Professional Documents
Culture Documents
by John Friedman
Table of Contents
Table of Contents.....................................................................................i
Introduction ........................................................................................... 1
What’s In a Name?................................................................................ 27
Acknowledgements ............................................................................... 57
i
T H E F I V E K E Y S
Introduction
W
hat happens when you combine a genuine corporate
commitment to being an exemplary corporate citizen with the
lessons learned over 20 years of public relations and corporate
communications? For me, I watched a transformation as an ancillary
program to “maximize” the charitable giving program for a Fortune 500
company evolved and grew into an integrated program that demonstrated
value to finance/accounting, human resources, community and government
relations and ultimately was integrated into the primary branding for the
company to better demonstrate the company’s commitments to its
stakeholders. In short, it changed the way we communicated with our
stakeholders – changing everything from employee communications to
community outreach and shareholder and government relations.
1
As the program evolved it became apparent that we were changing the way
that the company communicated. Rather than speaking ‘to’ the various
constituencies through established statements and prepared press releases,
we were developing and engaging in a real dialogue. We embraced
transparency as a more effective way reach out to those who were integral
to the company’s continued success. At the same time, the principles of
transparency served us well when we were faced with the occasional
unfavorable events. When we had problems or “bad” news, we proactively
reached out to our employees, regulators and the public – directly and
through the media. This helped to further enhance the image of the
company as well. I call this transformation the “new” public relations.
The reasons for our success were that we recognized that the principles of
sustainability not only redefined the company as a ‘good’ citizen, but also
that the increasing stakeholder interest (demand) for corporate responsibility
provided an opportunity for us to become an more attractive neighbor,
employer, customer in addition to the preferred supplier compared with our
less socially-conscious competitors.
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T H E F I V E K E Y S
At the same time we were fortunate that the company leadership recognized
that the goal of our efforts was to effectively engage stakeholders, and could
(and should) not be measured in column inches or minutes of airtime but
rather in direct business enhancements - good customer and supplier
relationships, reducing opposition to growth, enhancing speed to market,
fostering a favorable regulatory climate and requirements and enhancing
human resources ability to hire the best talent. These things are harder to
measure, but ultimately are the best way to demonstrate the value of our
efforts to the success and growth of the business and built buy-in for the
program as we went along.
Today, stakeholders are becoming more and more insistent that businesses
act in a manner that is socially responsible. In the United States this is
primarily focused on environmental impacts such as carbon emissions, use of
natural resources (such as wood, stone and water) and energy consumption.
A company that bases its culture and actions on sustainability is at a
strategic advantage with stakeholders who care about these issues because
when this culture redefines the company, PR can take advantage of this
“convenient truth.”
3
employees represent the core group and your most effective advocates,
when properly informed, included and engaged.
4
T H E F I V E K E Y S
1
Evolution Becomes Revolution
T
he changing information needs of both stakeholder and companies
are redefining the role of corporate communications departments
and professionals including community, shareholder, government,
and employee relations. Companies are recognizing that an increasingly
savvy – some would say cynical – audience is becoming more and more
discerning about messages that corporations are sending. The “new PR”
requires corporate communications professionals to modify their strategy,
and refine the structure and content of all manner of communications
vehicles including Web sites, annual reports, executive speeches and
presentations to include sustainability and to integrate those messages and
principles. Progressive companies have recognized the true power of the
Web and made the transition from using the Internet as a source of
information into a forum for dialogue; rather than attempting to stifle
criticism, they find the net provides them with an unparalleled opportunity to
tap into, and respond when appropriate, to what is being said about their
enterprise.
5
The five principles or “keys” outlined in this book offer a framework for how
a program can be built, based on the model of answering “who”, “what”,
“where”, “how” and “why.” When all those elements are in place,
communications professionals do not need to present information “in its best
possible light” (or spin) but rather can focus their efforts toward
transparency and openness.
6
T H E F I V E K E Y S
2
Five “Keys” to Unlock a Successful
Sustainability Program
T
he five “keys” that I have developed over the last decade are
those elements that I believe are necessary to build a unlock the
true potential of sustainability as a business-supporting strategy.
They have been the basis for programs that I have recommended and
implemented for companies ranging from the Fortune 500 to small not-for-
profit organizations (seeking to partner with businesses) and those working
to implement sustainability, including my work with the Sustainable Business
Network of Washington (SB NOW). They have been well received by a
variety of audiences including business leaders, academics, students,
philanthropic organizations, government representatives, and other opinion
leaders.
