the new pr

8/14/2019 The New PR

1/60

The New PR

Meet todays communication needs through five successfulkeys that replace spin with transparency and unlock the fullpotential of your sustainability program.

by John Friedman

Made possible by:


2/60

T H E F I V E K E Y S

Table of Contents

Table of Contents.....................................................................................i

Introduction ...........................................................................................1

Evolution Becomes Revolution..................................................................5

Five Keys to Unlock a Successful Sustainability Program...........................7

Key 1: Alignment with your Core Business Model (why)..........................8

Key 2: Integrate Sustainability into Day-to-Day Operations (how).......... 10

Key 3: Employee Engagement and Empowerment (who) ...................... 14

Key 4: Tangible (local) Benefits (where).............................................. 21

Key 5: Maximize Stakeholder Engagement (what) ................................ 23

Whats In a Name?................................................................................ 27

Sustainability as a Business Strategy....................................................... 29

Business Benefits of Sustainability .......................................................... 34

The Forces Encouraging Sustainability as a Business Model ...................... 40

The Complicating Factors....................................................................... 44

The Time is Right.................................................................................. 48

Maximizing Your Program ......................................................................51

Acknowledgements ............................................................................... 57

About the Author ..................................................................................57

i


3/60


4/60


Introduction

All progress is initiated by challenging current conceptions, and executed by

supplanting existing institutions. George Bernard Shaw

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 companys 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.

Beginning in 2000, I had the distinct honor to lead a team of professionals

that was tasked with building a program based on Lafarge North Americas

established corporate commitments to environmental, social and economic

progress that would not only motivate employees, but would actively engage

stakeholders and provide a greater return on our investment. In the process,

the program went from being an added value to being integrated into a

wide array of company outreach efforts that facilitated recruitment,

community support for operations, government relations activities,

shareholder outreach and more. In less than three years we redefined how

the company was presented and perceived by its customers, the

communities in which it operated, employees, officials and other opinion

leaders.

1


5/60

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 companys 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 new PR included opening up, and

letting the public in through open

houses, plant tours, presentations and

regular meetings with local opinion

leaders, civic associations and the

creation of citizens' advisory committeesas well as the more traditional media

outreach, press releases about local

good works, etc. We discovered that the public often viewed the tall fences

surrounding our facilities negatively but that, once we showed them the true

purpose (to maintain safety around industrial sites and quarries), the

perception began to change. With knowledge came a greater understanding.

It was not uncommon for people to express that they were pleasantly

surprised that the company was not hiding behind the gates and unwilling

to let them see what we were doing, but eager and proud of our operations.

We were changing

the way that the

company

communicated

developing and

engaging in a real

dialogue.

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.

2


6/60


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 businessand 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 becausewhen this culture redefines the company, PR can take advantage of this

convenient truth.

When Lafarge SA asked me to begin to teach colleagues throughout the

company how and why the program that I initiated for Lafarge North

America program was successful, I was able to identify five keys that

contributed to our success. And when we were less than successful it was

often attributable to not following all five. Over the years, I have refined the

principles to provide a general framework on how to build a successful

program and shared them with audiences around the world in presentations

and articles, on the Web and in person. In doing so, the new PR expanded

into a new way of communicating with our employees as well. I keep the

name, however because it reflects that reality that employees are not only as

internal constituents they also represent the public and are an audience

that must be won over just as another other constituency. Arguably, failure

to make this commitment dooms any effort because, as we shall see,

3


7/60

employees represent the core group and your most effective advocates,

when properly informed, included and engaged.

4


8/60


1

Evolution Becomes Revolution

Transparency allows people to see who you really are;spin tries to show them who you think they wish you were.

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 andprinciples. 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


9/60

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.

Successful business is increasingly relying on building and fostering open,

multi-stakeholder dialogue. Corporate communications professionals can use

their skills to articulate the organizations environmental, social and economic

commitments to both internal and external stakeholders. This can be done

through standards or statements of expectations (such as ethics,

environmental, and safety policies). Working with and engaging with

community stakeholders offers insight into how to ensure that these policies

not only reflect community needs but also industry standards and any

statutory and regulatory requirements.

Working with stakeholders within the organization is also important, usingthe employee (or internal) communications function to obtain the input and

gain the buy-in of tax, legal, human resources and other departments that

will benefit (and can offer important guidance) in the development of both

the policies and the messages explaining them.

