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Innovating Sustainable CSRSustainable CSR
Fortune China CSR Ranking 2012 gAnalysis and Trends in China
Sam Lee, CEOInnoCSR Co LtdInnoCSR Co. Ltd
Global Conference on CSR & Globalization Korea University Business School, April 13 2012
Outline
I FORTUNE CHINA CSR RANKING RESULTS
II HOW DO WE RANK THE COMPANIES?
III FORTUNE CHINA CSR RANKING INSIGHTS AND KEY LEARNINGSIII FORTUNE CHINA CSR RANKING INSIGHTS AND KEY LEARNINGS
IV GOING FURTHER WITH THE FORTUNE CHINA CSR RANKINGIV GOING FURTHER WITH THE FORTUNE CHINA CSR RANKING
2
Fortune China CSR Ranking Resultsg
Fortune China CSR Ranking ResultsMultinational CompaniesMultinational Companies
2012 Rank 2011 Rank Progress Fortune Global 500 Company Industry 2012 Score
1 15 ↑ 73 Sony Consumer Electronics 86.32 7 ↑ 22 Samsung Electronics Consumer Electronics 81.33 4 ↑ 195 Intel Technology 78.74 22 ↑ 365 3M Industrial Goods & Services 77.34 9 ↑ 25 F d M t A t bil 77 34 9 ↑ 25 Ford Motor Automobiles 77.36 24 ↑ 152 Dow Chemical Basic Materials 76.57 N/A N/A 79 BMW Automobiles 74.68 5 ↓ 71 BASF Basic Materials 74.59 8 ↓ 143 Nokia Technology 74.410 3 ↓ 89 Toshiba Consumer Electronics 74.111 28 ↑ 28 Hewlett-Packard Technology 73.912 N/A N/A 123 Johnson & Johnson Health Care 73.513 13 — 136 Unilever Personal & Household Goods 73.314 17 ↑ 1 W l M t St R t il 72 914 17 ↑ 1 Wal-Mart Stores Retail 72.915 10 ↓ 253 Sharp Consumer Electronics 72.716 46 ↑ 32 Carrefour Retail 70.317 12 ↓ 178 Bayer Basic Materials 70.118 6 ↓ 16 General Electric Industrial Goods & Services 69.519 1 ↓ 124 Dell Technology 68.920 2 ↓ 2 Royal Dutch Shell Oil & Gas 68.321 45 ↑ 52 International Business Machines Technology 68.122 44 ↑ 40 Hitachi Industrial Goods & Services 67.322 36 ↑ 47 Siemens Industrial Goods & Services 67 3
4
22 36 ↑ 47 Siemens Industrial Goods & Services 67.324 N/A N/A 90 Peugeot Automobiles 66.925 14 ↑ 8 Daimler Automobiles 66.5
Fortune China CSR Ranking ResultsChinese CompaniesChinese Companies
2012 Rank 2011 Rank Progress Fortune China 500 Company Industry 2012
Score
1 1 — 35 China COSCO Holdings Company Limited Industrial Goods & Services 74.82 13 ↑ 47 ZTE Corporation Technology 653 5 ↑ 16 Baoshan Iron & Steel Co., Ltd Basic Materials 62.64 4 — 5 China Petroleum & Chemical Corporation Oil & Gas 61.44 14 ↑ 1 China Railway Construction Corporation Limited Construction & Materials 61.46 18 ↑ 17 Ping An Insurance(Group) Company of China, Ltd Financials 597 29 ↑ 2 PetroChina Company Limited Oil & Gas 58.88 15 ↑ 32 Shanxi Taigang Stainless Steel Co., Ltd Basic Materials 579 2 ↓ 3 China Mobile Limited Telecommunication 56.8↓
10 43 ↑ 8 China State Construction Engineering Corporation Limited Construction & Materials 56.411 7 ↓ 21 China Shenhua Energy Company Limited Basic Materials 5411 38 ↑ 40 Wuhan Iron and Steel Company Limited Basic Materials 5413 3 ↓ 22 Lenovo Group Limited Technology 53.614 21 ↑ 41 Suning Appliance Co., Ltd Retail 50.615 11 ↓ 15 Metallurgical Corporation of China Ltd Basic Materials 50.215 40 ↑ 42 China Eastern Airlines Corporation Limited Airlines 50.217 18 ↑ 62 China Citic Bank Corporation Limited Financials 49.617 25 ↑ 34 Air China Limited Airlines 49.6↑19 9 ↓ 9 China Construction Bank Corporation Financials 49.420 8 ↓ 45 China Coal Energy Company Limited Basic Materials 48.221 39 ↑ 23 China Pacific Insurance (Group) Co., Ltd Financials 46.822 20 ↓ 7 Industrial and Commercial Bank of China Limited Financials 4622 30 ↑ 10 SAIC Motor Corporation Limited Automobile 46
5
22 30 ↑ 10 SAIC Motor Corporation Limited Automobile 4622 45 ↑ 4 China Railway Group Limited Construction & Materials 4625 N/A N/A 29 Huaneng Power International, Inc Utility 44
About the Fortune China CSR Ranking 2012g
1. Purposes of the Ranking
External purposesExternal purposes
• Raise CSR awareness through active communication
• Develop the business case for CSR in China - show how ‘doing good’ contributes to ‘doing well’good contributes to doing well
• Provide a standard for companies in China to assess their CSR performance
• Encourage healthy competition in social responsibility and towards CSV
• Develop in-depth and systematic understanding of companies’ CSR practices through research
Internal purposesInternal purposes
