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publisher’s note

Ignoring CSR is not an Option

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Rajesh Tiwari Publisher rt@iccsr.org

“Indian centre for CSR Believes that it is important for Indian companies to also be aware, informed and educative about such management concepts as it is said that if you do not change ….time will change you anyway!”

usiness’s today impacts People, Planet and Society. Yet at times, Business is unable to understand, connect to the repercussions it creates for People, Plant and Society and thereby they continue to perceive Business’s with Suspicion and even for Government it remain a case of Suspect. Accordingly it is the abundant duty of Business’s to come clean and remain Credible and Ethical. Across the Globe today, the trend toward CSR, Stepped –up Government Legislations and even , more for Gallery, oriented Elaborate Government codes continues, more in response to the Global Economic Crisis and to the opening of Markets in BRIC nations. Champions and Advocates of these Measures speak with almost Missionary Zeal for speedier implementation as if increased Corporate Governance is Panacea of all ills and should be able to halt all risks Corporate Malpractices, Negative earnings by just implementing such policies. There is little doubt that CSR Framework and Guidelines help and Erase the Doubts in minds of Share-holders and Stake-holders and for these reasons CSR Disclosures and Transparency has become the Toast of the day and corporate use them as integral to their core policies when comes to reporting Financial Results, Disclosures, ownership’s details, Share-Holdings, Executive Pay and Perks, Board Independence, Governance Structure and Corporate Policies. It will, therefore, not be out of place to think and request Government of India to Formulate and Build a Robust and desirable frame work/action plan to encourage, stimulate and Further the Business Interest’s with eye towards the “social Returns” Here, one could take a leaf from Government of Germany which has articulated a National Strategy for CSR since 2010, and Readers are encouraged to see the Link http://www.bmas.bund.de for a detailed look of this National strategy which Germany pursues unlike the Voluntary Guidelines for CSR which our Government is advancing. Wherever Government is Pro-active in its CSR approach…Business’s have flourished along with Sustainable Development. Our current Minister Veerappa Moily is indeed making serious efforts to ensure that CSR becomes Mandatory and if current adoption

of its Consultative committee is any indication, India soon will have a Compulsory CSR Framework and Policy. We at CSR Today, feel that he will use all his skills to ensure smooth Passage of this Bill, in coming Parliament Session. Indian Public Sector is also largely ignorant about its commitment towards CSR and what it means to adopt Global best practices in CSR. Most of them, think that they are doing great CSR work but are mindfully unaware that before indulging in CSR work, have they performed scientific analysis to ascertain stakeholders needs and aspirations. The need to understand that if Stakeholders needs and aspirations are not mapped…. How can their shareholders be happy? It is also very sad to understand that in competitive environment they take advises from social organizations, which have never managed or created Businesses’ worth billions of dollars. Imagine PepsiCo, General Electric, Starbucks, BP, Kraft, Unilever etc Will ever resort to taking advise from any social Organizations? Public Sector in India need to understands that they need to know what Global companies are doing in CSR. World Over, CSR is acquiring Centre- Stage in Corporate Planning or Vision Document as Companies are increasingly understanding that it is important for their survival to not only look for “Financial Returns” but also they need to include “Social Returns” Leading Global Fortune 500 companies are imbibing CSR in their Core Strategic Vision as they understand that ignoring CSR is not an option but embracing it will only give and allow them to “Sustain competitive Advantages”, That’s why Economist like Michael Porter and others are talking about inducting the concept of “Shared vision” for organizations to adopt in their core strategic Planning. Indian centre for CSR Believes that it is important for Indian companies to also be aware, informed and educative about such management concepts as it is said that if you do not change ….time will change you anyway! So those who plan in advance will shape their destiny well and will remain ahead of its peers. CSR Today is committed to keep its readers abreast of all such recent Global happenings in CSR…so that India remains fully integrated to Global Best practices and ever changing landscape of CSR!

May-July 2012 | Corporate Social Responsibility Today | 1


Conference on

Corporate Social Responsibility October 8, 2012 , 0930-0500 HRS Mumbai

Business strategy and CSR: How they integrate and pay off for your business� As the number of companies implementing sustainability and other corporate social responsibility (CSR) policies has grown, an increasingly important question is how embracing these policies affects financial performance. Are environmental and social initiatives essentially efforts in public relations — and costly ones at that? Or does creating a corporate culture that focuses on these issues for employees, customers, the community, and the world at large actually add to the bottom line and the price of a share? Get your questions answred from Leading CSR Experts such as Toby Webb, Founder, Ethical Corporation and CEO, Stakeholder Intelligence A Not for Profit Organization 601, Techno city, Plot No. X4/5A, T.T.C. Industrial Area, Mahape, Navi Mumbai- 400710 (India) Email: info@iccsr.org Website: www.iccsr.org


message from minster |

corp affairs, govt of india

Dr. M. Veerappa Moily Minister of Corporate Affairs Government of India

May-July 2012 | Corporate Social Responsibility Today | 3


Contents

12 cover story

May-july 2012 | vol. 0i | issue 01 Printer and Publisher: Rajesh Tiwari EDITORIAL Executive Editor: Sanjeev Verma Copy Editor: Tinu Joseph CONTRIBUTORS Martin Neureiter, Brent Croxton, William Fisher, Irene Daskalakis, Harsha Mukherjee INDIAN CENTRE FOR CSR ADVISORY BOARD Pankaj Pachauri Ted McFarland Mag. Martin Neureiter Chandir Gidwani Lou Altman Kingshuk Nag Toby Webb Anil Bajpai Nikos Avlonas Rajesh Tiwari Satish Jha Amit Chatterjee

12 Unveiling the Importance of Corporate Social responsibility Across the Value Chain 14 The Business Case CSR for the World Market Leader in Brick Production 18 Corporate Social Responsibility: Wisdom or Window Dressing?

STAKEHOLDER SOCIETY

24 3 Bold Methods for Turning Capacity into Impact

Corporate Governance 26 Ethics & Compliance Forecast For 2012

Sustainable supply Chains 30 Making the Sustainable

Supply Chain Puzzle Simpler - Five Ways to Start

interview “Organization must periodically measure the impact of its CSR activities to see if it is having the desired impact on the right stakeholders”

36

–Ravi Shankar, Ex. VP, Marketing & Rural Business, Fullerton India

18

green products

32 Product Lifecycle Management Strategies: Designing products for sustainability and profitability

CSR Fundamentals

35 Four Pillars of CSR at Reliance Industries

sustainable development 38 The future of business and sustainable development

sustainability standards 40 Moving Forward on a

Sustainability Journey

PRODUCTION, CIRCULATION AND LOGISTICS Hardik C CIRCULATION SALES DK Upadhyay HEAD OFFICE CSR 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: editor@csrtoday.net Website: www.iccsr.org REGIONAL OFFICES NEW DELHI Regional Director: V Chopra Senior Manager: Nidhi Mohan CHENNAI Regional Director: DK Karthikeyan MUMBAI Vice President: Harsha Mukherjee Senior Manager: Dinesh Upadhyay Published, Printed and Owned by Indian Centre for CSR Published and printed on their behalf by Rajesh Tiwari. Published at Indigo Press (I) Pvt Ltd, Plot No. 1C 716 of Dadoji Konddev Cross Road, between Susscs and Retiwala Industries, Byculla (E), Mumbai 400027 and published at 106/A Nirman Kendra Plot No 3, Dr E Moses Road, Mahalaxmi Estate, Mahalaxmi Mumbai 400011 Editor: Rajesh Tiwari Disclaimer

REGULARS

01 Publisher’s note 05 CSR News 10 Column: Toby Webb 42 Book Review

advertisers’ index: ONGC Inside Front Cover | Tata 07 | TDS Group Inside Back Cover | IOCL Back Cover

The 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 publication, 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.


CSR News Parliamentary Panel Recommends Two Per Cent Mandatory Spent on CSR

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parliamentary panel has recommended that in the companies bill, CSR spent be made mandatory for companies above a particular turnover or net worth threshold. These companies will have to allocate two per cent of their net profit towards corporate social responsibility (CSR). Parliament’s standing committee on finance, headed by Bharatiya Janata Party leader Yashwant Sinha, finalised its report on the Companies Bill, 2011. The report would be given to Lok Sabha Speaker Meira Kumar soon. The committee wanted the government to have a clause in the Bill stating companies with net worth above `500 crore or an annual turnover of over `1,000 crore would have to earmark two per cent of their average net profits to CSR. The average net profits would be for the three-year period preceding the year in which the CSR allocation is to be spent. The committee also suggested a central Yashwant Sinha, Head of Parliament’s Standing Committee on Finance funding agency be created for companies that couldn’t spend the allocated money, and these funds be parked in that agency, something the government said it would review. The panel also asked the government to revert to the earlier stand of appointing auditors for a year, against the Bill’s proposal of appointing them for five years.

Monitoring of CSR Activities

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inister of State in the Ministry of Corporate Affairs R P N Singh said that Government proposes to make it mandatory for companies to spend income on CSR and the steps are being taken by Government to ensure that the Corporate Social Responsibility (CSR) is followed by companies for promotion of economic development of the country especially by assisting the disadvantageous sections. The Indian Government has taken various steps to encourage adoption of Corporate Social Responsibility (CSR) activities by the companies. The Department of Public Enterprises has issued guidelines for Central Public

Sector Enterprises (except those making losses) to mandatorily create a CSR budget. In July, 2011, National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business were released for guidance of companies in general. The Companies Bill, 2011 proposes that companies, depending upon their networth, turnover and net profit, shall endeavour to spend in every financial year, atleast 2% of the average net profit made during the three immediately preceding financial years, towards a range of activities including welfare of SCs, STs, OBCs, minorities and women, in pursuance of its CSR policy.

Tata Steel Trains Rural Youth as Part of CSR

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ata Steel Rural Development Society (TSRDS) is partnering with the Bhubaneswar-based Central Institute of Plastic Engineering and Technology (CIPET) to impart skills upgradation training to the local youths. Under a pilot project, seven boys from villages around SCM were trained as Plastic Processing Machine Operators by CIPET. After completion of training, Kheria Autocomp Limited, an ISO Certified company based at Ahmedabad, absorbed all of them. They are being paid a salary of `9,995 per month, besides other benefits. Similarly, for generating livelihood options for youths living in the periphery, Tata Steel has organised a Site Safety Supervisor Training Programme. Twentyone site safety supervisors, who successfully completed their training, were absorbed by various registered vendors of the Company. As part of the Company’s affirmative action initiatives, 38 per cent of the supervisors recruited were from the SC/ST community. Partnering with L&T, TSRDS, facilitated training of undermatric, college drop outs and ITI-passed jobless candidates. They are being trained at Kolkata in carpentry, bar bending, masonary and electrical trades, among others. After completion of training, the candidates will be absorbed by listed contractors of L&T. TSRDS has also has trained 30 local youths in welding in collaboration with the Chennai-based Pan IIT Alumni Reach for India. Following the training, the boys found engagement in BHEL.

May-July 2012 | Corporate Social Responsibility Today | 5


CSR | NEWS

Committee on Public Undertakings to Examine 14 Cos for CSR

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he Committee on Public Undertakings has said that it has selected several subjects, including Coal India Ltd, Indian Oil Corporation Ltd and Bharat Sanchar Nigam Limited for a comprehensive examination during 2012-13. The Committee will study issues related to Corporate Governance in select Central Public Sector Undertakings (CPSUs), Corporate Social Responsibility in select CPSUs, Sick, Loss Making and Closed CPSUs and Public-Private Partnership in select CPSUs. Among its functions, the Committee examines the reports, if any, of the Comptroller and Auditor General of India on the Public Undertakings and also examines the Public Undertakings in the context of autonomy and efficiency. The Committee also chose ten subjects based on Audit Paras contained in CAG Reports relating to various public undertakings. The Committee on Public Undertakings is a Parliamentary Committee consisting of 22 members. Fifteen are elected by the Lok Sabha and seven by the Rajya Sabha from amongst their members. It has selected several subjects, including Coal India Ltd, Indian Oil Corporation Ltd and Bharat Sanchar Nigam Limited for a comprehensive examination during 2012-13.

Indian Oil Launches mobile Healthcare

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P N Singh, Minister of State, Petroleum & Natural Gas and Corporate Affairs launched IndianOil’s Mobile Healthcare Scheme, a Corporate Social Responsibility (CSR) initiative of IndianOil, in the presence of H S Bedi, ED(HR), IndianOil and B S Canth, GM, UPSO-I and other senior officials. The scheme is designed to provide primary healthcare to underprivileged people in select rural areas through mobile medical units (MMU). As a part of the service, the 12 MMUs will provide free consultation and medicines to the needy in 141 villages in the three districts of Kushinagar, Mau and Maharjganj. Each MMU will comprise of a qualified Doctor, a pharmacist, a community mobilizer and a driver. The MMUs will be linked to IndianOil’s Kisan Seva Kendras(small format petrol/diesel stations). In one year, the MMUs are expected to cover a targeted population of over 3.5 lakh people. Gradually, this service is envisaged to be expanded to cover other parts of the country. The programme will also be a platform to create awareness on various

6 | Corporate Social Responsibility Today | May-July 2012

R P N Singh, Minister of State, Petroleum & Natural Gas and Corporate Affairs launched IndianOil’s Mobile Healthcare Scheme, a Corporate Social Responsibility (CSR) initiative of IndianOil, in the presence of H S Bedi, ED(HR), IndianOil and B S Canth, GM, UPSO-I and other senior officials.

issues like Health, Hygiene, Family Planning and HIV/AIDs. For this initiative, IndianOil has chosen Wockhardt Foundation as the implementing partner.CSR is an integral part of IndianOil’s corporate philosophy and healthcare is a key thrust area. IndianOil has a commitment to set aside 2% of retained profit for CSR activities.

News in Short NTPC Invests `10 Crore for Setting up an Engineering College NTPC Ltd’s Korba unit will invest `10 crore for setting up an engineering college at Korba in Chattisgarh. This is part of its corporate social responsibility initiative. A cheque of `1 crore, as a part of this initiative, was handed over to the Chief Minister Dr Raman Singh by NTPC Korba’s General Manager, Mr S K Roy. NTPC Korba unit has so far provided a total of `9 crore for the institute.

NTPC awards to Golden Peacock in CSR NTPC has been bestowed with Golden Peacock Award for Corporate Social Responsibility (CSR) 2012 constituted by Institute of Directors (IOD). The award was presented by Juma Al Majid, Chairman of Dubai Economic Council. NTPC was shortlisted for this prestigious award by a jury consisting of eminent personalities and chaired by Justice P N Bhagwati, former Chief Justice of India. The award is a recognition of its efforts in the field of CSR and has further enhanced its social image in the global community.

Vedanta celebrates Environment Day Vedanta Aluminium celebrated World Environment Day by organizing a massive plantation programme involving all the Vedanta & its associate employers & families. On the occasion, Dr. Mukesh Kumar, President & COO informed that nearly one lakh saplings will be planted in and around the plant this year as part of our commitment towards making the area green and to improve the ecology of the area. The Environment Day Celebration at Lanjigarh commenced with plantation in the plant premises and at Resettlement and Rehabilitation colony.


CSR | NEWS

J&K Bank Develops Parks as Part of CSR

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&K Bank has taken initiative to develop and maintain parks, which forms an important segment of its Corporate Social Responsibility, is aimed at providing means of entertainment to the people of the state. This was stated by Mushtaq Ahmad, Chairman & CEO, J&K Bank in his address to a large gathering of people soon after he dedicated Rani Bagh, the picturesque park developed and Mushtaq Ahmad, Chairman & CEO, J&K maintained by J&K Bank, to the people of Anantnag Bank dedicated Rani Bagh, the picturtoday. Notably, with Ranibagh, the number of parks esque park developed and maintained by developed and maintained by J&K Bank has moved J&K Bank, to the people of Anantnag up to nine. Revealing the Bank’s expansion plan, Chairman said that J&K Bank is planning to reach out to the remotest areas and unbanked segments of the state by pursuing a massive expansion plan for next three years. Parvez Ahmad, Executive President of the bank, in his address said the J&K Bank believes in concept of shared business dividends. “We believe J&K Bank’s growth is directly proportional to the financial soundness and social and economic empowerment of the people.” He said, “Environmental protection, promotion of sports, education, health and heritage preservation continues to be our priorities while framing annual CSR budgets”.

