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UC Berkeley Center for Responsible Business &

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UC Berkeley Center for Responsible Business & Business for Social Responsibility July 8-9, 2008

2 Program Schedule Day One Day Two Overview of CR & Global Trends
CR Strategy Development Tool Case: Tale of Two Strategic Approaches CR Metrics, Impact & Value Chain Day Two Defining Your Stakeholders Communicating & Branding Your CR Strategy Small Group Work Preparing for the Future

3 Overview of Corporate Responsibility & Global Trends
Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management Overview of Corporate Responsibility & Global Trends Professor Kellie A. McElhaney Haas School of Business

4 A Short Story in Three Parts
The Power of Business The Challenges in the World A Solution in CSR

5 Part One is Short: It’s About the Power of Business.

6 There’s Been a Shift of Power & Resources
2006 Company/Country Revenue (Fortune Magazine) GDP (World Bank) [millions, USD] 1 United States 13,201,819 2 Japan 4,340,133 3 Germany 2,906,681 4 People's Republic of China 2,668,071 5 United Kingdom… 2,345,015 22 Exxon Mobil 339,938 23 Poland 338,733 24 Austria 322,444 25 Wal-Mart Stores 315,654 26 Norway 310,960 27 Saudi Arabia 309,778 28 Royal Dutch Shell 306,731 29 Denmark 275,237 30 BP 267,600

7 If you think it’s bad being exploited by global companies…try being ignored by one.
- Jeffrey Sachs

8 There’s Been a Shift of Trust Expectations of Companies to Operate in Society’s Best Interests v. Perceived Performance Globescan, 2005 8

9 Private Sector Has Lost Trust
Trust in global institutions to “operate in society’s best interests” NGOs 2, Business ranks 11 (out of 12), only ahead of Parliament/Congress Armed Forces NGOs UN Religious Institutions WTO Government Press/ Media Trade unions/ Labor World Bank IMF GLOBAL COMPANIES Parliament/ Congress NGOs more trusted, high credibility Environics International, 2006

10 Part Two is Longer: It’s About the Challenges our World Faces

11 Water Climate Change Food Rich/ Poor Gap
1.1 B lack access to clean drinking water 2.5 B lack access to proper sanitation 5 M die from water-related disease (10 times killed in wars) Climate Change 2006 hottest year on record Need 80% decrease by 2050 to prevent global catastrophe Climate change is the greatest market failure the world has ever seen. - Sir Nicholas Stern, Former Chief Economist, World Bank. Food Global food prices (grains & oils) have risen 54% in 2008 In rich countries, we spend 10-20% of budget on food; in poor countries, 60-80% 15M children die of hunger For first time, levels of obesity approaching parity with levels of starvation Rich/ Poor Gap Half of the world lives on less than $2/day Richest 20% of countries account for 75% world’s income From this, disease, lack of healthcare, lack of education, lack of opportunity

12 The Third Part is a [piece of a] Solution: Corporate Social Responsibility (CSR)

13 CSR Goes Mainstream 13

14 CSR is Everywhere

15 Defining CSR Net Impact:
Using the power of business to improve the world. Business for Social Responsibility (BSR): Companies being able to be commercially successful in ways that demonstrate respect for ethical values, people, community, and the environment. A Corporate Strategy Definition (McElhaney, 1998): A corporate strategy that is integrated with (1) core business objectives & (2) core competencies to create financial and social/environmental returns, and is embedded in corporate culture and day-to-day business operations. 15

16 Strategic CSR CSR Strategy must fit two things:
Core business objectives: Increase sales, penetrate new markets, engage employees, reduce operating expenses, improve reputation, protect brand, beat competitors Core competencies: Technology, financial products &services, making markets, natural food, automobiles and transportation systems, travel & tourism. 16

17 Global Citizenship/ CSR/ Sustainability
Employee Engagement Community Investment Philanthropy Government & Public Relations Governance & Ethics Environmental Footprint Supply Chain/ Sourcing Social/ Environmental Impact of Products & Services 17

18 A Typical Corporate Strategy
Hewlett Packard, 2006 18

19 A Typical CSR Strategy Supply Chain Community investment Safe products
Cause marketing Environmental management Human rights Employee volunteerism Fair employee treatment Philanthropy Business ethics Product give-aways Corporate governance Social/ environmental reporting Sponsorships Workplace diversity Non-Profit partnerships 19

20 A Lost Opportunity… …to utilize CSR as a powerful integrated business strategy, not an add on.

21 What People Think CSR Is…
Spending (a little bit of) the (whole lot of) money that you make.

22 What CSR Really Is… How you make (the whole lot of) money that you spend.

23 CSR is not about how you spend the money you make.
It’s about how you make the money you spend. 23

24 The Triple Bottom Line Triple Bottom Line Triple Bottom Line
Economic Triple Bottom Line Triple Bottom Line J. Elkington, SustainAbility Social Economic Environmental

25 Internal & External CSR
Governance Transparency Supply Chain Mission, Vision, Values Reporting Compensation/ Benefits Environment Stakeholder Engagement Ethics Diversity Human Rights Socio-political Issues Health & Wellness Community Engagement & Investment Accountability Downsizing & Layoffs Privacy Work Life Balance Philanthropy Marketplace Job Satisfaction

26 Stages of CSR Sweet Spot

27 The Baby Parable & Four Approaches
Save babies, one at a time Charity work Serve desperate needs Teach babies to swim -Empowerment work -Teach skills -Help people overcome Run upstream to stop whoever is throwing the babies in Advocacy work See cause of suffering, work to stop it Analyze why people throw babies in rivers (the University Professor!) Problem analysis “Big picture” view Educate self, share knowledge

28 It is Linked with Basic Human Needs

29 CSR Maturity Philanthropic Transactional Integrative Growth stage:
Level of engagement Low High Importance to mission Peripheral Strategic Magnitude of resources Small Big Scope of activities Narrow Broad Interaction level Simple Intensive Managerial complexity Infrequent Complex Strategic value Modest Major EXAMPLES ACTIONS: Donation Grants Event sponsorship Cause-related marketing Employee volunteerism Joint-advocacy Joint-action Deep partnerships Financing principles Changing rules of industry

30 A CSR Landscape Transform multiple industries. Transform an industry.
WORLD Transform multiple industries. INDUSTRY Transform an industry. Take responsibility for our full impact (social, environmental, economic). Take responsibility for adjacent industries. Take responsibility for global conditions (climate change, global inter-dependence, etc.). Be a beacon to others. Develop codes of conduct for the industry. Build strong coalitions to effect and enforce them. COMMUNITY Be a good neighbor. Innovate and demon-strate restorative business practices. Influence the industry indirectly, by example. Give something back. Support local communities (philanthro-py, direct programs, employee matching & volunt’ring.) Reduce waste, consumption and emissions. COMPANY Run a good business Provide access to tools/ product. Disaster relief.

