignored. The United Nations Principles for Responsible Investing1 has become perhaps the most visible frame-work intended to describe the general rec-ognition that ESG factors represent risk factors that must be adequately addressed and provide an overarching framework to address what needs to be done. As evi-dence of the importance that the market places on ESG.

ESG investment

ESG investment


ESG OverviewGlobally, there has been an accelerating public consciousness that simply using tra-ditional financial metrics are not adequate investment criterion and institutions and individuals have become increasingly in-terested in the behavior and values that are manifested by business entities. Accord-ing to BSR, “The global financial crisis of late 2008 has led to intense scrutiny of the foundational beliefs and basic structures that underpin current global markets and in-vestment models.”2 This trend is confirmed through the broad calls for greater disclosure and accountability, and the market’s grow-ing recognition that there is a significant demand for ESG products and services. The demand is particularly high in Europe, but growing rapidly in the United States.

ESG Investing has been primarily the provenance of institutional investors where ESG criteria are often considered a met-ric to illustrate quality management and a commitment to long-term sustainability. Socially Responsible Investing (SRI) is a subset of ESG investing that is typically re-

tail oriented and takes a narrower, more ex-clusionary approach focused on the “rights and wrongs” of various actions.

This institutional orientation is borne out through examination of ESG/SRI in-vested assets. According to the Social In-vestment Forum, in 2007, $2.7 trillion in

Assets Under Management (“AUM“) was managed in the United States using some aspect of ESG/SRI principles. Of that less than $200 Billion was mutual funds, closed end funds and ETFs and less than $3 Billion in separately managed accounts.3 The re-mainder was in institutional accounts.

Institutional investors tend to take a lon-ger term view of investing and are interested in the sustainability of companies. Effective-ly dealing with ESG issues is fundamental to a company being sustainable. The classic definition of sustainability as, “development that meets the needs of the present without compromising the ability of future genera-tions to meet their own needs”4 is accurate but may be insufficient as it does not clearly address the financial or economical impera-tive of a business’s operation. George P. Nas-sos, Director - Environmental Management and Sustainability Program & Center for Sustainable Enterprise at IIT Stuart Gradu-ate School of Business summarizes it like this, “For long-term investors, it is impera-tive to look for companies that are truly sustainable – environmentally, socially

and economically… these companies will provide the best long term return for their shareholders and, at the same time, will be able to sustain their competitive position.” It is the marriage of strong ESG fundamen-tals with strong financial fundamentals that truly makes a company sustainable.

Background of ESGThe roots of ESG Investing can be traced back to early efforts at Socially Respon-sible Investing (SRI) started by religious organizations such as the Quakers which established restrictions on investing. In the early to mid-1700s, Quaker church mem-bers were prohibited from participating or investing in the slave trade or providing any support for the ability to wage war. John Wesley (1703-1791), founder of the Meth-odist Church, preached in his famous Ser-mon 50, “The Use of Money,” that we must be moral in all dealings with money so that we might “gain all we can without hurting our neighbour.”5

Wesley recognized that there was a component to an investment’s value that went beyond the financial metrics. He defined it in moralistic terms.Through-out the 1800s and early 1900s, religious investors were encouraged to avoid what was considered to be “sinful” investments in guns, liquor, and tobacco. This contin-ued to be the main thrust until the 1960s when, during the Civil Rights Movement, Dr. Martin Luther King, Jr. in his August 1967 sermon, Where do we go from here?, began to call for the use of economic pow-er as a means to create pressure for social change.6 The idea expanded into the anti-war movement of the day, and investors who opposed the Vietnam War began to avoid investing in companies that were supporting the war effort.

In 1971, PAX World launched the PAX World Fund (now called the PAX World Balanced Fund) which is widely regarded as the first publicly available SRI mutual fund. The fund primarily screened out compa-nies profiting from war efforts. Throughout the 1970s and 1980s, investor avoidance of South Africa is believed to have reduced in-ternational investments in South Africa by as much as 75% and added to the political pressure that eventually forced that system to change. Through this period funds were also created to advance such causes as wom-en’s rights, labor equity and the environ-ment and a growing acceptance of what we now call ESG became routinely included as a consideration in public pension funds.