Additionally, since asking or requiring companies to reveal their shortcomings

as part of the process requires the involvement of the legal department as

well as internal (and/or external) auditors. In order for the reporting to be

transparent and credible, auditors validate both the initial baselines as well

as subsequent results. And to avoid litigation, legal counsel must be obtained

to ensure that the messages do not put the organization at legal risk,

particularly in light of the sometimes highly charged and litigious atmosphere

that seems all too prevalent.

6


10/60


2

Five Keys to Unlock a SuccessfulSustainability 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 andimplemented 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


11/60

Key 1: Alignment with your Core Business Model(why).

Demonstrating the contribution that a company, its employees andits products make to the community in which it operates clearly

supports the business strategy.

Successful businesses must be adept at determining market changes, trends

and expectations. They cannot be in such a rush to embrace the new trend

that they abandon their fundamental and core purposes.

Businesses must be prudent when it comes to social responsibility efforts,

and not rush headlong into activities or partnerships that are not aligned

with their long-term interests because that, quite simply, is bad business. For

any program to be valuable to a business, it must further the goals of that

company.

Companies can reconcile their desire to be socially responsible with their

need to collaborate with reasonable stakeholders that are supportive of their

business model - whether they are individuals or organizations. At the same

time, a lesson can be learned when it comes to stakeholder individuals and

organizations that may have a core purpose that is counter to the business.

When it appears that this element is being violated, it is understandable that

the public would view the arrangement skeptically as either a failure of

strategic thinking (allowing a Trojan horse into its corporate offices) or as

appeasement in an attempt to defray criticism. It is natural, for example,

that people question why McDonalds - an organization that owes the selling

of meat and chicken products to be consumed by people for its success -

would allow representation on its board of directors by People for the Ethical

Treatment of Animals. There is a basic and fundamental contradiction

between the business model and an organization that states as one of its

core values that it is a simple principle that animals are not ours to eat. It

8


12/60


hardly seems strategic to believe that PETA will be satisfied with improving

the living conditions for animals destined for the slaughterhouse.

In this attempt to be socially responsible, it appears that McDonalds is doing

so in a manner that is in direct opposition to its core business. On its face,

this raises questions. And stakeholders from employees to shareholders in

are right to question the arrangement. And McDonalds should not only be

ready to answer those questions, a more effective approach would be to

publicly explain the relationship. As of this writing, the company has not

effectively communicated the strategy behind this seeming contradiction,

leaving themselves vulnerable.

In contrast, the partnership that we began in North America between

Lafarge SA and Habitat for Humanity International is on its face a natural fit.

Lafarges business is relies on the sale of cement, concrete, crushed stone

and gypsum wallboard products. Making the linkage between these products

materials for building our world and Habitats mission to provide decent,

affordable housing supports the business by demonstrating the companyscommitment to providing building products. It further connects those

products to their social impact they build a better world. It is important to

note that the program was created as a model for operations to follow; it

was not required that they partner with Habitat. Rather, what was required

was that any efforts follow the principles that it exemplified. Naturally, as a

ready-made program many voluntarily signed on, eventually growing the

program to over 20 countries in less than five years.

It is important to recognize that a company need not be large or to make a

huge commitment of resources and time. When an automobile dealer lends

vehicles for a community parade or allows the graduating high school class

to borrow a truck on which to build their float for the homecoming game, the

company does just as effective a job at demonstrates its commitment to the

community and the value of its products or services. When a sporting goods

store donates team jerseys for the softball team it does the same thing.

9


13/60

Key 2: Integrate Sustainability into Day-to-DayOperations (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.

From a Vision to a Culture (building an internal constituency)

For sustainability to be integrated into a business model, it must be

compatible not just on the theoretical level, but also practically on a day-to-

day basis. Asking people to engage in behavior that is seen as incompatible

with their regular duties is a recipe for failure. For this reason, the human

resources department is a key partner when building the program.

Incentives and rewards must be aligned with the desired actions and

outcomes in sustainability, just as they are for other more traditional

business objectives. Including the sustainability program efforts in

recruitment materials helps attract those who would fit with the culture, and

encourages like-minded individuals to apply.

Identify and build on quick hit benefits

Sustainability programs are not just long range efforts. In fact, they can

facilitate and provide short term benefits. There are tax advantages that can

10


14/60


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.

