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BlackRock, the world’s largest asset manager, has partnered with Ceres to issue a guide for institutional investors seeking engagement on sustainability and corporate responsibility issues with companies.

The resulting 68-page guide is certainly timely. More companies realize they have to consider the impacts that environmental and social issues have on their business, but the demands of Wall Street and the short-termism endemic in the U.S. means corporate social responsibility (or what our friends abroad designate as environment, social and governance — ESG) is still overlooked.

But times are changing. More institutional investors understand the risks within a company’s supply chain, ranging from climate change to human rights abuses, pose long-term threats to its business. And in recent years, investors have used the power of communication — backed up by the number of shares owned in a company — to get businesses to change their ways. The recent decision of Lowe’s to stop using bee-killing pesticides, and that of food conglomerates such as ADM to clean up their palm oil supply chains, are a few examples of investors’ successes in pushing companies to adopt more responsible company policies.

The question for investors, however, is the approach they should take when it is time to “speak up” to the companies in which they have purchased shares.

To that end, this report, 21st Century Engagement: Investor Strategies for Incorporating ESG Considerations into Corporate Interactions, is a primer for U.S. institutional investors ready to ramp up their engagement with companies but unsure of how to start. While we often hear the word divestment as a threat when we read financial news, the BlackRock-Ceres report argues that direct communications with companies is the preferred route instead of selling shares of companies underperforming on the sustainability front.

Such a strategy is especially true if an investor owns a large share of that company or is focused on long-term results. After all, the power of persuasion (as in an eloquently written threat with teeth) is starting to gain traction. Therefore, the report offers guidance on a variety of tactics, such as proxy votes for shareholder resolutions.

The advice this report offers is crucial considering the momentum activist shareholders have generated. Once dismissed as an occasional annoyance led by a few ragtag activists, shareholder resolutions are on an upswing, in part because the threat alone can nudge a company to change a policy. Shell’s executive leadership recently supported a shareholder resolution that requires the company to recognize climate change risk. While some activists may sniff at what they see as a token step, such a response would have been unthinkable only a few years ago.

In addition to laying out frameworks for engagement strategies, from the development of a strategic communications plan to how to follow through on a proxy vote, the guide is full of case studies as well. Finally, this report offers some suggested questions investors should ask companies based on industry — from food retail to banking and even for sectors that have been slow to accept sustainability-related risks, such as insurance companies.

In the end, this report should be required reading for all investors, including professionals working at large international financial companies, as well as individual investors who understand that environmental and social performance is important to a company’s bottom line.

Image credit: Americasroof

Although it seems counterintuitive to most people, indoor air quality is commonly two to five times more contaminated than outdoor air. Meanwhile, the average American spends 90 percent of their time indoors. Although we typically think of cars, factories and power plants contaminating outdoor air, there are also numerous sources of indoor contaminants that are less obvious.

As building envelopes get tighter, less air infiltration increases the concentrations of these pollutants, creating human health concerns. The primary approaches to protecting indoor air quality include diluting toxins through ventilation and reducing or eliminating the sources of indoor pollutants.

"Two factors work together to impact indoor air quality. Ventilation affects how much fresh air you are bringing into the home, and source-control affects which materials are releasing chemicals into the space," says Scott Steady, product manager for indoor air quality at UL Environment. "As we tighten up our homes and have a tighter envelope, that decreases the dilution for the emissions coming from sources inside the home."

Ventilation to dilute toxins

As new homes are remodeled or constructed to have tighter building envelopes, ventilation strategies are increasingly important. In addition to volatile organic compounds (VOCs), indoor air quality can suffer from excessive levels of pollen, dust and particles from combustion. Exhaust-only ventilation systems can be efficient in removing many toxins from the home, but they do not recover the heat from exhaust air and exhaust precious cool air out in the summer. They create a negative pressure in the home, forcing make-up air to infiltrate through leaks in the building envelope. Balanced ventilation systems by contrast often supply filtered air, further promoting indoor air quality.

“The rooms with exhaust fans get really good ventilation, but the back bedroom may not feel the effects of that,” explains says Sarah Widder, energy engineer for the Pacific Northwest National Laboratory. “In general, we know that balanced ventilation systems work better in terms of delivering fresh air equally to all rooms of the house.”