CSR Activities of Coal India

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ratik Prakashbapu Patil, Minister of state in the Ministry of Coal informed parliament CIL’s Corporate Social Responsibility Policy. As per policy, the company will take projects for the people and development of the Areas within the radius of 15 Kms for every project. The identified areas are education, water supply, health care, environment, social empowerment, grant/donation/ financial assistance/sponsorship, heritage sites etc. Funds for the CSR activities is being allocated based on 5% of the retained earnings of previous year subject to minimum of `5 per tonne of coal production of previous year.


CSR | NEWS

Siemens Surpassed its Sustainability Targets in Fiscal 2011

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iemens has announced that it has exceeded sustainability targets in the last fiscal year. Its achievement included a reduction in Siemens’ carbon dioxide emissions of 22% on a revenue adjusted basis, compared to fiscal 2006. The target for emissions reduction was 20%. Compared to fiscal 2006, Siemens also cut its water consumption 33% on a revenueadjusted basis considerably surpassing its 20% target. Barbara Kux, Siemens Managing Board member and Chief Sustainability Officer said that “Sustainability is our guiding principle and creates major business opportunities for our company. We’ve made significant progress in this respect with regard to both our internal and our external targets.” In fiscal 2011, Siemens generated revenue of EUR 30 billion with its Environmental Portfolio an amount equal to around 40 percent of the company’s total sales and a nine percent increase over fiscal 2010. Siemens is now one of the world’s largest suppliers of ecofriendly technology. By the end of fiscal 2014, the company intends to increase revenue from the products and solutions in its Environmental Portfolio to at least €40 billion also driven by new, innovative products and achieving above-average growth in the area of renewable energies, for example. The company originally planned to cut annual CO2 emissions at its customers by roughly 300 million tons by the end of fiscal 2011. The actual reduction totaled about 320 million tons an amount equal to the total annual CO2 emissions of Berlin, Delhi, Hong Kong, Istanbul, London, New York, Singapore and Tokyo combined. In fiscal 2011, Siemens further improved on its performance of the previous year to again capture the No. 1 spot in the Diversified Industrials category of the Dow Jones Sustainability Index. The company also won the 2011 German Sustainability Award for its sustainability strategy. Barbara Kux, said, “As the impressive assessments of external observers also attest, we’re on the right track.”

Sustainability Reporting Mandatory for Cos

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he Indian government is pushing for corporates to report their efforts for sustainable development under the Companies Act. A committee headed by CII president and Godrej group chairman Adi Godrej has been asked to look at the viability of compulsory sustainability reporting within the formal framework of corporate governance. They have been given task of formulating the draft national corporate governance policy, the objective of which will be to encourage companies to adopt economically sustainable measures. The minster for corporate affairs, Veerapan

8 | Corporate Social Responsibility Today | May-July 2012

Moily said, “Our ministry has also issued voluntary guidelines on social, environmental and economic responsibilities of the business. The core elements of these guidelines state that business should respect, protect and make efforts to restore the environment and business should support inclusive growth and equitable development.” The Godrej committee will also suggest a comprehensive policy framework to enable corporate governance of the highest quality in all classes of companies without impinging on their internal autonomy to order their affairs in their best judgment.

TATA Coffee Wins Green Business Leader Award

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ata Coffee Limited, India’s largest coffee producer and exporter is presented the FE-EVI ‘Green Business leader’ award in the “FMCG” category. The”FE-EVI Green Business Leadership Award 2011-12” is initiated and conducted by The Financial Express and Emergent Ventures India to map the greening of corporate India and to felicitate green leaders. The Green Business

Tata Coffee awarded the Green Business Leader at FE-EVI leadership award 2012 Awards aims to recognise businesses and organizations in India which successfully operate with environmentally sustainable practices. The award was presented by corporate affairs minister Veerappa Moily at a glittering award ceremony held in New Delhi marking the world environment day. Speaking on the occasion Mr. Hameed Huq, MD, Tata Coffee said, “Last year we were awarded the highest honor in the “Low energy sector “category, and this year we have gone one step further, and bagged the title of ‘Green Business Leader’ in the FMCG category. Tata Coffee is committed to building sustainability and is constantly identifying opportunities for greening its business.” He further added, “It is important to realize that the task of environment protection is a universal responsibility of all.”


CSR | NEWS

Coca-Cola India Joins Hands to Revitalize 100 Rural and Semi-urban Schools

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n the momentous occasion of World Environment Day, World Vision and The Coca-Cola India joined hands to revitalize 100 rural and semi-urban schools in India. This partnership will be within the framework of internationally recognized Support My School campaign and provide basic amenities such as access to water, sanitation, playing fields, rainwater harvesting and other basic amenities to rural and semi-urban schools across India. Support My School is an ongoing partnership between The CocaCola India, NDTV, UN-HABITAT, Charities Aid Foundation, Sulabh International, Tata Teleservices and Pearson Foundation to improve school infrastructure across India with a special focus on clean water and sanitation. The ‘Support My School’ campaign was initiated in January 2011 with a vision to revitalize rural and semi-urban schools by providing basic amenities to create healthy, active and happy environment at schools. The

campaign on 1st June 2012 reached a critical milestone of 100 schools and has already touched the lives of over 43,000 children across India. The interventions made at these schools have helped reduce dropouts and ab-

senteeism and also increase enrollments. With World Vision joining hands, the campaign aims to strengthen its resolve to reach more schools and impact thousands of children. The need for a visionary program such as this is great. In India, fewer than half of all schools have a working toilet. Research shows that inadequate infrastructure, such as sanitation, accelerates the dropout rates, especially among girls in rural areas. Already in

one campaign school, enrollment has jumped by nearly 40%. Clean water is a cornerstone of healthy communities and a healthy environment, which is why World Environment Day marks the launch of this new partnership. “World Vision is proud to join the CocaCola NDTV Support My School campaign,” said Cheryl Self, National Director of Global Corporate Partnerships at World Vision. “This campaign is a unique mass movement that sensitizes people and gives them an opportunity to make a difference by contributing towards the transformation of schools.” “We are honored to be in this partnership with like-minded partners from civil society, private sector and concerned citizen of the world. Together with partners, Support My School is working towards developing healthy and active schools in India, one school, and one student, at a time,” said Deepak Jolly, Vice President of Public Affairs and Communications, Coca-Cola India.

One Day Seminar on

Connecting Social Entrepreneurs and CSR on 27th July 2012

Organized by

Indian Centre for CSR in partnership with Indian Entrepreneurs and Investors in Social Sector are organizing a Seminar on Connecting Social Entrepreneurs and CSR. The seminar on CSR will underline and bring forth best of the Global Knowledge and Practices to Social Entrepreneurs in India. This seminar aims towards facilitating the gap between Entrepreneurs and Social Investors by enabling them to meet, discuss and debate the Global Scenario, Investment Climate for Sustainability and Need for Funding Social Projects. Objective

Focal Theme

Reputed Speakers

l Showcase Innovative Modes to do CSR l Promote Grass Root Innovations andSocial Ventures l Realizing the aim of Financial andSocial Inclusion l Providing corporate with Low-Cost, Socially Motivated Community Development Projects.

l Bridging the Gap between Social Entrepreneurship andImpact CSR Initiatives. l How Impact investing can be beneficial for CSR l Showcasing top 5 community development projects & social innovative products l How should Social Entrepreneurship approach Corporate l Metrics for Corporate to choose their Impact Investment Initiative l Build a revenue based CSR

l Rajesh Tiwari – CEO ICCSR l Pooja Warrier – UnLtd India l Amit Grover – Nature Talent l Deval Sanghvi – Dasra l Jitendra Bhargava – Renowned Brand Maker l CSR executives from Banking Industry l Entrepreneurs & Representatives from partner organizations

Indian Centre for CSR, A Not for Profit Organization 601, Techno city, Plot No. X4/5A, T.T.C. Industrial Area, Mahape, Navi Mumbai- 400710 (India) Email: info@iccsr.org, hm@ iccsr.org, Website: www.iccsr.org


Sustainability Environment

Climate solutions: Your budget needed

Here’s what’s proposed by NASA’s James Hansen to tackle runaway climate change:

“W Toby Webb is the founder and chairman of Ethical Corporation and Member Advisory Board Indian Centre for CSR. Toby is also cofounder 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.

e need to start reducing emissions significantly, not create new ways to increase them. We should impose a gradually rising carbon fee, collected from fossil fuel companies, then distribute 100 percent of the collections to all Americans on a per-capita basis every month. The government would not get a penny. This market-based approach would stimulate innovation, jobs and economic growth, avoid enlarging government or having it pick winners or losers. Most Americans, except the heaviest energy users, would get more back than they paid in increased prices. Not only that, the reduction in oil use resulting from the carbon price would be nearly six times as great as the oil supply from the proposed pipeline from Canada, rendering the pipeline superfluous, according to economic models driven by a slowly rising carbon price.” It’s of course a little more complex than this (just a bit). But it is clear now, after a decade or more of debate, that we now know that emissions trading simply will not work. Technology will help, but it won’t save us. A GHG tax/fee is the only way to go. Now we know this, and all (sane people) seem to

Not only that, the reduction in oil use resulting from the carbon price would be nearly six times as great as the oil supply from the proposed pipeline from Canada, rendering the pipeline superfluous, according to economic models driven by a slowly rising carbon price 10 | Corporate Social Responsibility Today | May-July 2012

agree on it we need to begin exploring just how this will work, whom it will affect and how technology can help us overcome the hurdles. I know work has been done on this, plenty of it. But we need more. Smart companies should support some serious research into consequences of carbon taxation. BP always used to want to be seen to be progressive. Why not support further, well-publicised research into this? If Harvard are working on this, then why not help them financially? (BP has gone quiet on all this recently, if you search their website for “carbon tax” there are no statements to be found post 2008 at a senior level) Exxon were saying upstream carbon taxes were they way to go back in 2007. Here’s a quote from a piece I wrote on this five years ago: “Exxon is in favour of what it calls “upstream cap and trade” of carbon emissions, where the “cost” of carbon-rich fuel sources would be paid at the point of its extraction, before the carbon was released into the atmosphere. This might be when coal is mined or sold, or when petrol is refined from crude oil. Governments would have to think about a “price cap” to protect the industry, and allow businesses to pass on the costs to consumers, Exxon says. Exxon’s proposed solution, when compared with the EU’s “downstream” cap and trade system - where companies pay to emit carbon dioxide as they emit it - would operate more genuinely “like a carbon tax” and fix the price of carbon, says the company. According to Exxon, this avoids the problems of working out emissions caps sector by sector as in the EU’s downstream system.” Of course Exxon and Hansen will no doubt disagree on who pays: the company or the consumer. How that plays out remains to be seen. Better to start having that debate than continue kidding ourselves with emissions trading nonsense.


One Day Seminar on

Global Standards of CSR and Relevance for India Organized by

Presenting

Martin Neureiter (Chairman of the ISO 26000)

Indian Centre for CSR graciously invites you to our One Day Seminar on Guidance on Social Responsibility that will take place on: 18 July 2012 in Mumbai, India Who is this Seminar Aimed at and why?

What is the Objective of this Seminar?

What is the Focal Theme of this Seminar?

The seminar objective is to comprehensively

Relevance of CSR standards for

sider diverse revenue generating models of

make the audience understand, evaluate

Indian companies

CSR by doing Impact CSR. This would build a

and discuss the scope of standards and

CSR Reporting for Companies

CSR portfolio of each corporate which would

usage of the same for development of a

• •

enable them to form a niche from their

corporate CSR framework

CEO and CSR Heads who would like to con-

Global Compact Principles in the UN System:

contemporaries

Marketing Heads who is interested in learn-

a Challenge for all Public Institutions

ing about CSR or striving for best practices/ insights on CSR and Sustainibility.

Internalizing Social Responsibility and the

Matching Public Governance and Private Sector Responsibility:

Voluntary and Mandatory Reporting Standards

Emerging Fields and Challenges for the Role of Government in Social Responsibility

Preparedness for Adoption and Implementation of ISO 26000

A Not for Profit Organization 601, Techno city, Plot No. X4/5A, T.T.C. Industrial Area, Mahape, Navi Mumbai- 400710 (India) Email: info@iccsr.org Website: www.iccsr.org


cover story Unveiling the Importance of

Corporate

Social responsibility

Across the Value Chain

Corporate Social Responsibility (CSR) has rapidly surfaced as one of the most “strategic” areas in business management, yet most organizations still have a tough time proving the value it brings to their overall sustainability and financial performance by irene daskalakis

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o matter their size, sector or region of operation, organizations instinctively react to the positive influence community and environmental related initiatives attribute to their brand, but the issue remains the incapability to measure that influence and prove that it has a direct effect in improving revenue and market share. 12 | Corporate Social Responsibility Today | May-July 2012

In my introduction, I purposely quoted the word “strategic” because it seems that everywhere I look I see it being used by most executives and associated to pretty much any effort that has a social or an environmental focus. “Strategic” certainly sounds like a strong word, characterizing any effort that has been thoroughly thought through, assessed and prioritized. But is that really the case for most organi-

zations? The reality is certainly not, as one of the most common comments of executives is their incapability to secure funding for relative initiatives. If something is of “strategic” importance then it has been extensively reviewed internally and has received the necessary budgetary allocation needed to be apportioned for its sustained maintenance and monitoring. So this brings up the question, “why have organizations been


cover | story

unable to make the business case for Corporate Social Responsibility?” The easy response to the above question is the lack of a systemic and clearly defined CSR Strategy that is developed in line with corporate goals and objectives. In most instances, CSR represents a branch of Marketing and Public Relations that includes the implementation of philanthropic and funding activities, via third parties (e.g. NGOs, CSOs). These initiatives, although good in that they support vital social issues, are not always associated to corporate objectives, nor do they enable the organization to engage with stakeholders as they do not correspond to their respective expectations and needs. Τhere needs to be a general acceptance of the fact that CSR is an internal tool enabling the organization to better manage and assess risk. It is not a tool for external communications, nor is it a tool for promotion of the organization. It is a management system that takes into consideration the internal and external environment in which it operates and aims at positioning the organization with the least possible sustainability impact. Organizations that truly want to experience the benefits of CSR across the value chain must determine the sustainability context of their operations, assuring that CSR is integrated throughout the organization, is practiced in its relationships and takes into account the interests of stakeholders. In other words, there needs to be an assessment and an understanding of operational impact across the social and environmental spectrum as well as an identification of the stakeholder groups that are affected. Similarly, when assessing operational impact, most organizations identify the operational areas with the most impact, but they do not explore deeper into potential solutions that can significantly contribute towards achieving better operational efficiency and reducing operational cost. With respect to the issue of stakeholder impact, most organizations proceed to identify their primary and secondary stakeholders. However, not much emphasis is placed on creating the appropriate channels to engage with stakeholders and receive their feedback via constructive dialogue. This becomes most evident if we examine some of the most common observations that surface as key issues that prohibit the effective application of CSR. First is the lack of internal understanding and awareness of the CSR Strategy of the or-

ganization. The reality of the matter is that in most cases organizations may use the phrase “CSR Strategy” but in reality they are referring to individual “CSR initiatives” that are not tied to the Corporate Strategy, and are thus not trickled-down to the operational level. This results in lack of awareness by executive management and employees, as these initiatives do not affect their everyday tasks and ultimate performance. Most often, employees have no idea of their organization’s CSR objectives and targets, let alone the actual definition of what “CSR” truly means. Thus, great emphasis must be given to inform employees of the reasons why the organization is investing in this effort and of the processes that they will need to learn so as to conduct their work according to the established CSR objectives and KPIs. The more CSR is embedded within everyday operations the more committed employees will feel towards supporting and representing the organization’s CSR Strategy. Second is the lack of external understanding and interest in the organization’s CSR Strategy. This is actually an area that is most difficult to manage and the one that baffles most organizations. When designing CSR initiatives most organizations first consider their personal objectives in associating social or environmental characteristics to their brand, without placing much emphasis in what their external stakeholders need or expect of them. The result of this is a waste of resources (monetary and human) being invested in marketing campaigns that do not contribute at all towards minimizing stakeholder impact or attracting stakeholders to the organization. The root of this problem is the inability to detect what stakeholders actually seek out of the organization. Unfortunately, for most organizations the issue of “stakeholder engagement” only covers the external phase which entails initiatives the organization does to tackle Sustainability impact. There is no information provided as to how the organization reaches out to stakeholders and collects their feedback in order to conclude that the initiatives that are implemented are the correct ones. This brings us to the third issue, the communication of Sustainability performance in order to assure that the organization obtains valuable information that feeds into improving its progress from time to time and ensuring

that the organization operates as an accountable player within the overall spectrum of Sustainable development, via transparent policies and processes. A perfect example of how organizations can communicate their sustainability progress and collect stakeholder feedback is via their Sustainability report. Ironically enough, when most Sustainability reports are issued they are not used at all for any engagement purposes. What usually occurs is the Report is printed and distributed only to a small number of stakeholders (who do not even bother reading it) or uploaded on the Corporate Website where it is up to the individual interest of visitors to read it and submit their feedback (in some cases, stakeholders are not directed to a feedback form or do not have the means to send their comments). Furthermore, in several instances, Reports are developed without the use of internationally recognized Reporting Guidelines, thus not succeeding to communicate effectively the Sustainability performance of the Organization. Using innovative, yet simple tactics, such as the implementation of Town Hall meetings inviting local community leaders and members to attend and engage in dialogue on specific areas of the Report, or the distribution of a synoptic version of the Report and providing incentives (discount or extra services) for stakeholders to submit their feedback, organizations can actively engage with their stakeholders. However, it is worth being mentioned that the type of communication and engagement tactic must consider the specific characteristics of each stakeholder group in order to assure that the information that is being communicated reaches recipients and is understood accordingly. All in all, the potential of CSR to provide an extra layer of protection when assessing and managing operational risk is universally accepted. Nowadays CSR has evolved as the new method of conducting effective risk management. Economic prosperity is directly affected by social sustainability, while without environmental sustainability no entity or organism can survive in the overall context of Sustainable Development. Irene Daskalakis is an Associate of Indian Centre for CSR. She is a well known Global sustainability Expert. May-July 2012 | Corporate Social Responsibility Today | 13