The Value of Partnerships Building Credibility

Social marketing and co-branding opportunities allow for a company to take

advantage of an established philanthropic organizations credibility. In

exchange, the company helps that organization fulfill its mission.Partnerships such as these often require negotiation and active

management, but the investment is often worth the effort. A 1999 Cone

Roper corporate citizenship study found that almost 9 out of ten Americans

(88 percent) expect companies to address social issues, and almost the same

number (87 percent) want to know what those companies are doing. Eighty

three (83) percent have a positive image of companies that engage in social

activities and 65 percent would switch to a company that supports worthy

causes. Clearly social marketing is a powerful mechanism to differentiate a

company and companies such as Ben & Jerrys, Home Depot and Chic-Fil-A

have demonstrated that being a values-based company can have strategic

advantages, a fact that is not lost on the next generation of business

leaders.

Values-based Companies are Winning the War for Talent

In October 2006 NetImpact released a survey of MBA students that showed

strong support for sustainability. Eighty-one (81) percent believe businesses

11


15/60

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.

More important from a human resources perspective, seventy-nine (79)

percent indicated they would seek employment that is socially responsible in

the course of their careers, and 59% said they would do so immediately

following business school. Clearly then having a commitment to sustainability

can be advantageous for recruitment efforts by making the company a

preferred employer.

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 couldparticipate. 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


16/60


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

companys 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


17/60

Key 3: Employee Engagement and Empowerment(who)

All politics is local. Tip ONeil

When we developed the program for Lafarge North America, we created a

framework for and to encourage strategic decision-making at the local level.

This was based on the fundamental notion that local people are closest to

the community and therefore have the greatest awareness of as well as

stake in local impacts. For this reason the national partnership with Habitat

for Humanity served as a turnkey example that operations could implement

or model their own program based on its demonstration of a value-adding

program. It also took advantage of the fact that homelessness and poverty

housing are a social issue that transcends location. In fact, the year we

launched the program, homelessness was the second highest concern

nationally in the United States (crime was first) according to a Cone Roper

survey. Other geographically diverse companies may seek to develop

regional efforts based on local concerns. And increasingly issues like global

warming, CO2 reduction, energy cost/consumption are issues that provide

the basis for widespread programs.

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


18/60


In Davenport Iowa, the Lafarge cement plant adopted a portion of the

Mississippi River and conducted annual efforts to clean the river and to keep

in clear of debris and trash. The river was a fundamental part of the plants

transportation strategy and the importance of the river to the plants

economic viability was clear.

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.

The most fundamental reason for empowering employees and engagingthem in sustainability programs is the same reason local employees are the

best at dealing with customers, communities, regulators, etc. Employees are

closest to the community of stakeholders because they are community

stakeholders with the unique perspective of knowing the needs of both the

community and the company. When Lafarge North America attempted to

locate a manufacturing and distribution facility on Wall Street near the port

of Vancouver, the market analysis seemed very favorable. The strategic

planning department at headquarters reported on the ease of transportation

and the closeness to the market. What they did not count on what a three-

year history of the local community successful fighting and arguing against

development on the land. The company was surprised to discover that their

plan to build a childrens park adjacent to the facility did not satisfy the local

community. This argues strongly in favor of building the community presence

and getting to know the community before major time, effort and

expenditures are committed.

15


19/60

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 bookMoral CapitalismSteven 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.

The culture that follows upon successful economic growth is

a global one, rooted in American consumerism ... thatsubverts traditional elites and values. Global business is the

carrier of this culture, responding to consumer demands. It

is legitimate for business to deliver what people want, but at

the same time business should take care that local cultures

are not permanently asphyxiated.

In the deployment of its power, business has a responsibility

to moderate its impact on those communities, which can

hardly protect themselves against the intrusions.

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


20/60


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

Align Incentives with Desired Culture

Getting employees to embrace a vision requires commitment, consistency

and a willingness to review processes and procedures to ensure that they

provide recognition and incentive for the desired behaviors. That means the

leader must be willing to challenge everything in order to ensure that the

business practices and cultural expectations are in congruence.

At all levels of the organization, employees need to be included if they are to

be expected to act in ways that support the overall corporate objectives.

Sustainability or socially responsible practices remain strong motivator but

only if employees are empowered and rewarded for behaviors that are

aligned with these values. Human Resources policies and programs must

support the vision, including hiring practices, reward, and recognition andincentive programs.

Jack Welch considered successful employees who engaged in behaviors that

were out of alignment with the corporate vision and culture to be the most

dangerous. Employees (customers and stakeholders) who see people

rewarded naturally emulate those behaviors and believe that those actions

are the reason that the person is successful. When this happens, it is fair to

say that they have been elevated to the level of maximum damage. As

difficult as it may be to punish or reprimand employees who contribute to

the bottom line, their negative example is powerful. If, for example, a

manager consistently reaches production targets but does so by repeatedly

violating safety procedures employees and other stakeholders will see

this as a powerful example of what the company really stands for and the

commitment to safety will be seen as lip service.

