Oil on Troubled Waters (Guest Blog)

Guest Blog by Adrian Henriques

Why has the oil industry produced its own sustainability reporting guidelines – apparently leaving the GRI to its own devices?

The international oil industry has produced a new version of its sustainability reporting guidelines. This comes in the middle of the GRI oil sector supplement development. While the industry guidelines acknowledge the GRI – and even discuss how it differs – this is not a helpful step.

Some of the key problems with the new version of the oil industry guidelines include not addressing the major impact of oil: burning it. In the words of the external stakeholder panel:
“it does not provide more emphasis on the need for the industry to report on actions taken to reconcile the twin challenges of energy security and climate change. One notable example is greenhouse gas emissions related to the use of petroleum product”.

In addition, reporting on tax expenses is reduced to commentary, without the need to produce hard figures. And transparency over taxation is one of the most important ways to tackle corruption. In this sense, taxation is a crucial indicator of development impact.

Despite all this, the guidelines are described as the formulation of an “industry consensus on the most material sustainability issues and the associated choice of consistent indicators and reporting elements”. Well, they definitely represent an industry consensus, but could not be presented as any kind of cross-stakeholder view.

Even the industry’s own Stakeholder Panel is asking them to co-operate with the GRI.

Source

Adrian Henriques is a commentator on corporate accountability. He is the author of ‘Corporate Impact’ and ‘Corporate Truth’. He also works with companies, NGOs and other organisations on issues of sustainability and transparency.

Reposted from Green Conduct

The Future of CSR Codes and Standards

Reposted from the primary CSR International Blog: http://www.csrinternational.org/?p=1373

Yesterday, we had an excellent webinar with Deborah Leipziger, author of "The Corporate Responsibility Code Book" and "SA 8000". It got me thinking about the future of CSR codes and standards, and if indeed they have a future. In this piece, I look at the lessons we have learned so far (both positive and negative) and what part CSR codes and standards play in an emerging New Governance model.

Positive Lessons

Let me start with what I think we've learned about CSR codes and standards over the past 30 years or so.

1. Codes can be a useful activist tool - One of the first CSR codes was the Sullivan Principles, launched by Reverend Leon Sullivan in 1977 to give companies operating in apartheid South Africa a code of ethics. Another example is the CERES Principles, launched in 1989 as the Valdez Principles after the Exxon Valdez oil spill. Both these CSR codes can claim their fair share of success in shifting awareness and behaviour.
2. Codes can help to generate consensus - The benefit of CSR codes and standards like the ICC Business Charter for Sustainable Development (1992), the UN Global Compact (2000) and arguably the forthcoming ISO 26000 (2010) is that they create a common language and set of principles that broad constituents of companies feel comfortable with and can commit to voluntarily. Their effectiveness at changing behaviour is questionable.
3. Codes can embed incremental improvement - What CSR codes and standards like EMAS (1993), ISO 14001 (1996) and OHSAS 18001 (1999) have shown is that process-standards are extremely effective in bringing about continuous improvement in organisations and bringing CSR issues like environment, health and safety closer to the operational management of companies. Often change is slow and patchy however.
4. Codes can change industry sectors - Some of the most effective CSR codes and standards have been industry- or sector-based, such as the Forest Stewardship Council (1993), the Kimberly Process (2003) and the Equator Principles (2003). Their strength lies in changing the rules of the game for an entire sector, which eliminates first-mover disadvantage. They also enjoy a common language and high relevance.

Negative Lessons

There are also downsides to CSR codes and standards, which we have come to realise.