31 A Company Who Gets It: Whirlpool

32 Whirlpool & Habitat for Humanity
$25M commitment in 1999 Given $34M, plus 73,000 refrigerators, ranges, household items to 36,000 homes Pledged to give appliances to every house built through 2011 Launched Building Blocks initiative in 2006, sending over 1000 employees & more volunteers to neighborhood for 1 week to build an entire block From onset, was philanthropy; in 2004, became brand message “We make very large, very heavy metal machines, often with big motors. This puts a human face on what could be a very cold metal category.” Sponsored 2006 Reba McEntire Habitat for Humanity Tour 32

33 It’s an Integrated Strategy…

34 With Business Implications

35 Brand, Employees & Consumers
Who says social responsibility is a big influence in their impressions of companies? Product Purchase Who considers corporate citizenship when buying a company’s product? 49% 79% Product Boycotts How many people would boycott a product if they learned about negative citizenship practices? Employee Recruitment Who considers social commitment when choosing an employer? 76% 77%

36 CSR & The Million Dollar Employee

37 The Role of CSR in Business
Inspires/ attracts employees Enhances/ redefines the brand Enhances value proposition Fosters distinctiveness Tells a story Opens access to new markets Increases license to operate Improves efficiencies Increases trust and loyalty 37

38 CSR Leaders May No Longer Finish Last
Economist Intelligence Unit global study, “Doing Good: Business & Sustainability Challenge” 2007 Sponsored by B of A, Orange, Kearney, SAP Companies who rated selves highly on CSR saw 16% increase in profits, price growth of 45%, compared to poorly-rated at 7% / 12% May not be causal or proved, but executives believe it is Asked to name highest priority over next five years, 61% cited “communicating their practices to all stakeholders”

39 Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management
CSR Frameworks Part 1: Context What is CSR? What is the role of business? CEO Aron Cramer, BSR

40 …but what’s behind all these activities?
What is CSR? CSR is… Being energy efficient Publishing a sustainability report Greening the supply chain Healthy working conditions Producing a human rights policy Signature philanthropic program Having a social mission statement Partnering with nonprofits Dialogue with stakeholders Enforcing a code of conduct …but what’s behind all these activities?

41 CSR is aligning business with the world’s needs
Business has the potential to promote the wellbeing of the world through problem solving and wealth distribution. A just and sustainable world is indicated by the wellbeing of: Individual health, security and wellbeing Societal health, security and wellbeing Healthy functioning ecosystems, natural resources and biodiversity Individual Society Ecosystem Business Business can contribute to society by: Developing solutions Innovating Creating financial wealth Allocating resources

42 The Emerging Business Case
The world is increasing in complexity and understanding social and environmental issues is required for making informed business decisions. Technology Public Policy Natural Resources Making sense of complexity & finding opportunities Globalization Business Success Markets Population Supply Chain Operations Climate Change Communities Cultural Values Energy War Religion

43 CSR can mean meeting essential global challenges through value creation
Corporate leadership is not just about “reducing risk” but using business and markets to deliver social and environmental solutions. Philanthropy & Civil Activism Non-market solutions for social/environmental needs CSR (Value Creation) Market solutions for social/environmental needs Social & Environmental Value No Value Failure to provide any value Financial Only Financial gains with little or no societal value Market Value

44 Evolving Definitions of CSR
Value Creation Now Integration 2000’s Innovation 1990’s Reaction 1980’s

45 CSR Frameworks Part 2: Strategy Development
Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management CSR Frameworks Part 2: Strategy Development

46 Approach Assessment: Where are we now?
Implementation Strategy Visioning Assessment: Where are we now? Visioning: Where do we want to be? Strategy: How do we get there? Implementation: Let’s get there. Testing: Will it work?

47 1. Assessment: Where are we now?
Implementation Strategy Visioning Assessment Components: Business Strategy: where is the business going over the next ten years? Internal Assessment: What are our existing policies and practices? Current Approach: How do we manage CSR today? Value Chain: What are the various touch points of our business? What opportunities and risks do they create? Reputation: How do important audiences – internal and external – view our company/industry?

48 2. Visioning: Where do we want to be?
Assessment Implementation Strategy Visioning Visioning Components: Leadership Profile: What is our company’s aspiration? Materiality Analysis: What are our most material issues? Prioritizing: Where do we want to make a mark? What is secondary? Internal Support: Will this vision get traction throughout the company? External Credibility: Will this strategy be credible with key stakeholders?

49 3. Strategy: How do we get there?
Assessment Implementation Strategy Visioning Strategy Components: Framing Questions: Will this aid our business, foster innovation, and mitigate risk? Value Chain: Can we integrate this strategy throughout the supply chain? Change Management: What changes will be needed to make the strategy effective? Systems Thinking: What levers must be influenced to make the strategy work? Relationships: What relationships do we need to execute this strategy? Communication: Can we communicate this strategy effectively? A good CSR strategy should help companies access: (1) financial capital, (2) human capital, (3) reputational capital, (4) natural capital, and (5) produce social capital.

50 4. Implementation: Let’s get there.
Assessment Implementation Strategy Visioning Implementation Components: Communication: Strategy must be conveyed clearly and effectively. Policy Development: Develop policies needed to implement strategy. Integration: Core business plays a role. Targets: Metrics (impacts, not only activities) and accountability introduced. Collaboration: Look for opportunities with industry and other partners. Reporting: Communicate our impacts to internal & external stakeholders. The integration segment just ahead will provide more guidance on implementation.

51 5. Testing: Make it credible and resilient.
Assessment Implementation Strategy Visioning Testing Components: Stakeholder Dialogue: Is the strategy credible to key opinion formers? Forecasting: What are the “unknown unknowns?” Refresh the Strategy: Assume that adjustments to strategy will be needed.

52 CSR Frameworks Part 3: Strategy Exercise
Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management CSR Frameworks Part 3: Strategy Exercise

53 Exercise One: Rescue Our Reputation!
Your consumer products company has been hit by a series of labor and quality scandals that has placed it in the bottom fifth of the annual Consume-A-Lot reputation rankings. Your CEO asks you, as the head of Public Affairs, to work with the head of CSR develop a three-step program to raise the company’s rankings to the 50th percentile in two years, and top quartile in three. You have not really worked with the head of CSR before, and have always wondered whether his boss, the General Counsel, really embraces corporate responsibility. What process will you use, and what will you recommend to the CEO?

54 Exercise Two: Open New Markets!
Your food retailing company is taking advantage of market liberalization in India, and aims to be the #1 foreign retailer within five years. As head of strategy, you have never really thought about CSR, but know that the India plan can make or break your career. You want to make sure that your stores are viewed favorably in a notoriously difficult market. You want to develop a five year strategy that establishes your company as a leading corporate citizen in India. How will you develop a strategy, and what will it be?

55 Exercise Three: Innovate!
Your new CEO has set innovation for society as the #1 objective for the company under her leadership. As the Vice President, Sustainability, for your consumer electronics company, you have been tasked with developing new product offerings. You have been asked to focus in particular on emerging markets with low to middle incomes, with the goal of increasing sales volume and generating economic opportunity for underserved communities. What process will you use, and what will the main points of your strategy be?

56 Exercise Four: Overcome the Skeptics!
You are the head of CSR at a pharmaceutical company headed by a CEO who has made numerous cynical comments about “greenies” and “CSR as nothing but the flavor of the month.” At the same time, the Board has recently established a committee focusing on CSR, and with the three most powerful independent directors to the Committee. You have been asked to report to the Committee, with the CEO not present, on the three greatest risks and opportunities facing the company concerning sustainability. How will you develop your report, and make sure that it has real impact on the company’s thinking? How will you manage the CEO’s skepticism?

