DIRECTIONS 16

Each year, Directions takes an in-depth look at an area of sustainability

and communications. This time, were delving into the quite sizeable
gap that still exists between business and society. Its not the void
that interests us so much as the question of how it can be shrunk.
How do we move from just minding the gap to actually mending the gap?

INTO THE GAP

16

Inside, we hear from experts and practitioners on how business

and society can be brought closer together, what the obstacles are,
and what the priorities should be in the months and years ahead.

EXTERNAL CONTRIBUTORS
ROBIN NUTTALL
Co-author of Connect: How companies
succeed by engaging radically with
society and Partner
McKinsey & Company

PETER ZOLLINGER
Head of Impact Research
Globalance Bank

LAURA PALMEIRO
Sustainability Integration Director
Danone

JAN-WILLEM VOSMEER
Corporate Social Responsibility
Manager
HEINEKEN

SOFIE SCHOP
Senior Project Manager,
Communications
Sustainable Apparel Coalition

ALEXANDRA PALT
Chief Sustainability Officer
LOral

DR. REN BUHOLZER

Managing Director, Global Head
Sustainability & Head Public Policy
Credit Suisse

RICHARD KARMEL
London Managing Partner
Mazars UK

SALTERBAXTER CONTRIBUTORS
NIGEL SALTER
CEO

KATHLEEN ENRIGHT
Director Consultancy & Communications

OLIVIA SPRINKEL
Head of Salterbaxter North America

HUW MAGGS
Strategy Director

ROISIN GREENE
Account Director

KRISTINA JOSS
Senior Consultant

CAROLINE CARSON
Consultant

ARABELLA BAKKER
Director Consultancy & Communications

Amazing progress has been made

on the sustainability front.
Most businesses now have detailed
sustainability targets and strategies.
According to a recent study by
Accenture, 87% of CEOs say that
sustainability is central to their
planning and strategies.
Reporting and disclosure are
now pretty much standard practice
there may even be too much.
Sustainability is starting to be part
of the way that products and services
are innovated and marketed. And the
challenge of longer-term thinking and
a reinvention of the role of capitalism
is being championed by the likes of
McKinsey, BlackRock, Morgan Stanley
and Inclusive Capitalism. We even
have a major agreement from Paris
on climate to build on and the UN
Sustainable Development Goals
as a platform for global actions.
So the plus column is looking pretty
good. Is the job done?
Well, no. From looking at 2015 and 2016
we see that in many ways things havent
changed at all.
VWs share price dropped by over
20% at one point due to the quite
astonishing emissions scandal.
And the Panama Papers scandal
proved that the issues of taxation
and transparency are fundamental
to rebuilding the trust in business
and finance and that there is still
a very long way to go.
It seems as if a lot of the work that has
been done to date has been focused
on minding the gap making sure
business does less harm, protecting
reputation, managing risk. But as most
of us know, the big opportunities for
business are not achieved when it
just minds the gap. They emerge when
business and brands actively seek
to mend the gap. John Browne and

BUT AS MOST OF US KNOW,

THE BIG OPPORTUNITIES
FOR BUSINESS ARE NOT
ACHIEVED WHEN IT JUST
MINDS THE GAP. THEY
EMERGE WHEN BUSINESS
AND BRANDS ACTIVELY
SEEK TO MEND THE GAP.

CONTENTS

02

Connecting the gaps

The engagement gap

06

Profit and purpose

The integration gap

10

Eye to eye
The behaviour gap

14
Robin Nuttall describe this as radical
engagement with society and Robin
talks more about this in our first article.
So this year in Directions (number 16!),
we decided to take a step back and
assess some of the gaps that still
need to be bridged. Dont get us wrong,
we celebrate and applaud the great
progress being made in many ways.
But our passion is in showing business
the commercial opportunity it can
gain if it goes beyond housekeeping
sustainability and truly seeks to connect
with societys challenges in order to
secure and drive long-term success.
There are gaps in policy, gaps in
innovation, the value-action gap, gaps
between ambition and reality, gaps
in knowledge and understanding,
gaps in finance, gaps in science.
We see them all as opportunities for
business to succeed rather than simply
as problems. Weve chosen a few
that we think capture the heart of
the debate. We know there are plenty
more we could cover too there
are gaps in our gaps! Wed love to
hear your views on these.

Consumer trust in brands

The information gap

18

Speaking the
same language
The marketing gap

22

The investment gap

How the financial
sector can step up

26

Say_Do/Practice_Preach
The implementation gap

30

Handle with care

The human rights gap

34

Conclusion

DIRECTIONS 2016 SALTERBAXTER

02

The publics distrust of big business

is nothing new. As far back as 97 BCE,
for example, legal codes in Han Dynasty
China considered merchants; former
merchants; sons of merchants; and
grandsons of merchants certain
kinds of criminals. But the cost of
such unpopularity is much higher for
businesses today than it ever has been.
New technology and the public appetite
for novelty can subject companies to
relentless transparency. Missteps may
trigger an availability cascade, with
the media feeding its 24-hour news
cycle with unverified and oversimplified
information that the public embraces.
In a matter of days or even hours,
perceptions gain traction, and a
corporations good standing, which
may have taken years to build up,
could be irreparably damaged.

THE ENGAGEMENT GAP:

HOW BUSINESS CAN STEP UP
01 Take a hard look at the gaps
between the business and
its stakeholders.
02 Be prepared to redraw the
lines of connection. This isnt
just about CSR strategy,
its about the companys
forward direction.
03 Get the whole organisation
behind a more connected
mindset it will pay off.

But theres also opportunity here.

While conducting research for Connect:
How Companies Succeed by Engaging
Radically With Society, which I
co-authored with former BP CEO Lord John
Browne and Polaroid Swing Co-Founder
Tommy Stadlen, we discovered that
about 30% of corporate earnings is at
stake in a companys relationship with
external stakeholders. Whats more,
businesses that connect effectively
with society can see a shareholder
value boost of more than 20% over
a single decade relative to peers.
The bottom line is clear: if you can
capture this opportunity, you can grow
in a way that your competitors cannot.

03

DIRECTIONS 2016 SALTERBAXTER

WHO TO ENGAGE
Businesses need to develop strong
connections with several stakeholders,
including employees, governments and
regulators, the environment, and NGOs.
Employees both reflect and create
their employers brands. In addition,
employee morale greatly influences
financial performance. One London
Business School researcher, for
instance, found that companies listed
among the 100 Best Companies to Work
for in America between 1984 and 2009
generated 2% per annum share price
uplift versus their competitors.
Governments and regulators, meanwhile,
wield the greatest power of all over
business, and they require companies
to perform a unique and challenging
balancing act. Ignore government
and its influence will eventually catch
you off guard, we write in Connect,
commandeer it and you risk a backlash
from society further down the line.
Lord Browne in 1997 became the first
Big Oil chief executive to publicly
recognise the link between man-made
carbon emissions and global warming.
He believes the environment may be big
businesss most complex stakeholder.
The rise of technology and NGOs have
essentially given a new and powerful voice
to environmental concerns. Business
leaders should place their organisations
at the centre of transformative solutions
that make the low-carbon world an
attractive destination.

04

THE FOUR TENETS OF

RADICAL ENGAGEMENT
In Connect, we argue that conventional
corporate social responsibility (CSR)
efforts are inadequate for establishing
and maintaining dynamic relationships
with these complex stakeholders.
I would characterise typical CSR
initiatives as box checking, an activity
thats disconnected from the companys
core commercial activity.
What businesses need instead is to
identify and pursue their social purpose
with the same rigour as they identify
and pursue their commercial purpose.
And that major shift in mindset needs
to begin at the top of the organisation
by adopting the following four tenets.

01

Map your world

It may sound obvious, but it is absolutely
critical to understand the trends that
are shaping your context and to quantify
the value at stake. Doing so effectively
means considering your goals in relation
to those of your stakeholders while
bearing in mind the resources and
influence each of you brings.

02

Define your contribution

In Connect, we explain that knowing
where your company can actually
make an impact, versus where it can
only be a spectator, is vital to set your
engagement priorities. For every topic,
firms should choose which combination
of the 3 Cs of engagement strategy
contest; concede and lead; and
collaborate is most appropriate.

03

Apply world-class management

embed deeply within the business line
The management of the connection
between business and society is rarely
done as professionally as other parts
of the business, we write in Connect.
In order to radically engage society,
organisations should subject these efforts
to the same four core management tools
that they deploy in their commercial
efforts: creating capability; organising
to win; establishing processes; and
measuring outcomes.

04

Engage radically
Finally, businesses must fully embrace
openness and transparency. As we write
in the book: To earn trust and credibility,
the private sector should engage the
external world on the front foot, building
lasting relationships which are based
on regular, authentic negotiation rather
than public-relations propaganda,
brinkmanship or passive silence.

WHATS NEXT
The future of public engagement
will be shaped by three main trends:
the rise of artificial intelligence;
the shift of the worlds economic centre
toward emerging economies; and
the emergence of a wealthier, bettereducated, and more empowered global
class than we have yet seen. This new
generation could be the most lucrative
in history for businesses. It will certainly
be the most challenging.
But we need not greet these disruptions
grimly. With the right guidance, the most
progressive businesses stand to gain
huge ground against their competitors.
Gaining support for these efforts will
require structured thinking around their
potential upsides and downsides as
well as a concerted move from the back
foot to the front foot in the way the
organisation engages with society.