The United Nations Principles for Responsible Investing has become perhaps the most visible framework intended to describe the general recognition that ESG factors represent risk factors that must be adequately addressed and provide an overarching framework to address what needs to be done

ESG | investment


Current Status of ESG In the last three years according to the UNPRI, “the number of signatories to the Principles for Responsible Investment has soared from 50 to 500, representing US$18 trillion of assets and 36 countries.”7 This represents an enormous growth of interest in the subject and is an indication that ESG Investing is no longer a niche approach but now represents a fundamental shift in the way asset managers view investing. This

growth accelerated last year during the finan-cial crisis. The crisis ”catalyzed additional investor interest in responsible investment, with 160 new signatories – holding assets of over US$5 trillion– signing up to the PRI between October 2008 and May 2009.”8

Unlike the original SRI movement which is primarily values driven and is sometimes criticized for being based on non-financial criteria, ESG is based on as-sessing the financial risk of ESG factors and strives to evaluate the way in which com-panies address and mitigate their ESG risk factors. Michael Muyot of CRD Analytics describes it this way, “As companies look to raise profitability and enhance long‐term shareholder value by focusing increasing attention on transparency and environ-mental, social and corporate governance (ESG) matters, they simultaneously boost their appeal to the expanding sustainabil-ity investor community.”9 In other words, the risk-based approach of ESG provides the opportunity to take a quantitative ap-proach to evaluating ESG factors with an eye to improving the investment selection process in a meaningful financial way.

The question of “why” we should con-sider ESG issues has been widely debated and discussed. War, apartheid, sweat shops and their social and political consequences have made it clear that social issues have financial consequences. The Exxon Valdez incident, superfund sites and the climate change10 debate makes it clear that envi-ronmental issues have financial conse-quences. Enron, Global Crossing, World-Com, Lehman Brothers, AIG, Citi have all

brought awareness of the financial impor-tance of corporate governance.

The impact on markets and the investors who have been hurt or helped by the good or bad application of these issues makes it clear “who” should be interested. In fact, ac-cording to the CFA Institute “There is an in-creasing recognition of the need to include the analysis of ESG factors”11 in order to ful-fill the duty of financial professionals to act in the best interests of clients.

The UNPRI and other initiatives have worked to address “what” should be con-sidered. Conferences have been held throughout the world to discuss environ-mental, social and governance concerns and identify what should be included as an evaluated criterion.

The open question still being broadly struggled with is “how” ESG issues can and should be best incorporated into the invest-ment process. SRI takes a values based ap-proach but the approach is controversial, bi-nary in that each issue is typically applied as a yes or no criterion and is highly subjective based solely on the particular values used. For ESG Investing to truly become a com-

ponent of mainstream investing, thoughtful financial metrics need to be developed that provide investment managers the tools that they require for quantifying the financial impact of a company’s ability to manage ESG risks. Investors and financial managers need a variety of tools to measure the finan-cial premium of those risks, their impact on long term Cost of Capital, and on a com-pany’s likelihood for lasting sustainability.

Recommendation to the CommunityThe issue of “how” cannot be resolved by any one group and will require the com-bined efforts of academic institutions, asset management firms, institutional in-vestors and others but it is an issue that is clearly timely. I recommend that an effort be made to bring thought leaders on the various aspects of ESG Investing together with the purpose of addressing the funda-mental question of how ESG criterion may best be quantitatively applied into the in-vesting process.