Heat recovery ventilation systems are balanced systems that both remove stale air and supply a constant stream of fresh, filtered air into the living areas (i.e., bedrooms and living room), to insure optimal air circulation throughout the house. By controlling the location of the fresh air intake, balanced ventilation systems eliminate radon in make-up air and moisture intake from the walls, windows or crawl space that can be problematic with exhaust-only ventilation systems.

Pollen, dust and even particles can be removed, especially when a high-MERV filter is used. In heat recovery ventilation systems, a heat exchanger captures heat from the outgoing air during the heating season. Zehnder heat recovery ventilation systems are up to 95 percent efficient in transferring this heat to the incoming air, keeping energy bills down. They also boost cooling in the summer months by increasing ventilation rates and transferring coolness to intake air.

Low-emission materials

Numerous products emit VOC gases at room temperature, which are known to cause human health effects. These VOCs are released from a vast array of products, including paints, furniture, cleaning products, air fresheners, personal care items, building finishes, engineered wood products and adhesives. Indoor levels of VOCs can be 10 times higher than outdoor levels, making them a high priority in boosting indoor air quality.

The EPA has not determined threshold limits for indoor VOC emissions, but third-party programs exist that are intended to mitigate exposure to specific VOCs that are believed or known to impact human health. These organizations identify low-emission materials to promote indoor air quality, largely doing the homework for selecting products that enhance indoor air quality.

GREENGUARD-certified products satisfy stringent third-party standards for safer indoor environments.  This program, administered by UL Environment, screens for more than 10,000 chemicals, including formaldehyde and certain VOC levels. There are currently more than 26,000 certified products available in 28 categories, making safer material selection easier.

Image credit: Aditi Rao, Flickr (upper image)

Major oil and gas companies - BG Group plc, BP plc, Eni SpA, Royal Dutch Shell plc, Statoil ASA and Total SA - have called on governments around the world and to the United Nations Framework Convention on Climate Change (UNFCCC) to introduce carbon pricing systems and create clear, stable, ambitious policy frameworks that could eventually connect national systems. 

The six companies set out their position in a joint letter from their chief executives to the UNFCCC Executive Secretary and the President of the COP21. This comes ahead of the UNFCCC’s COP21 climate meetings in Paris this December.

The chief executives write: “Our industry faces a challenge: we need to meet greater energy demand with less CO2. We are ready to meet that challenge and we are prepared to play our part. We firmly believe that carbon pricing will discourage high carbon options and reduce uncertainty that will help stimulate investments in the right low carbon technologies and the right resources at the right pace.

"We now need governments around the world to provide us with this framework and we believe our presence at the table will be helpful in designing an approach that will be both practical and deliverable.” 

The chief executives also sent an additional letter that has been published in newspapers, setting out this position on carbon pricing and also the role that natural gas can play in reducing carbon emissions.

Mark Kenber, ceo of The Climate Group, the international non-profit, commented: “This is a symbolic moment, and demonstrates an important if not universal shift. It reflects a growing realisation within influential sectors of the fossil fuel industry of a need to adapt to both market and climate realities.

“It helps increase the likelihood of a positive outcome at COP21 by sending a signal to the wider business community, and showing that the direction of travel is towards comprehensive and effective regimes regulating carbon emissions."
 

 

Picture credit: © Mopic | Dreamstime.com - Carbon Dioxide Emissions Concept Photo
 

Guests at W Hotels will soon be sleeping on sheets and pillow cases partially composed of recycled plastic.

In a new partnership with the Ekocycle brand, the bedding will replace what is currently used in its 46 properties worldwide beginning with its US locations and then rolled out globally. The bedding will also be sold via the W Hotels online store, with full, queen and king size sheets available, at prices ranging from $207 to $267. Pillow cases are $62 to $79.

“W guests want to live a stylish, more sustainable lifestyle and this partnership is a way to allow them to do so when they are on the road,” said Sarah Doyle, global brand director of W Hotels Worldwide, which will expand to 60 properties by 2017. “Plus, it’ll help guests feel like they’re doing good for the environment when they stay with us, which could be a draw for new W guests as well.”

Described by W Hotels as ‘ultra-luxury,’ the sheets are made of 30% recycled polyester, or about 31 plastic 20-oz bottles for a king size sheet set. Cotton represents 60% and 10% is virgin polyester. That translates to approximately 268,000 plastic bottles for its hotel beds in North America alone. The company said guest won’t feel any difference, for the manufacturing process for its sheets remains the same. Use of the recyclable material does not increase their cost.