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The Business Case CSR for the

World Market Leader in

Brick Production

Wienerberger Tumkur site – Karnatakat Wienerberger is the worlds largest brick producer, present in 27 countries in the world. One of them is India the first developing country Wienerberger is active in by martin neureiter

W

hen the decision was taken to enter the Indian market in 2006 it was not quite clear how this would happen. First option was to work this country the same as all the others the company was active in, meaning, concentrating on the technical and commercial aspects, and trying to keep the within the legal framework of the host country. It was the newly designated country manager for India, an Austrian expat with several 14 | Corporate Social Responsibility Today | May-July 2012

years of experience in India who came up with the idea that it would be necessary to include a strong CSR component into the market entry strategy, as this market was significantly different than all the other markets in which Wienerberger was active. For that purpose he researched the market for CSR advisors with an international component to them and came across the CSR Company International, a Vienna based company with offices in 14 different countries and a

number of large and medium sized clients. But that alone did not do the trick. The CEO had to be convinced. And that turned out to be a tough call. In a first reaction to the country manager he told him, CSR is a waste of money and that the company would do India just as it had so successfully entered all the other markets. It was thanks to the persistence of the country manager who insisted that without this CSR component the risk of failure was great and that that would mean loss of money


cover | story in a much larger dimension than what would be put aside for CSR. Finally, after several months, the CEO agreed to hold a meeting at his office to discuss this issue. So we came to corporate headquarter in Vienna, a 34 story high glass tower in the south of the city overlooking the town on the one side and the flat lands out to the south on the other. His office was of course on the top floor with a beautiful view and the day was sunny and clear skies, so the horizon was far away. We started the discussion and we tried to explain our approach to CSR as a strategic approach serving the business needs and engaging the stakeholders and taking into account their expectations. So we started to brainstorm what we could be doing for the people living in Tumkur around our proposed factory site. As we are polite people we had the CEO have the first idea. He came up with the grand idea that we could support saving the tigers in India, they are a endangered species and the attention in Europe for these wild cats is big. It was on me to say something on this, as everybody looked at me what I would say to this proposal. That is the job of a third party person in such meetings. So I started by saying that generally that was a good idea but what was the connection between tigers and bricks? Maybe only the colour is similar, everything else does not fit. The tigers live approximately 2000 kilometers further north than where our site was, they are in India by far not as popular as they kill farm animals and sometimes the farmer himself, they live in protected areas which can not be used for farming, so their image is a very different one than from a European perspective. So from our perspective in the comfortable leather office chairs overlooking Vienna we tried to decide what would be good for people living in rural India, near our site and know what their needs and expectations would be. My suggestion then was, what we actually need to know is whom are we dealing with, who are our neighbours, what are they, what is their education, their income situation, their expectations etc. Only then it would make sense to set the agenda and decide what we could contribute. And so it was done. We hired students from the University of Bangalore, the sociology faculty, to do a house hold survey. For that purpose we simply drew a circle of 10 kilometers around our plant and declared it our impact zone. It could just the same have been 8 kilometers or 12, there was no magic to that figure, it just seemed the obvious one.

So the students knocked on every door and asked how many people lived in the household, how many men, women, children, what education the people had, which religion they belonged to, which cast, what they did for a living, their age etc. so all the basic data we needed to know. But that was not all: We also asked what were their greatest needs. That was a crucial question as we should learn later.

to comply with EU regulations in India but the simple fact that it is cheaper to rebuild an existing factory and all its processes than having to adjust the processes newly to a new set of production line. Anyhow it took Wienerberger a lot longer to get the factory started than initially planned, but for many different reasons. But what has that to do with job creation? It sounds like a lot of jobs. An Indian factory of

We explained our approach to CSR is strategic that serves the business needs and engages the stakeholders taking into account their expectations. We started to brainstorm what we could be doing We learned that we had around 2900 people living in the immediate surrounding of our plant, 90% of them day labour workers, some land owners and some skilled labour. They are mainly Hindu, some are Muslims and some belong to different sects. There are two predominating casts. No child has made it further than basic education. On the needs there were three clear priorities. Number one was jobs: Being day labourers they wanted permanent jobs. The average income is around 1.5 Dollars a day per person, but nothing during Monsoon time or when sick etc. Now this is a difficult thing for a brick producer. Normally in India maybe not, but for this particular one it is. In India brick production is a low tech business. Many brick producers are very very local, in the village, digging out clay and putting it into the sun to dry and that is the brick. Of course there are also more sophisticated production sites, but none that could compete with this factory. Just to give the reader an idea of this factory. It is the largest brick producing factory in India, but not only that, it is the largest in all of Asia. It has a daily production amount of 35.000 bricks and it still has the option to double this output. It is a one to one model of a factory built by Wienerberger in Belgium, so it also complies with EU environmental standards although standing in the middle of rural India. By the way, the reason for that is not necessarily the commitment of Wienerberger

this size would have to employ 1000s of workers, actually around 15.000 to be exact. And how many does this factory need? 28 workers, not more. And not unskilled labour but highly skilled computer experts who are trained for 9 months in Austria on the machines. So this factory is not a job creation exercise. So on the first expectation we would not be able to deliver. Nevertheless, we tried something by promising that every family who lost a piece of land because of our factory, at least one member would get a job. This would be as driver, gardener or security guard. But even that took us more than a year to accomplish. And these are just a handful of jobs. The second need expressed was health. Based on the fact of malnutrition – the basic food of the people is based on 4-5 crops grown – they develop mainly diabetes and some eye diseases, some coming from diabetes, some from the flies and other hygienic defaults. So a lot of elder people get blind, which stops them from working and they become a burden for the families, another mouth to be fed. Now a brick company is not a health care provider, so we were thinking hard what can we do on this expectation. We learned that there are state run health care centres in some villages around our plant. So we visited the one closest to the factory. The surprise was great, we found it, we entered, and stood in an empty room. A friendly man told us, yes, this is the May-July 2012 | Corporate Social Responsibility Today | 15


cover | story rural health centre, they have no furniture and no apparatuses and no medicine, but people come here and a trained person looks at them and tells them what they should be doing. Driving back from there we decided we would build a proper health station in the nearest village and set up a proper structure to provide people with the necessary health support. But that should take time, we first needed to find a piece of land in a good location in the village. Finally we got one. But before that

any, as it is not our core business. So we looked for a partner who would actually run the centre. We came across the Karuna Trust, an NGO that runs 100s of these centres all over India, mainly in very remote areas, with great success. The founder even won the Alternative Nobel Price for his engagement. They agreed and took over the management of the centre, while we paid for a nurse that would be there every day in the morning and a visiting doctor who would come once a week for more serious

The centre is a full success story as it links this activity to business. As the house is built with Wienerberger bricks which insulate much better than classical Indian bricks building was going to go up we wanted to do something immediately. We decided, based on the research done by the students of Bangalore Sociology faculty, that we would look into eyesight. We came up with the idea of an Eyecamp. The eyecamp: It was set up as a one day activity, we invited all the people living around the factory to come to the school on a certain date. We got some eyedoctors from Bangalore to do tests on the people on their eyesight. We had the employees of the factory use the day as a volunteering activity for the community. More than 500 people came. A huge success. Around 70 people got glasses prescribed and Wienerberger took the costs for them and another 60 people needed an eyeoperation to recover eyesight, they had gone blind already. Such an operation is not a big deal moneywise, they cost around 100 dollars each, but for people earning 1,5 dollars a day that is big money. So the company also covered this cost. It should later prove to be one of our best investments – but read about that later. Concerning the health centre, do not expect that this is a huge building, it is actually a 5meters x 4 meters building with two rooms, built with Wienerberger bricks. Also this should have an unexpected effect, but also that a little bit later. The first issue was, ok, now we have a building, but what now. We are a brick company, not a health care provider, we do not have any experience in this, nor do we want 16 | Corporate Social Responsibility Today | May-July 2012

cases. We also pay for the equipment and the medicine. The centre is a full success story, also for one other reason, which links this activity to business. As the house is built with Wienerberger bricks which insulate much better than classical Indian bricks as they have a hollow structure inside, the people noticed that inside the building there is a much better climate than outside and they can touch the bricks without a salesperson coming to them and asking them if they can help them. The building is in the middle of the village so every passer by can knock on them, see and feel the difference and get a first impression. And to make a long story short, in a radius of 30 kilometers there is no local brick producer anymore, because people only want to buy our brick, as they can experience the difference. After we got this health centre up and running the CEO in Vienna was still very sceptical about the whole exercise, he still thought it was just a waste of money, we could do without it and saved the money. Maybe here is the right place to mention that for all the CSR activities including our services there was only a budget of 25.000 Euros allocated. That included all activities like building the health centre, the Eyecamp and our consulting fees. A joke of a budget in comparison to the costs of setting up the factory there, but the best we could get at the time. And why did we agree as a consulting company to such a contract? Well, first it is

about getting the foot in the door, secondly it is a well known multinational company, so makes itself good on the reference list and thirdly we really believe in what we are doing, so we were sure we will convince them of our work and get a better deal next time round. And it did not take long until this opportunity came along. India is a big democracy, of which it can be very proud of. But democracy is also expensive. So one nice day a candidate for one party came to the factory and talked with management and mentioned that he would like to have one million Dollars from the company to support his campaign. He would act favourably for the company and support us whenever and in whatever once elected. The company called also me and asked what to do and my answer was a clear “No�, do not pay. Maybe he wins this time, but next time round the other party will win and then you are stamped as a supporter of that party that lost and will have a rough time, or they will want you also to pay a million dollars to support them. So better not to pay. Well, this guy did not take that message too good. He organised some 100 people to demonstrate in front of our factory, block the entrance, throw stones at the trucks trying to pass and in general halting the activities at the gate, which would make the production stop if lasting for a longer time. Actually a few days would be enough. And then something astonishing happened. The people from the nearby village came and thorugh the demonstrators out, telling them that this is a good company, they want us to be here, some of the people who came were the ones who had their eyesight given back by the operation we had financed. We did not have to call the police, not our own security guards, it were the people of the village who saved us from a delicate situation. What more can you ask for as being an accepted part of the local society. When we reported this to the CEO back in Vienna he gave us all 27 countries to do the CSR work because finally he realised the connection between doing CSR and money. It would have cost us 1000s of dollars if we would have to close production for several days, but the people of the village prevented that because of our previous actions. Just imagine we would have followed the initial idea of supporting the tigers. Martin Neureiter is a Member of Advisory Board, Indian Centre for CSR and the CEO of CSR Company International.


A One Day Conference on

Global and National Best Practices

and how the landscape is Changing Date: 10 October 2012 | Time: 0930 AM-0530 PM Venue: Hotel Taj Mansingh

MISLEADING ADVERTISEMENTS

There has been a sharp rise in Misleading Advertising, particularly through messages to mobiles, television, print and online by little known outfits and even individuals promising everything from special saunas, magnetic fat burners, slimming machines and belts and strength enhancers. Not only is such advertising fraudulent, the concoctions and “treatment� offered might be harmful. Indian Centre for CSR under the Aegis of Ministry of Consumer Affairs, Government of India is organizing a one-day conference to discuss and find a way forward to cure this menace. The objectives of this Conference are to foster global knowledge on the topic with best of the class speakers, acumen, networking, valuecreation and global success in tackling this problem. Our stellar lineup of speakers will redefine the critical role of Marketing and Advertising Heads and Media in behaving a Responsible Organizations.

For more information write to us at du@iccsr.org A Not for Profit Organization 601, Techno city, Plot No. X4/5A, T.T.C. Industrial Area, Mahape, Navi Mumbai- 400710 (India) Email: info@iccsr.org Website: www.iccsr.org


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Corporate Social Responsibility:

Wisdom or

Window Dressing?

The scary economic developments of the past two years are contributing to a renaissance of discussion about “Corporate Social Responsibility,” and how it might have helped head off Wall Street’s precipitous failure. To explore that question, Truthout contributor William Fisher talked with Chip Pitts, one of the world’s leading authorities on the subject. In this interview, Professor Pitts answers key questions. He believes that CSR, if “properly implemented, would have prevented the crisis.” Former chief legal officer of Nokia Inc.and former chair of Amnesty International USA, Professor Pitts currently serves as president of the Bill of Rights Defense Committee and lectures on CSR and business/human rights at Stanford Law School and Oxford University. He is adviser to the UN Global Compact and theBusiness and Human Rights Resource Center and has also advised the successful Business Leaders Initiative for Human Rights, among other global CSR initiatives 18 | Corporate Social Responsibility Today | May-July 2012

William Fisher: What is CSR? Is it more than charitable giving through the company foundation? Professor Pitts: Believe it or not, CSR does not stand for “Corporate Scandal Response,” but for “Corporate Social Responsibility.” And, suspicions to the contrary notwithstanding, neither CSR nor “business ethics” is the oxymoron it may seem to be at first glance. There was a false suggestion (reaching its high point in a 2001 European Union “Green Paper”) that CSR was merely voluntary and thus “optional,” but this is now widely and rightly seen as a misleading diversion orchestrated by corporate lobbyists. No corporation can be responsible without complying with law, so at a minimum, CSR of course begins with mandatory legal compliance: not just with local law, but (especially in developing countries where local law may be absent or unenforced) global human rights and environmental laws. But beyond that, CSR requires compliance with the highest global ethical standards, meaning that corporations must not only “do no harm,” but also “do what good they can.” This does not mean mere philanthropy – charitable giving of some small percent of profits back to the community – although a philanthropic


cover | story combating poverty and achieving other public goods. This “business case” for CSR is why it has held up so well during the financial and economic crisis of the last several years, as assessed by various independent sources. And this integration of CSR into the core business, and not unlimited campaign spending by fictional corporate persons granted “free speech rights” under the recent US Supreme Court’s “Citizens United” decision, is the true meaning of corporate citizenship (which, properly understood and implemented, should be synonymous with CSR).

