CSR: 8 Short Questions, 5 Long Answers

For those of you who don't speak Romanian (which I don't, though I have downloaded an App :)), I thought I would provide a translation of my recent interview which appeared online here. The interview is with ResponsabilitateSociala.ro,  the premier portal in Romania for all things relating to CSR. Andreea Giuclea, editor of ResponsabilitateSociala conducted the interview and was responsible for asking me many thought-provoking questions. ResponsabilitateSociala is hosting the annual Europe CSR Lessons on 15th and 16th May in Bucharest, with a fine line-up of speakers and fascinating case studies. I will be presenting a home-grown case study from my own market on Wednesday 16th May. More about that after the event.

When Bing Tanslate came up with an interesting "English" translation of my interview in Romanian, I realized that I had to step in. This is just one example:

 

Here is the interview in full. Bingless. 

 

We recognize that companies have to start where they are. As consultants, we are always looking to help our clients deliver more progress, better results, faster implementation and broader and deeper assimilation of sustainability principles in the business. However, we recognize that companies can only do so much and that they have to pace themselves. Sustainability is a long-term effort and must follow a strategy which has a scope and a timing which is right for each business.

 

We therefore advise companies to look at their broader role in society and how their sustainability performance is positioned in the context of the contribution they make to a better world. We advise companies to find the right focus for their business and drive their performance in that focused area as hard as they can, while ensuring a minimum baseline across key sustainability indicators. We advise companies to ensure they bring along all their employees and external partners – sustainability works best when it forms a culture which is embedded in the business and is done in partnership.

 

We urge companies to measure not only performance, but outcomes and consider the question: what is different in the world as a result of our sustainability performance? We advise companies to report as honestly and as transparently about their business in a way which enables stakeholders to gain a true appreciation of their impacts. Finally, we advise companies to be realistic and authentic, acknowledging they are on a multi-year journey and not a day-trip.

Worldwide, I believe sustainability is in a dynamic phase and moving towards a more holistic representation of the concept. Rather than just trying to "be good" or "do good", there is more of a realization these days that sustainability is a way of business, not just a project which runs alongside the business. No longer just about values or philanthropy, companies now see they can make money through sustainability.

 

This means that companies are looking for the "shared value" aspects of sustainability activity which are generated through different business models. Regulation is also getting keener in many countries and carbon emissions, energy, water and other natural resources are becoming more expensive. Financially, companies are realizing that their financial balance sheet has the potential to be significantly affected by government intervention with carbon taxation, water taxation, landfill costs etc.

 

The move to an integrated approach to sustainability, characterized by the integrated reporting model, is taking time to be fully understood but is showing signs of reaching a wider corporate audience. Finally, the use of web-based tools to connect with stakeholders and online interactions to gather stakeholder feedback are becoming more acceptable.

 

Broadly, the approach to sustainability is more governed by the size and global nature of a business, rather than its location. Global companies, which are generally leading the sustainability pathway, operate in the same way in every market in which they are present. This has the effect of leveling out local and cultural differences. Local companies in every market are impacted significantly by the standards established by leading businesses, as they are often suppliers to these businesses. Microsoft, P&G and Wal-Mart, for example, require their suppliers to report on sustainability performance.

 

However, in a more general sense, there are some differences in culture and focus, depending on the state of business and sustainability practice. Local companies in emerging economies, for example, are primarily concerned with ensuring compliance and attention to quality, safety and employee standards, while focusing their efforts on those aspects of sustainability which will deliver shorter term cost advantages, such as energy and raw materials savings. In some areas, such as India, sustainability is more about citizenship and philanthropic activities. In some countries, such as Japan, sustainability is very systematic and driven by quality frameworks, whereas in other countries, such as Africa, it's more about social equality and empowerment.

We see transparency as a catalyst for performance. The very act of preparing a Sustainability Report causes a company to confront many issues within its business which have never been addressed previously in the same way. Different questions are asked and new measurements are required. Core deliberations about disclosure cause serious discussions in the business at the highest levels. Making a public commitment to targets and action plans carry a certain pressure to deliver, far more than with targets communicated internally.

 

Additionally, Sustainability Reporting is a source of pride for employees and serves to support employee engagement. Therefore, most companies find that reporting serves as a management tool to help define and determine performance levels, set targets, engage employees and make progress.

 

In addition, of course, transparency is the basis of a trusting relationship with stakeholders – research has shown that readers of Sustainability Reports increase their level of trust in the reporting company, even if the report is not of the highest quality. (See specifically the recent report from ACCSR, on readers' perceptions of Sustainability Reports) A strong level of trust from stakeholders is massively significant and can help the company move forward and overcome challenges and risks. Often, the Sustainability Report is the only place in which the company can tell its own story, as reports in the press may be misrepresentative.

