Why doing good is good for business: the rise of sustainability up the corporate agenda Article icon


Helen Dunne reviews a lively morning debate

Charlotte Grezo group director, corporate responsibility strategy, Centrica

Business should benefit society - through employment, through taxes, after all business pays for the lifestyle we all have - but also in overall providing an environmental, social benefit.

A business that doesn't get perceived (and I think perceived is an important word) as providing an overall benefit is in real danger of losing its licence to operate. Shell in Nigeria was not perceived as benefiting the community in the south of the country which has led to ongoing problems. Coca-Cola in India and the problems they had with extracting water locally; again the local population didn't really perceive any benefit was accruing to them and that was at the heart of a lot of the problems.

The definition [of sustainability] I am going to work from is managing the impact of a client or business on society, the environment and the economy. It's all about business behaviour - community investment is one element of that but, fundamentally, I'm talking about the way a business behaves.

It's a balance between minimising the possible negative impacts of a business on society and the environment but also, really importantly, maximising the positive consequences of your business. This isn't all just about risk; it ought to be very much about opportunity as well.

If you look at BP, their share price is still around £4, down from £6.50 before Deepwater Horizon. Estimates suggest that incident will add around 20 per cent to the cost of deep-water drilling and 20 per cent to the time it takes to get the planning. That incident has not just cost BP; it's cost a whole sector.

Memories are really long. Nike and sweatshops was in the 1990s, but everyone still remembers it. Brent Spa and Shell was the 1980s and finally Nestlé and the mis-selling of baby milk in the developing world is no less than 40 years old. I've been all around the world and referred to that and people immediately remember it, so operating in a responsible manner is hugely important to the long-term success of a company.

Sustainability needs to be aligned to business priorities, to complement and support business strategy; it's a hugely important part of building trust with society.

It takes years to do this properly. When I joined Vodafone, they had nothing. It's quite a big company, of course, and operating in quite a lot of countries, but even just to get to what I regarded as a good CR programme that brought business advantage took six years. You can't do this stuff without data and information. It takes two to three years to build a good database for a company of any complexity. So people that say they've done stuff in a year, it simply isn't true unless you're very tiny and small.

If you talk about something as a company, you need to have the evidence, the data and the proof points behind that. Otherwise, in the longer-term you'll do more harm than good. The consumer might be won over for a while but nobody who knows anything about it will.

Governance is absolutely key, but you can rarely find good information about the governance in this area. At Centrica, we have just agreed a set of governance principles for CR that set absolutely clear accountability for where this stuff lies and who owns it and who delivers it. Without that, you really struggle.

Gill James head of sustainability, Standard Chartered

Sustainability for an organisation is actually about your long-term future. It's about delivering returns to your shareholders as well.

As an organisation you've got institutional investor pressure, regulatory pressure is increasing all the time (particularly in the banking sector) but also political pressure. You've got to cover off all that when looking at your sustainability agenda.

At Standard Chartered we see this as a strategic advantage. If we get this right, it actually differentiates us from the competition. The more that you can be seen to be delivering in a sustainable way, that supports your brand, while innovation increases sales.

Increasingly, across all the markets in which we operate, we see more and more people wanting to join us because of our sustainability agenda.

The aim of our sustainability agenda is to contribute positively to the economies in which we operate. And if you look at the markets where we are - we're in Asia, Africa and the Middle East - these are a lot of developing markets. It's absolutely critical to us to be delivering something back to those economies.

Successful economies mean that companies and financial institutions operating within them have a future. But it's also about working with clients in countries where the culture may not necessarily be as up to speed on environmental social issues as, say the UK, to raise their standards. It's also about promoting the communities in which we operate.

We run sustainability on a commercial basis. None of this is loss making for us. We have a 'Living with HIV' education project. That was due to necessity. Ten years ago in Africa, we saw the impact that HIV was having on our own operations. Our community investment programme grew out of a business need. I think that is where doing good can really have a positive effect on economy.

You can actually see the return on investment in everything that you do. And if you get distracted from that, that is when it becomes a nice to have, it can become a cost. And your own businesses, the individuals out there making the money and the revenue for you will not engage.

Mine is a small function within the bank. Our aim is to partner with the businesses, to embed what we do and for them to actually manage this and take ownership of it.

Investors have a real role to play here. I spend a lot of time talking to socially responsible investors, but increasingly our mainstream investors are actually asking the questions. The conversation with the investment community is a lot more adult than some of the conversations that we have with the NGOs. The NGOs are very black and white. With your investors, you can say Look we don't have all the answers. Here are our processes. Here is the accountability. Here is the governance and actually this is what we're trying to get to. I actually find those conversations very valuable. You engage with NGOs, you help them understand - we have a proactive campaign with them - but, at the end of the day, you've also got to understand you are never going to win with some of your stakeholders. It's a balancing act on what actually matters to you as a company.

One of my real positives is my head of wholesale banking. He is the one driving this. He tells me I'm not being tough enough on some of his business teams. And actually him going out and talking to the investors, putting him in front of the NGOs, is far better than putting the head of sustainability there because there is still that perception that you're a fluffy sort of department.

Ed Gillespie co-founder, Futerra

A lot of CSR and sustainability began with internal good housekeeping work, which can affect the bottom line but doesn't necessarily lead to product innovation and changing your external relationships with clients and suppliers. People now are talking about abandoning CSR full stop and actually bringing that right into the core business because they've embedded it so deeply it's no longer this additional thing. It's actually at the core of what they do. This is the only game in town in the long-term. And so you either engage with it now, deeply and seriously, or you get left behind.