Chip Pitts, President of the Bill of Rights Defense Committee and lectures on CSR and business/ human rights at Stanford Law School and Oxford University. He is adviser to the UN Global Compact and the Business and Human Rights Resource Center

impulse and philanthropy remains a (relatively minor) part of CSR. CSR is responding to major structural drivers and expectations of investors, employees, NGOs, global media, governments and society at large – stakeholders who will reward companies that “get it right” and punish those who get it wrong. As a result, CSR requires accountable and long-term sustainability: deeply integrated decision making that manages risk, seizes brand and employee recruitment and retention benefits and drives the “triple bottom line” (people and the planet as well as profits) throughout the core business, so that corporations are not part of the problems experienced today (social and environmental externalities like climate change, pollution,

human rights abuse, conflict and war), but instead are aligned with society and the expectations of all stakeholders to contribute to much-needed solutions. “Sustainability doesn’t refer merely to profit-making sustainability, although some business executives have unfortunately started to use it perversely in that narrow sense, and doesn’t refer merely to environmental sustainability, but includes long-term, future-oriented social sustainability as well – of the systems that support all of us. An exciting CSR trend is thus corporate deployment of their core competencies – strategic thinking, marketing, logistics, inventory control, etc. – in innovative public-private partnerships aimed at fighting HIV/AIDs, preserving scarce water resources,

Fisher: Who uses CSR? Pitts: CSR is relevant to businesses of all sorts and sizes, although global corporations subject to tremendous stakeholder scrutiny and pressure (by NGOs such as Greenpeace and Amnesty International, governments, the global media, international organizations and unions) have taken it up to a greater extent either as a result of various scandals or in order to achieve the various business benefits and proactively maintain their “social license to operate.” Small and medium enterprises (SMEs), though, have a tremendous economic impact and form part of the supply chains of the larger global corporations – tens of thousands in WalMart’s supply chain alone – and so can and must also implement CSR within their own spheres of influence. People are also trying to enhance attention to core CSR concepts even within the informal or black-market sector (again, as ironic as that may seem), given its persistent importance, especially in developing countries. Governments and international development and aid agencies are looking to forms of CSR in which companies join multi-stakeholder initiatives to help solve some of the world’s most significant problems. (This is the impetus behind the UN Global Compact, for example, or the International Labor Organization’s Better Work initiative). More broadly, CSR includes the increasingly convergent global norms of human rights and sustainable development such as the human rights, environmental and anti-corruption principles of the UN Global Compact – that form the framework for our continued peaceful existence on the planet, so it is incumbent on all of us to support greater CSR, whether as employees of corporations, or consumers needing to make more ethical (e.g. fair trade) purchasing decisions. May-July 2012 | Corporate Social Responsibility Today | 19


cover | story So if the question is “who uses it,” the answer should be: YOU – and all of us! Fisher: Do any companies have long histories and demonstrable achievements from their use of CSR? Pitts: The roots of CSR are deep in societies around the world, drawing on longstanding universal ethical norms such as the Golden Rule, and common sense notions of preserving the natural and other resources that sustain all of us (as well as the companies). Moreover, notions of CSR were “present at the inception” of the corporation. From the very inception of bodies corporate, such as the Roman societates, through medieval bodies corporate (universities, cities, guilds), and even chartered companies of the age of exploration, and the colonial companies and corporate churches, utilities and charitable entities involved at the founding of the United States of America, corporations have generally had public as well as private purposes (although companies like the British and Dutch East Indies companies also caused great harm). Modern corporations, too, which achieved key attributes of their current form (such as limited liability) in the 19th century, were often conceived with social purposes as well as private profit in mind. Thus, companies in England such as Unilever (founded by Lord Leverhulme) and Cadbury chocolate company (conceived of by George Cadbury as having humanitarian purposes) have long-standing CSR traditions and demonstrable achievements that continue today – consider Unilever Hindustan’s Shakti program empowering female entrepreneurs – although these companies, like other companies, also have had CSR problems including serious issues pertaining to the labor conditions under which their products are manufactured. In India, Tata similarly has a long tradition of investing in communities as well as occasional scandals, and in the United States the same could be said of companies such as Sears, whose founder Julius Rosenwald helped create 4-H programs and train farmers in agricultural techniques, and J.C. Penney, whose founding executives famously embraced positive values in ways that have been emulated by many companies today, including Hewlett-Packard and Nokia. Ford is another example: it is prominent in environmental efforts today and was the birthplace of the doctrine of Fordism, whereby workers get paid enough to buy the products they make 20 | Corporate Social Responsibility Today | May-July 2012

... but the company also has a dark history of complicity with forced labor in Nazi Germany and apartheid in South Africa, as well as with violent repression of unionists and political dissenters in Latin America. So even leading companies like Ford often have mixed records, at best, of compliance with CSR principles. Fisher: How about companies in the financial services sector? Any users here? Pitts: The financial sector is actually a place of great CSR activity in recent years, as initiatives like the United Nations Principles for Responsible Investment and the Equator Principles now cover trillions of dollars in investment money committed to take environmental and social factors into account in investment activities. The Equator Principles now cover the vast majority of project finance in the world, in yet another demonstration of how the most sophisticated investors now understand that so-called “non-financial” risks (relating to the environment or human rights) can have a tremendous impact in terms of the financial bottom line and so must be the subject of enhanced monitoring and reporting. Fisher: Could CSR have impacted the behavior of the “too big to fail” institutions that brought us to the brink of financial disaster? Pitts: Properly implemented, CSR indeed would have prevented the crisis, which at core was about the opposite of each of the seven principles in my most recent CSR book. Instead of integrated decision-making that recognizes longer-term duties to the system – to society and the planet as well as for short-term profit – we saw utter neglect of those duties. Instead of adequate attention to all stakeholders, we saw myopic and greedy focus on returns only to top executives, managers and shareholders. Instead of transparency, we saw manipulation of corporate forms and opaque financial instruments such as derivatives and credit default swaps. Instead of consistent best practices and compliance with the highest global legal and ethical standards, we again saw evasive manipulation of loopholes. Instead of precautionary risk management, we saw systemic moral hazard. Instead of accountability, we saw offloading risk and responsibility onto a stream of other actors. And instead of attention to and investment in the community, we saw rapacious inattention to and plundering of communities. The ultimate

cause of the crisis was the ideological embrace of Milton Friedman’s warped but still dominant view that “the only social responsibility of business is to make a profit for its shareholders,” and until that socially and economically counterproductive - and empirically, legally and ethically inaccurate - view is corrected, we will continue to have the increasing and more intense crises of global capitalism that we have seen recur with ever greater frequency over the past forty years. Sadly but clearly, the lessons have still not been learned. The crisis was not just a crisis of the financial sector, but one arising from an ill-informed and erroneous mindset that still infects businesses in general and requires correction. Fisher: Is CSR a top-down or a bottom-up practice? Pitts: CSR is both top-down and bottom-up. Premised on engagement with all stakeholders instead of only shareholders, CSR requires broad dialogue with workers, community members and other elements of society in order to align the company with society. It also requires transparency so that investors, communities and other stakeholders can hold companies accountable. But without commitment and “tone at the top” – with the CEO, board members and top managers leading by example – CSR will not succeed. Fisher: How is CSR organized? Pitts: CSR starts with a commitment to “integrated decision-making” i.e. systemic thinking that sees the interrelationships between top global issues, stakeholders, corporate departments and previously segregated roles of individuals (e.g. applying different principles in their corporate life than they do in their personal or spiritual lives). By obliterating prior boundaries that blocked alignment with society, CSR can expand corporate vision, transform the corporate mission, inform strategy and motivate employees and all stakeholders to take the enterprise to the next level in ways that sustain resources for present and future generations. Stakeholder engagement is a key procedural plank for CSR, with greater transparency within the corporation and outwards toward society driving progress, enhanced risk management and accountability for results. Fisher: How is CSR managed? Pitts: Sometimes companies segregate the CSR or Sustainability or Corporate Citizen-


cover | story ship function in a separate department and expect that department to handle CSR issues in isolation – a recipe for CSR failure and enhanced rather than reduced risk. Other companies still consider CSR mainly a “public relations” exercise and relegate it to the PR or Communications function - also a red flag that the company may not truly understand CSR. Indeed, while reaping brand benefits is a major driver for CSR, and critics are wrong to say that CSR is “merely” PR, overemphasizing PR above substance remains one of the common traps to be avoided by companies attempting to implement CSR. Real CSR has resulted in tangible benefits in terms of enhanced attention to human rights by extractive industries and reduced instances of child and forced labor in supply chains, but those achievements take hard work and not glossy brochures. Because of the broad purview and authority of the legal function in many leading global businesses, and the fact that CSR begins with legal compliance, the Legal Department is often the focal point for CSR in many companies, working to ensure an integrated CSR approach. At other times, there is a dedicated CSR function with a senior VP in charge who works closely with legal and other business functions. But whether tied to Legal, or Public Affairs, or another function, and even if there are senior executives and dedicated CSR staff, the best companies realize that to be successful CSR must truly be integrated into the company’s vision, mission, strategy and core business. Otherwise you may have the CSR or PR department saying one thing, for example, while procurement does the opposite or a business unit leader creates pressures for human rights violations or environmental degradation in the supply chain by establishing targets at odds with responsible action. Performance incentives must be aligned with CSR commitments and metrics, so that executives and employees alike are evaluated in part on CSR targets and values as well as more traditional revenue and profit targets, reaping rewards for successful achievements and risking penalties up to and including termination for violation of CSR and ethical commitments. A variety of new management tools ranging from online guides to human rights impact assessments (complementing the more traditional environmental risk assessments) now exist to help manage CSR in a responsible fashion and ensure it is not treated as a mere “add on.” Environmental tools have been around quite

Companies segregate the CSR or Sustainability or Corporate Citizenship function in a separate department and expect that department to handle CSR issues in isolation – a recipe for CSR failure and enhanced rather than reduced risk. Other companies still consider CSR mainly a “public relations” exercise awhile, but for the last several years there has also been a new UN Framework for Business and Human Rights that emphasizes the corporate responsibility to respect allhuman rights, starting with having an explicit policy to that effect but backed up with a variety of “due diligence” procedures ensuring integration, risk management, evaluation, and existence of effective remedies and grievance procedures. The UN Framework as well as many new tools to assist are catalogued by the London-based Business and Human Rights Resource Center (www.business-humanrights.org). These range from the Guide for Integrating Human Rights Into Business Management created by the Business Leaders Initiative for Human Rights in conjunction with the UN Global Compact and the Office of the High Commissioner for Human Rights, to various other management approaches to CSR issues, most

of which revolve around traditional notions of planning, taking action, and checking on results as a feedback loop into renewed planning and action. Fisher: How is CSR evaluated? Pitts: CSR is evaluated both via internal audit and review mechanisms and a variety of external review, audit and verification mechanisms, some of which are within the ambit of company influence and some of which are less subject to company control. As an example of internal mechanisms, one leading company, General Electric, has a world-class internal audit team which goes far beyond the “green eyeshades” implication that the word “audit” suggests; the audit function there has historically served as a source for future corporate leaders as well as a critical check to ensure compliance with the spirit as well as the letter of the May-July 2012 | Corporate Social Responsibility Today | 21


cover | story corporate code of conduct. GE also embeds CSR into its rigorous operational reviews. But in addition to such internal mechanisms, GE also participates in sustainability stock indexes such as the Dow Jones Sustainability Index, and is subject to other external review by various stakeholders. Of course, companies that do not adhere to CSR are also now subject to various sorts of market and legal pressures, ranging from protests and boycotts, to adverse media coverage, to enforcement actions by government agencies and litigation. Fisher: What are the roles of chair, board, CEO, CFO, shareholders, employees, etc. in making CSR a company-wide practice? Pitts: The balance to be struck here is between an unmistakably honest and strong commitment and accountability “from the top” – the CEO and board and other “Csuite” executives – and the distributed leadership necessary for CSR to truly permeate the enterprise. While the CEO is and should be ultimately accountable, and it usually makes sense to have rigorous supporting mechanisms such as a top executive specifically charged and focused on CSR issues, as well as a board-level committee dealing with matters of CSR, business ethics, and risk management, this should not be an excuse for avoiding similarly accountable leadership by other core business functions including the heads of business units and country leaders and the heads of critical functions such as manufacturing, procurement, logistics, quality control, legal, human resources, finance and the like. Indeed, within their own “spheres of influence and activity” each employee and each participant in the enterprise’s extended value chain should know and be accountable for their CSR obligations. One fascinating development in recent years is how large companies like Wal-Mart or the major apparel brands are dramatically influencing behavior throughout their supply chains by requiring CSR compliance as a condition of being a supplier. Fisher: How do you make CSR part of the corporate culture? Pitts: As with the question of human rights and environmental compliance in society at large, this is in fact the most critical question. The law and market incentives are inherently limited – they can only go 22 | Corporate Social Responsibility Today | May-July 2012

history, the Universal Declaration of Human Rights, as well as clear values of sustainability evidenced in global declarations like the Stockholm and Rio Declarations. Objective analysis of the corporate values and culture both stated/explicit and tacit/actual – is thus crucial, and can be accomplished by a variety of techniques including employee and stakeholder surveys and interviews. My Stanford Law School students are working with the UN Global Compact to survey corporate values and consider means of promoting the uptake of appropriate world-class CSR values (which takes on even greater importance as

The balance to be struck here is between an unmistakably honest and strong commitment and accountability “from the top” – the CEO and board and other “C-suite” executives – and the distributed leadership necessary for CSR to truly permeate the enterprise. The CEO is and should be ultimately accountable so far without risking counterproductive legal, practical or market failures. So even though (as discussed above) CSR involves compliance with law and is also “enforced” through both positive and negative incentives, both practical experience and academic research indicate that it can all be fruitless unless the culture and values of the company support CSR andaccountable results. To hear some business leaders or business school academics discuss the subject, you may come away with the impression that virtually any values are acceptable and that a “values-based” company is simply one that has values - even if those values merely relate to short-term shareholder and management wealth maximization. This is wrong. Genuine leadership is inherently moral. So the values chosen matter tremendously, and they must be values aligned with society (including the most universal statement of human values in

China and the other “BRIC” countries come online). Already, it is clear that one thing you don’t want to do is simply consider CSR to be a narrow “check the box” compliance function, which is calculated to miss issues, create rather than appropriately manage risks, and undermine the authentic CSR culture that derives from the right values implemented in the right fashion. Instead, the best companies are increasingly having recourse to innovative techniques based on the latest scientific understandings of human nature and learning, including scenario planning and proactive brainstorming, experiential methods, multimedia, literature/stories and even theater, all of which can be excellent ways to enhance employee abilities to truly listen to, understand and respond to stakeholder perceptions, and even create new products, services, business models and entirely new market opportunities as a result.


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Stakeholder Society

3 Bold Methods for Turning Capacity into Impact Companies that make an impact fitting of their capacity also dare to be bold. They dream a dream big enough to capture the hearts of their stakeholders and they make a robust action plan to that realize that dream by brent croxton

C

ompanies at their best and brightest can be stunning when it comes to getting things done. Whether it’s bringing a cancer fighting drug to market, coordinating legions of workers to build a skyscraper, or distributing cans of cocacola a far as the Himalayas, companies are capable of bold initiatives, brilliant ingenuity and breath-taking productivity. CSR professionals seek to be catalysts for companies to leverage their powerful resources and capacities for good, but often companies who perform well in their core business functions fail to bring the same mojo to their citizenship endeavors. Sure, they are giving back in some way and have some programs to show off, but the inventive, audacious vision they are capable of isn’t applied to their efforts to serve their communities and mitigate societal problems. And, it makes sense. Companies have first priorities and each is at a different place in their endorsement of the notion of a triple bottom line. However, some companies get it! Some companies understand that the competitiveness of a company and the health of the communities around it are mutually dependent, and a result, they bring the mag-

24 | Corporate Social Responsibility Today | May-July 2012


Stakeholder | Society nitude of their capacity to bear in their citizenship endeavors. At RW, we love discovering companies whose citizenship prowess matches their firepower. As a starting point, such organizations are always strategic, i.e., what they do best as a company is directed toward specific societal problems that require their particular stripe of expertise and resource. And, this is huge… But it isn’t enough. Companies that make an impact fitting of their capacity also dare to be bold. They dream a dream big enough to capture the hearts of their stakeholders and they make a robust action plan to that realize that dream. One of our favorites, Microsoft, is a great example of such audacity. Here’s how they do it:

Choose a bold issue Large companies that possess significant resources and expertise should endeavor to tackle bigger global problems. Microsoft is invested in many areas of need (e.g., nonprofits, disaster relief, jobs and growth, etc.), but their focus on youth and education is perhaps their boldest initiative yet. The numbers are mind blowing! In today’s world,there are more than 1 billion people ages 15 to 24 on the planet, comprising the largest youth cohort in history. Of that, 75 million were unemployed in 2011, and less than half (44%) of them enroll in the equivalent of high school and even fewer graduate. For of issues of this magnitude, we need all hands on deck, and companies need to join the fight. (Check out the infographic at the top of the page for a visual of this info.)

