Category Archives: Strategic Planning for Sustainability

Implementing Your CSR Commitments: Setting Goals and Targets

Once your company has finalized and published its CSR commitments, attention needs to turn to the actual implementation of those commitments, which includes the day-to-day decisions, processes, practices and activities that are required in order for the company to adhere to its commitments and effectively carry out its overall CSR strategy.  It is imperative that companies follow through on the promises and aspirations spelled out in the CSR commitments and demonstrate to all of their stakeholders that they are serious about fulfilling their obligations.  Implementation failures create mistrust and cause confusion among stakeholders as to how the company will respond to certain situations.  Taken to the extreme, a company that fails to implement its CSR commitments will find itself losing employees, customers and business partners and will see its reputation in the marketplace and community plummet.

Implementing CSR commitments involves identifying and setting clear goals and targets that can be readily measured and reported on to stakeholders.  While many of the aspirations associated with CSR commitments are big and brave, often akin to dreams, it is nonetheless necessary to turn them into objectively stated goals with a timeframe and performance criterion so that at some point a fairly clear answer can be given to the question of whether or not the goal has been achieved.  Goals and targets bring commitments to life and take companies beyond good words and intentions to the point where they take actions based on their preexisting strategic and management capabilities and core competencies.  The power of goals and targets are enhanced by disseminating them throughout the company’s stakeholder groups and committing to report regularly on progress and connect the goals and targets to measurement of performance and effectiveness among directors, executives, managers and employees.  Hopefully a good deal of thought has been given to goals and targets as the CSR commitments were being selected since stakeholders will understandably expect to see companies proceed quickly to implementation once the initial fanfare surrounding the announcement of the commitments fades away.

There is no universal approach to implementing CSR commitments and the methods used by companies will vary depending upon the specific content and focus of their commitments, current organizational structure, organizational culture, resources, priorities of the CEO and the other members of the senior management team and other factors.  One way to implement CSR commitments was suggested by Hohnen and Potts and included the following steps that are discussed in the following sections[1]:

  • Develop a CSR implementation plan;
  • Develop an integrated CSR decision-making structure;
  • Prepare and implement a CSR business plan;
  • Set measurable targets and identify performance measures;
  • Engage employees and others to whom CSR commitments apply;
  • Design and conduct CSR training;
  • Establish mechanisms for addressing problematic behavior; and
  • Create internal and external communications plans.

As should be clear from reviewing the bullet points above and sections below describing each of the activities, implementation requires support and investment from across the entire organization.  While primary responsibility may be vested with a group or department, input will be need from the board of directors, all members of the executive team and managers and employees in all of the functional and customer departments.  For example, directors and executives must set the appropriate “tone at the top” and employees should not only be trained but also should be brought into the process of generating ideas for goals and targets and creating communications to external stakeholders regarding those goals and targets.

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10 Golden Rules for Setting Sustainability Goals

Woothiff noted that the emergence of sustainability reporting as a common practice of business organizations around the world had led to a focus on the process of setting appropriate sustainability goals and targets upon which the reports could be based.  Goals and targets are also a necessary element of sustainability strategy—without goals and methods for measuring performance against them a company’s sustainability initiatives will drift and quickly degenerate into a series of ad hoc actions and events will minimal overall impact.  In order to assist companies in setting their sustainability goals, Wothiff offered a menu of “10 Golden Rules”, which form the basis for the following list of suggestions and guidelines[2]: 

