Documente Academic
Documente Profesional
Documente Cultură
www.csrquest.net
www.4cr.org
The headings in this paper are links to pages in the above website providing additional
information and links.
The 4CR framework has been designed to integrate the various strands of corporate responsibility and to
support stakeholder oriented strategic management and the staged development of strategic capabilities
enabling companies to reach optimised sustainability performance.
This paper describes Part A2 of the 4CR framework reviewing CSR application trends and defining a
corporate responsibility and sustainability management framework.
The 4CR strategic framework is being developed by Athens University of Economics and Business in collaboration with
K-NET SA and INLECOM Ltd utilising their initial research work in the CSRQuest project.
Table of contents
P. & Y. Katsoulakos
P. & Y. Katsoulakos
increased transparency and improved governance aimed at rebuilding public trust and investor
confidence;
delivering wider societal value including support for health and human rights improvements and
environmental protection;
These objectives express company expectations / wishes for the future development of their Corporate
Responsibility and Sustainability programmes but do not always reflect current practices.
P. & Y. Katsoulakos
Success stories from responsible companies, for example the leading companies in SRI indexes, confirm
that outstanding financial performance is not incompatible with good sustainability performance.
However it should be recognised that the motivations of companies to address corporate responsibly
and sustainability varies widely from instrumental approaches using responsible practices as a means of
maximising profits to intrinsic approaches committing the company to upholding its values and
principles irrespective of the impact on financial performance.
KPMG's 2005 Survey of corporate responsibility reporting highlights the diverse motivations for
corporate responsibility (74% economic and 53% ethical) and the following important business drivers:
a) to have a good brand and reputation;
b) to be an employer of choice;
c) to have and maintain a strong market position;
d) to have the trust of the financial markets and increase shareholder value;
e) to be innovative in developing new products and services and creating new markets.
CSR
implementation
type
Opportunistic
Short term
Stable
Long term
In examining the actual CSR operation in various companies, it would appear that there is some
confusion in many employees as to what CSR is, which activities constitute CSR, what the boundaries
are and how CSR can be integrated in mainstream business operations. The traditional activities of
sponsoring, donations, charities have to be extended by advanced forms of responsible behaviour
affecting all company decisions, functions and processes through programmes on human potential
development, contribution to the social welfare, environmental protection, etc. As a result each
company has to discover to a large extend its own unique ways to manage Corporate Responsibility and
P. & Y. Katsoulakos
4
19th July 2006
Sustainability which given the complexity of the change management challenge entails high costs and
performance penalties.
CSR is based on corporate self-regulation and voluntary initiatives beyond legal obligations. However,
this often leads to misleading perceptions and interpretations.
activity is not CSR as it is governed by some standard or regulatory requirement. Strictly speaking, even
though this may be the case, CSR practising companies are expected to have policies that emphasise
and safeguard compliance to law and regulatory standards. Corporate responsibility encompasses legal,
ethical and sustainability responsibilities. In this context a company that does not comply with its legal
responsibilities cannot legitimately claim to be a CSR company.
Operational uncertainties and difficulties are compounded by recent observations of company anxiety
regarding CSR communications. Over-promising or declarations of rightness and good intentions could
cause the mistrust of consumers and stakeholders creating the opposite effects from those expected.
Companies are recognising that corporate responsibility communications should be low tone and
straightforward reflected in the actual behaviour of every member of the company which is extremely
difficult to achieve before CSR is integrated into the companys bloodstream.
P. & Y. Katsoulakos
Today an estimated 35,000 organisations qualify as international NGOs (with programs and affiliates in a
number of countries). Many recent surveys place NGOs as the most trusted organisations by the public
invariably far more trusted than national governments.
In recent years NGOs have seized the opportunity to increase their impact in society by focusing on
reforming market systems rather than confronting them, working closely with business organisations on
human rights, energy, and environment and community projects. The vital role of NGOs in sustainable
development was recognized in Chapter 27 of Agenda 21, leading to revised arrangements for
consultative relationship between the United Nations and non-governmental organizations.