Enact a bold strategy A key challenge to preparing youth for viable livelihoods is the increasing rate at which new technologies are changing the nature of work in every sector from farming to industry to services. Today’s youth need resources that in the past may have been desirable and even advantageous, but today are simply mandatory. As a technology leader, Microsoft understands this dilemma and how they are uniquely poised to make education and technology more accessible for them. Although Microsoft has numerous programs running that seek to improve access to high quality education, we will highlight three:

1

Partners In Learning – This program aims to help teachers around the world to build their skills, share best practices, and innovate in their classrooms throughonline

communities or at events that connect teachers from the around the world.

2

Shape The Future – Shape the Future helps governments to imagine and attain universal technology access for all their citizens. Microsoft helps build the Public/Private Partnerships that lead to greater employability, economic recovery and a better future.

the divide for youth around the world and is committed to working with others businesses, the NGO community, and governments to help youth succeed in the global economy. These initiatives and many others are great examples of a company matching their citizenship with their firepower. Their issue, their plan, and their partnerships are not only strategic…they are audacious!

Large companies that possess significant resources and expertise should endeavor to tackle bigger global problems. Microsoft is invested in many areas of need (e.g., nonprofits, disaster relief, jobs and growth, etc.), but their focus on youth and education is perhaps their boldest initiative yet

3

Students to Business – In 2011, Microsoft trained more than 360,000 students worldwide in technology and job skills through Microsoft Students to Business, which connects students with Microsoft partner companies. Students benefit from unique mentoring, training and certification opportunities.

Be bold in how you collaborate High impact initiatives for global problems at the scale of the ‘youth bulge’ issue can never be effectively addressed by a do-gooder hoping to go it alone. Collaboration is a must. If the programs above don’t speak for themselves, Microsoft has taken collaboration to the next level through their commissioning of the “Opportunity for Action” report. Through this paper, drafted by the International Youth Foundation,Microsoft is seeking to raise awareness regarding the opportunity divide – “an emergent gap among youth between those who have access, skills, and opportunities to be successful, and those who do not.” The report is also a call to action to address the challenges limiting today’s youth. By commissioning this paper, Microsoft is seeking to generate a global dialogue about how technology and other investments can help bridge

About the Author Brent Croxton is an Associate Partner of RealizedWorth, a leading consulting firm specializing in employee volunteering and workplace giving programs. Brent provides training and hands-on involvement in the design and implementation of corporate citizenship programs that are highly engaging and transformational for employees. Brent tells us, “I’ve spent most of my professional life working alongside some incredible leaders building programs that seek to develop volunteers, build teams, transformcorporate culture and serve the community. For me, taking into account the motivations of individuals is essential to the success of any program or event. RW calls this ‘meeting people where they’re at.” A successful program goes beyond merely getting people to show up or engage in new behaviors; rather, it provides an opportunity to be changed.” With a life-long interest in human motivation, most of what Brentwrites and speaks about relates in one way or another to the transformation of individuals and the flourishing of organizations. Recent topics include “Managing Generational Diversity,” “Emotionally Intelligent Leadership,” “Volunteering that Transforms” and “Why Volunteering Makes Better People.” Realized Worth works with companies to design and implement successful employee volunteer programs. Shoot me an email to discuss what we can do for you: brentcroxton@realizedworth.com May-July 2012 | Corporate Social Responsibility Today | 25


corporate governance

Ethics & Compliance Forecast For 2012 Good corporate governance practices instill in companies the essential vision, processes, and structures to make decisions that ensure longer-term sustainability. More than ever, we need companies that can be profitable as well as achieving environmental, social, and economic value for society by steve priest and santiago zorzopulos reich

O

ur crystal ball of ethics and compliance predictions has never been cloudier than at the end of 2011. Political priorities and public perceptions of institutions are traditionally predictive of the ethics and compliance environment. This year, however, inclement weather has been coming from all corners of the globe. In the absence of clear signals, the most reliable predictor for ethics and compliance in 2012 is what has already happened in 2011. Steve Priest ,described by The Wall Street Journal as “one of the most sought consultants to keep companies on the straight and narrow� and Santiago Zorzopulos Reich, a senior consultant at the Ethical Leadership Group, predict the top trends for 2012.

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No place to hide – ethics pressures are building globally

Photo Courtesy: NASA

In the United States, the Occupy Wall Street movement demonstrates distrust of large corporations. The Tea Party movement distrusts large government. Public opinion polls suggest most Americans have little trust in their

26 | Corporate Social Responsibility Today | May-July 2012


corporate | governance elected officials − or much of anything else. This can only lead to increased pressures − public and private, formal and informal − to do the right thing. In Europe, governments are falling and the viability of the Euro is being called into doubt. Taxpayers are looking for scapegoats and deep pockets and may find both in the guise of corporations. In the BRIC countries (Brazil, Russia, India and China), new ethics laws have been passed or are fiercely debated while large segments of the citizenry believe corruption is stunting progress. Smaller companies increasingly find themselves under the scrutiny of their larger customers as misconduct, including bad labor practices, lapses in product safety, environmental malfeasance and bribery creates huge legal and reputational risks throughout the supply or commercial chain. And investors are enforcing a form of ethics discipline as well. A suspicion of an insider trading scandal caused sophisticated investors to flee several prominent hedge funds this year. Chinese middle market companies lost billions of dollars in market capitalization over the past year as global investors lost trust in the integrity of their accounting practices and financial statements. There appears to be no safe haven for those hoping to escape the global trend towards increased ethics and compliance demands from those who have felt its absence in the past.

2

Bribery enforcement is on the upswing around the world

Rising enforcement of the U.S. FCPA has garnered the most attention recently, as well it should. Eight of the top ten FCPA settlements of all time have occurred in the last two years. 2011 marked settlements with JGC of Japan ($211 million), Pfizer ($60 million) and Johnson and Johnson ($70 million). And in a development that should serve as a warning for individuals as well as corporations, Jeffrey Tesler, a UK citizen, forfeited $149 million in 2011. Bribery enforcement goes well beyond the U.S., however. Russia, China and Brazil have recently passed anti-bribery laws that are, at least, tough on paper. One could argue that an unpredictable enforcement environ-

ment makes these laws even more dangerous for multinational corporations. And the U.K. has implemented a Bribery Act that is stricter than the FCPA. The first person sentenced under the law was a British clerk who took thousands of pounds from people who didn’t want to be prosecuted for driving offenses. He was convicted to a six year prison sentence. If a clerk taking a few thousand gets a six year sentence, what might we expect from million dollar bribes? We’ll most likely find out in 2012 given the pace of violations making headlines around the world.

3

When the government is your major customer, dot your ‘i’s and cross your ‘t’s

Pharmaceutical companies continue to be hit with record-setting fines. Just this year, Merck agreed to pay $950 million and plead guilty to a criminal misdemeanor charge to resolve government allegations that the company illegally promoted its former painkiller Vioxx and deceived the government about the drug’s safety. (This is on top of almost $5 billion previously paid to settle thousands of productliability lawsuits.) GlaxoSmithKline agreed to pay $3 billion to resolve U.S. criminal and civil investigations into whether the U.K. company marketed drugs for unapproved uses and other matters, its biggest legal settlement. Pharma has been hit by billions in fines and settlements over the last few years. Whether the industry deserves it or not can be debated. However, when its major customer (the U.S. government) is also its major regulator and when failure to settle can result in debarment from business with the U.S. government, it is a difficult situation to negotiate. It is not pharma alone that faces this asymmetry. Many companies in defense, infrastructure, and aid and development have paid large fines and agreed to stringent corporate integrity agreements in order to avoid the corporate death penalty of debarment. With the public’s louder cries for accountability, expect more government inspection of those with whom it does business.

4

The line blurs between bad governance and bad ethics

Olympus is the poster child for bad governance causing ethics problems – and being an ethics issue in and of itself. In a presentation to investors, Olympus itself identified multiple problems:

• The old guard stayed too long, serving as advisers even after stepping down. • Too much power was vested in one person, who served as Chairman and CEO and appointed auditors and board members. • The board did not engage in proper oversight, exemplified by one member who said “I do attend board meetings but I have no idea about their content.” • It was difficult to find truly independent, objective board members who were comfortable with challenging executives. Poor corporate governance is rampant in Japan but not isolated to the world’s third biggest economy. The HP board deserves dishonorable mention for its hiring and firing of Leo Apotheker in less than a year, perhaps due in part to the fact that only four board members took the time to meet with their prospective new leader.

5

Compliance is not enough

Your compliance quiz: What industry has devoted more money and people to corporate compliancethan any other? The answer: financial services. Look where it is in today’s headlines: vilified by Occupy Wall Street, distrusted by ordinary citizens, the butt of scorn on late night comedy television shows. Two examples from the financial services industry in 2011 serve to confirm that a compliance program absent a culture of integrity can be insufficient − and even dangerous: Citigroup agreed to pay $285 million to settle claims that it misled clients about sub-prime loan securities it sold. Presumably with the OK of its lawyers and compliance officers, who are ubiquitous, Citigroup selected securities it believed had a high chance of failing, packaged them, and sold them to investors. When the securities performed as predicted, investors lost about $700 million while, according to the SEC, Citigroup reaped hundreds of millions of dollars in fees, trading profits, and payments from credit default swaps. While attorneys may have found the structure of the deal legally defensible, the SEC did not. A federal judge went further, rejecting on ethical grounds the standard language of the settlement in which Citigroup did not admit to wrongdoing. Judge Rakoff wrote that

May-July 2012 | Corporate Social Responsibility Today | 27


corporate | governance

The Ten Principles of the UN Global Compact

T

he UN Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anticorruption:

The figure below shows how responsible business and sustainable profits are embedded into the function of the board:

Human Rights • PrINCIPlE 1: Businesses should support and respect the protection of internationally proclaimed human rights; and • PrINCIPlE 2: make sure that they are not complicit in human rights abuses.

Source: UN Compact

Labor Standards • PrINCIPlE 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; • PrINCIPlE 4: the elimination of all forms of forced and compulsory labor; • PrINCIPlE 5: the effective abolition of child labor; and • PrINCIPlE 6: the elimination of discrimination in respect of employment and occupation.

the case “… touches on the transparency of financial markets, whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth.” And a few blocks away, regulators have been unable to find about $1 billion in client money at MF Global. It does not take a compliance expert to know that you cannot use client money to hide firm losses. But this firm, run by former US Senator and New Jersey governor Jon Corzine, stands accused of doing just that. In addition, executives are being investigated for using insider information about the firm’s 28 | Corporate Social Responsibility Today | May-July 2012

the CEO who raised them even though he had documented evidence to support fraud suspicions. Renaultdemonstrated another kind of failing: fire and publicly denounce individuals for selling confidential information before completing a thorough investigation. And in the U.S., a football program known for its ethical probity (Penn State) and a coach legendary for his ethics (Joe Paterno) fell under dark clouds because they failed to respond quickly or effectively to allegations of sexual abuse of children by a former assistant coach of the football team. Only the first of these (Olympus) would most likely have been addressed by the SEC whistleblower program. But all of them underline the need for companies to have a strong anti-retaliation policy, an internal program emphasizing reporting responsibilities, and a real culture of integrity.

7

Insider trading rises as an enforcement priority

Environment • PrINCIPlE 7: Businesses should support a precautionary approach to environmental challenges; • PrINCIPlE 8: undertake initiatives to promote greater environmental responsibility; and • PrINCIPlE 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption • PrINCIPlE 10: Businesses should work against corruption in all its forms, including extortion and bribery.

financial situation to unload MF Global convertible bonds before they lost value.

6

It is not only the crime − but also the response and cover-up that causes pain

Much attention has been paid to the new SEC whistleblower program that provides incentives to individuals to report violations of securities laws. Whistleblower protections and incentives have been around for a long time. The bigger focus has long been on results and reputation. The board of Olympus demonstrated one way not to handle serious allegations: dismiss

While there have been notable insider trading convictions globally, the U.S. Department of Justice has made prosecution of insider trading a major priority of late. Over two dozen people have been convicted in the last year. A billionaire who once ran the hedge fund Galleon, Raj Rajaratnam, was sentenced to 11 years in prison and fined $10 million. Rajat Gupta, the former head of the prestigious consulting firm McKinsey and board member ofGoldman Sachs, Procter & Gamble and American Airlines, has been criminally charged. Networks of intelligence gatherers for financial institutions are under scrutiny. Expect more in the U.S. and globally as enforcement agencies learn from each other and look for low hanging fruit. And, with the recent revelations of different practices regarding insider information for our elected officials in Congress, expect some interesting headlines and new regulations from Washington that will reverberate around the globe.

8

Antitrust enforcement continues at a high level.

The U.S. DOJ has sued to block three mergers in 2011 alone (including the huge AT&T-TMobile deal), versus six deals in the previous decade. The European Union, of late


corporate | governance the most vigorous of the competition enforcement authorities, continues to be aggressive, with Google the most recent large multinational under its microscope. International cartels are the main priority of the EU, with one case from 2011 being a 315 million euro fine against major players in the detergent industry including Henkel, Procter & Gamble, andUnilever. Other recent cases around the globe make clear that collusion has scant refuge: Samsung, Sharp and six other LCD makers agreed to pay nearly $400 million to settle US price-fixing allegations, and Whirlpool units and Panasonic were fined over $200 million in an EU refrigerator compressor cartel case.

9

One bad apple can spoil the whole bunch

2011 marked several more cases where one individual’s actions harm an entire organization. One rogue trader at UBS cost the firm $2.3 billion in bad trades, which led to the resignation of the CEO and loss of confidence in the firm’s ability to manage risk and compliance. Employees of the International Monetary Fund endured months of unwanted attention in the wake of the arrest of their managing director, Dominique Strauss-Kahn, on charges that he sexually assaulted a housekeeper in a New York hotel.

10

The watchers need watching

A vigorous marketplace needs watching. In smaller markets and days gone by, customers could simply tell one another when a company was not trustworthy. Now we have regulators and courts; the media; non-governmental organizations of all stripes; and web-enabled ratings, evaluations and diatribes to keep companies on the straight and narrow. Unfortunately, these watchers need watching as well. Just this year, we have observed the following troubling cases involving “the watchers”: • The U.S. SEC destroys documents against regulations. • A federal judge throws out an FCPA conviction saying of the U.S. DOJ, “The government team committed many wrongful acts. It should not be permitted to escape the consequences of that conduct.”

There appears to be no safe haven for those hoping to escape the global trend towards increased ethics and compliance demands from those who have felt its absence in the past. Smaller companies increasingly find themselves under the scrutiny of their larger customers as misconduct creates huge legal and reputational risks • Wikileaks releases non-redacted materials, jeopardizing the lives of many innocent people. A shadowy group of computer experts calling itself “Anonymous” pulls off massive coordinated and complex attacks on organizations around the world, including Sony, Visa and the government of Egypt. They bring defense intelligence contractor HB Gary to its knees by hacking into its state-of-the-art systems, taking over its website and publishing confidential information about the company and its CEO.

Implications Doctors, dentists and oil change shops alike preach prevention to reduce problems later. But we continue to eat too much of the wrong things, exercise insufficiently, floss too little and defer oil changes on our cars. Organizations are no different. Leaders know that strengthening a culture of integrity is a good investment and a high priority, but in the fast and stressful pace of other business, ethics andcorporate compliance efforts often get short shrift or become check-the-box exercises. The trends outlined above make it clear that companies that do business with governments, companies whose products or services impact public health or safety, medium or large organizations, and publicly traded companies all need to devote more attention to their cultures. This does not mean they need to “lawyer up” or engage in costly endeavors. It does mean that strengthening a culture of integrity with a strong and credible ethics and compliance program needs to be a corporate priority. Leaders

throughout an organization should to be measured and rewarded when they create an environment where “doing the right thing” is the expected day-to-day behavior. Based on current conditions, we predict a stormy 2012. About the Authors Steve

Priest

(steve@stevepriest.

com) was described by The Wall Street Journal as “one of the most sought consultants to keep companies on the straight and narrow.” For seventeen years Steve was president of the Ethical Leadership Group (ELG), a consulting firm that specializes in ethics training & communications and compliance assessments. Steve now serves as founder of ELG and senior advisor at Global Compliance, the compliance solutions firm that ELG joined in 2007. For more information about his work, visit Steve’s CCI author page.

