Companies look beyond performance, and now measure impacts

Our analysts have been conducting in-depth analysis on companies are now measuring more than just performance and outputs. Leading companies wish to understand the true impact of their business on local communities, and communicate it to their stakeholders.

Our upcoming report focuses on an area of sustainability that is not well-understood by companies: how to measure socio-economic impacts.

Initial findings suggest that corporate communication and reputation-building needs are driving this interest in socio-economic impacts.



Find out more

On the 14th of July, the London Centre for Corporate Governance & Ethics and Ethical Corporation will be hosting a free roundtable debate on this topic. In August, a free summary of this report will be available here.

CEOs are more optimistic about sustainability than sustainability managers

In a United Nations Global Compact (UNGC) and Accenture study of 766 CEOs 93% believe that sustainability will be critical to their future success and 81% said that sustainability issues had become part of their company’s strategy and operations.

That's good news, but is it all talk?

Well, not necessarily.

78% of the CEOs say the downturn has actually raised the importance of sustainability - a term which has also come to incorporate the reliable provision of a company's products and services to communities. According to CEOs, sustainability is just good business, and it is being recognized as a source of cost efficiencies and revenue growth.

Consumer trust again emerges as the much-discussed driving factor. 72% of those surveyed said that "brand, trust and reputation" was a primary factor.

According to the study, consumers have become the most influential stakeholder - a title previously reserved for employees. 58% of the CEOs selected consumers as the stakeholders with the greatest influence, while 45% selected employees.

Government is the third most important stakeholder, selected by 45% of CEOs.

The most affirming news is that 54% of the CEOs surveyed think sustainability will be fully integrated into business worldwide within the decade, but 80% say it will happen within 15 years.

This view contrasts with the often pessimistic discussions that have emerged among sustainability managers at Ethical Corporation events. Perhaps top management is more committed than we think.

Read more about how companies are actually integrating sustainability at www.ethicalcorp.com/csr.

Instant news service on corruption launched

Thomson Reuters, the well-known providers of instant information on global disasters, has today launched a similiar service on corruption.

TrustLaw is described as a global hub for free legal assistance and anti-corruption news and information.

Watch this site as its content develops. It may prove to be a rich source of country corruption information, case study analysis, updates on global anti-corruption conventions and free legal advice.

When will sustainability rankings become more accurate?

Macleans recently published a list of the 50 most socially responsible companies with a strong presence in Canada.

Among the leaders are Adidas Group, Ballard Power Systems Inc., BCE Inc., BMO Bank of Montreal and BMW.

Some of their CSR practices are worth sharing. However, there are a number of critiques on their methodology. This is commonly the case with corporate ranking schemes.

Yes, it is good to recognise socially and environmentally productive activities. But it is time that we stop labelling a giant corporation as an overall sustainable leader based on a few activities.

It’s time we start rewarding companies that have embedded sustainable practices into their company’s strategy, operations and culture. At a minimum, let’s put a company’s praise into context.

Does such a ranking of ‘embeddedness’ exist?

Water Footprinting versus Water Life Cycle Analysis

Water is the new environmental issue being discussed by businesses.

This does not mean that we can manage it in the same way we manage carbon emissions. Why? Well, because water is also a social and political issue.

So, how should companies measure water use, and use the findings to inform business strategy?

One camp supports the adaptation of Life Cycle Assessments (LCAs) to water

LCAs now have a standardised approach to measuring greenhouse gas emissions at the product level.

Advocates of LCA purport that we should not reinvent the wheel, and simply adapt this widely-accepted method to water.

Additional benefits of LCA for water include:
1. Quantifies impact and results in an absolute volume-based figure for which the method is more robust and incontestable
2. Allows stakeholders to benchmark competitors, and compare products irrespective of their industry or location
3. Focuses on direct impact only
4. Benefit from globally accepted method used for carbon that has clear timelines and budget estimates

In the other corner is water footprinting

Proponents for footprinting include organisations such as WWF and the Water Footprint Network.

Benefits of the water footprinting methodology include:
1. More inclusive as it includes direct and indirect water use along the value chain
2. Captures the full impact picture including type of water use, location, timing, temporal and local scarcity dimensions of water
3. Provides basis for local impact assessment and formulation of sustainable water use strategy

Here is an overview of the results of a recent water footprinting exercise, presented by WWF UK's Director of Corporate Partnerships at the 2010 Climate Change Summit.