1(UNEP FI, 2006)2(Laura Gitman, 2009)3(SIF, 2007)4(Brundtland, 1987)5(Wesley, 1872)6(Clayborne Carson, 2001)7(UNEP FI, 2009)8(UNEP FI, 2009)9(Muyot, 2009)10(GS Sustain Research, 2009)11(CFA Institute: Centre for Financial Market Integrity, 2008)

About the AuthorDaniel t. Allen is the Director - Business Develop-

ment for Ativo Capital management LLC, an se-

Cregistered investment advisor. mr. Allen is a grad-

uate of the J. mack Robinson College of Business,

Georgia state University and is a former U.s. mili-

tary officer. He has been quoted in national publi-

cations such as UsA today, frequently writes about

environmental, social and Governance (esG) in-

vesting and is a public speaker on the topic. He

is the group leader of the Linkedin group, esG

investing, one of the largest international profes-

sional groups of its kind. His security licenses in-

clude the series 7 and series 66.

Investors and financial managers need a variety of tools to measure the financial premium of those risks, their impact on long term Cost of Capital, and on a company’s likelihood for lasting sustainability

case study BHP Billiton


Linking esG Metrics to executive PayCompanies should link appropriate ESG metrics to reward systems in a way that they form a meaningful component of the overall remuneration framework

BHP Billiton is a diversified natu-ral resources company that pro-duces or extracts petroleum, aluminum, base metals (includ-

ing uranium), diamonds and specialty products, stainless steel materials, iron ore, manganese, metallurgical coal and energy coal. Given the potential ESG-related risks faced by the company, BHP Billiton has em-bedded sustainability within its entire orga-nization, with particular reference to health, safety & the environment.

The company has been progressively evolving its practice of integrating ESG metrics in its remuneration packages, as evidenced by its remuneration report disclosure. While BHP Billiton has used safety (measured predominantly by injury frequency rates) as a driver of executive re-muneration for many years, over the past two years BHP Billiton has established a balanced scorecard approach to ESG met-rics as a basis for executive remuneration. The oversight functions of both the sus-tainability committee and the remunera-tion committee of the board are utilized in

case study | BHP Billiton


order to assess and reward executives on their ESG performance.

While some companies need encour-agement to incorporate ESG factors into their remuneration structure, BHP Bil-liton has embraced the incorporation of these factors into its remuneration pack-ages. This is due to the fact that BHP Bil-liton believes that ESG issues are integral to the mining sector, and as such, the company understands that ignoring ESG issues could ultimately result in the loss of its license to operate in particular areas of the world.BHPBillitonrecognizesthat-anydiminution in or loss of its license to operate will negatively impact its ability to execute its strategy of creating long-term shareholder value through the discovery, acquisition, development and marketing of natural resources.

Due to the potential impact of ESG fac-tors on the company’s operations, BHP has embraced the incorporation of ESG metrics into its remuneration packages. The company has seen an overall progres-sion in its incorporation of these metrics and it has put in place a structure whereby the sustainability committee of the board receives a detailed paper on the Health, Safety, Environment and Community performance of the company. Based on this paper, and after reaching a view of what entails appropriate outcomes, the sustainability committee advises the re-muneration committee on its assessment. The remuneration committee typically pays close attention to the sustainability committee’s assessment of the company’s performance, and a focus on the growing relationship between these two commit-tees has been a key part of BHP Billiton’s evolution in improving its governance and its metrics setting processes.

Currently, 15 per cent of executives’ short-term incentives are based on a bal-anced scorecard of ESG measures. At pres-ent, BHP Billiton’s long- term incentive plan is based on total shareholder returns, and ESG metrics are not explicitly in-cluded. The company currently takes this approach as it believes ESG performance has the potential to have a significant im-

pact on overall financial performance in both the short and long-term. Poor ESG performance will therefore be reflected in total shareholder return, thereby influenc-ing the vested outcomes of the long-term incentive plan.

However, BHP Billiton’s remuneration structure has recently undergone signifi-cant changes. For example, in 2009 and 2010 ESG metrics were primarily focused on total recordable injury frequency; how-ever, since 2011 the company has adopted a balanced scorecard approach for its ESG metrics which were broadened to include fatalities, significant environmental in-cidents, HSE risk management, human rights impact assessment, and environ-ment and occupational health. The remu-neration committee also has the discretion to award zero pay-outs in the case of ex-treme events, regardless of the outcomes of its formulaic measures. The company has seen continued progress over time in its sustainability initiatives and states that linking ESG issues to remuneration has had a significant financial impact on employees whose compensation is most closely linked with ESG measures, driving better ESG performance. This has coincid-

ed with BHP Billiton’s broader initiative of minimizing operational risk.

