Transparency: judgement day for sustainability?

Monday, May 14, 2012

18:00 - 20:30

Paul Polman, CEO of Unilever, said that if social media enabled people to bring down a government in weeks, “it can bring down a company in seconds". Are we entering an "age of damage", a result of the convergence of social media and sustainability?

And maybe it is not all about risk. Leading companies are using transparency and open innovation to grow their businesses. 

Finding a thread between Wikileaks, The Leveson Inquiry, NewsCorp, BP, Goldman Sachs, KONY2012, #McTweets, is complex. For some it is the most empowering trend in sustainability, whilst others see it as beyond the sustainability remit. Where do you sit?

On the 14th May we were be supported by an excellent panel:

  • Keynote: Kate Robertson, Chairman of Euro RSCG & co-founder of One Young World.Fresh from the stages of Davos, Kate shared her views on the age of transparency.

  • Kresse Wesling, Founder of Elvis & Kresse. Elvis & Kresse is a great example of a business being built on the principles of sustainability and transparency.

  • Roger Leech, Open Innovation Director, Unilever. Unilever's "Open Innovation" programme is taking transparency to the next level of co-creation – we enoyed hearing how it is working.

  • Bob McKinnon, Founder and Director of the GALEWiLL Center for Opportunity and Progress. Bob gave a US perspective, via video link, on the practical application of transparency for different businesses.

Speakers

Bob McKinnon GaleWill

See bio

Kate Robertson Euro RSCG Group

See bio

Kresse Wesling Elvis & Kresse

See bio

Roger Leech Unilever

See bio
Round Tables

Built Environment

Widespread and mandatory Display Energy Certificates would transform the built environment more than any other policy. Do you agree, and is it feasible?

Supply Chain

Is scope 3 reporting the solution to corporate transparency?

Carbon Strategies

Would mandatory carbon reporting drive change or just generate more paperwork?

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The 14 May ‘Carbon Management Strategies’ roundtable asked whether and how mandatory carbon reporting can deliver value for companies. The discussion took place less than a week after the Aldersgate Group announced that 77% of the UK public approves of mandatory carbon reporting for companies with more than 250 staff. Roundtable participants argued that greenhouse gas reporting provided direct benefits to companies by helping them highlight risks and reduce costs. Many large companies are already publishing these reports, either through the Carbon Disclosure Project, as a result of pressure from the top of the supply chain (Wal-mart already requesting carbon data from its 60,000 suppliers), or as part of their ongoing sustainability programmes. What is more, reporting gets easier each year as firms develop internal data collection processes and more of their own suppliers report relevant information.

Delegates felt that mandatory reporting could make it easier to collect supply chain data, and could improve comparability between companies’ carbon footprint reports. However, carbon reporting is only useful if done right. Roundtable participants expressed concern about constantly changing government rules, which could drive up the cost of compliance, especially as the CRC uses different inclusion thresholds and scope boundaries. They also cautioned that government would need to be clear about the purpose of reporting to ensure greatest benefit. Delegates believed that consumers would be confused and unimpressed with a report that just gives “a number” and noted that many consumer-focused carbon labelling initiatives have already been scaled back or abandoned. They also worried that mandatory carbon reporting could serve as a pretext for an eventual carbon tax that reaches down to relatively small non-carbon intensive companies; if so, firms would be incentivised to disclose as little as possible or engage in avoidance strategies. To deliver value for companies, mandatory reporting should be used to drive innovation and cost savings and encourage behaviour change within companies and the public.

‘EXAMPLES’
Expressing CO2 in a way that means something to the audience
Walmart already driving 'mandatory' reporting along their supply chain
Carbon footprint can highlight risk in the organisation

‘RED FLAGS’
- Carbon labelling can be confusing to consumers without context/compatibility
- Carbon report that gives a number but no business benefit

‘CHALLENGES’
- The constant change in regulation of CRC. Where do you draw the boundaries?
- Mandatory GHG reporting must be addressed alongside CRC
- Need to be very clear what reporting is for? To drive low carbon innovation? To respond to notion - That society has a right to know? Which it is will shape the value.

‘SOLUTIONS’
- Data collection gets easier every year
- Large corporations are already doing it
- It will drive change we just need to be patient for the change to be in CO2. Raise awareness - - - Engage stakeholders - change behaviours - decrease CO2

Finance & Corporate Sustainability

Is integrated reporting necessary in a world of social media?