I love the quote from a manager at Nike who said you have three options as a business in the 21st century. One is business as usual, and you will hit the wall at some point and go out of business. The second one is efficiency, and you will become a little bit more efficient, you'll improve your energy consumption, you'll look at your resource use; you'll still hit the wall -just a little bit later. The third option is to reinvent and evolve and change your business, and I think that's where the dynamism and the challenge and the excitement come from.

Employees want to work for a company they feel good about, who they think they share their values with. How do you embed loyalty and trust with your clients? Well, you show them transparently how you're managing your business efficiently. And you try and do a bit of good in the world.

This is a massive opportunity. I often use the Chinese symbol for crisis in my presentations, which is made up of two characters - 'danger' and 'opportunity' - and that for me encapsulates sustainability.

We have lots of clients saying We'd like a Plan A, and you say Well, M&S had to work incredibly hard for many years under a number of different work programmes and streams. Obviously their chief executive has been won over and said We want one of those. They don't appreciate that it actually is an incredibly complex and complicated thing to put together.

Unless your CSR team is actually influencing your core business, it's pointless. It is just window dressing. And you will get scrutinised from people like NGOs. You really do have to make sure you've got commitments that you are going to deliver on and that there are time scales to do so. Or you'll be hung out to dry.

The volunteering aspect, and that additional contextual work that people can do that has a philanthropic edge, is really important. But I think you also have to develop it beyond that and beyond the traditional environmental champion role where some poor beleaguered person in the corner of the office feels like the bin Nazi, hassling their colleagues about recycling and switching things off. Increasingly, some of the companies we work with are taking their environmental champions programme and shifting that to connect with product and service innovation to train up and educate employees to be able to challenge each other in a more sophisticated way about what sustainability really means to the business. That's not just a top down thing. This is them being able to challenge people in every meeting, to say Well is this really sustainable? Is there another way of doing it? It is important to encourage lateral thinking otherwise the volunteering elements go back to being a bit CSR peripheral, because it is about stuff which is either beyond the organisation and beyond the core business or it's just housekeeping. We have to join those up much more effectively.

Because of the internal scrutiny and intimate understanding of your business that you need to have when you're doing sustainability credibly, you are much more appealing to investors because you understand your business much better. From a socially responsible investment perspective, they say We know this business knows what it's doing and has one eye on the longer-term future.

Rober Nuttall managing director, corporate responsibility and sustainability, MHP

I'm seeing huge polarity, perhaps wider than ever before, with those who, to put it simply, get it or get what it would be versus those who are still scratching their heads. Some pretty large organisations are still scratching their heads and wondering what it's all about.

It's intriguing that companies who have got big public-facing, consumer-facing brands, are still doing things which are not sufficiently transparent, not sufficiently authentic and can't be verified. From a risk standpoint, never mind from an opportunities standpoint, that is quite a position to be in. One of the reasons is that often organisationally, companies are quite fragmented in terms of where responsibility for this area lies.

Unless the chief executive, and it has to be the chief executive, is really behind this and driving this agenda, then it's very unlikely to happen because it cuts across all parts of the organisation. An organisation where the chief executive just nods towards it but doesn't really push, is not an organisation where this is going to happen - both from a risk and an opportunities standpoint.

There is an increasing scepticism and cynicism amongst consumers as to what companies are saying they're doing. It's getting worse, not better, if you look at all the research. I think that takes you to the interesting place of third party endorsement and who you work with or partner with. Corporates often underestimate the power of NGOs, but NGOs have become more pragmatic in terms of how they work with corporates whom they believe to be authentic.

To be quite frank [when we launched Plan A at Marks & Spencer], none of us knew what we were doing, including our chief executive Sir Stuart Rose. We thought This is a good idea; let's take it forward. Nominally an amount of £200 million was put aside to drive it forward. Why that number? Well, because it was a number.

There was nothing much behind it, which takes me into the area of the business case. If companies are looking for the cast-iron business case that if you do 'x' then 'y' will happen, they will be disappointed. The very nature of driving innovation is that what comes out should surprise and be different.

At Marks & Spencer, we were absolutely staggered by the initial amount of savings and then by the amount that could be made. The first year we sat down and said What's this cost us? We were amazed to find it had been cost neutral. We had to ask the auditors to check again. We just couldn't believe it. It turned a profit in the second year and now the green activities, in their broadest sense, that M&S engage in are very, very profitable.

Every organisation that has been engaged in this, that's been bold, has been pleasantly surprised. But it requires boldness. And that comes back again to the chief executive and senior team saying Yes, give it a go.

About 12 months into Plan A, my colleague said Robert, this is not going that well. I said What? Surely not? In the core business sections, whilst they'd understood broadly what was expected of them, nobody had really sat down and asked What would a sustainable model look like for your part of the business? It's not obvious. They would say You want me to make margins, you want it to go Fairtrade, you want it to do this, that and the other but that costs more money. Help me. Help me do this. That's where the rubber hits the road, in terms of where CR becomes really value added. You need to understand that the answer isn't necessarily that obvious and work with the business to determine what that might look like. That's the Nirvana, if you like. The rest, however important it is, will not fundamentally shift the organisation.