Santiago Zorzopulos Reich is a senior consultant at the Ethical Leadership Group. Prior to joining the company, Santiago was the Dubai Ethics Resource Center’s Manager of Programs where he helped launch the new Center and create its portfolio of products and services. His work in Dubai included: founding the Corporate Directors’ Leadership Forum, conducting a highprofile research program on ethics and corporate responsibility in the Gulf region, and implementing several client-specific projects for public and private organizations. @ copyright “This piece was originally published on CorporateComplianceInsights.com, a knowledge-sharing forum designed to educate and encourage informed interaction within the corporate compliance, governance and risk community.” May-July 2012 | Corporate Social Responsibility Today | 29


Sustainable Supply chain

Making the Sustainable Supply Chain Puzzle Simpler - Five Ways to Start Companies are not in control of their supply chain. But their ability to use tools to control outcomes are only as good as the company’s intelligence. It’s why many will be attracted to the CR issues by mallen baker

C

ompanies like what they can control, for obvious reasons. It’s why so many will be attracted to the corporate responsibility issues they can most easily affect, so that they can report on year on year improvements in a straightforward way. By definition, companies are not in control of their supply chain. They may be able to influence, and there are certain areas where they can require. But their ability to use these tools to control outcomes are only as good as the company’s intelligence as to what’s going on out there – and if you have thousands of suppliers across Asia or Africa – well, that’s not going to be very easy. Recently, I pulled out five basic tips for building sustainable supply chains in an article for Ethical Corporation – and I thought it would be worth reprising them here.

Create a clear picture of what’s out there. You may think you know what your supply chain looks like, but that’s no guarantee that you fully understand where the hidden issues lurk. For instance, Marshalls wasn’t aware some years ago of the issue of child labour in Indian

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Sustainable | Supply chain sandstone quarries – until an NGO report focused on the issue and led them to make their own investigations. The company went on to take more strategic and focused action to ensure they tackled the problem of any of their peers. Some of those peers have not emulated this action – even though the problem is now well known and well publicised, mostly by Marshalls itself. If you simply looked at a description of suppliers to computer hardware manufacturers, you wouldn’t necessarily pick up on some of the problems that have beset Foxconn - the company that became famous for having a surge of worker suicides at the factory that manufactured products for Apple. It’s easy when issues hit the public domain of course – you should assume that within your supply chain will be some fairly important ones that COULD hit the public domain – but haven’t yet. Prioritise your engagement. Sure – it would be great to purge the supply chain of every social, ethical and environmental problem. Unless you have a very small pool of suppliers, that’s not going to happen. So at least you can start by identifying the areas of the biggest risk. Everyone has seen the basic risk mapping approach – where your suppliers, or your purchases, are ranked on a grid that matches likelihood of a problem or negative impact versus severity of that problem if it does occur. Of course, you still have to make certain choices in how you identify and weight the criteria. If a product is made in a country known to have endemic child labour, or routine corruption, does that automatically push it into the ‘high risk’ category? What if it’s a low profile, low volume product? Different companies will work it out in different ways – the important thing is that it makes sense for the kind of business you’re in and the kind of dialogue it will then lead you to have with your suppliers.

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Be clear about your own standards. 3 If these were your own factories we were talking about, in your total control, what would be the standards you would expect to enforce? If I came to one of your actual sites tomorrow – whatever country they may be in – would they recognise that as a description of the real day-to-day operating practice for the company?

There’s a fine balance here. At what point do you pass the line of demanding that companies based in a very different social context, with very different norms and expectations, behaves just the way that you behave? There’s a line somewhere, but where the line is drawn is highly controversial. You may find it easy to say that you never, ever tolerate forced labour in your supply chain. Fine. That’s over the line. The argument

you’ve got a policy on it, tell me whether there is any child labour in your supply chain, and if so what it looks like. And, as always, get top level buy-in. Any list of ‘top tips’ on some aspect of CSR or sustainability includes getting top-level buy-in. With good reason. There are risks in your supply chain that could attract seriously bad publicity if they go bad – and your senior

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There are risks in your supply chain that could attract seriously bad publicity if they go bad – and senior management expect to know about them before that happens. And dealing with those risks will certainly have an initial price tag attached ‘but that’s how it’s done around here’ will not be accepted in that case. What about cultures where longer hours are the norm than would be considered acceptable in your head office? Ah, so that’s definitely the right side of the line, is it? Until what point? How many hours become too many hours? Before you can meaningfully engage with your suppliers, you need to know what is acceptable, and the areas where you might have to compromise for the sake of the competitiveness of your supply chain, and even the need to avoid unintended negative social outcomes.

management expect to know about them before that happens. And dealing with those risks, although there may be some payback if done well, will certainly have an initial price tag attached. They have to get the strategic business case for prioritising action in this area – or else it will be the first thing to go when times get tough. That would be now, of course. Mallen Baker has spent the last fifteen years focusing on how CSR could be about the way companies define their mission in the world – and how they

Focus on ways to measure perfor4 mance – So you engaged with your suppliers. So what? What changed as a result? How do you know? I am never so unimpressed with a company’s maturity in its CSR if its reporting on supply chain solely focuses on the processes it has put in place to engage suppliers. And they report number of communications, numbers of suppliers that say they have read the code of conduct, numbers of workshops carried out. What are the things that happen on the ground that we most care about in relation to those issues. Child labour? Don’t tell me

can effectively communicate what they do. He has written on the subject a lot. As well as the Business Respect email newsletter (longest running CSR email newsletter in the world). He is contributing editor with Ethical Corporation He has worked directly with a number of companies to help them make the most of their work in CSR. He was part of Business in the Community, leading its Marketplace work, and leading the Business Impact Review Group – 20 companies who developed a common approach to CSR reporting and first used the ‘marketplace workplace environment community’ framework that many companies still use to this day. May-July 2012 | Corporate Social Responsibility Today | 31


Green Products

Product Lifecycle Management Strategies: Designing products for sustainability and profitability

A number of external pressures are making Going Green a top concern of manufacturing executives. Globally, governments are exerting pressure on businesses to do more to reduce the negative impact their operations have on the environment. EU has established an eco- design directive

What is Green? In manufacturing, the measures of success have been basically the same for hundreds, if not thousands, of years. To succeed, manufacturers have always had to produce products that performed well against a set of requirements, were fairly priced, had high quality, and 32 | Corporate Social Responsibility Today | May-July 2012

were available at the right time and place. These criteria are still critical for a manufacturer’s success. But in recent years, a new imperative has begun emerging. Manufacturers also are being measured on their commitment to minimizing the environmental impact of their products and manufac-

turing operations, in addition to the role they play in promoting the overall well-being of consumers. It’s a trend commonly referred to as Going Green and it’s being driven by consumers, supply chain partners, competitors, and governments. Driving each of these constituents is the growing body of evidence that human activity and products are, indeed, having an adverse impact on the environment and consumers. As consumer attitudes and government policies around the world combine to pressure manufacturers to reduce the impact of their products on the environment and promote social well-being, decision-makers are asking how they can meet these demands without sacrificing profitability. Enterprising manufacturers are discovering that adopting environmentally sound Green practices and taking action to improve consumer’s well-being can be a boost to profitability, not a drag. In the words of Lee Scott, CEO of Wal-Mart, “Being a good steward of the environment and in our communities, and being an efficient and profitable business are not mutually exclusive. In fact, they are one and the same.”1 The Wal-Mart CEO is not alone. Many other industry leaders have come to the same


Green | Products conclusion. For example, one global consumer packaged goods leader has broadened the definition of Green by focusing on the sustainable well-being of consumers. Commenting on the 2008 launch of a sustainable well-being advertising campaign, a spokesperson said the company was committed to demonstrating its commitment to the mental, physical, and environmental well-being of consumers and their communities. For product companies, there are many opportunities to develop new approaches to the design, sourcing, manufacturing, and distribution of products that create the threefor-one benefit of being Green, improving consumer well-being, and enhancing profitability and competitiveness. In this executive brief, we show how adopting advanced product lifecycle management principles can make a major contribution to your business success, consumer well-being, and to sound environmental stewardship.

Why go Green now? A number of external pressures are making Going Green a top concern of manufacturing executives. Globally, governments are exerting pressure on businesses to do more to reduce the negative impact their operations have on the environment. For example, the European Union has established an eco-design directive, a framework to guide how manufacturers of energy-using products should focus in the design stage on the reduction of energy consumption and other environmental impacts that occur throughout the product life cycle. Pressure is coming from the physical world, too. Even if it’s possible for companies to ignore the impact their operations have on such things as carbon emissions, there is no way they can ignore shortages of natural resources. A shortage of resources that go into your products or are necessary to make or move your products is a direct threat to the success of your business. Similarly, a shortage of available energy at a plant location can force companies to curtail production. In addition, many companies are facing pressure from trading partners. Retailers are vying with each other to appeal to consumer aspirations and devising Green strategies, which are being driven throughout their extensive supply chains. Clearly, fear is motvating many companies to adopt a credible Green strategy. But Going Green has many upsides, including the poten-

Important information for those in your organization who care about the bottom line and the environment:

• Executive management • Product developers • Marketing and sales • Operations, logistics, and sourcing • Finance and costing

tial to gain competitive advantage by being the first to market with new products and services that satisfy consumer thirst for a better life. A survey of 22,000 US shoppers by Information Resources, Inc. found that consumers are increasingly making purchase decisions based on the ecofriendliness of products and the fairness with which a company’s employees are treated.2 In a similar European study “nearly two thirds of respondents said they would be willing to pay a higher price – a premium of 11% on average – for products and services that produce lower greenhouse gas emissions”. 3 While there remains a gap between “attitude” (consumerintentions) and “behavior” (actual buying decisions at the point of sale), these sorts of gaps have a habit of closing up extremely quickly when products that meet consumer wishes at no cost penalty are made available. In these conditions, being first to market is more important than ever before and the position of long-standing market leaders can quickly be usurped by innovative pretenders who get their environmentally friendly products to market more quickly. As consumers increasingly make purchase decisions based on social and environmental considerations, more companies are adopting consumer well-being programs. For example,

the fastest growing food categories are organic and health-oriented products. In response, cereal and snack category companies, which started by packaging their products in smaller serving sizes, are now completely redeveloping their product lines.

Sustainability and profitability Product companies can adopt a number of business strategies that serve the dual purpose of environmental stewardship and improving business results. These include: Adopt lean materials management. Eliminating the use of unnecessary materials can significantly reduce your cost of operations, as well as the use of natural resources and the energy needed to move, store, and consume these resources. This dematerialization enables you to reduce freight costs, reduce inventory carrying costs, and reduce regulatory exposure. Every time you eliminate a redundant material, consolidate a purchase or use existing inventory, you eliminate a non value-added shipment. In addition to reducing freight costs, this eliminates a freight shipment and the associated carbon emissions. Use more recycled materials. Many companies have numerous opportunities to design their products to use recycled materials instead of virgin materials. Using recycled plastic bottles, tires, paper, and other materials can reduce your material costs as well as reduce your environmental footprint. Redesign products to weigh less. Companies can achieve environmental benefits and business advantages by designing products to weigh less. Called “lightweighting,” this practice reduces the freight costs and, at times, the cost of the product itself. Reduce packaging content. Designing products to require less packaging and design-

In a European study “nearly two thirds of respondents said they would be willing to pay a higher price – a premium of 11% on average – for products and services that produce lower greenhouse gas emissions May-July 2012 | Corporate Social Responsibility Today | 33


green | Products ing more advanced packaging solutions helps to reduce inbound and outbound freight costs as well as reduce the volume of waste materials that must be sent to a landfill. Model the environmental impact of your product. Most advanced product companies model their future production requirements to meet anticipated demand. Modeling for environmental impact is being adopted by a few innovative companies to determine the future environmental impact of their products and their plants. For example, a manufacturer of laundry detergent can model the environmental impact of the product to learn how it impacts downstream water quality. With this knowledge, the manufacturer can change the materials it uses or production levels to avoid causing an environmental problem. Still others

products pulled from the supply chain. These techniques can be applied to new products or line extensions. Buy local to reduce carbon footprint. Local or regional companies that design for sustainability can lower their carbon footprint by minimizing their use of long-distance supply chains to bring products from low-cost countries. In the UK, products produced using organic practices can’t be labeled organic if they are air freighted into the UK. Manufacturers of organic products can leverage near shore or local production as a competitive advantage.

How can technology help? Product lifecycle management (PLM) represents one of the most promising ways in which

Local or regional companies that design for sustainability can lower their carbon footprint by minimizing their use of long-distance supply chains to bring products from low-cost countries. The European Union has established an eco- design directive, a framework to guide how manufacturers of energy-using products should focus in the design stage on the reduction of energy consumption and other environmental impacts are assessing the physical design of their supply chain networks and reassessing if their facilities are in the right place to deliver long-term service to their customers while minimizing carbon emissions from transportation. Model the health and well-being impact of your products. Nutritional, allergens and other claims can also be modeled and validated against product claims. To ensure that the “as-manufactured”, distributed and consumed product will meet government standards at a 98% level or higher, models can integrate R&D tests, production assays and 34 | Corporate Social Responsibility Today | May-July 2012

technology can increase both environmental sustainability and competitive advantage. PLM can help your company: • Design products to use more recycled/renewable materials • Design products with dematerialization strategies that use less material, reduce carbon footprints and yield byproducts with less environmental impact • Use less environmentally sensitive, hazardous, and pollution-causing material • Source materials that have less environmental impact

• Speed the design process so you consume fewer resources – and less money – to get products to market • Streamline the manufacturing process to reduce time, emissions, and the consumption of energy and materials • Design products that have higher initial quality so rework costs are minimized • Design products that solve an environmental problem • Model the environmental impact of a product and/or a manufacturing operation. Enterprising organizations working to create environmental and business value through PLM should focus on: • Project and portfolio analysis. Project and portfolio analysis allows you to establish goals for Green initiatives and monitor your progress toward reaching those goals. Visibility into your current status allows timely mitigation of risks and ensures you capitalize on opportunities. • Integrated compliance. Integrating compliance capabilities into your business operations provides a timely feedback mechanism to ensure you are in compliance with environmental goals and product standards. Integrating compliance also helps to minimize rework costs, reduce wasted R&D capacity, and minimize time to market. • Process, product, and compliance modeling. Modeling your current product capabilities, costs, and future environmental impact provides a valuable source of information for integrating sustainability and business strategies. • Integrated intelligent workflow. An integrated workflow engine automates the collection, routing, and roll up of sustainability information. Integration of all required roles improves compliance and minimizes time to market. • Documentation management. A secure, centralized repository of sustainability information enables you to document and control compliance information. From “Twenty First Century Leadership,” a speech pre-

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sented to Wal-Mart employees on October 24, 2005. Neil Merrett, “Sustainable manufacturers reaping con-

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sumer awards,” bakeryandsnacks.com, January 15, 2008 AMR Research Note, October 22, 2007.

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To learn more about how Infor™ is helping enterprising organizations like yours Go Green, visit www.infor. com/goinggreen.


csr Fundamentals

Four Pillars of CSR at Reliance Industries

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eliance Industries (RIL) gives due importance to occupational health initiatives. Theses initiatives focus on lifestyle diseases in addition to work- related hazards. The company has comprehensive programmes in place for the identification and management of diabetes and hypertension. These include awareness generation, counselling and providing nutritional advice to the employee and their family. The company has an advanced, merit oriented performance evaluation system in place wherein employees are rated annually according to their team’s performance, their individual performance and their performances on special projects. The company ensures that union representatives are provided with training on all aspects of our Company’s business to facilitate better understanding and have a constructive dialogue. It has a policy of putting employee health and safety above all other priorities.

