Implementing, Monitoring, Measurement & Reporting

CSR Lec 8

Implementation of CSR

Institutionalize the Commitment Management Leadership

Report

Plans, Resources & Processes

Develop Indicators Reviewing & Revising Systems

Management Leadership: Role of the Board Establish a CSR committee to develop policies Adopt sustainable principles and values

Evaluate current performance with the expectations of stakeholders, review management philosophies and systems, determine the scope of public disclosure and evaluate the ability of information systems to produce the data required

PROCESS
Becoming aware of the issues
Sensitizing Linking CSR to the companys core Routinising competencies

Discovering

Experimentation

Embedding Linking structure and strategy with systems

Develop a supportive corporate culture

Senior Executives/ Board

Retraining

Exposure to New Stakeholder Groups

Explain Why Change & Impact of Change

Corporate responsibility : Areas of Operations

COMMUNITY - Stakeholder dialogue - Partnerships - Employee engagement - Sponsorships - Donations WORKPLACE: - Business standards - Employment creation - Labour standards - Health and safety - Skills training - Diversity and equality - Workplace health MARKETPLACE: - Integrity - Quality - Safety - Reliability - Customer relations SUPPLY CHAIN: - Procurement standards - Environmental and Social - Concerns

ENVIRONMENT Emissions Recycling of Water Waste Management Biomedical waste management Green procurement Energy Management

Monitoring & Measuring CSR

Focus of Monitoring & Measurement

Internal Stakeholder Effect External Stakeholder

External Institutional Effect

Employees

Need: Is Value getting created?

Monitoring & Measurement of CSR

1. internal compliance monitoring 2. External monitoring 3. Accredited/certified/verified monitoring

Corrective Action

Design mechanisms, measurements for Monitoring

Metrics/ Guidelines: GMP, MCI, ISO 14001 OSHAS-18001 SA 8000, UN Global Compact

Who will Monitor & When

International Declaration of Helsinki

Sample of CSR metrics, measurement, and rating systems

Categories of CSR metrics, measurement and ratings systems Indices developed by financial index companies Rankings and data produced by SRI information providers Reputation indices produced by media/ polling/PR firms CSR-related standards Examples

CSR Initiatives and learning networks

Voluntary Codes: Measurement

Voluntary Codes

Adopt Principles

Certifications

Self Reporting/ Third Party Reporting

Rating Indices

CSR Business Principles

Caux Sullivan UN Global Compact Equator

Business Conduct Principles

Caux Round Table Developed in 1994 by Japanese, European and North American business leaders meeting in Caux, Switzerland

Global Sullivan
Developed by the African-American preacher Rev. Leon Sullivan

Express support for universal human rights

Promote equal opportunity, Respect voluntary freedom of association

Grounded in two basic ethical ideals: kyosei and human dignity

The Caux Principles aim to operationalize the twin values of living and working together and human dignity by promoting free trade, environmental and cultural integrity and the prevention of bribery and corruption- Code of Ethics

Compensate to meet basic needs and provide the opportunity to improve skills and capabilities
Provide a safe and healthy workplace; Promote fair competition Work with governments and communities to improve quality of life Promote the application of these principles by those with whom we do business.

The UN Global Compact Principles

Asks business leaders to "embrace and enact" a set of universal principles in the areas of: human rights labour rights environment Anti corruption and to support the broad UN goals of peace and
development by participating in concrete projects: MDGs

Companies are asked to take action:

Within company operations In societies where they operate

UNGC Principles
Human Rights Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses
Labour Standards Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

Principle 6: the elimination of discrimination in respect of employment and occupation

UNGC Principles
Environment
Principle 7: Businesses should support a precautionary approach to environmental challenges;

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery. Principle 8: undertake initiatives
to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies

Equator Principles
Project finance plays an important role in financing development particularly in emerging markets Environmental and social policy issues are often encountered Opportunity to promote socially and economically responsible stewardship and development Increased awareness of the risks: Financial loss Reputation damage Shareholder pressure

Types of Risks
Categorize projects as A, B or C (high/medium/low environmental or social risk) An Environmental Assessment (EA) will be prepared based on the categorisation An Environmental Management Plan (EMP) will have to be produced for higher risk projects The Borrower will covenant compliance with the EMP

Certifications
SA 8000 BSCI (Business Social Compliance Initiative) ) (EU) WRAP (Worldwide Responsible Accredited Production) ( Apparel, footwear & accessories ETI (Ethical Trade Initiative) ( UK) Code of conduct audits

Voluntary Certification: SA 8000

Social Accountability International (SAI) is a global, multistakeholder, standards setting organization whose mission is to advance the human rights of workers around the world. In 1997 the first auditable global social standard seeking to guarantee the basic rights of workers was launched- SA 8000 Voluntary standard for auditing and certifying labor practices, based largely on ILO conventions, UN Convention on the Rights of the Child, UN Declaration on Human Rights. Provides the framework for the independent verification of the ethical production of goods and services

Standard SA 8000
Management Discrimination Formal Communicatio n

Working Hours Supply Chain

Remuneration
Disciplinary Practices Freedom of Association & Right to Collective Bargaining Child Labour

Health & Safety

Forced Labour

Summary Statistics

March 2010

March 2010

The sustainability value cycle

Which may result in superior financial performance.