1 Global citizens: business leaders discuss corporate responsibility on the global stage NYSE Magazine,

August/September 2006

17


21/60

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 inknowing 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


22/60


contribution without which the quality of life that we enjoy would be

impossible.

Build Buy-in at All Levels

Corporate leaders recognize that for a program to be successful, employees

much take ownership of it at all levels. Just as safety, environmental

stewardship and sound financial practices are considered everyones

responsibility, these programs can impact and therefore bring benefits to

many aspects of a business beyond communications and risk management.

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.

As a company develops its environmental, safety and ethics policies, it

should not do so in isolation. Benchmarking against other companies in the

same industry will provide a good understanding of the current state of

affairs. Looking to other businesses can provide a greater understanding of

what the standard for businesses is in general. Likewise, companies do well

to review community standards what does the local community expect

from businesses? This not only helps better define the standard, it has the

additional value of helping the company to be attractive to an employee pool

that is drawn from the local community. Employees have a personal

incentive to work for a company that is protective of their health, safety,

their homes and their community at large.

Budgeting must take into consideration realistic expectations of both the

time and cost associated with engaging the community. These estimates are

facilitated by a good relationship with the community, including regulators.

19


23/60

This can help a company accurately budget for anticipated expenses and

revenues (including timing).

Lastly, human resources departments have discovered that prospective

employees prefer to work for (and with) companies that the feel share their

values especially those that reflect the community concerns and issues.

Certainly the idea that people would seek out a safer, financially sound

employer is not hard to imagine.

20


24/60


Key 4: Tangible (local) Benefits (where)

With exceptions such as relief after the Indian Ocean tsunami and otherdisasters 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.

A benefit of a sustainability program is that it reports and offers information

on the wider breadth of impacts. Effective programs do not offer theoretical

impacts, but rather transparently report the impacts that are measurable and

follow agreed upon standards. Those standards must be agreed upon and

deemed as both meaningful and fair by both the company and its

stakeholders.

PROFITS

CONSUMPTIONOFNATURALRESOURCES

WAGESAND

BENEFITS

PRODUCTS

EMISSIONS

COSTSAVINGS

IMPROVELIVES

EMPLOYEESAND

RETIREES

direct indirect totalimpacts impacts impacts

PRODUCTS

TAXES

SHAREHOLDERSRETURN

TANGIBLE

BENEFITS

INTANGIBLEBENEFITS

(COMMUNITY

SPIRIT)

VOLUNTEERS

IMPACTS

COMMUNITYGOODWILLTOWARDCOMPANY

DONATIONS

PROFITS

CONSUMPTIONOFNATURALRESOURCES

WAGESAND

BENEFITS

PRODUCTS

EMISSIONS

COSTSAVINGS

IMPROVELIVES

EMPLOYEESAND

RETIREES

direct indirect totalimpacts impacts impacts

PRODUCTS

TAXES

SHAREHOLDERSRETURN

TANGIBLE

BENEFITS

INTANGIBLEBENEFITS

(COMMUNITY

SPIRIT)

VOLUNTEERS

IMPACTS

COMMUNITYGOODWILLTOWARDCOMPANY

DONATIONS

Transparency

reveals the hidden

truths, including

both recognized a

unrecognized

impacts that every

company brings to

a community (see

diagram). This

includes, but is not

limited to the

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

nd

21


25/60

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.

When companies ask their stakeholders to accept targets for improvements

in things such as emissions or accidents, it is important that they agree on

what the overall targets are, and how they will be defined, measured andreported. It is not enough for a company to commit to poisoning a reduced

percentage of the population each year.

22


26/60


Key 5: Maximize Stakeholder Engagement (what)

One cannot expect people to change their personality; but it is reasonable toask them to change their behavior. Likewise, companies that have a genuine

commitment to sustainability can implement their programs in ways that add

value and more clearly demonstrate their commitment.

Accurately Define and Identify Stakeholders

Many businesses take a marketing approach to customers selecting to

focus their efforts on the most profitable segments of their market. This is a

sound business strategy that companies usually come to when they realize

that customers are not all equivalent and that an unprofitable customer

fleeing to a competitor is not only an acceptable risk, but a circumstance that

may actually benefit the company.

Sustainability is a new strategy and, like market segmentation, what we may

be seeing today are companies in a desperate rush to be seen as socially

responsible in fact trying to establish presence the same way some

companies grab for market share without questioning the profitability. This is

part of the natural learning curve for companies, particularly in the beginning

of their life cycle where economic need may supplant the necessary

confidence to take a longer-term view.