57 CSR Frameworks Part 4: Integration
Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management CSR Frameworks Part 4: Integration

58 CSR Integration Framework How do we integrate CSR into the company?
Purpose & Vision Core Business & Material Issues Stakeholder Relations Transparent Communication Business Processes Industry Collaboration Performance Evaluation Implementation Tools

59 Core Business & Material Issues Internal & External Alignment
Internal & External Alignment If CSR is aligning business with the world’s needs, how do we ensure alignment throughout the process? Purpose & Vision Core Business & Material Issues Internal & External Alignment Stakeholder Relations Transparent Communication Business Processes Industry Collaboration Performance Evaluation Implementation Tools

60 Purpose & Vision BSR Services Visioning & Strategy Development Forecasting Trends R&D Purpose & Vision What impact do we want our business to have on society? Vision establishes a direction that can then enable: Prioritization of issues and opportunities Allocation of resources Communication internally and externally Development of performance & measurement Leadership Avoidance of risk is not a road map; it is neither anticipatory nor is it a destination CSR vision statements should: Align with the company’s strategic objectives Address the company’s material social, community, and environmental impacts Be meaningful for employees and external stakeholders Where are we today? How do we get there? What is our vision for tomorrow?

61 BSR Services CSR Assessment R&D Materiality Analysis Stakeholder Engagement Strategy Development Convenings Core Business & Material Issues What is the business case for CSR at our company and what issues should we focus on? Core Business & Material Issues An effective CSR strategy requires integration into the core business and understanding the following: Business Model: products, services, core competencies Business Context: trends, relationship between business and external factors Material Issues: areas with high impact on both business and society Issues Relevant to Business Issues Impacting Society Material Issues

62 BSR Services CSR Assessment Strategy Development Supply Chain Strategy Business Processes Business Processes How do we ensure that our everyday business processes are aligned with the vision? Effective execution throughout your business processes can be enabled by integrating CSR into: Policies Procedures Staff Performance measures Strategy Marketing Sales Production Management Sourcing Design Human Resources

63 BSR Services Stakeholder Engagement Working Groups Convenings Internal & External Alignment How do we align our actions internally and externally to achieve our vision? Internal & External Alignment Aligning efforts internally and externally is critical to effectively executing a CSR strategy. Within the company Along the supply chain Within the industry With external stakeholders With the ecosystem Employees Investors Suppliers Buyers & Consumers Competitors Partners Government Civil Society Air/Water/Land Species

64 Implementation Tools What practices will enable us to implement our CSR strategy?
Implementation of the strategy depends on the following key practices: Stakeholder Engagement Industry Collaboration Performance Evaluation Transparent Communications

65 BSR Services Engagement Design & Facilitation Stakeholder Engagement Internal Process Development Stakeholder Engagement Strategy Stakeholder Engagement Stakeholder Engagement: What are external groups’ perspectives on the issues? What: Engaging with external groups in a two-way dialogue on key issues Why: To better understand and align business actions & stakeholder interests Business Benefits: Gather information for decision-making Secure trust and credibility Anticipate and manage conflicts & trends Assess performance and progress Develop collaborative solutions Gain access to capital & markets

66 Industry Collaboration
BSR Services Working Groups Convenings Supply Chain Strategy Industry Collaboration Industry Collaboration How can we collaborate with our industry to increase our impact? What: Collaborating with other companies in the same industry on key initiatives Why: To increase impact of efforts, and in some cases share and thereby reduce costs and other barriers to improvement Business Benefits: Shared resources Greater influence as a collective Exchange of knowledge & best practices Consistent message & expectations across the industry Level playing field

67 Performance Evaluation
BSR Services Metrics Development Accountability Systems Information System Strategy Performance Evaluation How do we measure progress and ensure accountability? What: Developing metrics to assess progress in key performance areas and having incentive structures in place to ensure accountability Why: To understand how well desired objectives are being met Business Benefits: Better understanding of ROI Measure progress Gather information for reporting Inform strategic planning

68 Transparent Communications
BSR Services Reporting Metrics Development CSR Strategy Transparent Communications Transparent Communications How do we communicate our actions accurately, for to benefit of ourselves and our stakeholders? What: Communicating actions and performance openly to stakeholders Why: Discussing issues publicly demonstrates a company’s CSR commitment and creates accountability. Business Benefits: Clear, consistent communications to the public Enhanced credibility with stakeholders & the public. Companies can take clear positions on issues that matter to them Engage and shape public discourse

69 In Closing… Characteristics of A Successful Sustainability Strategy
Strengthens business competitiveness Aligned with basic business strategy Supported top to bottom Globally coherent Credible externally Resilient in the face of change

70 Company Case Studies A Tale of Two Strategic Approaches GE & HP
Director Stacey Smith, BSR Kellie McElhaney

71 GE’s Strategic Approach

72 Background and Drivers
Increasing investor inquiries Investor Relations exploring SRI and DJSI requirements Begin to form a new definition of best-in-class company Well-managed Well-governed Corporate Citizenship Need to build Corporate Citizenship piece Important commercial drivers in development Ecoimagination Emerging markets Decision to create a report to address growing stakeholder inquiries Insert image of GE’s ranking circa 1999 In terms of market capitalization as at 31 March 2008, GE is the world's third largest company and also second in the BrandZ ranking. In the 1960s, aspects of U.S. tax laws and accounting practices led to a rise in the assembly of conglomerates. GE, which was a conglomerate long before the term was coined, is arguably the most successful organization of this type. In 2004, GE was recognized by a variety of observers, including: --The Financial Times and FORTUNE, which named GE the most respected and admired company, respectively. --GovernanceMetrics International, which gave GE a perfect score for its governance practices. --The Dow Jones Sustainability Index, which added GE to its list of highly selective companies chosen for their environmental, social and economic programs.

73 Starting point was a citizenship report
First Activities Starting point was a citizenship report Engaged external support to guide them Created SWOT on CR performance – delivered to Board Conducted high level materiality analysis Most data collection was in place (EHS, HR, etc.); other data not available First report developed and published in 2005 Engaged stakeholders to receive feedback Insert image of first report Investors were asking weak in some areas but they knew they were strong in other areas (diversity, governance, compliance, EHS)

74 Launch of Commercial Actions
Ecomagination – a research priority the cut across all business units signaling a joined up collaborative approach Company to Country – product development driven by questions: “what are the social infrastructure needs of the country” Check ecomangination spelling Check company to country title Insert images of products

75 Results from First Report
Identified key areas of weakness and began integration into GE system Public Responsibilities Committee redirected focus and inquiry from philanthropy to core citizenship agenda as determined by materiality analysis Developed Human Rights policy followed by worldwide roll out in subsequent years Put in place processes for water and waste data collection – two years to collect baseline and then set targets Began conducting business unit materiality analyses Clarify name of Board Cmte Insert image of ??? Weaknesses: data collection and action on water and waste, lack of human rights program

76 Culture is top down and driven by one philosophy
Structure Culture is top down and driven by one philosophy “Conductors” of the orchestra –collect and review business unit goals and deliverables and identify opportunities with support of external advisors; then work with business unit to push performance No central structure established – instead virtual work group across company comes together once a year to work on report; some strategy is developed at that time Business units tasked with strategy and implementation based on materiality analysis Insert image of structure and business units Business unit materiality: issue results; some goverence starting to be identified Opportunity to provide leadership in emerging markets re citizenship issues Do not analyze and debate, decide and execute

77 HP’s Strategic Approach

78 Business Drivers

79 Working together across HP
GC strategy workshop Cross-functional company team defined an integrated GC strategy for FY07 assessed GC relevance and prioritization determined gaps, opportunities and mapped to company strategy identified top three GC priorities developed strategies and goals gained commitment from BUs and Functions to integrate strategies and goals into business plans Why did we come together? While preparing the 2006 Global Citizenship Report, specifically the materiality assessment, it became clear that not all businesses and functions had fully internalized the extent of transparency and the depth of information included in the report. The materiality assessment originally intended to be published in the report gave visibility to the fact that a public statement about HP’s global citizenship issues was being driven from the bottom up, in some cases likely without the awareness or agreement of Executives. The materiality assessment was subsequently not published, and it was decided that HP must first ensure that Executives in all involved groups have a deeper understanding of global citizenship issues and then assess the need for increased transparency and integration of GC into each business’ strategic planning process.