AND, AS WE POINT OUT

IN CONNECT, THERES
PERHAPS NO BETTER
TIME TO INITIATE THOSE
EFFORTS THAN RIGHT NOW.
Companies have never been
more accountable for the positive
contribution they make to peoples
lives, we write. The connected firms
of the future will push the boundaries
of human possibilities in their quest to
contribute. They will not fracture their
bonds with society.

05

DIRECTIONS 2016 SALTERBAXTER

PROFIT AND
THE INTEGRATION GAP

Danone has succeeded like few other big companies

in putting sustainability at the heart of everything
it does. Salterbaxters Olivia Sprinkel caught up
with Laura Palmeiro, Danones Sustainability
Integration Director, to find out how theyre
bridging the integration gap.

Olivia Sprinkel: How important do

you think it is for a business like
Danone to have a clear purpose?

THE INTEGRATION GAP:

HOW DANONE IS STEPPING UP
01 Everything Danone does
is guided by a clear mission
and purpose.
02 Group leadership have
provided essential support
for integration including
a group-wide manifesto
and new integrated report.
03 There has also been a big push
to engage employees at all levels,
as well as suppliers and society.

06

Laura Palmeiro: Its extremely important.

At Danone, our mission shows us our
direction as a company. Like many
Danone employees, I find our mission
to be very inspiring. It doesnt say
anything about profitability. Of course,
profitability is necessary to remunerate
our shareholders and also to reinvest
in the future. But making money is not
a purpose in itself.
The purpose of the company is to deliver
our mission of achieving health through
food and to do it in a sustainable way
while benefiting the largest number
of people. We arent just targeting a
niche market or a specific social class.
We want to reach as many people
as possible with our brands.

For a long time, customers and the

wider society have been distrustful
of big businesses. The reasons for
this are mainly historical, and there
is a widespread perception that
corporations are usually there just
to make money. There have also been
ethical issues, a misalignment between
economic, social and environmental
interests. In the past, most businesses
didnt address stakeholders interests,
but only their own, and normally only
in a financial sense.
As we know, lots of companies
have started to move towards a
more comprehensive understanding
of their responsibilities to include
shareholders, society and the planet.
But there is still a misunderstanding
and misalignment between business
and society. This is something that
will only change through greater

transparency. The only way to fill

the trust gap is to become more
transparent with external parties,
to invite them in to give their opinions,
to co-construct solutions together.
To become more porous. Maybe
even to bring outside parties into
the governance of the company.
OS Can you give some examples
of how Danone is collaborating
with external parties?
LP We are strong believers in
co-creation. Its one of the guiding
principles behind the different funds
that we have set up. One of them is
Danone Communities, where we are
working to solve nutritional problems
in different parts of the world.
Then there is the Ecosystem Fund,
where we are working with not-for-profit
partners to create jobs and reinforce our
local economic and social environments,
or ecosystems. Together, we provide
training and financial support for
Danone business partners, to help them
develop their businesses in a better way.

For example, some of our milk suppliers

are very small farmers. We help them
learn about optimal methods for
cattle feeding, how they can increase
their yield, how to improve the cows
lives and reduce health problems
all of which increases the quality of
the milk they produce. Its a win-win
situation the farmer gets assurance
that more of their milk will get to market,
which means they make more money
to support their families, and we are
assured good quality milk. When were
able to build strong ecosystems,
everyone benefits.

WHEN WERE ABLE TO BUILD

STRONG ECOSYSTEMS,
EVERYONE BENEFITS.
OS How is Danone going about
the task of integrating sustainability
throughout the business?
LP The backbone of our sustainability
approach is the Danone Way a process
that is now completely embedded in the
day-to-day functioning of the company.
It touches every area of the business:

compliance, governance, quality

control, human rights, diversity and
inclusion through to measurement of
our carbon footprint, reduction of
environmental impact, sugar reduction,
adaption to nutritional needs.
There are four pillars to the Danone Way:
For each of the pillars there are
different topics; for example, Better
World (the environmental pillar) includes
water, climate change, agriculture and
plastic. Then within each of the topics
are specific practices and policies, and
targets to achieve in the near future.
Each of our country business units
does an annual Danone Way selfassessment. Then external audits
are carried out to verify the process
and the data. These audits reinforce
the credibility of the whole process.
They do this at the same time as
reporting their financial situations.
We then carry out external audits
of at least 20% of the business.
We first launched the Danone Way
in 2001, initially with two or three
Danone group companies, and now
it covers 98% of our total turnover.
We update the Danone Way every year
to reflect our newest commitments.

PURPOSE

07

DIRECTIONS 2016 SALTERBAXTER

THERE ARE FOUR PILLARS

TO THE DANONE WAY:
01
02
03
04

UNIQUE BUSINESS APPROACH

BETTER HEALTH
BETTER LIVES
BETTER WORLD

OS Who is responsible for implementing

the Danone Way in your businesses, and
how does this relate to the companys
other sustainability activities?
LP Each business has a Danone Way
co-ordinator. Sometimes its the
environmental manager, sometimes
an HR person. It depends on the
configuration of the business unit.
The Danone Way is only one of our tools,
but it is the only one that is transversal,
touching all of the various sustainability
topics, and which enables us to see
the overall progress. Each topic is then
managed by topic owners. For example,
our latest climate policy came out
at the end of 2015 and is applied by
our worldwide community of carbon
masters, co-ordinated centrally, who
have their own way of communicating,
setting targets and delivering against
plans. There are similar experts
working in other social, nutrition
and environmental topics.
OS You also have a manifesto
at Danone. Can you tell us a little
about that?
LP The manifesto is our mission in
action. It is what we stand for, what
the mission concretely means and
what we commit to do. It represents our
convictions as a company. Importantly,
all Danone employees have a role in
implementing the manifesto. We recently
held our second Manifesto Day, where
we connected 100,000 Danoners
simultaneously, through Webex.
The CEO gave an address and we shared
progress and examples of the manifesto
in action, including screening some
short films that had been made about
how the manifesto has come to life in
our subsidiaries. Colleagues all over
the world were tweeting and we enjoyed

being all together, whether in offices

or in plants. Everyone could see the
presentations in their own languages.
Its a big thing to do, and a technical
challenge. But it is very inspiring,
having the whole organisation together
like that. It gives a sense of unity.
OS Youve also been working with
the B Corp community. Are you
looking to become a B Corp?
LP Weve signed an agreement last
year with B Lab, the organisation behind
B Corps. The Danone Way approach has
existed for a long time and is embedded
in our culture, including our ways of
thinking and doing business. Our CEO
met people from B Lab and realised that
the Danone Way is essentially like an
internal B Corp assessment. Much
like the existing B Corp-certified
companies, we believe that we are not
only responsible to shareholders but
also to civil society and all our various
stakeholders. In both cases, its about
creating dialogue with society and
using business as a force for good.
This led to the question: Why couldnt
we become a B Corp? As we started to
look into it, we saw that the existing
B Corp assessment was really aimed at
medium to small scale businesses and
would therefore be extremely difficult
for us to answer. We realised that if
we supported the idea and wanted
to become a B Corp, we would have to
find a way for big companies to respect
the same topics and logic that B Corp
companies do now, but with an
assessment process thats adapted to
fit the challenges of collecting detailed
information across a big multinational.
So we set out to try to certify at least
10 Danone subsidiaries in order to

understand the challenges. One of

them, Danone Spain, has been recently
certified and another one will most
probably be certified before the end
of the year.
Were using what weve learned from this
process to help develop a questionnaire
for big companies as part of a working
committee that was formed. Other
members include big accounting firms
and financial institutions as well as
companies such as Unilever and Natura.
OS Danone recently published its first
integrated report. Can you describe
how that came about?
LP Danone has always had sustainability
embedded in its culture, but our way
of applying this has become more
structured in the last few years.
We started formalising it with the
Danone Way and by setting up the
funds. And our latest steps are our
manifesto and the integrated report.
I think you need to have an integrated
strategy to have an integrated report
and weve had an integrated strategy
for many years. So it was only natural
for us to embark on this project. But we
needed to have the right organisation
in place to make it happen. It has taken
us a few years, but we finally published
our first integrated report this year.
In my view a perfect integrated
report doesnt exist so far. There is
no unanimous agreement on what
an integrated report should look
like, and there can be very different
interpretations. But I think we are going
in the right direction by having a first
version of an integrated report. We have
already heard from stakeholders that
they think it is a good tool. It gives all
kinds of stakeholders NGOs, unions,
suppliers, rating agencies more
information on how our management

is actually making decisions, as well

as the role of sustainability within
our strategy, and this should help
a lot in closing the transparency gap.
OS What advice would you give
to other companies on how to
successfully integrate sustainability
into the business?

THE MOST IMPORTANT

THING IS TO HAVE FULL
SUPPORT FROM TOP
MANAGEMENT.
LP The most important thing is to have
full support from top management.
Without that, it can be extremely difficult
to put an integrated strategy into action.
This is a condition for success.

OS A final question. Are you optimistic

that the gap between business and
society can be closed?
LP Im very optimistic, partly because
society is becoming more challenging
than it used to be. The work that
NGOs and civil society are doing is
extremely important. People have
more information now, not to mention
more means to exchange and share
information, and this is a good thing
in itself. It is a helpful challenge for big
corporations, as it pushes them towards
transparency and giving explanations.
Companies are going to have little choice
but to start integrating dialogue into
their normal working processes. Younger
generations are much more challenging
to businesses than the generations that
came before. Theyre pushing businesses
to keep evolving through what they
choose to buy, what they choose to share
on the internet, where they choose to
work. Millennials will help to make sure
that we keep working to close the gap.
So, yes, there are good reasons to
be optimistic.