Key takeaways:• There are clear lines of oversight at BHP

Billiton and the sustainability and remu-neration committees of the board work in conjunction to establish and verify ap-propriate ESG metrics to be used for the purposes of executive remuneration;

• The collective efforts between the sustain-ability and remuneration committees of the board has assisted BHP Billiton in establish-ing more robust governance practices;

• BHP Billiton uses a balanced score-card approach to ensure that both ESG and financial goals are achieved within the organization;

• The board retains discretion in award-ing remuneration based on ESG metrics and can reduce payout levels based on underperformance or certain qualifying events, despite their formulaic approach to determining awards; and

• BHP Billiton associates higher levels of performance related to sustainability initiatives due to properly incentivizing executives on ESG metrics.

© UnPRi

due to the potential impact of esG factors on the company’s operations, BHP has embraced the incorporation of esG metrics into its remuneration packages

ethics supply chain


ethical sourcing@ WalmartAudit ProcessWalmart implemented an industry best practice to conduct validation audits that check the accuracy of third-party audits

Factory audits are a central pil-lar of Walmart’s ethical sourc-ing program. Because Walmart does not own any of the factories

that produce merchandise for our stores, regular audits are conducted to verify that a supplier is complying with Walmart’s Standards for Suppliers and to find ways to strengthen working conditions and labor practices in factories. In 2011, more than 9,737 audits on 8,713 factories were con-ducted to verify if suppliers were adhering to Walmart’s Standards for Suppliers.

When auditors visit a factory, the audit process enables them to determine if:• Workers are treated with dignity and

respect;• Workers are paid appropriately and re-

ceive the legally and contractually de-fined benefits;

• Working hours comply with the law and Walmart’s standards;

• Well-defined hiring practices are fol-lowed, which include age verification

ethics | supply chain


and confirmation of the individual’s eli-gibility to work in the country;

• The working environment is clean, safe and well-maintained; and

• Open and safe communication be-tween workers and management is established.

Walmart AuditsFactory prequalification is required for factories of suppliers managed by Walmart Global Sourcing or Direct Sourcing Group where Walmart is the importer of record. To be approved, a factory must receive one of Walmart’s two highest as-sessment ratings. Subcontracting factories must also be audited if they produce part or a component of a product, containing a Walmart private label or proprietary brand logo, including, but not limited to, a ma-jor component of a finished product that could be sold independently.

After a factory is approved to produce merchandise for Walmart, all subsequent audits are unannounced.

The audit process includes:1. Opening meeting – Auditors verify

the factory’s business license and follow up with factory representatives on any noncompliance violations identified during previous audits

2. Factory tour – Auditors conduct a factory walk-through and speak with employees on the production floor about the factory’s compliance with Walmart’s Standards for Suppliers. Au-ditors also check equipment and safety mechanisms and inspect for any health, safety and environmental hazards.

3. Employee interviews – Auditors interview a representative sampling of workers (based on the size of the work-force) in a private area without manage-ment present. The selection of workers is representative of factors such as gen-der, nationalities, age and skill ratios at the factory.

4. Documentation review – Auditors review personnel documents and re-cords to check workers’ ages, contracts, compensation and working hours.

5. Closing meeting and signing of the onsite report – During the closing meeting, the auditor will discuss any identified issues and recommendations to remedy any violations observed and present the factory with an onsite re-port containing this information for their acknowledgment and signing.Once a factory is audited, the findings

are reviewed and a rating is assigned by the Walmart Ethical Sourcing Assess-ment Team.

There are four types of assessment ratings:• Green: minor to no violations; the fac-

tory will be audited within 2 years.• Yellow: medium-risk violations; the

factory will be re-audited within 1 year.• Orange: higher-risk violations; the

factory will be re-audited within 6 months; if factories receive three or-ange ratings in a two-year period, the factory is disapproved and prohibited from doing business with Walmart for at least one year.