W Hotels is also introducing the new environmentally-friendly Mobile Charger and Accessory Valet to its nightstands. Made from 32% post-consumer materials - or about 3 recycled 20-oz bottles - it features a USB charger and international adapter, alarm clock, ambient LED light and holds jewellery. It can be purchased for $75. Minwiz, a Taipei-based engineering firm that focuses on using recycled materials, developed the MCAV.

Ekocycle, the environmental brand formed in 2012 by Black Eyed Peas singer will. i. am and Coca-Cola, has been creating lifestyle brands using recycled plastic. The concept was inspired by will.i.am when noticing the garbage left behind after a concert in South America. The first Ekocycle item introduced was a set of headphones with rapper Dr. Dre. There are now also bags, luggage, shoes and apparel.

“The new Ekocycle sheets and chargers that will now be at W are further proof that we can transform so much of the way we live through more sustainable, recycled materials,” stated will. i. am.

“W joining the Ekocycle movement was the perfect choice,” said Doyle. “And once we got to brainstorming, we didn’t need to look much further than the one thing every single guest – whether travelling for work or play – uses: the bed.” 

The Renault-Nissan Alliance, the world leader in zero-emission mobility, will provide a fleet of 200 all-electric vehicles as the official passenger-car provider for the United Nation’s COP21 climate conference in Paris later this year. The fully electric car fleet will shuttle delegates during the event from 30 November to 11 December 2015.

More than 20,000 UN participants from 195 countries are expected to attend the annual climate summit. It will be the first time the UN will use a zero-emission fleet for its entire passenger car shuttle at a COP event.

The goals of the Paris summit are to have a new global climate-change agreement in place by the end of 2015 and to have the Climate Green Fund, established to help developing countries adapt to climate change and reduce emissions, start allocating funds.

“Electric vehicle technology is an efficient solution for a practical and affordable mode of transportation. This solution has a positive impact on the climate and air quality in our cities,” said Carlos Ghosn, Chairman and CEO of the Renault-Nissan Alliance. “It’s time to accelerate the shift to zero-emission mobility by working together with all parties concerned.”

The COP21 car fleet will feature the Renault ZOE subcompact car, the Renault Kangoo Z.E. van, the Renault Fluence Z.E. sedan, the Nissan LEAF compact car and the 7-seater Nissan e-NV200 van.

The Renault-Nissan Alliance will work with companies in France to set up a network of more than 50 quick and standard charging stations powered by 100% renewable energy in strategic locations. The quick charging stations will be able to charge the EVs from 0 to 80% capacity in about 30 minutes.
 

I’ve always wondered the validity of that oft quoted phrase, “There’s no such thing as bad publicity.” Surely, particularly in these social media savvy days (should that be anti social media?), a bad tweet can, and does, have huge ramificiations. Even in the pre-internet days, Gerald Ratner’s comments about the jewellery his company sold are now infamous and who can forget during the BP oil crisis of 2010, the ceo’s comment that he’d like his life back…

Interestingly, more news about a company’s chief executive – positive and not – is good news when it comes to the firm’s valuation, according to a study at University of Cambridge Judge Business School. More media coverage of a CEO is a “channel of investor recognition” that also helps the chief executive extract higher compensation, says the study.

“The study shows that, in the long term, if a firm’s CEO attracts more media coverage the firm will do better in terms of valuation,” says Bang Dang Nguyen, University Lecturer in Finance and Director of the MPhil in Finance Programme at Cambridge Judge. “We live in a world of incomplete information, and the study shows that additional coverage of a company’s CEO helps fill that information gap for investors, and this contributes to additional valuation.”

The study deliberately focused on coverage of CEOs rather than their companies, because often a CEO is better known than his or her company, and investors tend to listen to the CEO seriously; in fact, in many cases the CEO becomes not only the company’s public face but also its embodiment in the eyes of investors and the broader public.

The study found that companies with the highest level of CEO media coverage outperformed in value those with the lowest level by 8%, while firms with the highest level of positive CEO coverage outperformed those with the lowest level by 7% – suggesting it was the greater aggregate CEO coverage itself, not its relative positivity, that was the key factor to greater value.

Previous studies have mostly focused on the effect of media coverage on specific events or announcements by firms, while Nguyen’s research uses a long-term approach based on aggregate coverage of CEOs, including both good and bad news.

“Because of incomplete information, investors rely at least partially on public information to make decisions,” the study says. “Media coverage may help in removing some uncertainty, bringing in more transparency, adding credibility, and highlighting the viability of future projects.”