  • The goals should not only address sustainability challenges laid out in the commitments but should also benefit the business and expand business opportunities for the company. In order to motivate involved parties within the company to pursue environmental and social goals they should also make good long-term business sense for the company.  For example, support skills development in the local community not only enhances wellbeing among the company’s neighbors but also provides the company with a strong local talent pool to choose from when hiring for growth initiatives.
  • The goals and targets should be formally reviewed and approved at the very top of the organization—by the directors and members of the senior executive team. In the ideal situation the entire process will be publicly driven by the CEO, who takes responsibility for suggesting, championing and implementing the sustainability goals and targets.  The directors and executives have a responsibility to demonstrate to all internal and external stakeholders that sustainability is a key element of the company’s strategy and is perceived as a driver of innovation, improvement, progress and growth for the business.
  • Sustainability goals should be based on activities and investments that will be integral to the business of the company, as opposed to creating separate work that diverts resources from core activities. Sustainability goals and targets should be created for each of the company’s main functional activities including research and development, manufacturing, operations, packaging and distribution, supply chain and human resources so that the company improves its processes and procedures at the same time it is making a positive impact on sustainability challenges.
  • Companies need to strike the appropriate balance between impact and achievability when setting their sustainability goals and targets. The goals should stretch the company and its organizational capabilities and, if achieved, should have a demonstrable impact; however, they should not be set so high as to guarantee failure, which creates a weak track record and damages morale.  Setting goals that are too soft exposes the company to criticism for meaningless gestures and engaging in “greenwashing”.
  • All of the goals should be important; however, resources are limited and companies need to prioritize activities for a particular period to make sure that their efforts achieve the most meaningful impact and generate the biggest results. Sustainability goals should be aligned with other current initiatives throughout the business so that sustainability is tightly aligned with strategy and the sustainability program clearly addresses important needs inside the company.
  • Goals and targets should be not be selected and published without a clear strategy that outlines the path the company intends to take in order to achieve those goals and targets within the specified timeframe and budget. If agreement cannot be reached on strategy, or if the necessary resources are not readily available, the goal should not be included.  It is better to have a relatively small number of attainable and impactful goals as opposed to a long list that includes goals that cannot realistically be achieved.
  • While, as mentioned above, the “tone at the top” matters and the CEO should be a champion of the sustainability goals and targets, ideas should be solicited from everyone in the organization. Employees generally have the best understanding of the types of changes in the day-to-day activities of the company that can have the biggest impact on the company’s environmental and social performance.  Moreover, a number of studies have confirmed that employee engagement in sustainability activities leads to higher morale and loyalty, thus reducing turnover.  Engaged employees are also strong ambassadors for the company in their interactions with other stakeholders.
  • Sustainability goals and targets are certainly excellent internal management tools and external public relations activities; however, the three key stakeholders in terms of gaining traction on the company’s efforts are employers, customers and consumers. When choosing goals and designing measurements for targets it is important to take the expectations of these groups into account so that each of them can recognize the tangible benefits they can expect to receive if the company is successful.  Improved wellbeing for employees has already been mentioned; however, surveys indicate that consumers want to do businesses that perform well with respect to sustainability.
  • Setting sustainability goals and targets is hard work and requires extensive engagement with internal and external stakeholders including outside organizations such as nonprofits, NGOs and governmental bodies in the communities in which the company operates. Engagement and collaboration with these external organizations provides access to new opportunities, solutions and resources.  Moreover, support from these organizations lends credibility to the company’s sustainability efforts and communications.
  • While many of the points above have focused on benefits of sustainability goals and targets to the business, sustainability initiatives obviously must also position the company as a “good corporate citizen”. Companies should approach sustainability goals as an opportunity to find innovative ways to simultaneously create new products, services and processes while also solving environmental or social sustainability issues that have not been satisfactorily addressed using traditional methods or approaches.

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[1] P..Hohnen (Author) and J. Potts (Editor), Corporate Social Responsibility: An Implementation Guide for Business (Winnipeg CAN: International Institute for Sustainable Development, 2007), 57.

[2] Adapted from J. Wootliff , Setting Sustainability Goals: 10 Golden Rules, Environmental Leader (December 9, 2010), https://www.environmentalleader.com/2010/12/setting-sustainability-goals-10-golden-rules/

What’s a Chief Sustainability Officer?

We have previously discussed the role and responsibilities of chief responsibility officers; however, many companies refer to that position as the chief sustainability officer, or CSO.  In a 2007 White Paper on the changing role of the CSO, Heidrick & Struggles noted that for many years the primary role of a company’s chief environmental, health and safety (“EHS”) leader was to handle audit and compliance matters and interact mainly with permit writers, safety inspectors and low-level compliance staff at regulatory agencies.  However, as companies had come to understand the crucial role that EHS performance played in overall company performance they had begun to recognize that EHS could no longer be treated as a cost center but instead should be regarded as an important strategic asset that could easily become a significant liability if not properly managed.[1]  As such, Heidrick and Struggles found that companies were changing their organizational structures to move away from the traditional practice of having the CSO report into Legal or Human Resources toward a new alignment in which the CSO reported directly to the CEO and interacted regularly with other members of the senior executive team as a peer.[2]  The CSO was also being expected to communicate directly with board members, another sign that the position was regarded as being an important driver of company growth and performance and an architect of overall company strategy.