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The discussion centered on the possibility that the growing relevance of social-media channels would make integrated reporting less relevant, or perhaps even irrelevant over time. The group shared insights on the foundation and the value of integrated reporting to initiate the discussion. The discussion then focused on whether integrated reporting’s value is diminishing as social-media channels make it inevitable for global companies to not merely disclose information, but to also engage in dialogues that stakeholders can easily initiate today via social media. Overall, the group was in agreement that integrated reporting will remain relevant and perhaps even be essential as the need for enterprises to engage with their stakeholders via social media continues to grow. The thought is that information from structured and transparent integrated-reporting processes would be necessary to give organizations the credibility to have meaningful exchanges with stakeholders, whether via social media or more traditional channels. It became clear that a key challenge going forward for organizations committed to transparency is accounting for the new breed of stakeholders that social media has given a voice to. It was also noted that these stakeholders are likely more difficult for organizations to identify in advance, and new methods and additional resources will likely be required to ensure that these stakeholders are properly accounted for and can be engaged with effectively.


‘CHALLENGES’
- Respond tactfully to social - media constituents
- Account for fringe stakeholders
- Resources dedicated to managing stakeholder concerns
- KPI's difficult to monetize across sectors
- Integrate ESG results with financial results
- Not knowing who will initiate dialogue

‘RED FLAGS’
- Not being reactive to conversations initiated via social media channels
- Not having relevant data to engage stakeholders

‘EXAMPLES’
- PRI- new standards for integrated reporting
- PUMA - a more offensive/performance driven approach to integrated reporting

Communications

The anatomy of damage: what are the different ways that reputations suffer in the social era?

Technology

What do we mean by "Open innovation", and why is it increasingly being used in relation to sustainability strategies?

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Our one word answer: #OUTOFTHEBOX
In order to achieve success with Open Innovation you need to think out of the box
The market is more demanding and you therefore need a complete solution
You need to cherry pick best in class and use an ecosystem approach
Sony’s Open Planet ideas uses crowdsourcing to develop technologies, they have given 7 Sony Technology IPs to the market with a promise to develop the winner make no profit on the development.
This was a communications piece rather than product development but allowed R&D people to talk directly to customers
Used Good for Nothing community to develop apps
Problem for Unilever having posted challenges and wants is not a shortage of ideas but solutions.
Ideas come from all areas, directions and in various development states. IP is always important and the best safeguard for developers
To work needs a change of internal mindset at Unilever to deal with bright young entrepreneurs.
It is there answer to disruption
Motivation for most is not wealth but the opportunity to put something out there

Energy Effeciency

What are the different ways that transparency can be a game changer for energy efficiency?

Corporate Strategies

Do companies need to build more transparent, issue based sustainability communications in the era of social media, or can response-based strategies suffice?

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The group discussed the fact that while there were high profile examples of companies being exposed for poor practice through social media channels, this has not led to wholesale change in customer purchasing behaviour. This can make it difficult to adopt a proactive communications strategy.

Social media is a global medium, and what is important to stakeholders in one country may not have the same resonance with stakeholders in another country. Companies therefore have to prioritise their communications efforts to the needs of local stakeholder groups.

Strategically companies are adopting different approaches to disclosure given the increased scrutiny through different media channels. There is definitely a need for greater accuracy and rigour in what is disclosed, this has made some companies more reserved about disclosing information until they have real confidence in the information. Companies need to disclose context and information not just data, to support informed and balanced decision making amongst stakeholders.

Companies also need to be aware of changing stakeholder views and opinions so that they can respond quickly to new demands for disclosure and action.

CHALLENGES’
The consumer is yet to act – there is little evidence of consumers penalising companies over the long term following exposure.

Transparency audience depends on local context, different by continent.

Transparency of social indicators and other local emissions are more of a problem because of the need for context to support informed decision making. This leads to the disclosure of impacts not just data.

There are different sustainability norms across global corporate cultures e.g sustainability reporting in Middle East vs UK. Accepted business procedure in one country may be interpreted differently elsewhere e.g facilitation payments.

‘SOLUTIONS’
- Interface use environmental product declarations to support transparency – customers make buying decisions based on the quality of the products not the reputation of the company.

- John Lewis customers loyal because of the transparency of its policies and commitments. For example sales of beef went up in the BSE scandal because people knew of John Lewis commitment around product sourcing and knew that it came from a trustworthy source.

‘EXAMPLES’
- Interface people interested in products not companies. Link transparency to products using LCA

‘RED FLAGS’
- Need to make sure that the information that is disclosed is accurate otherwise it will be exposed through social media with the potential reputational backlash

Energy Policy & Strategy

How transparent is your energy strategy?  Who wants to know and why does it matter?

Resource Efficiency

Are eco / sustainability labels aimed at the consumer dead, or will they evolve into a key driver of change?

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Our small but perfectly formed group were broadly label-sceptical - with exceptions. Prominent labels such as Nordic Swan (in Scandinavia), Energy Star, FairTrade, Soil Association, and to a lesser extent FSC and MSC, were seen as conveying a simple, understandable message, and had both wide recognition - and integrity.

