Corporate Social Responsibility and Social Accounting: Supporting Sustainable Development prepared for World Environmental Center April 27, 2000.

Corporate Social Responsibility and Social Accounting:

Supporting Sustainable Development

prepared for

World Environmental CenterApril 27, 2000

Overview Business for Social Responsibility (BSR) Corporate Social Responsibility (CSR)

CSR Then & Now Why Interest is Growing / Links to SD

Measuring and Reporting on CSR Current State of Affairs Social and Ethical Accounting, Auditing &

Reporting What is it? Why do it? Who is doing it? And how?

Indicators, Auditing and Verification

Conclusions

Business for Social Responsibility

A US-based global business organization with more than 1,400 member and affiliated companies

Two organizationsA non-profit member-based trade associationAn education fund with a public awareness mandate

A network of global partnerships

A broker of best practices

Mission and Purpose

BSR"To improve the quality of life for current and future

generations by helping business [members] understand, implement and improve socially responsible practices as an integral part of their success”

BSREF“To promote corporate social responsibility in the global

business community and to promote cross-sectoral collaboration, thereby helping companies profit in ways that support the development of a more just and civil society and a sustainable economy”

Corporate Social Responsibility

CSR - Then

Who? ShareholdersWhat? Financial ImpactHow? Profit

CSR - Then

LoadingDock

Point of Sale

ProductionProduction

CSR - Now

ProductionProduction

Employee Issues Philanthrop

y

LoadingDock

Point of Sale

Voluntarism

Environment

CED Community

InvolvementEthics

Governance

HumanRightsMarketplace

Mission, Vision, Values

Accountability

Workplace

Transparency

Sourcing

ContinuousProductResponsibility

. . . AndMaximizeShare Value!Design

CSR - Now

Who? Multiple StakeholdersWhat? Financial, Social, &

Environmental ImpactsHow? Profit, employee

satisfaction and retention, % recycled

content, etc.

Defining CSR, Its Scope

Many definitions . . . often used:Achieving commercial success in

ways that honor ethical values and respect people, communities and the natural environment

BSR stresses the idea that this encompasses content and process, both what you do and how you do it

Corporate Social Responsibility: Why Interest Is Growing

Business Benefits Provides access to capital and improves financial

performance Reduces operating costs Improves ability to hire and retain qualified employees Increases productivity and quality Assists in risk management Enhances brand image and reputation Contributes to customer loyalty and increased sales Reduces regulatory burden/generates greater public support

Values (Internal and External)Complexity

Values Shifts -- Poll DataEnvironics/The Conference

Board/PWBLF23 countries, 1999: 25,000 surveyed

90% want companies to focus on more than profitability

60% form an impression of a company based on its social responsibility

In the past year: 40% responded negatively (talked negatively about)

to companies perceived not socially responsible 17% had actually avoided the products of companies

perceived not socially responsible

Values Shifts -- Poll Data Environics/The Conference

Board/PWBLFFactors that most influence public impressions of individual companies

social responsibility brand quality / reputation business fundamentals

Values Shifts -- Poll Data PWC/Reputation Institute

United States, 1999: 10,830 surveyed

75%-95% of consumers expect companies to avoid Bribery and corruption Child labor in their supply chain Employment discrimination Health & safety violations Harm to the environment

Values Shifts -- Poll Data

Financial Times/PWC2000 “Most Respected Companies Survey,” 750 CEOs asked about the most important challenges for companies today

“Increased pressure from stakeholder groups” was ranked second most important. Pressures include:– Shareholder resolutions– Consumer boycotts– Employee Strikes– Loss of government contracts, financing, and

insurance– Elimination from screened mutual funds

Stakeholder Maps

Complexity -- New Roles for Organizations

(Courtesy of Mark Wade, Shell International)

Government Employees

CustomersSociety

Share-holders

NGOs

Company

Government Employees

CustomersCompany

Share-holders

NGOs

Society

OLD NEWMaps are representational only- not comprehensive

(WTO Photo #1)

(WTO Photo #2)

Measuring and Reporting on Corporate

Social Responsibility

Government• UK DFIF Ethical Trading Initiative• UK FCO+: Landmines• EU proposed Code for MNCs• EU Parliamentarians demand for MNC Code• US FCPA

Intergovernmental Organisations• OECD Guidelines for MNCs (tbr 1998)• ILO Tripartite Declaration of Principles• ILO Labour Stds re: 1997 WTO meeting• UDHR