They start with the premise that sustainability – ensuring the long term
viability of the company that is in keeping with the continued best-interests
of the environment, society and economic viability - is more than a form of
“strategic philanthropy” because when it is done effectively positions and
advances a business economically while providing positive impacts to the
social and environmental pillars as well. The keys follow a model for telling
an effective story – answering the age-old questions of who, what, where,
how and why. In many ways the “new PR” – restores the true meaning of
the phrase – relating to and with the public, rather than a narrower focus on
media relations.
It is important to note that the five elements are not in order of importance.
All are critical and a failure in any area results in a program that is less
effective, or even ineffective or counter-productive.
7
Key 1: Alignment with your Core Business Model
(why).
Demonstrating the contribution that a company, its employees and
its products make to the community in which it operates clearly
supports the business strategy.
8
T H E F I V E K E Y S
hardly seems strategic to believe that PETA will be satisfied with improving
the living conditions for animals destined for the slaughterhouse.
9
Key 2: Integrate Sustainability into Day-to-Day
Operations (how)
Most employees understand and act in their own personal and professional
best interests most of the time. There is a natural inclination, therefore, to
avoid the expense (in effort and money) for any program that does not
provide an favorable impact to them. This can include the psychological “lift”
people feel from doing good and knowing that their company supports those
efforts. On a daily basis, however when company and personal bottom lines
are equated – such as through performance incentive programs – employees
will tend to focus on programs that appear to offer fiscal return in favor of
those that do not provide them with positive rewards. But employees
understand the importance of maintaining environmental standards if the
company is to stay in business. Employees understand that routine
maintenance of equipment keeps it operating. And certainly employees
understand and appreciate investment in equipment and programs that
improve their safety and well being.
10
T H E F I V E K E Y S
be realized associated with in-kind contributions. There are often local, state
and national tax incentives for targeted programs; such as environmental
mitigation or programs that assist the elderly, the infirm or infants.
Risk Management
Another benefit is in the area of risk management. In addition to its moral
obligation to do everything in its power to keep its employees safe, a
company also reduces costs associated with insurance premiums and
lawsuits (in the event of an accident). A reputation for safety will also
encourage more safety conscious applicants. The result is a company culture
of safety, watching out for the well being of others and refusing to cut
corners on safety programs. That, in turn results in safer working conditions
and practices.
11
should work toward the betterment of society. Eighty-nine (89) percent said
business professionals should take social and environmental impacts into
account when making business decisions and six out of ten (60) percent
believe CSR makes good business sense and leads to profits.
Lafarge North America found that the partnership with Habitat for Humanity
was a valuable tool for engaging employees at all levels. Quite simply, they
embraced it fully. It made them feel good about their company, the products
that they were making and their individual contribution. Employees at the
regional office outside Atlanta, GA not only used their vacation time to
volunteer at builds, they even started a vacation “pool” so that others could
participate. Realizing the potential, human resources and marketing
departments around the country began to include messages about the
partnership at trade shows, recruitment fairs and in corporate profiles. New
hires reported that the partnership was one of the things that attracted them
to the company. Marketing seized on the opportunity to hold product
demonstrations on Habitat job sites, inviting their best customers to join
them. This not only built a home for a deserving family, it also built a sense
of partnership between Lafarge and its customers. It also allowed for new
products to be demonstrated in field situations, resulting in sales.
All this while receiving favorable recognition in the local media and
impressing opinion leaders in the local community, as well as handy do-it-
yourselfers who were also on the Habitat build site and got to experience the
products and the company commitment at the same time.
12
T H E F I V E K E Y S
Longer-term Benefits
Sustainability programs are naturally more associated with long-term
thinking and results. The benefits include such valuable (but hard to
quantify) elements such as corporate reputation and image. A positive image
can have an impact on reducing barriers to entry and growth in a market
and encourages customers. When Lafarge wanted to establish a presence in
Anniston, Alabama, local employees put together a plan to use the
company’s partnership with Habitat for Humanity to introduce the company
to the market – by donating materials, expertise and volunteer labor to build
houses for the needy. That required a temporary, provisional permit to
operate a concrete batch plant. After the houses were built the company
found no opposition to continuing and expanding its operations in the area.
Perhaps recognizing the power of sustainability to build not only the external
brand but the internal culture as well, a strong majority of the MBA students
(78 percent) surveyed by NetImpact think that sustainability should be
integrated into the MBA core curriculum.
13
Key 3: Employee Engagement and Empowerment
(who)
Many operations evaluated their local needs and developed programs of their
own, using the same criteria that reflect the five keys. In Canmore, Alberta
the local desire to provide habitat for endangered species such as wolves
and bears led to the formation of the “Predator Preservation Project” to
protect these animals. Once again the company used its products and
engaged employees with the necessary skills to build over and underpasses
that allowed the animals to cross major highways. This program was
successful because it followed the five principles, most notably addressing a
primary local stakeholder concern through the unique commitment and
capacity of the company (which includes the know-how of its employees) to
make a difference.
