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At the time of writing I am waiting to hear details of how bookmaker Ladbrokes is going to measure success in its promise to link executive pay to efforts to tackle problem gambling.

The Ladbrokes move has followed growing calls for the use of fixed-odds betting terminals (FOBTs), dubbed the “crack cocaine of gambling”, to be banned.

In a letter to gambling minister Helen Grant - revealed by Sky News - Ladbrokes chief executive Richard Glynn said responsible gambling performance measures would be written into senior executives’ remuneration. The letter also included a pledge to promote the industry’s Code for Responsible Gambling in its shop windows.

When I asked Heineken Asia Pacific recently about its responsible drinking initiative, the Heineken Sunrise Campaign - where party-goers were encouraged to drink responsibly in order to be in their best form to catch a beautiful sunrise – my question “Will the campaign be deemed a success if less beer is sold?” fell on deaf ears. Similarly my ‘As a business, doesn’t Heineken want people to drink more beer, rather than less?’ and‘how do you sell CSR programmes like this at board level?’ went answered.

A survey of 215 senior business leaders conducted by Business in the Community published last month found that individual employee objectives often do not align with the organisations corporate responsibility goals leading to behaviour which goes against those business values.

Commenting Stephen Howard said: “Without responsibility being truly built into the DNA of companies, trust in business will continue to plateau. It is time for business leaders to think differently about how they create the right culture within their business and the practical steps they can take to turn values into action.

“Indeed, chief executives and investors must move beyond financial value as the only recognised metric of business success. By adopting an integrated approach, reporting on the added value of responsible practice business, and rewarding responsible behaviour, business can form a new and more powerful contract with society – and re-claim its rightful place as an engine for social change and innovation.”

I began this year lauding the efforts of pharma giant GSK which announced that its sales personnel would no longer be rewarded by hitting individual sales targets. Instead they’ll be recognised for their technical knowledge and their quality service.

Measuring the success of many CSR initiatives is one of the industry’s holy grails. When financial targets aren’t the whole equation, success criteria have to be very carefully defined. I await with interest what Ladbrokes comes up with.

And take heart too that, according to BITC’s Leadership Report, nine out of 10 chief execs believe that they have a greater social purpose than simply returning a profit and 70% think too much attention is given to short term business goals.

 

Michael Boag, md, Stroz Friedberg, an intelligence and risk management company, discusses the need for business to grasp the nettle of third party risk

The failure to conduct appropriate due diligence on third parties poses an ever increasing risk to business, as regulators and law enforcement across the world step up their pursuit of organisations and individuals involved in alleged cases of bribery and corruption. If recent reports are anything to go by, the compliance programmes of some UK companies may prove woefully inadequate, with only half of all UK businesses polled said to be vetting their external suppliers for UK Bribery Act (UKBA) compliance.

The consequences could be high - not only can legal action under legislation like the UKBA and the US Foreign Corrupt Practices Act (FCPA) result in fines into the hundreds of millions, companies can also be debarred from public works and government procurement or face civil legal action, not to mention the incalculable cost of reputational damage and the accompanying loss of business.

While local agents, distributors, licensees and joint ventures partners may not be employees, firms are increasingly being held liable for the corrupt actions of these third parties.

The UK Ministry of Justice has provided specific guidance on the Bribery Act, which states that organisations must apply “due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks”. The US Department of Justice (DOJ) and Securities & Exchange Commission (SEC) have also reinforced the importance of due diligence, with their FCPA guide stating that “Risk-based due diligence is particularly important with third parties and will also be considered by DOJ and SEC in assessing the effectiveness of a company’s compliance program”.
 In response, companies must develop an appropriate due diligence strategy, which should start with a risk assessment of the third party relationship, to ensure that the depth and rigour of the due diligence process is proportionate to the risk.

An effective due diligence programme makes it easy to see how organisations that focus on getting it right tangibly reduce their corruption and bribery risk. Take a recent example, where due diligence had been conducted into a potential joint venture partner in Africa. This had identified allegations that an executive at the prospective partner had, while an executive at another firm, been accused of paying a bribe through the son of a government minister. Although he had not been officially sanctioned in the country, numerous local sources confirmed that the allegation had real merit. A serious corruption red flag had been raised and the firm backed off the joint venture. The decision also helped avert the potential of serious reputation damage by becoming involved with a local partner with a less than stellar reputation for integrity.

