Ethical Performance
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Opening the door to transparency

October 2014

Transparency is a step beyond regular Corporate Social Responsibility - it means not just behaving ethically but showing how you’re doing it. Miranda Ingram reports

 

We’ve had Sustainability and now the buzzword is Transparency which, with consumers, investors and employees increasingly interested in companies’ social and environmental performance, is fast becoming a corporate necessity.

Think of transparency as your personal reputation. It is a step beyond Corporate Social Responsibility – it means not just behaving ethically but showing how you’re doing it.

Or, as Sally Uren, ceo of Forum for the Future, puts it: “When I talk about transparency, I mean full disclosure of all material, societal, environmental and economic risks and how a company is dealing with them.”

Which sounds so simple, but with lots of great Transparency statements on lots of great websites but how do consumers and other stakeholders sort the real thing form the PR blurbs?

Uren laughs. “I want to understand the degree to which the company is taking Transparency seriously,” she says, “which means a good description of what is going on in the supply chain and evidence that the company understands the sourcing of their primary ingredients, coupled with a willingness to give an honest appraisal of where they are at with their sustainability.”

Supply chains, as Uren points out, are not easy so it is essential that a company shows that it has a clear grip of the complexities. It is also important that they focus on their key material issues. “I’m not interested in how many fewer plastic bags a retailer, for example, uses compared to where they source they products.”

A great example of a company which has taken the step from sustainability to full-blown transparency is worldwide parcel delivery service UPS. Short of delivering parcels by donkey, UPS is bound to have a carbon footprint and might be expected to shy away from talking about it. Instead, the company has won a clutch of awards for its sustainability initiatives and goals which are both rigorous and convincing.

They include the introduction of a proprietary IT system which provides drivers with optimal route advice which last year saved over 1.5m gallons of fuel and avoided 14,000 metric tons of CO2, the continued expansion of alternative fuel and advanced technology vehicles and active encouragement to customers to reduce their packaging.

Then last year UPS became one of the first US companies to sign up to the Global Reporting Initiative (GRI) G4 framework and report at a “Comprehensive” level, the most rigorous option available.

But even with sustainability software packages such comprehensive reporting is expensive and time-consuming, admits UPS Head of Sustainability for Europe, Middle East and Africa Peter Harris. So why go the extra mile?

“We asked ourselves: what is the end game? and the answer is to become more sustainable over the long term,” says Harris. “Transparency helps us achieve this in three ways. Firstly, it’s essential that you can measure your sustainability in order to manage it. Secondly, being open about how we are doing encourages us to do even more. And, thirdly, we recognise that we can’t do this on our own - we need to bring our stakeholders with us on the journey and we can only do this by being thoroughly transparent.”

On top of this, says Harris, being transparent is also a way of encouraging others to do the same. “Even if UPS were to be 100% sustainable, if the global environment is not sustainable, our contribution would be worthless. There is little point being sustainable in an unsustainable world.”

Transparency needs to engage at three levels: employees, investors and customers. The enthusiasm of UPS employees, carefully nurtured by staff roadshows, surveys and competitions, proves the validity of a recent US survey by marketing consultants Interbrand which showed that two thirds of all US workers are happier in their jobs knowing that their employers are helping to protect the environment and that nearly six in 10 actively seek out employers who share their ethical standards.

But while investor demand is a factor driving the shift towards transparency, there is work to be done in helping investors understand the key issues, says Uren. “Often, they do not have a clear understanding of material and ethical risks so they are dealing with known unknowns when we talk about the scarcity of water and resources, climate and environmental issues. Companies can be nervous of being too transparent if investors don’t know what to do with this information.”

The final challenge is customers. While all of us, individuals and companies as well as the planet, stand to benefit from more ethical companies the impetus, likewise, needs to come from all of us which means that ethical companies need to engage with customers so that customers can respond to company behaviour.

“At least we are moving away from niche green brands which is good as this gives the impression that green behaviour is a niche issue,” says Uren. “But when it comes to driving demand for ethical behaviour, customers are still ambivalent.”
In this challenge, Uren sees a big role for brands. “There is a limit to what you can put on your packaging and website information is often confusing.” The way ahead, Uren believes, is for companies to integrate their ethical message into their core messaging.

One example is H&M’s much trumpeted “Conscious Collection”, a 2011 line of separates made from organic cotton and recycled polyester. In trumpeting its sustainability aspirations into its brand the company, which frequently surveys its clients, is showing confidence that customers are interested in the ethics of fashion.

H&M then went further to position the brand as an industry leader in sustainability by committing to sourcing all of its cotton from more sustainable sources by 2020 and taking a lead in sustainability reporting - transparency - by becoming one of the first and largest companies in the world to make its supplier factory list public.

“Now we are taking this even further by expanding the list to include all of our first tier supplier factories – covering 100% of our production volume,” says H&M’s Ulrika Isaksson. “We believe that a transparent supply chain can be a catalyst for positive change and hope that this will continue to promote transparency in our industry in general.”

H&M’s transparent sustainability strategy is widely praised but there are critics who point to the company’s leading role in creating today’s fashion industry’s high-turnover, cheap-throwaway culture.

Transparency must, crucially, be whole hearted and comprehensive. Otherwise, says Uren, don’t bother – unconvincing transparency is counterproductive. “You will communicate to your customers that you are not serious and then there is a danger of cynicism developing towards the whole concept,’”she says.

UPS’ Peter Harris agrees. “If I were giving advice to companies considering adopting transparency initiatives I would say, first, think it through very carefully and do it correctly, not on a whim.”

There are four key points to bear in mind, says Harris. “Firstly, be comprehensive: make sure there are no holes in your policy because if there are they will quickly be spotted and be detrimental to the entire undertaking.

“Secondly, be comparable: as far as possible follow a global framework so that your Transparency can be compared to others’. Third, be credible, which means, ideally, getting a third party organisation to monitor your achievements so you know they are really working, not just working for you.”

Finally, says Harris, think materiality. “Focus on the important issues – too much unnecessary or useless information is difficult for others to follow and stops your message getting out.”

“Those who take a step towards transparency find that their stakeholders like it and that gives them the confidence to do it more.” says Uren. Nevertheless, many business leaders still fear that greater public disclosure will leave them vulnerable to criticism.

“Be afraid at your peril,” says Uren. “Radical transparency is coming and if you think you can hide under a stone you are kidding yourself. We live in a hyper-connected world with GPS and crowd sourcing data and we can shine a spotlight anywhere so it is better to engage now.

“But above all, be positive. See transparency as an opportunity and use your customers for their invaluable input.” 




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