Bad news can also help culture change, according to Mark Taylor, dean of Warwick Business School. Commenting on yet another banking scandal where banks have been fined nearly $6bn for rigging foreign exchange markets, he said: “The fact these fines are so big and this has been investigated so thoroughly, demonstrates just how serious the collusion and price fixing was, and how low confidence in the banks has sunk. A shift in culture is necessary in order to ensure that something similar doesn’t happen in another guise. Imposing heavy penalties - together with the accompanying adverse publicity - is one way of shifting that culture.

I suppose with all these corporate scandals what’s important is to acknowledge the sin and then focus on the solution. Like Alan Philips said: “It is bad news. But we just have to get on and deal with it.”

 

US retailers are starting to ask their product suppliers for merchandise with packaging that is more sustainable, according to speakers at the recent LuxePack Conference in New York. Laura Klepacki reports

Retailers are starting to ask their suppliers for merchandise with packaging that is more sustainable, according to speakers at the recent LuxePack Conference in New York.

“I think retailers are feeling pressure from their consumers and they are putting the pressure on us,” said Brook Harvey-Taylor, president of natural beauty brand Pacifica, which has been a vendor for Whole Foods for 17 years and is among a select group of brands sold at Target under its ‘Made to Matter’ section. “Retailers are asking `what are you doing?’ and ‘how do you speak to the consumer about it?’ We have always worked within the parameters of Whole Foods, but I think this is the first time retailers outside Whole Foods in the mass market are asking about it.”

While widely vocalized, actually putting together a package that is sustainable remains challenging. “I sat at one supplier’s table – a big supplier in the cosmetics industry – and I said ‘show me everything that is recyclable.’ They showed me three things out of thousands,” said Harvey-Taylor.

Price is still a big concern for manufactures, noted Juliane Camposano, vice president, Global Design, previously a design executive for L’Oréal. A box containing post-consumer material is more costly and retailers want a price that the consumer will pay. “There is a balance between the two that always has to be evaluated.”

Additionally, finding information on materials and on supplier business practices – such as energy consumption - takes a lot of research. “It is like tedious detective work,” said Camposano.

None-the-less packaging breakthroughs are happening. Pacifica is now using a new polypropylene tube from Viva Healthcare Packaging,that has a “very good lifecycle analysis score” and is completely recyclable, said Bruno Lebeault, North America marketing director for Viva. Typically a tube has multiple components made of different materials and sourced from various suppliers. This tube is all made from the same material, has an in-mould label and is all manufactured under the same roof.

Bill Russell, professor of Green Accounting at Columbia University, pointed to L’Oréal as a leader in responsible packaging selection. To penetrate India with its Garnier shampoos it introduced a sachet packet that uses less material and is locally sourced. “By doing that they were able to have the quality packaging and price points they needed for that local market,” said Russell. “This solution might not be right for Europe or North America, but it was the best one for India at that moment in time.”

Russell said embracing sustainability can lead to a 50% to 81% increase in profitability for a company, and outlined an economic sustainability assessment model that firms can use to track and compare expenses, revenues and intangible benefits. Core measurements include direct and indirect expenses, processes that make up what the company does to deliver the product and package, and costs associated with waste. The elastic model also takes into account ‘carrots’ such as an increase in reputation associated with an innovation and also if a payoff would result from investment in a third party certification.

The model is still “messy” and “turbulent,” but not tracking the business of sustainability at all is worse, advised Russell. In this area, Walmart, in conjunction with the Sustainability Consortium has been producing lifecycle analyses or a ‘Sustainability Index’ for individual product categories sold at Walmart, with more than 700 to-date and more being added. This is helping them “come up with hot spots – what is the most critical toxin to remove or what it the most critical aspect of the footprint that we want our product developers to do for that segment of products,” explained Russell.

According to Russell, the prospect of not addressing these issues could be dire. The planet’s biological resources are being consumed at a 50% greater rate than the earth is producing them. “We are doing all this while population is increasing, so even if it was business as usual, by 2050 we would be consuming nearly three planets of the biological resources that the earth is producing,” stated Russell.

Meanwhile, co-author of Cradle to Cradle, William McDonough remarked that packaging design doesn’t have to be about using less. But rather, materials can be used in abundance, as long as they are used wisely. “We should eliminate the entire concept of waste.”

