Ethical corporation Issue One, December 2001

Issue 1 • December 2001 Free news and analysis at www.ethicalcorp.com

Mark Wade An exclusive Interview with the founder of the Shell Report

FTSE4GoodSigns of an investment sea change?

Creating TrustThe leading thinkers on CSR and brand management

PlusWally Olins

The legend talks to Ethical Corporation

GoodCorporation’s CEOThe options for effective reporting standards

and special interviews with

Rob LakeHenderson Global Investors

Emma Howard BoydJupiter Asset Management

w w w . e t h i c a l c o r p . c o m

Genoa 2001: Would you like this to happen outside your HQ?

Editor’s notes

Welcome to the first edition of Ethical Corporation magazine, the first independent by-industry, for-industrybriefing on the business case for corporate social and environmental responsibility. Our objective is to servethe growing demand for business intelligence from large enterprises about who’s benefiting from imple-

menting ethical practices right through their companies and how they’re doing it.You can subscribe free to this magazine by simply filling in one of the reply cards inside or by visiting our website

www.ethicalcorp.com.In this issue we speak to a broad cross section of industry experts and analysts to find out why companies like Shell

and the Co-operative Bank have embraced corporate responsibility and hear the advantages they’ve gained. We’re alsotalking to leading thinkers such as Warwick Business School and the New Economics Foundation for a cross-industry per-spective.

Investors and stakeholders are pushing these issues where it matters - with their cash. Find out what some of theleading fund managers like Henderson and Jupiter have to say about CSR involvement and what they’re looking forfrom your company.

As branding supremo Wally Olins puts it, business has moved to the front pages, and now is the time for you toaddress the issues in your corporation.

Let us know if you would like your company to be interviewed for next month’s issue or if you are interested incontributing an article. Meanwhile, enjoy the first issue!

Toby WebbEditor

Contents4 | Wally Olins on ethics and product differentiation

6 | The man from Del Monte, he say ‘good’

7 | Leading think tank NEF gives us its view of profits and ethics

9 | GoodCorporation's CEO gives us the standards lowdown

10 | CorporateCulture suggests 10 steps to CSR success

12 | We speak with Mark Wade, Founder of the Shell Report

14 | Rob Lake, Henderson Global Investors, on global SRI

15 | Warwick Business School on the next generation of executives

17 | FTSE4Good - measuring a sea change in investment? We ask FTSE’s Gareth Parker

18 | Emma Howard Boyd, Jupiter Asset Management, on changing attitudes to SRI

19 | CSR Duo, Richard Aylard and Jordana Friedman, Burson Marstellar

21 | Publish & be praised, by Flag

22 | Ethical brand and that customer base: we talk to the Co-operative Bank

24 | Real Ethics, Robert Jones

25 | New resources - helping you formulate your strategy

3w w w . e t h i c a l c o r p . c o m

December 2001 Ethical Corporation magazine

Ethical Corporation magazine is published monthly by

FC Group3rd Floor, Black Lion House

45 Whitechapel Road London, E1 1DUUnited Kingdom

PublisherChristian Braun

[email protected]+44 (0)20 7375 7153

EditorToby Webb

[email protected]+44 (0)20 7375 7561

DesignAlex Chilton [email protected]+44 (0)20 7736 5568

© Copyright 2001 First Conferences Ltd. All rights reserved. This document contains original material protected by copyright. No unauthorised use of material herein may be made without the prior consent of First Conferences Ltd. Ethical Corporation magazine is a proprietary creation and trademark of First ConferencesLtd. Please note the views of the contributors in this publication are their own and not those of Ethical Corporation magazine.

Can you give us a quick rundown onyour career to date?I began my career in the advertising industryand started Wolff Olins with Michael Wolffin 1965. Wolff Olins has created a number ofvery well known brands, Orange, 3i, FirstDirect among many others, and has officesworldwide working with a number of globalcorporations.

Omnicom bought Wolff Olins a fewmonths ago and I left amicably. I amProfessor of Marketing and Branding at sev-eral universities and I write books and lec-ture at conferences and seminars.

In a recent Economist article “Who’s wearing the trousers?”you stated that “the next big thing in brands is social responsibility… It will be clever to say that there isnothing different about our productor price, but we behave well.”Is this something that your currentexperience would confirm? It’s clear to me that the difference betweenmost products is now negligible – it’sincreasingly about the company behind theproduct rather than about the product itself,especially where you have companies sellingservices across a number of areas, like Virginor Tesco, for example.

Look at petrol companies – if you think aparticular company’s behaviour is bad, youcan buy from a competitor. If you don’t wantto buy from one company, you just drive

down the street and buy from another. Thiscan happen almost everywhere that productsare commodities, not in all cases, but inmany.

With individuals like Richard Branson orAnita Roddick, the company is associatedwith the reputation of the person, and viceversa. The Virgin brand is a manifestation ofwhat Richard Branson purports to be, and istherefore inseparable in the consumer’smind.

In what ways are corporate socialresponsibility and branding currentlycolliding?Look at the way in which Nike and othershave had bad press on ethical business issuesand the way the ‘No Logo’ movement istreating brands as a scapegoat, an enemy anda power beyond control. Then you can seewhy it is that a lot of people are attributing tobrands a deliberate attempt to manipulateand control. But you only have to look atbrands like Levis and Marks & Spencer to seethat the customer is still in control. They fellfrom consumer favour and suffered becauseof it.

Of course, brands are trying to manipu-late the customer. We live in a world that isdeeply manipulative. Children try to manip-ulate parents and vice versa. But corpora-tions and their brands cannot directly controlconsumers, however hard they try. The cor-poration will instead have to anticipate whatconsumers want and provide it. Now con-sumers want to see socially responsible com-panies. And they will buy their products.

It is in the interests of a corporation tobehave better for market share. Corporationsare increasingly taking this into account.

Is this a gradual change over the last 10 years, or is there a seachange happening here in corporatephilosophy?I think it is a sea change. I can remember 25years ago, the few organisations wanting asocial audit back then were the very unusualones.

Today even the most conservative andthreatened of corporations knows that it hasto do something. It’s becoming part of theirvocabulary, even if they don’t believe in it.Whether or not they believe in it doesn’tmatter. They will do it not because they wantto but because their share price will go downif they don’t get involved.

The fundamental of any corporation isshare value. Everything has to be measuredagainst share value, market share and profit.Making money by behaving badly will notwork if everyone knows about those that aredoing it. Social pressures are now becomingsufficiently powerful to make companiesbehave better. Business has moved to thefront pages.

BP is projecting itself as a highly respon-sible social creature. It may or may not be,but it understands the power of socialresponsibility. Exxon are not bothering –they believe it has no bearing on their profits.

The Exxon attitude is the one that wasshared by most companies in the past. Overthe next 10 years I believe we will see a realshift to the BP attitude as consumer groupsand the media increasingly highlight compa-nies’ ethical activities.

Which firms would you highlightwhose practices are taking ethicalconsiderations into account?Most companies are starting to try very hard.Most large European companies like Shelland BT take this very seriously. Business isfront page news and this means that corpo-rations and their brands will be pressurisedinto doing what consumers wish them to do.Ethical business practices will become moresignificant. ■

Ethical Corporation speaks with Wally Olins


4 w w w . e t h i c a l c o r p . c o m

Business has moved to the front pages

Wally Olins advises various corporations on branding and corporate identity issues. He is Visiting Professor at a number ofuniversities. He has written manybooks, including the seminal work‘Corporate Identity’, and is currentlywriting a new book on branding. He canbe contacted on +44 (0)20 7224 2121

i n t e r v i e w

Getting the man from Del Monte tosay yes is not easy. The basis of oneof the world’s most successful

advertising campaigns is Del Monte’s com-mitment to growing and using only thefinest, freshest produce. The message is simple:the Del Monte label guarantees quality tothose who consume it. It also implies that theattentions of the Del Monte man bring happi-ness to the producers of the foods he chooses.

The case of Del Monte Kenya Limited(DMKL) showed that getting the man fromDel Monte to say “yes” to spending on thewelfare of his employees and the communi-ties surrounding his Kenyan plantation hadbeen more difficult than getting him tospend on more obvious business interests. Atthe time DMKL was owned by the ImermanSouth African group, and the commitmentsto meeting the highest product standardswere not translated to meeting standards ofemployee care. Certainly local communitiesdid not always cheer the arrival of the DelMonte man.

In fact, animosity between DMKL’s man-agement, staff and neighbouring communi-ties grew to such an extent that by 2000 theunions, local NGOs and representatives ofthe Catholic church combined to organise aboycott of Del Monte’s products in Italy, oneof the company’s key export markets.

DMKL had drawn criticism from activiststudents in Kenya since the 1970s.Nevertheless, as an export-focussed business,DMKL did not pay much attention to thedemands of a few local radicals. Why shouldthey when they paid their 5,000 employeesrelatively well, provided social facilities,including housing, education for employees’children and healthcare - social goods thatmany argue should be supplied by governments,if not individuals themselves? In addition, afurther 50,000 people in the neighbouringtown of Thika are directly or indirectly sup-ported by Del Monte’s presence.

Despite such capital outlay and the ben-efits of the company’s presence, the fact thatthis was not enough to head off a boycott of

DMKL’s produce indicates the changedworld in which we live and companies oper-ate. It underlines that issues of corporateresponsibility relate to how companies treatlocal communities, as well as how they treattheir employees. It also shows that corporatesocial responsibility is as much about theway in which companies interact withemployees and communities as it is abouthow much one spends.

DMKL did not entirely neglect peoples’needs, but the wider society, both in Kenyaand later in Italy, felt that the company wasnot contributing what it could afford for, andthus should offer to, its employees and near-by communities.

The situation reflects the complex, “glob-alised” world which we inhabit. We arebecoming used to the idea of living in a moreinterconnected world, and many changes aredriven by multinational companies whichsupposedly roam the world looking for com-petitive advantage, undermining govern-ments and national interests.

In response, suggests Mary Kaldor of theLondon School of Economics, we see anincreasingly active civil society, making itsclaim to regain the space “grabbed” bymultinational corporations. Alternatively, itmay be that as people in developed countriestravel to places and are kept informed ofevents around the world, almost regardless oftheir occupations, they project this “worldli-ness” onto their everyday lives.

Whatever the motivation for the growthof consumer activism and the changing rela-tions between western societies and the firmswhich were once perceived as representingtheir interests, the changes are significant.Companies must fully understand theseshifts to avoid damaging their reputations,and thus their profits, as DMKL has shown.

The Italian consumer boycott of DelMonte’s goods was directed against the com-pany’s Kenyan operations, but the negativepublicity undermined the Del Monte brandat large. Swift Del Monte Kenya Limitedaction appeased its critics. The boycott was


Toby Kent draws upon a specific case of Del Monte in Kenya, recently acquired by Signor Cragnotti’s Cirio

empire, and argues that wherever one sees the responsibilities of business lying, good business sense dictates

that companies address the needs both of their employees and of the societies in which they operate.


CSR investment is not a choice

Toby Kent can be contacted by emailat [email protected]

cancelled in April 2001, but the damagedone to the company is more enduring.Employee and community relations havenotably improved, but profits remain down.

The events at DMKL show that corpo-rate social responsibility is not simply a lux-ury in which companies invest when theyfeel they can afford it. In a commercial worldin which “the customer is always right”investing in employee welfare, or socialinvestment, is almost as much about whatyour customers demand you pay as aboutwhat your company feels it can afford to pay.