14
T H E F I V E K E Y S
At the same time, employees could bring their unique skills and talents to
the project. Welders managed to dismantle and remove a sunken barge that
had been an eyesore on the riverfront for decades in a manner of weeks,
demonstrating the value of their skills and dedication.
In many locations in Canada where Lafarge had quarries, large trucks and
loaders were used to clear snow (and transport it to inactive sections of the
quarry). This transformed the large construction vehicles from noisy
“monsters” into good corporate citizens and again, allowed the employees to
showcase their individual skills as well as their dedication.
15
Empowering employees is critical because they can help define how the
program is implemented by identifying local issues, opinion leaders, and
opportunities. But an even more valuable role is that they are closest to, and
therefore able to identify, the impediments whether they be cultural,
religious or rooted in the existing official and unofficial power structures. If
Wal-Mart wants to win the battle for hearts and minds, for example, they
won't do it with fuel efficiency; they'll do it by actively engaging their
employees and treating them as the heart of their success. And they would
do well to realize that when employees are happy and satisfied, the pro-
union arguments won't have any traction with the public, or employees.
In his book Moral Capitalism Steven Young, global executive director of the
Caux Roundtable stresses the critical importance of developing programs
that are mindful and respectful of the local indigenous cultures that may be
ill equipped to “fight back” against a more technologically advanced one.
Employees at the local level not only represent and offer insight into the local
culture, but they often can serve as “ambassadors” – helping the company to
understand what the community needs and wants (and what it does not
want) and helping to explain the benevolent intention of the company to the
community.
16
T H E F I V E K E Y S
Michael F. Curran, Chairman and CEO, Willbros Group Inc. agrees that a
company cannot merely impose the standards from its home country. “Doing
the right thing involves having your people listen to and talk with the local
communities about their real needs and striking a balance.”1
1
“Global citizens: business leaders discuss corporate responsibility on the global stage” NYSE Magazine,
August/September 2006
17
Much has been made about the spectacular collapse of companies such as
Enron and WorldComm pointing out that each had well-written and widely
disseminated policies governing corporate ethics and were lauded as leaders
in social responsibility. It is clear that malfeasance and criminal behavior
became the norm in these extreme cases, it is notable that the initial turn
from entrepreneurial to illegal behavior can be traced to an overwhelming
emphasis on short-term results and making the quarterly targets through
increasingly creative and ultimately criminal accounting. In these cases, the
articulated culture and the desired culture were at odds. And the result was
catastrophic.
Empower Employees
One of the best ways to empower employees is to allow them to use their
unique expertise in making the contribution. Allowing employees to use their
skills also helps demonstrate the value that the company brings to the
community. When backhoe and loader operators from a heavy industrial
facility take to the streets to remove snow, the operators take pride in
knowing their skills are providing unique value to the community. When a
dentist volunteers his time at a local retirement community, the skills that he
brings combine with his commitment to the community to demonstrate the
value his practice brings – and it allows employees to do good and reminds
them of the value their skills bring – and it encourages others to patronize
that practice.
Empowered employees that feel good about the work that they are doing
and the contribution that their company makes to society are more likely to
be productive. A culture of sustainability encourages people to see their work
in the greater context. So employees who work in a rock quarry know that
they are not just blasting and breaking stone, they are building homes in
which people live, hospitals in which their children will be born and schools
where those children will be educated. They are helping to build the road
that will carry those people from place to place. In short, they are making a
18
T H E F I V E K E Y S
Strategic planning departments can benefit by (and are hampered when they
neglect) the need to understand community opinions regarding the impact of
proposed changes. If a company is integrated into the community, reaction
to proposed actions can be anticipated and included in planning (including
budgets and timelines). Companies that have engaged local community
stakeholders are less likely to be surprised by community opposition, and
have an opportunity to work with the community to work through the issues.
19
This can help a company accurately budget for anticipated expenses and
revenues (including timing).
20
T H E F I V E K E Y S
With exceptions such as relief after the Indian Ocean tsunami and other
disasters that draw international attention and concern, for the most part,
people like to see the benefit in their own community. Impacts such as
employment opportunities, contributions to tax revenues and bringing
needed goods and services to the community are easily understood and
appreciated. At the same time, noise of production and vehicular traffic are
easily recognized local consequences.