These methodologies are not mutually exclusive. Hypothetically, a company could measure it's water LCA, and follow-up with a longer-term footprinting in order to place the findings into context, looking throughout the entire supply chain.

Read more about corporate water strategies at www.ethicalcorp.com/water.

Chinese consumer cynicism about corporate sustainability claims

Chinese consumers are becoming just as cynical as Western consumers about corporate green- and whitewashing (insincere environmental and social claims communicated by companies), according to the GlobeScan’s annual global tracking research.

The study, which interviewed over 30,000 people across 34 countries, finds that "while in 2005 more than 80% of Chinese consumers felt that companies communicated ‘honestly and truthfully’ about their social and environmental performance, this has now fallen sharply, with only 40 per cent feeling this way in this year’s study".

An increasing number of consumers are reading company sustainability pages. However, an even larger number of consumers (30%) look beyond company websites, to other online sources for information about a company's sustainability performance.

GlobScan also finds that the top-scoring green consumers of 2010 are in the developing economies of India, Brazil, China, and then Mexico.



Read more here.

UK DEFRA Chief Scientific Advisor explains the science of climate change

If you are given an opportunity to listen to Professor Robert Watson, UK DEFRA's Chief Scientific Advisor speak, take it!

Watson has the ability to captivate an audience and explain, in simple terms, the science behind climate change's impact on rising temperatures, increases water stress and more.

Here is a link to one of his many presentations on the science of climate change, and another on food security.

A 60-second clip gets to the crux of the climate change challenge

WWF Canada gets straight to the point with this public advocacy clip, highlighting the need to change societal norms.

Sneak peek into a new report on the CRC

Here's a sneak peek into the results from Ethical Corporation's research for the brand new, 2nd edition report 'The Carbon Reduction Energy Efficiency Scheme: How Companies Cut Carbon, Save Money and Meet Legal Compliance'. The report covers:

Insight into how the CRC was designed, such as…

The scheme has been designed so that, over the long term, the relatively high price of allowances will make it more cost-effective for all firms to invest in cleaner technologies, improved production processes and energy-efficiency strategies. In this respect, the cap-and-trade market structure provides an incentive for organisations to reduce their emissions.

Strategic approaches to trading, such as…

By identifying and separating out its emissions sources, a firm can plot a marginal abatement curve that enables the firm to develop the most cost-effective and efficient abatement strategy based on its existing emissions. Firms should only purchase CRC allowances if all the abatement opportunities have been exhausted. The market price of carbon would need to be lower than the cost of abatement or there would be no point in purchasing allowances.

Exemptions from the scheme, such as…

Subsidiaries of CRC organisations (or whole CRC organisations if no subsidiaries exist) are exempt if they can demonstrate that they have more than 25% of their relevant emissions covered by Climate Change Agreements.

Last-minute changes to the scheme, such as…

Principal subsidiaries have now been renamed to ‘Significant Group Undertakings’, and regulations have been made more flexible for this group. Subsidiaries that are large enough to qualify in their own right (over 6000MWh) may now opt to participate in the scheme separately from their organisation group. The caveat here is that organisations cannot opt to disaggregate a nominated SGU if this will bring their own energy consumption below the 6000MWh threshold.

Critiques of the scheme, such as…

The British Retail Consortium believes that the UK Government has failed to understand the business realities of franchising operations, arguing that franchisers have very little control over their franchisees’ energy management.

BT contests DECC’s decision to exclude renewable energy, requiring companies to report renewables at the average grid factor. Several other interviewees echoed BT’s concerns, yet most agreed why DECC seeks to avoid double counting of fuel credits.

A simple presentation of what is required by your company, and associated fines such as…

If your organisation is eligible for CRC, but has failed to register by the end of the registration period, you will have to pay a fixed fine of £5,000. Then, for each subsequent working day you fail to register, you will be fined an additional £500 per working day to a maximum of 80 working days, together with publication of non-compliance.

