What is CSR and how is it connected with Ethics and Governance?

Toby Webb, Founder, Ethical Corporation and Stakeholder Intelligence. Lecturer, Corporate Responsibility, Birkbeck, University of London

Chosun Ilbo CSR Conference, Seoul, April 10th 2013

Toby.Webb@stakeholderintel.com

What is CSR today?

• CSR is about how you run your business when no-one is watching

• It covers: Ethics, Integrity, Products, Services, Consumers, Investors, Anti-corruption, Suppliers, Tax payments, Market Ethics, Employees, Civil society and the Environment…

CSR today = Sustainable Business

• Sustainable business does not happen without strategy

• Strategy does not happen without Governance

• Governance does not happen without Ethics

• Ethics do not happen without Stakeholder Engagement

Paul Polman, Unilever CEO

Who are some of the leaders?

Unilever Sustainable Living Plan - 10 year journey towards sustainable growth (2010) Applies right across the value chain Responsibility for own direct operations Also for suppliers, distributors and how consumers use Unilever brands Underpinning Plan are around 60 targets

Marks and Spencer Launched Plan A in January 2007, setting out 100 commitments to achieve in 5 years

Now extended Plan A to 180 commitments to achieve by 2015

Ultimate goal of becoming the world's most sustainable major retailer

Who are some of the leaders?

General Electric - Eco-Innovation as business strategy

Ecomagination business unit mainstream focus on business innovation and sustainable industrial products

$2.3 billion invested in “Ecomagination” products in 2011

Reduced GHG emissions 30% since 2004

Reduced wastewater by 45% since 2006

2011 - Siemens reorganised operations into four core business units:

Energy - efficiency in energy production and distribution, including oil, gas and renewables

Healthcare - supplying technology (medical imaging equipment and healthcare IT)

Industry - providing software and technology services

Infrastructure and cities - sustainable technologies (smart grid equipment and rail vehicles)

How about an Asia-based company?

Golden Agri Resources – A model for sustainable palm oil

• 2010 - announced ground-breaking deal with The Forest Trust to help prepare for Roundtable on Sustainable Palm Oil (RSPO) certification by December 2015

• Engagement with local NGOs for monitoring of sustainable agriculture implementation

• Working with Greenpeace and international NGOs

• Won back business from Nestle and Unilever: Share price went up!

“No deforestation” commitment: Now extended to pulp & paper Sister company APP in Feb 2013

Why do they choose to lead?

Unilever

Marks and Spencer

General Electric

Siemens

Golden Agri Resources

• Securing supply

• Customer trust

• Low carbon future

• Urbanisation trends

• Market access

How do they engage with stakeholders?

• Dialogue with civil society

• Consulting experts on agriculture, trust, urbanisation, climate change, energy futures

• By using guidance and standards

• Listening to their employees

• Watching trends emerge

ISO 26000 Guidance ‘Standard’

Key guidance for CSR and Sustainability

• ISO 26000

• Dow Jones Sustainability Indexes

• FTSE4Good Index

• Global Reporting Initiative Guidelines

• OECD Guidelines

• UN Global Compact

BUT: Guidance not the whole solution: You must study your own Risk and Opportunities

• Ten year journey towards sustainable growth with 50 tough targets

• Aim to bring safe drinking water to 500 million people

• 2011: Increased proportion of portfolio that meets highest nutritional standards from 22% in 2010 to 25% in 2011

• Aim: Halve the greenhouse gas impact of products across the lifecycle by 2020

• 2020 aim: Source 100% of agricultural raw materials sustainably

• Sustainably sourced raw materials up from 24% in 2011 to 36% in 2012

Unilever: Business Benefits of Sustainability

Total sales 2008-2012 up 26% from 40bn Euros to 51bn

Siemens and Green Business Strategy

• 2011: Products and solutions in Environmental Portfolio generated revenue of €29.9 billion: 41% of total revenue

• Objective: Grow annual revenue to €40 billion by 2014 –with new, innovative products and exceptional growth in fields like renewable energy. These include:

Siemens and Green Business Strategy

• Combined cycle power

plants and intelligent building technologies: far more energy-efficient than comparable solutions

• Renewable energy systems and components: wind turbines, steam turbines for solar-thermal power plants. Environmental technologies for cleaner water and air

How do these examples link to stakeholder engagement?

• Employee engagement drives innovation and ideas

• NGO partnerships bring science, experience credibility

• Communities have increasing power & influence

• Social media means no company escapes scrutiny

• Big business want a long term vision from Governments: And policies and incentives that enable investment and longer term planning: So must lead by example

Social Media means no escape from the public eye

How do CSR and Sustainability improve Business?

• Consumers want to trust brands, not products

• Leading companies turning sustainability into opportunity all over the world: New products / motivated people / cost savings

• 9 billion people means less resources and innovation will be essential: Sustainability = risk reduction

• Corporate roles in changing inefficient systems will be vital: The winning companies recognise CSR is systems change

• CSR and Sustainability = Smarter business

Harvard Business School

Professor Robert Eccles, Harvard Business School

Do other companies make money from CSR and sustainability?

London Business School & Harvard Business School research:

• Firms with better CSR performance face significantly lower capital constraints

• Better stakeholder engagement and transparency around CSR performance, are important in further reducing capital constraints

• That the relation is driven by both the social and the environmental dimension of CSR

"CORPORATE SOCIAL RESPONSIBILITY AND ACCESS TO FINANCE" Available at: http://ssrn.com/abstract=1847085

Five ways ethics and governance are linked to CSR and Sustainability

1. CSR and Sustainability cannot exist without Business Ethics

2. Business Ethics cannot exist without good Corporate Governance. Ethics always begins and ends with leaders

3. Good Corporate Governance is now seen by international investors as part of good management by boards

4. Poor Corporate Governance is priced into share valuations by analysts and large international investors

5. Good Corporate Governance begins with Rule Compliance

Why Transparency Matters

• Compliance with international best practice in Governance and behaviour expectations = The first step to building investor and stakeholder trust – That’s true for Korea too!

• BUT: Compliance alone is not enough!

• Transparency is an under-valued method of building trust, both from Markets

Lack of transparency affects trust

Why Transparency Matters

• Responsible ownership is about being accountable to shareholders

• That’s true for businesses in Korea too…

• Fact: Investors reward better managed (governed) companies!

$18 Trillion in International Investor Assets

Conclusion: Eight Key Steps to Global Ethical Governance

1. Adopt best practice in International Corporate Governance

2. Go beyond Compliance: Develop and integrate Ethics 3. Lead from the top of the company on Ethics 4. Use Ethics to build strategy in CSR and Sustainability 5. Engage employees, partners, suppliers and civil

society in strategy and policy development 6. Use engagement to drive innovation in Governance,

Practice, Product and Service Innovation across your business

7. Embed ethics, CSR and Sustainability into your business every day

8. Never forget: Ethics, Governance and CSR are how smart business will be done in the 21st Century

Thank you!