Once you have their approval, you

should try and involve everybody in
all operations. This is important for
the buy-in of the project. Integrated
sustainability will only really work if
it is embedded throughout. It doesnt
work if its present in some divisions
but not in others. And you need to be
collaborating and co-creating solutions
across the whole organisation.

09

DIRECTIONS 2016 SALTERBAXTER

TO

THE BEHAVIOUR GAP

More companies than
ever before have clear
values and ambitious
sustainability goals,
but these are often a poor
predictor of real employee
behaviour. Salterbaxters
Roisin Greene looks at
how business can bridge
the difficult gap between
what employees say they
believe and what they
actually do.
Increasingly, people throughout
business and society recognise the
importance of acting responsibly.
But this does not always stop us
from making poor decisions, and then
repeating the cycle. Why is it that our
explicitly held sustainable values do
so little to predict what we actually do?
Whats true for individuals is also
true for organisations. Even the best
and clearest trickle-down strategies,
processes, values and targets have
their limits. Its basic human nature to
avoid loss, overvalue our own inputs
and sometimes veer away from what we
intended to do. This is why influencing
employee behaviour is not only the next
important step in many companies
evolution as responsible organisations
for many, its also one of the toughest
challenges they face.
To put it bluntly, your company will
never be truly sustainable unless all of
your employees adopt truly sustainable
behaviours. And for all the reasons just
mentioned, this can be a big ask.

10

KEY OBSTACLES:
HABIT AND BIAS
Its easy to assume that a lack of
information is the main issue when
people fail to act in their and also
societys best interests. But thats
not the whole truth. Education alone
is almost never enough.
We should stop wasting resources
trying to de-bias employee mindsets
with greenwashing and instead start
to de-bias our organisational processes.
The decision to give in to temptation
and revert to old habits is a moment
laced with many nuances. Employee
engagement campaigns are designed
with the best of intentions to raise
sustainability awareness and influence
behaviour. Which is why its such a
shame that so many are formulaic,
rooted in unrealistic assumptions
about human behaviour and often lack
in-built measurement of effectiveness.

THE BEHAVIOUR GAP:

HOW COMPANIES CAN STEP UP
01 Adopt new frameworks and
tools to help employees make
better decisions.
02 Create a great employer brand
to reinforce positive behaviours.
03 Boost psychological safety
to help employees adapt and
speak with an authentic voice.

Organisations need to design new

structures, strategies and processes
to help bridge the gap between peoples
explicitly sustainable values and their
implicitly unsustainable actions.
Lets look at three key areas where it
is possible for almost any organisation
to make systematic improvements to
help their people make better decisions,
achieve sustainability targets and
ultimately build a better society.

01. REMOVING
UNCONSCIOUS BIAS
Increasing employee diversity is
a key pillar in many organisations
sustainability plans, but this does
not automatically mean the people
in charge of hiring are making more
diverse or gender-neutral recruitment
decisions. To the contrary, many
companies continue to overlook the
best candidates in favour of the familiar.
Why? More often than not this comes
down to unconscious bias.

Harvard professor Iris Bohnets

research has shown that the traditional,
unstructured interview process is a poor
predictor of on-the-job performance.
Yet this approach continues to be used
by most companies. Typically hiring
managers are free to use the interview
to explore details that they think are
important, and this leaves the whole
process open to their personal bias.
One of the key issues at play here is
overconfidence the belief (perhaps
entirely unconscious) that you are
right and that your experience and
expertise is better than that of others.
And many hiring managers are simply
more likely, by default, to hire someone
who is similar to them (same gender,
background, education or hobbies).
Unconscious biases can affect
employee decisions across the
full range of companies sustainability
aspirations. One of the best ways
to combat this is by implementing
smarter processes that reduce the
effect of individual biases and help
employees to make smarter, more
responsible decisions.

11

DIRECTIONS 2016 SALTERBAXTER

WE SHOULD STOP
WASTING RESOURCES
TRYING TO DE-BIAS
EMPLOYEE MINDSETS
WITH GREEN WASHING
AND INSTEAD START
TO DE-BIAS OUR
ORGANISATIONAL
PROCESSES.

Such improvements do not have to be

complicated. In the case of fair hiring,
simply removing names, gender and
image cues from the hiring process
can be enough to neutralise managers
personal biases.
Google has gone a step further and
completely redesigned its recruitment
process to remove unconscious bias.
How? By structuring the content of
their interviews using data. Before
interviews, the companys peopleanalytics departments crunch data and
identify which interview questions are
more highly correlated with on-the-job
success and weigh them accordingly.

02. INFUSING YOUR

BRAND WITH PURPOSE
Employees seek out jobs and
organisations that align with their
values and give them a sense of genuine
purpose. This is especially true among
the youngest generation of jobseekers.
In a recent Deloitte survey, millennials
said they believed businesses were
behaving with increasing responsibility
though most felt that businesses
continue to focus too much on their
own agendas.
If an employees personal values are
not in line with those of the company
they work for, they are extremely
unlikely to be willing or motivated to
change their behaviour in support of the
companys goals. Ultimately millennials
say that they want companies to focus
more on people, products, and purpose
and less on profits.
Organisations need to develop a strong
employer brand that supports a
culture in which employees work
lives and personal values are aligned.
A powerful employer brand ties all
of the organisations activities together
leading with purpose and permeating
into everything your employees do
and how they do it.

12

For sustainability activities to be

mainstreamed throughout a business,
they need to be internalised by all
employees and become a norm.
When a well-meaning company
creates green teams to take on the
sustainability activation, employees
who are not part of these teams
can end up deferring responsibilities
essentially outsourcing ownership
of their individual sustainable
behaviours. By contrast, some
companies are using small nudges
throughout the organisation to change
behaviour incrementally and create
new norms. Each time these companies
teach employees how to talk about
the company purpose or sustainability
initiatives in their day-to-day interactions
with customers or suppliers, they are
also reinforcing these behaviours within
the internal culture.
Merck has created an employer brand
that is very effective in positioning the
company values (improve life, achieve
scientific excellence, operate with the
highest standards of integrity, expand
access to our products and employ
a diverse workforce that values
collaboration) at the heart of every
activity. So Mercks Open Innovation
Centre is designed using their own IP
products; they use their expertise in
drug and delivery systems to create new
partnerships which deliver malaria and
AIDS treatment more effectively; and
they transfer what they have learned
in delivering clean water to laboratories
to supply water to communities in
developing countries. The employer
brand ties all of these initiatives
together and communicates them
consistently throughout the
organisation, showing how they
all contribute to a single purpose.

PSYCHOLOGICAL SAFETY
STARTS AT THE TOP
According to Harvard professor
Amy Edmondson, there are
three key steps to building
psychological safety in
any organisation. Leaders
who want to create
an internal culture
of responsibility
should take note.

03. THE IMPORTANCE OF

PSYCHOLOGICAL SAFETY
Now that sustainability issues are
firmly on the table, organisations need
to create teams and work environments
that support positive behaviours,
each of which in turn will support the
companys sustainability strategy.
There is an increasing body of research
suggesting that psychological safety
is by far the most important trait to
develop high-performing teams. This is
the belief that you will not be punished
for speaking up with ideas, questions,
concerns or mistakes. Without this sense
of safety, employees focus on impression
management and self-protection for
fear of appearing ignorant, incompetent,
intrusive or negative. Such fears
are very common in the modern work
environment, which leads to workplace
silence and ultimately a decrease in
learning and innovation, both of which
are essential in moving towards a more
sustainable organisation. In comparison,
teams where members feel safer are
more likely to admit mistakes, to partner
and to take on new roles.
How do we move away from an
environment where being wrong is
avoided like the plague, where blame
is more important than gratitude and
where outlying views are ignored?

Again, Google is a notable innovator.

The company has found that
psychological safety is the most
important factor in its efforts to create
high-performing teams. Topping a list
that also includes dependability,
structure and clarity, meaning and
impact of work. To help its teams improve
and to monitor that improvement, Google
has created a tool called the gTeams
exercise. Its now been over a year
since the launch, and the findings are
revealing. Google teams that adopted
a new group norm, such as starting
meetings by sharing a risk taken
in the previous week, have improved
psychological safety by 6% and structure
and clarity by 10%. Feedback from
teams has suggested that having
a framework to talk about these
dynamics was the most impactful
part of the experience.

DO THINGS DIFFERENTLY
In order to win in an increasingly
uncertain environment, companies
need to do things differently. A final
word of caution: when organisations
try to optimise everything, its sometimes
easy to forget that success is often
built on human experiences. Ultimately,
its how our people and our teams
work together that brings about the
innovation and change.

01

Frame problems as
opportunities to learn
For the vast majority
of us, workplace
uncertainty, complexity
and interdependency
are constants.
Create a team
dynamic where
each member feels
comfortable to
ask for clarification
or help and
where they
feel their
input matters.

02

Acknowledge your
own fallibility
Leaders should demonstrate
a tolerance for failure by
acknowledging that they are
not always perfect and share
insights into how they learned
from past mistakes. This creates
a safe space to speak up and
encourages team members
to voice their opinions.