To get there, package designers should shift away from the practice of using ‘less’ of a bad material - such as something that contains toxins – and just eliminate it completely. Admonished McDonough, “Being ‘less’ bad is not being good.” 

Excellent, you’ve found us, writes Claudine Blamey. After years studying or working in another profession, you’ve decided to start a career in CR and sustainability (CRS). What do you need to succeed? We’ve been asked this question a lot in recent weeks, as well as another – how can the ICRS help people beginning a career in CRS? Here are our answers.

CR and sustainability is now a major profession, encompassing all major economies in the world and business sectors. It’s also one of the most diverse professions in terms of knowledge and skill sets. Transforming businesses and economies to sustainability means addressing business resilience issues, climate change, availability of resources, the concept of circular economy, community impacts, health and safety, human rights, supply chains, diversity and inclusion, equality, and governance. We need communicators to engage all parts of the business and external stakeholders, strategists to integrate sustainability into business strategy, people with commercial awareness who can speak the language of commercial teams, analysts able to turn data into digestible information and innovators to design new sustainable products and services, and more.

This is good news for people looking to enter the sector because it’s highly likely that you have one or more of the attributes we need.

We have defined the skills and behaviours for the profession in our ICRS Competency Framework. Coupled with an enquiring mind and a good dose of tenacity and enthusiasm, that should help you meet the various challenges and overcome them. The Framework sets out five generic competences and four CRS specific Guiding Principles. When you look at this framework, reflect on the following questions:
• Which, if any, of the competences have you developed already? Remember – they’re generic business competences. It’s likely that you already have some.
•Likewise, do you understand/accept the role of the Guiding Principles?

If you identify gaps, a great way to bridge those gaps is to join the ICRS where you can access a wide variety of resources – webinars every two weeks on pertinent CRS topics; signposting to countless reports and sources of information; award winning learning materials from Virtual Ashridge; discounts on relevant books via Greenleaf publishing; and, of course, a community of members with knowledge and expertise to tap into.

We are also developing a practical, competency based eBook specifically aimed CR and sustainability professionals just starting out. It will give insights into what it really means to work in the sector.

If this whets your appetite and you’re interested in membership, find out how to apply here: https://icrs.info/membership. Affiliate membership – aimed at people with limited professional experience in CRS – is £120 per year, and just £30 for students.

The ICRS’s mission is to help people to be brilliant in their work so that they can make a positive difference to society and our planet. If you have any questions, don’t hesitate to get in touch with us at info@icrs.info or call us on 020 7839 019

Claudine Blamey is Chair of the Institute of Corporate Responsibility and Sustainability (ICRS) and Head of Sustainability and Stewardship at The Crown Estate. 

With many companies having tens of thousands of suppliers, it is not surprising that managing corruption risks is proving problematic. Miranda Ingram reports

The Bribery Act 2010 was passed in the UK in 2011. So far there have been no prosecutions but investigations are underway. The first prosecution will make it very clear what is and isn’t acceptable and how heavy the punishments will be.

Obviously a fat brown envelope to a government employee or customs official is a no-no. But what about Wimbledon tickets, say, or a slap-up lunch?

Do you know if your procurement manager selecting suppliers because of a family relationship? Is one of your suppliers’ suppliers paying kickbacks to pass health and safety inspections? Could your purchasers and suppliers be divvying up the spoils of fraudulent billing?

Corruption is possibly the biggest obstacle to economic and social development around the world, distorting markets, stifling economic growth, undermining democracy and the rule of law. The United Nations Global Compact estimates that the cost of corruption is more than 5 per cent of global GDP, with more than US$1.5 trillion paid in bribes each year.

Businesses all over the world are exposed daily to corruption risks in the supply chain as well as the ensuing financial hardships, growing threat of legal action and increased pressure of public opinion. Yet almost two thirds of the anti-corruption due diligence procedures assessed by GoodCorporation over the past four years have been found to be inadequate – particularly appropriate due diligence on third parties.

“Managing corruption risks in the supply chain is one of the hardest areas of anti-bribery controls to get right,”says GoodCorporation director Michael Littlechild.

“With many companies having tens of thousands of suppliers, it is not surprising that this is proving problematic. The temptation is to do one of two things: conduct superficial due diligence on all third parties and suppliers or carry out more detailed investigations on a handful thought to pose the biggest risk.”