Transparency
reveals the “hidden
truths”, including COST
SAVINGS
IMPROVE
LIVES
unrecognized
PRODUCTS
TANGIBLE
BENEFITS
diagram). This
DONATIONS
INTANGIBLE
BENEFITS
(COMMUNITY
SPIRIT)
limited to the
GOODWILL
TOWARD
COMPANY
impacts from
operations,
products and
services that the company makes available as well as ancillary benefits from
employees’ contributions to the community. In many cases, if not all, the
21
community reaction regarding these issues can be anticipated, evaluated,
planned, budgeted and communicated as part of the regular business
process.
The need for transparency – being honest in both reporting the negative as
well as the positive impacts – is critical to build community support for an
enterprise. Being honest about issues prevent opposing groups and
organizations from using that information to argue against the company.
Companies demonstrate this kind of transparency without negative
repercussions when they announce that they are not going to meet quarterly
earnings, for example. This kind of reporting is expected and commonplace.
Companies are also comfortable announcing production delays and
problems. Negative news, when it is revealed willingly and explained, has a
less damaging impact that when it is hidden.
22
T H E F I V E K E Y S
23
employers, communities, governments and suppliers who have a direct
impact by the company’s success.
Those who argue that he is simply preying on the fears of the public in order
to sell more food should consider the accepted practice of auto
manufacturers who tout their vehicles’ crash test results.
The Lafarge partnership with Habitat for Humanity was built to satisfy all five
principles and is a fully realized program. The partnership does incur costs
(lost revenue and employee time spent volunteering) but it also supports the
business by showcasing the importance of the company’s products and the
unique skills and dedication of its employees. In fact, by accepting on
specification ‘seconds’ that would otherwise be waste or need to be recycled,
Habitat helps support the realities of production. Employees are involved in
every step of the program, from producing, delivery and installation the
donated materials. The benefit is as visible as the homes and as memorable
as the homeowners that the volunteers meet. And by volunteering side by
side with some of the company’s primary stakeholders (including customers
who are invited to help build, suppliers on whom the company relies, opinion
and community leaders with whom the company has relationship) the
company maximizes stakeholder engagement. In fact, as one plant manager
remarked “we donated $12,000 worth of product, sold $85,000 to our best
customer, the employees love us, and we’re on the front page of the local
newspaper as a great corporate citizen.”
24
T H E F I V E K E Y S
Wal-Mart has a national partnership with the National Fish and Wildlife
Foundation. Through the “Acres for America” program, Wal-Mart has pledged
to conserve at least one acre of wildlife habitat for each acre the company
has, or will develop over the next ten years. Through this program at least
138,000 acres of land will be protected. But no matter how well intended,
because this program violates several of the five elements, it is not providing
Wal-Mart with the maximum strategic value. For example, it is largely
invisible to the local community, there is no linkage to the products and
services the company provides and, the average Wal-Mart associate is
unaware of it and does not personally participate.
The company would do well to promote the program locally with in-store
signage pointing out the corresponding land that has been set aside, ideally
either closest to the location in question, or most closely resembling it
ecologically.
Many of the products that Wal Mart provides to millions of customers around
the world are made with recycled plastics and even metals. The packaging
and store signage is often made with paper and cardboard that have been
recycled – and will be again. The company committed to only sell
‘sustainable’ farmed fish. These programs are not promoted, however, and it
is up to the consumer to find out about them.
25
Lastly, there are literally thousands of rolling portable billboards that could
become a showcase for the company’s sustainability programs much in the
same way U-haul trucks offer images of the many places around the country.
Similarly, a number of Lafarge mixer trucks bearing the Habitat for Humanity
logo and partnership information were deployed in locations that had
ongoing relationships with the charity. The opportunity to drive one of the
“habitrucks” was reserved for drivers with impeccable safety records and
naturally these were the trucks used for public events and open houses as
well.
Working with and in cooperation with a local community is necessary for any
company that wishes to enter, or grow in that community.
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T H E F I V E K E Y S
3
What’s In a Name?
W
hile the notion of corporate social responsibility or CSR as it is
often abbreviated may not sit well with those who view it as
nothing more than an attempt to reduce profits for the sake of
some often unspecified social good, it can also be viewed as a strategic
business response to an evolution in expectations of what it means to be a
corporate citizen that is being driven by globalization and the increasing
prevalence of information technology.
Companies that wish to be successful must meet the needs of all of these
“customer” groups. Doing so in a manner that is strategic and adds value by
supporting the company’s business model is what corporate responsibility
27
should be. Without the strategic focus, it risks becoming what critics fear, a
“feel good” program that may reduce profitability and therefore hurts the
company and its stakeholders.