Expert opinions on the specifics of the scheme, such as…

The following quote by an Asda representative: “The problem with a league table is that it is open to abuse, in that companies that have taken no action to reduce their carbon outputs could take rapid action and be seen as progressive whereas those companies, such as Asda, that have a sensible plan to reduce carbon outputs could join the scheme and have an impossible challenge of further reducing carbon against those companies who have taken little action to date. For the measure to work effectively, credit must be given to work undertaken before CRCs came into effect.”

By the end of the week, you can download a free summary from www.ethicalcorp.com/crc.

Water stewardship surfaces as a top concern among sustainability professionals

Responsible water management has emerged as a leading concern among sustainability managers. 52% of sustainability professionals surveyed already list water stewardship as one of their company’s top 5 responsible business issues, while 99% believe that water concerns will become more of a priority for businesses in the next 5-10 years.

Ethical Corporation’s brand new report, Unlocking the Profit in Water Savings, 2nd Edition, explores how big companies manage water risk – and the business opportunities in doing so.

Many companies have made significant progress in their water management strategies. Since the first edition of this report in 2008, mainly more clear lessons and twice as many solid case studies have surfaced.

Several companies interviewed, such as Rio Tinto, now have ten years of experience to draw from.

Like carbon, the initial approach to water stewardship focuses on reduction. Efficiency and simple monitoring technologies provide quick wins, often realising a return on investment within one year.



Unlike carbon, corporate water management engulfs a host of direct social, economic and environmental risks. Degradation of community access, treatment and sanitation, ecosystems, scarcity and licenses to operate have become realities for many of the sustainability managers interviewed and surveyed.

A company’s water strategy depends on the specific risks and local issues confronting its operations, and determines where to focus its activities.



For more information:

Read about water management strategies from Whitbread, M&S, Unilever, Shell, SAB Miller, Coca-Cola, Molson Coors, Intel, Rio Tinto, and many more. Visit the report web page.

Listen to a podcast on one of our case studies. Toby Webb interviews Andrew Wales about water management at SAB Miller.

Can volunteering be strategic or is it merely charity?

A few weeks ago, I was discussing the business case for volunteering with the Lord Mayor, City of London.

The City of London Corporation’s recent publication seeks to articulate the business case for volunteering.

Recent research by a number of organisations and academic institutions supports this case for volunteering. One challenge researchers face is that the impact of volunteering is usually indirect or induced. Cause-effect can be difficult to ascertain.

If you are looking to build a case for volunteering in your company, or tightening the connection between your volunteering programme and your bottom line, here are some statistics to help you:
2010 findings from the City of London’s ‘Volunteering – The Business Case’:

- The average annual cost to support each volunteer involved in an education based activity in London is £381 per person per annum. (This figure comprises the full cost including direct management costs and all additional costs involved in running an effective volunteering programme)
- 31% of organisations used volunteering as part of their strategy to address critical business issues.
- Over 60% agreed that volunteering builds teamwork skills in employees.
- Volunteers believe that they developed the following competencies:
66% communication skills
65% ability to help others
54% adaptability
45% influencing/negotiating
43% team working
41% leadership
41% willingness to improve
40% planning/organising
39% decision making
39% problem solving
39% fostering relationships and networks

The Institute for Volunteering Research conducted a 'Helping Out' study for the UK Cabinet Office in 2008. They found that:
1. 54% of UK employees who do not have access to a volunteering scheme, wish their employer had one.
2. The same study found 67% of UK volunteers felt satisfaction from their results.
3. 82% of UK employees said that having time off would motivate them to volunteer.
4. Where a volunteering scheme existed, 29% of employees volunteered.
5. Women are more likely to volunteer than men (64% vs 54%).
6. The biggest motivator for employee volunteering is having the ability to choose where to volunteer, followed by paid time off and the opportunity to build skills.
7. Employees of large UK companies are 47% more likely to have a work volunteer scheme.

D&T's 2007 Impact Survey found:
8. 62% of employees would prefer to work for a company where they can volunteer

According to the UK Home Office:
9. 11.1 m people involved in formal volunteering at least once a month are most likely to be involved in: organising or helping to run an activity or event (57%), raising or handling money (54%), leading a group/ being a member of a committee, giving other practical help (32%).

Do-It.org finds:
10. The most important aspect of volunteering opportunity is career training (36%), closely followed by wanting to make a difference (27%).

According to this study from Fidelity Charitable Gift Fund and VolunteerMatch:
11. Americans who volunteer their time and skills to nonprofit organizations donate an average of 10 times more money to charity than people who don't volunteer.