CSR practices through research
• Build database of CSR best practices
• Become the leader in evaluating and measuring companies’
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Become the leader in evaluating and measuring companies CSR performances in China
2. Building Our Ranking Population Sample
Initial 1,000 companies• Fortune China 500• Fortune Global 500Fortune Global 500
Filtered to 112 companies• Top 50 companies from Fortune China 500Top 50 companies from Fortune China 500• Top 50 companies from Fortune Global 500 with
presence in China• MNC and CHN Companies among last year's
Fortune CSR Ranking Top 25 not originally included
Final 100 companies• Top 50 MNC ranked• Top 50 MNC ranked• Top 50 CHN ranked
8
3. Ranking Population Industry Distribution
AutomobileCHN
Automobile
Basic Materials
Consumer Electronics
MNC Automobiles
Basic MaterialsAuto Financials
Healthcare
Industrial Goods & Services
Consumer Electronics
Financials
Auto (17%)Tech
(17%)Basic Mat.
(22%)ServicesOil & Gas
Retail
Technology
Health Care
Industrials Goods Fin.
(21%)Telecommunication
Utility
Airlines
& Services
Oil & Gas
Retail
(21%)
Airlines
Construction & Materials
Retail
Industry distribution based on the Industry Classification Benchmark (ICB) (UK)
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Industry distribution based on the Industry Classification Benchmark (ICB) (UK)
4. Developing Our Model (1)
Premises
Sustainability ratings Core content derives
Premises
Sustainability ratings vary significantly in structure, but share
considerable overlap in
Core content derives from international conventions e.g.
UNDHR ILO Coreconsiderable overlap in content
UNDHR, ILO Core Conventions.
Conventions form the basis for institutional
t d d Most ratings can bestandards (SA8000, ISO14000,
ISO26000 etc )
Most ratings can be analyzed via an ESG
framework.
10
ISO26000 etc.)
5. Developing Our Model (2) – Methodology
Analysis of CSR Rating frameworks
Mapping of International Conventions, CSR standards, Rankings
Extraction of Core CSR Factors (12 Key Criteria)
Analysis of CSR Rating frameworks
Extract common criteria Extract common indicators
Study of China CSR-Legal-Regulatory-Policy Drivers
Extraction of Core CSR Factors (12 Key Criteria)
Incorporate extracted ESG domain and indicators to create basic framework
S i M th d l
Study o C a CS ega egu ato y o cy e s
11th Five-Year Plan Extract National Policy Priorities Local CSR guidelines
Finalization of Fortune China CSR Ranking Model
Scoring Methodology
11
Finalization of Fortune China CSR Ranking Model
6. Developing Our Model (3)
Mapping and Analysis of Conventions
To build our framework, InnoCSR Research Team studied d d k d l
Mapping and Analysis of Conventions
Conventions Rating Models & Reporting Guidelines
70+ standards, rankings, rating models, conventions
Conventions Rating Models & Reporting GuidelinesUN Declaration on Human Rights DJSI Accountability RatingOECD Guidelines for MNC Enterprises Innovest Asian Sustainability Rating
ILO Fundamental Principles and Rights at Work Good Corporation Analista
UN Global Compact GSES Asset 4
UN Millennium Goals Ethibel Bank Sarasin
Rio Declaration on Energy Corporate Knights CRI
Stockholm Convention on Organic Pollutants Covalence SA Calvert GroupStockholm Convention on Organic Pollutants Covalence SA Calvert Group
ISO 26000 Guidance on Social Responsibility VIGEO FTSE4Good
UN Declaration on Anti Corruption and Bribery KLD REPU Tex
SA8000 AA1000AS GRI
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7. Developing Our Model (4)
Extraction of Key Criteria
ENVIRONMENT SOCIAL GOVERNANCE
l b dEnvironmental Management Labor Practices Board Structure & Diversity
Pollution Prevention Supply Chain Fair Marketplace Practices
Resource Use Customer Relations CSR ManagementResource Use Customer Relations CSR Management
Climate Change & Biodiversity Community Involvement CSR Communication
13
8. Developing Our Model (5)
Chinese Legal/Policy Analysis
• Labor Contract• Consumer Rights• Company
• Environmental• Circular Economy Promotion• Energy Conservation
g / y y
p y• Occupational Disease• Work Safety• Product Quality• Advertising
gy• Pollution• Water and Social
Conservation• Waste• Desertification
China E l China Social DesertificationEnvironmental
