If Sustainability Costs You More, You’re Doing It Wrong

If Sustainability Costs You More, You’re Doing it Wrong: The Do’s and Don’ts of Sustainable Value Chain Management

There is a lot of anecdotal information on what makes a sustainable value chain, but very little data, so we partnered with ASQ and ISM, with the help of Deloitte, earlier this year on a multi-year research study to identify proven management practices and cost-saving approaches, and the initial findings are out!

Since the supply chain is what separates “real” sustainability from “green washing” many businesses and NGOs are looking to this research to help them know the best ways to make their value chain (supply chain, distributors, partner organizations, etc.) more sustainable.  While others have conducted research in this area, there are two unique aspects in this project that distinguish it from any other research available:

• Beyond focusing mainly on an organization’s suppliers, it encompasses the entire value chain from the moment something comes out of the ground and is put back into the ground, reused, or recycled, encompassing suppliers, distributors, partners, and the internal aspects of the value chain as well.
• Instead of looking at interest in sustainability and future plans, it looks at which concrete actions are most effective at increasing supply chain sustainability, where the outcomes will help direct organizations on where to put their time, energy, and resources to provide the greatest benefit.

The first phase of this research – a survey with almost 1,000 responses from corporate responsibility leaders and supply chain experts – identified ten management practices that can improve sustainable value chain effectiveness, measuring by just how much an organization saw an increase in this effectiveness:

• Organizations that engaged with suppliers at any tier saw a 38 percent increase in their sustainable value chain effectiveness
• Organizations that had sustainability embedded into their culture saw a 24 percent increase in sustainable value chain effectiveness
• Organizations that had worked with suppliers and others (such as distributors) as part of quality programs in the past experienced a 22 percent increase in effectiveness
• Organizations that engaged with or talked about sustainability with value chain members saw a 21 percent increase in sustainable value chain effectiveness
• Organizations that rewarded suppliers for sharing expertise and knowledge around sustainability recorded a 17 percent increase in effectiveness

The survey also identified five management practices that reduce operating costs:

• Organizations that engaged with suppliers at any tier saw a 46 percent reduction in operating costs
• Organizations that provided suppliers with monetary rewards for sharing expertise and knowledge around sustainability saw 45 percent reduction in operating costs

Click here to view the full set of findings!

One of the most astonishing finds is that the return on investment (ROI) for sustainable value chain initiatives is in the triple digits!

The next phases of the research involve interviews, case studies, and secondary research; let us know if you are interested in participating.  And make plans to join us at the COMMIT!Forum taking place October 2-3 in New York City for a deep dive into the research results.  Register by August 31^st and receive 25% off your registration!

A Gold Medal for Corporate Philanthropy

Elliot Clark, Contributor

Hershey Foods Teams with Former Olympian Carl Lewis to Teach Kids Fitness and Moderation

I wrote a column a few weeks ago about corporate fitness and wellness programs. I decried the lack of planning “responsible” companies were directing at the health of their employees in the area of wellness. Shortly after the article ran I received a call from a Hershey’s representative about programs they were running to instill healthy values in kids. The spokesperson for the program was none other than Carl Lewis, the great Olympian who was voted the “Olympian of the Century” for the Twentieth Century by none other than the International Olympic Committee.

I arranged the interview because I wanted to hear about the Hershey’s Track and Field Program which just concluded this past weekend.  I also wanted to ask  Lewis about why he partnered with Hershey’s.  I wanted to ask Andy McCormick, VP of Corporate Communications to reconcile the epidemic of childhood obesity and my mental image of candy chomping kids with Hershey’s commitment to teaching children healthy living.

Long before there was Michael Phelps, Carl Lewis was the hero of the Baby Boomer generation.  Born in 1961 in Wilingboro, N.J., he competed in four Olympics from 1984 to 1996 and won 10 Olympic medals, nine of them gold.  He is one of two athletes to win that many medals (you can guess who the other is). He got involved in athletics as a child when his parents started a track and field program in his home town in the 1970’s.   Through that program he had the thrill of meeting Jesse Owens, another great Olympian and arguably America’s first warrior in the battle against Nazi Germany (my opinion). When he was young, Lewis also competed in the Jesse Owens. I asked him how he got involved in this program.  He has been involved for seven years.  He hopes that by supporting the Hershey’s Track and Field program he can inspire other young people to get involved and get moving and find fitness and competition fun. (Point of fact: Hershey’s Track and Field alumni include the 2004 Olympic Gold Medalist in the Women’s 100 Meter Hurdles, Joanna Hayes.)