03

Model curiosity by
asking a lot of questions
This creates a need for team
members to answer the
question being asked and
have their voices heard.

13

DIRECTIONS 2016 SALTERBAXTER

C O N S U M E R

THE INFORMATION GAP

Giving consumers more
information about the
sustainability of products
is great in principle. But it
wont automatically foster
more informed buying
decisions. Salterbaxters
Caroline Carson reviews
the gaps in consumer
transparency and she
talks to Sustainable
Apparel Coalitions Sofie
Schop about how theyre
supporting brands to
reach consumers at scale.

I N

B R A N D S

Consumer trust in brands and

companies is a volatile commodity.
With each emerging corporate scandal
or ethics issue, public trust in big
companies erodes, sometimes purely
by association.

if a critical mass of companies manage

to be fully transparent about the
environmental and social impacts
of their products, their action could
set in motion a huge wave of consumer
behaviour change.

Yet when governments or industry

bodies sit down to hash out better
standards for corporate accountability,
it is almost always other stakeholders
such as investors, NGOs, employees,
suppliers and partners whose
concerns and needs dominate the
discussion, not the general public.

As more brands provide consumers

with this kind of information, consumers
will become more aware of the
environmental and social issues and
so begin to seek out this information
from other brands, which in turn will
need to provide a similar level of
information if they want to compete.
With time, this will bring tangible
change, because brands with a poor
record on social and environmental
issues will be exposed and have little
choice but to put their houses in order.

As a result, many businesses do not

think of consumers as a main audience
for their corporate sustainability
programmes and reporting. More often
than not, consumer engagement is
seen as the preserve of the marketing
teams, with little to do with corporate
communications.
The net effect is that consumer
engagement on sustainability has
lagged well behind initiatives aimed
at other audiences. As a result, a lot
remains unknown in this space.
What do consumers want and need in
order to be able to make more informed
purchasing decisions? And is anyone
prepared to reveal the good, the bad
and the potentially ugly when it comes
to their products?

THE CASE FOR GREATER

TRANSPARENCY
For companies, these are increasingly
urgent questions. In our always-on,
social media saturated culture it is
becoming ever more difficult for brands
to conceal or ignore any unpleasant
truths that may be lurking behind
their glossy advertising campaigns.
If companies dont tell, someone else
eventually will. The trusted companies
will be the ones that are willing to
reveal all.
But there is a much bigger idea at play
here as well, a very simple idea really,
but one that could be a game-changer:

WELL-INFORMED
CONSUMERS CAN CREATE
THE DEMAND FOR BETTER
BRAND PERFORMANCE ON
SUSTAINABILITY CRITERIA
JUST AS THEY CURRENTLY
DRIVE THE DEMAND FOR
BETTER PRICING AND
QUALITY OF PRODUCTS.
TWO ROADBLOCKS:
CREDIBILITY AND
COMPARABILITY
There are some big practical
obstacles. One is the sheer challenge
in establishing credibility around
these sensitive topics, given that so
many consumers no longer trust big
companies to tell them the truth.
A recent study, by TNS for The European
Commission found that only about half

THE INFORMATION GAP:

HOW THE APPAREL SECTOR
IS STEPPING UP
01 The Susta inable
Appa rel
Coalition is developing
gu idelines to help its
member compan ies
be more tra nspa ren
t.
02 Competing footw
ea r
bra nds are shari ng da
ta
and insights to find ou
t
how best to provide
this
information.
03 Initia l insights
suggest that
simplicit y, comparabil
ity
and credibilit y of the
information is key.

of European consumers trust

companies claims about environmental
performance.
Also in that study, 58% said they think
product labels do not provide enough
information, and 48% said existing
labels are unclear.
So there appears to be a clear
opportunity here for corporate
innovators to build trust and with it
brand loyalty by providing consumers
more and radically clearer product
information.
But will consumers believe what these
companies say, even if what theyre
saying is clear? Probably not without
some form of external verification. And
unless its easy for consumers to
compare different companies claims,
the information wont carry much
meaning. For that to be possible,
companies will need to collaborate
across sectors in unprecedented ways.

15

DIRECTIONS 2016 SALTERBAXTER

TRYING TRANSPARENCY
ON FOR SIZE
One industry that has made impressive
strides towards consumer transparency
is the apparel sector, thanks in no small
part to the work of the Sustainable
Apparel Coalition (SAC). The SACs
members are a whos who of leading
apparel, footwear and home textiles
companies, and theyre all being
encouraged to make comparable
sustainability information for their
products and brands publicly
available by 2020.
The SAC has developed a roadmap
to help members do this. But the big
question remains: how should all this
new information be displayed? What
does genuine transparency look like
in practice, and how much information
is too much?

THE MAIN CHALLENGE IS

HOW TO DISTIL ALL OF THE
ISSUES FROM THE FULL LIFE
CYCLE OF A SHOE INTO ONE
EASY-TO-UNDERSTAND
LABEL WITH ONE
PERFORMANCE SCORE.
To explore this, the SAC has been
convening a group of member brands
in an EU pilot project called the Product
Environmental Footprint (PEF). This is a
truly groundbreaking initiative, because
it has major competing footwear makers
including H&M, Inditex, Nike and
adidas sharing product sustainability
information freely with each other,
to find the best way of sharing this
information with consumers.

16

50%

OF EUROPEAN CONSUMERS
SAY THEY TRUST COMPANIES
CLAIMS ON ENVIRONMENTAL
PERFORMANCE.
IS STANDARDISED
LABELLING THE
ANSWER?
As part of the pilot project, Salterbaxter
has been working with the SAC to design
and test a label that can meaningfully
communicate product-level performance
information directly on the shoe, plus
a range of supporting communications
that consumers can turn to if they want
more detail.
This is about giving shoppers the critical
information they need, clearly presented
and at exactly the right point in the
buying process when it can help them
decide whether to purchase or not.
The main challenge is how to distil all
of the environmental issues from the
full life cycle of a shoe into one easyto-understand label with one
performance score.
A few months into the pilot, were
already starting to unwrap some
useful insights. Weve found that
once consumers understand what the
initiative is about, many of them are
receptive and think the new labelling
will have a positive effect. But it is
also becoming clear that third-party
accreditation and/or verification of the
standard will be important to build trust.

THE OTHER SIDE

TO TRANSPARENCY
For behaviour-change potential,
labels carry a particular power to
help consumers make quick, informed
decisions. But that power depends
almost entirely on how much the
consumer already knows about the
underlying issues at the moment they
pick up the product.
Traffic-light labelling schemes on food
are a good example. They work because
shoppers have learned, thanks to
long-running campaigns and education
initiatives, the significance of calories,
fat, fibre and salt. Also because
regulation (in most countries at least)
ensures this information is displayed
consistently across brands and
products, making it easy for consumers
to compare one product to another.
In the case of sustainability impacts,
some topics such as labour issues
are already widely recognised thanks
to the amount of publicity theyve had,
but many other issues, from waste and
toxicity to energy efficiency and the
supply chain are much less known
and understood.
So while it will be important for
companies to improve the quality
and comparability of the data that
companies present during the path
to purchase, it is just as important to
explain to consumers why they should
care about these issues, by connecting
them with how they experience the
product. Only then will the information
be truly transparent.
There are no off-the-rack solutions,
but the SACs pilot project has shown
that theres certainly willingness from
leading brands to be proactive in doing
what is needed to bridge the information
gap. And once the big brands start doing
it, surely more will follow suit.

Q&A

SS We aim to enable and encourage our

members, which are brands, retailers,
facilities and affiliates, to become fully
transparent by 2020. In order to reach
consumers at scale we create tools
and provide support to our members,
instead of reaching out to consumers
directly. We also engage and partner
with peers and key stakeholders like
consumer associations and NGOs to
start the public dialogue.

WITH SOFIE SCHOP,

SENIOR PROJECT MANAGER,
COMMUNICATIONS, AT THE
SUSTAINABLE APPAREL
COALITION

1 The Higg Index is a suite of self-assessment

tools that enables brands, retailers and
suppliers to measure their environmental,
social and labour impacts.

CC Is the idea that the Higg Index1

will become a certification standard?

Caroline Carson: Transparency is one

of the key pillars of the SACs 2020
vision and strategy. How has this been
received by your member brands?
Sofie Schop: Transparency
particularly consumer understanding
and perception is indeed an important
part of our 2020 vision and one of the
main reasons for members to join. By
measuring sustainability performance,
the industry can address inefficiencies,
resolve damaging practices, and
achieve the environmental and social
transparency that consumers are
starting to demand.
CC Where is the demand for
consumer transparency coming
from? The consumers themselves?
Or is it brands, regulators or
NGOs who are driving the change?
SS The demand comes from all of these
stakeholders. This is why we work on
creating one common language for the
industry. We want consumers to speak
this language, and we have invited
stakeholders like brands, governmental
institutions, NGOs and academics to
create the language together.
CC There are two sides to
transparency: brands making it
available and consumers engaging
with it. The roadmap obviously starts
with the former, but what plans
are in place to build interest and
demand for greater transparency
in the apparel sector?