Just as companies eventually recognize that it may be better off firing a

customer that costs time and resources that would better be invested

servicing more profitable and less demanding customers (or customer

segments) so too companies must be careful when they select the issues

and organizations with which to associate and partner.

Some attempt to determine the issues most of concern to their stakeholders,

and this is on its face a good strategy, provided the definition of stakeholder

reflects true stakeholders in the companys success including customers,

23


27/60

employers, communities, governments and suppliers who have a direct

impact by the companys success.

Whole Foods Market CEO, Chairman and Co-founder John Mackey

demonstrates the alignment between sustainability and issues that matter to

customers and other stakeholders when he speaks publicly about the

superiority of natural and organic foods. As the leader of the worlds largest

natural foods emporium, he is speaking directly to like-minded people who

patronize his stores. When Mackey speaks out against biotechnology and

genetically engineered foods, it in fact can be seen as a combination of his

personal beliefs and values with a savvy business strategy to appeal to his

customers.

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 fiveprinciples 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 companys 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 companys 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 were on the front page of the local

newspaper as a great corporate citizen.

24


28/60


Effectively Engage Stakeholders

True stakeholder engagement requires relationship building over time; in

order to build the necessary credibility and trust that are required. It also

means being active and proactive with your messages. Companies that

wish to be seen a certain way must not only act in a manner that is

compatible with their desired image, they must also communicate with their

stakeholders about their commitments, efforts, results and yes, even their

missteps, if they are to be credible.

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 andservices 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


29/60

Lastly, there are literally thousands of rolling portable billboards that could

become a showcase for the companys 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.

26


30/60


3Whats In a Name?

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 strategicbusiness 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.

The use of the phrase corporate social responsibility also sounds

suspiciously like socialism and that phrase carries emotional baggage,

particularly in the United States of America. In fact, corporate responsibility

is really the next phase of an idea that is at the core of capitalism that in

order to be successful, businesses must respond to the changing demands of

the marketplace. It is not to be confused with a system of government.

When one broadens the definition of the market beyond traditional

customers (and potential customers) and begins to include the stakeholders

that are necessary for corporate success, CR is really a reflection that

increasingly a corporations success relies on the reputation that it has

established among its customers, employees, suppliers, the community in

which it operates, shareholders and investors and government legislators

and regulators who are called upon to act when those stakeholders feel their

best interests are not being addressed.

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 companys business model is what corporate responsibility

27


31/60

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 andmeasure a longer-term business model.

The concept of sustainability recognizes that these three exist in dynamic

tension and that the long-term dominance (or subservience) of one or more

pillars threatens the viability of the entire enterprise. Focusing exclusively on

the economic pillar (as is often the criticism of companies) to the exclusion

of the environment and a company can plunder natural resources until it no

longer can produce products. Similarly, ignoring the need for a successful

financial future is not practical.

28


32/60


4

Sustainability as a Business Strategy

Business 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.

In the 1980s the emphasis seemed to shift, particularly under President

Reagan in the US and Prime Minister Thatcher in the UK toward a more

economic-focused model. Principles like Total Quality Management that

taught if you take care of the customer, the bottom line will take care of

itself were seemingly abandoned to focus on driving value for shareholders.

The result was an almost obsession with quarterly earnings and year-over-

year stock performance. Unrealistic (and unsustainable) growth became the

expected norm. In the technology sector, stocks soared despite non-existent

earnings. Not to be outdone, unscrupulous business executives took

advantage of regulatory and clever accounting loopholes that crippled (and

in many cases destroyed) powerful companies in a spectacular fashion.

Overnight thousands lost their employment and savings. Shareholder value

evaporated and pensions that were tried to company stock ceased to exist.

The problem according as Noel Purcell, Group General Manager of

Stakeholder Communications for Wespac Banking Corporation told the 7th

National Business Leaders Forum on Sustainable Development in May 2006 is

that when self-interest and personal advantage are elevated to the status of

core values as a result public trust in corporations goes out the window.

29


33/60

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:

One of the most noticeable results was a very one-dimensional view

of business, with considerable importance given to short-term value

creation as measured by immediate stock market performance.

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.

This crisis, which we are still experiencing, highlights the

inconsistencies between short-term shareholder value and true

stakeholder value. It has made civil society and companies even

more aware that sustainable development is the only way for acompany to thrive in the long run. Companies have to take into

account their impact on the societies in which they operate and the

environment that surrounds them.