For these reasons, I prefer to use the term ‘sustainability.’ Sustainability was
defined by the World Commission on Environment and Development in 1987
as “meeting the needs of the present generation without compromising the
ability of future generations to meet their own needs.” It is important to note
that financial success is one of the needs of the current generation that
cannot be sacrificed or the business will not be around to provide for future
generations. At the same time, a business that is not a responsible steward
of its resources, for example, may reap tremendous profits in the short term
but discover that it has been short sighted in strategy.
John Elkington, title of SustainAbility LLC coined the term “triple bottom line”
to describe the need to measure business impacts in three broad categories
– economic, environmental and social. Managing each of these three
effectively provides an effective framework upon which to define, build and
measure a longer-term business model.
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T H E F I V E K E Y S
4
Sustainability as a Business Strategy
B
usiness is a powerful force for driving both economic and social
gains. This can be seen from the benefits that generations have
come to take for granted in industrialized nations. For millions of
people around the world, capitalism has been a force for economic and social
advancement. People are living longer, healthier lives and enjoying the
prosperity that capitalism has helped to fuel.
29
European business leader Bertrand Collomb, chairman of construction
materials giant Lafarge SA for many years and now chairman of the World
Business Council on Sustainable Development, described the repercussions in
Global Agenda Magazine in 2003:
The crisis of 2001-2002 showed the limits and the excesses of this
approach. Markets do not always give an accurate forecast of the
economic and business situation. Long-term shareholder value
requires a stakeholder approach.
Critics of CSR and sustainability often cite Nobel Prize winning economist
Milton Friedman’s famous maxim that “the social responsibility of business is
to make money.” Friedman famously stated: "There is one and only one
social responsibility of business – to use it resources and engage in activities
designed to increase its profits so long as it stays within the rules of the
game, which is to say, engages in open and free competition without
deception or fraud.”2
Many critics of the CSR movement have latched onto the notion that
Friedman was only referring to the “rules” in a legal sense when he wrote
2
Friedman, Milton: “The Social Responsibility of Business is to Increase its Profits” The New York
Times Magazine, September 13, 1970
30
T H E F I V E K E Y S
this. Over the last three decades, however, history offers example after
example of companies that obeyed the legal parameters but neglected the
rules of the marketplace and have ceased to be viable. As the market
expectations change, companies must be prepared to respond. And
expectations of what it means to be a “good” corporate citizen have changed
so that companies must do more than simply meet existing customers’ needs
with a product over the short term. Increasingly long term financial success
requires business strategies that include good customer and supplier
relationships, reducing opposition to growth, enhancing speed to market,
fostering a favorable regulatory climate and requirements and maximizing
human resources. Sustainability programs, as outlined below accomplish
these tasks.
31
2006 Business Rules Fortune points out that Welch’s old rules
1: Old rule: Big dogs served companies well but that as realities
own the street.
have changed, business must evolve with
New rule: Agile is
best; being big can them. “The risk” the magazine explains “is
bite you.
applying old solutions to new problems.”
2: Old rule: Be No.1 or
No.2 in your market.
New rule: Find a
Almost exactly echoing Collomb’s comments
niche, create
something new. a few years earlier, the magazine questions
3: Old rule:
whether a company's near-term stock price -
Shareholders rule.
New rule: The and the quarterly earnings per share that
customer is king. This
drive it - really is best measure of success.
is really the old.
4: Old rule: Be lean and
mean.
The “new” rules for business, according to
New rule: Look out,
not in. Fortune are almost a textbook argument in
5: Old rule: Rank your
favor of sustainability. They advise that being
players; go with the
A's. responsive to market changes is more
New rule: Hire
important than dominating through size and
passionate people.
6: Old rule: Hire a market share. Larger companies must avoid
charismatic CEO.
the temptation to fall into the arrogance that
New rule: Hire a
courageous CEO. success sometimes breeds and never forget
7: Old rule: Admire my
that they must come to the market, and not
might.
New rule: Admire my the reverse.
soul.
Fortune, July 14, 2007
Lafarge used the phrase “a small, large company” in their vision statement to
describe the powerful combination of being large enough to marshal global
resources and yet small enough to be responsive to local needs. Interestingly
the vision was first created for one division of the company and focused on
meeting the needs of direct customers. Within a few years it had evolved
into the corporate vision, and the concept of treating “the community as
customer.”
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T H E F I V E K E Y S
The “new” rules return the emphasis to the customer from the shareholder.
Bringing back the old, fundamental rule of capitalism. Sustainable companies
define customers as the community of stakeholders who impact their
business, not just those who purchase their goods or services. And they also
are careful to identify who are not customers (or stakeholder) – those for
whom the success of the business is secondary, immaterial or contrary to
their agenda.