But generally the view was that there were too many labels, some of them bland to the point of meaningless - eg, the UK's Red Tractor scheme for food, which means nothing more or less than that it's been grown or packed in the UK according to legal requirements. Excessive labelling could be offputting, placing an unrealistic expectation on the consumer to make dozens of ethical decisions during every shop. So it's no surprise that, for example, that Tesco is abandoning its carbon labelling scheme.

Labels are often inherently reductionist, struggling to reduce complex environmental and ethical issues to a single, simple metric. That said, it might be possible to have broader brush labels which could actually be more meaningful: for example, a label which makes clear that a product was not in any way contributing to tropical forest destruction (this is an idea currently being explored by one NGO). But as Unilever are acknowledging, when the impact of a product is principally in use, not in sourcing, then a label could be misleading - or at best inadequate.

For the future, consumers may be able to use digital means - eg mobiles - to instantly 'scan' any product, and see the story behind it. This could in time render labels redundant. Equally, as brands compete to be seen as genuinely sustainable, so labels become redundant for brand leaders, since it would simply not be possible to make an 'ungreen' choice in a leading brand's store.

So: labels are at best a stop gap - but the best will survive for a while yet.


‘CHALLENGES’
- Some labels are counter-productive - not a true meaningful standard/test
- Too many competing labels - confusing for customers
- Evaluating sales due to eco labels
- Customers are not demanding this information
- Get eco labels to communicate a complicated issue

‘SOLUTIONS’
- Opportunity for best practice across a whole sector eg standard eco label for hotels rather than 100+ as at present
- ecolabels can drive change in supply chain. Asking suppliers to comply with ecolabel data, companies between - products can drive change

‘RED FLAGS’
- Oversimplification (into one metric)
- Counterproductive….Red tractor=legal. Form of greenwash? Customer consumption?
- Avoid removing existing ecolabel (e.g nordic swan on hotels) Fear of losing customers
- Depending on general customers to lead/& discarding label if they don't follow audience

‘EXAMPLES’
- Tesco carbon dioxide label on products
- mobile phone as a wallet to evaluate products credentials during the purchase
- nordic swan ecolabel being widely recognised by population/society in the Nordic

Plenary roundtable - 1

Are we really in a new era, what some call the "age of damage", of is society as unwilling to punish unethical business as ever?

Plenary roundtable - 2

Why do only 20% of consumers trust corporate sustainability communications, and how can companies turn this around?

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This summary of the round table discussion on the above issue has been structured into the 4 output areas recorded on the coloured post-it notes, namely Challenges, Solutions, Examples and ‘Red Flags’. It is worth pointing out that, unsurprisingly, there were many more Challenges than anything else but also a high number of Solutions and few Red Flags, which reflects the highly positive/optimistic outlook of the group!

1. Challenges
•Dialogue on complex issues (like human rights and carbon emissions) is extremely challenging, and for the most part ineffective. These issues are often expressed as ‘simple’ questions by consumers which corporations find very hard to answer.
•Demonstrating that the corporation means what it says on sustainability issues is highly challenging, especially when the corporation is ‘faceless’ to the consumer (not a good start point for establishing trust). For the most part we face the hardest communications challenge – that of cognitive dissonance. Reversing established prejudice can be near-impossible even with substantive proof points.
•We don’t know enough about the psychology of human decision making in this area, which is a major barrier to creating solutions to the above point. To help in this area, John agreed to circulate some recent work by the Royal College of Art to the group, and Phil will circulate a synopsis of Havas Media’s Meaningful Brands survey.
• Getting the right balance between Transparency and Propaganda in CSR reports is a big issue. 10 years ago they were exclusively propagandist, and whilst better currently, there is still a need for greater humility. This needs to balance the fact that unnecessary honesty can be high risk (depending on who you are!!).
•Large/siloed corporations find it particularly difficult to align sustainability strategies across functions/departments and thus consistent messaging. Given Occupy London’s view of large corporates, it would seem that those companies need positive, credible sustainability messages more than most, and simultaneously have the hardest job to perform.
•Sustainability practices are particularly difficult if you don’t own your own supply chain – hence Tesco’s challenge is so much greater than Unilever’s. Not easy to explain to consumers!!
•As the panel had earlier pointed out, just because sustainability is hard (as is indicated by an endless stream of challenges) this is no excuse for paralysis, so on to....