 Proportionate risk-based due diligence helps organisations highlight key red flags that a tick box approach would almost certainly miss.Putting in place an anti-corruption due diligence programme that reflects strong governance and a commitment to ethical practice, which can withstand scrutiny from a growing legion of regulators, must be a top priority.
 

Whistleblowing is a complex issue for businesses.

History tells us that many corporate disasters could have been prevented if companies had listened when concerns were raised.

Staff had reported worries about open ferry doors five times when the Herald of Free Enterprise sank in Zeebrugge. Sherron Watkins reported her concerns about Enron’s accounting five years before she felt compelled to blow the whistle outside the organisation.

Regulators and authorities recognise the need for the public to be protected from such risk and malpractice.
The Combined Code of Corporate Governance requires UK listed companies to have whistleblowing arrangements in place or explain why not.

Bribery Act
The Ministry of Justice includes whistleblowing as a key bribery prevention measure in its guidance on the UK Bribery Act. And in the financial services sector, the Financial Conduct Authority has its own Whistleblowing Desk, but actively encourages firms to set up appropriate internal procedures as well.

Yet although 90 per cent of large firms have formal whistleblowing procedures in place, a survey by the Institute of Business Ethics found that while one in four employees was aware of misconduct, more than half choose to stay silent. An Eversheds’ report last summer found that 43 per cent of whistleblowing lines are unused.

There are a number of reasons for this. Culturally whistleblowing still has connotations of betrayal, be it the idea of ‘snitching’ at one level or the more serious issue of denunciations at the other. The latter can be particularly challenging for organisations operating internationally, as they will need to work hard to create a culture where such reporting is considered acceptable.

This is time consuming, as local legislation, employee protection and data protection rules need to be taken into account. According to Transparency International, the UK is one of only four EU countries with robust legislation in place for the protection of whistleblowers.

Confidentiality
Anonymity and confidentiality also need to be balanced. Ideally, confidential reporting should be encouraged.
Anonymous reporting can make it harder for organisations to get to the root of a problem and resolve the issue successfully. However, in certain situations, anonymity may be required by law or be more appropriate.
Organisations need to instill confidence, so that staff know they will be protected if they raise a concern.

So how can businesses make whistleblowing work?

Whistleblowing is most effective when it operates within an open-door culture where employees are actively encouraged to raise their concerns and can do so without fear. In such organisations, problems are likely to be aired earlier and can be addressed long before they develop into crisis management issues.

When concerns are discussed openly, this also reduces the negative connotations of whistleblowing, making the notion of speaking up far more acceptable. Indeed, in the very best organisations, blowing the whistle is really the last port of call, operating as a backstop if other measures have been tried and failed.

Senior management are responsible for setting this tone, ensuring that an open and ethical culture is embedded throughout their organisation.

A clear understanding of good corporate behaviour makes wrongdoing easy to spot. It is also far more likely to be reported and dealt with.

In addition to creating the right culture, companies need to ensure that the right training is given, that stakeholders know how to raise concerns and that concerns are acted upon.

Training must cover three key areas: how to raise a concern, how staff will be protected and how the concern will be dealt with.

Training should emphasise that staff are encouraged to raise issues with line managers, are empowered to blow the whistle when necessary and can do so without fear. It should make it clear that the whistleblowing line is for raising concerns about danger, risk, malpractice or wrong doing that affect others. Issues to do with an employees personal situation should be dealt with by the grievance procedure.

Hotline training
But it is not just the hotline users who need training, those designated to receive calls must also be taught how to handle the various concerns raised.

According to Public Concern at Work, this is not the case on over half the companies they surveyed in 2013.
A whistleblowing policy should be aimed at all stakeholders and this should be reflected in the way it is promoted.
Details of the process should be visible on the company website, inside the organisation and through direct communication with relevant customers, suppliers, shareholders and other third parties.

Finally whistleblowing must be correctly acted upon. Ideally the process should be managed as independently as possible from the day-to-day running of the organisation.

Companies must be seen not just to listen, but also to act. Public Concern at Work has found that there is a critical gap between the number of times a person will report a problem before they give up (1-2 times), and the number of times on average a company receives a report before it acts (3-4 times).

Getting the culture, process, training and communication right may not be easy, but it is the best way to make a whistleblowing system work.

It also means that businesses are more likely to find themselves addressing a problem rather than managing a crisis.