Andy McCormick explained the program and it is impressive.  Founded as a community-based program by Dr. Donald Cohen in 1975,  Hershey’s became the sponsor in 1976.  It has a number of partners, including the National Parks and Recreation Service.  This year’s competition cycle included groups throughout the United States and Canada and started in February. Initially more  than 130,000 children competed this year, which was winnowed down to the several hundred who were in the finals this past weekend.

I asked Andy about the epidemic of childhood obesity and how Hershey’s as a candy manufacturer reconciled supporting lifestyle-based programs. Andy said that fitness and lifestyle are keys to the mission of the Hershey “Moderation Nation” program.  He pointed out that as a confectionary manufacturer they believe that candy is a “treat,” not a dietary staple.  Consumption of candy is 2% of the American dietetic caloric intake and has not risen in the last 30 years.  Lewis pointed out that a treat, when in moderation as a part of a healthy and balanced diet, is perfectly acceptable for kids.

Lewis explained that he believes part of the secret of the success of this or any other program is family involvement.  He said that you have to get outside and do things with your kids.  Family 5K runs, biking programs and other activities are much more likely to motivate kids and they are great for the parents who often complain they don’t have time to work out.  The secret of the incentive is the family festival environment of the meets.  He enjoys the opportunity to interact with the kids, to give back to the community and “feeling like a big kid” while he is there.

I asked Lewis what he would recommend to companies seeking to promote wellness among their employees given what he had learned from the organizing success of the Hershey’s Track and Field Program.  He sees the error of most corporate programs.  Gym activities alone are not fun.  He believes people like to compete and most people really compete against themselves.  He believes companies should have a program of year round activities for which employees can train and that are inclusive in nature.  He thinks that this will create more focus and excitement than telling people to just get in the gym three times a week. He also believes that if people learn fitness and healthy competition when they are young through programs such as the Hershey’s Track and Field Program it will become a lifelong habit.

Andy McCormick reiterated that personal fitness and community fitness are part of the corporate mission for sustainability.  The Hershey’s Track and Field Program has grown by 18% in the last year so the company knows the program is important and needed.  The support from the Parks and Recreation Department has been invaluable, but budgets for Physical Education programming at the national level have been cut. The work of private corporate sponsors like Hershey’s are critical for these kinds of programs to survive in the current fiscal environment.  Hershey’s is committed to this philanthropic endeavor.

Building Our Body of CR knowledge

What makes a corporate responsibility (CR) program successful? Do an organization’s structure, staffing, budget impact success in achieving goals? What’s the effect of executive engagement in CR?

These are just a few of the questions CR Magazine and NYSE-Euronext have sought to answer over the past couple of years of research into CR practices.Thanks to strong response from the CR community, we’ve learned a few things about the state of corporate citizenship...

read more

Building Our Body of CR knowledge

What makes a corporate responsibility (CR) program successful? Do an organization’s structure, staffing, budget impact success in achieving goals? What’s the effect of executive engagement in CR?

These are just a few of the questions CR Magazine and NYSE-Euronext have sought to answer over the past couple of years of research into CR practices.Thanks to strong response from the CR community, we’ve learned a few things about the state of corporate citizenship...

read more

Building Our Body of CR knowledge

What makes a corporate responsibility (CR) program successful? Do an organization’s structure, staffing, budget impact success in achieving goals? What’s the effect of executive engagement in CR?

These are just a few of the questions CR Magazine and NYSE-Euronext have sought to answer over the past couple of years of research into CR practices.Thanks to strong response from the CR community, we’ve learned a few things about the state of corporate citizenship...

read more

What is a Sustainability Report? What is a GRI Report? What is the Difference?

By: Cora Lee Mooney, Lead Trainer at BrownFlynn

In a recent blog post, Dilemma of GRI Reporting Stats in the US – Needs Grain of Salt?, Prizma does a nice job articulating the uncertainty about what counts as an “official” GRI report and challenges the reader to categorize what they consider to be borderline cases (Apple, Cummins and Yum) as either “GRI-Referenced” or “a GRI Report”.  Prizma has raised a provocative question and I agree that some clarity is needed.  This is a concern about which I have given a great deal thought ever since BrownFlynn’s adjunct trainer Steve Voien raised it during one of our GRI-Certified training courses last year.

They key question is this: When does a sustainability report become a GRI report?

BrownFlynn’s answer: A sustainability report becomes a GRI report when an Application Level is declared.