NCOs could therefore play a central role in strengthening and maintaining the momentum of the
corporate responsibility and sustainability movement by promoting and facilitating collaboration
networks for sustainable development.
A template reflecting the prevailing business model is given in the following table.
Key
Responsibilities
stakeholders
classification
Identification
of key
stakeholders
and their
primary needs
/ concerns
Policies
What
are the
companys
values and
objectives in
each
responsibility
area
Strategies
Measurement
Programme
Reporting
Impact
assessment
Improvement
targets and
strategies
Action
programme
Achievements
Performance
indicators
Progress
Benchmarking
Independent reviews
Feedback
First companies identify their key stakeholders and their primary interests. This is used to select the
responsibility areas they wish to focus on (responsibilities classification). An example of typical
responsibility categories are identified in the above table based on the Global Compact and related
classifications (expanded in section 3).
The next stage is formulation of policies for each area selected and development of related strategies.
The corporate responsibility policies should be part of and integrated with the overall corporate values
and policies but this is not as yet common practice.
Formulating strategies and the CSR programme typically starts with impact analysis facilitating the
specification of improvement targets in line with the specified policies. Quantifiable improvement targets
and indicators are crucial to a successful corporate responsibility programme. Strategies, which should
also be aligned with the overall business strategy, are then developed following evaluation of
alternatives to achieve the improvement targets. Strategies are transformed into an action plan, the
CSR programme, which is implemented by operational units through extensions of existing processes or
through specific projects.
The CSR programme is monitored against the indicators set in strategy stage and the results are
reported through CSR, sustainability or related reports. These reports which represent the central
component of CSR management are often made public for transparency purposes and frequently
provide an input into the assessment process undertaken by SRI evaluations or other benchmarking
exercises.
It should be highlighted that companies operating in high impact sectors such as power generation, oil
companies, transport and heavy industries (see also The FTSE4Good Indexes Sector Classification) have
the burden to invest heavily on reducing their impact on environment.
It can be assumed that most companies include shareholders, employees and customers as key
stakeholder groups and then add to others particularly relevant to their circumstances [see Stakeholder
classifications, who are stakeholders].
The following table provides an example of the typical interests and expectations of the main groups of
stakeholders
stakeholders
interests
Expectations
Shareholders
Employees
Customers
Satisfaction of needs
Profitability and value
Suppliers
growth
Government
Healthy macro-economy
Society
Social welfare
P. & Y. Katsoulakos
Workforce
We are guided by our aim to be the employer of
hallmarked
by
integrity,
quality
and
care
with
policy
services.
operations.
Community
We strive to be a good corporate citizen around
Human rights
We respect the Universal Declaration of Human
operate.
Environment
We are committed
management,
them
to
help
us
achieve
our
to
providing
to
continuous
working
programme
improvement
of
and
websites
(e.g.
http://www.csr.gov.uk/bestpractice),
from
SRI
indexes,
and
from
associations such as CSR Europe, WBCSD, BITC, the Ethical Corporation, etc.
A number of individual companies also provide best practices interactive websites to promote
stakeholder engagement.
A good source of examples of how companies can put in practice corporate sustainability principles is
the Sustainable Livelihoods project undertaken by the World Business Council for Sustainable
Development (WBCSD). It includes 14 case studies transforming innovative ideas into commerciallyviable realities and demonstrating innovative sustainability oriented business models.
Examples from these projects include:
Procter & Gamble (P&G), for instance, is working with UNICEF and relief agencies to bring its water
purifying sachets, to disaster-stricken areas and remote villages.
Philips is collaborating with local hospitals and NGOs in India to provide specialist diagnostic
Leading cement producer, Holcim is working with a microfinance provider to supply low-cost housing
solutions in Sri Lanka.