DMKL has learned from its experiences,but it was a costly lesson. Had the DMKLmanagement always listened to the concernsof employees and local communities theycould have avoided the boycott altogether.Expensive developments could have beenspread over years as part of company growthrather than as large, unexpected capital out-lay, and productivity is unlikely to have beenharmed by better employee relations.However, responsible action is not worth acompany’s investment if it does not addressthe concerns of those you want to impress.

If done well, responsible corporatebehaviour will minimise expenditures thatcompanies may come to pay as a matter ofexpediency. It will also reduce the risk ofinternal, client, or consumer conflict. TheDMKL case shows the power of consumersto influence business decisions. However,consumers, or customers are not always endusers but may be clients, or other companiesin supply chains. Whoever they are, reputa-tion matters.

Corporate social responsibility is notabout being nice. The potential to limitexpenditure, maintain or improve employeeand community relations, control risk andpromote reputation means that applying cor-porate social responsibility strategies is sim-ply good business sense. ■

Arecent article in the Financial Times(Oct. 8) reported on a forum thathad taken place at Harvard Business

School, the home of globalised business.Students, it seems, were discussing how cor-porate social responsibility can help bridgethe gap between have and have-not nationsas one way to reduce terrorism. US businessstudents, as a result of the horrific events ofSeptember 11th, are now being forced toconsider how their actions impact on society.

Immediately after the attacks, many fromthe NGO movement thought that CSR dis-cussions would be put on the back-burnerand that there would be little opportunity tocontinue the dialogue with companies thathas progressed relatively well over the lastfew years. Impending layoffs and financialconcerns would surely take precedence overdiscussions about CSR programmes andpolicies.

In some cases this has proven to be true.US-based Dole Food Company has justscrapped its director responsible for CSRpolicies, in spite of their commitment toimproving labour standards.

At the same time, since September 11th,there has been an unprecedented level of dis-cussion across businesses in Europe andNorth America about their impact on socie-ty. CSR has an even greater relevance todaythan it did just two months ago. “The cata-clysmic events of September 11th are onlylikely to intensify society’s scrutiny of busi-ness… many in the media are arguing that acertain redistribution of the west’s economicwealth, rather than redeployment of its mili-tary power, will be far more effective incountering further acts of global terrorism”writes John Griffiths, director of RocketScience, a consultancy.

Some of the issues companies are dealingwith are more immediate, such as mitigatingrisk in order to renew insurance policies orcoping with the obvious concerns of employ-

ee stress. At the same time, companies arestill having to grapple with long-term con-siderations and the question of what CSRwill ultimately mean. James Farrar, CSRManager at British Airways, for example,recognises that their immediate socialresponsibility is to their staff and to the sur-vival of the business… “but, over time, whatthe brand is and what BA stands for willchange.”

Perhaps less apparent than the immedi-ate concerns is the more pressing need forcompanies to understand the link betweentheir regular business actions and their global,social and environmental impacts, in partic-ular, how they can have a more positiveinfluence on global poverty and inequality. Itis an opportunity for CSR programmes tobreak the PR barrier – that is, to be fullyimbedded in a company’s operations andoutputs.

CSR programmes, todate, have been basedon the assumption thatthey can improve thebottom line. But as onecorporate leader said at an EnvironmentCouncil conference lastspring, “this is still aleap of faith”. More importantly, we need tohave a better understanding of how CSRprogrammes can actually have an impact onsocial and environmental performance of thecompany.

Corporate social responsibility emerges,in part, from a frustration that the corporatesector yields considerable power and that theadvantages of the free-market, globalisedeconomy have not necessarily delivered anequal benefit to all. Those in the south havebecome servants to the system, yet fail toderive sufficient benefits.

CSR programmes were meant to partial-ly overcome this. But, to date, with few

exceptions, they haven’t led to any signifi-cant change. BP, well-known for its CSRprogrammes, including stakeholder dia-logue, rebranded itself last year as “BeyondPetroleum”. Unfortunately, there is little evi-dence of BP “doing well by doing good”. BPhad to climb down on its rebranding exerciseat its AGM in April, admitting that it could-n’t commit itself to any serious investment inrenewable energy.

A recent study by the University ofSussex has found that companies with envi-ronmental management (EMAS) systemsperform no better in this regard than thosewithout. And much of social reporting hasresulted in “corporate spin” rather thanimprovements to social performance (seeCorporate Spin: the Troubled Teenage Yearsof Corporate Social Reporting, NewEconomics Foundation, 2000).

CSR cannot save the world, nor can itcompletely rebalance the inequities thathave emerged over the last half-centuryacross the globe. As Oded Grajew of theInstituto Ethos in Brazil says in a new book,The Civil Corporation, “If business is sopowerful and now doing so much good, howcome so much is still wrong in the world?”

An embedded CSR programme, however,can make a difference: to employees; to rela-tionships with customers; and to suppliers.And there is also the potential to see greaterbenefits of business delivered to the south –the current servants of global capitalism.

When employees and shareholders are

By Deborah Doane, Head of Corporate Accountability, New Economics Foundation



“Since September 11th there

has been an unprecedented level

of discussion across businesses

in Europe and North America

about their impact on society”

No more global business as usualCorporate ethics after September 11

7

consulted, they generally don’t agree withthe state of the world. A recent survey byPowergen found that 77% of respondentsbelieve that environmental and social per-formance of the company ranked just as highas financial performance. “Aligning a com-pany’s values with those of its employeesmakes a more highly motivated and produc-tive workforce”, says Rob Lake ofHenderson’s Global Investors.

What can companies do? First, they cancommit themselves to open, honest dialoguewith stakeholders – not just those from theinside. Stakeholder councils provide one wayfor companies to formalise this process andensure that external factors are taken intoconsideration in a company’s decision-making.

The Co-operative Bank, winner of thisyear’s Impact on Society award, is intendingto raise a discussion on its website about howthe events of September 11th may havechanged its customers’ views about a varietyof ethical issues, and in turn, to help deter-mine what the bank’s response should be. Itis proceeding cautiously, however – the dialogue is intended as a way to determinewhat is important to its stakeholders in lightof the events, not a PR exercise to raise itsown profile.

Second, companies must go beyond CSR

as a marketing tool. While it is laudable andimportant that many companies are con-tributing to the disaster relief funds to helpvictims of the attacks, it should not be usedas a replacement for more serious engage-ment with the issues.Corporate Philanthropyat BA may have suffereddue to financial con-cerns, but CSR pro-grammes will continueas the need to align CSR more closely with governance struc-tures becomes more rel-evant than ever before.

A more sophisticatedapproach to CSRengages thoughtfullywith the local commu-nity as partners in theprocess. The implemen-tation of properly monitored and enforcedlabour standards, such as fair wages and livingconditions, should involve community actorsin order to ensure that the best of intentionsare not led astray. A simple signing of a codeof conduct is no longer sufficient.

Third, they should consider how theendless pursuit of profits benefits a few, often

to the detriment of the majority. Basic servic-es, such as water and electricity, are nowdelivered by private northern hemispherecompanies in many developing countries,often in an unregulated manner.

How can companies see the benefits ofthese services delivered to a larger portion of the population, in an affordable andaccessible manner? The pharmaceuticalindustry’s excessive profits through intellec-tual property rights means that many indeveloping countries have little access toaffordable medicine for highly curable ill-

nesses. CSR has, to date, failed

to deliver any tangible bene-fits on a sufficient scale. Butthis doesn’t mean that weshould give up on corporateresponsibility. Following aheightened awareness ofglobal issues sinceSeptember 11th, we shouldbe giving it more, ratherthan less, attention.

Companies that do sur-vive the short-term crisis willemerge in a completely dif-ferent operating environ-ment – one in which CSRhas the potential to help facethe challenges that will seethem survive over thelonger-term, for the benefitof the many, not the few. ■



“What can companies do? First,

they can commit themselves to open,

honest dialogue with stakeholders

– not just those from the inside.

Stakeholder councils provide one

way for companies to formalise this

process and ensure that external

factors are taken into consideration

in a company’s decision-making.”

For more information visit www.neweconomics.org

8

It is difficult to find a dissenting voice inthe current chorus of approval for socialresponsibility. The number of convincing

reasons for being socially responsible isgrowing and, whether these come frominvestors, consumers or employees, mostcompanies recognise the importance ofaddressing social and ethical issues. But oncecompanies have decided that they want to dosomething… what then? Putting these prin-ciples into practice is the real challenge.

An increasing number of companies arechoosing to adopt one of a variety of stan-dards on offer that cover various aspects ofsocial responsibility. Some companies haveobvious key single issues to deal withbecause of the business they are in. Chemicalindustries, for example, have focussed on theenvironment, and clothing manufacturerson labour conditions. In response to theseconcerns, existing standards generally coverone stakeholder group. The ISO series isperhaps best known for its quality (ISO9000) and environmental management (ISO14000) standards. The demands of healthand safety have created other standards, fromthe international OHSAS 18001 to individ-ual national standards. To meet concernsover sweatshops and child labour there arestandards such as SA8000 and the UK-basedEthical Trading Initiative, which focus onlabour practice throughout the supply chain.

However, many companies are nowmoving on from dealing with their sector’sheadline issue to respond to the broaderpressure on companies to be all-rounders. Itis not much use to have an outstandingrecord on pollution reduction if indecentwork practices are endemic in the supplychain. Gradually, the fragmented nature ofsocial responsibility is developing into amore comprehensive approach that tries tobring together all parts of the business’impact on society. In response there are nowstandards that offer an overall managementapproach, encompassing the key areas of

environment, labour and so on. For multina-tionals the UN Global Compact provides aset of principles covering the environment,labour and human rights to which compa-nies can sign up.

There are alternatives to common stan-dards. The most popular is to create a home-made code of conduct. Companies devisetheir own ethical criteria, communicated intheir literature and on their websites directlyto their suppliers and customers. They mayemploy certifiers to check their compliance,but generally this is for internal purposesrather than as a public audit of their adher-ence to their own rules. Another moreresource-intensive alter-native adopted by somelarge companies is socialreporting. Again, this isbased on a home-madecode, as the social reportmakes public the activi-ties and progress underthe code and may be externally verified.Reporting frameworks have been developed inrecent years for this purpose, such as theAA1000 and the Global Reporting Initiative,that provide methodologies on social report-ing and their external verification.

So companies trying to understand whatsocial responsibility actually means in practiceare faced with a variety of possible solutions.There are two key decisions of principle to bemade. The first is whether to adopt an exist-ing standard or devise an own code. Owncodes have the benefit of being tailored to thebusiness and reflecting the values of theshareholders, management and, if consulted,employees and other stakeholders. Commonstandards have the converse benefit of beingshared with others and so are perceived asneutral. Stakeholders and the public as awhole do not fear that the company hasomitted issues that it finds inconvenient.Moreover, few but the largest companies canafford the process of sifting and choosing their

own values or have the expertise to judgewhether they can be monitored effectively.