In order to understand why we came to this, I need to point out some key components of the GRI Framework that are important to keep in mind when discussing this topic – the GRI Profile Disclosures, GRI Disclosure on Management Approach and the implicit quality controls that GRI has in place for those who declare an Application Level.

These important differences (discussed in our recent whitepaper GRI Application Levels: Why Strive for an A?) lead me to call all three of Prizma’s borderline cases (Apple, Cummins and Yum) “GRI Referenced”–i.e., not a GRI report.  Why?  Because none of these three reports disclose even the minimum stakeholder engagement and materiality analysis required to declare a GRI Application Level.

Never mind the number of indicators…the reason why GRI reporting is an “upgrade” from other CSR responsibility reporting is because of the internal discussions that are prompted during pursuit of a GRI Application Level (especially Level A or B).  We find that the pursuit of an Application Level prompts internal discussions that improve governance, attention to key impacts, sustainability policies, procedures, training strategy, goals, internal controls and ultimately sustainability performance.

Producing a “GRI Referenced” report is simply a matter of adding an index that cross references to any number and set of GRI metrics (and usually only to indicators).  But producing a report with an Application Level requires demonstration of sustainability management strategies, which seems to be exactly what we want in an “official” GRI report.

My advice: If you want to know whether a given report is an “official” GRI report, search for the term “Application Level” instead of “GRI”.  If you find that an Application Level is declared (A, B or C), then you can be certain that the company has committed to report or explain a certain standard set of disclosures.  Without an Application Level, you just don’t know what to expect, regardless of how many times the word “GRI” shows up in the report.

An Ethical Voice Silenced

I was riding in the back of a cab some where between Detroit and Troy, Michigan when I knew he had died.  The Maine area code on my iPhone told me even before I heard the voice on the other end that Rush Kidder was no more.

I remember the day I started reading How Good People Make Tough Choices.  Or rather, I remember the day when I came upon the concept that would change my life: right versus wrong is easy; it’s right versus right that’s hard.  Whether he knew it or not, with that idea Rush captured the essence of the corporate responsibility movement.

As the cab sped on to the next sustainability conference, one in a series I would speak at this week, I thought about the people I would encounter.  Earnest, well meaning.  The kind of people that often ask me if I think that companies will, “ever finally come around,” and that’s when I miss Rush most.

It’s easy to paint the world in white hats and black hats, good guys and bad.  But Rush realized the world is made of little hats and big hats.  Business people aren’t inherently bad.  They — we — have to make trade-offs.  Short-term versus long-term.  The few versus the many.  Justice versus mercy.  It’s not a question of profits versus planet.  It’s a question of the health and wellbeing of the employees today versus the health and wellbeing of their grandchildren tomorrow.  The very present “now” of laying people off versus the very distant “then” of unknown risks to future generations.  Sometimes we wear the little hat of our narrow now — our own interests or those of our family, group, or organization.  Sometimes we wear the big hat of our community, our society, or our human race.

Rush knew all those things, defined them all in understandable models, and set a bunch of people — me included — on fire.  His words put a very needed boot in my very intellectually lazy backside, making me think differently about business as a wholly owned subsidiary of society.  About every business as a solution to a social problem.  About the need for teaching a whole generation to think about their place in the world as a series of right versus right decisions.

I thought about all that as the cab sped down the highway, as I heard the words, and knew that my friend, my colleague, my inspiration was no more.

Dr. Rushworth Kidder, founder of the Institute for Global Ethics and author of many books including How Good People Make Tough Choices, died of natural causes on March 5^th in Florida.  Rush was a keynote speaker at the 2011 COMMIT!Forum and helped inspire the theme for this year’s program as well.

Sneak Preview of 3rd Annual International Corporate Volunteerism Conference:Public and Private Sector Leaders Join to Discuss Shared Value & ICV

Climate Science is Useless (to Business)

Richard Crespin, Contributor

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Image via Wikipedia

Time to send scientists to b-school & business leaders back to science class

Kyoto. Montreal. Durban. Rio.

Venerable cities all, but, with the exception of Rio (only because it hasn’t happened yet), each is also synonymous with failure. Failure to get consensus on the future of the environment and sustainable development.

But why? When I speak with individual business and government leaders a broad consensus exists on the need for action. The barrier seems to be politics. So let’s by-pass the politics. To do that, though, we need a different kind of collective-action—one based on science and grounded in data.

The problem with science is that it’s mostly aimed at scientists. The “big science” coming out of scientific academies and institutions is aimed either at other scientists or at the big multi-national conferences. Let’s flip that on its head.