The “new” rules also focus on empowering employees and igniting their
passion for the company and making them part of its success. This ties in
with the importance of visionary and courageous leadership and the
importance of having a corporate “soul”.
33
5
F
or anyone to accept the premise that social responsibility is a
business strategy, we must be able to define and quantify the
business benefits that can be derived from adopting this model.
This is so that success can be measured, just as with any business strategy.
34
T H E F I V E K E Y S
Each day that a store remains vacant or a commercial lot lies undeveloped is
a day of lost sales revenue for the company. The community does not realize
the benefits of having those goods or services available, workers are denied
employment, and the community cannot collect sales and income taxes. A
diagram illustrating the some of the economic, environmental and social
impacts that a business can have on the community in which it operates can
be found on page 19, in the discussion of local benefits.
3
NYSE Magazine, August/September 2006
35
Market Opportunity/Advantage
Brand Reputation is arguably the most important asset a company has over
the long term. Jack Welch talked about ‘walking the talk’ but the concept
goes back to the very dawn of democracy and the concept of an empowered
populace. Socrates said that “the way to gain a good reputation is to
endeavor to be what you desire to appear.” It is important to note that he
acknowledges that people attribute values based on acting in accordance
with aspirations. In other words, people judge based on the impact of
actions, and not intentions. And it is unlikely that anyone (individual or
company) can truly achieve perfection. The best case is that when outlying
behavior or actions take place, they are more likely to be viewed as
aberrations rather than symptomatic of a greater and negative truth.
Employee Engagement
Beyond the “feel good” aspect that is often cited as one of the softer (less
business focused) benefits of sustainability, employee morale and culture are
linked to productivity, recruitment and retention.
36
T H E F I V E K E Y S
valuable assets but those that consider employees as integral partners in the
organization’s future and success recognize the power of true employee
engagement. Employees who are passionate about the company and its
products are the best advocates and can counteract threats to brand image
simply by talking to their neighbors and friends.
Robert Lawless, Chairman, President and CEO, McCormick & Co. Inc.
explains that “being socially responsible allows you to attract talent, because
good people will align with the company that really cares about employees
and communities. We link social responsibility to talent retention.”4
4
Ibid
37
Seize the Innovation High Ground
Companies that are looking for ways to be more environmentally, socially
and economically responsible are driving innovations in products, services
and sourcing as well as financial acumen. In six years the number of hybrid
(gas-electric) passenger vehicles sold in the United States rose from 9,367 to
over 246,642 – a 2,533 percent increase - according to the Electric Drive
Transportation Association. Sales of compact fluorescents initially faltered
due to the color of the light emitted. Today’s bulb not only provide the same
light spectrum as classic incandescent bulbs, they use 75% or 80% less
electricity to do so – paying for themselves in about half a year in energy
savings. Recently Wal-Mart, the world’s largest retailer, announced plans to
sell one bulb to every consumer in its 100 million customers. Not only does
the planet benefit from the reduction in energy use, but companies like
General Electric that produce the bulbs also benefit from increased sales
(and reputation). Companies that are seen as innovative tend to attract
innovative employees, and the cycle accelerates. And that is good for
business.
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T H E F I V E K E Y S
instituted but also the first to return after Nelson Mandela was elected and
asked the world to reinvest in the country. Businesses can find themselves in
the same situation.
From 1995 to 2003 assets involved in social investing have grown 40 percent
faster than all professionally managed investment assets in the U.S.
Investment portfolios involved in SRI grew by more than 240 percent from
1995 to 2003, compared with the 174 percent growth of the overall universe
of assets under professional management over the same time period.
39
6
The Forces Encouraging Sustainability as a
Business Model
Globalization
One hundred years after the first powered flight, the oceans are no longer impenetrable barriers
that keep people, ideas and information apart.
Today people travel more than ever before, and corporations often
outsource products and send workers to new locales. This leads to exposure
of both companies and individuals to differing practices and societal norms.
This invites natural comparisons, with the accompanying pressure for a
company to match benefits to the individual and the community that are
perceived as beneficial. Companies that wish to relocate employees may find
that those employees insist on negotiating for a combination of the “best”
benefits from both their “home country” and the “host country.” This in turn
exposes workers in the host country to the new practices and may put
pressure on that office to increase their offering to its local employees.