 

Leo Martin is director of business ethics advisers GoodCorporation. GoodCorporation has recently launched a Whistleblowing Framework designed to help organisations test and measure the effectiveness of their whistleblowing procedures. 

Tax evasion and avoidance may be different in law, but in the eyes of the general public, they often amount to the same thing, which means there is a strong corporate reputation and governance argument against avoiding tax.
Patricia Mansfield Devine reports 

Over the past few years, news headlines have been full of the issue of corporate tax evasion and avoidance.

Tax evasion is the illegal non-payment of taxes, such as not accurately declaring earnings. Tax avoidance, in contrast, is legal non-payment of taxes, such as shifting profits across borders to a jurisdiction where taxes are lower.

However, evasion and avoidance may be different in law, but in the eyes of the general public, they often amount to the same thing, which means there is a strong business argument against avoiding tax.

At a time when wages have stagnated, benefits and services have been cut and many people’s standard of living has dropped, it often angers the public to see how little tax some companies - particularly giant multi-nationals - actually pay. The result has been a series of grass-roots sit-ins, occupations and demonstrations against some of the best-known tax avoiders such as Google, Amazon and Starbucks, and the emergence of an Action Plan by the OECD to tighten the loopholes that multi-nationals have used to their advantage.

The OECD launched its Action Plan in July last year, at the request of the G20 finance ministers. Called the Base Erosion and Profit Shifting (BEPS) Project, it identifies 15 specific actions to equip governments with the domestic and international instruments to deal with the problem of tax avoidance. In December, the organisation published a timetable for planned stakeholders’ input into BEPS, which will be discussed at the next OECD meeting, in September this year.

The view that tax avoidance is unethical is one that is strongly held by NGOs fighting poverty.

“There is no doubt that tax avoidance is unethical,” says Murray Worthy, senior economic justice campaigner at War on Want.

“What it really means is large companies and rich individuals not paying their fair share for public services, and the welfare state and other things that the people in this country rely on.”

There is a spurious argument that tax avoidance is legal, says Worthy, “But that’s simply because the rules haven’t caught up with the way that big companies are operating.

“There is nothing about what these companies are doing that is somehow different from being illegal,” he continues, “other than that the rules haven’t caught up and made their actions illegal yet.”

The tax rules that currently exist in the UK are out of synch with the way companies are now able to structure their businesses, says Worthy, and the Government could do much more to tighten them up, particularly when it comes to British overseas territories such as Bermuda and the British Virgin Islands, where companies can use financial vehicles to avoid paying taxes in the UK.

“Most people don’t believe that’s just ‘tax planning’,” he says.

“They think if companies are using complex methods to avoid taxes that something needs to be done.”
Complexity in tax avoidance is also something specifically discouraged by the Confederation of British Industry (CBI).
“It is right to highlight and try to root out businesses that evade or aggressively avoid tax,” says the CBI’s senior press officer Mark Hadley.

“The CBI does not support abusive tax arrangements which serve no commercial purpose.

“We encourage UK businesses to only engage in reasonable tax planning that is aligned with commercial and economic activity and does not lead to an abusive result. The Government recently introduced a General Anti-Abuse Rule (GAAR) which is there to determine and combat artificial and abusive tax avoidance schemes.”
Campaigning at grass roots level, particularly against firms such as Starbucks, which has a strong UK high street presence, has done a great deal to push tax up the political agenda, but there are those who doubt its true effectiveness.

“There are some areas where it has paid off,” says Worthy, “for instance the abuse of hiding the true owners of companies - the Government has announced a register of beneficial owners, but there is much more that still needs to be done.”

The business argument
However, it is not simply a moral issue, believes Worthy - there is also a strong business argument for not avoiding your fair share of tax.

A public backlash entails business risk. When Starbucks was occupied in a grassroots boycott, it took months before the company’s sales started to recover. This kind of adverse publicity does long-lasting damage to a company’s reputation.

To avoid being tarred with the same brush, the CBI encourages its members to undertake narrative reporting to provide a broad and meaningful picture of a company’s business.

Last year the organisation published a business-led voluntary Statement of Tax Principles, which is intended to promote and affirm responsible business tax management by UK businesses. The Statement encourages businesses to seek to increase public understanding of the tax system in order to build public trust in the system, and asks businesses to consider how best to explain more fully to the public their economic contribution and taxes paid in the UK.