Laws
China Social Laws
• CGI/SRI Index SSE
National Development P l /Pl
China CSR Trends
• 11th Five Year Guidelines for Economic and Social Development
• Five Year Plan for Energy Development
• CSA8000 • SASAC Guideline• CSC9000T• HM3000• Financial Association
Policy/PlansTrends
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• Medium and Long Term Plan for Renewable Energy Development
Financial Association • Shanghai Local CSR• Shenzhen Stock Exchange CSR
9. Developing Our Model (6)
S i S
ESG i hti ll i d t i
Scoring System
ESG weighting across all industries:
• Environment: 40%• Social: 40%• Government: 20%
Environment Social Governance40% 40% 20%
China-focus:
• For MNCs, China-specific information required for full score in key CSR areas
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score in key CSR areas
9. Developing Our Model
Fi l F k
3
Final Framework
3 domains
12 criteria12 criteria
40 sub-criteria
139 indicators
Draws an accurate and in-depth picture of the state of
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Draws an accurate and in-depth picture of the state of CSR integration in China
10. Limitations of the Model
Scope of information• Only publicly disclosed information is captured• Only publicly disclosed information is captured
Sample size100 i k d• 100 companies ranked
• 12 companies included from 2011 CSR Ranking
Different scoring system for MNC and CHNDifferent scoring system for MNC and CHN• MNC and CHN cannot be compared directly
H f tHuman factor• Subjectivity of analysis
17
Fortune China CSR Ranking 2012Key Findingsy g
1. CSR is NOT Corporate Charity
A MNC CSR S MULTINATIONALS• Top 10 Donors donate 17 times more than Bottom 10 Donors
69.61 67.20
Average MNC CSR Score
• Difference between the 2 groups is only 2 points• Increasing donation rates do not gnecessarily lead to better CSR.
Average CSR CHN Score
Top 10 Donors(0.34% of Revenue)
Bottom 10 Donors(0.02% of Revenue)
CHINESE COMPANIES• More than 85% of Chinese firms got maximum score for donations.
45.0837.84
g
• Donations do not account for point difference. • Top donors also focus on other areas
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Top donors also focus on other areas of CSR. Top 10 Donors
(0.18% of Revenue)Lowest 10 Donors
(0.003% of Revenue)
2. CHN Still Lag Behind MNC in Most CSR Areas
Gap between MNC and CHN for the 12
Board Structure & DiversityCSR Management
pcriteria
Supply Chain CSR Engagement
Labor PracticesCommunity Development
CSR communicationSustainable Resource Use
Supplier Engagement on CSR
Fair Operating PracticesPollution Prevention Consumer Protection
Labor Practices
Responsible Purchasing Policy
Supplier Compliance & Monitoring
0 10 20 30 40 50 60 70
Supply ChainClimate Change and Biodiversity
Environment Management0 20 40 60 80
MNC CHN
0 10 20 30 40 50 60 70
MNC CHN
• Chinese companies still lag behind the multinational companies on all it i t CSR t
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criteria except CSR management• Still very few Chinese companies perform CSR screening and audits on their suppliers
3. External Audits Reinforce Transparency
Percentage of MNC tti t l dit Average scores of
36%
getting external audits
80
Average scores of companies conducting
audits
64%
36%
50.5
67.3
57.7
50
60
70
Percentage of CHN getting external audits
39.4
20
30
40
28%
72%
0
10
20
CHN MNC72%
CSR reports that are audited by a 3rd-party result in higher overall CSR score:
17% hi h f MNC
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- 17% higher for MNC- 28% higher for CHN
4. German Firms Best Environmental Performers
Environmental Performance
4445464748 At ESG level
Strict governmental regulations iti l i fl G i ’
4041424344 positively influence German companies’
environmental performance
7080
Environment Domain BreakdownJapanese companies
German companies
American companies
2030405060
At 12 criteria level
G0
10
Environment Management
Pollution Prevention
Sustainable Resource Use
Climate Change and Biodiversity
German companies perform best in Environment management
d P ll ti P ti
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Biodiversity
Japanese companies German companiesAmerican companies
and Pollution Prevention.