80 Current GC investments
It was agreed that HP should drive for more investment in the framework categories: brand and differentiation. …and to continue work in critical areas such as employees, education privacy and compliance. We developed a framework to help operationalize our global citizenship efforts. Representatives from each BU and Function identified GC programs and investments for their respective organizations. Company-wide, our GC spending is distributed across the six categories of the pyramid/operational framework as indicated here, with the vast majority in the categories of employees and compliance, and the least investment for brand and differentiation. The team created a long list of global citizenship activities the company could drive, but recognized the need for sharp focus areas and ultimately chose a few topics to focus on moving forward: 1) energy, 2) product takeback/recycling, and 3) a responsible supply chain.

81 Recommended GC priorities
Energy Improving energy efficiency and innovation in our operations and products. Product take back and recycling Reducing product environmental impacts through leading-edge reuse and recycling solutions. Responsible supply chain Raising standards in HP’s global supply chain and ensuring responsible manufacturing for all products. Energy - Improving energy efficiency and innovation in our operations and products to support HP brand and differentiate HP from competitors. Product take back and recycling - Reducing product environmental impacts through leading-edge reuse and recycling solutions, to support HP brand and differentiate HP from competitors. Responsible supply chain - Raising standards in HP’s global supply chain and ensuring responsible manufacturing for all products, to increase access and help differentiate HP from competitors.

82 Proposed GC Goals Energy Product Take-Back & Recycling
Reduce HP operations’ energy consumption and CO2 emissions by 15% by 2010 Reduce energy used for data center cooling at HP by 50% by 2010 Product Take-Back & Recycling Recycle 1B pounds of material by 2007 Set industry-leading vendor standards (for reuse and recycling) by early 2007 Create consistent and convenient access to EOL services for commercial customers for improved customer loyalty and revenue around EOL services (internal goal) Raising standards in our Supply Chain Ensure that >75% of spend (>$40B) in product materials and distribution is with suppliers that conform to the EICC by 2008 Complete China and E. Europe pilot training programs and release business impact results to set benchmark for industry in 2007 Publish Supplier Toolkit for industry use in partnership with EICC members in 2007 All goals are proposed goals, still under investigation and yet to be approved by various stakeholders.

83 Additional Points Discussed
Energy Halo: Establish tools to set travel reduction and carbon credit goals by 2008 (internal goal of 5% reduction) Lack of Energy Star related goal for products Product Take-Back & Recycling Optimize % of recovery efficiency Establish next recycling/reuse goals, preferably as % of sales for external reporting Raising standards in our Supply Chain Integrate materials and supply chain standards into the sales process for targeted customers by 2007 (internal goal) All goals are proposed goals, still under investigation and yet to be approved by various stakeholders.

84 Next steps Gain agreement on GC priorities from cross-company strategy team Review proposed goals with internal stakeholders (in progress) Executive Council Members Global Marketing Council Supply Chain Board Others Present recommendations to EC Integrate GC strategies into business plans Publicly announce new GC priorities & goals

85 Global Citizenship at HP
Being an intellectual, economic and social asset HP strives to be an economic, intellectual and social asset to each country and community in which we do business. We believe the highest standards of honesty and integrity are critical to developing loyalty. HP is part of a complex global business system, through which thousands of companies and other organizations collaborate to provide high quality information technology products and services to millions of customers worldwide. Global citizenship is fundamental to every part of this system, as illustrated by HP's programs represented throughout this graphic.

86 Sustainable Products & Solutions Program
Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management Corporate Responsibility (Sustainability) Metrics, Impact & the Value Chain Tony Kingsbury Executive-on-Loan Sustainable Products & Solutions Program UC Berkeley

87 Desired Outcomes Deeper understanding of CSR / Sustainability Metrics
Understand the Value of measuring CSR / Sustainability Metrics Understand the need to be transparent and look across your value chain Learn how to identify and apply the key metrics for your company / organization

88 Topics Measuring Corporate Responsibility / Sustainability
Sustainability…Why is This Important? Three P’s Approach  Planet  People  Profit / Prosperity What’s Important for Your Organization? In-class examples Discussion of your key metrics (break-out?) Wrap–up discussion from break-outs Conclusion

89 Sustainability – what is it?
Webster Definition: “method of harvesting or using a resource so that the resource is not depleted or permanently damaged” World Commission on Environment and Development: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” “The word ‘sustainability’ has been thrown around a lot. What it means to us is not seeing things piecemeal, not stressing business issues in one place and responsibility in another. To us, sustainability means running our business while being conscious of, and addressing its impacts, and addressing them everywhere.” …Nike

90 Sustainability – what is it?
However you define sustainability, you need to realize that sustainability is a journey, not an endpoint…

91 Measuring Sustainability Why is This Important?
"You only manage what you measure" How many of you know what mpg your car gets?...what it costs to fill-up your gas tank? How many gallons of water is used when you flush your toilet?... Or take a shower? How much does your organization pay to dispose or recycle your waste? Do your suppliers pay their employees a living wage?... Do they offer health benefits? When we Measure… we know what & how to improve!

92 Example In 1995 Dow set a goal of improving it’s energy efficiency by 20% in 10 years. Starts with knowing how much energy was used Tracked progress Tracked $ spent on improvements Tracked $ & energy saved from improvements Results: 22% Improvement (9 trillion btu’s saved)… $1 Billion spent on improvements $5 Billion+ saved from improvements.. and counting 2005 goals seek another 25% improvement by 2015! Source:

93 Example Improving working conditions in contract garment factories remains a key part of our overall social responsibility strategy.  Our approach, which involves factory monitoring, training, other capacity-building programs and engaging with stakeholders, gives us first-hand insight into factory conditions, and helps us measure progress against our standards. In 2006 we: Continued to employ a team of more than 90 people around the world dedicated to improving the lives of garment workers. Evaluated 425 new garment factories and rejected 18 percent for failing to comply with our Code of Vendor Conduct. Conducted 4,316 inspections in 2,053 garment factories around the world, covering 99.4 percent of garment factories approved for the entire fiscal year. Revoked our approval of 23 factories for compliance reasons, approximately 1.1 percent of our base.

94 Measuring Sustainability...Why is This Important?
Trend in transparency throughout the value chain…

95 Measuring Sustainability...Why is This Important?
Trend in transparency throughout the value chain… How many of you know your organizations carbon footprint?

96 Measuring Sustainability...Why is This Important?
carbon footprint - example of what’s coming

97 Measuring Sustainability...Why is This Important?
How many of you have heard of Wal-Mart’s Sustainability Initiative? “We soon realized (sustainability) …was something we could be proactive about, a business strategy. It's not an easy path, but we now see it as the greatest opportunity we have to create value for our customers, cut costs, increase morale, grow responsibly, and do the right thing for the planet.” Lee Scott, Wal-Mart CEO

98 Wal-Mart is beginning to ask it’s suppliers for Carbon Footprint data
Are you ready to supply carbon data to your customers and stakeholders? What is the Opportunity? Reduction = $ savings Carbon/CO2 is a green house gas = climate change reduction Ability to differentiate from competitors Lower cost, employee moral, hiring, reputation gains, ability to quickly supply data, etc.