Measures that businesses could take, he suggests, include an explanation of their policy for tax management and the governance process that applies to tax decisions, along with some details of the amount and type of taxes the firm is paying. “A straightforward one-page narrative report on the company website would probably be sufficient,” he says.
The business community is actively engaged in a broad set of initiatives to promote tax transparency, he adds. “Business supports global action on high-level profits reporting to tax authorities [as in the G8 commitment that was negotiated at Lough Erne in 2013] which will allow tax authorities to design more focused and targeted audits, without placing disproportionate extra burdens on businesses.

“In addition, there is an international register of beneficial company ownership, the BEPS Action Plan, and efforts to support developing countries in designing and enforcing effective tax rules – all of which the CBI supports.”
However, it is important to avoid a broad-brush approach that puts all businesses in a single basket, he says: “Especially in the media. If this continues, then it could risk making the UK a less attractive place to do business.”
All eyes are now on the OECD meeting in September, but War on Want, for one, will not be inputting directly on this occasion. “[The meeting] will be trying to fill in the big cracks,” says Worthy, “but there are still lots of weaknesses, such as treating individual arms of companies as separate traders - this is not how multinationals work and we won’t see big changes until that’s addressed.”

Of most concern, he believes, is the backlash from the US on the digital economy, as the US has refused to accept any specific wording on digital trading, leading to less detail in the proposed agreement, and also the rules on permanent establishment - the presence that a company needs to have in a country before it can be taxed - might be changed.
There are many political and technical problems, says Worthy, and importantly no developing countries are involved. The new OECD measures won’t benefit many of the world’s poorest, he says, and the tax system needs to work for the majority of people in the world.

Political battle ahead
One instance he cites is that the anti tax haven rules being discussed are not binding on individual governments but have to be signed off by individual members, which could result in a stiff political battle.

“The UK Government is trying to get companies to shift their headquarters here,” he says, “and it wants to be able to offer tax incentives. Anything that impacts the City will be opposed by the UK Government, which is keeping an eye on financial instruments reforms such as the use of derivatives to avoid tax.”

From the business perspective, says the CBI’s Hadley, the CBI is supporting the multilateral efforts at the G20 and OECD level to modernise international tax standards. “But as the UK seeks to shape this agenda it must not crush recent competitive gains,” he says.

“We must co-ordinate reforms with other countries so UK firms are not disadvantaged. A unilateral approach that creates competing regimes risks uncertainty for businesses and increases the compliance burden.” 

The year 2014 is “unlikely to see the spectacular equity returns” enjoyed during 2013, but it will be a year in which assets in a logical manner can be managed, according to Amy Domini, founder and ceo of Domini Social Investments (www.domini.com), a New York City based mutual fund family.

 “What lies ahead for responsible investors during 2014?” asked Domini in an investor communiqué this February. “Certainly new products, particularly those that are cleaner or more local, certainly a more predictable stock market, and probably enhanced interest in the value added by utilizing social and environmental considerations when choosing investments,” she added.

 The executive, who manages around $1 bn in liquid assets for high net worth families at the Sustainability Group in Boston, asserted that these trends already evident. It would seem good news for the ethical investor.

 The desire for more direct and useful products has, in recent years, led institutional and ultra-wealthy investors to buy venture capital funds that promise to seek out and invest in segments of the sustainability market such as clean land or hydro-culture, solar power or ‘bottom-of-the-pyramid’ wealth creation. Nevertheless she noted: “These investment vehicles demand long-term commitments with no liquidity. That isn’t for everyone.”

 In response Domini Social Investments launched Nia Global Solutions, an equity portfolio that seeks to bring some of these concepts into the public market. Meeting the strictest of sustainability questions, Domini started with their own a basic universe of 2,800 companies. Only three worked for Nia. Today the firm now has a pool of about 43 [companies] to work with in managing the portfolio.

 Noting that there is likely to be a “big new effort” in the socially responsible investing world” she stated: “Bringing the concepts of high impact investing into the public equity setting is filled with challenges, but the industry has long heard the call from investors for something cleaner and more consistent with personal values than what they’ve seen to date.” Domini asserts too that 2014 will see a growing “acknowledgement that Environmental, Social and Governance (ESG) research adds value.”

 The Domini Social Equity Fund (Investor shares) returned 32.85% in 2013, outperforming the S&P 500 Index, which returned 32.39%. So, something is working. Meanwhile, the Domini International Social Equity Fund (Investor shares) outperformed its benchmark by more than 2%, returning 25.77% versus the MSCI EAFE Index’s 23.29%.