Unilever has partnered with Ghanas health ministry and UNICEF to reduce the prevalence of iodine
deficiency, thus bringing major improvements in maternal and child health.
EDF provides affordable solar energy to villagers in Morocco, too remote to connect to the national
grid.
BP, Eskom and Rio Tinto are working with local small and medium-sized enterprises (SMEs) to
strengthen the fabric of both developing and transitional economies.
As indicated earlier NGOs are playing a key role in corporate responsibility projects focusing on social
welfare, mediation or consultation. Illustrative project examples include:
Greenpeace has collaborated with UK utility nPower to develop and promote a jointly branded
renewable energy product which generates environmental returns through reduced greenhouse gas
emissions. Their Juice initiative offers regularly priced green power from an offshore wind farm in
north Wales
WWF and HSBC developed together a sustainability strategy for the bank which has already
resulted in a new credit policy for the forest industry and senior staff trained in sustainability issues.
Amnesty International is supporting the new United Nations World Programme for Human Rights
Education and has worked with companies operating in zones of conflict to train business executives
in human rights issues.
Rainforest Alliance and Kraft together developed a common code for promoting sustainability among
coffee growers and distributors and sustainable coffee production in Mexico, Colombia, Brazil and
Central America.
P. & Y. Katsoulakos
10
11
The UK government abolished OFR in December 2005. Reporting on environmental and social impacts is
no longer a legal requirement in the UK, possibly reinforcing the voluntary nature of CSR reporting.
The EU Accounts Modernisation Directive is intended to increase the comparability between companies
in the EU through a common reporting framework. To achieve this objective, the Union requires common
financial reporting standards that are transparent, fully understood, properly audited and effectively
enforced. The Directive brings European accounting requirements in line with modern accounting
practice, requires enhanced disclosure in directors reports and increases the reporting remit to take
account of the growing demand for non-financial comment and analysis.
P. & Y. Katsoulakos
12
CSR
or
sustainability
performance
can
lead
to
participation
in
high
profile
results
processes,
international
investment in technology to control environmental risks which often produces additionally costcutting benefits;
eco-efficiency which means making more from less by reducing ecological impacts and resource
intensity throughout the life cycle of products;
improved human capital through talent attraction and retention and a motivated and participative
work force;
lower health costs from healthier employees that become more productive and more effective.
P. & Y. Katsoulakos
13
Sustainable Competitiveness
Enhanced sustainable competitiveness can be achieved through innovative stakeholder approaches to
strategic management.
http://www.mori.com/csr/database.shtml
P. & Y. Katsoulakos
14
Harvard researchers John Kotter and James Heskett 3 showed that over an eleven-year period, sales and
employment growth at stakeholder oriented companies were significantly higher than at shareholderfocused companies. Specifically, stakeholder oriented companies reported four times the growth in sales
and eight times the growth in employment. The authors argued that successful, visionary companies,
although very diverse in other ways, put a lower priority on maximizing shareholder wealth and greater
emphasis on serving the interests of a broad mix of stakeholders.
The key remark here is that although it is not possible to distinguish the effect of corporate
responsibility from other strategies in corporate performance if the only common strategy in a large
number of successful companies is stakeholder orientation then at least this represents a strong link
between stakeholder approaches and business success.
Waddock and Graves (1997) correlated companies' previous year CSR ratings with financial performance
on measures such as return on assets (ROA), return on equity (ROE), and return on sales (ROS). They
found quantitative support for the assertion that there is a connection between how a company treats
its stakeholders and financial performance.
A number of surveys indicate that, over the longer term, companies that rate highest on ethics and
corporate social responsibility are the most profitable 4.
Despite the success of CSR companies described by the studies outlined above there is not yet
compelling evidence or theoretical proof that responsible behaviour results in economic performance
improvements. Distinguishing the influence of CSR and sustainability strategies from the effect of other
business strategies on the economic or financial success of a company remains a research topic.