But today the situation is the exact opposite of what it used to be. Ten or so years ago, when you talked about corruption in the supply chain, people would shrug and say “that’s the way business is done over there; you can’t operate without kickbacks.” Then, the supply chain could be used as a way of not knowing what was going on: “I don’t care how you do it but I need those goods shipped this week” was a way of not knowing that a customs official had had to be bribed to speed up clearance.’

But the new Bribery Act - and similar toughened up legislation around the world - makes a company responsible for the actions of its agents - a particular risk when the use of a local agent is obligatory in licensing applications, for example.

“Anti corruption due diligence is not rocket science,”says Littlechild. “But it does demand focused effort as well as considerable resources to do it properly. This is particularly tough on SMEs who as well as lacking resources may also lack clout. If you are Shell, say, and you ask a supplier to fill in a questionnaire they’ll probably do it - a smaller company may lack leverage.”

But while the investment in stringent anti corruption policies may be high, the costs of ignoring it can be far higher - not just the costs of the corruption itself but also management time and resources dealing with the fallout, such as legal liability and damage to a company’s reputation.

Dealing with corruption, on the other hand, can improve product quality, reduce fraud and related costs, enhance the company’s reputation, improve the business environment by promoting fair competition and create a more sustainable platform for future growth.

Crucially, suppliers also reap benefits. The United Nations Global Compact 10th Principle Working Group recommends that customers not merely dictate compliance terms but play an active role in educating suppliers and helping them fix problems.

Tullow Oil is a leading independent oil and gas company operating in Africa and the Atlantic Margins and with a portfolio of over 130 licences spanning twenty two countries.

Since instigating a rigorous zero tolerance for bribery and corruption programme with the launch of its Supply Chain Anti-Corruption Due Diligence Evaluation Procedure in 2014, the company raises awareness of its Code with suppliers through meetings that are held before contracts are awarded.

“The oil industry has known issues of corruption related to bribes being paid for securing of contracts, collusion in companies’ supply chains and unethical dealings with public officials, to name a few,” says ethics and compliance manager Hemrish Aubeelack.

Tullow now makes sure all suppliers have an equal opportunity to tender by providing advance notice of tenders, an overview of the standards potential suppliers are required to meet and feedback to all unsuccessful companies on why they were not selected.

Supply chain due diligence has had a positive impact in encouraging suppliers that did not have adequate controls in place.
“We have had a number of success stories where, as a result of providing feedback to suppliers on their anti-corruption controls that we considered inadequate, suppliers took the opportunity to develop or enhance their compliance programmes. They understand that investing in compliance controls makes them an attractive and trusted business partner for any client, which is rewarding,”says Aubeelack.

Over the past year, during which Tallow was assessed by Transparency International as having scored 100% in ‘reporting on anti-corruption programmes’ , the company has delivered workshops and training to over 200 staff and suppliers involved in contract management and both staff and business partners are encouraged to raise concerns about actual or potential breaches of the company’s Code of Business Conduct, anonymously if they wish, through the company’s ‘Speaking Up’ channels.

“With an anti-corruption programme in place we are able to demonstrate to our stakeholders, both internal and external, how we are living our values,” says Aubeelack. 

***

GoodCorporation recommends the following three-stage approach:

Stage One: Screening
• Undertake a careful risk-based assessment of all suppliers – new and old – to identify those that pose a real threat to the organisation.
• Use a carefully designed decision tree covering the following areas:
• Do the third party’s services include helping to obtain, promote or expedite sales?
• Has the third party been independently sourced or recommended by a public official/client?
• Do the third party’s services involve freight forwarding or customs clearance and might they subcontract this process?
• Does the third party obtain any kind of government permit on the company’s behalf or might they use agents to do so?
• Do the third party’s services involve lobbying or interacting with government or public bodies on your behalf?
• Does the third party source goods or services
• Is the third party paid a success fee?
• If the answer to any of the above is YES a due diligence risk assessment should be completed.

Stage Two: Initial Risk Assessment
• The due diligence risk assessment should covering the following subjects, some of which will require a questionnaire to the supplier:
• Is the third party delivering its services in a high or medium-risk country?
• Are the third party’s owners/managers/close associates current or former public officials/politically connected or subject to sanctions?
• Has the third party any previous connection with the contracting company?
• Is the third party subject to any investigations or convictions relating to bribery or corruption?
• Has the third party requested non-standard remuneration?
• Does the third party have an acceptable/robust anti-bribery policies/code of conduct?
• Would this contract represent a substantial share of the third party’s business?
• Could the third party provide three referees from existing customers?
• If the answer to more than one of the above is YES, risk based due diligence follow-up is required.

