Sandra Macleod, Group CEO Echo Research June 2009 Conference on Corporate Communications 2009 CR and sustainability: Commit or Crunch?

Sandra Macleod, Group CEOEcho Research

June 2009

Conference on Corporate Communications 2009

CR and sustainability: Commit or Crunch?

Outline

• About Echo

• Echo early CR studies

• Fast forward to 2008

• With the recession in full flow ...

• Now 2009 ...

“The soul never thinkswithout a picture”

Aristotle

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Echo Research is the premier global specialist in reputation analysis and stakeholder

research. We enable our clients to measure how they are viewed, accurately and

impartially, and to protect their brands and reputation

All Echo research complies with the MRS Code of Conduct and ISO 9000:2001

In both 2007 and 2008, we won the Gold Award for Integrated Research at the AMEC

(Association for Measurement and Evaluation of Communications) Awards

Echo leads on communication and reputation research for:

Offices in London, Paris, New York, Singapore

Members ofUN Global Compact

About Echo Research

200 staff and analysts

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The Organisationvalues, objectives,strategies

Activitiesmessages sent bycompany

Outputmessages receivedby audiencemedia analysismarket research

OutcomeAudience choices / behaviours3rd party endorsementRecruitment / retention Brand Equity/Brand ShareRegulation

The audiencevalues &expectationsmotivationalresearch

Outtake / Impactaudience perceptionsclient research

Strategic Value

• Eight developed and emerging economies: Australia, China, Japan, France, Germany, South Africa, UK, US

• 5,432 articles over 4 years in national dailies, business magazines, internet

• 240 interviews with the financial community, ‘umbrella’ organisations, CEOs , senior corporate CSR decision-makers, in-house PR practitioners, global agency heads.

• and 40 decision makers in the financial community

Echo’s early CR Studies: Scope

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Echo Research

CSR and the Financial Community: Friends or Foes?which asked questions of the crucial ‘Put Your Money Where Your Mouth Is’ group: Does CR really make a difference to your investment decisions?

…and our most recent in that series

We spoke in qualitative, depth interviews to:

We analysed the financial pages in depth….

• UK: eFinancialNews, Financial Times, Reuters, The Daily Telegraph, The Guardian, The Independent, The Observer, The Sunday Times, The Times, Wall Street Journal Europe.

• US: Boston Globe, CCN Newswire, Chicago Tribune, Dow Jones Business News, Forbes, Harvard Business Review, Los Angeles Times, New York Times, US Newswire, Wall Street Journal, Washington Post, Washington Times.

• France: La Tribune, La Vie Financiere, Le Figaro Economie, Le Monde, L’Enterprise, Les Echos

• Germany: Borsen-Zeitung, Der Spiegel, Financial Times Deutschland, Finanzwirtschaft, Frankfurter Allgemeine Zeitung, Suddeutsche Zeitung

• Australia: Australian, Australian Financial Review, Business Review Weekly, Sydney Morning Post

• South Africa: Business Day, Business Report, Financial Mail

Global volume of coverage on CSRAugust 2004 - July 2008

August 2004 - July 2008

Total Number of articles analysed: 52,150

inspiration interpretation internalisation integration

“…The environment, diversity, human rights, the community – these used to be soft issues. Now they are hard issues: hard to ignore, hard to manage and hard for businesses that get it wrong”

- David Grayson, quoted by Yvonne Fonteyn, bdfm.co.za

…we measured CR as it went mainstream…..

from soft

………..

……................t

o hard

But how convincing was the link between CR and performance ?

• Division of opinion - interesting given strong beliefs about benefits of CSR

• Enron scandal (‘good CSR but look at them’) offered a convenient bolt hole for doubters

• ‘We need more positive evidence’

Some remained sceptics…

‘Is CSR going to affect my investment analysis ? No, because my investment analysis is on numbers and I can’t put numbers to CSR’

So how to make CSR come alive for investors and analysts ?

• Primarily greater shareholder pressure

• Better methodologies to measure impact

• Clearer definition of CR - codification of what is expected

• More case studies / developed ‘case law’

So how to make CSR come alive for investors and analysts ?

• Focus on key issues for the company - and be open and transparent about reporting

• Feature honest stakeholder reactions and progress against targets (this is a journey – not a destination)

• Don’t put CR in a discrete box

• Use the language of the financial community

For many others though, CR was edging its way into investment decisions

• Growing numbers of professionals assessing non- financial risk

• CR becoming better understood (the Aha factor – ‘we can do well by doing good’)

• Institutions starting to say: ‘This is not just for today but for tomorrow and further ahead’.

‘If companies are exhibiting best practice in their social and environmental issue of risks then that is evidence of good strong management, and they tend to run good companies which return well over the longer term’

William Oulton, Deputy Chief Executive, FTSE

SO FAST FORWARD TO 2008….

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The Media as Agenda Setter: 2004 - 09

Base: Echo Sonar articles from global online sources© echo 18

world’s largest social networking site with 132M unique visitors (Jun 08) and 500+ member groups on sustainability, up to 2750 members each.

Sustainability on social networks: Facebook

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n=100 largest groups, Oct 2008

• Universities (St Andrews)• Countries (Bermuda,

Egypt)

• Green buildings• Ecodesign• Biotecture

• Organic / local produce• “Take a bowl to restaurants, like a

wandering monk”• “Avoid 30 threatened species of seafood

and fish”• Lactovovegetarianism vs carnivorism”

• “Legalise Hemp”• Fertiliser-free flowers• Hydroponic greenhouses for 3rd world

• “Do 1 goodeco-deed a day”

• “Wear your XO with pride”

• Media / exhibitions / music / festivals / tourism

• A sustainable Christmas

• Green venture capitalism

• Technology & Innovation

• “Companies that truly create good”

• Aerogenerators• Renewables / Alternative

Fuels

• Ecofashion• “Only wear

sustainable cotton ”

• Transportation• Sustainable religion• Sustainable

shopping

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Given the world financial crisis, what is the most important thing companies should do?