The success of Socially Responsible Investing (SRI) 5 , having grown during the last decade to represent
close to 10% of available resources worldwide, provides evidence of good performance of responsible
businesses. However, even though there is some evidence that SRI indexes outperform comparable lists,
this is not entirely consistent in recent years and superior performance cannot be attributed
quantitatively to responsibility related factors.
If, as anticipated, stock exchanges begin to include some elements of corporate responsibility in listing
requirements, then the credibility of the assumption that corporate responsibility contributes to better
performance will be further enhanced.
3
4
Kotter, John, and Heskett, James. (1992) Corporate Culture and Performance . New York: Free Press.
Canadian Centre for Social Performance and Ethics at the University of Toronto; Orlitzky, Schmidt and Rynes 2003;
Zairi and Peters 2002
5
Social investment forum www.socialinvest.org
P. & Y. Katsoulakos
15
19th July 2006
corporate responsibility becomes an integral part of the wealth creation process - which if managed
properly should enhance the competitiveness of business and maximise the value of wealth creation
to society;
there is the incentive to integrate CSR and sustainability in the overall corporate strategy and in the
business processes and to improve responsibility related practices as part of the companys overall
quality management system.
A survey6 in 1999 found strong interest in corporate social performance in Australia, Canada, the USA
and the UK, while there was least concern in China, Nigeria and Kazakhstan. Somewhere in between
were Germany, Japan, Indonesia and South Africa.
In the same survey, the USA and the UK dominated the FTSE4Good Global Index 7 with 41 per cent and
18 per cent of constituent companies respectively.
Environics International Ltd. Toronto, (1999) Millennium Poll on Corporate Social Responsibility.
FTSE4Good.com
http://www.sustainability-indexes.com/htmle/assessment/review2004.
16
P. & Y. Katsoulakos
Sustainability strategies were further integrated into companies core businesses evident in new
principles in codes of conduct, wider scope and coverage of environmental and social performance
measurement and alignment of sustainability targets with remuneration systems.
Policies and practices were increasingly expanded to cover supply chain management including the
definition of environmental and social standards and external audit procedures for suppliers.
Corporate governance was improving reflected in splitting the role of chairperson and CEO as well
as reduced external auditors conflicts of interest.
Sustainability reporting was increasingly integrated in Annual Reports and external verification as
well as internal assurance systems were spreading.
Reductions in normalised greenhouse gas emissions, energy consumption, water use and waste
generation provided improvements in eco-efficiency.
Sustainability is continuing its move from corporate strategy and operations into product and
service offerings reflected in the integration of eco-design requirements in the electronics industry,
increasing implementation of environmental criteria in project financing and a wider use of life cycle
analysis in the chemical industry.
Transparency and accountability along the whole supply chain are increasingly visible through
policies and control mechanisms with industry groups such as the Business Social Compliance
Initiative (BSCI) adding further impetus to this development.
Sustainability indicators are increasingly linked to financial value drivers and integrated into Annual
Reports.
Corporations widely recognise and acknowledge the importance of human capital management for
their success but there is still considerable scope for improvements in all industries in measuring,
controlling and reporting on issues such as talent attraction, organisational learning, and employee
performance indicators.
Overall, sustainability performance continues to advance across all sectors. At the same time,
substantial room for progress in sustainability remains on the corporate agenda.
Certainly the key development in 2005 is movement towards sustainability oriented products and
services which could provide the impetus to bring corporate sustainability mainstream.
17
www.accountabilityrating.com
P. & Y. Katsoulakos
18
increase transparency and improve governance aimed at rebuilding public trust and investor
confidence;
deliver wider societal value including support for health and human rights improvements, and
environmental protection;
Increasingly, corporate responsibility is viewed as part of the evolution of market-based societies from
an unbridled to a mature capitalism. The more developed and sophisticated corporate responsibility is,
the more mature and stable market capitalism becomes10 .