The second is whether to have inde-pendent verification. Those against cite thedifficulty of verifying soft issues and theproblems of short-term reviews by auditorswho have not been part of the process ofcrafting the values. These arguments seem tobe losing ground to the need for credibilitywhich independent review can bring. Againthere may be a differentiation by size here.The vast majority of companies that are nothousehold names have little hope that wewill take their word for it. The big brandsmight have thought differently in the past,

but the ethics of the largest companies havebeen called into question in recent years. Asa result, many multinationals have takenrefuge in independent verification, believingthat although openness may expose weak-nesses, it will also inspire the greater confi-dence that the whole process is seeking toachieve.

Every company is different: we all havedifferent focuses depending on the type ofbusiness we do, the issues we face and ourown organisational culture. But the princi-ples of social responsibility apply to everyone– and make business sense for everyone.Choosing the best way to deal with the issuesof social responsibility depends on what yourcompany needs and what you can invest, notjust financially, but also in terms of both timeand effort. ■


Companies realise why they should be socially responsible, but the question of how is not so straightforward, says Michael Littlechild


Effectively implementing businessethics in the enterprise

Michael Littlechild is the CEO ofGoodCorporation. For more informationvisit www.goodcorporation.com

"It is not much use to have an

outstanding record on pollution

reduction if indecent work practices

are endemic in the supply chain"

1: Articulate a clear sense of purposeFirst, revisit the purpose of the business. Thepurpose should be inspirational for everyonewith a stake in the business. That means itwill probably include a social dimension.

There are very few businesses that do notmake a social contribution. You take away oilor banking, the utilities or transport busi-nesses and watch the knock-on effect oneveryone’s lives.

To get to your purpose, ask what theworld would be like without your product orservice. Social aspects of a business missionis not a superficial aspect of branding. Itshould be an accurate representation of yourrole or it won’t be credible.

Take Pfizer’s refreshing statement of pur-pose: “We at Pfizer dedicate ourselves tohelping humanity and delivering exception-al financial performance by discovering,developing and providing innovative healthcare products that lead to healthier and moreproductive lives.”

Within this new sense of purpose is theconcept of balance. Increasingly, sharehold-ers understand that managing simply tosecure financial results can bite you on thebottom line.

2: Create a workforce committedto your purposeArticulating your purpose gains you at leasttwo things. First, you communicate a con-sumer benefit (and win a bit more trust).Second, you stand more chance of achievingthat rare thing – employees working togeth-er for a common goal.

But there’s more to it than defining adirection. There has to be a conscious deci-sion to create a common culture. CarolLavin Bernick took over from Alberto Culveras Vice Chairman and Director of Pfizer andrealised the company was facing a culturalcrisis. Changes included making an annual‘state of the company’ address and creatingthe role of Growth Development Leader.

She says, “Passion is probably the singlepre-requisite to cultural change… if you’renot passionate about it, don’t even bother.”Believe in your product or service but don’tpresume employees will gather round theflag. Creating a co-operative culture whereemployees work together on a shared goalwon’t happen by accident.

A co-operative culture involves a plannedapproach, employee involvement, the shar-ing of best practice and common policies andprocesses. When you are on this road, youwon’t simply find it easier to retain existingemployees, you will also become a magnetfor like-minded people.

3: Define “how we do thingsaround here”People have a lust for a clear framework ofhow to behave. Usually called values, the factis there are many ways of defining how you

do things in your business. Shell have theirbusiness principles. Southern Sun Group ofSouth Africa have defined their top tenaccountabilities to stakeholders. Johnson &Johnson have a credo. Hewlett Packard haverules of the garage. The big trick is develop-ing a framework which makes sense for you.But there are three critical factors:

• your convictions need to emerge fromyour business

• they need to be genuine convictions andstrong enough to remain in place whentested

• they need to be translated into practice

4: Manage the intangiblesThe model of business success has changed.Past financial success only provides onedimension of value. Other factors which canadd to the value of a business include a clearstrategy, a strong board, customer loyalty,employee skills, new revenue streams, competitive differentiation, reputation andinnovation.

They may be called intangibles, but that’snot a good name. They’re very tangible. Ifyou successfully manage values and valueyou earn trust.

5: Develop a clear strategy for corporate social responsibilityHere’s a prediction. In the next decade or so,corporate social responsibility will mergeinto corporate governance and corporatereputation. They’ll become the same thing.In the meantime, it’s not too difficult to cre-ate your own model for managing CSR.

There are some useful starting points.For example in the UK there are theBusiness Impact Task Force model and thenew GoodCorporation mark.

The trick is to recognise that there is not

With a raft of critics attacking global brands and with businesses waking up to corporate responsibility, John Drummond suggests ten simple steps to help organisations win trust


10

How to protect a trusted brand


one holy grail in CSR but at least seven.However, that’s for another day. The initialchallenge you have, as Richard Holme andPhil Watts from Rio Tinto and Shell havesaid, is to find your “magnetic north”.

You need to define why you want to man-age CSR. And that varies from company tocompany. Drivers include attracting ethicalinvestment, compliance, competitive differentiation, improving reputation andwinning customer loyalty.

6: Create a brand with personalityThere is no reason why common principlesof success should lead to conformity, but theyoften do. People articulate their purpose andvalues in the same way as others. They fol-low the same reporting guidelines. They fol-low the same techniques in eBusiness,employee communications, financial man-agement, setting objectives and every otheraspect of business. And that is not a goodway of winning trust. I prefer Madonna’sadvice - express yourself.

People who win trust are open, visible,engaging and they tend to have their ownpersonality. That personality is diverse. Youcan see it in the buzz as you walk into thereception of Asda HQ in the UK.

You can see it in the amazing ideas ofSemco of Brazil, who devolve “to the max”.And you can see it in the words of RalphLarsen, Chairman and CEO of Johnson &Johnson, in their European CSR report for2000 (that’s an invitation to seek them out).

7: Listen and involve people in strange new waysWhy is this at 7? The first step to win trust isto listen. If a company does not have its fin-ger on the pulse of stakeholder opinion, itdoesn’t have a feel for its corporate health.And it’s not just about good old fashionedquantitative and qualitative research.

Look at the recent creation of a consumerpanel by the radio station Classic FM.Members will be recruited from listeners viaon-air advertisements. As GWR chairmanRalph Barnard says, the aim is “to meet thegrowing need for consumers to have a moreeffective voice in broadcasting.”

The truth is that there are a bunch ofnew ways of engaging customers. We’realready seeing more engagement through

digital TV. And for the last few years I’vebeen proposing businesses use their access tomarket to move beyond employee volunteer-ing to customer volunteering for social caus-es. It’s coming.

8: Manage risk including risks relating to trustIt’s bizarre that the risk management or cor-porate audit departments still focus onfinancial risk. New corporate governancerequirements in the UK and the newCompany Law Review know that directorshave wider responsibilities.

The sentiment they express is that thedirectors have a duty to manage longer termrisk relating to reputation, business probity,health and safety and social or environmen-tal issues.

Manage risk effec-tively and you can headoff chunky financial risklike more regulation andlegislation, windfall taxesor consumer boycotts.

My own convictionis that a new disciplinewill emerge called integrity risk manage-ment. It’s not difficult. It’s applied commonsense. You simply spot the areas where thereis a potential gap between your policy andyour practice and you manage it.

9: Leverage social changeBusinesses still tend to think good corporateresponsibility is about managing the foot-print of their impact on society. But realprogress will be achieved when they usetheir muscle to achieve genuine socialchange linked to their business. I see agrowth in campaigns which go beyond basiccharitable fund-raising or PR into new terri-tory – working on a single cause and campaigns which make a tangible social difference.

It’s a difficult balancing act, but it can bedone in a way which wins trust and leads togenuine social and business benefit. There isnothing wrong with mutual benefit. Andthere is nothing wrong with business playinga social role.

10: Invest in communications but make it a dialogueWhat is the point, I ask, in having a great

story to tell but not telling it? There are won-derful hidden stories about the contributionof business. Look at the recent social websites of BT and Diageo. There are many hid-den gems in almost every business.

But even the best don’t invest. They don’tinvest in communications. And when theydo, they make several key mistakes:

• they sometimes forget that people areinterested in people

• they sometimes forget that good communications are about a dialogue not about an annual report

• and they sometimes forget that we are as interested in future plans as past performance

So what is this? So what are these ten steps? They don’t add up to PR, corporateresponsibility or branding. So what are wetalking about here? Is it a new concept?Could we call it sustainable branding ortrust marketing?

You can if you like. I prefer business com-mon sense. And it isn’t hair-brained wishfulthinking. Many of these actions are takingplace today in businesses of many sizes. Also,let’s not imagine this is only relevant forcompanies. This is as relevant for govern-ments and not-for-profit institutions. It’s theway things are going.

Our choice is simple. We can create sus-tainable businesses which are authentic, aimfor balanced results, behave responsibly andwin trust because they deserve it, or we canstep boldly down a cul-de-sac of increasedconsumer cynicism. Where do you want tobe? In the wake or in the vanguard? ■


“Passion is probably the single

prerequisite to cultural change…

if you’re not passionate about it,

don’t even bother.”


John Drummond is the StrategyDirector of Corporate Culture.

For more information visit www.cc-plc.com

What’s your background with Shell?I’ve been with the group for 22 years. I startedout as a research biochemist in support ofour chemicals business. I was a foundermember and am a current member of theSustainable Development Group in the cor-porate centre of Shell International.

How is Shell going about becominga truly sustainability-supporting company?Firstly, our commitment to sustainabledevelopment is to contribute to sustainabledevelopment. That means that you need tomanage your operation in a way that isresponsible in terms of respect for the envi-ronment, of respect for people and of beingmindful of human rights.

You can do that within your existing busi-ness model in that you can run your affairsin a way that recognises these broaderresponsibilities. In this regard, when you getoil and gas out of the ground you do it morecleanly, more safely, more efficiently.

When you refine it you are very con-cerned about eco-efficiency aspects. Andwhen you sell the products you try to do it inthe way that is going to involve the lowestquantity of sulphur, lead, aromatics and soon. And when you explore in sensitive areasof the world you do it in a way that respectsbiodiversity and the rights of indigenouspeople or whatever the particular issue mightbe.

That type of contribution to sustainabledevelopment can be done within your exist-ing business model. On the other hand, youcan also view it as evolving within what Iwould call the fourth dimension of sustain-able development, that of time.

You can say you can use this agenda toinform the way you evolve your product

portfolio. In our case as an energy major thatwould mean a long term evolution awayfrom hydrocarbons as the basic fuel stock torenewable or alternative energy sources. Soultimately one can view that as the goal.

But I also have to be very upfront and saythat we can sow the seeds for that now, wecan bring in the new technologies, we canhelp develop the markets and the infrastruc-ture, but let’s not kid ourselves: hydrocar-bons are going to remain the mainstay of theenergy scene for at least the next thirty yearsand the transition away from them is goingto be a long process.

What are the internal challengesyou’ve faced at Shell? How do corporate communications,marketing and corporate strategistsinteract in terms ofimplementingsocially and environmentally responsible strategies?I think it operates at amore fundamental levelthat that. The idea isthat we want to take theconcept of corporatesocial responsibility into the decision-mak-ing process and hardwire it into the systemsand processes on the one hand, and bring itinto the hearts and minds of people on theother.

It’s a cultural change that we are trying toengineer as part of Shell’s overall transfor-mation. So in that regard it’s not just a ques-tion of individual departments – it’s abouthow you bring this into your strategy andplanning, how you bring it into your finan-

cial approvals, how you bring this into theway in which you motivate and reward staff.