Are more likely to have good management

Corporations that address social, environmental, and economic issues

Social Responsible/ Sustainability Indices

Three approaches to identifying companies that practice sustainability

c Negative screening Remove companies that are perceived as not sustainable c Positive screening Select companies that are perceived as sustainable c Best-in-class Use peer-group, rulesbased comparisons to identify sustainable companies, then choose those ranking in the top 10%

Social Responsible/ Sustainability Indices

Dow Jones Sustainability Index
Launched in 1999, the Dow Jones Sustainability Indexes track the financial performance of the leading sustainability-driven companies worldwide.

Financial Times Stock Exchange Index FTSE4Good.

Information is collected From a) Public domain b) Company Reports c) Personal Visits

Monitoring & Verification

Commercial practices; e.g. tax fraud, money laundering, antitrust, balance sheet fraud, and corruption cases. Human rights abuses; e.g. cases involving discrimination, forced resettlements, child labor and discrimination of indigenous people. Layoffs or workforce conflicts; e.g. extensive layoffs and strikes. Catastrophic events or accidents: e.g., fatalities, workplace safety issues, technical failures, ecological disasters and product recalls. To ensure quality and objectivity of the Corporate Sustainability Assessment, an external review by Deloitte is completed.

FTSE Good
The FTSE4Good Index Series has been designed to measure the performance of companies that meet globally recognised corporate responsibility standards, and to facilitate investment in those companies.

Who decides which companies are eligible to go on the

FTSE4Good list

FTSE works in association with the Ethical Investment Research Service (EIRIS), and its network of international partners to research company corporate responsibility performance. EIRIS is a leading independent provider of research into the social, environmental and ethical performance of companies. How do they decide? A variety of sources are used to check the most up to date and relevant information: Reading annual reports Looking at company Web sites Written questionnaires Telephone questionnaires

FTSE4Good can be used in four main ways

Investment As a basis for responsible investment, financial instruments and fund products Research As a research tool to identify environmentally and socially responsible companies Reference As a reference tool to provide companies with a transparent and evolving global corporate responsibility standard to aspire to and surpass Benchmarking As a benchmark index to track the performance of responsible investment portfolios

OECD Principles Develop a corporate culture to Strike a balance between regulation and self-regulation Strengthen corporate social responsibility Promote best practice through regional co-operation

Monitoring Tools Quantitative Tools Employee and customer surveys Public attitude and trust surveys Employee health and safety, reduction of wastes, efficiency in resource usage and productivity surveys Qualitative Tools Positive and negative media coverage Peer and expert evaluation Shareholder dialogue and informal feedbacks Image among financial analysts and regulators Perception about company amongst stakeholders

Although many companies create value from CSR, very few assess the financial value creation and even fewer communicate that to the markets
Creating value CSR program Assessing value Communicating value

Maximizing value from CSR

Established metrics to monitor program

Converting CSR Communicate metrics to financial value CSR value to CFOs, investors

Creating Value for CSR

CSR programs can have direct and indirect financial impacts, depending on the business drivers they target
Business driver New geographical markets Effect on business driver Facilitate markets entry Examples of metrics # and value of new markets entered through program # and value of new products developed and sold # and market value of new patents developed Employee retention, Cost of training new employees # employees with new skills from experience Favourability ratings evolution, # meetings with stakeholders Water, energy and raw materials uses reduction

ILLUSTRATIVE
Indirect impact Direct financial impact

Financial impact Increase revenue through increased sales Increase revenue through increased sales Increase revenue from patents Decrease cost of hiring and training new employees Increase revenue per person Increase revenue indirectly through goodwill

Develop cutting edge technology/products Innovation Expand the number of patents

CSR program Human efficiency

Improve talent attraction, morale and retention Improve skills (e.g. leadership,) Strengthen reputation, goodwill and loyalty with stakeholders Enable bottom line costs saving

Trust & reputation

Operational efficiency

Decrease cost

Pathway to value from CSR along four dimensions

Gain access to new markets and market share through exposure from CSR programs Create products to meet unmet social needs and increase differentiation Use CSR practices
to engage consumers and build knowledge of expectations and behaviors

New markets New products

Growth

New customers/ market share Innovation Reputation/differentiation Operational efficiency

Develop cutting edge technology and innovative products and services for unmet social or
environmental needs that could translate to business uses, patents, proprietary knowledge, etc.