Culpeper R. 1998. The Evolution of Corporate Responsibility: From Unbridled to Mature Capitalism, Address to the
Canadian Centre for Ethics and Corporate Policy, Toronto 2nd December 1998.
P. & Y. Katsoulakos
19
19th July 2006
It can be concluded that CSR and corporate sustainability as business practiced approaches are at the
infancy stage. One can observe similar patterns to other popular schemes such as Total Quality
Management and the Learning Organisation. The similarities are the early enthusiasm, the momentum
building initiatives, the doubts whether tangible benefits will materialise and the few real early
adopters.
There are also some encouraging differences including:
support for CSR and corporate sustainability from the financial community through SRI and
associated corporate sustainability indexes;
support from a number of committed business associations such as CSR Europe, WBCSD, BITC,
GRI, etc.;
early evidence of business benefits and serious attention on measurement and benchmarking;
general consensus that CSR and corporate sustainability is a necessity and a critical element in the
worlds sustainable development;
CSR movement evolution characteristics are summarised in the following diagram. Key points include:
SRI has grown consistently and has become an established branch for investment;
P. & Y. Katsoulakos
20
On the positive side it is becoming clear that leading companies in the future will have missions and
strategies to constantly increase shareholder value but as an integral part of those strategies will also
recognise and act upon the potential for:
Mainstreaming of corporate responsibility in business strategies and operational processes and wider
diffusion in companies of all sizes remains the main goal of the corporate responsibility movement from
2000 onwards.
In the words of the Rt Hon Gordon Brown Chancellor of the Exchequer in the UK in 2006: Now we need
to move towards a challenging measure of corporate responsibility, where we judge results not just by
the input but by its outcomes: the difference we make to the world in which we live and the contribution
we make to poverty reduction.
P. & Y. Katsoulakos
21
Corporate
Responsibility
and
Sustainability
Management
Framework
2.1 Corporate responsibility management challenges
As the business case for Corporate Responsibility and Sustainability is becoming clearer it is also
becoming evident that it could take some time before Corporate Responsibility and Sustainability
becomes part of mainstream business practice.
It is widely recognised that implementation of Corporate Responsibility and Sustainability requires time
to reach maturity and the speed of achieving mainstreaming is dependant on leadership, training and
organisational capabilities to integrate CSR and sustainability policies in the overall business strategy
and in core operational processes.
Socially and environmentally responsible behaviour is multisided and is related to all functions, decisions
and processes in a company. The width and complexity of the Corporate Responsibility and
Sustainability scope makes mainstreaming a change management challenge necessitating carefully
planning and possibly long term commitment to developing appropriate capabilities.
Key challenges in Corporate Responsibility and Sustainability management include:
managing in an integrated manner the full lifecycle of CRS strategy formulation, implementation,
evaluation and evolution incorporating stakeholder participation;
rationalising and harmonising the economic, compliance, ethical, and sustainability dimensions of
corporate responsibility and sustainability in the context of stakeholder requirements;
managing non-financial risk, particularly to brand, reputation, local licence to operate and to
performance instability as an integral part of corporate sustainability management;
integrating eco-design and other sustainability requirements into product and service offerings;
P. & Y. Katsoulakos
22
Corporate Sustainability;
Corporate Governance.
accountability to stakeholders;
Economic impact: sustainability of the businesses and its 'human capital and engagement in
sustainable wealth creation processes at global national and local levels.
Social impact: the impact of products or operations on human rights, labour, health, safety, regional
development and other community concerns.
It is pointed out we distinguish between economic impact in the context of corporate sustainability as
defined above and profitability. The 4CR stakeholder oriented strategic management (Part C) addresses
competitiveness and profitability within the total responsibility perspective as defined in the 4CR
corporate responsibility taxonomy.
P. & Y. Katsoulakos
23
Stakeholder engagement;
The above are interlinked through learning feedback loops that support strategy development and
continuous implementation improvements 11 .Learning and knowledge management is particularly
important to enable active participation of key stakeholders in the companys operation and the
development of knowledge based dynamic capabilities 12.