Can you tell us how the management structure works at the very top level for strategicdecisions on this within Shell?We have at the executive level what we callthe Sustainable Development Committee,which is chaired by Phil Watts, theChairman of the Committee of ManagingDirectors. This committee comprises of verysenior representatives off the ChiefExecutives committees of each of our fivemain businesses: Exploration and Production;Chemicals; Oil Products; Gas; and Powerand Renewables. The committee also com-prises heads of corporate centre functionslike human resources, finance and legal as

well as company secretaries and us in theSustainable Development Group. It meetstwice a year currently and looks at the wholeapproach of driving this type of thinkingacross our organisation.

Beneath that there is what we call theSustainable Development Panel, whichcomprises representatives from those sameareas but at a rather more workaday levelwho are still very senior but who can roll

Mention corporate ethics and the name of Shell often comes up. We spokewith Mark Wade, founder of the Shell Report and a key member of Shell’sSustainable Development Group, to find out more about the business benefitsand challenges


12

Shell’s Mark Wade speaks withEthical Corporation magazine


“We want to take the concept of

Corporate Social Responsibility into

the decision-making process and

hardwire it into the systems and

processes on the one hand, and to

bring it into the hearts and minds of

people on the other”

i n t e r v i e w

What are institutional investors asking for from Shell today that they didn’t ask for 5 years ago?Clearly there has been a very significantincrease in interest in socially responsibleinvestment funds. This is coming from thegeneral public who want to make sure thattheir money is invested in ways they feelcomfortable with.

It’s also coming from pension fundswhich are being managed on behalf of allsorts of organisations, such as unions anduniversities, who are telling their fund man-agers they want their members’ moneyinvested in a way they would feel happywith. There’s no doubt that this is growingrapidly, but it still represents quite a smallproportion of overall investment in the stockmarkets.

When we look at the more mainstream

investors, I think that to a large extent theseconsiderations are not top of their agenda.When it comes to making judgements oncompanies in this more mainstream areathey’re going to be looking for the most partat the more traditional measures of predict-ing future value growth. Nevertheless, ourcommitments to CSR and sustainable devel-opment are seen as neutral in that regard. Solong as we can be seen to perform as an effec-tive organisation then they will continue torecommend us.

Of course, you do see the growth inthings like the FTSE4Good indices and theDow Jones Sustainability Indexes andthere’s a whole raft of these type of indicesnow. Shell is in the FTSE4Good. We’ve beenin the Dow Jones Sustainability Indexessince their inception and last time around wewere the top sustainability company in theenergy sector. ■

their sleeves up and make this happen in apractical sense throughout the organisation.

Externally we also have the SocialResponsibility Committee, non-executiveexternal directors of the board of the two parent companies of the Shell Group, RoyalDutch Petroleum and Shell Transport and Trading. This meets on a twice-yearlybasis to review our internal governanceprocesses regarding the application of Shell’sbusiness principles, to help shape safety andenvironmental policies and procedures andto shape our commitment to sustainabledevelopment.

Are you feeding the message aboutsustainability and responsible behaviour out to your suppliers?It’s a mammoth challenge. One importantcomponent is that when we form new jointventure relationships or contractual supplierrelationships our business principles areclearly on the table during those negotiations.We have to be satisfied that the conduct ofthat joint venture or contractual relationshipwill uphold those principles or operate in away which is compatible with them.

That’s the first element and we have rightof audit in terms of HSE and other ways ofensuring that our businesses are managedwith integrity. That’s the front line if you like.

The second line is more on the heartsand minds side again, to use our influence tohelp people see the business case for corpo-rate social responsibility such that there is awillingness to want to go these routes. Butit’s a big challenge and the further you pushthe envelope on your supply chain or rela-tionships the more difficult it becomes.

What are emerging corporateresponsibility issues today for the energy industry?In the energy industry, the biggest issue isthat of climate change and companies’responses to that particular issue. That is amajor challenge, in terms both of how youaddress the issue of climate change and ofthe impacts that has on the way you manageyour business. You have to look at what busi-ness opportunities can come from it. Forextractive industries clearly there are otherenvironmental issues. Biodiversity is of concern. When operating in sensitive partsof the world the rights of indigenous people

and the development of social capital withinthe respective communities are some of themain issues with which we will be confronted.

Where are the CSR-related businessopportunities in the future for Shell?In terms of business opportunities, I thinkthat depends on the business model. In a group of companies like Shell we havehugely different businesses. We have oilexploration and production, where many of the relationships are with national oilcompanies.

What are the advantages there of CSR?Well, we’re seen as a company of enormoustechnological strength and as an organisa-tion of great integrity in that we don’t bribeand take a very strong stand in that area.

Shell has the economic capability to takevery long-term views of emerging energysystems and have the economic clout to makethe massive investmentswhich are oftenrequired to help a coun-try generate incomefrom its indigenousmineral wealth.

So you need todemonstrate to govern-ments that you can behave responsibility andhelp them meet their strategic energy needs.You also need to demonstrate that you can dothis in a way which is sensitive to the environment and to the needs of localcommunities. If you can do this then you arelikely to be seen as a preferred partner. Insome of the other business models, such asbusiness-to-business, you can look atimproving your costs through eco-efficiency.In some of the business-to-business con-sumer models you might use an awareness ofsociety’s expectations for the delivery of goods,mindful of the environment and respectful ofhuman rights in their supply chain and pro-duction.

You need to make sure that your goodsand services are in line with that. If peopleare looking for things which are greener,cleaner and safer, then that can be used to inform the type of products you wouldproduce. So there’s a number of differentways that you can use an understanding ofCSR and where it’s come from in terms ofsociety’s expectations to deliver business value.


“When we form new joint

venture relationships or contractual

supplier relationships our business

principles are clearly on the table

during those negotiations”


For more information on Shell visitwww.shell.com

What’s your involvement in sociallyresponsible investment?

I’ve been the Head of SRI strategy atHenderson since December 2000, after 14years at NGOs such as Friends of the Earth,Traidcraft and the RSPB. Nick Robins, ourHead of Research, has had jobs in similarorganisations. The work I do now is surpris-ingly similar to the work I did at NGOs –working with companies to try to influencethem to embrace SRI and ethical polices.Henderson’s global investments total justover £100 billion worldwide and Hendersonhas large shareholdings in a large number ofcompanies, which gives us some influenceover their ethical policies. I believe that theextent to which business can offer solutionsto some global problems is significant.

Can you give us some backgroundon Henderson’s investment in SRI?

It started in the late 1970s beginning with the Joseph Rowntree charitable trust.Henderson now has over £1 billion in SRIinvestments, one of the largest ethical invest-ments in the UK. We invest for a variety ofretail and institutional clients.

Will the Company Law Review affect the way these funds are invested in the future?

The Review will lead to legislation in a cou-ple of years that will probably require com-panies to report on aspects of environmentaland social performance. But we are alreadyasking companies questions about theseissues now, whatever the outcome of theCompany Law Review.We look at human rightsand socially responsibleinvestment policies inall the companies weresearch for potentialinvestment. We make apoint of seeking anactive dialogue withcompanies on all the issues of business ethicsin all areas. We try to work out as much aswe can about how companies work.

For example, staff motivation and repu-tation are all-important to their future valueto us. If we see that companies do not seemto be taking notice of some of these issues,we will address this, as any other investorshould, to help them have a full understand-ing of the importance of socially responsibleinvestment.

Henderson has a constant dialogue withcompanies based on our risk managementstrategies to make sure that our funds per-form and that we have an understanding ofthe views of that company and the risks forour money. We will, of course, ask forimprovements if we believe them to be neces-sary. We are continually trying to build a morerounded analysis of companies into our main-stream investment process.

What are the challenges for companies you are working with in implementing ethical practices?

It depends on which sector you are in. Inretail it’s often the developing world. Thereality is that operating in low labour costcountries has some major ethical challengesfor companies. The reputational risk of

using child labour is very great for a majorhigh street brand.

For example, currently there is a lot ofdiscussion about chemicals in the homebeing potentially hazardous to consumers.Companies need to get on top of public

opinion and safety aspects to keep up withpublic expectations.

Oil companies have issues of humanrights, security in developing countries andof course climate change. Mining companiesthat work with the military in developingcountries have some major issues they haveto look at.

From Henderson’s perspective,where do you see this moving in the next year or two, especially withan apparant recession coming?

The level of expectation of consumers on allthese issue is rising – companies are going tobe continually pressured to increase standardsand to do things on a voluntary basis.Expectations will rise and public expectationswill still be there in any recession.

What are the benefits? Well, supply chainsavings, HR savings, R&D savings. This isquickly turning into a must-have scenariofor companies. There is a sense that interna-tional companies need to be far more sensi-tive and show that they are socially responsi-ble in different countries and that they canadapt to meet changing public needs. ■


Investment fund managers are playing an important role in encouraging business ethics within enterprises and establishing responsible funds forinvestors. Ethical Corporation speaks with Rob Lake of Henderson GlobalInvestors to find out what institutional investors are looking for from enterprises


Influencing ethical policy

i n t e r v i e w

“What are the benefits? Well, supply

chain savings, HR savings, R&D

savings. This is quickly turning into a

must-have scenario for companies”

For more information visit www.henderson.com

14

Few journalists, politicians, corporateCEOs or international agency profes-sionals would bare-facedly reject cor-

porate social responsibility. But every year,MBA courses in business schools all over theworld are full. Full of ambitious would-beexecutives who argue that the “business ofbusiness is business”. Reiterating Friedman’s1970s utterances about the social responsibil-ity of business being to make profit, fromwhich all benefits will ‘trickle down’ to thosewho patiently wait, MBA students are mostreluctant to make the business case for CSR.Foremost they want to be taught how tomake money fast. Indeed, one of the greatestdiscrepancies in the evaluations MBA stu-dents customarily make of their professorspertains to their appreciation or not ofwhether the case for CSR has been madeconvincingly or boringly. At WarwickBusiness School, learning about CSR is acompulsory part of every MBA. In somebusiness schools it is a losing battle to makeone session an optional elective.Nonetheless, for students or senior execu-tives alike, to reject CSR is to be oblivious toone of the most fundamental challenges tohave impacted international business overthe last ten years.

A moral imperativeOver the last decade, foreign direct invest-ment by international companies in develop-ing countries has increased tenfold and pub-lic funding of development assistance hasdeclined. CSR is now not only a bottom lineissue but also a moral imperative, withrespect to the relationship between businessand its internal/external stakeholders. CSR isto be sidelined at your peril.

Ethical deliberations are demandingmore time in the boardroom. Business lead-ers are realising that they need to address

company culture so as to merit an image ofintegrity and responsibility. They are alsoaware that the ‘external costs’ of their opera-tions (i.e. the costs of those environmentaland social impacts beyond operating coststhat previously the state or local host com-munities have absorbed) can no longer betaken for granted, and over time, need to be‘internalised’.

Globalisation also means that interna-tional business is increasingly operating inareas of conflict. Business can no longer poseas neutral. There exists a growing imperativefor business operating inareas where humanrights are infringed touse legitimate influenceto promote humanrights even outside oftheir areas of operation.At the very least they arebeing called upon toexamine whether their presence and theirindirect impacts contribute to, or under-mine, the development rights and opportu-nities of their host communities.