Heidrick & Struggles cited a range of pressures and sources that were forcing companies to take a new look at how their EHS and sustainability activities were managed including aggressive governmental enforcement activities in the US and in the European Union, financial and legal considerations, concerns about climate change and energy costs and availability, the need to develop new technologies to address environmental challenges and intensified scrutiny from public interest groups and the media into sustainability practices generally and oversight of environmental and social matters in supply chains specifically.  Companies also had to address the emergence of numerous guidelines and reporting standards for sustainability and social responsibility that were changing the expectations of stakeholders regarding corporate performance and communications.  While at first many companies were reacting to changes in their environment as opposed to taking the initiative to transform their businesses to take into account sustainability, most eventually began to appreciate significant business benefits such as enhanced brand, preservation and enhancement of reputation, decreased costs, protection of assets, increased efficiency and competitive advantage.[3]

Creating a list of necessary competencies for an effective CSO, Heidrick & Struggles began with the ability to think strategically, which was described as the ability to look toward the horizon, identify an opportunity or challenge before it affects the company, and develop and implement a strategy to either take advantage of the opportunity or manage the challenge.  Particular attention was given to the creation of business opportunities by the CSO, a marked shift from focusing primarily on prevention, mitigation and compliance.  For example, the CSO can proactively seek out technological solutions to environmental problems that simultaneously reduce costs and improve productivity, a true “shared value” proposition.  A second key competency for the CSO identified by Heidrick & Struggles was the ability to communicate effectively and translate complex technical concepts and strategies into terms that resonated with the company’s top leadership and key constituencies (i.e., employees, investors, lenders, insurers, rating agencies, customers, suppliers, the media and the public).  When communicating the CSO needed to be able to adapt his or her tone and approach to a wide range of audiences ranging from the CEO, directors and regulators to each of the employees who would be called upon to change their skills and behaviors in order to execute the sustainability strategy.[4]

While strategic and communication skills were at the top of the competency list, Heidrick & Struggles pointed out that the CSO must also have or quickly develop a a wide range of interdisciplinary and cross-functional competencies, including the following[5]:

  • Ability to hire, lead, develop, and inspire a diverse staff and to develop trusting relationships with a variety of company constituents before an issue becomes a problem.
  • A solid grounding in a wide range of EHS requirements, processes, procedures, technologies, and, depending upon the scope of the operation, familiarity with these issues at the local, state, federal, regional, and international levels.
  • A knowledge of financial operations that extends beyond budgeting to include project financing, corporate finance, an understanding of how finance intersects with EHS and sustainability, and the ability to make a business case for a new direction.
  • Knowledge of the company’s processes, products, technologies and business processes coupled with the ability to manage EHS systems within the company and the ability to assess and audit those systems with vendors, suppliers, and distributors.
  • Familiarity with technological and process advances and an understanding of the trends in EHS and the influences on the company and the industry segment.
  • Ability to communicate with community leaders and activists and to communicate with the media in a crisis.
  • Ability to develop and manage a marketing campaign related to the EHS and sustainability aspects of the company’s performance, products, or liability.

Heidrick & Struggles reported on the important role that the CSO can play with respect to development and implementation of EHS and sustainability strategies and policies.  For example, one of the companies described in the White Paper explicitly integrated EHS and CSR and created a Corporate Social Responsibility Council that included the company’s equivalent to the CSO position, the CEO, two of the company’s ten business unit managers, the Chief Technology Officer, Chief Strategy Officer, Director of Human Resources, Director of Communications, and the Marketing Manager.  The Council met several times a year to set and evaluate the company’s EHS and CSR policies and the CSO was responsible for ensuring that those policies were understood and implemented throughout the organization through an extensive network of some 200 EHS managers.  In order for this type of structure to work, the CSO must have a clear understanding of how things work throughout the organization and the skills to participate in the design of appropriate management systems so that information can flow upward and downward and be available for use in reporting to directors, the CEO and other members of the executive team and the company’s stakeholders.