 The market will also start to see “the development of real products for the public’s new interest in the ideas of ‘Slow Money’, Sustainable Agriculture, Fossil-Fuel Free investing and High Impact.” On fossil-fuel free investing, she added: “It’s real and it’s going to become an industry standard. The challenges of investing without fossil fuels have been well stated, but they lack moral validity.”

 Separately, AIM-quoted Impax Asset Management (www.impaxam.com), which is focussed on investing in alternative energy, water, agriculture and related markets and manages £2.4bn for investors globally, late this January reported strong investment performance in 2013 for all its listed equity strategies, relative to global markets, relevant benchmarks and peers. Impax’s flagship investment trust, Impax Environmental Markets plc saw a robust +33.2% performance in the past calendar year.

 Ian Simm, Impax’s Chief Executive, commenting said: “It’s been a long time since the outlook for environmental markets and resource efficiency stocks has been quite as good as it is right now. The next 12 months look promising across all our investment strategies, buoyed by a broad-based cyclical recovery from the deepest downturn in living memory.”

The £5.94m Guinness Alternative Energy C fund continued its top ranking amongst UK Registered funds over the past year to 31 January 2014 with a cumulative +50.46% return versus past three- and five-year performances at -19.28%/140th rank and -9.01%/122th, respectively. The one-year performance was nevertheless a decline over +67.62% witnessed as at the end of December 2013 and mirrored dented investment returns amongst leading funds here and across the four other sectors.

Premier Ethical A Inc., a £67.06m fund, was runner up this time on a +27.85% performance versus +56.45%/2nd rank over past three years and +117.75%/8th over last five. Sarasin Sustainable Equity USA P US$ fund came in third top with +26.33% against +31.74%/17th over past three years. Kames Ethical Equity B Acc., a £407.94m fund, has been an extremely consistent performer: fourth over the past year (+26.10%), sixth over three years (+47.36%) and fourth over five (+134.11%). SUNARES bottom ranked again on a past one-year view.

For US Mutual funds, Firsthand Alternative Energy fund outstripped sector peers over the past year with +80.86% - but down from +93.71% for the year to end of December 2013 and contrasted with -10.29%/199th over three years. The $414.40m Eventide Gilead N fund came second over the past year (+48.43%) against +80.26%/1st over three years and a pulsating +216.43% over five. Despite producing +47.29% last year, Guinness Atkinson Alternative Energy was weak over the past three years (-24.87%). Epiphany FFV Latin America A bottom ranked here for the past year (-18.95%).

MAP Clean Technology Fund I top ranked European Funds with +124.37% over the past year, beating LSF Asian Solar & Wind A1 with +119.00% versus -17.97%/998th over past three years). The €8.34m Asselsa Small & Mid Caps Switzerland fund ranked fifth over one year (+46.96%) versus +22.44%/264th over three and +100.19%/151st over five years. SUNARES lagged the sector returning -30.65% over the past year and -56.32% over past three.

The UK Individual Pensions sector displayed the best peer group average over one- and three-year periods (+27.37% and +38.43%, respectively). Top ranked for the past 12 months was FL/Premier Ethical EP Pension fund (+28.26%) against +57.97%/13th over the last three years, followed closely by Sanlam/Kames Ethical Equity 8 Pension fund (+27.93%) versus +50.98%/17th over three years. Sanlam/Kames Ethical Equity 8 Life fund scooped top spoils in the UK Insurance sector posting +25.75% over the past one year versus +45.94%/12th over three.

A new collaboration between key players in the global tea industry has been launched by sustainability non-profit, Forum for the Future.

The Tea 2030 partners include four of the seven companies responsible for 90% of the world tea market: Unilever, Tata Global Beverages, James Finlay and Twinings, together with the Ethical Tea Partnership, Fairtrade International, IDH, Rainforest Alliance, S&D Coffee and Tea and Yorkshire Tea. It is also supported by the International Tea Committee.

The initiative calls for the sector to find legal ways to collaborate – while continuing to compete – to turn tea from a standard commodity into a ‘hero crop’ which benefits the millions who work in all parts of the industry as well as the wider environment and economy. 

Collaboration will focus on three key areas: sustainable production, market mechanisms and consumer engagement.
Forum for the Future has published ‘The Future of Tea – A Hero Crop for 2030’ which identifies the challenges facing the industry including climate change, population growth, and competition for agricultural land and water. It presents four possible scenarios for the year 2030 which are designed as a tool to help businesses plan for the future and develop sustainable products and business models.