Some reflectionsI offer the following reflections for those thatstill believe there is no business case for CSRand that companies have no role to play incontributing to society other than throughprofit-making.

Some believe that people will a prioribenefit if business is allowed unbridled tomake profit. This is called the ‘trickle down’effect. The concept refers to economic meas-urements of benefits, not equity or well-being considerations. Furthermore, historyhas demonstrated that people living inpoverty, especially indigenous communitiesin the vicinity of remote agricultural, miningand oil operations, have been among the last

to benefit. They have lost faith in the distri-bution powers of the governments that host-ed these investments. They now frequentlyresort to negotiating directly with business tosecure more immediate benefits in educa-tion, housing and health – basic develop-ment rights – and in return they grant whatis tantamount to a local ‘social license tooperate’. This is understandable, and mostcompanies respond rationally by seekingdialogue not conflict. Some countriesrequire this in law, few are aware that suchprior consultation is enshrined in an ILO

(International Labour Office) convention orin the national constitution of countries withstrong indigenous communities, such asColombia. Companies are also recognisingthat they must take responsibility for thewider impacts of their operations beyondtheir workforce and the perimeter fence.With the recent liberalisation of investmentregimes worldwide, governments may havemade downward adjustments in social wel-fare spending in order to accommodate taxbreaks to attract these foreign investments,sometimes with strong encouragement frominternational financial institutions. Businessis starting to recognise that it has a responsi-bility to address locally the social impactsgenerated as a result of their investmentopportunities. Companies are acknowledg-ing that they cannot pay their taxes thensleep easy in the knowledge that benefits willtrickle down, other than through employ-

By Professor Alyson Warhurst, Director, Corporate Citizenship Unit,University of Warwick, UK



“CSR is now not only a bottom line issue

but also a moral imperative, with respect

to the relationship between business

and its internal/external stakeholders.

CSR is to be sidelined at your peril.”

Educating tomorrow’s executive The business case for the integration ofcorporate social responsibility

15

ment, to their local host communitiesthrough the lifetime of their investment.

The ‘triple bottom line’Some suggest that the greater the competi-tive pressure on business the less able theywill be to serve wider social goals. But thismisses the fact that, in many countries, gov-ernments and banks now select companies,award licenses and approve finance on envi-ronmental and social track records and notjust on economic grounds. This is the ‘triplebottom line’.

Many companies are pushing CSR in thesupply chain by demanding that their sup-pliers demonstrate ethical and environmen-tally sound practice. Research is showingthat the conditions attached to investmentfinancing and procurement, which are sensi-tive to longer-term political, environmentaland health risks and liabilities, are drivers aspotent as government regulation in promot-ing more environmentally and sociallyresponsible business practice. This in turnenhances a company’s competitiveness andcontributes to its acquiring ‘preferred suppli-er status’.

Some observers have expressed concernthat there exists pressure from ‘sociallyresponsible’ businesses to impose costs theyhave accepted voluntarily on their suppliersand that this is tantamount to unfair busi-ness practice.

The response here is that, yes, companiescan and do set higher and higher standards.These improved social and environmentalpractices, in turn, are quite appropriately dif-fused through the market. As a result, anumber of corporate initiatives in the areasof human rights, biodiversity conservationand social development have addresseddevelopment needs that were not being metby governments.

This view, in a sense, is a corporate paral-lel to the argument that we should not givemoney to charities as individuals as this takesaway the pressure on governments to addresssocial development. While we might agreewith the theory, who are we to say that thoseliving in poverty and those whose humanrights are being infringed today should waitfor governments to change tomorrow, or inthe case of developing countries that haveinvited foreign investment in, for the benefitsto trickle down? In an ideal world there

would be no need for corporate social invest-ment or for charities, but surely there is roomfor both while we are striving for a ‘trickledown utopia’. In the meantime, appropriateconsultation and active listening to stake-holder needs and concerns should ensurethat the strategies of companies wishing topursue responsible practice are tailored tolocal needs.

No harm to developmentI have heard it asserted that companies,through being obliged to operate to higherstandards, are harming the developmentprospects of poor countries on account oferoded competitiveness. This seems miscon-ceived on two counts.

First, economic wealth is no longer a sin-gle priority. Rather, broader concerns abouthealth, wellbeing and quality of life are asimportant and, in some specific situations ofweak government, busi-ness can deliver thesemore efficiently anddirectly to local commu-nities through corporatesocial investment.Secondly, communitiesand politicians in devel-oping countries havestrived hard to achievehigh environmental andlabour standards andnot to be considered as‘pollution havens’.

Moreover, research suggests that under-taking environmental investment can pro-mote economic, technical and energy effi-ciencies and savings and reduce costs in thelong term through avoiding costly retro-fit-ting and reducing future liabilities.Increasingly, some companies consider theyhave a responsibility to use their legitimateinfluence to promote human rights andlabour codes of conduct as well as improvedenvironmental standards, as good corporatecitizens.

Just because we don’t all agree aboutwhat is ‘development’, is that justification fordoing nothing? I should think not! It missesthe growing importance to business of part-nership and dialogue with stakeholders andinterested partners that can help companiesto understand what would actually consti-tute improved social performance and con-



Professor Alyson Warhurst holds theChair of Strategy and InternationalDevelopment at Warwick BusinessSchool and is Director of theCorporate Citizenship Unit (CCU),University of Warwick.

For more information visitwww.wbs.ac.uk

tributions to development as defined by spe-cific affected groups.

Students and social policyFinally, it is ironic that MBA students aregood at scoring points today about the legit-imacy of NGOs, while their professors prob-ably protested in the 1960s and 70s aboutapartheid, the coup in Chile, policy towardsthe Sandanista government in Nicaraguaand the ‘cuts’ at home in education. Studentstoday, (MBAs or political scientists), aremore likely to make a ‘hit’ on the stock mar-ket than hit the streets protesting.

They miss the important point aboutwhy pressure groups exist. NGOs in mostcases endeavour to speak on behalf of people(or issues) who, for reasons such as humanrights infringement, have no ‘voice’ – i.e. dis-placed communities, refugees, disadvan-taged groups such as women and children,

endangered species etc. It is through dia-logue with NGOs that many of these issuesare put on the business agenda.

I am definitely not arguing that MBAstudents are unworldly or immune fromsocial responsibility concerns. In fact, themost rewarding part of teaching is beginningwith a class of sceptics and ending with anenthusiastic group of students who arequeuing up for further reading and casestudies to make the CSR business case. ■

"Companies are acknowledging that

they cannot pay their taxes then sleep

easy in the knowledge that benefits

will trickle down, other than through

employment, to their local host

communities through the lifetime

of their investment."

16

Can you give us a little informationon your career to date and currentjob role at FTSE?As Head of Index Design at FTSE, myresponsibilities include the design both ofFTSE’s indices and of bespoke indices forFTSE’s external clients. As one of the origi-nal five staff of FTSE, I have undertaken avariety of roles within the company,focussing on the calculation and manage-ment of indices, the operation of data servic-es and the provision of consultancy servicesfor FTSE’s clients. Managing the introduc-tion of free float of FTSE indices and theplanning and design of FTSE4Good havebeen career highlights to date.

Can you give us some backgroundon the FTSE4Good indices and thethinking behind them? Is this is a charitable exercise or did thedemand come from investors andFTSE listed companies originally?FTSE created the FTSE4Good index seriesin response to market demand as there wasconsiderable interest in, and demand for, arecognised global benchmark for sociallyresponsible investors. FTSE4Good providesa tool for investors to track the performanceof a company’s corporate social responsibili-ty against a comparable benchmark in atransparent and objective way. FTSE4Goodis a new and different means of assessing bestpractice in corporate social responsibility.

There are various different attemptsat creating a standard for SRI,including the Global ReportingInitiative. How do these tie in withyour objective global standard forsocially responsible investment? The Global Reporting Initiative is likely tocontribute to the quantity and quality of dataavailable and therefore to the growth ofFTSE4Good, which will evolve withinvestors’ standards as more information

becomes available. The principles on whichthe FTSE4Good indices are based are root-ed in globally accepted international stan-dards such as the UN Global Compact andthe Universal Declaration of Human Rights.From this foundation, FTSE4Good identi-fied three key areas:• the promotion of practices that mitigate

damage to the environment• the encouragement of respectful and con-

structive relations with stakeholders• the support and respect for the protection

of international human rights.FTSE hopes the development of the

FTSE4Good indices will encourageinvestors and companies, as well as the pub-lic, to engage in debate over their sociallyresponsible practices. As companies areencouraged by investors to adopt sociallyresponsible practices, the level of disclosurewill increase. This will allow the index seriesto evolve and reflect the changing expecta-tions of the market over time.

Information on the companies included inthe FTSE4Good index series is sourced fromresearch and analysis conducted by EIRISand its partners globally, under the directionof the FTSE4Good Advisory Committee.This research and analysis has been supple-mented by the use of questionnaires.

Why do you think corporations are approaching you to be listed in FTSE4Good?Initiatives like FTSE4Good are makingcompanies more aware that investors expectmore than simply good financial perform-ance. FTSE4Good allows them to demon-strate that they are meeting those challenges.

Profits and ethics used to be atopposite ends of the scale. What'schanged in the last decade andwhere do you see this leading in the next ten years?There has been a vast increase in the number of

indices and funds based on different concepts,such as technology and growth, in the past fewyears. FTSE4Good is possible becauseinvestors are becoming more aware that theycan play a role in social responsibility whilst nothaving to suffer lower financial performance intheir investments. The indices aim to expressinternational consensus on the principles ofresponsibility to which companies should beexpected to adhere and to establish theseprinciples as a global standard for corporateresponsibility.

Do you believe the current politicaland economic situation will have aneffect on companies strategies forSRI / CSR? Non-core strategies canoften be shelved in times of turmoil.Have we come too far to go back now?Business leaders around the world nowrecognise that companies enjoying the eco-nomic benefits of globalisation can alsodemonstrate a commitment to corporatesocial responsibility. There is a deepeningconviction that a socially responsibleapproach will enhance the reputation ofcompanies and reduce business risks irre-spective of market conditions.

Alongside this, there has been an increasein demand from global investors for corpo-rate social responsibility issues as an invest-ment criterion. In the UK alone there hasbeen a rise in the number of ethical fundsfrom 34 in 1998 to over 60 now, as well as theamount of investment in these funds - £1.8min Q2 1998 to £4bn in Q3 2001.

This trend is reflected across globalinvestment markets and has indicated theneed for the market to have a consistent,global standard by which to judge companies’corporate social responsibility credentials,hence the launch of the FTSE4Good series. ■


Ethical Corporation speaks with FTSE’s Gareth Parker to find out more aboutwhat’s driving initiatives like FTSE4Good


Creating global benchmarks for corporate responsibility

For more information visitwww.ftse4good.com

i n t e r v i e w

Which industries are leading? Andwhich are way behind?

Difficult question, as different industrieshave different environmental and social risksassociated with them. Our job in theresearch unit is to identify those companiesin a sector which show strong environmentaland social performance. We carry out arolling programme of sector surveys, withthe aim of seeing who the leaders and lag-gards are.

It is also part of remit to encourage thelaggards to improve their environmental per-formance.

How seriously are ethical funds takenin the City?

In the UK, retail SRI funds have grown to£3.7 billion in little more than a decade.Recent pension fund legislation, requiringpension fund trustees to disclose whetherthey take account of social, environmentaland ethical issues, has also given the indus-try a boost.