• Red: most serious violations that war-rant no future business with Walmart.Walmart uses the audits to help make

decisions about suppliers and factories – whether to develop them, make them a preferred supplier or to stop doing business with them due to the severity of violations.

integrity of AuditsAll audits are conducted by approved third-party audit firms. Walmart only contracts with accredited and internation-ally recognized auditing firms. Approved audit firms will be required to complete

the equivalence process for the Auditing Competence portion of the Global Social Compliance Program.

All auditors must be approved and registered with Walmart. Audi-tors must have an understanding of local laws, requirements and collective bargain-ing agreements prior to the audit. Local language skills, gender and relevant audit experience in that particular industry are considered when assigning audit teams.

Walmart takes steps to ensure that all factory audits are conducted with integrity. Walmart implemented an in-dustry best practice to conduct validation audits that check the accuracy of third-par-ty audits. These re-audits are conducted by the Walmart Ethical Sourcing Special Au-dit Team. Validation audits occur within 30 days of the last audit, and they follow the same protocol including choosing the same workers to interview, reviewing the same set of records, etc. Validation audits are conducted at random or if Walmart has concerns about a particular audit. © Walmart

Factory prequalification is required for factories of suppliers managed by Walmart Global sourcing or Direct sourcing Group where Walmart is the importer of record

SuStainability Investment


Sustainability: Generating a Return on investmentInnovative organizations that understand the value of CSR work to create a corporate culture in which each employee is committed to doing his or her part to improve the environment

by john garrett

Organizations of all sizes are rap-idly discovering that corporate social responsibility (CSR) and sustainable business prac-

tices can foster improved green programs and overall environmental stewardship.

Today we are seeing increased awareness and active participation by business profes-sionals in the development of CSR policies. Organizations are becoming more involved in green initiatives by adopting sustainable processes and practices, adapting products and services to the low-carbon economy and innovating all areas of their usiness. The net positive on reducing waste, designing green buildings, implementing green opera-tions and maintenance plans — is they all have continually proven to yield a positive return on investment (ROI).

CSR has come to rely on a more com-plex set of factors than corporate gover-nance alone and also depends on sustain-able development, environmental impact and supply chain management.

With the development of the new carbon trading markets, verified emission reduc-

SuStainability | Investment


tions (VERs), also known as carbon offsets, and renewable energy credits (REC’s), it has become easier for organizations to create and measure direct ROI from CSR. Likewise, CSR efforts have shown to yield measurable returns in waste reduction, improved effi-ciency, diminished liabilities, improved com-munity relations, and brand recognition.

Through communicating clear and mea-surable sustainability objectives and the implementation of practical and equally func-tional corporate governance mechanisms, or-ganizations are realizing that they can achieve a ROI through their sustainability efforts.

Integral strategies in ensuring substan-tive long-term results include:• Define path of progress in CSR and stra-

tegically manage expected organization-al outcomes

• Ensure basic CSR values are culturally integrated across the organization

• Adopt an effective engagement strategy with stakeholders to create buyer aware-ness and loyalty

• Properly map organizational objectives and critical success indicators with CSR performance metricsInnovative organizations that under-

stand the value of CSR work to create a corporate culture in which each employee is committed to doing his or her part to improve the environment. According to Forrester Research, effective CSR and sus-tainability practices within large companies have been shown to contribute to a profit increase of up to 35 percent.

What’s your ROi?There are proven methodologies that dem-onstrate ROI benefits to CSR. Partial sum-maries of several strategies are outlined below and reflect best practices in the im-plementation of successful CSR programs designed to drive improved operational performance and net positive ROI.

improving Operational EfficiencyPerhaps the strongest – and best document-ed – argument for engaging employees in environmental practices is the connection between CSR involvement and increased

operational efficiency. Front-line employ-ees are often in the best position to identify inefficiencies and propose improvements. Educating employees on CSR can improve profitability by supporting greater efficiency through less waste, water and energy usage.

innovationEmployee environmental and sustainability education can be a source of innovation and savings, resulting from the development of new product and service lines as well as new technologies, materials or processes that re-duce water, energy usage or harmful materials.