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Echo Facebook poll

Base: 100 Respondents, Facebook.com

*Answer breakdown by age

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Echo opinion leader survey : What sustainability means to you?

67.3% %

Echo’s Opinion Leaders: US/UK Heads of Communications, CSR, Sustainability, Senior Management, Advisors and Influencers

Base: 167 Respondents© echo 21

Base: 167 Respondents

Contributions to the cause of sustainability

5: A Very Significant Contribution 1: No Contribution At All

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For most businesses, sustainability is...

Base: 167 Respondents© echo 23

The global credit crunch will...

Base: 167 Respondents (Percentages do not sum to 100% due to rounding)

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What does sustainability mean to YOU?

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Source: Linked-In, leading business-oriented social networking site; 24M+ registered users in 150 industries n=20

“Bringing people, planet, and profit into balance in a humane, cultured manner”

Definitions:

“Think of having bacon and eggs for breakfast. If you own one hen and one pig, the eggs are sustainable, the bacon is not”

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What is an Unsustainable company?

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Source: Linked-In, n=20

“Any company lacking in innovation.”

“Any company that cannot differentiate itself from the competition.”

“Those that don't value people as assets, that don't understand the effect of their organisation on the environment and community, and that don't practice conservative financial management.”

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What sustainability IS, at best….

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Source: Linked-In, n=20

“Sustainability means planning for your business to be in business forever. It’s the big picture: conserving, protecting.”

“Sustainability means having measurement systems, both in terms of growth and decay, and to manage risk.”

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NOW THE RECESSION IS IN FULL FLOW, WHERE ARE WE….?

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Can CR be justified, they ask?

“Recession will put a stop to CR / CSR….. Companies will concentrate on saving themselves rather than the planet”

“Social concerns are being crunched off the agenda” – The Observer

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Signs of the times…. even in recession

Mars’ total cocoa supply to be “sustainably produced” by 2020 working with Rainforest Alliance

All cocoa in Dairy Milk product to be certified by FairTrade

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tells supplier conference of 1000 Chinese companies: “We will hold you to strict environmental and social standards – despite the recession”

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Does all this herald a new era?

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….. a growing societal and business mindset.

Consumers have become outraged by greed and its consequences for the economy. They feel a greater longing than ever for institutions that care. Emerging at the same time is an online-fuelled culture of individuals who can share, give, engage, create and collaborate in large numbers.

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Ways of joining Generation G…

CO-DONATE Google’s Project 10100, for public to submit ideas that help other people, voted on by public

ECO-GENEROSITY Novacem UK offsets carbon output, and produces cement that absorbs CO2

FREE LOVE giving stuff away: FreeGreen offers free, downloadable green house plans

BRAND BUTLERS time-saving free services: IKEA’s cycle trailers at stores to carry furniture

PERKONOMICS free perks: Lexus sponsored a rock tour, offered free parking and VIP passes to any audience member arriving in a Lexus.

TRYVERTISING try before you buy: Pomme Bébé sells baby snacks and lets discerning babies try first….

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… and some new perceptions of value and challenges

• “We find ecology and economy are linked” – Seiko Epson

• “The principles are part of a smart strategy to reduce risk” – Musgrave

• “We seek to embed responsibility in all our activities regardless of how tough the competition gets” - Danisco

• “Other [same sector] manufacturers do not observe the minimum wage. This makes it difficult for us. But we hope for a stable workforce” – Pentland

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…and what the future holds….• Admissions of problems to be resolved give greater credibility to

successes

• Better data collection – “we need a clearer picture of safety performance at our sites” (Diageo); “we have found weaknesses in reporting on environmental assets and liabilities” (Suez – France)

• Greater workforce diversity – “50% of US citizens of 21+ are of Latin, African, Asian descent”.

• More ‘lessons to be learnt’ from failures: “We had injured employees talking to their colleagues about the circumstances of their accident and that is much more powerful than having managers telling you how to do things differently” – Nestle

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Future challenges

• Applying prevention rather than cure to corporate issues – “We built a hospital for respiratory diseases near our oil refinery……………….”

• Identifying and declaring so others can learn: “The child labour issue is sometimes based on falsified documentation” (Nike – who are very frank about success and failure)

• Revisiting the past and aiming for restoration / closure: “VW exploited 20,000 forced labourers and concentration camp prisoners.…our employees pressed for a memorial with names inside the factory” (Volkswagen)

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…NOW 2009, THE FINANCIAL FOCUS WE RESEARCHED 5 YEARS AGO IS ON PEOPLE’S MINDS - IN ANOTHER GUISE

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Our questions for 50+ CEOs and COOs

FUTURE PROOFING SUCCESS:

• Life after recession: do you anticipate a 'new paradigm‘ Yes / No.  If yes: harder? softer? greener? more humanitarian?

• How is your organisation reshaping itself and getting ready to meet the new challenges ahead?

• What are the toughest sustainable development challenges for A. Your business sector as a whole? B. Your business specifically?

• How important are : Human security & well being /  Economic prosperity / Environmental adaptability

• Who do you turn to for guidance / advice?

Stay tuned for results (Oct 09)

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Thank you.

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Questions? Observations?