The Forum’s report and Tea 2030 initiative launch coincided with the publication by the Institute of Human Rights at Columbia Law School that showed that Indian tea plantation workers are paid less than £2 per day and live in inhumane conditions. “The living conditions on the plantations presented some of the most conspicuous violations of Indian law,” the report states.

The report, “The More Things Change... The World Bank, Tata and Enduring Abuses on India’s Tea Plantations” , is the result of a three-year study in which researchers visited 17 plantations in Assam used by Amalgamated Plantations Pvt Ltd (APPL), a company in which Tata Global Beverages (owner of the Tetley brand) holds a stake. The report also criticised a widely welcomed employee share-ownership scheme established with finance from the World Bank’s lending arm, the International Finance Corporation (IFC). Workers said the scheme was pushed by APPL with “threats and duress” but little information or independent advice.

APPL said the Columbia report was “incorrect and misleading in some parts, which are injurious to our interests and defamatory”. The company operated within all laws on pay and conditions and “believes in continuous up-gradation of standards of working and operations”.

Peter Rosenblum, Columbia Law School’s professor of human rights and the report’s director, told Ethical Performance: “APPL is able to rely on the fact that very few people ever go to the plantations to verify their claims. As we document, the IFC has never supported an unnanounced audit. Workers claim that they have never encountered an auditor in the labour lines. Worse, they are all quite familiar with the word ‘audit’ because they are systematically ordered to prepare for them in advance: clean up, paint buildings, move patients out of the hospital, etc. We could have called the report “Hidden in plain sight” because everything we identify is easily verified and well-known to those who live in the plantation world.”

Dr Ann-Marie Brouder, principal sustainability advisor, Forum for the Future commented: “The issues raised in this report, such as labour and human rights, are unfortunately not confined to tea alone and are common to other agricultural sectors; hence the solutions will only come from wider collaboration outside of the tea sector, involving national and regional governments, unions and NGOs.

“The tea sector is aware of and facing up to its problems, and through collaborations such as the Ethical Tea Partnership and Tea 2030, exploring how these problems and future challenges can be tackled.”

The World Bank has said it will hold its own inquiry into the allegations. 

Ethical Performance talks to Dave Howson, CSR and sustainability director of Bacardi, the world’s largest privately-owned drinks company
 

Starting out as a warehouse manager 15 years ago Dave Howson, now global director of sustainability at drinks giant Bacardi, says that sustainability is in the DNA of the company: “The company was founded in response to an overflow of molasses in Cuba, from which a much smoother variety of rum was blended. Even old bourbon barrels were used to age the rum, so we were recycling 152 years ago.”

The world’s largest privately-owned drinks company has achieved significant progress in energy and water reduction: “We have 28 distilleries around the world and there has been a lot of activity in these areas for a long time, even prior to those activities becoming part of our CR platform.”

Howson is proud of the company’s water waste reduction of 54% - “an outstanding achievement” and reducing greenhouse gases by 25% - “a great job”.

The company has recently extended its sustainability commitment with the Good Spirited initiative. “This sets our sustainability goals right across the business, not just focusing on energy and water,” explained Howson. “One area we’re focusing on is packaging. We have a sustainable packaging manual for our employees and we’re looking at reducing the weight of glass packaging and the impact of the business on the environment.”

Setting the bar particularly high is the pledge to responsibly and sustainably sourced sugarcane. As a board member of Bonsucro, the sustainable sugarcane not-for-profit, Howson is all too aware the level of difficulty and challenge presented by a commitment to 40% sourced by 2017 and 100% by 2022: “It is stretching but we’ve made a public commitment which will send out a signal to other drinks companies.”

Consumer awareness of the sustainability of the drinks industry is currently at a low level, Howson admits. “It’s nowhere near where tea and coffee are. But with millenials coming through – our future customers – they will want those credentials. And having those sustainability credentials will be our licence to operate.”

As part of the Good Spirited campaign, brand focused stories about sustainability – supply chains, the usual of sustainable ingredients, etc – are planned and will be used to spread the message.

Howson sees his biggest challenges in water stewardship – with an ever-increasing global population – and in establishing an extended value supply chain where sustainable production goes well beyond the factory walls.
Having a long term vision is implicit to any sustainability programme. Howson looks to galvanise employees by breaking down targets to focus on more manageable achievements. “Setting short to medium term goals, lets people see what can be achieved through sometimes relatively small changes.”