July 2001 also saw the FTSE4GoodIndices, a new family of indices covering theUK, Europe, USA and the world, go live,once again raising the profile of SRI.

How much is SRI becoming an issuein standard funds?

Following the introduction of the pensionfund regulation in the UK, we are beginningto see SRI embraced by all shareholders. Forexample, some of the SRI specialists areintroducing voting policies specifically onSRI issues, such as a commitment to voteagainst the annual report of a companywhich fails to produce an environmentalreport. These policies apply to all the assetsmanaged and not just to those in screenedmandates.

We have recently had a review of institu-tional investment in the UK called theMyners Review. Its support for greater trans-parency and for investor activism could alsolead to a growth in SRI.

Do you believe that some in the cityare looking to discredit these funds?

The City’s attitude to SRI is changing. Mostnotably, UBS Warburg in their reportSustainable Investment (Aug 2001) statesthat it believes changing public sentiment,new laws and the launch of ethical bench-mark indices will encourage product innova-tion and growth.

Are you seeing different SRI trendsemanating from different countries?

The growth of SRI in the UK is part of aworldwide trend. One example of this is thegrowing number of social investmentforums, such as UK Social InvestmentForum (UKSIF), around the world. UKSIF,the UK’s membership network for sociallyresponsible investment, was established 10years ago - the latest, ASrIA (“SRI” in “Asia”),will be launched in early November 2001.

And, to respond to the growing interestin SRI across Europe and the need thereforefor pan-European information and network-ing, five social investment forums in Europehave got together to create the EuropeanSustainable and Responsible InvestmentForum (Eurosif). Funding for Eurosif ’s ini-tial work programme is being provided bythe European Commission.

Are corporations fearful of negativeinvestment consequences ofnon-responsible behaviour?

We have noticed that in recent years compa-nies are responding much more promptly toour requests for information on their envi-ronmental and social performance. I believethis relates to the growth of SRI in the UK,and in particular to the introduction of thepension fund disclosure regulation.

Can you give us an insight into thelevel of commitment to activelyimproving their environmental orsocial performance companies needto demonstrate to convince your team

that their commitment is serious?

Jupiter’s SRI funds invest in two types ofcompanies: those that are solving an envi-ronmental problem; and those that are min-imising their impact on the environment.

For companies in the second category –best in class companies – we are identifyingthose companies which are demonstratingsector leading environmental and social per-formance. Whilst there are certain universalindicators which are relevant for all companies(such as introducing environmental man-agement systems and publishing CSR reports),other key performance indicators may onlybe relevant to certain sectors. For example, inthe retail sector we would look for the devel-opment of codes of conduct for suppliers,whereas for the housebuilding industry wouldlike to see use of brownfield sites and highenergy efficiency in the houses they build.

We are looking for a commitment to con-tinuously improve their environmental andsocial performance from all companies thatwe deal with.

As an integral part of protectingbrand strength, do you believe thatethical business policies will be animportant part of all corporate strategy in the future?

In a world in which financial value increas-ingly depends on intangibles like brands andmanagement quality, over time it may makemore sense to look at social, environmentaland ethical performance to assess futurefinancial prospects, as well as looking at tra-ditional indicators.

I believe that companies have to be increas-ingly mindful of the reputational risk associat-ed with mismanagement of their environ-mental and social performance. Companieswith strong brands are consequently themost vulnerable to a reputational shock. ■

Jupiter Asset Management manages a number of well performing green funds. Ethical Corporation speaks with head of environmental research,Emma Howard Boyd



Ethical funds and the City

i n t e r v i e w

For more information visitwww.jupiteronline.co.uk

What is currently driving corporatesocial responsibility initiatives within large companies?

Aylard: A whole range of things, but thereare three I would single out, first of all pub-lic attitudes, which are changing fast in anumber of areas. Even if you look at the wayparents bring up children, if I allowed mychildren to do the things my parents allowedme to do 30 or 40 years ago, I wouldn’t beregarded as a responsible parent, eventhough at the time they appeared perfectlyfair and reasonable. So I think standards aregoing up all the time.

The second thing is the importance ofcorporate reputation. Companies stand orfall on the strength of their reputation, andbeing publicly arraigned as being irresponsi-ble is a pretty good way to lose a reputation.

The third thing is the information revo-lution, where we’ve got more and more peo-ple knowing about everything. It’s not truethat everyone knows everything about allthings that are going on around a company,but what it does mean is that almost anybodywho really wants to find out about what’sgoing on in a company can now do so. Therearen’t any really effective hiding places any-more in the days of the internet revolution.

How do public attitudes towards corporate behaviour differ in the US and the UK?

Aylard: Well, we’re into sweeping generali-sations here. Even just looking at the UK, wehave different attitudes amongst differentgroups of people. But certainly, when NGOshave done focus groups with their membersand with the people they want to attract tobecoming members, one of the themes thatseems to strike a chord is that companieshave a role in making the world a betterplace, to put it as simply as possible, and that

companies need to be seen to be making theworld a better place as well as making prof-its, paying taxes, employing people anddoing all the sort of conventional things thatone expects of a business.

Friedman: In a society as large as the USinevitably public attitudes are shaped by amultitude of factors, one of them beingNGOs and their environmental and humanrights agendas, consumer rights and otheragendas. But I get the sense from havingworked on these issues in the UK for sixyears that in the US the public attitudestowards CSR are less shaped by NGO factorsand more by issues that seem to affect thepublic on a daily basis.

The first issues of a CSR nature that, tomy mind, really captured and galvanised thepublic in the US wereenvironmental issues inthe early 90s and also,perhaps even more so,issues around humanrights and labour rightsthat were affecting tex-tile and shoe manufac-turing firms and theretailers of those products in the US. Thepublic in the US began to realise that theyactually had a certain amount of purchasingpower and that they could affect corporatepolicy by exercising that power.

Are NGOs going to have a hardertime after the September 11 attacks?For example, the site made referenceto earlier, the Families Against Bushsite, has suspended campaigning inthe wake of this attack. HasSeptember 11 taken the pressure offbusiness leaders in terms of CSR?

Aylard: No I don’t believe it has. I think thefirst thing to say is that I think Chris Rose is

quite right to suspend Families Against Bushand I think an awful lot of us who wouldsupport broadly speaking the NGO positionon Kyoto would think he’s done the rightthing. And quite clearly in the short termpeople’s attention is elsewhere. But in thelonger term, I think it would be hard tobelieve that issues of ethics and environmen-tal and social progress would be less impor-tant in the aftermath of September 11 thanthey were before.

I think that there’s going to be a greateremphasis on the connections between causesand effects, between a decision taken on oneside of the world and the consequences andimpacts on people living on the other side ofthe world. And whilst at the moment thespotlight is very much on governmentaction, I don’t believe it will stay there and I

think the role of the global business commu-nity will come under the spotlight and thatwhen it does it will be important for compa-nies to be able to demonstrate that they areresponsible players in society and that theyare actively engaged in things that strength-en the fabric of societies around the world –really part of the solution and not part of theproblem.

Friedman: After September 11 it will bevery difficult for any company to divorce itsday-to-day business operations from thearticulation of its values. And perhaps for theNGO community they see that business, as avery obvious target of these attacks, is per-haps more vulnerable than they thought it

Ethical Corporation spoke with Richard Aylard and Jordana Friedman, Directorsat Burson Marstellar’s Corporate Responsibility Unit, about the thinking on bothsides of the Atlantic on CSR and corporate advantage



“After September 11 it will be very

difficult for any company to divorce

its day-to-day business operations

from the articulation of its values”

Nobody’s laughing now

i n t e r v i e w

19

was and more in need and open to engage-ment from the NGO community. So I amquite hopeful that this event will provide anopportunity for greater cohesion between thebusiness and NGO communities in the USand probably globally.

Aylard: If we’re all in this together when itcomes to fighting global terrorism I can’t seewhy we aren’t all in this together when itcomes to fighting climate change. They’redifferent orders of threats, but they’re boththreats.

How do Wall Street and the City viewethical investment?

Aylard: The whole subject of ethical invest-ment has been creeping up the agenda for anumber of years. A few years ago if you men-tioned it in the City, a lot of people wouldlaugh. I don’t think anybody’s laughing now,even if they aren’t all regarding it as beingparticularly important or moving up theirpersonal agenda.

But I do think that a simple barometer ofhow these things are going is that confer-ences on this subject in the City are nowbeing very well attended. The whole conceptof ethical investment is moving away fromjust the specialist socially responsible invest-ment funds which are looking to makeinvestments either in particularly responsiblecompanies or to avoid what they wouldregard as particularly irresponsible compa-nies and it is now moving out to being a filter that is applied right across all invest-ments to see that CSR, if it’s not handledproperly by a company, is a significant riskand if it’s done well, there are significantboosts to reputation.

So they are beginning to be able to look atit in line with the usual metrics they use toassess a company. This is slow progress.There are no great breakthroughs but yearon year I see it moving up on a steady basis.The amounts invested in specialist funds aregoing up and the degree of scrutiny that isbeing applied across the board is increasing.

Friedman: Some of the leading socialinvestment funds such as Domini SocialFund perform at the same level as the S&P500 and, of course, there are funds that aresmaller and more targeted that actually

demonstrate performance above and beyondthe S&P. For a very long time social invest-ment funds had the reputation of not deliv-ering as much financial value as more gener-al funds, and that view is changing.

The emergence of indices like theFTSE4Good or the Dow JonesSustainability Indexes is putting additionalpositive attention on the social performanceof companies, and the audiences for thesekinds of indices are the financial analysts.There are more and more mainstream com-panies that are following the indices. Theywant to know which companies are on themand how they’re being measured and are try-ing to benchmark themselves against thecompanies on those indices. That kind ofexercise wasn’t going on five or ten years ago,and certainly not on the part of multination-al companies.

How important is responsible corporate behaviour for staffrecruitment, morale and retention?

Aylard: I think it’s very important. It’s sur-prising the number of companies that say tome when we’re looking at which stakehold-ers they should be in discussion, “Oh, I don’tthink our staff are very interested in this.”And actually, when they do start looking atwhat the expectations of their staff are, theysuddenly find that it matters an awful lot tothem. So it does matter and not just in theclassical company where the story is that thefather goes home at night and his little boyasks him, “Daddy, why do you spend all daymaking pollution?” People do actually care.They want to feel involved. They want tobelieve in what their company is doing. AndCSR can play a major part in that. There isplenty of anecdotal evidence that companiesthat have found themselves in trouble oversocial and environmental issues have effec-tively been punished by not being able torecruit the brightest graduates. The top peo-ple in any one year can work anywhere theylike and they’re not going to want to tell theirfriends that they’re going to work for a com-pany that’s just been involved in some mas-sive pollution incident or some potentialhuman rights abuses.

How do you see CSR progressingover the next few years?

Aylard: It is something that is very muchmoving up the corporate agenda and it’s par-ticularly moving up the chief executives’ cor-porate agenda. It’s something that more andmore companies are having to come to termswith in different ways. It depends very muchon the nature of their business. Some havebeen engaged in it very actively for a numberof years, either because they’ve had a partic-ular problem or because their business hasparticular impacts.