Knowledge of and insistence upon these ‘best of both worlds’ packages puts
pressure on the company and indeed business in general that results in
increased salaries, but also superior benefits such as vacation time, pensions
and profit sharing, health insurance and maternity leave. Sometimes by
their very existence in a community a company redefines the local
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T H E F I V E K E Y S
Information technology
Information is now shared at the speed of a mouse-click. News no longer
waits for the morning edition of the paper or the 11 PM broadcast. This has
fueled an ever-increasing appetite and a growing market for news – as
producers, editors, reporters and writers scramble to fill the increased
demand for information created by a 24-hour news cycle. It is important to
note that with few exceptions (such as entertainment and show business
reporting) nobody ever achieved ratings by filling a serious newscast with
“good” or “soft” news.
41
messages being disseminated. Most dramatically, the messages must be in
alignment with observable actions around the globe.
While politicians and scientists debate the facts, the public is becoming
increasingly convinced and concerned about the environmental impact of
human activity. People see the flooding of New Orleans during Hurricane
Katrina, record heat-waves in Europe, satellite images of melting glaciers as
connected events based on a changing climate. These stakeholders are
looking at the environmental impacts of business with a critical eye.
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T H E F I V E K E Y S
And this leads us to the forces that are impeding or complicating the
implementation of sustainability as a business strategy.
43
7
The Complicating Factors
There are many who believe that businesses have a moral obligation to
advance issues as human rights, gender equality, competitive wages, and
the like. This can be hugely problematic for many in lesser-developed or
non-Western counties that see may not welcome these new ideas and
morays. To them, companies that seek to import different values threaten to
destabilize their entire society – religious, politically and socially. And from
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T H E F I V E K E Y S
this perspective, these businesses, through the fault of their own best
intentions, are viewed with suspicion if not outright hostility.
45
starting out. With this, GRI may have taken the necessary steps toward a
tiered approach that rewards commitments and practices as well as results.
But until a set of standards emerges there will always be disconnects and
confusion. Companies would do well to ensure that their practices conform
to local laws and regulations and engage proactively in stakeholder dialogue
to ensure that they are keeping abreast and helping to manage stakeholder
expectations.
Corporate Structures
CR activities combine elements of strategic planning, human resources,
environmental, legal, communications and a host of other functions. It is
especially difficult to develop a program that provides value to all these
various functions unless the organization is structured to facilitate, and
encourages cross-functional efforts.
Because of the strong need for stakeholder dialogue, and to ensure that local
concerns are addressed, CR is sometimes housed in corporate
communications departments. Corporate communications departments often
are called upon to craft messages to both internal and external audiences,
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T H E F I V E K E Y S
have ready access to corporate leadership and are responsible for managing
the company’s public image.
47
8
The Time is Right
M
any, including this author, believe that forward-thinking
companies will integrate sustainability goals into their
business models and will use their visions of sustainability to
help define revenue-generating strategies.
When a majority of customers believe and care enough to “vote with their
dollars” by patronizing companies that make a commitment (such as to
reduce green-house gasses) then the successful companies will be those
who do so, investing pennies today to be in business tomorrow. Rather than
spending on PR campaigns and political contributions, those companies
would do better to invest in clean technologies. Tax advantages encourage
these investments – helping to support the economic pillar. And doing so
without regulatory pressure likewise enhances their corporate image and
brand reputation.
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T H E F I V E K E Y S
Bertrand Collomb goes as far to say in his Global Agenda piece that he
believes European-based companies have a natural advantage based on that
continent’s shared more socially-conscious culture. In short, he postulates
that it may be easier to become a capitalistic moralist than a moral capitalist.
He concedes that this position may overlook the cultural advantage of
American companies; innovation, responsiveness to changing market
conditions and expectations and an entrepreneurial spirit that all derive from
a society based on capitalism.
There is quite some evidence that this shift is already taking place. Many
corporations have realized that they cannot regain the lost public trust
through traditional public relations techniques such as glossy brochures, and
slick video news releases. Half (50 percent) of business leaders say
companies frequently handle social and political challenges through the
media and public relations, but 65 percent consider this to be an ineffective
strategy. Three out of four (75 percent) report that their business lobbies
government and regulators in response to challenges but 48 percent regard
this tactic as ineffective. The vast majority (84 percent) favors a business
strategy that combines high returns to shareholders with "contributions to
the broader public good.”5
One third of Americans, for example, believe that the government is covering
up aspects of the 9/11 attacks and questions the manner in which the World
Trade Center buildings collapsed. Movies such as Independence Day included
realistic scenes of the destructions of landmark buildings such as the White
5
McKinsey Quarterly, March 2006
49
House, clearly demonstrating the ability of moviemakers to simulate such
events. As a result, news footage of that day is met with genuine skepticism,
around the world. In contrast, few question the reality behind the blurry,
handheld videos of the Asian Tsunami from 2004. We have lost credibility as
we have gained the ability to fake it so well.