He is keen to emphasise that Good Spirited includes everyone in the business. “Across all our offices, we can develop 6,000 advocates for sustainability.” And it can come down to little things he says like turning lights off at home time and turning computers off over lunchtime. “With our global targets, everyone has a massive role to play. We also want to employees to bring all their green behaviours from home – eg water usuage when filling the kettle – into work.”

Another way Bacardi is looking to engage employees is through its Million Acts of Green programme on the company intranet. “It’s where people can input the green activities they’ve done – such as printing on two sides of paper – and it calculates how much energy they’ve saved. It’s simple but fun and engaging,” he said. “It may even instigate gentle competition between sites and we’ll offer rewards for an individual’s sustainable behaviour. It’ll act as a platform to share activities and perhaps spread insights from other offices which new teams will then implement.”

When working in a company as vast and as widespread as Bacardi, Howson admits that the sustainability challenge can sometimes seem daunting. “But we know it’s the right thing to do, both for the company and for the planet. And we’ll continue to strive to do that.”

For smaller businesses, Howson advises companies not to feel that they have to change the world in six months. “You need to look at your materiality and your stakeholders. See what you can achieve, what impact changes would make and then speak to your supply chain. You need to take one step at a time.”

If there was one thing he could change in sustainability business practice it would be the alignment of the total value chain. “Farmers, millers, producers –we’re all heading in a sustainable direction and really need to pull together.”
 

Elaine Cohen, ceo of Beyond Business Ltd, discusses the current state of play in reporting frameworks
 

We are witnessing a leadership battle for ownership of sustainability transparency and it’s not a good thing. Instead of playing to everyone’s strengths, we are risking moving the needle back to only one strength. The state of everyone’s bank account. The battle is being played out on the respective turfs of the IIRC, SASB and the GRI, where IIRC and SASB are focused on what investors want to know in order to make more money and GRI is focused on what companies are doing to the world that makes it more or less sustainable.

Creating a harmonized corporate transparency pathway which enables consistent and non-overlapping disclosure frameworks does not need to be a lost cause, although it looks that way at present. Even the definition of a core concept such as materiality is not consistent across these three leading organizations, as explained eloquently by Dunstan Alliston-Hope and Guy Morgan of BSR in a great article. The lack of synergy in development of different reporting and transparency frameworks is leading to fragmentation and separation, rather than collaboration and integration.

2010: The Global Reporting Initiative pronounces a goal to see a “generally accepted and applied international standard which will effectively integrate financial and ESG reporting by all organizations.” This was clearly an expectation that GRI would become an integral part of the fabric of any future integrated reporting framework. Everyone was optimistic and there was a big buzz of excitement and anticipation when the IIRC was formed in 2010, chaired by Professor Mervyn E. King, the then chair of GRI.

2011: Leaving the GRI to go dedicated at the IIRC, Mervyn King signals where he sees the future. With investors. GRI congratulates Professor King on his new appointment and looks forward to working closely with IIRC to promote Integrated Reporting. Perhaps GRI was a little too optimistic that the IIRC would even care. IIRC continues to generate momentum for integrated reporting and overlooks, it seems, a similar major reporting event which is taking place at the same time. The new-improved GRI Reporting Framework.

2012: In October 2012, the newly-formed Sustainability Accounting Standards Board (SASB) claimed it will be the US voice for material non-financial issues cutting right across the GRI and IIRC self-assumed mandates. With bold plans to create sector-based standards that identify material non-financial issues that should be included in mandatory reporting by publicly traded companies, SASB starts to shake up the mix.

2013: GRI and IIRC sign an MOU, declaring that both parties will proactively engage with each other by sharing information and striving for “complementarity” in their respective frameworks. Shame they didn’t agree to agree on a definition of materiality. That would have been an MOU with teeth. Just three months later, May 2013 was alive with the sound of eager applause at the GRI conference in Amsterdam, hailing the new G4 as the superhero way forward for sustainability reporting, with a materiality focus, and a shorter, sharper, cleaner, quicker way to relevant corporate transparency. The process-oriented G4 framework was seen by (almost) all as a massive improvement on previous GRI reporting frameworks. Oops. Just one thing missing. The G4 framework excluded all serious mention and reference to integrated reporting and guidance which had been promised.