SS No. Were developing tools that

allow members to voluntarily share
Higg Index performance information
in a comparable way. What this will look
like is something we are testing out
by talking with consumers and other
relevant stakeholders and peers.
CC How has leading the EU initiative
the PEF footwear pilot influenced
the roadmap so far?
SS Its a huge influence. The footwear
pilot will be an important resource of
information. The outcomes will provide
hugely valuable insights into consumer
perceptions. The information we are
gathering through this collaboration
with the European Commission will be
shared publicly and integrated into
our broader transparency work.
CC Its impressive how open
and honest the brands are able
to be on the PEF project.
SS Oh definitely. This is the way we
at the SAC operate and Im very proud
of how it works. Everyone who commits
to this project is really that open and
willing to share. SAC is a coalition,
so it is the members themselves who
co-create the tools. Sharing insights
is the way to create tools that will be
useful and beneficial to everyone.
CC What do you think transparency
will mean for brands performance?
SS Ultimately, the whole point is to
accelerate improvement. Sharing
performance information is a crucial
first step. Comparability to other scores
or performance over time will add
essential meaning to the data.

17

G
N
I
K
A
E
P
S SAME
E
TH GUAGE
N
LA

THE MARKETING GAP

Too often in companies,
the sustainability and
marketing functions
fail to understand what
the other is saying.
But profitability and
purpose increasingly
mean the same thing,
says Salterbaxters
Kathleen Enright.
Jan-Willem Vosmeer
shares how they work
together at HEINEKEN.
Companies will only be able to drive
the change the world so urgently needs
if they can rally all their stakeholders
including their customers behind
the sustainability agenda. Yet in many
companies the sustainability and
marketing functions barely talk to each
other. When they do, it can seem as if
theyre speaking different languages.
We often witness the effects of this
intra-organisational gap. On the one hand,
we see chief sustainability officers
(CSOs) struggling to translate their
sustainability strategies through the
brands and into consumer engagement;
on the other, we see chief marketing
officers (CMOs) struggling to leverage
sustainability to bring meaning and
value to brands. Does it have to be
this way? Absolutely not. Having a
sustainability strategy is part of the
minimum license to operate, so it is
hardly irrelevant to the work of the

marketing department. And marketers

have a key role at the heart of the
sustainability agenda as well. After all,
they are the ones who will manoeuvre
the difficult shift from corporate to
consumer communications, getting
sustainability out of the boardroom
and into the living room.
There is no one-size-fits-all model for
resolving this issue. Each company has
different drivers for sustainability and will
need to structure itself accordingly, but
there is one common factor for success:
that marketing and sustainability need to
work closer together.

GETTING THE STRATEGY

AND STRUCTURE RIGHT
In a sense, the business of sustainability
is the management of a new type of
knowledge. It doesnt sit with one
person. And it requires new ways of
working and making decisions that sit
with the many, not with the few.

MARKETING AND
SUSTAINABILITY CAN
BE SEEN AS TWO SIDES
OF THE SAME COIN.
Working together with different, often
new, partners takes time. All parties
need to go through a learning curve,
develop a shared language and be
able to trust each other.
Collective ownership
A few companies have stepped ahead
of the curve in terms of spreading
ownership of sustainability out across
the whole organisation so that it can
drive innovation, generate employee pride
and create new market opportunities.

THE MARKETING GAP:

HOW CSOs AND CMOs CAN STEP UP
01 Choose strategic goals that
align both the CSO and
CMO agenda with a clear
brand purpose.
02 Find a common language,
possibly going so far as to
coin a new term alongside
sustainability.
03 Ask different questions
and get new answers
look to the new aspirational
consumers for ideas.

For example, Nestl has made the

decision not to have a CSO so that the
sustainability strategy is not an isolated
concern but rather is shared throughout
the business.
Finding where to start
This is not an overnight process. Clearly
it wont be possible to suddenly have
every part of your companys DNA
come to the forefront in support of the
sustainability strategy. Finding the right
place to start is key, and this means
choosing the right issues at the right
time, delivered through the right brands
and with the right partners.
Its important to make these decisions
with a collaborative mindset; that is,
aligning the sustainability and marketing
agendas with the heart and purpose
of the business. This is the only way
to ensure the challenges including
the big sustainability issues can be
meaningfully addressed.

DIRECTIONS 2016 SALTERBAXTER

SPEAKING THE
SAME LANGUAGE
Marketing and sustainability can be
seen as two sides of the same coin. And
when we look closely at those two sides
and the language associated with each,
we can see that CMOs and CSOs are
often concerned about the same things.
Its just that when they talk about what
guides them, they arent using quite
the same terms. You say pot-ah-to,
I say pot-ay-to
CMO says today, CSO says tomorrow
We regularly meet CSOs who say they
are finding it difficult to get through
to a particular marketer who manages
a brand that is doing very well on an
existing strategy, which has them easily
delivering their targets and unlocking
commercial rewards. Telling such a
marketer that they need to change,
because we think consumers need to be
more responsible, is an understandably
tough conversation to have.

YOU SAY POT-AH-TO,

I SAY POT-AY-TO
Too often, whats missing is the middle
ground. And the truth is that sustainability
and marketing both need short-term and
long-term wins. Sustainability needs to
be identifying the quick wins that will
drive longer-term momentum, while
marketing needs to remember that the
role of marketing is brand guardianship,
which has to be delivered over a long
period of time.

20

CMO says digital, CSO says transparency

When CMOs talk about digital and
CSOs talk about transparency, are
they actually saying the same thing?
Transparency has not only allowed
businesses to show consumers the good
things they are up to, but has increasingly
allowed the consumer to scrutinise the
life cycle of the products they buy in to.
Social media has been a catalyst for
transparency and has allowed consumers
and stakeholders to respond in the blink
of an eye to an issue they feel is important
enough to shout about.
Together, social media and transparency
have created a connection and a
conversation between stakeholders,
consumers, investors and businesses.
Find your own interpretation
To many people, the term sustainability
really means very little. Its too broad,
too generic, and yet contradictorily, also
too narrow; a lot of people understand
it to be mainly about environmental
impact. In some areas of modern
business, sustainability is increasingly
associated with creating added value,
while in the marketing world it is still
associated with austerity and sacrifice.
So, do we need a new word? I would
argue that each company needs to find
their own word or phrase to express
their ambitions and the value they
bring to the sustainability landscape.
Language is appropriation. The more a
term is owned and understood, the more
it will become part of corporate culture.
There are already some notable
examples of this. Sony speaks of
Futurescapes, Unilever speaks of
Sustainable Living, PepsiCo speaks
of Performance with Purpose.

WHAT A BRAND IS FOR

In recent years, pressure from activists
and governments has pushed many
businesses to set more ambitious
targets. An increasing number of
businesses are building sustainability
plans into their core strategies, with
a joined-up structure that stretches
across geographies, business functions,
products and revenue models.
From a consumer perspective, market
saturation and mass media have shifted
us into the Era of Emotion. Peoples
internal motivations have changed.

FOR A BRAND TO BE
CREDIBLE AND AUTHENTIC,
ITS PURPOSE HAS TO BE
ROOTED IN A GREATER
SOCIETAL NEED.

Our access to endless information

and socialisation has given new life
to age-old questions. Why am I here?
What impact do I want to have on the
people around me?

Authentic brand purpose

Brand purpose sits at the heart of
all this. The leading businesses and
brands of the future will investigate
and reimagine purpose and value.
But brand purpose, done incorrectly,
also has the potential to be the next
wave of greenwashing. Consumers have
fast realised this and are rejecting what
they perceive as counterfeit brand
purpose a pure marketing activity
with no greater societal benefit.
To unlock the rewards of brand purpose,
it has to be an authentic brand purpose
one that is rooted in and supported by
the companys sustainability strategy.
It needs to be about doing, not just
saying. It needs to set commitments
and deliver proof of promise through
action and measurement.
Change the brief
What is standing in the way of marketers
understanding the sustainability
agenda and vice versa? We know
that the language often used is
confusing and misleading for both
parties, but what it actually comes
down to are the questions being asked
upfront the brief.

If we change the brief to ask different

questions, surely we would get
different answers?
For decades, the green movement has
been chasing the wrong ball: if only we
could cultivate so-called advocates
(pejoratively dubbed tree-huggers)
then we could scale the market for
sustainable goods and tip the business
paradigm toward more conscious
capitalism. Its time to admit that
this was wishful thinking.

The data couldnt be clearer. Advocates

will never be more than 20% of the
consuming public. But thats okay
because theres a new kid in town,
one who cares about style, shopping
and status, as well as doing right
by the planet.
GlobeScan have named this high-velocity
demographic aspirational consumers
and their emergence is significant for
many reasons, but mainly because
they are the largest consumer segment
globally (39% of the population) and the
first to unite materialism, sustainability,
and cultural influence. In short, they are
the most critical audience to reach and
engage if we want to drive sustainable
behaviour change at scale.
Aspirationals want something to believe
in and they want brands to stand for
something bigger than a product or
service. Give them an inspiring ethos.
Bring a strong point of view. Back it up.
And thats where the glitch is. They
need proof of promise, which is to
say credibility. And marketers need
their sustainability colleagues to
help deliver this.

For a brand to be credible and authentic,

its purpose the why, its reason to
exist has to be rooted in a greater
societal need. Purpose has to be about
more than just selling more stuff.
Sustainability provides the framework
and the proof points to do this. It has
become the new proxy for brand trust.

THE VIEW FROM

HEINEKEN
JAN-WILLEM VOSMEER, CSR MANAGER,
SHARES HOW SUSTAINABILITY AND
MARKETING ARE MEETING AROUND
THE TABLE.