Foster brand loyalty, reputation and goodwill with stakeholders by engaging with them on CSR
programs

Enable bottom line cost savings through environmental operations and practices (e.g., energy
and water efficiency, less raw materials needed)

Return on capital

Workforce efficiency Reputation/price premium Regulatory risk License to operate

Reduce costs generated by employee attraction and turnover by using CSR to build morale Develop employees skills and increase productivity through participation in CSR activities Develop reputation on CSR practices that garners customers willingness to pay price increase or
premium Mitigate risks by complying with regulatory requirements, industry standards, and NGO demands

Facilitate uninterrupted operations and entry in new markets using local CSR efforts and
community dialogue to engage citizens and reduce local resistance

Risk management

Supply chain/security of supply Reputational risk Leadership development

Secure consistent, long-term, and sustainable access to safe, high quality raw materials and
products by engaging in community welfare and development

Avoid negative publicity and boycotts by addressing CSR issues Develop leadership skills and improve employee quality through CSR
participation

Management quality

Adaptability Long-term strategic view

Build ability to adapt to changing political and social situations by engaging local communities Develop long-term strategy encompassing CSR issues

Illustration of how companies can create value from CSR

4 dimensions Sub-dimensions New customers/ market share Examples

ILLUSTRATIVE

Novo Nordisk: Engaged in emerging economies like India, China,

and Bangladesh to help build clinics, national diabetes programs, systematic education for doctors, nurses and patients, and comprehensive patient support initiatives. As a result, in China, Novo Nordisk has earned market leadership (e.g., market share above 70%) Verizon: Launched a new product for elderly and disabled to meet social needs of population. Has resulted in increased sales and 100,000 new customers and improve its efficiency and has saved $7 billion in last 5 years

Growth

Return on capital

Operational efficiency

Invested $1 billion over 10 years to reduce its energy consumption

Risk management

Reputational risk

Engaged with local stakeholders and built trust with local

communities by being responsive to community needs. Has allowed Intel to be proactive about managing concerns, avoiding zoning delays and fines, and benefiting from tax incentives

Management quality

Leadership development

Developed Corporate Service Corps to send emerging leaders to

work pro bono in emerging markets to foster economic growth. Has led to improvements in five areas: global leadership skills, cultural intelligence and global awareness, employee retention and commitment to IBM, new knowledge and skill contribution to IBM, and intrapersonal growth

Importance of Reporting
Information Disbursement to Stakeholders

Internal commitment

Positioning the company

Stakeholders Internal

Format of Reporting Team briefings Procedural notes Training sessions Internal magazines Internal compliance or audit reports Intranet Notice boards Site locations Specific reports Annual reports Websites Stand alone reports External magazines AGMs Media outlets Corporate videos Speaking platforms for senior managers

External

Credibility of CSR Reports

Consistency In Information Stakeholder Participation

Admitting Limitations

Honesty

How Should the Report Be?

History, Growth Milestones, Risks

Corporate context

Performance Mechanisms (KPIs)

Adopted

Stakeholder engagement
Main Stakeholders Mechanisms to engage them

Achievements/ Underachievement

Photographs/Diagrams

Testimonials/Case Studies

Reporting Code: Sustainability Reports

Global Reporting Initiative (GRI)
Developed through a multi-stakeholder, consensus-seeking approach Designed to be used by organizations of any size, sector, or location Takes into account the practical considerations faced by a diverse range of organizations

Focuses on economic, environmental, and social metrics.

For Indian companies going to be listed abroad, sustainability reporting has become mandatory.

What is it?
Guidelines are for voluntary use by for organizations reporting on the economic, environmental, and social dimensions of their activities, products, and services. The GRI incorporates the active participation of representatives from business, accountancy, investment, environmental, human rights, research and labor organizations from around the world. Started in 1997, GRI became independent in 2002. It is an official collaborating center of the UNEP and works in cooperation with the Global Compact. http://www.globalreporting.org

Description of GRI Principles

form the framework for the report (transparency, inclusiveness, auditability); inform decisions about what to report (completeness, relevance, sustainability context); relate to ensuring quality and reliability (accuracy, neutrality, comparability); and inform decisions about access to the report (clarity, timeliness).

Common Understanding One: Integration

Corporate Social Responsibility: The Integrated Approach to Business in the 21st Century
Contribution to Financial Profits Governance
Economic

GDP

Salaries, Prices Regulation/Policy

Climate Change
Environment Social

Corruption

Communities

Waste

Biodiversity Resource Use Human Rights

Labour/ Workplace