I see it moving away from being primari-ly about corporate philanthropy and a fewnice-to-have programs that look good in theannual report or form the basis of a CSR pro-gram and moving toward being the way acompany does business, looking at all itsimpacts on society, trying to maximize thebeneficial impacts and minimizing the neg-ative impacts.

So it’s going to be moving away from thefringes of what a company does and moreinto the mainstream. A few companies haveplaced it firmly in the mainstream. An awfullot more haven’t really got to grips with it inthe modern sense of its being about the wayyou run your business and about good busi-ness other than about what’s going to be ourcharity of the year and where shall we putthe money from the trust fund, which hastended to be the case up to now in a lot ofcompanies.

Friedman: One dimension of CSR that Isee taking off in the near future is that of pol-icy engagement and policy dialogue, namelythe constructive engagement of companiesin partnership with governments, multilater-al institutions and NGOs to address globalchallenges like poverty, the negative aspectsof globalisation and human rights abusesand be increasingly called upon to use theirinfluence, access and resources to improvesituations not only in the communities inwhich they operate, but also beyond. We’realready starting to see their working on apolicy issue in the area of, for example, AIDSand HIV awareness raising and financing fordrugs. Up until very recently, pharmaceuti-cal companies were very resistant to makingAIDS drugs more available on a wide basisat lower prices. But more and more pharma-ceutical companies are being pressurised tobe more sensitive to the global challenge ofAIDS and HIV. ■



20

Irecently met a senior manager from a highstreet retail company. We discussed herboard’s reluctance to produce a corporate

social responsibility report. It wasn’t the cost orthe work involved that put them off. Nor wasit that they didn’t want to expose the companyas a poor performer – far from it. In fact, thecompany in question had been running ahighly commendable ethical trading pro-gramme with its suppliers for years. The prob-lem was that they didn’t want to shout aboutthe CSR programme, they just wanted to geton with it because ‘it’s the right thing to do’.

That’s one of many reasons I’ve heard fornot communicating on CSR. Others includenot wanting to attract attention from NGOs,lack of demand from stakeholders and reluc-tance to be seen to be taking credit for a com-munity programme that was initiated by staffrather than the company’s management.

Whatever their reluctance, executivesshould recognise that the business benefits ofwell-produced CSR communications faroutweigh the costs.

Firstly, there’s the benefit to your compa-ny’s reputation. While a glossy greenwashbrochure can do more harm than good, anhonest, transparent report will support yourcompany’s reputation as a responsible cor-porate citizen. And it won’t give NGOsammunition with which to attack you.Greenpeace targets companies that hide theskeletons in their cupboards and fail toengage with their stakeholders, not thosethat publish honest, accurate, ‘warts ’n’ all’information. Of course, there’s little pointcommunicating unless your company isengaging in CSR activities and actively try-ing to improve performance. But that’s notto say you should wait to communicate untilyou’ve tackled all your social and environ-mental impacts – you’ll be waiting a longtime and missing opportunities to improveyour reputation all the while.

Secondly, there are recruitment andretention benefits. A recent survey by theCherenson Group found that almost 80% ofemployees would rather work for a companythat has an excellent reputation and pays a

salary to meet their needs than a companythat would pay a higher salary but has a pooroverall reputation. With reputation such animportant issue for your potential and exist-ing employees, does it make sense to keepquiet about what you’ve been doing on CSR?

Publishing CSR information reassuresyour investors that you’re taking responsibil-ity for your environmental and social impactsand that you’re unlikely to be hit with a hugeenvironmental liability claim or a customerboycott because you employ child labour. Italso encourages your company’s inclusion inethical funds and indices. Tesco was verypublicly excluded from the FTSE4Goodindex in July because it had not communicat-ed its commitment to CSR. The companyrectified this with a new CSR website inAugust (to be fair, the site was in the pipelinebefore the FTSE4Good exclusion wasannounced) and in September Tesco wasincluded in the index. With the value of eth-ical investment in the UK at around £4 bil-lion and rising, you can consider your CSRcommunication budget money well spent.

Then there are the improvements in CSRperformance, and the related financial gains,that occur when awareness is raised not onlythrough the distribution of communicationmaterials, but also through their production.One of the benefits of producing a CSRreport most frequently cited by corporateCSR managers is that the data-gatheringprocess requires input from departmentsthat otherwise rarely think about CSR. It isoften this process more than any other thatputs CSR squarely on the agendas of HR,finance, facilities management, marketingand other departments.

The involvement of these differentdepartments is critical to successful CSRcommunications, as an otherwise excellentCSR campaign can be undermined by aninconsistent message from another part ofthe company. On a BA flight recently I wasimpressed to hear that the company was col-lecting donations for a foreign aid charity.When I felt in my seat pocket for the collec-tion envelope, there wasn’t one – a lost

opportunity for the charity to benefit and adoubt cast over BA’s commitment to the pro-gramme. This could have been avoided witheffective communication between thedepartment that decided to run the charityprogramme and the department responsiblefor putting items in seat pockets.

Integration is a key word in CSR com-munication. Not only is it important toensure an integrated approach from the var-ious departments involved, it is also vital thatyour communications campaign is integrat-ed across different media and different audi-ences. Don’t expect to reach all your stake-holders with a single document – it’s notgoing to happen. Identify your key stake-holder groups and tailor communications toeach of their needs, thinking about the issuesthey’re interested in, the formats that aremost useful to them, the language they’llunderstand etc. Bear in mind that there willbe overlap between your stakeholder groups– for example, employees are often share-holders too – so there should be consistencyof key messages, look and feel across the dif-ferent materials you produce in order toavoid confusion or cynicism.

And don’t forget your internal audience –if your employees see an externally focusedCSR report when you have neglected tocommunicate your achievements internally,they’ll dismiss what they read as PR thatdoesn’t reflect what’s really going on in thecompany. What’s more, most of the dialoguethat your stakeholders have with your com-pany isn’t through a printed report or a web-site, it’s through interaction with youremployees. If you fail to communicate onCSR internally, you are restricting youremployees’ abilities to pass on CSR informa-tion to your external stakeholders.

This all sounds like a lot of work, and Iwon’t lie to you – it is. But the benefits ofeffective CSR communication are so greatand varied that they easily justify the timeand effort put in. ■


The benefits of a clear, concise communications strategy for corporate responsibility far outweigh the cons, argues Kate Crawford of Flag


Publish and be praised

For more information on Flag visitwww.flag.co.uk

From the beginning it has been our cus-tomers’ ethical stance. The line-by-line pol-icy was developed in full consultation withour account holders prior to its launch in1992. We understand that ethics are not setin stone but that issues change over time.

That is why have been back to our cus-tomers on two subsequent occasions toensure the policy continues to reflect theirviews. In December we will again be send-ing a questionnaire to all our customers ask-ing them for their views. We then propose topublish a revised policy to coincide with thetenth anniversary of our policy in May 2002.

Was communication of a updatedcorporate philosophy initially a problem? From those early lessons you must have learned which internal staff communicationsprocedures work well.Obviously internal communications wereand remain an important issue for the bank.

Initially we had to explain to staff what ourethical policy was about and how it affectedtheir daily work. All staff completed whatwe called an Heritage Culture and Valuescourse, which helped to place our ethicalstance in the context of the bank’s position

The Co-operative Bank’s ethical policy is now nearly 10 years old.What can you tell us about its ori-gins and about why the Co-operativeBank decided to take an ethicalstance ahead of most companies?When we asked customers in the late 1980swhy they banked with us, many said it wasbecause we were ethical. Although we werepart of the Co-operative Movement, whichhad co-operative principles dating back tothe Rochdale Pioneers of 1844, and we hadtaken a stance against apartheid in SouthAfrica in the early 80s, we had done little topromote our “co-operative difference” atthis stage.

We therefore decided to ask 30,000 cus-tomers if they thought we should adopt anethical stance and an overwhelming majori-ty (84%) said yes.

The Co-operative Bank has seen a

large rise in the number of accountsand profits in the last 5 or so years.How much has this been down toyour ethical stance?The Co-operative Bank has reported recordannual and interim results on 15 consecu-tive occasions dating back to 1994. Thebank has never claimed that ethics alonesells bank accounts. We know customers arealso looking for competitive products, firstclass service and convenience when choos-ing a bank account. However, what our eth-ical stance does do is differentiate us fromthe other players in the very crowded finan-cial services market.

A cost benefit analysis produced for thisyear’s Partnership Report shows that up to18% of the bank’s £96.3m pre-tax profit inthe year 2000 can be reasonably attributedto its ethical and ecological policies. Thiscost benefit analysis takes into account theannual cost of the bank’s turning awaybusiness on ethical and ecological grounds,together with associatedoverheads (more than£2m), the premiumpaid to purchase greenenergy (around £50K)and green air condi-tioning systems(£500K) and the timeand money provided forcommunity investment(£2.5m). In 1992 wehad fewer than 1.5mcustomer accounts.Today we have morethan 3m.

How are the decisions made when it comes to making policies onissues such as animal testing? Is this something that is discussed at board level?


22

Ethical finance – a path to profit


“The Co-operative Bank has reported

record results on 15 consecutive

occasions dating back to 1994. The

bank has never claimed that ethics

alone sells bank accounts. However

our ethical stance differentiates us

from the other players in the very

crowded financial services market.”

i n t e r v i e w

The Co-operative Bank has doubled its customer base in recent years.The bank believes this increased business is due to their well-known stance on business ethics and socially responsible investment. We spoke with Simon Williams, Director of Corporate Affairs, to find out more

within the wider Co-operative sector. Todayour ethical stance is part of the inductioncourse for new staff.

We have now established ethical advo-cates groups in key locations, which enablestaff to get involved in the promotion anddevelopment of our policy.

On your website you state that yourcustomers helped in the ban on thesale of cosmetic products tested onanimals. Can you elaborate on thisand let us know how the bank wasinvolved?From the outset our ethical stance has statedthat the bank will not invest in, or providefinancial services to, organisations involvedin the testing of cosmetics on animals.

Whilst we cannot claim that it was sole-ly due to our actions that the testing of cos-metics on animals has now been banned inthe UK, our highlighting of the issue cer-tainly played a part.

In 1996 we ran a famous advertisingcampaign that featured a model holding apot of anti-ageing cream in a typical cosmet-ics ad pose. However, in the bottom lefthand corner the picture is torn away toreveal rabbits confined in a laboratory. Theadvert carried the headline “We don’t investat face value”. This ad was banned by Vogue

- a ban that was subsequently given consid-erable debate on radio and TV programmes.

What about publicising your stance and work in this area? One of the challenges for compa-nies is to publicise effectively their current activities to make customersand the media aware of what theyare doing already. What is the Co-operative Bank’s experience?We have never been afraid to tell peopleabout our ethicalstance. We do not thinkthere is any point inhaving a position onissues if you are not pre-pared to explain whatthat position is. We haverecently used our web-site to encourage cus-tomers to join a debateon GM food. This has proved very popular,with hundreds of customers taking part.

Do you believe that your competitorsin the UK banking market are look-ing at your success and beginningto copy your model?We are still the only clearing bank to publishan ethical stance, which tells customers who

we will and will not do businesswith. We believe all bank cus-tomers should know what hap-pens to their money whilst it isin the bank. Therefore all banksshould publish their own state-ments.