2. Solutions
•Non-expert endorsement was agreed to be the most powerful channel (i.e. consumer to consumer conversations, whether real or virtual)....these stand the best chance of reversing cognitive dissonance. To prompt these conversations (as corporations have no direct control over them), companies must interact with consumers showing both the good and bad of their sustainability efforts – such honesty is much more likely to provoke C2C conversations. Increasingly, traditional advertising should be judged in its ability to prompt/provoke consumer conversations.
•Products which incentivise or delight consumers when they make more sustainable choices hold the key to attaining brand loyalty/equity founded on sustainability. For example, shampoos/shower gels which change colour when you delay rinsing could reduce water usage whilst making it fun for consumers (Gavin should patent this idea!!).
•Companies should always communicate on their sustainability strongly through their good times, and this will help them when times get tough. This is exactly what BP failed to do.
•Companies with a clear vision from their CEO on sustainability are in a much stronger position to communicate, as this is more likely to rally the company, gain attention in relation to sustainability, and focus all operations on how they contribute to sustainability-related KPIs. Unilever have achieved this – it is a mantra used by all staff - the CEO’s vision makes sustainability mean something to every employee.

3. Examples
•Generally speaking it was felt that there are far too few good examples of effective, accountable sustainability programmes, and that consequently ‘best practice’ is far from emerging, be that in terms of process/methodology or KPIs/metrics. As an example, the main plenary session highlighting the need to define transparency is itself indicative of the need to establish clear criteria for communication strategy in this area.
•Unilever’s Sustainable Living Plan is generally thought to be a ‘best in class’ example of both a process and a report. Even as an example of best practice, this is at the early stages of development.
•Richard Branson was highlighted as a great example of how to lead a company in this direction. Not only does he provide a human face to the organisation, he epitomises openness by directly responding to complaints. As a consequence of an open corporate culture, Virgin’s communications (from any division) are much more likely to be trusted.
4.Red Flags
•Relating to the above point about Branson, personality-run businesses can of course be a communications disaster if you’re Rupert/James Murdoch. Once trust is lost (as Kate pointed out), the fish will keep swimming towards you....it’s a gift that keeps on giving as Rebecca Brooks found out today.....
•Whilst the above is obvious in hindsight, we agreed that as a general rule, the ‘bean counters’ in corporations shouldn’t be allowed near public forums/platforms if you want to inspire trust...

Ecosystems & Natural Capital

What are the benefits for organisations who use EPL's and other ways of pricing environmental and social eternalities in their accounting?

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Environmental profit and loss reporting is rare – but it is clear that understanding the possible risks/benefits of environmental impacts on a business and its supply chain is becoming more common. Taylor Wimpey were about to launch a project which will engage with suppliers on issues such as energy use and waste – both Penguin (books) and McDonalds (restaurants) consider the importance of water – e.g. for trees and lettuce respectively.

Water is an increasing topic for many businesses. The CDP suggested that if carbon is the “shark” then water is the “teeth”.

To the challenge of integrated reporting (taking account of social and environmental elements) a six capital framework was mentioned - Finance, manufactured, human, intellectual, natural and social.

http://www.ifrs.org/nr/rdonlyres/af194b65-a32e-4590-b6fe-5a7d33fde170/0/ac061110.pdf

Puma who have produced an EP&L are clearly now using the information on natural capital risk to alter their business processes and product designs

http://safe.puma.com/us/en/2011/11/puma-completes-first-environmental-profit-and-loss-account-which-values-impacts-at-e-145-million/


Trucost contributed to a Financial times report “Biodiversity: Valuation is vital to life support services” which concludes “Valuation will improve decision-making and help to focus on the opportunities.”

http://www.ft.com/cms/s/0/625b41d4-8573-11e1-a75a-00144feab49a.html#axzz1vskTOuFQ

The groups post it notes;

‘CHALLENGES’
- Educating customers why eco-labels are important
- Common valuation for eco values

‘SOLUTIONS’
- Supply chain questionnaire
- Integrated reporting. 6 capitals

‘EXAMPLES’
- Virgin - inviting blog for transparency
- McDonalds - lettuce in water rich areas
- PUMA Completes First Environmental Profit and Loss Account which... safe.puma.com
- Within the context of publishing a worldwide unprecedented Environmental Profit and Loss Account (EP&L), PUMA and PPR HOME, the PPR Group‟s...

Venue Detail

Bank of America Merrill Lynch: King Edward Hall

King Edward Hall | 2 King Edward Street | London | EC1A 1HQ

Directions

Bank of America's offices are a very short walk from St Paul's tube station (Central Line). Exit the station at Cheapside/Newgate Street. Go past the BT centre, with it on your right-hand side and take the first available right down Edward Street. Continue down this road for 80m and the entrance to the venue is on your left-hand side.

Do not go to the main reception desk at their offices when you arrive. You are looking for an entrance that leads you directly into the King Edward Hall.