99 Measuring Sustainability
Planet (Environment) People (Social) Profit / Prosperity (Financial)

100 Measuring Sustainability
Planet (Environment) – What are common environmental measures? What’s important for your organization?

101 Common Planet (Environment) Metrics
Energy use (direct & indirect) Emissions (direct & indirect) water - air - land Climate Change potential from your operations Recycling & Use of Recycled Materials Fresh Water Use Material Intensity… products, packaging, etc. Hazardous substances in your value chain Biodiversity… land use and activities that effect. etc.

102 Common Planet (Environment) Metrics
Environmental Materials used by weight or volume. Percentage of materials used that are recycled input materials. Direct energy consumption by primary energy source. Indirect energy consumption by primary source. Total water withdrawal by source….Water sources significantly affected by withdrawal of water. Percentage and total volume of water recycled and reused. Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas. Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas. Total direct and indirect greenhouse gas emissions by weight. Other relevant indirect greenhouse gas emissions by weight. Initiatives to reduce greenhouse gas emissions and reductions achieved. Emissions of ozone-depleting substances by weight. NOx, SOx, and other significant air emissions by type and weight. Total water discharge by quality and destination. Total weight of waste by type and disposal method. Total number and volume of significant spills Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. Percentage of products sold and their packaging materials that are reclaimed by category. Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations. Significant environmental impacts of transporting products and other goods and materials used for the organization's operations, and transporting members of the workforce. Total environmental protection expenditures and investments by type. Extracted from the Global Reporting Initiative

103 Common Planet (Environment) Metrics
Product Responsibility Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements. Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship. Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services. Extracted from the Global Reporting Initiative

104 Measuring Sustainability
People / Society – What are common societal measurements? What is important for your organization?

105 Common People (Social) Metrics
Labor Practices (around the world & throughout your value chain) Women & Minorities hiring and treatment Ratio of salary of men to women by employee category Corruption Policies & Practices Human Rights… Policies, Procurement, Suppliers Community Engagement & Practices Donations, Volunteerism, etc. Turnover by age group, gender & region Rates of injury, lost days, absenteeism, etc. etc.

106 Measuring Social / People Impact
Social: Society Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting. Percentage and total number of business units analyzed for risks related to corruption. Percentage of employees trained in organization's anti-corruption policies and procedures. Actions taken in response to incidents of corruption. Public policy positions and participation in public policy development and lobbying. Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country. Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes. Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations. 5 Extracted from the Global Reporting Initiative

107 Measuring Social / People Impact
Social: Human Rights % and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening. % of significant suppliers and contractors that have undergone screening on human rights and actions taken. Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained. Total number of incidents of discrimination and actions taken. Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights. Operations identified as having significant risk for incidents of child labor, and measures taken to contribute to the elimination of child labor. Operations identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of forced or compulsory labor. Percentage of security personnel trained in the organization's policies or procedures concerning aspects of human rights that are relevant to operations. Total number of incidents of violations involving rights of indigenous people and actions taken. Extracted from the Global Reporting Initiative

108 Measuring Social / People Impact
Labor Practices & Decent Work Total workforce by employment type, employment contract, and region. Total number and rate of employee turnover by age group, gender, and region. Percentage of employees covered by collective bargaining agreements. Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements. Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region. Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases. Average hours of training per year per employee by employee category. Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity. Ratio of basic salary of men to women by employee category. Extracted from the Global Reporting Initiative

109 Measuring Sustainability
Profit / Prosperity (Financial) – What are key Financial Measurements What are the important metrics for your organization?

110 Common Profit (Financial) Metrics
Income & Profitability & Growth Investments Purchasing Practices Joint Venture practices Debt to Equity Ratio Risks from operations and products Financial Assistance from Governments Patents, New Products, etc.

111 Measuring Financial Impact
Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments. Financial implications and other risks and opportunities for the organization's activities due to climate change. Coverage of the organization's defined benefit plan obligations. Significant financial assistance received from government. Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation. Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation. Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation. Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement. Understanding and describing significant indirect economic impacts, including the extent of impacts. Extracted from the Global Reporting Initiative

112 Measurement to Goals - SC Johnson Example
Source: 2008 SCJ Public Report, Page 10

113 You Are Only As Green As Your Supply Chain (Herman Miller)
Years ago Herman Miller decided to become an advocate for the environment, both because we believed it was the right thing to do and because we saw the potential for a clear business benefit. Ever since, we've been refining our processes to put our aspirations into practice. Our Perfect Vision campaign, launched in 2003, includes green goals such as no landfill waste, no hazardous waste, no air or water emissions from manufacturing, and the use of 100% green energy, all by the year These are stringent targets our company cannot reach without engaging over 200 materials and components suppliers in the ongoing task of greening our global supply chain. As we've examined every aspect of our worldwide supply chain, we've learned one key lesson: A business, and the products it sells, can only be environmentally sustainable through a holistic approach to design, raw materials, production methods, packaging, shipping, recycling, and even marketing--across the entire value chain. It's far too large and complex a undertaking for any organization to go it alone and be truly effective. You know the saying, "It takes a village to raise a child." Well, it takes an entire supply chain to green a company. Here are three things we recommend to companies working with their suppliers on the long-term goal of going green. 1. Design your products with sustainability as a core principal. At Herman Miller, we have a problem-solving, design-driven culture, so we spend a lot of time thinking about how to create our products. In 2001, when we were creating our Mirra chair, we had been working with architect Bill McDonough and chemist Michael Braungart, both leading-edge environmentalist thinkers, toward their vision of a "cradle-to-cradle" design that embraces sustainable materials in a closed-loop life cycle. As a result, we eliminated the use of a chemical called polyvinyl chloride in that chair. Now, PVC has advantages, including the fact that it is inexpensive and durable. However, PVC releases toxins during manufacturing and when it is burned. We decided not to use it and implemented that decision with the help of our suppliers. We embedded those cradle-to-cradle principals in our product development process for all new designs, beginning with Mirra. 2. Refine your goals and put them to paper. We aim to be fully sustainable by 2020, but we're holding ourselves accountable to interim goals along the way. For example, by 2010, 50% of our sales will come from products that conform to our own rigorous Design for the Environment standards, and we aim to reduce our environmental footprint by 80%. Achieving these goals requires paying attention not only to materials, including their chemical ingredients, but also to our sources of energy, to our manufacturing processes, and to our packaging. We don't want to reduce our impact in one area while ignoring it in another. Nor do we want to move our environmental impact upstream into our supply chain. 3. Embrace transparency and meaningful metrics. Our company, our customers, and our industry in general are moving inexorably toward more transparent reporting when it comes to the environment. And, like any other management issue, what gets measured gets managed. When it comes to our supply chain, several measures apply. We award points through our Supplier Quantification Process for formal environmental programs and active waste-reduction programs. We rate our suppliers according to how effectively they are working to help us reach our goals--from researching alternative materials to incorporating our measurable targets into their flow charts. And this is the crux of the issue: We're not only looking at our suppliers, but at our suppliers' suppliers. We have 12 years and a long way to go before reaching our self-imposed deadline for our Perfect Vision mission. By looking--and forcing change--outside our company as well as inside, we believe we can achieve this goal. By following the three steps above, we believe other companies can reach their green goals as well. Author: Brian Walker, CEO of Herman Miller Source:

114 Herman Miller You Are Only As Green As Your Supply Chain
Key Points: Know your Value-chain Establish Meaningful Goals (and share them) Be Prepared for a Transparent World The right METRICS are the root to all three of these points

115 Break-out groups Discuss the key metrics for your organization as a group Come back in 20 minutes prepared to present your: Key metrics? Why? How can you make sure they are implemented?