Comments from various interviews with CSOs included in the White Paper emphasized the important of the CSO being able to drive employee engagement through his or her vision, communication skills and demonstrated enthusiasm.  As a promoter of significant change throughout the organization the CSO must be able to understand human nature and behavior, build trust, forge alliances and facilitate collaboration among people, departments and external stakeholders.  Also, since sustainability challenges cannot be tackled and resolved by any one company, the CSO must be able to work effectively with broader initiatives focusing on particularly environmental and social issues, perhaps assuming a leadership position in those initiatives, and convince other companies in the same industry to stand down from their day-to-day competitive views of one another and develop appropriate new standards that would benefit them and their customers and employees and fend off regulatory intrusion.  In that regard, Heidrick & Struggles reported that CSOs were serving on senior-level advisory groups and associations aimed at influencing public policy developments and regulations or dealing proactively with specific challenges to their particular industry or value chain as a whole.[6]

[1] A. Luijkenaar and K. Spinley, The Emergence of the Chief Sustainability Officer: From Compliance Manager to Business Partner (Heidrick & Struggles International, 2007).

[2] Heidrick & Struggles found that many companies were expanding EHS, areas which had already been combined for a number of years, to include sustainability and corporate social responsibility and referring to the leader of activities in the expanded area as the CSO.  Id. at 3.

[3] Id. at 6-7.

[4] Id. at 9.

[5] Id. at 10.

[6] Id. at 3.

For further discussion see Strategic Planning for Sustainability prepared and distributed by the Sustainable Entrepreneurship Project.

What’s a Chief Responsibility Officer?

Rangan et al. argued that well-managed CSR creates social and environmental value, while supporting a company’s business objectives and reducing operating costs, and enhancing relationships with key stakeholders and customers.[1]  Rangan et al. joined others in recommending that companies establish an independent full-time position to oversee CSR and sustainability (they referred to this position as the “Chief Responsibility Officer” (“CRO”)) and who would have access to the CEO and input into the company’s business strategy.  Rangan et al. emphasized that it was important for the CRO to hold that position as his or her primary responsibility, noting that too many companies delegated CSR oversight responsibilities to human resources or operations managers who were only able to devote a portion of their time to that job while continue to spend most of their time on their day-to-day line responsibilities.

The CRO should be given the resources to do his or her job in the form of a dedicated CSR unit that would be formally and publicly tasked with coordinating and integrating CSR initiatives across the organization, even if responsibility for implementation of the various initiatives remains dispersed throughout the company.  While the CRO cannot attend every planning meeting or event, representatives of the unit can be knowledgeable participants for each program including have decision rights in the design and execution of programs.  The knowledge collected from the activities of the CSR unit will allow the CRO to elevate strategic CSR topics and priorities to the highest levels within the organization quickly and effectively.[2]  Rangan et al. conceded that coordinating a company’s CSR initiatives in a strategic manner is a challenging task given that companies may be engaged in a diverse set of programs that include philanthropy, value chain activities and wholesale business transformation that may be driven and led by a range of actors including community affairs managers, operations managers and members of the executive team.

Rangan et al. pointed out that having CSR represented in the C-suite serves as a catalyst for the strong leadership and support for CSR initiatives that must emanate from the senior executive team in order for those initiatives to capture the imagination and energy of employees and other stakeholders.  The CRO should be sure that CSR is taken into account when business strategy is being discussed and established in the boardroom and in meetings among senior executives and should take the lead in communicating with operations managers about how budgets and performance metrics for particular programs have been established taking into account CSR priorities.  The CRO should also join the CEO in engaging with stakeholder groups to explain the company’s CSR strategy and obtain feedback and address concerns.  Finally, the CRO should be responsible for ensuring that the company adheres to the continuous process of auditing and evaluating its CSR activities necessary for a coherent and effective CSR strategy.