NGO• “New” Sullivan Principles• CEP SA8000• ECCR/IRRC/TCCR Principles for Global Responsibility• NEF/CAFOD Open Trading Initiative• InterAction Council: UDH Responsibilities• International League for Human Rights - Human Rights Auditing Standards and Procedures Projects• Amnesty International Human Rights Guidelines for Companies• Oxfam Campaign for “basic rights”• CERES principles• Consumers International: Consumer Charter

for Global Business• The Interfaith Declaration on International Business Ethics

Academic• Charter of Common Responsibilities in Business (University of Friborg)

IndustryCaux Round Table Principles for Business ICC Charter for Sustainable DevelopmentInternational Code of Ethics for Canadian Business Corporate Social ResponsibilityICC Rules of Conduct on WBCSD WG on Bribery and Corruption ICC Int Code of Advertising Practices

Courtesy of Mark Wade, Shell International, 1999

Current State of Affairs:The Proliferation of New

Standards

Current State of Affairs:Societal Expectations

High

Low

Low High

As trust diminishes, the demand for transparency in the form of assurance mechanisms increases

(Courtesy of Mark Wade, Shell International)

“Trust me”

Tru

st

Transparency

Trend

“Tell me”

“Show me”

“Involve me”

What Is It? Social Auditing Human Accounting Intellectual Capital Social Accounting Holistic Accounting Ethical Auditing Social Balances Ethical Budgets Ethical Accounting

(Courtesy of Simon Zadek, ©1999)

Why Do it? Measuring what counts. Quality management. Recruitment and retention of employees. External stakeholder engagement/trust. Partnership development. Investor information. Enhanced governance. Government and regulatory relations. Risk assessment and management.

(Courtesy of Simon Zadek, ©1999)

Who is Doing It?

(Images of Social Report Covers)

How Do People Do It? Assessing the financial costs and impacts of social

and environmental initiatives Rating performance against internal and external

benchmarks Engaging in and reporting on stakeholder

dialogue and partnerships Producing reports on social and environmental

impact Verifying integrity of data through internal and

external methods Institutionalizing changes based on the process Measuring continuous improvement

What is Social and Ethical Auditing, Accounting, and

Reporting?

Social and Ethical Auditing, Accounting,

and Reporting (SEAAR) SEAAR is the expression used by the Institute

of Social and Ethical Accountability (London, UK) to describe the emerging field of social auditing

SEAAR is a management tools companies can use as they try to become more socially, economically, and environmentally sustainable

SEAAR

A means to improve social performance Focuses on governance, accountability,

and transparency -- how an organization makes and communicates its decisions

“a portfolio of tools and techniques for measuring, understanding, reporting on, and ultimately improving an organization’s social performance”(Adapted From New Economics Foundation Briefing Paper, 1998)

Why Do It?

Values

StrategyPublic or Media Interest

Drivers for SEAAR

(Adapted from Building Corporate Accountability, 1997)

SEAAR - Business Benefits Increases transparency and accountability

Clarifies company values and scope of influence Manages expectations by improving

understanding CSR performance affects stakeholder decisions

re employment, spending and investment Strengthens license to operate Dialogue creates learning and minimizes conflict Deals with “trust me” to “show me” transition Helps manage complexity

Who Is Doing It?

SEAAR Leadership initially European (UK), shifting to U.S.

The U.S. has been strongest at measuring and reporting on environmental and human rights issues

Growing convergence; efforts like the CERES-led Global Reporting Initiative are trying to set a global standard for ‘sustainability reporting’ that is equal to financial auditing in terms of the quality and rigour with which data are compiled and audited

SEAAR Leadership Examples The Body Shop International

BP Amoco British Telecom Diageo Ford Motor Company Nike Novo Nordisk Shell International South African Breweries Tata Iron and Steel

Who In The U.S. 83% of the Fortune 100 include some social and

environmental information on their Web sites 40% use their Web sites to describe their values and

commitment to CSR 34% use their Web sites to describe environmental

principles 31% include year on year comparison of progress 22% report self-assessment and/or internal audit of

social and environmental performance 7% report independent verification of social and

environmental performance(Source: 1999 study conducted by BSR)

Who in LDCs?