Strategic CSR Learning and Knowledge Management Approach- CSRQuest White Paper SFB1B 29/12/2004
An introduction to Knowledge oriented Strategy KoS and Strategic Knowledge Management Capabilities kBOS
white paper SKM1, 7/01/05, www.kbos.net
P. & Y. Katsoulakos
24
19th July 2006
b) governance structures, transparency standards and controls should be reviewed and adjusted as
necessary to support the agreed CRS policies and strategies which may take a number of iterations
to reach proper alignment;
c) a CRS capability development programme should be specified to support the implementation of the
strategies in the context of the specified governance design;
d) the overall strategy package as described above should be communicated across all stakeholder
groups for feedback and to establish a shared vision.
involve them in providing feedback on corporate strategies and performance and in identifying what
and how things can be changed;
A prerequisite of developing the type of relations outlined above is establishing good stakeholder
understanding of:
their intentions.
P. & Y. Katsoulakos
25
Stakeholder participation
Overlooking certain stakeholder expectations often means missed opportunities for building reputation
or entering new markets and can set up problems for the company in terms of lost contracts,
employees unrest and even litigation.
The question is how to respond in a balanced way to different voices from key stakeholders, some
making conflicting or costly demands and communicating their requirements with differing intensity. An
answer may be found in promoting a participative culture in the company.
The world has moved from a trust me culture to a show me culture and is now moving towards an
involve me culture in which stakeholders could be working in partnership with organisations. By
creating a participative culture for the companys stakeholders the gap between stakeholder
expectations and company responses can be reduced to an absolute minimum as the stakeholders
themselves become part of the solution.
Stakeholders should be represented by specific roles in the organisational design through which they
could participate in the companys business and learning processes. It is not enough to give
stakeholders the opportunities to be heard, because many will not have the capacity to participate
effectively. Building the capacity of stakeholders to participate is one of the most important challenges
for effective stakeholder engagement as has been learned from company experiences to date 13. The
companies learning processes and support systems should be designed specifically to address this issue.
Definition of stakeholder related responsibility and sustainability key performance and risk
indicators;
13
Stakeholder Engagement: Why Expectation Gaps Occur, Michael Blowfield, The Center for Corporate
26
The critical success factor in stakeholder engagement is the effective participation of key stakeholders in
the companys learning processes. In the above diagram this is illustrated through three feedback loops:
primary feedback (e.g. responsibility and sustainability concerns and priorities, level of satisfaction
and suggestions for change);
P. & Y. Katsoulakos
27
the corporate responsibility and sustainability specific processes practices and projects;
enable employees to understand how CRS principles affect their day to day work and decision
making;
establish the companys CRS identity among customers, investors and other stakeholders;
provide a pre-training function, across the organisation, addressing familiarisation and induction
requirements.
Training is essential, both for the CRS management team responsible for setting policy/strategy and
supervising communications and implementation, as well as for the team assigned to the different CRS
implementation activities.
external stakeholders to participate in the tasks assigned to them. The training programme should be
designed to support all the different roles involved in CRS related processes.
When developing a CRS training programme reference could be made to the CSR Competency
Framework developed by the UK DTI to help managers integrate CSR into decision-making and
operations.
The Framework consists of a set of six core characteristics that describe the way all managers need to
think about responsible business decision-making.
understanding society: understanding the role of each player in society government, business,
trade unions, non-governmental organisations and civil society;
building capacity: participating in partnerships and creating strategic networks and alliances;
questioning business as usual: challenging the way of doing things and being open to new ideas;
P. & Y. Katsoulakos
28
Quality management
Quality management principles should apply in CRS implementation in much the same way as in other
process or project. Recent benchmarking reports have shown that mainstreaming lags behind policy and
communication activities. CRS mainstreaming targets should therefore be properly monitored to identify
required improvements. More generally, user feedback on the effectiveness of the CRS processes,
communications and training programmes should be an integral part of CRS quality management.
responsibility
and
sustainability
performance
management
involves
performance
measurement, analysis, reporting and optimisation based on the indicators defined in the strategy. A
stakeholder approach to performance measurement is advocated to facilitate a growing understanding
of stakeholder issues and to obtain stakeholder feedback on the strategic choices the company makes.