Why? Well, the IIRC was powering up full steam ahead with its own framework, and apparently didn’t have the time to stop to think about how G4 could work to its advantage. Or it thought that G4 wouldn’t work to its advantage.
The official line was that the timelines for these two developments were different. Although, not that different. In December 2013, IIRC published the new Integrated Reporting Framework with a clear target audience: “The primary purpose of an integrated report is to explain to providers of financial capital how an organization creates value over time.”

Conspicuous by its omission in the < IR > Framework is any mention of GRI. There can be no mistake that Integrated Reporting is not about sustainability impacts. It’s about helping investors make financial decisions. Regrettably, or otherwise, that may exclude most of what is included in sustainability reporting.

The < IR > framework ignores GRI. Perhaps it’s time we stopped thinking of Integrated Reporting as an evolution of both Annual and Sustainability Reporting and accept that reality is different. Integrated Reporting plays a role in filling in the gap between top line and bottom line, and ensuring that the value-creation radar screen is not too narrow.
Sustainability Reporting plays a role in ensuring companies account for their impacts on all stakeholders. These are two purposes and despite the existence of a compelling connection between the two, no organization has successfully delivered a framework which encompasses both in a substantive way.

2014: And still, the MOU game continues. January saw the signing of an MOU between the IIRC and SASB “to more closely collaborate to advance the evolution of corporate disclosure and communicate value to investors...... Among other measures, SASB and the IIRC agree to strive for complementarity and compatibility in the ongoing development of their respective frameworks, guidelines and standards...” There’s that complementarity thing again. If only we could save the world by signing MOUs and preaching complementarity, we would all be able to sit back and take a long rest by now.

Present: So far, no single framework has earned true leadership. Sustainability Reporting is firmly entrenched and G4 is looking promising with uptake starting to emerge.

The token number, growing though it may be, of integrated reports, some of which are evidence of integrated thinking and some of which are evidence of little thinking, is unlikely to increase substantially unless we see that investors are not only demanding, but using, these wonderful new documents.

SASB is a great concept and has made fabulous progress in practice, but we have yet to see the detailed SASB standards being widely applied in any sector. In short, the battle for sustainability transparency leadership has not yet favoured any of the protagonists in an outright way, which might suggest that time and energies might be more productively used in working together rather than working apart.

Perhaps it is time that the leaders of the IIRC, GRI and SASB meet together at a Complementarity Retreat (no MOU necessary) and emerge with a set of agreed actions that will recognize the different value propositions of each framework, while ensuring a synergistic approach which will move us forward inclusively rather than driving more debate competitively.  

 

The full version of this article first appeared on Elaine Cohen’s CSR Reporting Blog.
 

Every Wednesday at 4pm PST / 7pm EST (and every once in a while at other times) TriplePundit will take 30 minutes or so to chat with an interesting leader in the sustainable business movement. These chats are broadcast on our Google+ channel and embedded via YouTube right here on 3p.

On Wednesday, February 26th, TriplePundit’s Founder, Nick Aster, held a chat with Ian Hanna, Director of Strategic Development for the Forest Stewardship Council International.

The vision of the global non-profit is that the world’s forests meet the social, ecological, and economic rights and needs of the present generation without compromising those of future generations. FSC International's strategy consists of five main goals:

Goal 1: Advance globally responsible forest management Goal 2: Ensure equitable access to the benefits of FSC systems Goal 3: Ensure integrity, credibility and transparency of the FSC system Goal 4: Create business value for products from FSC certified forests Goal 5: Strengthen the global network to deliver on goals 1 through 4

To meet these goals, the FSC International's program areas such as chain of custody, social policy, ecosystem services, and monitoring and evaluation, help manage the multidimensional nature of forestry and certification.

Hanna addressed these goals and concepts, and much more, in his interview.  

The chat will be live below at 4pm Pacific:

If you missed the conversation, you can still watch it on our YouTube channel.

 

About Ian

Ian Hanna is an ecologist, social entrepreneur and sustainability advocate that is the Director of Strategic Development for the Forest Stewardship Council. He works with various industries, agencies and NGOs to shift the wood and paper purchasing of businesses, consumers and governments to more responsible, verifiable sources such as FSC certification provides. Hanna hails from the Olympic Peninsula in Washington State and is a firm believer that individual action around our purchasing decisions is the quickest path to leaving a positive environmental legacy for future generations.