Supply Chain ManagementEducating employees on sustainability practices throughout the supply chain can lead to greater efficiencies and build collab-oration to meet sustainability, quality and other goals. It can also strengthen relation-ships between a company and its suppliers by aligning values and objectives.

Financial ResponsibilityWe are seeing an unprecedented level of government programs and initiatives de-signed to drive corporate decision-making within markets that include manufacturing, construction, etc., to invest in implement-ing practical and measurable green building design, construction, operations, and main-tenance solutions. In many cases, the good news is that implementation of sustainable operations can drive increased efficiency through reductions in energy consumption, implementation of building maintenance methodologies that are often cost neutral and decrease the cost of workspaces through use of recycled furniture while changing to low–use lighting (which provides eco-friendly work environments), to name a few.

Government subsidies and incentives often further complement and reward ef-forts to develop and implement successful sustainable operations and maintenance programs. Nearly all of the points needed for LEED Certification (40 points) can be achieved through the energy and atmo-sphere category (35 points). It is by far the largest category within the rating system, and emphasizes the combination of energy

performance and renewable energy, which has shown can lower costs by up to 50 per-cent in the first year alone.

It is widely accepted that green building occupants are healthier and much more productive in their work. With an average of 90 percent of Americans spending more of their time indoors, green buildings often have better indoor air quality and lighting, among other key advantages.

Measuring the impact of CSR in achiev-ing social and environmental goals can be difficult, but is becoming more common if not expected within corporations. Typically in business what gets measured gets man-aged, and as long as the right metrics system is created and data is tracked accurately al-most any environmental CSR initiative can yield positive results.

There seems to be a direct correlation between the implementation of effective green programs and design of green build-ings, and improved office worker produc-tivity and employee morale, while driving efficiencies and reduced consumption.

Innovative, forward-thinking companies have learned that they must be fully com-mitted to strategic initiatives that are direct-ly tied to their business’ core competencies (or those of clients, employees, etc.). The advantages of doing so through an effective CSR program, such as building brand rec-ognition and realizing increased sales and fostering trust with employees and commu-nity, can be achieved as a win-win in almost all situations. With committed leadership and a strategic approach most companies can find a substantial ROI benefit in CSR.

John Garrett serves as CeO of Facilities manage-

ment Advisors, LLC. Garrett has consulted with

clients that include some of the most recognized

Fortune 500 organizations in the world including,

Procter & Gamble, General Dynamics, Wyeth Phar-

maceuticals, Ameriprise Financial, Coca-Cola Com-

pany, Honeywell, Fidelity Investments, masterCard,

among others. Garrett is a published author and

regular speaker at conferences and trade shows.

Garrett holds a degree in Physiology from Oregon

state University, where he played collegiate foot-

ball, and pursued his mBA in strategic management

at Regis University.

corporate Transperancy


transperancy Leads to Long-term Sustainabillity For a Business, it’s performance on Environment consumption and Social interventions is as important as financial performance to achieve sustainability

by namita vikas

A clean image on Governance has its benefits with easy access to capital and to attract the right kind of institutional investors

and enhance shareholder value. While a significant part of good governance is mea-surement and reporting of performance through Annual reports, this is limited to financial performance as mandated by regu-lators and shareholders.

Since a ‘sustainable economy’ depends not only on economic but social and en-vironmental performance, it is becoming critical for companies world over to moni-tor, report and reduce its carbon foot print.

For a Business,, it’s performance on En-vironment consumption and Social inter-ventions is as important as financial per-formance to achieve sustainability besides profitability. We see examples, predomi-nantly from Europe where Companies apply triple bottom-line approach and at the same time, attain higher profits. These model companies have realized their de-pendence on limited non-renewable re-sources and therefore map this impact to

corporate | Transperancy


reduce it. This demonstrates that non- fi-nancial reporting which originates out of sensitivity towards society and environ-ment is beneficial and not just a matter of compliance. The role of reporting is very critical since it monitors processes and the relationship with social and environ-mental factors as part of overall disclosure and accountability.