1. Codes create auditing and reporting fatigue - Speak to anyone in business and they will complain about how much time and expense CSR audits and reports are costing them. They have a point, since the proliferation of CSR codes and standards (there are over 100 in "The A to Z of CSR" book that I co-edited) usually each have their own certification and disclosure requirements, despite considerable overlap.
2. Codes create confusion in the market - The excess number of CSR codes and standards creates noise in the mind of the customer and the financial analyst. If a company has ISO 14001 but is not a signatory to the CERES principles, is that good or bad? What is the difference between FSC and Rainforest Alliance certification? Confusion in turn creates distrust, which is ironically what CSR codes and standards are trying to build.
3. Codes can be a mask for irresponsibility - When we look at the collapse of Enron and Worldcom, the current banking crisis, or the reluctance of oil companies to go renewable, it is absolutely clear that CSR codes and standards (which all these companies had or have) can often mask a deeper unsustainable business model or irresponsible corporate culture. Despite genuine efforts by CSR departments, their activity remains marginal.
4. Codes are no substitute for regulation - The voluntary nature of CSR codes and standards means that they will inevitably only apply to the progressive few, and even those may choose to dilute their commitments during financial hard times, or hide behind the "lack of teeth" (i.e. sanction) in most CSR codes. Voluntary action is hardly ever effective in properly internalising externality impacts or creating widespread change.

Future Prospects

With the usual caveats that the future is unpredictable, it does seem to me that there are several trends in CSR codes and standards that indicate the direction of their evolution.

• Principle-based codes will consolidate - The great victory of the past 20 years has been the increasing consensus on what CSR principles should underscore business activities. We can expect a few of the principle-based CSR codes (like the UN Global Compact and the Global Reporting Initiative) to win through and the rest to wither away, or become marginal actors for big business.
• Process-based codes will struggle - The markets for process-based standards like ISO 14001 will continue to grow in developing countries, but quickly reach saturation point, as they have done in the developed world. The reason is that incremental improvement can only get you so far and then you need systemic change, which requires changes in the market structure or the policy framework.
• Performance-based codes will strengthen - Companies will come under increasing pressure to demonstrate their CSR performance in absolute, measurable terms (since process-based codes have essentially failed to solve our global problems). Hence, CSR codes like SA 8000 and emerging standards around carbon emissions will be in higher demand and more trusted.
• Sector-, product-, issue- and geography-based codes will expand - We can expect to continue to build on the progress and relative success of specific CSR codes and standards (as opposed to generic principles), whether they be for a specific sector (e.g. pharmaceuticals), product (e.g. palm oil), issue (e.g. water) or geography (e.g. China). They will be an elaboration of the generic codes, applied to a specific, actionable context.

A New Governance

My fundamental belief is that CSR codes and standards will not disappear, because they form part of an emerging new form of governance, based on a multi-stakeholder approach. They will not be a substitute for legislation (as many from business hoped over the past 20 years), but rather a complimentary mechanism for delivering change. Nor will they be the panacea for the world's problems, but rather an important piece in the jigsaw of solutions.

Behind this question of governance is the crisis in institutional confidence, i.e. the lack of trust by the public in the major institutions of society, including both government and business. Even NGOs are under increasing scrutiny and will see great pressure to demonstrate accountability. CSR codes and standards, if designed and implemented well, can help to bridge the trust-gap. If done poorly, they will only widen and deepen the chasm.

The secret, I believe, is not in the "what" but the "how" of CSR codes and standards, i.e. less about the content (what the code says) and more about the participative process through which they are created; less about the signatories and more about the ways the codes are implemented among the workforces and communities in which companies operate. In a nutshell, CSR codes and standards of the future will be less about words and more about actions.

The Long Tail of CSR

I recently read The Long Tail, by Chris Anderson and it started me thinking: What is the Long Tail of CSR? 

The Long Tail – named after the extended tail of a statistical distribution curve - is the idea that selling less to more people is big business. It’s the business model that has spawned the most successful companies of the Web 2.0 age. The Long Tail questions the conventional wisdom that says success is about generating ‘blockbusters’ and ‘superstars’ – those rare few products and services that become runaway bestsellers.

Anderson sums up his message by saying that: 1) the tail of available variety is longer than we think; 2) it’s now within reach economically; and 3) all those niches, when aggregated, can make up a significant market. He also notes that this Long Tail revolution has been made possible by the digital age, which has dramatically reduced the costs of customised production and niche distribution.