116 Break-out groups - Feedback
Key metrics? Why? How can you make sure they are implemented?

117 Conclusion Measure your Organizations Sustainability Performance!
Improvement begins with measurement Take into account the full value chain Determine what is important for your organization and set goals! Be transparent… you can’t avoid it! Reputational impact comes from being able to document your improvements Opportunities will flow from these activities!

118 Final Word. "Not everything that can be counted counts, and not everything that counts can be counted." -- Albert Einstein

119 Participants for Break-out
Group A Banaynal - Palm Bell - Driscoll's Berman - Bio-Rad Laboratories Consler - Safeway, Inc. Cortsen – NOEA Rudd- Altria Group, Inc. Group B Cousins - Safeway, Inc.  Degenna - Altria Group, Inc. DeMerritt- Frog's Leap Winery Hughes - ConocoPhillips Kelley - SunPower Group C McAlindon - Dow Coating Sol. McIntosh - Navigant Consulting Murdy - Fireman's Fund Insurance Rankin -The Forrester Group Renda - Safeway, Inc. Group D Rubinshteyn - UC Berkeley Shields - Altria Group, Inc. So - LG Electronics Steffen - Transformative Ldr Inst. van de Raadt -Waggener Edstrom Worldwide

120 Corporate Responsibility Leadership Workshop: Embedding CR in Your Operations & Management
UC Berkeley July 8-9, 2008

121 Defining Your Stakeholders
Stacey Smith, BSR

122 Stakeholder Value Stakeholders, both traditional and emerging, can play an important role in creating and maintaining business value. Stakeholders can supply key information regarding: emerging trends and impacts program implementation advise and partnership critical feedback regarding perceptions, expectations and performance Not all stakeholders can provide this value and a company must take a strategic and disciplined approach to its stakeholder relations to ensure that this business tool delivers value.

123 Stakeholder – Evolving Definitions
Government Civil Society Thought Leaders Remote Communities Suppliers Partners Local Communities Employees Investors Customers Traditional stakeholders include Shareholders Employees Customers business partners Companies often have reliable and sophisticated methods for relating to these stakeholders and incorporating their perspectives into business planning and execution.

124 Stakeholder – Evolving Definitions
Government Civil Society Thought Leaders Remote Communities Suppliers Partners Local Communities Employees Investors Customers Emerging stakeholders include governments and multi-lateral institutions advocacy/special interest groups and non-governmental organizations socially responsible and other investors community representatives the environment future generations As these stakeholders continue to evolve their influence, knowledge and potential value to companies, companies need to evolve methods to leverage the potential of these relationships for real business value.

125 Why Do Stakeholders Matter?

126 Benefits of Engagement
Opportunity Entrance to and expansion of markets Strengthened license to operate Trusting relationships Informed/improved decision-making Issues identification and management Continuum: Awareness => One-way communication => Two-way communication => Issue resolution => Incorporation to business decisions => Issue anticipation => Business opportunities => Achieve business objectives Mitigation of risk, lower legal costs Risk “(We engage) to find solutions to shared challenges, everything from creating awareness about a topic to improving company performance on the environment and human rights, to finding solutions to societal challenges.” --Novo Nordisk

127 Exercise 1 Are external stakeholders important to your business success? What role(s) can they play?

128 A Strategic Approach

129 Iterative Questions Why Who What Why do you want to engage?
What issues are most important? Who is the most relevant?

130 What Are The Issues? RISK OPPORTUNITY
Financial – ability to impact financial performance of company Reputation – ability to impact company reputation and image Litigation – ability to impact current/future litigation Regulation – ability to impact current/future regulation RISK OPPORTUNITY

131 Who is a Stakeholder? Those who are affected by or affect a company’s products or operations. Government Civil Society Thought Leaders Remote Communities Suppliers Partners Local Communities Employees Investors Customers Let’s start by simplifying the world down to these basic components: people and nature. And yes, technically people are a part of nature, but let’s keep them separate for now for the purposes of discussion. Some people are happy overall, some are not.

132 Mapping Your Stakeholders
Knowledge Stakeholder #2 Stakeholder #4 Orientation Influence

133 Stakeholder Relations
There is no best way to relate to traditional or emerging stakeholders, instead there exists a range of possible interactions that can serve the company’s business objectives. Companies can benefit from taking a disciplined approached to stakeholder relations that discriminates the type of interaction best needed based on the situation and the potential stakeholders. In a given situation, different points along this continuum might be most effective. Ignore Message Consult Collaborate Monitor Advocate Engage

134 Stakeholder Relations Continuum
Ignore Message Consult Collaborate Monitor Advocate Engage Ignore Monitor Message Advocate Consult Engage Collaborate Not directing communication or messages toward specific stakeholders and not monitoring or responding to their actions. Tracking the positions and actions of stakeholders through media scans, Internet searches, review of Web sites, review of list-serves, and talking with other parties. Typically “one-way” messaging toward specific stakeholders, sometimes for the purpose of “education.” These messages can come through direct advertising, media campaigns, letters, blogs, etc. Activities intended to enlist support for a specific effort or position. Often there may be an imbalance or implication of power/ influence affecting the relationship. Soliciting explicit feedback or input on a project or plan. No commitment regarding action related to the feedback/ input. Initiating or participating in two-way dialogue focused on mutual learning and solutions. It requires a commitment to openness. Explicit development of opportunities to work on shared objectives by the company and its stakeholders. Sometimes formalized in agreements; sometimes informal.

135 Dell – Stakeholder Map

136 HP – Stakeholder Engagement Grid
“These interactions help us better understand our markets and customers, develop effective approaches to global citizenship issues, and strengthen HP’s reputation.” --HP Where would you put HP’s Stakeholder Engagement Grid on the SR Continuum? On the Opportunities Continuum?

137 When to Engage Stakeholders
Engagement is substantive two-way interaction between a company and their stakeholders, focused on mutual learning and/or solutions. Engagement is most effective when: There is curiosity or concern regarding the impact of a company action or product There is a need or desire to learn about issues or stakeholders All of the decisions related to a project or issue have not yet been made There is sufficient control or influence by the company regarding an issue

138 Types of Stakeholder Engagement
Engagement may be used in different situations. It is often useful in following situations. Each situation requires a slightly different approach to ensure that the company can receive value. Crisis/Incident Community Trends Forecasting Business Planning

139 Exercise 2 Identify, by name or organization, a single stakeholder that is currently important to your company. What is your company curious about that the stakeholder could help shed light on? Articulate how you would invite this stakeholder to a conversation to discuss this topic.