Companies should take note as well, because the same phenomenon applies.
In 2007, PSB Green Brands research found that eight out of every ten
Americas believe that it is important to buy from ‘green’ companies. But
Ipsos Reid research the same year reveals that seven out of ten either
‘strongly’ or ‘somewhat’ agree that when companies describe a product as
“green” it is really a nothing more than a marketing tactic. Clearly, a
company that can demonstrate the sincerity of its commitment would have a
strategic advantage, with eight out of ten buyers.
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T H E F I V E K E Y S
Customize this form to reflect what you hear from your stakeholders through
public meetings and surveys. You may want to ask them to rank their
concerns. Do not limit what you ask your constituents by what you think
your priorities are or should be.
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Next, determine your ability to have a direct impact on each of the concerns
identified by your stakeholders.
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T H E F I V E K E Y S
Employees
Customers
Communities
Regulators/legislators
Investors
Environmental Global warming (CO2, etc.)
Energy use
Impact on ecosystems
Noise / dust
Pollution
Waste products
Social Crime
Diseases (specify) [i.e.
HIV/AIDS, cancer, etc.]
Equal opportunity / rights
Health insurance / benefits
Housing/ homelessness
Impact on local
economy/quality of life
Immigration
Labor relations / Unions
Work / life balance
Economic Ethics and favorable business
practices
Financial acumen
Job creation / opportunities
Local sourcing
Regulatory compliance
53
Determine how and if your company has existing capacities to address the
issues, paying particular attention to whether employees have specific skills
that could be brought to bear.
Social Crime
Diseases (specify) [i.e. HIV/AIDS,
cancer, etc.]
Equal opportunity / rights
Health insurance / benefits
Housing/ homelessness
Impact on local economy/quality
of life
Immigration
Labor relations / Unions
Work / life balance
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T H E F I V E K E Y S
Stakeholder Engagement
based on the Five Principles
Employee Engagement
(+1) Benefits
0 = neither favorable or unfavorable
Operations
- 1 = is not favorable
- 2 = is counter/has negative impact
Model
Total
Environmental
Global warming (CO2, etc.)
Energy use
Impact on ecosystems
Noise / dust
Pollution
Waste products
Social
Crime
Diseases (specify):
[___________________________]
Equal opportunity / rights
Health insurance / benefits
Housing/ homelessness
Impact on local economy/quality of
life
Immigration
Labor relations / Unions
Work / life balance
Economic
Ethics and favorable business
practices
Financial acumen
Job opportunities
Local sourcing
Regulatory compliance
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5. Make a Plan
Create Your SWOT (Strengths, Weaknesses, Opportunities, Threats)
chart/analysis using the information from the first four charts.
STRENGTHS WEAKNESSES
• 8 points or higher on • Identified as stakeholder
worksheet 4 interest (worksheet 1)
• Identified as ‘opportunity to • Identified as having a direct
lead efforts by defining impact on the issue (worksheet
standards/setting benchmark” 2a)
(worksheet 3) • Items earning 4 points or fewer,
• Identified as being able to and/or with -2 in any category
impact directly and indirectly (worksheet 4)
(worksheet 2) • If you are not able to lead or
contribute to effort (worksheet
3)
OPPORTUNITIES THREATS
• 5 - 7 points (worksheet 4) • Items which an incompatibility
• Identified as ‘opportunity to (-1 or -2) has been noted in
lead efforts by defining highlighted boxes (worksheet 4)
standards/setting benchmark”, • Items for which you have a
‘national partnerships” or “local direct (worksheet 2a) and/or
partnerships” (worksheet 3) indirect impact (worksheet 2b)
• Identified as being able to
impact directly and indirectly
(worksheet 2)
Presenting this analysis to decision makers can help them to understand the
strategic nature of your requests, and may provide a sense of urgency to
address threats before they materialize.
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T H E F I V E K E Y S
Acknowledgements
This book would never have been possible without the support and
encouragement of many people, including Matt Russell, Rich Lanza, Ed
Grefe, Andrew Foos, Brian Hawkinson, Mike Mielke, Cindy Cox Roman, Lee
Boyle, Susan Nickbarg, Steven Young, Jed Ipsen, Bertrand Collomb, Alain
Guillen, Ross Larsen, Pamela Kraft, Millard and Linda Fuller, and, my wife,
Karen.
© 2008
John Friedman
703 | 405-0200
As this handbook makes clear, adhering to the principles of sustainability is the best way to
promote social responsibility. Therefore, it is being ‘published’ in electronic format to adhere to
the principles of sustainability. Please consider the environmental impact if you do print it, and
print it on recycled (post-consumer) paper using soy inks.
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