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The secret to taking corporate responsibility seriously is making it part of normal business for all departments and functions
Leading companies have acknowledged the need to develop strategies that take account of the ethics of doing business. In the process, corporate responsibility has moved from a niche activity to the mainstream of business thinking.
But some central questions remain.
- What are the best methods for embedding the corporate responsibility agenda right across a company’s activities?
- What is the role of a central corporate responsibility department?
- How can the corporate responsibility department work effectively with other business functions?
A recent Ethical Corporation report explores these questions, examining firstly the core issues that a central corporate responsibility and sustainability department should tackle, and secondly, how separate functions or departments can embed corporate ethics in day-to-day activity.
The report suggests there are a number of steps a company’s central corporate responsibility department must take to establish and drive its agenda.
- Ensure senior management is engaged.
- Spell out how a sustainable agenda benefits everyone in the company.
- Measure success and report about it.
- Create strategy and programmes that are relevant to their context. One size does not fit all.
Getting the top people in a company to take on the corporate responsibility agenda is a crucial step. Man Group, for example, was one of many companies that suggested to Ethical Corporation’s researchers that if the chief executive of a company is talking about ethics and sustainability, then everyone else takes notice. As there are corporate responsibility elements in Man’s executive pay structures, if bosses don’t deliver on these then their pay and bonuses are hit.
Among the issues that make senior executives take notice is risk management. This includes taking account of a company’s exposure to climate and environmental risk, and minimising the impact of new and future statutory obligations. Conversely, companies that are leaders in tackling environmental and climate issues, for example, will be well placed as new rules and regulations take effect.
Novo Nordisk is a company that has taken the concept of embedding ethics and responsibility to the heart of its objectives. In 2004 the pharmaceutical company’s articles of association were revised to state that Novo Nordisk would seek to conduct its business in ways that are financially, environmentally and socially responsible. This sends a very clear message to investors and anyone with whom the company does business. It means the board and senior management have a strict obligation to take environmental and social matters into account when making decisions.
Such decisions can have a beneficial impact when developing sustainable procurement and supply chain strategies, one of the functions that the Ethical Corporation report examines. These ensure continuity of supply and can protect against reputational risks. There are also benefits for supplier companies and their employees, both key stakeholder groups for the purchasing company.
Transparency in supply chains – information about who is working for or with whom – has been hard to achieve, as many companies have, understandably, felt that supplier lists are commercially sensitive. This is changing. In a move that surprised many of its competitors, technology giant HP released its list of top suppliers in 2008.
The company argues that this is a useful way to encourage its competitors to cooperate in improving conditions in the IT sector’s supply base – releasing the list meant that it simply is not a competitive issue for HP any more. And making the list public also gives HP more leverage with suppliers to improve working practices.
There are, of course, benefits for suppliers in engaging in sustainability and responsibility programmes. Speaking to Ethical Corporation’s researchers, Starbucks highlighted three advantages for its suppliers. First, adhering to Starbucks’ standards means a farmer will be producing high-quality coffee beans that will command top prices. Second, as part of Starbucks’ process of continual social and environmental improvements, suppliers will be eligible for premiums from the company’s own buyers and for long-term agreements, if the supplier wishes. Third, Starbucks will make payments to community healthcare, education and other social projects as part of contracts with suppliers.
Once such policies are in place, it is important that people – including internal and external stakeholders – hear about them. A sustainability report is a very useful tool. BT is one of a number of companies that says reporting on corporate responsibility should drive behaviour change in the company and not just be reporting for its own sake.
Vodafone agrees, telling Ethical Corporation’s researchers that reporting communicates with stakeholders, providing a record of commitments against which the company will be judged. This focuses attention on the areas where improvements are necessary.
Also important is fitting the format to the message. Vodafone has experimented with a number of methods of communicating corporate responsibility messages across the company, and has found that in many instances traditional printed materials – that people can pick up and browse – can be more effective than emailing information or establishing blogs, for example. The company is also developing ways of getting information to staff using videos that can be sent direct to mobile phones.
Alongside procurement and communications, Ethical Corporation’s report also examines best practice in human resources, operations and logistics, and accounting and finance functions. In these areas, as in the brief examples mentioned here, innovation, alongside clever use of existing technology and techniques, is what makes leading companies stand out. And for these leaders, the corporate responsibility agenda has moved from being a standalone function to being central to doing business well.
Recommendations for embedding corporate responsibility
Creating pride in corporate responsibility achievements
Employees put a great deal of effort into their working lives, and want to feel proud of the organisations they work for. Make them aware of corporate responsibility policies, how they and other company stakeholders benefit from corporate responsibility programmes and how they can get involved. This is also crucial for recruitment of the best staff.
Engaging with suppliers
How a company procures products and services is an area where it can make commitments to embedding corporate responsibility, and really make a positive difference to the lives of stakeholders. Working with suppliers to instil corporate responsibility in company practices will have financial benefits for purchaser and supplier, help the supply chain and is essential reputational risk management.
Producing a report is perhaps one of the more traditional practices for corporate responsibility departments, and it remains a highly effective tool. It provides a public record of what a company is doing and plans to do in the future. If previous targets are not met, the company has to explain why. The report can also be a good basis for a company’s responsibility-related communications strategy.
Listening to colleagues
Some of the best corporate responsibility programmes focus on things that employees in operational departments can do to improve systems and make processes more efficient. And staff are in the best place to advise where efficiencies can be made and how to implement new procedures.
Measuring and recording data
The finance and accounting function within a company has a central role in developing systems for recording and analysing data. Increasingly, non-financial data is collected and analysed as part of the same process – which is an efficient use of resources and also brings the skills of finance professionals into responsibility data measurement and reporting.
For more on the Ethical Corporation report “How to Embed Corporate Responsibility Across Different Parts of Your Company” go to www.ethicalcorpinstitute.com/reports/csr