Critics of CSR and sustainability often cite Nobel Prize winning economist

Milton Friedmans 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


34/60


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 marketplaceand 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.

In addition, as Collomb makes clear, Friedmans encouragement for

companies to engage in activities designed to increase its profits can be

viewed as a case forsustainability. A paper company that denudes all of the

forests in proximity to its processing facility, for example, will not be

profitable over the long term, especially if it must incur additional expensesassociated with transporting heavy raw materials a long distance to its plant.

However, by engaging in environmental stewardship activities such as

replanting and working to ensure a continuous viable supply of raw

materials, the company is actually maximizing its long-term profits. A similar

argument can be made for a company engaging in practices that make it the

employer of choice (facilitating recruitment and retention), a preferred

community partner (reducing expenses and increasing its ability to produce

and sell goods), etc.

Fortune Magazine acknowledged the mainstreaming of corporate

responsibility and sustainability in a cover story Tearing Up the Jack Welch

Playbook (July 14, 2006) the magazine that had named Jack Welch the

manager of the century as recently as 1999. The magazine argued that

business has evolved away from the model he used to drive GE to the

heights of success in the 1980s and 90s.

31


35/60

2006 Business Rules

1: Old rule: Big dogs

own the street.New rule: Agile isbest; being big canbite you.

2: Old rule: Be No.1 orNo.2 in your market.New rule: Find aniche, createsomething new.

3: Old rule:Shareholders rule.

New rule: Thecustomer is king. Thisis really the old.

4: Old rule: Be lean andmean.New rule: Look out,not in.

5: Old rule: Rank yourplayers; go with theA's.New rule: Hire

passionate people.6: Old rule: Hire a

charismatic CEO.New rule: Hire acourageous CEO.

7: Old rule: Admire mymight.New rule: Admire mysoul.

Fortune, July 14, 2007

Fortune points out that Welchs old rules

served companies well but that as realities

have changed, business must evolve with

them. The risk the magazine explains is

applying old solutions to new problems.

Almost exactly echoing Collombs comments

a few years earlier, the magazine questions

whether a company's near-term stock price -

and the quarterly earnings per share that

drive it - really is best measure of success.

The new rules for business, according to

Fortune are almost a textbook argument in

favor of sustainability. They advise that being

responsive to market changes is more

important than dominating through size andmarket share. Larger companies must avoid

the temptation to fall into the arrogance that

success sometimes breeds and never forget

that they must come to the market, and not

the reverse.

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.

32


36/60


The new rules return the emphasis to the customer from the shareholder.

Bringing backthe 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


37/60

5

Business Benefits of Sustainability

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.

License to Operate (speed to market)

In business, time ismoney and each delay in permitting, construction,

recruiting and training employees has an associated cost in lost revenue,particularly in a competitive situation when the preferred company can use

the time advantage to establish itself in the market, cherry pick the local

talent pool and build relationships with customers and suppliers. A company

that has a positive reputation has an advantage. While the community may

not actively facilitate approval of a permit, community opposition often

results in substantial delays and requiring a greater investment of time and

money with contentious public hearings and town hall meetings at the

minimum to protesting and boycotting that adversely impact hiring and even

34


38/60


discourage customers. In short, the community needs to buy you before

you get a chance to sell them anything.

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.

This is a lesson that some sometimes more clearly demonstrated by its

failure. "We recognize that we need a 'license' to operate in any community

that we enter, says David Weidman, President and CEO, Celanse Corp.

Some of those licenses have been lost because of social irresponsibility on

the part of some companies within our industry. So this license to operate

demands that we be actively involved in the community.3

Whether you define it as enhanced goodwill or reduced opposition,

sustainability programs that position the company as a positive corporate

citizen can impact the speed with which the company enters or grows within

a market. A PR program that fosters trust by engaging the community

stakeholders is an essential element to building that dialogue.

Cost Reduction or Avoidance

Most businesses know the importance of investing in preventive maintenance

to keep equipment in good working order. In fact, these expenses are not

considered optional. Those who do not invest in this manner are considered

foolish and viewed with contempt. But there are other, direct ways that

businesses can save money through a longer-term approach.

3 NYSE Magazine, August/September 2006

35


39/60

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.

The lessons for corporations are clearly transferable. A company that is

viewed as a positive and favorable member of the community is likely to

have less opposition, and when as is almost inevitable a misstep does

occur; it is less likely to be perceived negatively. Like any other business

expense, a clear case can be made that reputational capital, is aninvestment, built over time and as a long-term strategy.