The broad responsibility and sustainability performance measurement categories have already been
defined. Detailed measurements are commonly based on process measurements or benchmarking
criteria. Process measurements relate directly to the companys specific CRS processes and projects.
Benchmarking tends to involve an external perspective, often comparing performance with that of
competitors or other best practitioners of business processes.
14
Neely, A.; Adams, C.; Kennerley, M. (2002) The Performance Prism: The Scorecard for Measuring and Managing
Business Success. London: Financial Times Prentice Hall.
P. & Y. Katsoulakos
29
19th July 2006
According to Neely and Adams, the following five perspectives and associated key questions can be used
to guide the design of measurement systems:
Stakeholder Satisfaction who are the key stakeholders and what do they want and need?
Strategies what strategies do we have to put in place to satisfy the wants and needs of these key
stakeholders?
A matrix of key stakeholder needs and contributions is shown in the following table.
Another interesting approach focusing on the quality of stakeholder relationships measured using the
concept of social capital has been proposed by CIM
15.
15
Svendsen, A.C., R.G. Boutilier, R.M. Abbott & D. Wheeler (2002), Measuring the Business Value of Stakeholder
Relationships: Part One, Vancouver: Centre for Innovation in Management
P. & Y. Katsoulakos
30
19th July 2006
The measurement system, which is the heart of a company's control system, must:
help evaluate whether the company is getting expected contributions from employees and suppliers
and returns from customers;
help evaluate whether the company is giving each stakeholder group what it needs to continue to
contribute at an equal or improved manner;
guide the design, implementation and improvement of processes that contribute to the companys
CRS strategies/objectives;
help evaluate the company's implicit and explicit contracts with its stakeholders.
31
Performance data shows the company's level of performance in each area of CRS concern. Comparing
that performance against internal or external benchmarks provides the basis for judgements about how
well the company is doing and how its performance is changing over time.
Benchmarks may be internal or external to the company, local or international in origin. They may serve
to compare performance with that of other similar companies or to gauge proximity to best practices or
to support technical optimisation. Increasingly, companies with global brands are moving to
international benchmarks - such as best international practice - irrespective of lower legislative or other
requirements in any given local market.
In many cases absolute scores or measures may need 'normalising' or standardising to allow valid
comparisons to be made over time or between different locations. Hence, discharges of potential
pollutants are usually expressed in relation to the total volume of discharges made in a given period and
product returns are expressed as a percentage of total physical quantities produced. In many areas of
concern - particularly those related to the natural and work environment - there are already commonly
accepted measures.
Placing social performance data on public record raises issues of verification. Whereas financial data is
subjected to the rigors of the audit process there is nothing comparable for social and environmental
data. Over the last few years several verification approaches have been suggested but cost remains the
key issue. Use of a 'Stakeholder Panel' has been one way of giving stakeholder representatives the
opportunity to comment on report contents and veracity.
Optimisation
The emphasis on stable, quantifiable measures (with appropriate normalisation) is central to CRS
performance management and should augment measuring stakeholder perceptions. Stakeholder opinion
surveys can be of great value in ranking stakeholder concerns or establishing the factors contributing to
them but cannot provide the only input for sustainability performance optimisation.
Sustainability performance management should turn data into information and knowledge that is
accurate, timely, relevant and usable in planning and optimisation activities.
The key to successful optimisation is establishing an understanding of the companys CRS strategy and
then define a clear focus for the sustainability performance optimisation exercise. This should take into
account national sustainability strategies, sector characteristics including the regulatory regime, the
social model and organisational design variables.