It just makes sense to do it given that

millennials a key segment for our
business expect brands not only
to be about lifestyles but also to
contribute to solutions for the
complex problems facing society.
We very much believe that HEINEKENs
brands can be gamechangers on
topics like climate change, anti
drink-driving or nature conservation,
and for that to be possible we needed
our sustainability and marketing
people to work more closely together.
Our focus on responsible consumption
of alcohol is an example of this in
practice a public conversation
driven by our sustainability strategy,
on a topic that our whole organisation
is passionate about. Beer brings
people together, but we think its
important to make the point that
misuse of alcohol is not cool. Through
Heineken, our flagship brand, were
trying to make drinking in moderation
aspirational. So weve launched
global campaigns like Dance More,
Drink Slow and more recently When
You Drive, Never Drink (as part of
our Formula 1 sponsorship) which
are about repositioning moderate
drinking as something that can
be cool. It may seem strange for
a beverage company to tell its
consumers to drink less. But we see
it as an opportunity both for society
and for our business. And were
providing a growing number of lowand no-alcohol brands and a range of
serve sizes to give people who want
to drink moderately, more options,
while still having a good time.

21

DIRECTIONS 2016 SALTERBAXTER

THE
INVESTMENT
GAP
Sustainable development
will never happen on the
scale thats needed without an
unprecedented injection of cash.
Salterbaxters Huw Maggs and
Kristina Joss note there are plenty of
reasons to be hopeful that change is
on the way. They talk to Credit Suisses
Dr. Ren Buholzer and Peter Zollinger
from Globalance Bank about how the
financial sector can step up to the task.
22

THE VIEW FROM

CREDIT SUISSE

HOW THE INVESTMENT

GAP CAN BE BRIDGED

DR. REN BUHOLZER, GLOBAL HEAD OF

SUSTAINABILITY AND HEAD OF PUBLIC POLICY

01 More CEOs and CFOs need to

articulate a sustainable business
vision compelling enough to
capture investors attention.
02 We all need to start thinking
of our biggest societal
challenges as opportunities
for economic growth.
03 Todays policy and research
initiatives are not enough
on their own, but could
point the way towards
systematic change.

We all know the significance of 2C.

But there is another number that could
turn out to be just as consequential
for the future wellbeing of the planet:
$12 trillion.
Thats the amount of renewable energy
investment that Ceres and Bloomberg
estimate will be needed over 25 years
in order to prevent global temperatures
from bursting past a certain dangerous
climate-change threshold.
By their projections, were currently on
course to see only $5.2 trillion invested
less than half of whats needed.
And thats just one example. To achieve
the UNs Sustainable Development
Goals (the SDGs), something like 2.5%
of global GDP needs to be invested in
public and private initiatives every year.
Is it happening today? Not by a mile.
How can large-scale investors be
convinced to move substantial
capital into sustainable development
opportunities? And why do so many
investors seem so uninterested in
making this happen?

THE KEYS
INVESTORS HOLD
Before we look more closely at the
reasons for the investment gap,
its important to note just how much
financial power the investment banks,
mutual funds and other large-scale
investors actually hold.

LARGE-SCALE
INVESTORS HAVE
THREE MAJOR LEVERS
THEY CAN USE TO ADVANCE
SUSTAINABILITY IF THEY
CHOOSE TO.
Together, these organisations exert
tremendous influence on global
investment flows and stock market
movements. They pool huge sums of capital
on behalf of asset owners. And they
have the crucial role of allocating
capital to businesses based on their
expectations of future performance.
These investors have three major levers
they can use to advance sustainability
in the financial sector if they choose to.
01
They can advance the financial markets
from within by pushing for the markets
to factor environmental, social and
governance issues into company
valuations.
02
They can crowd in private investment,
making use of financial innovations
(new products, services, portfolios,
investment strategies and structures)
to make sure clients capital is directed
towards environmentally and socially
focused investments.
03
They can exercise their shareholder
rights of active ownership to directly
influence companies business,
management and strategy.

Despite the need to significantly

scale action, there is a growing cohort
of financial institutions who are taking
steps. One example is Credit Suisse.
We spoke with Dr. Ren Buholzer
to understand why and how the
bank is scaling its sustainable
investment activities.
Our sustainable investment focus at
Credit Suisse has steadily evolved over
time. This is not a new undertaking for
us we have been providing financial
services to support education, nature
conservation, gender equality and
many other issues for a long time.
But we have reached something of
a tipping point recently, thanks in
part to the influence of big global
initiatives such as the SDGs and
the UNs Climate Summit.
Globally, we are focusing on client
segments where there is a clear
need for better access to sustainable
investment. Market research has
shown that millennials are twice as
likely to invest in opportunities with
positive environmental or social
impacts. So if we want to attract
or retain this client base we clearly
need to cater for their investment
beliefs with an appropriate offering
of products and services.
The priority has to be integrating
sustainability values into the overall
investment process, which is
conceptually and organisationally
much harder than just creating an
asset class.
Looking ahead, we see an
unprecedented opportunity
to connect with our client and
stakeholder communities through
sustainable investment. And we
think it is very important to keep the
dialogue going, both internally and
with our clients, around why we are
embedding sustainability into our
core business decisions and
investment strategies and why
this is so valuable for Credit Suisse,
our clients, and for society.

23

DIRECTIONS 2016 SALTERBAXTER

GAPS AND
OPPORTUNITIES
While we are observing signs of a more
systematic approach on the part of
leading investors, there are many gaps
that still need to be addressed across
the financial system before sustainable
investment can be scaled up to the
extent that the world needs. Heres
a quick look at five of the key gaps
which can also be seen as key
opportunity areas, where change can
take hold. And possibly already is.

01

The capacity gap

Todays financial and social situation
is unprecedented. Theres no way that
established business models can offer
all the knowledge, skills and processes
that are needed to address the new
challenges. Most investors simply
dont have the organisational capacity
to take this on. Not yet, anyway.
Since 2013, Morgan Stanleys Institute
for Sustainable Investing has been
working to advance market-based
solutions to economic, social and
environmental challenges in part
by training and developing the
next generation of sustainable
investing leaders.

02

The metrics gap

Most of the metrics that are commonly
used by financial and sustainability
professionals are incompatible. This
leaves investors with a lot of work to
do in order to translate ESG metrics
into tangible investment decisions.
The Task Force on Climate-related
Financial Disclosures is working to develop
a new metric standard, which would
make it easier for investors and other
stakeholders to compare companies
climate-related risks. The task force
has some significant clout behind it,
it was set up at the request of the G20
and is chaired by Michael Bloomberg.

24

Good climate-related disclosure

standards exist. While some firms
disclose using these standards as
guidance, most dont include them
in their financial filings. Thats what
is unique about the Task Force on
Climate-related Financial Disclosures
while we are building off existing
efforts, the recommendations
were developing are specifically
for inclusion in financial filings.
We want to help institutionalise
consideration of climate-related
financial issues at the board and
senior management level and
within the financial community.
Taskforce member and Global Head
of Sustainable Business and Finance
at Bloomberg, Curtis Ravenel

03

The communication gap

Communication is a critical part of the
sustainability agenda, but very few
companies have so far hit on a narrative
thats clear and compelling enough for
mainstream investors to take note.
Even companies own investor relations
teams often dont see the point.
There are already some notable
exceptions, though. At ABB, the
Swedish-Swiss power and automation
technologies company, senior leaders
have made it clear that sustainability
is core to everything the company
does, including financial relationships.
Investor relations plays a key role in
making sure ABB investors understand
and are up-to-date on things like value
creation and sustainable revenue and
profit generation.

04

The policy gap

The policy framework is skewed towards
conventional investments. Big shifts
in the rules and incentives governing
financial markets are needed, both
nationally and internationally, to
encourage more investors to choose
sustainable investing instead.

The UNEPs Inquiry into the Design of a

Sustainable Financial System is doing
its bit to try and speed up the transition
to a green economy through policy.
The goal is to find best practice financial
market policies and regulatory
innovations that can make a sustainable
financial system a reality faster.

05

The leadership gap

Significant progress is never possible
without leadership, and the investment
situation is no different. Where are
the outspoken leaders whose foresight
and moral responsibility can inspire
a definitive shift towards sustainable
investing?
Recently there have been a few
glimmers of this type of leadership
within the financial sector itself.
At the Bank of England, Mark Carney
has advocated for tougher corporate
disclosure standards to help investors
gauge climate change risks. And Larry
Fink at BlackRock wrote to S&P500
CEOs imploring them to focus on
long-term value creation.
These are, so far, the exception.
But theres every reason to believe
that a much more significant shift
on the investment gap should be
possible within another few years.
Better conversations happening
at higher levels could create a
positive feedback loop and a
decisive momentum.
The question is: who will step up to
really lead this process and define
what comes next? Will the new leaders
emerge from the finance industry,
the investment community or the
policy world? Whoever they are,
a significant opportunity awaits.

Q&A

WITH PETER ZOLLINGER,

HEAD IMPACT RESEARCH
AT GLOBALANCE BANK

Huw Maggs: What do you think are the

big gaps at the moment between the
sustainability agenda and mainstream
finance? Is this about communication,
metrics or leadership?

FLIPPING THE
SCRIPT COULD BRING
SUSTAINABLE INVESTING
INTO THE MAINSTREAM
CONVERSATION.