In kind donations can be used to demonstrate the value of products to a

community, and the skills of employees showcased. Volunteering with a

group of valued customers helps build the relationship around the shared

value of helping the community and gives the customer the opportunity to

work with your companys products and people. And, in fact, doing this

leverages a product demonstration into a public relations opportunity.

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.

One of the often-overlooked stakeholder groups is a companys employees.

While many companies talk about how their employees are their most

36


40/60


valuable assets but those that consider employees as integral partners in the

organizations 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

A failure to consider employees as vital in the organizations overall success

can compromise a companys competitive position. One company discovered

that employees who had not been informed of the corporate strategy of

maintaining a visible presence their market through the visible presence and

upkeep of idle equipment were unwittingly compromising the effort by

publicly complaining about the stupid manager forcing them to paint a

non-working production facility. This unintentional sabotage of the companystrategy demonstrates the importance of engaging employees in the strategy

and the power that they have to impact the success or failure of its

efforts.

This failure to include employees results in behavior that can damage

profitability directly. Poor morale can lead to passive sabotage in the form of

reduced productivity, shoddy workmanship and quality control and increased

absenteeism. At its worst, unhappy employees can and do engage in

behavior that deliberately hurts the company, such as an employee who

shares information about a corporate problem. This can result in damage to

corporate image, credibility and the bottom line ranging from lost sales to

increased costs due to fines and penalties.

4 Ibid

37


41/60

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. Todays 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 worlds 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.

In the area of reputation and brand management, companies that source

their products from supplier that engage in sustainable business practices

are protected from damage to their brand and reputation from issues such

as child labor and living wages. And they are helping prevent these practices

by providing a financial incentive their business for acting in a socially

responsible manner.

Gain Access to Investment Capital

One out of every nine dollars under professional management in the Unites

States in involved in socially responsible investing. That $2.16 trillion

represents a huge pool of money that is being invested in companies that

have been found to be sustainable.

When the world imposed economic sanctions against the Apartheid

government of South Africa, that nation lost access to capital. The Calvert

Group was the first mutual fund to leave South Africa when apartheid was

38


42/60


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


43/60

6

The Forces Encouraging Sustainability as aBusiness Model

Globalization

One hundred years after the first powered flight, the oceans are no longer impenetrable barriersthat 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 turnexposes 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

40


44/60


expectations as well such as by making products that the indigenous

population may covet for themselves.

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.

An obvious example of the power of the Internet to provide swift information

around the world is the September 11, 2001 terrorist attacks on New York

and Washington, DC. Within 15 minutes of the first plane striking the north

tower of the World Trade Center, Web traffic was up by 400% at VG Nett.

Within an hour, the Internet was literally grinding to a halt, as millions uponmillions of people tried to get to the news servers of Sky, BBC, CNN and

other large news providers. This demonstrates how the Internet works in

tandem with traditional media: The public may find out about an item of

news through another medium (radio, TV or even word-of-mouth), and then

logs on to the Internet to get the full picture of the situation.

Increasing Stakeholder Activism

The concurrent advent of information technology and globalization has

combined to not only increase the speed and availability of information, but

also a greater ease in the sharing of ideas and values. Together IT and

globalization are largely responsible for the rising interest in social

responsibility, and provide a powerful tool for companies, their stakeholder

and their critics alike to share information. The implication for media

relations/public relations professionals cannot be overstated because these

changes are not only impacting the mechanisms by and through which

information can be shared, but also transforming the content of the

41


45/60

messages being disseminated. Most dramatically, the messages must be in

alignment with observable actions around the globe.

Companies can no longer expect that information about overseas production

facilities and working conditions will remain confined to the local area.

Likewise, information about beneficial programs that a company, or its

competitors are using in one part of the world can lead to questions by

stakeholders from thousands of miles away. The result is increased scrutiny

and a progressively rising bar based on the best in class in each industry.

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.

This increasing stakeholder concern is leading to increasing expectations anddemands. An environmental program in Europe may give rise to questions

about why a company is not engaging in the practice universally. The

Lafarge cement plan in Exshaw, Canada was confronted with this at a

community meeting when they were asked why the company was not

offering to use the same pollution control technology that it had

implemented in Austria. Thanks to the Internet, the company was facing

community expectations that were substantially lower than Canadian and

provincial requirements.

42


46/60


The Linkage Between Economics and Politics is Becoming More

Widely Understood

As Thomas Friedman pointed out in The World Is Flatpeople are becoming

increasingly aware that their purchasing decisions are also political decisions.