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A few months ago I had lunch with Patricia Mulroy, the General Manager of the Las Vegas Valley Water District, arguably one of the most powerful people in the Western United States. She oversees a critical juncture in the Colorado River Valley, stewarding the very essence of what makes life possible in the arid American Southwest. I expected to hear how automatic faucets, hanging up your towel, and other incremental programs save water. I heard none of that. Instead, I heard a lot about the science of water use and dissipation and how Pat put science to work to literally save Las Vegas from going dry.

We need more of that kind of science directed at individual government and business leaders so they can take action. As an example, Planet Under Pressure, a gathering of the global scientific community, and theCOMMIT!Forum, a gathering of concerned business leaders sponsored by theCorporate Responsibility Officers Association (CROA), have issued a joint challenge to the business and scientific communities. Planet Under Pressure has asked the CROA, to assemble a delegation of business leaders to come to its London conference on March 26^th – 29^th to challenge the scientific community. The CROA, in turn, has asked Planet Under Pressure to assemble a delegation of scientists to come to the New York COMMIT!Forum on October 2^nd – 3^rd to respond.

During a World Cafe at Planet Under Pressure, business leaders will call on the assembled scientists to re-direct their science to address the business problems their organizations face in tackling ecological degradation, human wellbeing, and food and energy security. Planet Under Pressure will then send a delegation of scientists to the COMMIT!Forum to respond with their plans for addressing the challenges laid out by the businesses.

If this “call and response” challenge succeeds, it has the potential to have a lasting impact on how we address these issues. It will create a new enlightenment, capable of directing resources to the most pressing needs and ending years of anecdote and speculation.  It will also put data in the hands of the people most inclined to, and capable of, taking action today.

If you would like to join the delegation of businesses, click here.  Click here to learn more about Planet Under Pressure and here to learn more aboutCOMMIT!Forum.

Where CSR Fits On The Board’s Agenda

Richard Crespin, Contributor

According to the National Association of Corporate Directors (NACD) 2011 Public Company Governance Survey, when asked to name the top three issues for the board, only 1.5% of corporate directors picked “Corporate Social Responsibility” among the highest priorities for the board in 2011.

But what counts as corporate responsibility (CR) and when and how should boards and CEOs take an interest in it?  When we use the term “CR” we define it as maximizing the positive impact while minimizing or eliminating the negative. A closer look at the survey shows that a good chunk of the respondents report a CR issue as among their top three priorities for the board, including risk and crisis oversight (27.1%), shareholder/owner relations (6.4%), and disclosure and transparency (4.7%).  We argue that boards and CEOs need to take a more expansive view of CR and a more active role in CR leadership.

Fortunately, there seems to be a growing number of business leaders who agree.  In our 2011 Corporate Responsibility Best Practices Study, 72% of companies reported having a formal CR program, up from 62% in 2010.  These programs take on the full spectrum of CR-related issues (see table).  Moreover, 86% of respondents said their CEOs believe CR is important, up from 81% in 2010 and 66% of CEOs have led a CR-related initiative in the past 12 months.  When it comes to board leadership, 84% of boards get briefed on CR-related issues and 34% of them have led a CR-related issue in the past 12 months.

At the same time, in talking with management and directors, we hear a lot of confusion about the role boards should play in CR.  In the NACD study, only 4% of respondents said they had a committee dedicated to “Public Affairs/Policy/Social Responsibility.”  We would argue that this, again, too narrowly defines CR.  Using our broader definition, and many respondents have committees with some CR responsibility: Risk Oversight/Crisis Management (12.5%), Ethics/Compliance (5%), Environmental Policy (4%), Public Affairs/Policy/Social Responsibility (4%), and HR/Labor Relations/Management Development (2.1%).  By taking this broader view, companies would make progress on one of the principal deficiencies pointed out in the NACD study: the need for better risk management.

Many investors we’ve spoken with look at CR programs, especially those related to disclosure and ethics, as proxies for risk management. In the NACD study, fully 20.7% of respondents say CEO “ethical performance is not measured,” and 11.4% say “board and management do not gather information to assess ethical risks.” The NACD study finds a high correlation between the existence of formal risk management programs and board satisfaction with risk reporting, stating that, “those with formal programs were more likely to find that the program informed management and the board of the organization’s risks to a ‘great extent.’”

What do you think?  The NACD study also found that most boards characterize current disclosure and reporting requirements as “excessive.”  Are we asking too much of boards?  Should CR continue to be defined more narrowly?  Should boards have more formal roles in CR oversight and leadership?  Share your thoughts.