A basic optimisation process is shown in the following diagram.
P. & Y. Katsoulakos
32
The Optimisation Context will determine the type of optimisation techniques that should be used. These
techniques include statistical analysis of historical data, system dynamics simulation, optimisation
algorithms and process optimisation. Using the chosen techniques a number of optimisation options will
be produced and then the operating solution for the selected option will need to be constructed and
deployed.
It is now fairly well accepted that net present value analysis can be extended using real options
techniques to evaluate potential investments. Real options approach has been embraced by strategic
managers who recognise the importance of managerial flexibility in adapting strategy to a changing
market environment. Such approaches are well suited to sustainability performance optimisation plans.
P. & Y. Katsoulakos
33
Environmental responsibility
Issues
concerning the
consumers
Responsible
suppliers
management
Personal data
privacy
Ethical
standards
Support for Fair
Globalisation
Corporate
Governance
Practices
Production and distribution integrity;
Product safety;
Packaging safety;
Optimisation of positive health spin-offs and minimisation of the negative effects of
products and services;
Addressing special consumers needs (e.g. young and elderly, disabled).
Price/value and quality of product;
Informative and honest labelling;
Honest advertising;
Responsible marketing and selling practices, particularly to children;
Activities to safeguard consumers.
Equal opportunities concerning suppliers;
Supplier diversity management;
Working with sub-contractors, agents and suppliers to ensure that they also adopt
responsible business policies/practices;
Supply chain responsibility on human rights;
Responsible payments of bills;
Technology and knowledge transfer to suppliers;
Co-operation with public bodies on supplier diversity.
Policy and practices on supplier and consumers privacy;
Conformance to privacy standards;
Practice reviews and complaints procedures.
Business ethics policies and supervision for price fixing, unfair competition, money
laundering, tax fraud, bribes.
Adherence to Fair Globalisation principles;
Active participation in the promotion of fair globalisation.
Compliance to applicable regulations;
Transparency (accounting standards, financial disclosure);
Corporate accountability;
Safeguarding interests of stakeholders including minority and small shareholders;
Guarding against conflicts of interest (audit , nomination, remuneration board
committees);
Risk management.
P. & Y. Katsoulakos
34
Practice areas
Practices
Equal opportunities for women, minorities and physically disabled;
Employees equal Written non-discrimination policy covering background, religion, sexual orientation;
Policies and procedures on harassment;
opportunities
Equal opportunities management review.
Training and
professional
development
Good internal
relations
Employee
remuneration
Safeguarding
against forced
or child labour
35
The starting point for the business sector is action to promote positive health and safety in the
workplace and to optimise the positive health spin-offs and reduce the negative impacts of their
products and services. Additionally, pharmaceutical companies and large multinationals are expected to
contribute actively to combat global health challenges.
Companies are expected to participate in the communities in which they operate by responding to
critical social issues such as regional development, education and health and taking care to maximise
the impact of their donated money, time, products, services, influence, knowledge and other resources.
Practice areas
Practices
36
the start of 2005, there were more than 400 regulations in development at Federal level in the United
States and the European Union is currently drafting rules concerning air quality, chemicals, groundwater,
environmental liabilities and waste.
Environmental Risk Management is concerned with the protection of living and non-living natural
systems, including ecosystems, land, air and water in case of emergencies and high environmental
impact crisis produced by industrial accidents. This implies the prevention and the mitigation of high
risk events through the use of monitoring systems and of environmental emergencies procedures and
plans.
Practice areas
Practices
On-going programmes of staff training in environment;
Working with local authorities to build capacity and enhance
organisational ability to develop integrated approaches to
environmental management;
Research on renewable energy products and minimisation of
greenhouse gas (GHG) emissions from fossil fuels.
Environment
Performance
P. & Y. Katsoulakos
37