[1] K. Rangan, L. Chase and S. Karim, Why Every Company Needs a CSR Strategy and How to Build It (Cambridge MA: Harvard Business School Working Paper 12-088, April 5, 2012), 21.

[2] Id. at 21-22.

For further discussion of the model proposed by Rangan et al. for developing a CSR strategy, see Strategic Planning for Sustainability prepared and distributed by the Sustainable Entrepreneurship Project.

CSR Commitments: Unilever’s Sustainable Living Plan

An interesting, and highly controversial, illustration of corporate social responsibility (“CSR”) commitments was the introduction in 2010 of Unilever’s Sustainable Living Plan, referred to as the “USLP”.  The USLP was conceived and driven by Paul Polman, who began serving as the CEO of Unilever in 2009.  An Anglo-Dutch company launched in the 1880s near Liverpool, Unilever has grown to more than 300 factories across the world by 2017 and has developed and maintained more than 400 brands sold to around 2.5 billion customers (one in every three people on the planet).  The USLP has been described as a sweeping canvass of over 50 ambitious goals that include stopping all non-hazardous waste going to landfills, training 5 million women and cutting the water waste in the company’s factories by half (click here for more on the USLP).  Polman made the USLP, and sustainability in general, a core management principle with respect to his leadership of Unilever, not surprising given that the French government bestowed a knighthood on him in 2015 for his global campaigning to rein climate change and he was one of 26 people, the only business executive in the group, chosen in 2012 by then United Nations Secretary-General Ban Ki-moon to participate in the working group that eventually produced the United Nation’s Sustainable Development Goals.

Results from the Fortune list of the World’s Most Admired Companies for 2017 indicated that Polman’s emphasis on sustainability had bolstered its global reputation.  Unilever ranged No 38 among the “Top 50 All-Stars”, up from No. 41 in 2016, and it marked the sixth straight year that the company had made the list.  However, traditional financial measures were giving analysts and investors cause for concern.  While Unilever reported $58 billion in revenue and $5.7 billion in net profit for the year, sales growth was slowing, the company’s stock price had dropped 2% over the previous twelve months as the S&P 500 shot up 25%.  Analysts believe that most investors have little interest in the USLP and the analysts themselves wonder whether Polman has “morphed into the classic Davos Man, more intently focused on fixing global problems than the nitty-gritty details of operations”.  Other concerns include the ability of Unilever’s six research centers, disbursed all over the world and supported by more than $1 billion annually, to develop enough new products to keep up with the company’s growth requirements.  The answer appears to be “no”, since Polman has increasingly relied on acquisitions to grow the business, a strategy that makes integrating sustainability throughout the company more difficult.

Polman quickly understood that it would take years for the USLP to show concrete results, and that some of its targets could run counter to growth.  So he scrapped quarterly earnings guidance for investors, a system he called “absolutely ridiculous.” Polman sided with those who argue that the tyranny of quarterly goals traps public companies into continually trying to drive up share prices for investors, while downgrading more long-term, complicated missions, like improving working conditions and the environment.  This all may be true; however, stakeholders need to be able to follow a company’s journey along the path established in its sustainability plan, particularly since goals such as significant reductions in greenhouse gas emissions may take decades for a company as large as Unilever and it cannot reasonably be expected that the executive team will remain in place long enough to see everything through (a reality that illustrates the important of building a durable sustainability culture within the organization so that turnover and succession can be accommodated without “missing a beat”).

Source: V. Walt, “Selling Soap and Saving the World”, Fortune (March 1, 2017), 122.  For discussion of methodology used by Fortune to identify and rank the members of its annual list of The World’s Most Admired Companies, as well as the rankings for 2017 that cover over 40 industries and companies from 28 countries, see fortune.com/wmac.  Social responsibility is one of several criteria used when information is collected from 3,800 executives, directors and securities analysts, along with investment value, quality of management and products and ability to attract talent.  The result of the survey process is “The 50 All-Stars”, described as an elite assemblage that won votes from inside and outside their industries, and a “top five” in sectors across broader industry categories such as computers and communication, consumer products, contracted services, financials, media and entertainment, natural resources, power, precisions, shelter, stores and distributors and transport.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project and further information and guidance on creating and implementing CSR commitments and goals is available through the Project’s website.