Purchasing goods provides an economic incentive and positive reinforcement

of the existing social, political, environmental status quo in those items

country of origin.

Therefore CR provides the opportunity and some would argue the

obligation to further issues such as human rights such as providing equal

opportunity, living wages and improved working conditions. It is quite

natural, however, that the governments, religious leaders, and economically

powerful in those counties would see the exact same actions as political

agenda that as an attempt to destabilize local governments, faiths and

society.

And this leads us to the forces that are impeding or complicating the

implementation of sustainability as a business strategy.

43


47/60


48/60


this perspective, these businesses, through the fault of their own best

intentions, are viewed with suspicion if not outright hostility.

A seemingly sensible strategy is one of falling back on regulatory compliance,

linking social responsibility goals and objectives to cultural competence; and

a desire to demonstrate respect for local cultures, customs and laws.

Following this model is not without its pitfalls, however. Companies have

found themselves facing outcry back home for engaging in practices

overseas that offend the sensibility of shareholder and customers in the

States.

This can lead to a troubling situation when a company genuinely believes it

self to be socially responsible yet finds itself suffering from criticism leveled

by its stakeholders. When there is this kind of disagreement between an

organization and its stakeholders over expectations, it becomes an

imperative to reconcile. The shift can happen with stunning swiftness and

many companies find themselves ill prepared when the perception changes.

Wal-Mart, the world's largest retailer and currently #2 on the Fortune 500list, enjoyed status as one of the worlds most admired companies for years.

However, it has recently been subject to strong criticism for its wages and

employee benefits (both of which are well within industry norms) for not

doing more to advance these issues. This despite an impressive focus on

environmental sustainability; including the use of fuel-efficient trucks,

working to reduce waste in both packaging and garbage and pledging to

become energy neutral.

Not surprisingly, there are efforts underway to quantify sustainability efforts

and promote global standards. Groups such as the Global Reporting Initiative

(GRI), a large multi-stakeholder network of thousands of experts in dozens

of countries worldwide, has developed a popular, but not universally set of

guidelines. In 2006, in response to criticism that their standards had set the

bar too high for all but those companies with well-established sustainability

programs, GRI released a set of guidelines for organizations that were

45


49/60

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.

As companies strive to define their own standards, transparency becomes

the name of the game, as stakeholders who are brought into the process

that defines company policies, commitments, practices and goals. The

company must set benchmarks and then hold themselves to those standards

reporting and announcing their actual results publicly.

Corporate Structures

CR activities combine elements of strategic planning, human resources,

environmental, legal, communications and a host of other functions. It isespecially 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.

Effective CR programs require local implementation of corporate-wide ideals.

It is particularly difficult to coordinate in larger organizations that take pride

in their corporate culture of decentralized decision-making. CR also has no

obvious home within traditional corporate structures. When the function

exists as a separate entity, it may report to the CEO or Chief Operating

Officer. It is common to place CR within the legal/risk management

functions.

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,

46


50/60


have ready access to corporate leadership and are responsible for managing

the companys public image.

Companies that wish to have credible stakeholder communications must

recognize a fundamental change back to the true meaning of the words

public and relations. Relating to and with the public (external stakeholders)

requires open and honest communications; with an implied compact

between company and stakeholders that the company will eschew hyperbole

and rhetoric provided the community is open to working with the company

to work through (not around) issues.

Incentive and Reward Programs Based on Short-term Results

A close relative of the structural impediments to implementing a strategic CR

program is the fact that incentive and reward programs are often aligned

with financial performance on a monthly, quarterly and annual basis and do

not take into consideration the value of long-term strategic approaches.

Managers receive incentive bonuses based on strong quarterly returns may

be passively being discouragedfrom engaging in environmental orcommunity programs that can be viewed as a cost.

Culture of Instant Gratification

Americans are traditionally viewed as impatient and many have commented

on the seeming obsession with instant gratification. The concept of delayed

gratification is a difficult one for a society that values fast food, the fast

buck and in which the trappings of wealth are paraded nightly in the media.

The five elements of a successful sustainability program provide a model and

proven framework that helps address all of these issues.

47


51/60

8

The Time is Right

Many, 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.

As globalization continues, the expectation from suppliers and customers

around the world will continue to drive the market. Despite the gains over

many decades, anyone who advocates that business has done enough or

come far enough is fundamentally arguing against keeping abreast of and

meeting changing customer expectations, an argument that is anti-capitalist.

The principle that the customer is always right m

the new pr

Documents