Peter Zollinger: I would say that there

is actually a bigger gap at play here, and
its one that if bridged has the potential
to address many of the underlying
challenges you refer to. Its the gulf that
exists today between the mainstream
discussion on the macroeconomy by
politicians, economists, investors and
others, and the narrative around global
sustainable development challenges.
Apart from a few isolated examples,
these two conversations rarely connect
and they need to.
HM How can the two sides of this
discussion become more integrated
in their thinking?

PZ Theres an opportunity to flip the

sustainable development conversation
on its head. Instead of asking how
economies and markets need to change
in order to align with big environmental
and social challenges, we should
really be asking how in solving these
big challenges we can support wider
economic growth.
Now is a great time to have that kind
of conversation. Theres a real window
of opportunity. We have a global
economy thats not doing well. People
are desperately looking for investment
opportunities that bring some level of
return in a zero interest environment,
without excessive risk. Federal reserves
and national banks are pumping money
into the market with little to no success.

At the same time we have this other

world opening up around the climate
change conversation, the Sustainable
Development Goals and the UNs
Inquiry into the Design of a Sustainable
Financial System. Put these two things
together, and the timing couldnt be
better for major change.

HM When you talk about flipping

the conversation, what does that
look like in practice?

PZ I think it can happen in many

different ways. Its really about asking
the right questions. So for example:
how can climate change solutions play
a role in addressing slowing growth
in China? How can the SDGs provide
a lens of opportunity for growth and job
creation in Europe? How could monetary
policy support sustainable development
challenges in ways that get economies
going again? Its not necessarily
about having all the answers to these
questions, its about getting these
sorts of questions into the mainstream
conversation.
Flipping the script at this level could
bring sustainable investing into the
mainstream conversation at a lot of
different levels. By starting at the top,
we could see a knock-on effect as these
conversations make their way into
boardrooms, investment mandates
and everyday exchanges between
investment banks and their biggest
clients. Then we might start to see
all sorts of other gaps closing as well.

25

DIRECTIONS 2016 SALTERBAXTER

THE IMPLEMENTATION GAP

Lots of businesses have a plan for a more
sustainable future. The hard part is making
it real. Alexandra Palt, Chief Sustainability
Officer at LOral, talks to Salterbaxters
Nigel Salter about going beyond the big ideas
and headlines to drive business transformation
through its sustainability programme,
Sharing Beauty With All.
26

THE IMPLEMENTATION GAP:

HOW LORAL IS STEPPING UP
01 Approaching sustainability
as an opportunity to transform
the business, with full support
of the CEO.
02 Making it inspirational for
employees and quickly
rolling out practical tools.
03 Focusing on the little wins
that add up to big change.

Nigel Salter: Tell me a bit about the

early days after the launch of Sharing
Beauty With All and how you built
the focus on the way it should be
implemented.
Alexandra Palt: Well, to be honest,
our biggest fear in working through all
the processes and targets of the new
commitments was always that it
might get seen as just a sustainability
framework that is nice to have, but not
central to the main business strategy.
So we were quite obsessive about
ensuring that senior management
focused on what this would mean in
practical terms and how it would change
the business. We knew that our mission
was to get this into the bloodstream
and not to be something alongside
the business.
NS So how was it all received and
how did you achieve what you were
aiming for?
AP Its essential to find a way to work
in the same direction as the company
culture and to work from the inside as
otherwise you create too many barriers.
It all becomes a process of culture
change but you achieve more change
by working with the grain of the culture
than against it. So we went through a

series of steps that were key to moving

from awareness to action. I think
its true to say that we didnt have
these specific steps planned out in
sequence at the time and they were
running all alongside each other at
different moments.

STEP 01

The first step was really all about building

awareness within our management
and our brands. We helped them to
understand the changes taking place
in consumer demands and patterns,
the facts about resource constraints
and long-term risks, and also the
opportunities that brands have to use
this agenda in ways that support and
drive the brand proposition and sales.
This is the sort of information that
they work with every day, so we needed
to make sure we provided insights
that helped and supported rather
than more challenges and problems.

STEP 02

Step two was in two parts. We knew

that we needed to have a beautiful
branded programme that people within
LOral would look at and, to a degree,
fall in love with and see as aspirational.

This was the power of the Sharing Beauty

With All idea and also the look of the way
it was all presented. This was actually
crucial to winning the hearts of the people
inside. The second part was to back the
beauty up with practical tools workshop
toolkits, analysis tools, data to support
research made available super fast so
that everyone could start working with
the programme and the targets and get
it into their everyday business thinking
as fast as possible.

STEP 03

Step three was again a cultural point at

LOral that meant that the programme
took root quickly beyond the corporate
centre. Our culture is very entrepreneurial
and so this meant that once the brands
started seeing the potential of Sharing
Beauty With All they started taking
it all forward by themselves, taking
the initiative and making it their own.
This approach, where people dont
wait to be given direction or to be set
rules, meant that we moved far faster
than a top-down approach could
achieve. Our culture meant that
as soon as people got it they didnt
need any more encouragement
they went and started working with it.

27

DIRECTIONS 2016 SALTERBAXTER

STEP 04

And the fourth step was all about

leadership. A lot has been said about
this in different organisations, and
Im sure it can vary a lot, but I can
only speak to the power of having
the CEO fully committed and leading
from the front on this. Jean-Paul Agon
led the communications and made
clear from the start that this was
all about business transformation.
He would mention our commitments
at every single executive meeting,
and its important to underline that
performance against our Sharing
Beauty With All targets is now a
part of the bonus and incentive
scheme across the business.
NS What about rolling out regionally
and in different country cultures.
Has that been difficult?
AP I would say that there is one
overarching trend that has helped us
with this the move towards more
natural cosmetics. While its not exactly
the same issue of course, this has
helped to create a more receptive
conversation. Beyond that, you have
to approach things very differently
from country to country and actually
from brand to brand.
At each country level, weve needed
to work with and make a feature of the
local differences in focus and taste.

28

Otherwise its too easy for the regions

to see this as another corporate centre
programme to put in place and in
some places sustainability is really not
recognised as an agenda at all. So in
countries with issues around poverty
and development, it might make most
sense to focus on responsible sourcing
of raw materials and job creation/
security. Whereas, in a country like
Japan the biggest issue is recycling.
So each local country has been allowed
to ask What makes most sense for
us? What will help with our license
to operate? What will help us drive
more success?
NS And so what do you see as
the biggest achievements of
the implementation programme
so far? Your big progress on carbon
and palm oil?
AP No, strangely we actually see
those as relatively easy areas to
make progress and they make the
big headlines but are probably not
the best proof of our transformation.
I think the biggest achievements are
the many thousands of wins we have
every day. These are less glamorous
but it means that every decision

and process at LOral now has

sustainability considered in some
way and every person is being touched
by Sharing Beauty With All. New Product
Development is the core of our business
and sustainability is now central to it.
Thats a real transformation.
Beyond that I think there are now two
new emerging pieces that are likely to
be our biggest impact achievements.
The first is the product assessment tool
that we have taken two years to develop.
We believe this will underpin all our
progress to date, as it will mean that
every single one of our products will
be assessed across a full range of
environmental and social assessment
criteria. We have worked with experts
and stakeholders from around the
world to develop this and we have
integrated the latest insights on science
and subjects like planetary boundary
thinking. This tool will drive scale on
sustainability even further and faster.

NS Where next on this journey?

What does LOral want to tackle
and make reality next?

The second big achievement that we

are getting very excited about is the
work we are doing to go beyond the
less harm approach. We want to move
from fewer towards no impacts in our
industrial activity carbon neutral,
no water, zero waste and onwards
to measurable positive impact.
Our long-term vision is the restoration
of ecosystems and we already have
initiatives running in different countries
on shea butter and rice where we
are seeing carbon gains and the
restoration of ecosystems.

NS And what about working

with your suppliers? Have they
been able to respond to your
transformation fast enough?
AP They are of course integral to this.
We were very lucky in that the supply
chain was already very well managed,
but we have enhanced our approach
by making sustainability one of the
key selection criteria for a supplier.
We also provide self-evaluation and
learning tools to all suppliers to help
them work to our guidelines. It means
that they are now pushing us as much
as us pushing them.

AP Three simple things. The first is

consumer communication. We want
to play a big role in the challenge of
helping consumers to make different,
better choices and to see value and
aspiration in sustainability.
Second, disruptive innovation. We see
big changes coming in areas like
packaging and in the evolution of beauty
routines. This will be very exciting.
And finally, positive impact. I think
the role and expectation of business
is changing and the most successful
companies in the future will be those
that are most positive in their impact,
not just those that harm the least.
And this will become measured and
proven so there will be no hiding place.
And at LOral, we want to be one of
the companies leading the way on this.

29

DIRECTIONS 2016 SALTERBAXTER

HANDLE
WITH CARE

THE HUMAN RIGHTS GAP

Human rights have moved further up the
corporate agenda in recent years, though most
companies are still trying to find a path to tangible
progress. But we could be arriving at a turning
point when business shifts to seeing human
rights as an opportunity, not just as a risk says
Salterbaxters Arabella Bakker. Richard Karmel,
London Managing Partner at Mazars UK,
also gives insight into how business can
assess potential risks.
Shortly after the launch of the UN
Guiding Principles on Business Human
Rights in 2011, John Ruggie, the UNs
Special Representative, told a journalist
from Business Ethics: Its important
to keep in mind that the principles
are principles. Theyre not a toolkit.
You dont take it off the shelf and plug
it in and get an answer.

for human rights to appear as a single

issue on a companys materiality
matrix, bearing no reflection of
the breadth and complexity of the
underlying issues. After all, human
rights intricately interlinks with
issues such as sourcing, working
conditions, labour rights, pollution
and water scarcity.