Suppliers

Through a focus on local suppliers and regular supplier meetings, RIL has been successful in helping suppliers plan their production on the basis of assured sales. Reliance Industries has successfully reduced inventories of hazardous materials.

Society

(Local Communities)

RIL supports primary health care centers in several locations through management sup-

port, distribution of free medicines and have also invested in testing centers for diseases like HIV/AIDS and TB. The company has several programmes to promote waste management, including- a zero garbage campaign in townships and surrounding villages at Hazira, a programme to support rag pickers in recycling PET bottles in Surat, awareness generation programmes and construction of roads using 5 % plastic waste in collaboration with the Gujarat Engineering Research Institute. Reliance Industries has entered into strategic long- term partnerships with several NGOs and trusts across the country based on a thorough evaluation of their work and potential for positive impact on communities.

“We consider our stakeholders as our partners in our success and we remain committed to maximising stakeholder value, be it shareholders, employees, suppliers, customers, investors, communities or policy makers” –Mukesh Ambani CMD, Reliance Industries

Customers

The company has taken a lead role in creating new market by conducting customer meets called “Rishta” throughout India, to propel growth of its products.

Environment

To address waste management concerns, Reliance Industries has research collaborations with leading institutions like Indian Centre for Plastics in the Environment (ICPE), to identify uses for recycled plastic waste. UNFCCC has approved the changes proposed by our Company to the small-scale methodology for recovery and recycling of materials from solid wastes, to include PET recycling. May-July 2012 | Corporate Social Responsibility Today | 35


CSR Practices Interview

“Organization must periodically measure the impact of its CSR activities to see if it is having the desired impact on the right stakeholders” Fullerton India is one of India’s leading Non-Banking Finance Companies. Ravi Shankar, Executive Vice President, Marketing & Rural Business in a freewheeling interview with Harsha Mukherjee, VP, Indian Centre for CSR How does your CSR activities align with the objective of your business?

CSR is ingrained in the DNA of the company’s business. It is part of our business goals. CSR activities are designed differently from the convention in Fullerton India. As its CSR mission Fullerton India aims to identify alternative vocations that can be promoted among rural households it caters to and help them adopt alternate vocations to supplement their income. It will also help to promote their existing livelihoods with the objective of making these vocations into sustainable livelihoods and thus helping them to improve their standard of living and quality of life. Fullerton India has a widespread reach in Rural India through its network of 100 rural business branches which service over 11,000 villages. Since April 2010 Fullerton India conceptualized and implemented a unique Partnership Program to help rural communities in Livelihood Advancement. Fullerton India believes that such activities must be done with the engagement of employees. All the Livelihood Advancement programs and events are organized and run completely by Fullerton India Gramshakti staff, who work at the rural branches. Over the last financial year 2011-12 we have conducted over 500 events that have impacted the lives of over 22000 customers and their families as well as other citizens in the rural catchments we serve. What has been the Social Impact from your projects & other projects?

Fullerton India’s Livelihood advancement initiative has had a widespread and positive impact on the rural population that it serves. 36 | Corporate Social Responsibility Today | May-July 2012

Ravi Shankar, Executive Vice President, Marketing & Rural Business, Fullerton India

As part of the initiative training and inputs are given to customers to help them advance their existing livelihoods and adopt suitable alternate livelihoods. This is an ongoing process and these workshops are conducted regularly and in the last year alone the company conducted over 400 such workshops across the country benefiting over 20,000 families. These activities are livelihood oriented in that they are meant to improve the income generation capability of the households and not only increase their incomes but also help smoothen their cash flows. It is helping people improve their income and thereby their standard of living. How do you conduct the Social Audit?

The process of documenting the Social Accounts involved identifying and document-

ing the measures and indicators that would help assess the impact of the organization’s business and activities across key stakeholders. Social Return on Investment (SROI) is a method to measure the social value being created by organizations in addition to the financial value that accrues to organizations. SROI Analysis builds on other approaches to understand non-financial value by quantifying, and assigning monetary values to some of its predecided indicators. The term ‘local multiplier effect,’ refers to the number of times a rupee infused gets recirculated and the surplus wealth it generates within a local economy. Local Multiplier Effect is an effective tool to give an organization and its stakeholders a simple and understandable way to measure the economic impact of their business activities. The methods to assess SROI and LME were designed by Fullerton India for its operations. There was no equivalent tool readily available. While these concepts were used by social orgainstaions to measure impact in small geographies, it had to be specially designed for measuring the impact of operations of a commercial business entity such as Fullerton India which advances loans to small enterprises and salaried individuals. So independent market research and interviews with customers were conducted to assess the benefits derived from loans taken from the company. These were compared against other options available to them and the impact qualitified. In the case of small businesses the profits form business using the finance after interest costs were calculated and how when that was redeployed casuing a


CSR Practices | Interview multiplier effect was assessed. A well designed methodology was designed and audited by Social Audit Network, UK. The Social accounts compliled was audited by SAN,UK along with an eminent panel comprising of an academician,Industry, NGO & a Management consultant. The overall community impact of our CSR programs and the Social Audit process helped us bag the prestigious Company with best CSR award for the year 2009.This award was jointly given by Indian Merchants Chambers & Asian Centre for Corporate Governance & Sustainability. What have been your learnings from cross sector partnership in Livelihood program, how involved is the Government.

Most of our CSR activities are conducted in partnership with private commercial and social organisations and NGOs. Only in the case of Dairy Farming have we been able to tap the services of Government Veterinary hospitals and their doctors to help in providing inputs to cattle owners. All the activities are completely organized by our own staff along with these Partner organisations. In the community welfare intiative in eye care we have partnered with renowned eye care institutions like LV Prasad Eye Institute, Aravind Eye Hospital, Sankara Eye Foundation, Vasan Eye Care, Sight Savers , Paramhansa Yogananda Eye Foundation etc along with whom we have conducted numerous mini and large eye care camps that have benefitted over 200,000 people. Along with LV Prasad Eye Institue and Paramhansa Yogananda Eye Foundation we also run a permanent Vision Care Centre in Andhra Pradesh that provides eye care to the people in the catchment. We would like to partner with more Government agencies to design and implement more livelihood advancement activities, specific to each region that we operate in. What is the role of your parent organization Fullerton Financial Holdings ( FFH) in Fullerton India’s CSR activity, are they promoting or participating?

Each of the subsidiaries of FFH run their own CSR initiatives as part of their overall corporate objectives. So Fullerton India runs its own CSR programs and there is no participation form the parent organization.

What is the long term vision of the projects.

Our CSR initiative is based on the principle of “ Teaching a man to fish rather than giving him fish to eat”. That is why we thought of the livelihoods advancement initiative as our CSR program Since we also see a large overlap between beneficiaries and our customer base in the rural areas we plan to increase the intensity of this initiative. Our core business in the rural catchments is to fund expansion and advancement of existing and new livelihoods. This intiative matches our business objectives very well. Since many of these livelihoods require funding to get started our customized loan products play an important part in helping adopt new livelihoods. Our vision is to continue to grow this initiative further to introduce relevant newer livelihoods to the customer base and citizens in the rural areas that could help them improve incomes and their standard of living. We are exploring training organic farming and horticulture as one of the initiatives as most of the people have small pieces of land ideally suitable for this kind of activity. Comment on Impact Investment, High impact philanthropy.

I believe in investing our efforts in the livelihood advancement area which has a sustainable impact on the lives of people. They become self-dependent and are able to access other services on their own through their higher incomes – be it education or healthcare. This kind of initiative has a better and longer term impact. However it is necessary for all corporate organisations to invest in philanthropy of some kind so collectively it will have a wider and greater impact. This depends on the financial resources available to each organsation. So the initiatives chosen will depend on funds and other resources available. It is essential for these initiatives to be well thought of and sustained over a long period to create a deep and positive impact. There are many initiatives that can be run without much financial support through the large workforce in the corporate world. It is essential to engage them and utilize their expertise to deliver the programs. It could be in the area of education and healthcare. What is the importance of CSR Reporting & What CSR reporting standards do you see Fullerton India using in future.

It is important to assess the impact of one’s ini-

tiatives to ensure they are benefiting the people it was intended to. The benefit derived by intended beneficiaries must justify the investment of time and money of an organization in these initiatives. Often a lot of resources are wasted with little impact. So it is important for an organisation to periodically measure the impact of its CSR activities to see if it is having the desired impact on the right stakeholders – employees, customers, general public. We devised a method to measure the Social Return on Investment and the Local Area Multiplier to measure the impact of our business operations. We will adapt it further to measure the impact of our operations and the livelihood initiatives. Message to other companies in the Financial sector to promote CSR & sustainability activities.

It is important for each organization – whichever sector they operate in – to adopt an initiative that reaches out and improves the lives of common people. Most organisations already have their own CSR agenda. There is a need to step this up and involve more people – especially the highly trained and talented employees in the financial sector – who can contribute a lot in this area. How does Fullerton encounter financial default and repayment risk-related challenges.

There are number of risks that a financial institution has to face. These risks could be of delinquencies, frauds, staff turnover, overleveraging, regulatory etc. Our initial customer analysis and ongoing engagement with the customer through our relationship model enables us to manage such risks on a proactive basis. The loans are linked to livelihoods and the income generating activities the customer is involved in. Through our CSR intiatives we have been able to build a strong positive image among our customers and also built a strong bond with them. This has been extremely beneficial to us in the rural business. Even when their livelihoods are adversely affected due to natural calamities or local events people have ensured they repay their dues as soon as the situation returns to normalcy. This is because of our constant engagement with them beyond the customer-company relationship through our CSR activities. May-July 2012 | Corporate Social Responsibility Today | 37


Sustainable Development

The Future of

Business and Sustainable Development

(it’s not just your grandfather’s CSR anymore) While these are early days of corporate social responsibility, or CSR, being integrated into core business practices, there are a number of examples of companies that have incorporated initiatives like youth employment generation or rural solar power – to give just two examples – into their business models… by seth petchers

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first had the chance to visit India in 1994. Between then and 2008, when I relocated from Boston to Mumbai as the founding CEO of the NGO Shop for Change Fair Trade, I had the chance to visit India again several times, including a year-long stint divided between Pune and rural South Gujarat. As a periodic visitor over 15 years, I had a unique vantage point of the changes happening in India. Unlike a long-term resident of Mumbai, Pune, or Bangalore who might not be so keenly aware of the incremental daily changes that add up over time, each time I returned to India after three or four years away I was immediately shocked to see how different the country had become since my last visit. And what did I see? My urban middle class Indian friends and their children had unprecedented opportunities for study and employment. Despite the inevitable ups and downs faced in any economy, businesses were doing well. Malls filled with sleek Indian and foreign brands had sprung up all over, and on any given Sunday they were jam-packed with people just like my urban middle class friends who were exiting with carrybags full of new things. These developments were unquestionably good news. But of course this was not the entire story. While part of India was – and still is – doing well, there are still many struggling to make ends meet who haven’t seen their share of the economic miracle. It’s estimated that 80 crore Indians earn less than INR 100 day. Many parts of rural India face particular hardships. And when 60% of Indians depend on agriculture to make a living, the inability for farmers to share in the country’s boom transports the challenges of rural India to urban India as members of farming families migrate to cities to earn. Given the number of people living in rural areas and the increasing pressure on urban infrastructure, the rural Indian economy simply must to be made to work. And to do that, the country needs to harness the power of economic growth to make sure that everyone gets a fair share of the opportunities that are being created.

CSR, philanthropy, and sustainable core business practices As codified in the names of schools, hospitals, and charitable foundations, Indian industrialist families have a long history of philanthropy. The companies owned by these families – now joined 38 | Corporate Social Responsibility Today | May-July 2012


Sustainable | Development

“Because CSR initiatives are part of companies’ core business practices, by necessity they must be economically sustainable for all parties involved, resulting in true long term, win- win arrangements”

by listed companies, public sector utilities, and multinationals operating in India – play a tremendously important role in creating opportunities for the poor through their philanthropic contributions to NGOs (including mine) and community groups. Yet as important as philanthropic engagement is, the benefits are tied to benevolence rather than the country’s economic growth. Interestingly, alongside of philanthropy, Indian businesses are starting to unlock opportunities of integrating social, economic, and environmental sustainability into their core business practices. As this happens, development opportunities for the poor can become as successful as Indian business. Stated another way – when a business integrates social objectives into its core business practices, the company’s growth actually becomes a driver of development. While these are early days of corporate social responsibility, or CSR, being integrated into core business practices, there are a number of examples of companies that have incorporated initiatives like youth employment generation or rural solar power – to give just two examples – into their business models. And because these initiatives are part of companies’ core business practices, by necessity they must be economically sustainable for all parties involved, resulting in true long term, winwin arrangements.

NGOs in the new CSR model As this trend emerges, many NGOs are shifting their focus to provide platforms on which forward thinking companies can build sustainable development initiatives into their core business practices. For example, my organization, Shop for Change Fair Trade, has spent the past two years working with Indian brands to help them source in such a way that poor farmers – long the protagonists of disheartening media reports of farmer suicides – can get a fairer deal from the supply chain. By indentifying producer companies or other organizations that buy produce from poor farmers in a way that guarantees farmers higher incomes and an honest deal, Shop for Change helps brands like Shoppers Stop, ColorPlus, and Anita Dongre make their core sourcing practices sustainable. Then, in partnership with these brands, Shop for Change reaches out to consumers, letting them know that choosing products with the Shop for Change Mark makes a difference in the lives of poor farmers. For the companies we work with, this differentiates products in the market and boosts brand equity, a win for them, a win for their customers, and a long term win for farmers that will grow more impactful as sales of fair trade products grow.

The way forward As I meet more and more Indian companies I find that offices are abuzz with talk about CSR. Companies know they should do it and most of them want to do it. The question they’re asking is ‘how do we do it?” As businesses look for ways to create or evolve their CSR programmes, now is the time examine how philanthropic initiatives can be increasingly paired with the integration of CSR into the company’s core business practices. Sound overwhelming? More and more there are NGOs set up to partner with companies not only by receiving philanthropic support but also by helping to harness the power of markets to create sustainable development. Over time, as consumers appreciate this ap-

proach, shareholders value it, and such initiatives start to positively impact the bottom line, the power of sustainable business practices to drive both development and profits will continue to emerge. About the Athour Seth Petchers is the CEO of Shop for Change Fair Trade, an NGO working to build the market and the movement for fair trade in India. With 15 years of experience in fair trade across the globe, Seth is leading a team that is introducing the internationally successful fair trade certification concept to the Indian market. Prior to joining Shop for Change, Seth worked with the NGO Oxfam America where his focus was integrating the agency’s policy, corporate engagement, public education, and development work as it pertained to agriculture and fair trade. Before Oxfam, Seth worked on a joint project with the non-profit organization Chocolate Matters and the World Bank. This project focused on market assessment and development of business models that add value to cocoa produced by small-scale farmers. Seth also worked with the International Task Force on Commodity Risk Management, housed at the World Bank. His contributions included curriculum development for trainers and farmers and implementation of training programs in Nicaragua and Tanzania. After working in rural India in 1997-98, Seth became the first Certification Manager for Fair Trade USA, the fair trade certification agency for the U.S. market. At Fair Trade USA, Seth’s responsibilities included working with importers and farmer cooperatives to remove obstacles to product sourcing, as well as facilitating new business relationships between importers and cooperatives. More recently, Seth served as Board Chair of the Fair Trade Federation, a trade association of North American fair trade businesses. Seth holds a Master of Business Administration and a Master of Public Policy from Georgetown University and a Bachelor of Arts in South Asian Studies and Religion from Oberlin College.