The extent of Transparency and Ac-countability of a Business resonates with its Corporate Social Responsibility. Owing to the fact that CSR has 179 definitions in-ternationally, and so approached in differ-ent methods, it is yet to evolve as a uniform approach in India. In its latest avatar, CSR is ‘Business Responsibility’, where we see many organizations take responsibility of their impact on society, environment and acting on it positively. However lack of a good measurement system often paralyzes this process of quantifying positive impact.

Therefore, development of an effective measurement system becomes critical, and Disclosure, aided with such a system, would only improve practices in line with company values. With a robust reporting practice, there is an available benchmark against national and international players to improve practices.

A recent news article highlighted an important thought, wherein analogy was drawn between disclosure and good school assessment. It went on to state that peri-odic checks help recognize deficient areas, analyze strengths and weaknesses, which prepare students better for an all-round performance. The report card in itself is not an end, but is an important means to move from one stage to the next.

In the case of financial reporting we see this systematic approach, as it is regularly measured and similar logic could be ex-tended to non-financial reporting as well.

Following the RIO+20 summit,there is now, pressure on the governments and regulators across the world to develop effec-tive regulatory measures for non-financial reporting to encourage private sector’s con-tribution to sustainable development, given that transparency and accountability are key elements to such growth.

In India, the Ministry of Corporate Af-fairs (MCA) in an attempt to help corporate sector with its inclusive development efforts put out the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs). One of the underlying themes is that ‘actions taken by business should be agreeable to disclosure’. A disclosure framework is be-ing put together where businesses would be able to communicate their processes and performance in a transparent manner to both internal and external stakeholders.

The framework that was divulged for public consultation by MCA looked ho-listic in its approach and progressive in its understanding of Business Responsibility and Sustainability. This disclosure frame-work is consistent with global reporting frameworks, like GRI, which Indian com-panies use in their sustainability reports. In that sense, the framework promises to accommodate GRI to a point, that if com-panies are already reporting using the GRI framework, all they have to do additionally is clearly map each of the NVG principles to appropriate sections of their GRI Sus-tainability report.

However, the framework proposed by MCA didn’t provide guidance for the Fi-nancial Sector disclosure specifically. YES BANK has used the GRI G3 Financial Sec-tion supplement to frame its FY12 Sustain-ability Disclosure section of the Annual Report following international standards.. The GRI guidelines provide additional re-porting indicators to enable better Triple Bottom Line disclosures from the financial sector. A similar inclusion in the Disclosure framework suggested by MCA is desired to make it all-Industry encompassing.

In addition to this, the latest develop-ment regarding SEBI’s requirements on submission of a ‘Business Responsibility Report’ is another disclosure knock on the doors of Industry.

Some Indian Business have been ahead on the disclosure curve with about 75 companies reporting on Sustainability ei-ther through GRI, UNGC guidelines or integrating in their Annual Reports. That leaves a huge number of laggards who ei-

ther conduct business responsibly but don’t report or otherwise. We typically see four scenarios – those who do but don’t report, those who do and report, those who don’t do and don’t report and those who don’t do and report. The first and second examples are desirable and many such would only strengthen this non financial reporting base.

Reporting is a learning tool to look at processes differently and more closely. Reporting not only serves the function of effective internal and external communica-tions but also facilitates cross collaboration among different stakeholders. It certainly helps build trust, credibility and visibility among communities and investors apart from enhancing profitability. There are ex-amples which showcase that businesses can operate to generate profits while develop-ment priorities are executed in parallel.

While measurement and management systems are about change in behavior and mindset, businesses play the role of catalysts that continuously fuel positive impact. Sus-tainability is therefore not just an ethical im-perative but rather a sound business decision that helps mitigate risks and identify new business opportunities that impact society.