140 Nike Deep Dive on Issues Large, multi-stakeholder dialogue
Three issue focus areas 40 business managers together with 40 external stakeholders Two days including polling, presentation by company and expert, small group work planning, commitments Laid groundwork for ongoing initiatives

141 Gap Stakeholder Mapping Determined focus area
Thorough identification and research Cross-functional exercise to “map” stakeholders Development of plan for communication and engagement Ongoing resource to guide strategy and reference additional engagement activities

142 Wal-Mart System-wide Sustained Engagement
Identification of key systems of impact (packaging, textiles, GHG, buildings, etc.) Conduct research and analysis Assemble representatives from all key aspects of the system (producers, suppliers, experts, associations, government agencies, etc.) Create facilitated, long term forum for dialogue, commitments and innovation

143 Discussion

144 Supplemental Slides

145 Stakeholder Engagement Cycle
Plan Apply Design engagement Prepare company participants Engage/Dialogue Engage Evaluate engagement process & results Apply engagement learnings Follow-up with stakeholders Integrate Build internal capability Clarify roles Establish processes & tools Identify & prioritize issues Identify & prioritize stakeholders Define engagement objectives and scope High-level walk through Apply: Full cycle has 4 stages; first two have no reason unless you do the third; it makes no sense to do all this unless you’re going to do something with the information

146 Communicating & Branding CSR
Kellie McElhaney, Haas School of Business

147 McElhaney’s Seven Principles of CSR & Branding
Know Thyself Get a Good Fit Be Consistent Simplify Work from the Inside Out Know Yours Customer Tell Your Story

148 Stories trump facts ten times out of ten.

149 CSR is a powerful predictor of brand…if known
Social Responsibility Emotional Appeal 1 3 Supports Good Causes Environmental Responsibility Community Responsibility Feel Good About Admire and Respect Trust Reputation QuotientSM (RQ) Vision & Leadership Products & Services 6 2 Market Opportunities Excellent Leadership Clear Vision for the Future High Quality Innovative Value for Money Stands Behind 4 5 Financial Performance Workplace Environment Outperforms Competitors Record of Profitability Low Risk Investment Growth Prospects Rewards Employees Fairly Good Place to Work Good Employees Source: C. Fombrun, Reputation Institute, Harris Interactive

150 …and reputation matters….ask Nike.

151 There are Early Communicators

152 And Even They Have Enemies
Requires banked goodwill in customers’ minds when these messages emerge. 152

153 There Are Ready CSR Segments
Females (employees, consumers, investors) Millennials/Gen Yers Ages (cause focus) LOHAS/ Ethical Consumers More educated More diverse (gender, sexual orientation, ethnicity) More affluent (enter Walmart)

154 LOHAS: Lifestyles of Health and Sustainability
Strong environmental and social values, and base many purchase decisions accordingly Don’t just buy organic food or energy efficient appliances, they’re active in all LOHAS-related product categories “The largest market segment you’ve never heard of” “As ‘green’ products make inroads among Wal-Mart’s budget-conscious masses, they are gathering cachet among an affluent new consumer category which marketers call LOHAS.” (7/17/06) Sources: The Natural Marketing Institute; Adler, Going Green.

155 They’re Growing 2006 Ethical Consumerism Report
Key Milestone: Total Ethical Consumerism surpassed Tobacco & Alcohol spending in the UK for the first time in 2005. But, still need to push for forward movement and more alternatives across each of the ethical categories. In Food, Ethical spending only makes up about 5% of the typical market basket. Source: Co-Operative Bank, 2006 Ethical Consumerism Report 155

156 They’re Focused on Recycling & Local Shopping
Source: Co-Operative Bank, 2006 Ethical Consumerism Report 156

157 They’re Conscious Consumers
More likely to buy from companies that: Manufacture energy efficient products (90%) Promote health & safety benefits (88%) Support fair labor & trade practices (88%) Commit to enviro-friendly practices (87%) Source: MORI 2008

158 In Other Words, Consumers Care If It’s…
In me, On me, Or around me.

159 They’re the Millennials (ages 8-24)
89% said they are likely to switch brands if linked to cause 83% will trust company more if socially responsible 79% want to work for company that case about and contributes to society 78% believe that companies have responsibility for making a difference in the world 74% more likely to pay attention to a company’s overall messaging when they see that company has deep commitment to cause they care about 69% consider companies’ CSR reputation when deciding where to shop 61% feel personally responsible for making a difference in the world 56% would refuse to work for an irresponsible corporation Source: Cone Millennial Cause Study 159

160 Sign in Dreyer’s Ice Cream Scoop Shop, Berkeley, CA

161 They’re Lionesses Source: P. Diddy


163 The “Lioness Factor”

164 Enter the Lionesses

165 The Queen Lioness: Oprah

166 CSR Opportunity: The Power of Women
WOMEN more likely than men to: Volunteer in their local communities Investigate a company’s environmental reputation before making a purchase Invest in companies screened for different criteria including environmental practices, the hiring and promotion of women and minorities, labor practices and tobacco manufacture Factor CSR when job-searching Purchase a product with a percentage of profit earmarked for charitable donation Participate in company sponsored social programs 166

167 The Power of Women More likely than men to:
Indicate that it is important to ensure that workers inside and outside the U.S. are paid a living wage (68 percent versus 57 percent). Give corporations a “poor” rating for current CSR performance (18 percent versus 11 percent of men). Men are far more likely than women to rate companies as “excellent” or “good” (31 percent versus 13 percent, respectively). Indicate that it is extremely important for companies to make relevant donations to charities and philanthropies (27 percent versus 19 percent, respectively). Source: Fleishman Hillard – National Consumers League Study, “Rethinking Corporate Social Responsibility,” 2006

168 WOMEN: A Desirable Market Segment
Women make over 80% of purchasing decisions in the United States (and influence most others) Women are less likely to act impulsively on brand loyalty, and are more likely to do research and weigh information before making purchases Source: Faith Popcorn and Lys Marigold, 2000

169 March 2008, Goldman Sachs launched new initiative
Will provide 10,000 women in developing countries and emerging markets with educational opportunities in business & management Partnership with American & European universities Will contribute $100 million over five years, plus time & effort of employees

170 Pedigree: A Cause That Fits

171 HP & Technology

172 Tesco Green Club Card Points
Issue: British carrier-bag consumption is a tangible and actionable issue that consumers can comprehend with 17 billion handed out to U.K. shoppers every year, equivalent to 280/adult. 172

173 Tesco Green Club Card Points
Tesco Green ClubCard Points Program Rewards consumers with Clubcard points for re-using bags or recycling mobile phones & toner. Program launched with humorous TV ads featuring celebrities using alternative items for shopping bags (suitcase, golf bag, etc). Unclear what percent of Tesco’s annual $80 million media spend will go towards supporting this initiative. Consumer Connection Builds confidence that individuals, acting together, can bring about change. Keeps the environment top of mind. Results Since 2006 launch, reduced # of new bags by nearly 300 million (14MM fewer plastic bags/week). However, is susceptible to “green-washing” complaints from critics, such as Friends of the Earth, who claim Tesco is only focusing the “small, insignificant” issues that are easy to communicate to consumers. Similarly, Ikea began charging 9 cents/bag; usage has dropped by 95%. 173

174 174

175 2000 2002 2001 175

176 2007 176

177 A Brand Story Campaign for Real Beauty
Campaign began with ''global study,'' commissioned by Dove that posed questions about beauty across countries. Repositioned its brand around self-esteem issues Created to allow women to Vote on provocative images Join discussion groups on various beauty stereotypes Participate in Dove Self-Esteem Fund Uses un-retouched images of women rather than models Commissioned study called The Dove Report: Challenging Beauty The uniquely Me! Girl Scouts of America self-esteem program Works through the Unilever Foundation to donate money. In addition, Unilever employees donate time to mentor girls as part of the program. Program uses activity books and simple exercises to help build self-confidence in girls 177



180 & Impact Increased sales. U.S. sales rose 6% in one year to $500 million. Dollar sales jumped 2% in the month the campaign started. Heightened brand awareness. Ads received considerable press, more than 1 million women have visited and voted on images. Created buzz with the "water cooler effect"

181 Developing/ Refining Your CSR Strategies
Small Group Exercise

182 Questions for You: What are your business objectives?
What are your core competencies? What are the main drivers for CSR? Why would/ do you do it? What do you currently do today?