5a. External Influence Also Shapes CSR in China
hi Domestic companies score 50% higher, on related issues related to the 11th Five-Year Plan than on issues not directly related
Chinese Government•11th Five‐Year Plan (Labor Practices)•12th Five‐Year Plan (Climate Change)•MofCom SASAC CASS directly related.MofCom, SASAC, CASS
Industry Associations
Most of the technology and consumer electronics companies follow the EICC code of conduct.
•China National Textile and ApparelCouncil
•China Banking Association•Electronic Industry Citizenship
76% of the CHN follow the Shanghai
Electronic Industry CitizenshipCoalition
•76% of the CHN follow the Shanghai Stock Exchange CSR reporting guidelines•80% of the top 10 MNC are listed on
External Investors•DJSI, FTSE4Good•Shanghai Stock Exchange Guidelines•SRI CSR Rating Companies
23
pthe DJSI.
•SRI, CSR Rating Companies
5b. Example: EICC Code of Conduct
Electronic Industry Citizenship Coalition (EICC): brings globalElectronic Industry Citizenship Coalition (EICC): brings global electronics companies together to improve CSR standards in the global supply chain with their Code of Conduct.
1. Most of the technology (70%) and consumer electronics (50%) MNCs in our Ranking follow the EICC code of conductMNCs in our Ranking follow the EICC code of conduct
2. These two industries are among the best performing in our ranking (top 5) and the most represented in the top 25 MNCs
3. Top CHNs in these industries (ZTE, Lenovo) also adopted the EICC Code
Stringent standards help harmonize industry CSR performance, and clarify stakeholder expectations for companies
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and clarify stakeholder expectations for companies
6. Top CSR Performers can Improve in 4 Areas
• Further commit to reducing GHG and achieving Carbon Neutrality
• Set targets for Air Emissions and Energy Consumption
Environment25% of the Top25 did not have Energy Consumption
Targets gy p
• Incorporate tools to ensure new products are safe and being Product
SafetyOnly 12% of the Top25 assessed health impacts transparent about Product SafetySafety
• Establish policies to ensure worker
assessed health impacts of new products
21% of the Top25 • Establish policies to ensure worker rights and programs to help employees transition out of companies
Labor Practices
21% of the Top25 supported employees
made redundant
• Focus on minimizing risks by proactively identifying areas at risk to corruption and bribery.
Corporate Ethics
15% of the Top25 were actively searching for
corruption
25
7. CSR Trends in China
Scope of CSR in China is constantly expanding
Chinese Government’s 12th 5-year plan includes climate change
Gap in CSR performance between CHN and MNC
But Top 3 CHN perform as well as Top MNCsCHN and MNC
E t l t k h ld d i
Top MNCs
Chinese Government, industry External stakeholders are drivers of CSR in China
, yassociations and financial markets influence CSR in China
Booming of the CSR reporting practices
Companies face increased pressure and are provided guidelines by the Chinese
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pguidelines by the Chinese Government at the same time
Going Further with the Fortune China CSR Rankingg
Going Further with the Fortune China CSR Ranking
Identify best practices from different companies 12 ESG criteria, 40 sub criteria
Identify industry trends and specific benchmarking points 139 indicators
Assess companies in a holistic way and provide comparisons amongst competitors
Fortune China CSR Ranking +
CSR standardsSRI indicesOther CSR rankings
Find correlations between CSR and brand value, market share, etc.
Fortune China CSR Ranking
non-CSR rankings and standards
vs.
Year-to-year comparison of improvements in the CSR landscape
, ,
Fortune China CSR Ranking 2011 2012 2013
g standards
28
p o e e ts t e CS a dscapeAnalysis of the reasons behind them2011, 2012, 2013…
Example: ESG for Sony, Samsung and Intel
Environment Social Governance
Sony #1 - Green Star #1 – CSR training for #13 – Lack of diversity
Environment Social Governance
Sony Program employees in Board of Directors
#2 – Diversity target
Samsung
#5 - Eco-Partner Certification Scheme,Largest portfolio of
#2 Diversity target for female employees: 30% new university graduates and target
%
#32 - Lack of diversityin Board of Directors,No disclosure on boardLargest portfolio of
eco-friendly products >10% executives to within the next 10 years.
No disclosure on board compensation
Intel
#13 – No disclosure of targets for air pollutants,
#3 – Intel’s education programs such as Intel Teach and Intel
#2 – Link executive and employees’, compensation to CSR
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No disclosure of ISO 14001 in China
Intel Teach, and Intel e-learning
compensation to CSR performance
Innovating Sustainable CSRSustainable CSR
"It takes 20 years to build a reputation and five minutes to ruin it."
Warren Buffet- Warren Buffet
Tel: +86-21-5237-7387Tel: 86 21 5237 7387Fax: +86-21-5190-1040中国上海市长宁区华山路1336号 玉嘉大厦11 楼 A-2座, 200052www innocsr com
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