While reporting frameworks are mere enabling mechanisms, they don’t substitute as inputs to CSR strategies. CSR needs to be strategic in nature as any other business stream with the stakeholder and the posi-tive impact to be created in mind. A good start point would be to use the assessment mechanism that would identify where a company stands on the CSR scale and then move the graph higher.

However for India, the larger need is to demystify the CSR terminology and evolve with a common understanding of CSR to be able to create appropriate positive impact.

namita Vikas is president &

chief sustainability Officer

of yes Bank and spearheads

bank’s Version 2.0 Vision &

strategy of further strengthen-

ing the bank as a commercially viable financial in-

stitution with sustainability principles incorporat-

ed within its core operations. she is also advisory

Board Member of Indian centre for csr.

Book Review


The Responsible Business

Street Smart Sustainability

The Responsible Business offers a new and strategic approach to doing business that holistically integrates responsibility into all aspects of an organization, allow-

ing for returns at every level, business and social. This book is authored by Carol Sanford. She has been the CEO of InterOctave, Inc., a global business resource to Fortune 500 and new economy businesses large and small, for over thirty years. In addition, Carol lectures at universities such as MIT Sloan School of Management, University of Washington Foster School of Business, and University of Michigan Ross School of Business on sustainability, business innova-tion, and corporate responsibility. This book goes be-yond the often well intentioned but limited attempts at sustainability to present a framework that allows organizations to bring responsibility into everything they do and re-imagine success. From innovation, product development, and production processes to

business management, strategic planning, and share-holder development, the author shows how being a Responsible Business is a practical skill that can be applied day-to-day at every level of the business. No longer just the role of a department or the job of CSR professionals, successful responsibility and business efforts start at the business level, are then taken to the corporate level, and are finally applied throughout the organization.

The Responsible Business outlines a framework for building a responsibility and consciousness in-frastructure that applies a living systems view to the business and inspires all of its stakeholders, includ-ing shareholders. Throughout the book, illustrated by examples from technology to manufacturing, large and small, public and private, Sanford dem-onstrates how to make responsibility integral to all aspects of a business as an engine for innovation, profitability, and purpose.

If you run a small- to medium-sized business and you’re wondering whether or not to go green, this book probably isn’t for you. Al-though David Mager and Joe Sibilia do include

10 reasons sustainability makes economic and eco-logical sense, they’re not here to convince you why.Street Smart Sustainability is about – with detailed, nuts-and-bolts, step-by-step advice on – how to green business green profitably.

The book is written by David Mager and Joe Si-billia. David has helped over 300 Fortune 500 and entrepreneurial companies become green profitably and recently worked as an advisor on sustainability issues to the Obama Transition Team.

Joe is chief visionary officer and part owner of CSRwire.com; an online newswire that distributes news about sustainability and social responsibility to over a million professionals in more than 200 coun-tries. Mager and Sibilia begin by discussing how to get employee buy-in to and motivate your company into becoming sustainable. Then they cover how to get started – auditing your current sustainability po-

sition, developing a plan to move forward and quan-titatively measuring your progress.

Street Smart Sustainability” allows organiza-tions to address sustainability on a broad-based and comprehensive level. Rather than advocating the typical approach aimed solely at harvesting the low hanging fruit (such as making the switch to CFLs or low-flow faucets), Mager and Sibillia offer a pre-scriptive means of analyzing an entire organization with a systematic approach. Instead of focusing on the current state of the environment or proselytiz-ing the merits of green business, the authors dive directly into the types of reforms that can lead a business on the path toward true sustainability. Street Smart Sustainability is a roadmap to the sus-tainable low-hanging fruit at a time when the public is hungry for businesses that demonstrate genuine respect for the environment. It provides simple tools so you can make continuous, cost-effective improve-ments in your sustainability practices – practices that diffuse into the organizational DNA and become fix-tures, shifting the prevailing corporate culture.

RNI No. MAHENG13231/13/1/2012-TC

csr today jan-mar 2013

Documents

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mandatory csr spending

global csr fraternity

corporate sustainability

corporate responsibility

corporate governance

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