Stage three: Risk-Based Due Diligence
This could involve all or some of the following:
• Verification of the information provided in the due diligence questionnaire
• Telephone follow-up of any references provided
• On-site interviews and independent background checks for those that cause the greatest concern
• In the event of negative or incomplete feedback from the risk-based due diligence, the supplier should NOT BE SELECTED
Post selection controls to mitigate risk
• Once selected there should be a process in place to communicate the organisation’s responsible business principles and ensure that the supplier abides by these or their own equivalent principles
• Offer training/coaching to strengthen third party ABC controls
• Ensure that there is a policy in place not to offer, pay, solicit or accept bribes in any form to or from suppliers either directly or indirectly
• Ensure that the exchanging of gifts and hospitality complies with the organisation’s own local policy on gifts and entertainment
• Agree a process of monitoring and engagement to ensure compliance with anti-corruption controls and procedures
• Establish auditing rights to ensure that high-risk suppliers can be assessed as required
• Ensure regular and open dialogue with suppliers
Ensure third parties are aware of the organisation’s speak-up system so that any concerns regarding the breaches of anti-corruption procedures can be raised through the appropriate channels.
 

Solactive AG (‘Solactive’), a German index provider head-quartered in Frankfurt that develops, calculates and distributes tailor-made indices globally, launched its Solactive oekom Ethical Low Volatility Index this May, writes Roger Aitken.

Published in Euros, this is a total return index based on 100 as at the close of business on 21 January 2000. By 25 May 2015 it was standing at 254.58 points.

The Index was specifically created to track the price movements of low volatility stocks passing the Environmental & Social Governance (ESG) screenings of oekom research, a leading rating agency for sustainable investment. BNP Paribas has also licensed the oekom Ethical Low Volatility Index to launch a wide range of products spanning capital protected to more complex structures designed for both retail and institutional clients in Austria, Germany and Scandinavia.

 Steffen Scheuble, Solactive AG’s ceo, commenting said: “The Solactive oekom Ethical Low Volatility Index is the perfect example of our capacity to provide efficient exposure to a specific market in a timely manner.” He added: “This innovative ethical index benefits from both the comprehensive screenings of oekom research and the interesting built-in feature around historical low volatility.”

 The index universe provided to Solactive by oekom research is undertaken on a quarterly basis, which comprises European companies meeting what are described as minimum “sector-specific sustainability management requirements” and that have been awarded so-called oekom ‘Prime’ status.

 Companies in the selected universe are further screened for controversial business areas including alcohol, coal, gambling, GMOs, military, nuclear power or tobacco, as well as controversial business practices that cover business malpractice, controversial environmental practices, human rights or labour rights. Constituent companies can be removed from the pool should they violate these exclusion criteria.

Solactive selects stocks from the starting universe that are incorporated or listed in developed Europe and have a 20-days average daily trading volume of at least €10 million (c. US$10.88m/£7.07m). Stocks are ranked by inverse historical volatility over the past 130 days in their local currency.

 The Index is composed of the top 30 stocks that are weighted by inverse historical volatility and has amongst its top 10 components: Swiss Re AG (4.04%), Nestlé SA (4.01%), Hannover Ruck (3.96%), National Grid Plc (3.82%), Legal & General Plc Ord (3.63%) and Unilever Plc (3.59%).

Michael Schuelli, Head of Structured Solutions (Germany & Austria) at BNP Paribas Global Markets, stated: “We are enthusiastic about the benefits this index [Solactive oekom Ethical Low Volatility Index] will bring to our clients across the region and the strong potential it offers in creating solutions which bring a financial return to our clients, while meeting their ESG investment goals. Furthermore, we are confident it brings both transparency and good judgement to this space.”

Julia Haake, director of oekom research’s Paris office, asserted that: “Oekom research’s high-quality analyses form the ideal basis for an index with high sustainability standards.” In selecting constituent companies for the Solactive oekom Ethical Low Volatility Index “very rigorous criteria” are applied according to Haake. She further added: “The Index thus provides sustainable investors with guidance on which companies have systematically integrated sustainability into their management systems.”
 
Solactive calculates indices across all asset classes for 175 clients in Europe, America and Asia, with c.US$25bn invested (at 31 December 2014) in products linked to indices calculated - primarily via 170 exchange traded funds.