Ethical corporation lccge impact debate muckosy 14 07 10

An Ethical Corporation and LCCGE roundtable debate, 14 July 2010

Pam Muckosy, [email protected]

Social & economic impact of big business on local communities

WELCOME

From measurement to management

More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at [email protected]

A marked shift in how companies are approaching this topic

How and why do companies measure socio-economic impacts?

A need to look beyond measures and KPIs: Companies seek to measure what they do in order to

report externally But, increasingly the aim is to understand the external

system in which the company works for better management of the business

The study, www.ethicalcorp.com/impact


Looks at understanding the true impact of business.

In-depth interviews with >30 corporate sustainability, community programme and ethical sourcing managers

Survey of 116 sustainability professionals worldwide Review of over 60 corporate sustainability reports Literature review of initial impact research Analysis of existing tools and processes available to

help you measure impact Case studies on companies that have begun to test

impact measurement methods

Conducted by Peter Davis, Isabelle Fredborg & Pam Muckosy

What drives a company’s approach?


How a company approaches this topic is driven by a number of factors:

What is the company’s business? Where does it operate? What is the company trying to achieve? Demonstrating accountability?

If so, to whom? May be many different stakeholder groups who are

reached in different ways

Seeking to understand its context So that it can better manage its business

Do companies measure impact? (n=116)


Reasons companies measure impact (percentages, n=116)


Communicate to stakeholders

Build reputation

Inform community programmes

Other

Secure a license to operate

Encourage infrastructure development

Monitor local activities that may do harm

Increase supply chain effectiveness

What impacts companies measure (n=116)


Economic livelihoods for local community

Engagement, volunteering and charity

Job creation

Other

Human rights

Labour equality and rights

Poverty and economic equality

Local infrastructure

Access to basic resources

Tax contributions

Gender equality

Tying impact to performance or business strategy? (n=116)


4 models of socio-economic impact


1. Management of supply chain What are the impacts of what we buy?

2. External benchmarking against globally-defined standards GRI the best known

3. Management of ‘fence-line’ communities What is the local impact of a company’s operation

4. Contribution to local economy Corporate role in a host country’s development

trajectory

#1. Supply chain management


Who? Large retailers and branded goods companies

Why? To respond to consumer and media pressure to ensure that

supply chains do not contain labour, environmental and other abuses.

How Questionnaires and audit processes of supplier sites and

factories Accountability to whom?

Demonstrating to customers that goods and services are abuse free

How it’s developing Companies increasingly asking all suppliers, not just

manufacturing sites, about their processes Increasingly a genuine desire to understand value chain

I.e. Sedex


Exponential rise in the number of company standards Often similar in scope but not co-ordinated in

application With the result that some factories found

themselves almost always monitored to slightly different standards

Sedex seeks to help companies collaborate in their factory audits Repository of information Can still have company-specific questions/ issues

raised But bulk of information is shared

#2. External benchmarking


Who? Many companies of all sizes

Why? To respond to the pressures from international NGOs

and others to report and How Audit against an externally-generated set of

benchmark standards designed to allow comparability between companies.

Accountability to whom? Primarily aimed at the global ‘CR community’

How it’s developing More intelligent targeting of standards to be relevant to

particular industries

I.e. GRI


GRI is “world’s most widely used sustainability reporting framework” Seeks to make social reporting as comparable as financial reporting

Comprehensive reporting framework including: Corporate internal processes, for example

Strategy and planning Report parameters Governance and engagement

Performance indicators on 6 key issue areas, including: Environment Human rights Labour practices

Sector supplements developed To tailor the broad framework more precisely to specific industries Examples include: financial services, mining and metals, financial

services and electric utilities More being developed

#3. Managing fence-line communities


Who? Predominantly extractive firms, or other industries with a

significant local footprint Why?

To understand the inter-relationship of the site and the local community and environment

To guide corporate managers in behaviours in relation to local people

How Detailed assessment process to understand different aspects of

the relationship and to establish relevant benchmark metrics Accountability to whom?

Primarily designed to show accountability to local communities However, also useful in demonstrating globally a responsible

approach How it’s developing

Such assessments increasingly required as part of the due diligence approach for new projects to get sign off

I.e. Anglo American SEAT Toolkit


“Socio-Economic Assessment Toolbox” Designed to allow “operations to identify and

manage their social and economic impacts (both positive and negative)”

Designed as a management tool for Anglo’s site operations in relation to their local communities

4 stage process: Profile operation and local communities Identify socio-economic impacts and share that

assessment Develop management responses to each impact Report results to community

Reporting is relevant only as a communication tool with communities, not as a benchmarking exercise or compliance exercise.

#4. Contribution to local economy


Who? Large companies with significant investments in

particular countries Why? To understand the role that the company plays in the

society and economy of the host country To guide corporate managers in decision-making

How Detailed analyses, conducted by development

specialists Accountability to whom? Demonstrating to customers that goods and services

are abuse free How it’s developing Companies

I.e. Unilever


Increasingly seeking to understand the part that its operations play in development

Reports commissioned from development specialists to understand impacts, e.g.: Oxfam on operations in Indonesia INSEAD study of operations in South Africa

Some key findings of South Africa study: Unilever provides 0.9% of all tax revenues For each direct Unilever employee, there are 22

further jobs created in the value chain. Thus Unilever represents 0.8% of total

employment in South Africa

Sample strategic approach: DCED Standard, www.enterprise-development.org


A few existing models being reviewed


LBG

WBCSD Value Accounting

Good for Business

Five types of capital

Accounting for Sustainability

Poverty Footprint of Business

Ideas raised during the debate


Address other motives such as: responding to investors, differentiation, product impact and innovation

What are the best units for measuring outcomes. $s, equality?

Include case studies on local developing country companies

Risk is a major motivator Localisation of strategy is a must How to work with in partnership with an NGO Incorporate the role of stakeholder engagement How can we assess ‘cultural integrity’? What can companies do with their findings? Is a new

business model required? Are there any lessons or is there cross-over with

environmental impact assessments?

Social and economic impact


Thank you

The full report will be published in September at

www.ethicalcorp.com/impact

Ethical corporation lccge impact debate muckosy 14 07 10

Education

email pam muckosy

developing companies

local impact

comparabilitybetween

reasons companies

branded goods companies

true impact of business

impact percentages