More and more these days, we do less in terms of "trying to convince" companies to report. We prefer to talk to companies about Sustainable Business Strategy, and help them understand why and how this is beneficial for their business as well as for society and for the planet. The Sustainability Report is part of this discussion. Our reputation as Sustainability Report consultants often brings companies to approach us after they have made the decision to report and are looking for the expert support to deliver the best document they can.

However, we still spend much time and energy in helping develop awareness in the market, through our writings, conferences and our work with different corporate groups. One initiative, which we started in 2009, is called the Transparency Index. We evaluate and publish a ranking of the website transparency of leading public companies in different markets in the world to see how they are reflecting sustainability issues in an accessible way through their web platform. For the first few years, we covered the Israeli market only, but now, in partnership with the Center for CSR Development in Ukraine, we are expanding this into a global index which will be launched later this year. Web-based transparency is also influenced by the presence of a Sustainability Report.

In general, we find that companies which are on the sustainability journey are more ready to report because they have accepted that transparency is an inseparable part of the overall process. Often, they are subject to pressures from their customers or even competitive pressures to report. Those who have not, often talk about the complexity, cost and lack of investor pressure to report. However, these are companies who have not quite understood what Sustainability Reporting is all about. Even as an SME, you might say a micro-business, my consulting firm Beyond Business published a first Sustainability Report (which won an award as the Best SME Report in the global CRRA '12 Awards in April 2012), and we intend to report every two years. As a consulting firm, this is important for us to "practice what we preach" and demonstrate that any reason for not reporting on sustainability is simply an excuse and not a justification.

The Human Resources function in any business has an important leadership role to play in contributing to the definition and execution of sustainability strategy in any company, and also in establishing Human Resources practices which are sustainable. Sustainability done well requires changing the culture of the business. The Human Resources function has the specialist knowledge and skill to drive culture change processes.

 

To embed sustainability, HRM needs to be clear about the contribution of employee engagement and employee practices to delivery of an overall sustainable business plan. Many HRM processes are inextricably linked to sustainability themes – compensation, recruitment, diversity and inclusion, safety, health and wellbeing. HRM can also make a profit-supporting contribution to sustainability. Wellbeing programs, for example, are now known to deliver up to four times the investment for companies, in increased employee productivity, reduced health costs and insurance premiums, reduced absenteeism and turnover. HR needs to get better at measuring their contribution and tabling the benefits in a clear way. Regrettably, most HR Managers have still not understood this.

I think the first thing is for a company to make the decision to define a clear strategy that integrates sustainability thinking into business processes and define what the desired outcome is. In the current line-up, it is hard not to ignore Unilever as a company which has made bold statements about sustainability, "decoupling" environmental impacts from corporate growth and trying to engage consumers in behavior change, with a CEO who is very vocal about the importance of this approach and carries much influence.

 

There are many companies I admire, ranging from large global corporations to smaller local businesses in different countries. Pepsico, Marks and Spencer, BT, Novo Nordisk, GlaxoSmithKline, Intel, IBM, Microsoft, Walt Disney, Vodafone, Telefonica of Spain, Westpac Bank of Australia, Kesko of Finland, Natura Cosmeticos of Brazil, Novus International from the U.S., Netafim of Israel, – some of whom are my clients - are all showing sustainability leadership in many different ways.

I think the important thing here is not to try to reduce sustainability to one single denomination. Sustainability is a complex set of factors and no company is totally perfect. As long as a company is stretching itself to do what it can from where it is, and making demonstrable progress, I have admiration for that.

 

There is a lot of debate about whether CSR or Sustainability will remain as a distinct function in business or whether it will become absorbed into the fabric of each business and part of the general responsibilities of managers and the way they do things. I don't believe this latter approach will work. I believe that Sustainability will always be a required focus of every business, acting as a platform and a guide and a set of checks and balances for each business.

 

I believe sustainability is growing into an important profession which will rank alongside the business leadership with its own voice and contribution to successful sustainable business strategy. Of course, it does become part of everyone's role, but without leadership, no business function has impact. Just as businesses have absorbed Quality as a Way of Life, but there is still a Quality Manager in most businesses, so Sustainability cannot survive without its own distinct strategic leadership within the business.

Over the coming years, I believe we will see more regulation around sustainability themes, especially transparency and reporting, and therefore the number of companies which deliver Sustainability Reports will increase substantially. This will have the effect of catalyzing sustainability performance and creating a new competitive threshold for all companies everywhere. Companies which do not participate in this movement will lose ground and become the exception.

 

For those companies which are still undecided about sustainability, the time is now! In Romania, I believe there are massive opportunities, with a growing economy and a stronger presence in Europe and in the world. This is the time for companies in Romania to align with leading business practice and become more prominent in their adoption of a sustainability approach.

 

 

I am looking forward to the European CSR Lessons Conference and to being back in Bucharest. They have fabulous ice cream in Bucharest :)