183 Start Here Your CSR strategy must only link to two things:
Core business objectives: Increase sales, penetrate new markets, engage employees, reduce operating expenses, improve reputation, protect brand, beat competitors Core competencies: Technology, financial products &services, making markets, natural food, automobiles and transportation systems, travel & tourism. 183

184 Engage An Employee Team
Dedicate a CSR leader Develop a multi-functional CSR strategy-development team A CSR Council of champions, ambassadors Determine who needs to be there Get a few cynics in early Play with whomever shows up Invite in a few external stakeholders Clients, consumers, suppliers, NGOs, academics Set out to develop your CSR strategy

185 A Suggested Strategy-Development Process
Starting with business objectives & competencies…. Determine where you want to play (babies, landscape, etc.) Assess current CSR (philanthropy) initiatives & plot to see clusters Benchmark industry, develop your competitive advantage Select an issue for which you own [part of] the solution Develop a CSR strategy linked to your corporate strategy

186 A Suggested Strategy-Development Process
Go long & deep: FOCUS, FOCUS, FOCUS Signature project Fewer projects, more focus Make longer-term commitment 3-5 years, phases, etc. Teach CSR to your employees Then engage, involve your employees in your CSR You, as leader, stay involved Develop partnership(s) Determine KPIs, metrics Celebrate small wins Tell your story Stories trump facts ten times out of ten, period.

187 What Will You Do on Monday Morning?
What will you tweak? What will you toss? What will you develop/ do? How will you measure it? How will you communicate/ brand it?

188 Anticipating the Future
Aron Cramer, BSR

189 Anticipating the Future
Business has a key role to play in meeting global challenges. Many of the toughest CSR dilemmas have arisen when companies fail to understand the changing intersection of business and society. Business succeeds best when it is able to “get there early.”

190 The Value of Getting It Right; The Cost of Getting It Wrong
What are some examples of CSR problems companies faced by not anticipating the social or environmental implications of business change? What companies have succeeded on their business and sustainability strategies by anticipating social change? Monsanto, Shell, Nike…

191 What’s Next? What changes will define the intersection of business and society over the next ten years?

192 Wisdom from Donald Rumsfeld
“There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.”

193 Characteristics of the Emerging World
Decentralization of information…and power Rise of emerging economies Transparency as a given Resource scarcity and volatile commodity prices Return of the state

194 What sustainability challenges are we facing now and into the future?

195 Global Sustainability Challenges
What does the future hold for global sustainability? Business has an essential opportunity to make a unique contribution to meeting critical global challenges. By leveraging innovation, employment, capacity building, and value creation, the world is likelier to achieve the objectives of the Millennium Development Goals: Health Human Rights Water Economic Well-Being Climate Biodiversity Education Global Security & Peace

196 Challenge #1: Health New and ongoing health threats further exacerbate need for stronger health systems More than 500,000 women still die each year of treatable and preventable complications of childbirth.1 2.2 million children die each year because they are not immunized.2 1.1 billion people in developing countries have inadequate access to water, and 2 billion lack basic sanitation.3 28% of all children in developing countries are estimated to be underweight or stunted.4 Prevention measures for HIV/AIDS are failing to keep pace with growth of the epidemic.5 New major health threats have arisen, including bioterrorism, SARS, and toxic chemical waste dumping.1 Source: BBC

197 Challenge #2: Human Rights
In the absence of effective governance or justice systems, business and international bodies are increasingly needed to advance human rights The rise of anti-terrorism policies has brought increasing claims of discrimination and racism.6 Cases of violence and discrimination based on sexual orientation continue to occur in all regions of the world.6 No developed country has effective policies to protect the rights of migrant workers.6 Corporations are more accountable; shareholder resolutions regarding human rights are increasing annually.7 Women’s global participation in paid employment increased to 39% over the past 15 years, illustrating the potential for business to have an impact on gender disparity.8 Source: The Social Blog

198 Challenge #3: Water Freshwater resources are becoming scarcer or more polluted, leading to a global crisis in access to clean water Increasing water shortages, scarcities, and stresses throughout the world due to increasing populations and agricultural demands.9 1.8 billion more people could be living without adequate access to water by Glaciers are retreating 10–15m/yr in the Himalayas, creating immense vulnerability for Central Asia.4 >10 countries possess 60% of the world’s available fresh water supply.10 In 60% of European cities, ground-water is being used at a faster rate than it can be replenished; where some water remains, the cost to capture it is exhorbitant.10

199 Challenge #4: Economic Wellbeing
The widening of economic gaps is posing increased opportunities and challenges for business in the developing world By 2050 the global population is expected to top 9 billion, with 8 billion forecast to live in developing countries.4 The economic gap between rich and poor is further widening; in 2007, the richest 20% of the world’s population accounted for 75% of the world’s income.4 Nearly three billion people, which is half the world’s population, survive on less than US$2 a day.4 30,000 children die daily as a result of extreme poverty.4 Source: BBC

200 prompts the need for drastic cuts in global emissions
Challenge #5: Climate The threat of dangerous climate change is increasingly becoming a reality, and prompts the need for drastic cuts in global emissions Some 262 million people were affected by climate disasters annually from 2000 to Based on current trends and policies, energy-related CO2 emissions could rise by more than 50 percent over 2005 levels by In the 21st century, average global temperatures could increase by more than 5°C.4 Global temperature increases of 3–4°C could result in 330 million people being permanently or temporarily displaced through flooding.4 To avoid drastic global impacts, it is estimated that rich nations would need to cut emissions by 30% by

201 Challenge #6: Biodiversity
Despite greater conservation efforts, biodiversity loss is continuing at an alarming rate and increasing the risk of ecological catastrophe 20-50% of 9 of the world’s 14 biomes have been transformed to croplands.11 Over the past century, humans have increased the species extinction rate by as much as three orders of magnitude.11 Despite increased conservation efforts, deforestation continues at an alarming rate.5 Biodiversity loss is increasing the likelihood of ecological surprises and catastrophes.11 Unprecedented efforts in conservation and ecosystem management will be required if the rate of species loss is to be reduced.5

202 Challenge #7: Education
In a future driven by globalization and information exchange, education is becoming even more critical to the success of business and economic development Enrollment in primary education in the developing world rose from 80% to 88% between 115 million children, 60% of whom are girls, have no access to formal schooling.12 In many poor countries, people earn 10% higher wages with each additional year of schooling.12 Members of society will increasingly create innovative and contextually-relevant applications for new knowledge.13

203 Challenge #8: Global Security & Peace
Ongoing nuclear proliferation and new global challenges continue to pose a threat to global security and peace. There are over 25,000 nuclear weapons in the world today.14 The following countries are known to have nuclear weapons: China, France, India, Israel, Pakistan, United Kingdom, and the US.15 New environmental challenges, such as climate change and access to water, are potential topics for conflict and are inextricably linked with global security issues.

204 Insight: Sustainability Outlook
A project supported by 10 sponsoring companies Assessing broad trends through the lens of markets, commons, technology, and policy based solutions Based on two company/BSR/IFTF workshops and inputs from diverse range of experts

205 Insight: Sustainability Outlook
Discussion: What lessons do you draw from the map? How do these affect your business/CR strategies? How do you forecast trends affecting your company? How would you use a map like this? Do these present risks, opportunities, or both? What’s missing? Exercise/Discussion: What three things will you take back to your company next week?

206 We Are It, Friends. Never forget that a small group of committed individuals can change the world. Indeed, it is the only thing that ever has. - Margaret Mead

207 Contact Information Kellie A. McElhaney Tony Kingsbury Aron Cramer Stacey Smith

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