About Shop for Change Fair Trade Shop for Change Fair Trade is an NGO committed to ensuring a better deal for farmers. The Shop for Change Mark is an independent guarantee that small-scale farmers received a fair deal for their hard work. When shoppers choose products with the Shop for Change Mark, they know that they are empowering farming families to improve their lives, care for the environment, and invest in a better future. Shop for Change was established by Traidcraft Exchange (UK) and International Resources for Fairer Trade (India) and is funded by the European Union, ICCO, Hivos, and NABARD. May-July 2012 | Corporate Social Responsibility Today | 39


Sustainability Standards

Moving

Forward on a

Sustainability

Journey

UL Introduces its Sustainability Quotient Program

Only when sustainable business practices are factored accurately into valuations, through widely accepted metrics, will capital begin to flow to those companies that are most sustainable. Why? Because the investor’s decision is driven primarily by core business concerns rather than a sense of philanthropic zeal or social obligation by catherine sheehy

40 | Corporate Social Responsibility Today | May-July 2012

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orporate responsibility, sustainability, people-planet-profit – whatever term you prefer, it’s a concept and a field that is still developing and emerging around the world, including in India. Interestingly, thenotion of corporate social responsibility(CSR), whilerelatively new, has been practiced in part by many of the largest companies in India since their founding, particularly in the areas of community development and philanthropy.1 More than 100 businesses in India have joined the initiative to-date, according to the UN Global Compact (UNGC).2 Despite these positive signs, many companies in both the developing and developed economies are struggling to define CSR at a strategic level as well as on a tactical implementation level. Meanwhile, stakeholders – socially responsible investors, consumers, regulators, employees, nongovernmental organizations, and others – are increasingly pressing companies for information about their CSR efforts. Companies unable to respond are at a potential disadvantage in the marketplace.UL, a global safety science company, created the Sustainability Quotient (SQ®) Program to address this importantneed. Study after study indicates that CEOs see sustainability and CSRas a business imperative, but a recent report completed by Accenture and the United Nations highlights some of the inhibiting factors that prevent businesses from embracing sustainability fully. Among the issues cited are: lack of clarity in the marketplace about thedefinition of sustainability; unclear metrics; a mixed global regulatory environment; and concern that mainstream investors do not value the long-term sustainability initiatives required to truly integrate sustainability into a company’s operations. On this last issue, the authors conclude, “Only when sustainable business practices are factored accurately into valuations, through widely accepted metrics, will capital begin to flow to those companies that are most sustainable. Why? Because the investor’s decision is driven primarily by core business concerns rather than a sense of philanthropic zeal or social obligation.”3 UL’s SQ® Program, launched in 2011, is designed to provide a comprehensive system of assessing, rating, and certifying the sustainability initiatives of corporations.The goals of the Program are fourfold:


Sustainability | Standards 1. Provide a common framework for defining CSR that complements existing global protocols such as the UNGC; the Global Reporting Initiative (GRI), a voluntary reporting framework that provides guidance to companies on CSR disclosure;or ISO 26000, a voluntary social responsibility standard that provides guidance to companies on how to contribute to sustainable development; 2. Provide a tactical implementation path to help companies integrate sustainability into their operations and supply chains, and thathelps them apply the guidance of the UNGC, GRI, or ISO 26000into any stage of their sustainability journey; 3. Provide an easy-to-understand rating system, supported byrigorous verification protocols that enables users, whether they are consumers to investors,to comprehend, trust, and use the resulting scores; 4. Provide an auditable framework that enables companies and their shareholders to compare performance against like companies, and over time, that enablesthe integration of sustainability factors into financial valuations. The first of thesestandards, UL 880: Sustainability for Manufacturing Organizations, was developed over the course of two years with input from hundreds of stakeholders representing business, regulators, investors, consultants, academics, and others. As illustrated in Figure 1, the architecture of the Standardreflects both the path forward to certification – through prerequisites required for eligibility for certification, points from core indicators required to achieve a certified score, and points from leadership indicators available to show continuous improvement – as well as the path toward overall sustainability. The tactical, step-by-step journey from idea to execution of a sustainability program is broken down by UL into four types of indicators: 1. Inventories and Baselines reflect the status of the company’s sustainability efforts at a point in time and against which it will measure all future progress; 2. Policies and Procedures are what a company establishesto manage its progress toward its improvement goals; 3. Performance are those metrics a company uses to track progress and achievement of goals; and 4. Reporting is what is ultimately required to facilitate the integration of sustainability factors into financial valuations. In addition, the architecture of the Standard also reflects the scope of CSR accepted in the marketplace today. All indicator types aregrouped into the following domains: • Governance for Sustainability: including sustainability strategic planning, board oversight, internal stakeholder engagement, ethics

A Tool to Assess Corporate Sustainability

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variety of services based on the Standards and the SQ Program are available from UL to help companies wherever they are in their sustainability journey – from assessment services to determine readiness, to certification against all or part of the Standard.Some may use the UL 880 Standardas a management tool to help them understand what sustainability is and what it could mean for their business.But where to start?UL invitescompanies to find out how they measures up against others with a freeonline assessment tool athttp://sustainabilityquotient.questionpro.com/. This tool helps a manufacturer evaluate its sustainability profile based on key sustainability factors, such as environmental purchasing policies, greenhouse gas reduction targets, and sustainable supply chain code of conduct. It also provides a preliminary analysis of a manufacturer’s sustainability initiatives relative to the prerequisite and core requirements of the UL 880Standard. And, because the tool compares a company’s performance with the aggregate performance of other survey respondents, it helps draw a clearer picture of the marketplace’s competitive landscape.

policies, and creating the infrastructure and fostering the behaviors that create a culture of sustainability • Environment: including product stewardship, sustainable resource use, environmental management systems, energy efficiency and carbon management, materials optimization, facilities and land use, habitat restoration, and waste prevention • Work Force: including professional development, workplace integrity, employee satisfaction and retention, workplace safety, and employee health and well-being • Customers and Suppliers: including fair marketing practices, product safety, customer support and complaint resolution, and sustainable supply chain management, monitoring and improvement • Community Engagement and Human Rights: including community impact assessment, community investment, and human rights issues. CEO’s of the world’s largest corporations agree that sustainability is an imperative to the financial success, health, and security of our world. UL is proud to be part of the discussions and discernment of what CSR means for business and society today and in the future.Business leaders in India are encouraged to seek out the support of companies like UL as they continue their journeys toward a more sustainable world. 1

Chahoud, Tatjiana, J.Emmerling, D.Kolb, I.Kubina, G.Repinski, and C.Schlager, “Corpo-

rate and Social Responsibility in India – Assessing the UN Global Compact’s Role,” German Development Institute, Bonn 2007. 2

UN Global Compact, http://www.unglobalcompact.org/participants/search, accessed

June 12, 2012. 3

Berthon, Bruno, D.Abood, and P.Lacy, “Can business do well by doing good?”, October

2010, accessed online at http://www.accenture.com/us-en/outlook/pages/outlookjournal-2010-business-do-well-doing-good.aspx.

Figure 1: UL 880 Architecture

Catherine Sheehy is the Program Manager, Sustainability Services, UL Environment May-July 2012 | Corporate Social Responsibility Today | 41


Book Review

The Age of Responsibility

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usiness is doing more than ever before to tackle issues like climate change, poverty, human rights and corruption. So why are things are getting worse, not better? Why are environmental and social trends still headed in the wrong direction? Wayne Visser argues that traditional approaches have failed, leaving business stuck in the Ages of Greed, Philanthropy, Marketing and Management. Using Web 2.0 as a metaphor, he shows how business needs to radically transform if we are to ever reach a true Age of Responsibility. The required systemic approach is dubbed CSR 2.0 and characterised by five key principles: creativity, scalability, responsiveness, glocality and circularity. Citing more than 300 cases to illustrate ‘the good, the bad and the ugly’ of corporate sustainability and responsibility, the book describes how the new DNA of business is fast being decoded in the areas of value creation, good governance, societal contribution and environmental integrity. Having set out a compelling vision of the future, The Age of Responsibility describes how to get there by exploring change at the societal, organisational and individual level. Readers are left not only informed, but also inspired to make a difference. This book is the most challenging and exciting account of the future of business that you’re likely to read all year. This book argues that CSR, as a business, governance and ethics system, has failed. This assumes that success

or failure is measured in terms of the net impact (positive or negative) of business on society and the environment.It contends that a different kind of CSR is needed if we are to reverse the current direction of many of the world’s most pressing social, environmental and ethical trends. It reviews business’s historical progress over the Ages and Stages of CSR: moving through the Ages of Greed, Philanthropy, Marketing and Management, using defensive, charitable, promotional and strategic CSR approaches respectively. It examines the Three Curses of Modern CSR (incremental, peripheral and uneconomic), before exploring what CSR might look like in an emerging Age of Responsibility. This new CSR – called systemic or radical CSR, or CSR 2.0 – is based on five principles (creativity, scalability, responsiveness, glocality and circularity) andforms the basis for a new DNA model of responsible business, built around the four elements of value creation, good governance, societal contribution and environmental integrity. The book is authored by Wayne Visser is Founder and Director of the think-tank CSR International and the author/editor of twelve books, including nine on the role of business in society. In addition, he is a Senior Associate at the University of Cambridge Programme for Sustainability Leadership, Professor of Sustainability at Magna Carta College, Oxford, and Adjunct Professor in CSR at the La Trobe Graduate School of Management in Australia.

The New Sustainability Advantage

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he New Sustainability Advantage has a recalibrated and more compelling business case for sustainability strategies. It shows that if a typical company were to use bestpractice sustainability approaches already being used by real companies, it could improve its profit by at least 51% to 81% within three to five years, while avoiding a potential 16% to 36% erosion of profits if it did nothing. The fully revised business case is organized around seven easy-to-grasp bottom-line benefits that align with current evidence about the most significant sustainability-related contributors to profit. Expressed in clear business language and presented in an appealing, graphically rich format, this is a practical guide for sustainability champions who need to jus-

42 | Corporate Social Responsibility Today | May-July 2012

tify more aggressive sustainability strategies. The New Sustainability Advantage proves that the quantified business case for sustainability is more compelling than ever before. Written by Bob Willard who is a leading expert on quantifying and selling the business value of corporate sustainability strategies. Bob serves on the advisory boards of The Natural Step Canada, Learning for a Sustainable Future, and Durham Sustain Ability. He is on ad hoc advisory committees for sustainable business certificate programs at Seneca College, Algonquin College, and Ryerson University, and is a member of the Durham Region Roundtable on Climate Change (DRRCC) and the International Society of Sustainability Professionals (ISSP).


Company | Speak

REC allocated 0.5 percent of PAT for CSR REC has adopted an integrated approach to address the community, societal and environmental concerns in a strategic manner in line with DPE guideline

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ural Electrification Corporation (REC) has signed a MoU with Ministry

the rural areas enabling the literates to attend the various educational pro-

of Power, Govt. of India in March’ 2011 with commitments for under-

grammes to achieve higher skills and thus leading to creation of livelihood

taking sustainable projects under CSR initiatives in project mode with

opportunities and employment in urban areas and 100 new mAECs cum

predefined milestones, timelines for implementation and budget.

vocational training centres to be set up by State Resource Centres (SRCs)

While identifying CSR initiatives, REC has adopted an integrated approach to

in urban areas /district headquarters @ Rs.5 lakh each thus establishing a

address the community, societal and environmental concerns. REC has taken

educational hub for both illiterates and literates to acquire higher skills by

up the following CSR activities in a strategic manner in line with DPE guidelines:

attending various educational programmes thus leading to creation of live-

The CSR Budget@0.5% of Profit after Tax (PAT) of previous year was allocated

lihood opportunities and employment in urban areas.

for FY 2011-12, amounting to Rs.1285 lakhs. Some viable and sustainable CSR

(iv) Furthermore, due recognition was given to National Men Hockey team of

projects were identified and sanctioned aggregating to Rs.1410. 46 lakhs. Dis-

18 nos. of players each by awarding them @ Rs.1.5 lakhs per player for win-

bursement MoU target for an amount Rs.1298.92 lakh has been achieved during

ning Asian Championship Trophy’2011 and @ Rs.1.0 lakhs per player for

FY 2011-12 thereby obtaining an excellent MoU rating under CSR initiatives.

qualifying London Olympics’2012. This CSR initiative”Promotion of talent

REC has contributed to non project based CSR activities during FY 2011-12 within the provision of 5% of CSR Budget. The following project based CSR activities out of 95% of CSR Budget

in Sports” was identified and undertaken to raise their morale to bring our National Game Hockey to the new shining glories in future. Besides above, some of the project based CSR activities which were initi-

were initiated during FY 2011-12 based on mandatory base-line surveys and

ated during FY 2010-11 are continued in FY 2011-12 include:

needful assessment.

(i) Financial assistance to ISKCON Food Relief Foundation, New Delhi, to

(i) Financial assistance for Rs. 162.91 lakhs was provided to Dr. Reddy Founda-

purchase delivery vehicles under Mid-day meal program in Government

tion a CSR arm of Dr. Reddy Laboratories Hyderabad, for Skill up-gradation

schools for transportation of safe, hygenic and timely delivery of cooked

and job oriented training leading to creation of livelihood opportunities

food, in Ali Gaon, Badarpur Govt. Schools, New Delhi and Govt. School, in

and employment to 2400 rural/ semi urban youths from economically weaker section at 15 centres located in 6 states viz. Odisha, Jharkhand, Chhatisgarh, Bihar, West Bengal and Uttar Pradesh.

Palwal District of Haryana State. (ii) Financial assistance to The Energy and Resources Institute (TERI) for its ongoing REC CSR initiative of “Lighting a Billion Lives (LaBL)” under which

(ii) Financial assistance of Rs.152.55 lakhs was provided to Construction In-

Solar LED lanterns have been distributed to 2250 nos. of rural households

dustry Development Council (CIDC), an autonomous body established

in poorly electrified 45 villages of three States viz Madhya Pradesh, Assam

by Planning Commission, Govt. of India, for Skill up-gradation and job

and Maharashtra in FY 2011-12, are being periodically monitored by REC

oriented training leading to creation of livelihood opportunities and em-

CSR division and their impact evaluation are underway.

ployment to 500 rural/ semi urban youths from economically weaker sec-

(iii) REC Award for Young Champions in Sports viz. Chess & Badminton was

tion of society in construction industry at designated training centres viz.

also initiated during FY 2011-12 under CSR activity “Promotion of talents in

Faridabad(Haryana), Ghaziabad, Sidhauli & Ramshahpur in Uttar Pradesh and Pavpuri in Bihar States .

sports”, (iv) Other CSR Innovative Projects initiated in FY 2010-11 includes asset cre-

(iii) REC CSR Financial assistance of Rs.1050.00 Lakhs to implement a presti-

ation i.e. construction of dedicated, barrier-free, large training hall for vo-

gious programme entitled “Saakshar Bharat Mission” of the Government

cational training of physically handicapped persons entitled “Amar Seva

of India by National Literacy Mission Authority (NLMA) under MoHRD in

Sangam” and have been implemented in FY 2011-12 in Tamil Nadu State.

Public Private Partnership (PPP) mode. Over 1.61 lakh AECs are targeted to

Meticulous documentation relating to CSR approaches, policies, pro-

be set up under Saakshar Bharat Mission. It has been decided to upgrade

grammes, expenditures etc. were prepared. All CSR initiatives have been re-

the existing Adult Education Centres (AECs) into mAECs by providing them

ported to National CSR Hub TATA Institute of Social Sciences (TISS) Mumbai

ICT infrastructure viz. computers, furniture and audio visual equipment etc.

in compliance with DPE Guidelines.

In line with CSR vision and REC CSR policy to promote education including

Concurrent and final evaluation of all CSR projects initiated during FY 2010-

infrastructure creation, REC had sanctioned up-gradation of 220 mAECs

11 is being perused actively by engaging an external agency during FY2011-12

in rural locations @ Rs. 2.5 lakh per mAEC thus creating a platform/hub in

in compliance with DPE Guidelines. n May-July 2012 | Corporate Social Responsibility Today | 43


Next Issue Stakeholder Engagement Building Confidence in Banks Governance & Regulation Culture of Compliance

Corporate Social Responsibility – Unlocking the value

are indian Companies Ready? According to the results of a survey By Indian Centre for CSR, a majority of Indian Companies believe that the development of a Corporate Social Responsibility (CSR) strategy can deliver real business benefits, however only 11 per cent have made significant progress in implementing the strategy in their organisation

Communications & Reporting Inside Out: Sustainability communication begins in the workplace Environment CSR: On the Road to Going Green – Employers are updating their benefits programs to encourage employee activities that reduce greenhouse gas emissions Supply Chains Making supply chain self sustainable Business Ethics Mixing Philanthropy with CSR – A Waste of Shareholder Money Socially Responsible Investing Indices for Good – BSE’s Answer to Sustainable Index Sustainability CSR: A Logical Step Toward Sustainability: A Case Stidy


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