And therein lies both the opportunity

and the challenge.

Whether by design or out of inexperience,

it has sometimes seemed as if human
rights is simply too big a topic for some
companies to probe.

Business has often struggled to make

an honest assessment of its impact on
human rights. In fact, its not uncommon

THE HUMAN RIGHTS GAP:

HOW BUSINESS CAN STEP UP
01 Assess the salient
human rights issues
Take a people-first
(not business-first) approach
to evaluate impacts.
Look at the scale, scope and
the remediability of impacts.
02 Engage stakeholders
Get out and talk to all the relevant
stakeholders and rights holders.
For example: NGOs, communities,
workers, consumers and supply
chain partners.
03 Identify and activate the
opportunities for change
Find the opportunities for
your company. This is about
policies, operational changes
and outcomes.
04 Report on human rights
Develop the right level of
reporting to meet stakeholder
expectations.
This could include a standalone
human rights report, or a
dedicated section in the
annual or sustainability report.

31

DIRECTIONS 2016 SALTERBAXTER

WHY DOES THIS

MATTER NOW?
We are at a tipping point. The tide is
beginning to change internationally
with the advent of soft law, voluntary
frameworks and public rankings,
putting pressure on business to face
up to its impact on human rights and
to report with greater transparency.
This is no longer a cause driven solely
by NGOs and activists.

not the impact of human rights on the

business. This is a subtle but significant
shift in businesss understanding of the
relationship between the two.
Take for example a technology company.
Its salient human rights issues might
include conflict minerals and data
privacy (potential risks to the business)
as well as freedom of expression (an
opportunity for significant social impact).

The principle of salience is invaluable

in helping us understand and evaluate
where the gap can be closed between
business benefit and positive social
impact. And the former should no
longer be overstated at the expense
of the latter.

Rather, human rights is moving firmly

onto the agenda of senior business
leaders in functions such as finance and
risk. Here are just a few reasons why:
The UN Guiding Principles reporting
framework
The EU Non-Financial Reporting
Directive
The UK Modern Slavery Act 2015
The US Department of State Trafficking
in Persons Report 2015
The Corporate Human Rights
Benchmark (piloted in 2016).
Never before has there been such
a momentum of focus on human
rights issues, engaging areas of
the business that have the power
and influence to accelerate
meaningful and lasting change.

CHANGING MINDSETS
Human rights has often lazily been
seen as something that rests deep
within the supply chain of large,
multinational corporations with
operations in developing countries.
This mindset needs to change if
business including companies of all
shapes and sizes is to respond to the
changing expectations of lawmakers,
civil society and corporate peers.
One of the strengths of the new UN
Guiding Principles reporting framework
is the focus on salient human rights
issues. This means evaluating the
businesss impact on human rights

32

THE NEW REPORTING FRAMEWORK

IDENTIFIES THREE FACTORS COMPANIES
SHOULD LOOK AT TO IDENTIFY THEIR
SALIENT HUMAN RIGHTS ISSUES:
SCALE, SCOPE, AND REMEDIABILITY.

The new reporting framework identifies

three factors to help companies identify
their salient human rights issues. The
first is scale the gravity of the human
rights impact and how much someones
enjoyment of the right may be set back
by the companys activities. The second
is scope the number of people who
could experience a negative impact.
And the third is remediability how
easy it is for the impact to be righted.

THE OPPORTUNITY
FOR HUMAN RIGHTS
Human rights assessment should not
become a mea culpa. Too often (and for
reasons not unfounded), the relationship
between business and human rights has
been viewed with a degree of culpability.
However, just as business has shifted
from seeing sustainability as a burden
to an opportunity, so too do human
rights present business with the
possibility of showing leadership and
generating positive social impact.

Some companies undertake human

rights impact assessments as part
of the risk management process.
Thats an approach which can help
companies build resilience to risks while
also identifying opportunities to drive
positive change and create shared
value for business and for society.
Identifying and reporting on human
rights has rarely been an easy task for
business. Companies have been caught
on the back foot, coming under fire for
violations, poor governance and slow
responses to crises. Yet the current
momentum presents business with
the opportunity to get on the front foot.
There may not be an off-the-shelf toolkit
for how to do this, but the UN Guiding
Principles and other developments

Q&A

present sufficient guidance and

frameworks for individual companies
to take control of their human rights
impact and to show leadership.
The topic of human rights is firmly on
the corporate agenda for the foreseeable
future. We anticipate that the expansion
of the UN Guiding Principles reporting
framework database and the release of
the Corporate Human Rights Benchmark
will help to nudge more companies
into action.
Large or small, national or international,
now is the time to view human rights not
just as a potential risk to the business,
but as an opportunity to create positive
social impact and in so doing to
help close the gap between business
and society.

WITH RICHARD KARMEL,

LONDON MANAGING PARTNER, MAZARS UK

Arabella Bakker: To explain the

concept of salience, which activities of
a business or supply chain could
pose the greatest risk to people?
Richard Karmel: To address this simple
question, you dont only look for risks to
the business; your starting point should
be a thorough search for any possible
risks to people. Only by starting with a
people-first approach will you ensure
all your risks are covered. In the mining
industry, for example, the obvious risks
might be health and safety (workers

getting injured), and community and

environmental impact (putting waste
back into rivers), but a less obvious risk
could be the use of local military trained
security who may pose the greatest risk
to people. In the agricultural industry
in Africa, a salient risk might be child
labour, while a less obvious risk might
be the possible abuse of workers
transporting the product. These salient
areas where human rights are most
at risk are the same areas that,
if neglected, could have an enormously
negative impact on your business.

33

DIRECTIONS 2016 SALTERBAXTER

SO, WHETHER ITS CALLED THE SHIFT

FROM MINDING TO MENDING THE GAP,
OR RADICAL ENGAGEMENT AND
CONNECTION WITH SOCIETY,
THE POINT IS CLEAR. THE GREATEST
OPPORTUNITIES FOR BUSINESS ARE
IN THE SPACE THAT REQUIRES ACTIVE
INVOLVEMENT, MINDSET CHANGE
AND IN SOME CASES, MODEL CHANGE.
Whats interesting is that most
organisations seem to be starting
to realise this and are asking how?
rather than why?. This feels similar
to a shift that happened a while back
with sustainability generally, when
companies and their leaders seemed

34

to suddenly change from resisting to

simply accepting and focusing on how
to address the challenges practically.
So, the outlook is positive for those
that want step out of the comfort zone.
But as weve seen, there are a lot of
gaps out there that need to be bridged

and we know weve only scratched the

surface. And as before, for the
most part there arent big magic
bullets or simple solutions. Its all
about mending the gaps one small
idea, conversation or action at a time.

WHERE
ARE YOUR
GAPS?

01
INTEGRATION
GAP

05 INVESTMENT GAP

How integrated is your sustainability

strategy with your business strategy?

Are you articulating the business

value of sustainability to
mainstream investors?

02 BEHAVIOUR GAP

06 HUMAN RIGHTS GAP

How engaged are your employees

on sustainability?

How are you doing on addressing

human rights?

03 INFORMATION GAP

07 OTHER GAPS

How transparent are you with

customers on sustainability
performance?

What are the other significant

gaps with society?

04 MARKETING GAP
How well are your marketing and
sustainability teams aligned?

HELP US
FILL IN
THE GAPS

01

Leadership gap

02
03
04
05

Got two minutes? Grab a pen and list

five gaps that your business needs to
mend. Consider how close or far your
business currently is from the needs
and demands of society as a whole.
What would it take to genuinely mend
the gap? Jot down any ideas that
occur to you. Then consider sharing
your thoughts with a colleague or
collaborator. It could be the start
of something important.

35

DIRECTIONS 2016
2016 SALTERBAXTER
SALTERBAXTER

ABOUT US
Salterbaxter is the leading international sustainability
strategy and communications consultancy. We help
companies and brands Step Up to the changing relationship
between business and society.
We combine smart strategy, sharp insights and creativity
to help businesses succeed. Whether its communicating
to investorsor opinion formers, engaging employees
or changing consumer behaviour, our work delivers
for our clients in three key dimensions:
01

PURPOSE

 reating, defining, understanding and building

C
more purposeful organisations, strategies, brands
and communications.

02

PERFORMANCE

 trategies to drive betterperformance and

S
communications to make this performance
transparent and trusted.
03

TRANSFORMATION


Helping to find the new models and drive
the changes needed to fulfil the new contract
between business and society.

Contact us:
Samuel Griffin-Flynn
samuel.griffin-flynn@salterbaxter.com
Tel +44 (0)20 7229 5720

Olivia Sprinkel
olivia.sprinkel@salterbaxter.com
Tel +1 646 500 7906

82 Baker Street
London, W1U 6AE

14th Floor
375 Hudson Street
New York, NY 10014

36

salterbaxter.com
@salterbaxterMSL

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and communications.
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key topics throughout the year.
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Trends in CSR
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2004
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2006
Is CR in your blood?

2007
Cutting through the
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2008
Sustainability
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2009
Mapping the
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2010
The Innovation
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2011
Opportunity in the
new age of
uncertainty

2012
Profits from
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2013
Authentic?

2014
Getting under
the surface

2015
The rise of science

2016
Mind the gap

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