A 2009 Boston College publication shows:
12. The top three reasons American companies provide volunteering are PR, job satisfaction and team building.
13. Boston College has also published the drivers for volunteering effectiveness based on Fortune 500 companies. They found that one of the biggest drivers (36%) is having a culture of volunteering, which includes senior management volunteerism.
14. The college also designed a benchmarking tool for measuring the impact of volunteering.

A related area that lacks sufficient research is employee ethics. Recently LRN rightfully reported that most companies could do a lot more to encourage employees to do good on-the-job, not just off-the-job. One in three employees have left a company due to questionable ethics:

The sceptical consumer: when does trust matter?

Facebook and Google are frequently attacked for having unethical intentions with user data.

Yet, Google is expanding and experiencing exponential increases in traffic, while the latest number of Facebook users suggests that if it were a country, Facebook would be the third largest nation in the world.

Or, is it that we’re all a bit fickle with our trust, and relish the opportunity to complain about big business?

When it comes to our trust in companies, what is our breaking point?

Nestle still can’t shake a large number of baby formula critiques, despite its strong commitment to sustainability, and active engagement with a variety of stakeholders and critical friends. (You can find interesting debates in the video coverage of last week’s Creating Shared Value event)

BP’s integrated sustainability measures will be overshadowed by the reputational damage of the recent oil spill for years to come.

The Bodyshop fell under mass criticism for false claims about testing on animals. Now, decades later, they are frequently heralded as a sustainability leader amongst multinational companies.

What can we learn from recent trustworthy research?

Key trends revealed by Edelman’s annual Trust Barometer:
• For the first time, this year’s survey suggests that trust is as important as important to corporate reputation as the quality of their products and services.
• Global trust in business is up modestly but the rebound is fueled by a spike in a handful of Western countries, especially the United States where it jumped 18 points to 54%.
• Trust in business remains high in three of the four BRIC countries, with Brazil, India, and China above 60%.
• Trust in banks declined dramatically in most Western countries, plummeting 39 points (68 to 29%) in the U.S. and 20 points (41 to 21%) in the U.K. from 2007-2010.
• While Sweden, Canada, and Germany remain the most trusted countries for global headquarters (76, 76, and 75%, respectively), the U.S. is now trusted by 61%, up 10 points from last year. China rose by seven points in this category (27 to 34%).
• In all 22 countries, when asked which stakeholder should be most important to a CEO’s business decisions, respondents replied that “all stakeholders are equally important” – by as much as a 4:1 margin against individual stakeholders.
• Trust in business jumps by 26 points in Italy, 18 points in the U.S., 15 points in the Netherlands, and 14 points in Spain. In Russia, trust in business falls by 10 points (to 42%).
• Trust in government is stable, with significant moves in the U.S. (up 16 points to 46%) and in Russia, where trust decreased by 10 points to 38%.
• In 20 countries, corporate or product advertising continues to be the least credible source of information at 17%.
• In the U.S., U.K., Germany and the BRIC countries, more than 70% say that actions such as firing non-performing managers, repaying bailout money, or reducing the pay gap between senior executives and rank and file workers would restore their trust in the company.

Key Findings from AccountAbility’s What Assures Trust in a Downturn?

• Consumers are uncertain about who to turn to in order to reinstate their trust in business.
• There is an “accountability gap” between the institutions consumers deem to be accountable for ensuring sound business behaviour, and the trust held in those institutions to deliver. Regulators and businesses themselves score 60% and 56% respectively for their responsibility, yet only 22% and 6% of people trust them to deliver.
• Most survey respondents predict their use of ethical labels will be maintained.
• 73% of consumers say fair treatment of employees and suppliers are the priorities for what makes a responsible business.
• There is a generational difference in consumer perceptions of “who is responsible.” While the over 55s are more likely to make an effort to buy responsible products, they are also more likely to think that consumers have a personal responsibility to ensure business behaves well. Conversely, the under 24s externalise responsibility, putting the onus back on businesses, government and regulators.
• The following graphs illustrate the potential rewards and penalties consumers place on non trusted businesses:





Additional trust rankings are offered by PWC’s Building Public Trust awards and
Reader’s Digest European Trusted Brands 2010.