To date, some banks havemoved nearer to our position onsome issues, but their motivationfor doing this has not alwaysbeen the same as ours. Thethreat of legislation to hold com-panies, and ultimately theirbanks, responsible for the cost ofrectifying any damage caused bypollution has been a big incentivefor banks to consider the envi-ronmental impact of their cus-tomers’ activities.

Do you believe there is a major sea-change happening here in

corporate philosophy or could thiskind of stance be put aside in arecession?We believe we have a sustainable formulafor business success that will not be knockedoff course by a downturn in the economy. Areport we published last year entitled “Whoare the ethical consumers” shows that justover half of the population have bought aproduct and recommended a supplierbecause of its responsible reputation at sometime in the last year.

A third of consumers are seriously con-cerned with ethical issues when shoppingand a quarter have investigated a company’ssocial responsibility at least once. Thereforewe believe that ethical consumerism is not a passing fad but is becoming more andmore mainstream. Obviously, as the leadingethical bank, we can only benefit from thistrend. ■


“A third of consumers are seriously

concerned with ethical issues when

shopping and a quarter have

investigated a company’s social

responsibility at least once”


It’s time to think about ethical business ina new way. It shouldn’t be a duty, animposition, an add-on. It needn’t be

high-minded. But it should be as natural asbreathing.

Too often today, the motivation to be eth-ical is external. Companies tackle socialresponsibility after a recent disaster, or toprevent a future disaster, or to conform togovernment regulations. The motivator isfear of getting it wrong.

And the response companies make isoften peripheral to their business. Theysponsor an education initiative, or form apartnership with a charity. All very well, butit makes little difference to the vast majorityof their activities. The motivator here ismerely wanting to look good.

Rarely, in other words, does ethical busi-ness come from within. Rarely does it start atthe heart of the organisation, or pumpthrough its every artery.

But there are exceptions.Some organisations have always thought

about their social impact. They’ve alwayshad an ethical as well as a commercial pur-pose. This ethical purpose may not be partic-ularly high-minded, or deeply moralistic. Itprobably isn’t about saving the environment,or fighting for social justice. But it is, never-theless, ethical. It’s about making a positiveimpact on society.

Think of the Quaker businesses inBritain, people like Cadbury’s and Rowntreein chocolate, or Clarks in shoes. These busi-nesses, and many others like them, werefounded by Quaker businessmen to achievesocial as well as commercial aims. Theyweren’t limply philanthropic: they werehard-headed and very successful enterprises.But they did think it important, for example,to sell good unadulterated chocolate, or totrain their staff, or to build well-designedhouses near their factories for people to livein. And they found that pursuing these kindsof goals actually made them, in the end,more profitable.

Think of the John Lewis Partnership,Britain’s most famous employee-ownedretailer. The partnership was set up in the1920s to help prevent the Russian Revolutionfrom happening in Britain. Its aim was todissolve the opposition between owners andworkers to create a non-adversarial business.The model has worked well, and mademoney, for 80 years.

Think of IKEA, founded in the 1940s to make good design available to the many,not the few. Or Apple, aiming to make computers human enough for everyone touse. Or Virgin, whose big idea, or ethicalpurpose, is about championing the consumerin the face of big complacent incumbentcompanies.

These organisations have a bigidea, beyond shareholder profit. Theydon’t always shout about it: they sim-ply get on with what they do. But theyhave an ethical purpose that capturesthe imaginations of people inside andoutside the organisation: employees;customers; investors; and the media.

And their big idea wins themlong-term people commitment.While others bribe customers withloyalty cards, John Lewis and IKEAcustomers keep coming back because theylove the thing the company stands for. Apple has good years and lean years, but its customers stay loyal through thick andthin.

This kind of long-term commitment isinvaluable. It’s worth tens of millions ofpounds of advertising. But a big idea doeseven more. It gives organisations somethingthat no-one can copy. It’s the one kind of dif-ferentiation that isn’t replicable. Plenty ofpeople sell flat-pack furniture, but there’sonly one IKEA.

And there’s yet more that a big idea cando for a company. Because a big idea is big-ger than the thing the company does, thecompany can change what it does. It canmove into new markets, offer new services,

under the umbrella of the big idea. It can gowherever the money is. Virgin started with a record shop and moved into air travel,financial services and mobile phones.

Long-term commitment, sustainable dif-ferentiation and strategic flexibility. Threethings that do more than anything else toguarantee a company a future. So an organ-isation, by pursuing an ethical purpose fromthe beginning and from the heart, can secureits own future.

There are lots of ways to try to be ethical.The least convincing is corporate philan-thropy and, at its worst, that cynical thingcalled cause related marketing. This is themost superficial (and, sadly, the most com-

mon) approach to ethical business.Better is to run initiatives that improve

the organisation’s impact on society: projectsthat cut out CFCs, for example, or childlabour. But they’re often piecemeal and mayhave unintended consequences: in manycountries, for instance, child labour is a vitalcontributor to a family’s income.

The best approach is to stand for some-thing and live up to it: to find a big idea andmake that the driving purpose of the wholecompany. ■

By Robert Jones, Wolff Olins



Real ethics

“While others bribe customers

with loyalty cards, John Lewis

and IKEA customers keep

coming back because they

love the thing the company

stands for”

Robert Jones is a Consultant Directorof Wolff Olins and Author of “The BigIdea” published by HarperCollins.Contact him at [email protected]

corporate social responsibility.Who’s leading the way in the big vertical

markets? What are your competitors doing?And how can you get your company involvedat the right price, for the right return on yourinvestment?

We’ll show you how, with expert analysis,intelligence and case studies from companiesthat are already doing it. You’ll find up-to-the-minute information at ethicalcorp.com,completely free of charge.

With so many similar products and com-modities on offer to your customers, how doyou set yourself apart from your competi-tors?

Adopting a corporate code of practice isjust the start. Implementing that code fromthe top down is a mammoth challenge, butconsider the opportunities for your sales tar-gets in being seen as the company everybodywants to do business with. EthicalCorporation magazine and ethicalcorp.comare where you’ll find out how companiesacross industry are becoming just that.Ethical Corporation conferences are whereyou’ll hear the answers to your questions –and find out who’s already seeing the bene-fits reflected in their share price.

Being a preferred company only reallymakes a difference when your productsbecome the product of choice of new andexisting customers who don’t normally comeback to the same place on the shelf everytime.

As top branding consultant Wally Olins

puts it, “the difference between most prod-ucts is now negligible – it’s increasinglyabout the company behind the productrather than about the product itself.”

In Europe and the US, ethical and greenfunds are taking off, making good returns oninvestments for their clients, both individualand institutional. We’ll be putting the topmanagers on stage at our conferences for youto find out what investors and stakeholderswant and how you can deliver it.

Increasingly, asset and fund managerswant to know more than ever about howyour company operates before they buy equi-ty. Fund managers are under pressure fromcustomers to make sure the money is goingto the right places, and they are open toadvising companies on how to do this.

As Rob Lake of Henderson AssetManagement, which has over $150 billion inmanaged assets, told us, “Henderson has aconstant dialogue with companies based onour risk management strategies to make surethat our funds perform and that we have anunderstanding of the views of that companyand the risks for our money.”

How do you position yourself to takeadvantage on all the advice and analysisthat’s on offer from leading companies? Youcome to us for the latest information on whois doing what. And remember to bookmarkethicalcorp.com – the place you’ll find whatyou need to know and up-to-the-minuteinformation on formulating your ethicalstrategy.

Your offline, print and online information resource!

Ethical Corporation Conferences – Get ahead, stay ahead

Ethical Corporation magazine and www.ethicalcorp.com - the business case for cor-porate responsibility. Take advantage, do good and learn how to keep that customercoming back for more…

Ethical Corporation conferences,magazine and websiteEthical Corporation conferences are the pre-mier meeting place for business leadersembracing ethical corporate practice. OurEthical Corporation Europe 2002 conference,to be held on April 25-26 2002 in London,will be packed with case studies from acrossindustries on corporate ethics and the bot-tom line. We’re also in the US next year, witha high-level business strategy conferenceEthical Corporation USA 2002 in June. Makea note in your diary, these are events youwon’t want to miss!

Over the page you’ll find the preliminaryprogramme for our European conferencenext year – email [email protected] you want to take part or register early for adiscount.

If you would like to speak at an EthicalCorporation conference, please callChristian Braun on +44 207 375 7153 or on1 800 814 3459 extn. 275. Or email him [email protected]

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Ethical Corporation Conference 2002 c o n f e r e n c e p r o g r a m m e

Day 1, April 24 2002

“The business case for corporate social responsibility”2-day Conference: April 24-25 2002, LondonMasterclass: April 26 (Warwick Business School CCU)

Chairman’s Address

Keynote Speech: Your corporate reputation is everythingBalancing reputation management with operational delivery is key. Hear how a major European company is doing this andstill delivering the goods

Keynote Speech: Ethical reputation and practice - the last commodity differentiatorFind out what your customers are looking for, and hear about proven ways to deliver it

Networking, Exhibition & Refreshments break - Meet the speakers!!

Case Study: Asset and fund managers – what do managers and their clients want from your company?Tips on what asset managers are seeking from enterprise from a senior asset management executive

Networking lunch & Exhibition

Case Study: Successfully managing the command chain - from the top down and the bottom upHow do you manage the message internally? And what systems do you need in place to keep your ear to the ground foropinion, practice reports and new ideas from within? Find out here

Case Study: Integrating ethical practices with your suppliersDon’t get caught out by a weak link in the chain – hear how a major European company is working with its supply base andwhat other industries can take from its experiences

Networking, Exhibition & Refreshments break - meet the speakers!!

Panel Discussion: Building goodwill – what programmes should you adopt?Goodwill is vitally important in a downturn and can save your sales. Learn about what your company needs to do to createit in the minds of customers, stakeholders and employees

Panel Discussion: The risk to reputation of getting it wrong – our cross industry panel discusses ways ofminimising your riskImplementing a solid social responsibility programme is not easy – find out how to avoid costly mistakes from our expertpanel of cross-industry experts

End of Day 1 & Networking Drinks

Chairman’s Address

Keynote Speech: The business benefits of integrating CSR into a major European enterpriseHear from a top European company about the benefits and challenges of effective corporate responsibility integrationKeynote Speech: Effectively managing stakeholder relationships for corporate advantageSatisfied stakeholders are the key to running an effective organisation – find out how to keep them in the loop and how newopportunities can emerge from dialogue

Networking, Exhibition & Refreshments break - meet the speakers!!

Case Study: How NGOs can really help you formulate a realistic strategyNGOs can present a formidable opponent to your company if you don’t include them in relevant planning - hear how out-side organisations can advise you before an issue becomes polarised!Case Study: BT - Business and communication channels – get the message across, effectively!A unified communications strategy is essential, but not easy – hear from a leading expert how a well-planned online andoffline communications strategy can save you £££s and get your message out thereSpeaker: Tom Dowdall, Head of Group Business Practice & Corporate Policies, BTCase Study: CSR, human resources, and recruiting and retaining the best management talent – what areemployees seeking from you?Companies with bad reputations find it harder to recruit and retain the best talent - hear what the top MBAgraduates and executives are looking for in your company!

Conference EndsConfirmed speakers:Alyson Warhurst, Professor of Strategy & International Development, Warwick Business SchoolTom Dowdall, Head of Group Business Practice & Corporate Policies, BTEdward Bickham, Executive Vice President, Anglo American plc

Day 2, April 25 2002