There are three enablers of successful long tail businesses, according to Anderson: 1) democratising the tools of production (e.g. digi-cams, content editing software, blogging tools); 2) democratising the tools of distribution (e.g. Amazon, eBay, iTunes, Netflix); and 3) connecting supply and demand (e.g. Google, blogs, Rotten Tomatoes).

So how might this apply to CSR? To me, the Long Tail of CSR is all about extending the reach of CSR, and improving its ability to satisfy specific social and environmental needs. Let’s use Anderson’s enablers as a framework for thinking about this ...

Democratising the tools of CSR production

This is about breaking CSR silos and extending CSR beyond multinationals. At the early stages of CSR adoption, it is often confined to Public Relations, Corporate Affairs or Marketing departments. As CSR implementation matures, responsibility tends to migrate to specialised CSR departments of various descriptions (environment, health & safety, accountability, corporate citizenship, etc.). However, these versions of CSR are like the Hollywood model of blockbuster films. They suggest that CSR is about a few, high visibility programmes that are designed by CSR experts and delivered by big companies.

By contract, democratising CSR production would be mean firstly embedding CSR across the organisation – making it the responsibility of operations managers, financial managers, shop floor workers, basically everyone. This is only possible if CSR becomes part of the culture and incentive systems of an organisation. Secondly, CSR would need to be extended beyond the usual suspects (i.e. the high profile, branded multinationals) to the less visible B2Bs (business to business), to national (rather than multinational) organisations, to SMEs (small and medium sized enterprises), and down the supply chain (as WalMart is now most famously doing).

Democratising the tools of CSR distribution

To date, CSR has mainly be ‘distributed’ via a few select projects – typically philanthropic or charitable activities – in which the company offers its help to the ‘less fortunate masses’. Usually, the nature and scope of CSR activities is determined top-down and offered as a fairly undifferentiated ‘service’, e.g. Nike might decide to focus on sponsoring sports teams, events and celebrities and Coca-Cola might choose water as its key CSR issue. The most common delivery mechanisms are money (sponsorship and other forms of charity), or for the more advanced companies, adhering to generic CSR codes and standards.

By contrast, democratising the tools of CSR distribution should include allowing staff to participate in CSR delivery through volunteer programmes, and developing more geographically tailored and sector-specific CSR codes and standards, such as the Roundtable on Sustainable Palm Oil, or the Global Reporting Initiative guidelines for HIV/Aids reporting. Beyond this, embracing Bottom of the Pyramid (BOP) markets and supporting social entrepreneurs will allow the reach of CSR to be extended so that the needs of formerly unserved or underserved people can be met.

Connecting CSR Supply and Demand

Traditionally, CSR has been offered in the form of grants by multinational head-offices, who control the budget and set the criteria by which prospective philanthropic projects should be selected. For the more advanced companies, this has been extended to adherence by their operations to corporate codes of CSR practice and communicating this through CSR reports. Demand has typically come from community groups applying to corporate foundations for funding, or NGOs taking an activist approach to demanding improved CSR practices.

By contrast, connecting the Long Tail of CSR supply and demand will rely increasingly on cross-sector partnerships and multi-stakeholder groups. For example, Rio Tinto may work with the Word Conservation Union to identify biodiversity needs and satisfy them through appropriate CSR activities. Companies may also use extended stakeholder networks of community groups, social entrepreneurs and microcredit enterprises to better match their capacity to make a positive impact among those who can most benefit, as BP is doing with smokeless stoves in India and SC Johnson is doing with cleaning products in Kenya.

Conclusion

 To conclude, applying the Long Tail concept to CSR requires a different way of thinking about how CSR is generated, delivered and managed. It means making CSR a more inclusive and embedded process within the company, and a more diverse and far-reaching set of activities outside the company. It also means creating meaningful stakeholder partnerships to ensure that the right kinds of CSR benefit the right groups of people, where and when they need it.

The Long Tail in a nutshell, according to Anderson, is: “culture unfiltered by scarcity”. By extension, the Long Tail of CSR in a nutshell is: “responsibility liberated by collaboration”.

To download this think-piece as a pdf, go to: 

http://www.waynevisser.com/article_waynevisser_csr_longtail.pdf