Work is ongoing Asia, South Africa, and South America

Leadership is often from developed country companies working through their supply chains

Methodologies are similar, but at different stages of application

Values interpretations and goals can require different indicators in different local contexts

Challenge: Local application of global codes / values / reporting methods

How To Do It

Sample SEAAR Reporting Cycle

(Graphic Removed)

Things To Remember

Report regularly Use relevant, comparable indicators Involve stakeholders Be humble Employ independent verification Demonstrate use of information in business

planning and performance assessment Follow through on commitments

Indicators, Auditing and Verification

$ CO2 HRs

Financial Environmental Social/Ethical/Economic

1 Unit

1 Definition

Standard Formulae

Standard Exchange Rate Process

Traditional Verification

20-40 Units

20-40 Standard Definitions

Standard Formulae

Standard Instrument Calibrations

Traditional Verification

100s Units

No Standard Definitions

No Formulae

No Calibration

Traditional & Stakeholder verification/assurance

(Courtesy of Mark Wade, Shell International, 1999)

Indicators (Measurement) -- the Challenge

Auditing / Verification -- the Challenge

Methodologies / brands increasing in number and competition

Design and audit roles overlappingLack of comparable indicatorsCosts prohibitiveVerification of multiple types of qualitative

data requires multiple techniques -- audit against checklist one component of SEAAR verification

Conclusions

Identify the Issues on Which to Focus

No single “right” order of issues Each firm’s approach informed by unique profile

– mission, vision, values– compliance - leadership continuum – position in marketplace– core business goals– industry-specific issues– regulatory/public policy environment– advocacy group/media attention– geography

Recognize the scope of the task: a comprehensive, integrated analysis likely to yield best strategy

Recognize the Need for a Comprehensive

Approach Assemble leadership Clarify mission, vision, values and the corporate definition of CSR Assemble a comprehensive picture of current policies and

practices Assess strengths, weaknesses, options for improvement/strategic

linkages Engage internal and external stakeholders Prepare reasonable company response, including benchmarks

and measurable goals Align systems for accountability/recognition/rewards Continue cycle of regular assessment and reporting, even if

reporting is internal only Apply information learned in business decision-making

Getting Started: Sample Test QuestionsAre we a great company making great products? Do our products meet the needs of our customers? Do our products provide a net benefit to society? Do we produce them in an environmentally and

socially responsible manner? Do we conduct our business in an ethical and

transparent manner? Do we seek the opinions of those affected by our

choices and allow them to influence our decision-making?

Are we contributing to a better future?

Select from Types of Standards:

AA1000 & GRIProcess (AA1000)

Process concerns the reflection at all stages of the process over time of the views and needs of all stakeholder groups. Stakeholder views are obtained through an engagement process that allows them to be accurately and fully expressed without fear or restriction.

Measurement (GRI)

To be useful, information must be relevant to the decision-making needs of user-groups… In sustainability reporting the issue of what is or is not relevant may best be gauged through various forms of stakeholder engagement, such as surveys of stakeholder needs

(Courtesy of Simon Zadek, ©1999)

Watch Standards Limitations

Do the standards embed reported policies,

methods, and knowledge?

Do the standards promote a culture of social

learning and innovation?

Are stakeholders able to integrate values and

value through their engagement in the business

process?

Do the standards enhance overall performance?

(Adapted from Simon Zadek, ©1999)

Work at Quality

Seek methodology that is transparent, understandable, replicable, and credible

Develop process rooted in stakeholder engagement, with policies, systems, and performance measurement

Use methods that encourage experimentation and innovation, generate learning and develop new knowledge

Derive tangible, significant outputs and outcomes that are relevant to the organization and stakeholders and achieved in a cost effective manner.

(Adapted from Simon Zadek, 1999)

When Standards Promote Quality, They .

. . Create an effective quality floor Encourage self-determined quality Promotes experimentation and innovation Secures a transparent credible process Stimulates a results-oriented process Enables a cost-effective social accountability

environment Opens links to economic and environmental

process standards, and outcomes.

(Adapted from Simon Zadek, ©1999)

Look for Standards That Are ‘Open’ and

‘Shut’Open Responsive to specific issues and needs Rooted in values and vision Emerge and evolve through dialogue

Shut Standardised, replicable method Easy to adopt, clear quality frame Comparable outcomes

(Adapted from Simon Zadek, ©1999)

“I believe the distinction between a good company and a great one is this: A good company delivers

excellent products and services, and a great company does all that and strives to make the world a better

place.”William Ford, ChairmanFord Motor Company1999 Annual Meeting

More Information

www.accountability.org.uk

www.bsr.org/resourcecenter

www.globalreporting.org