A research institute affiliated with Korea's main independant daily The Hankyoreh released the results of their look at sustainability reporting in that country.
The large South Korean multi-nationals, known as "Chaebol" have really made their name on the global stage as big consumer brands - Samsung, LG, Hyundai, and Korean Air as examples. Stockbrokers are surely pleased with the level of transparency about financial performance, but how do these companies stack up in terms of transparency on economic, environmental, and social performance?
The Hankyoreh researchers found that Korean companies are strongest when it comes to reporting on environmental performance and product responsibility. Their analysis reveals that the level of transparency on human rights.
On a scale of 100, the highest score went to Yuhan-Kimberly with 57. Korea South-East Power came second with 55, followed by POSCO and Daewoo Securities with 52 each, finally Samsung and Korea Electric Power rounded out the top cluster with 48 points. A total of 22 companies were ranked overall. Of the top scorers, all use the GRI Guidelines as the basis for reporting except Daewoo Securities.
The lead author Lee Won-jae thought the results were positive and although past benchmarks are not available, he commented that the shift to greater transparency and the fact that most Chaebol embrace the global norm for reporting is a good sign. This group will continue to monitor trends in reporting in Korea into the future.
Thursday, August 30, 2007
Friday, August 24, 2007
Has an Aussie found the business case for sustainability reporting?
Thanks to Phil Hughes, the Director of the Centre for Public Agency Sustainability Reporting in Melbourne Australia for bringing an interesting tidbit to my attention.
He spotted a new report that reveals strong economic case for sustainability risk reporting to be adopted by Australian businesses.
On August 1st 2007, the Financial Services Institute of Australia (Finsia) released the first economic analysis to examine the costs/benefits to business and the economy of sustainability risk reporting in Australia.
The report, Tip of the Iceberg, found that benefits arise because companies with sustainability risk reporting benefit from lower corporate borrowing costs as a result of reduced risk, and higher labour productivity and sales from the boost to their reputation with employees and customers.
“In short, there is a strong economic case – to the tune of $1.2 billion GDP per annum and a significant profit gain of 2-3 per cent for medium and large companies that voluntarily report on sustainability risks”.
“Overall, the voluntary adoption of SRR [sustainability risk reporting] by more Australian businesses appears to be a worthwhile investment for them, as well as having wider economic benefits, and so should be encouraged by Australian Governments”.
The report also found that the proportion of Australian top 100 companies reporting of sustainability risks was likely to increase from 23 per cent to 60 per cent within three to five years.
Finsia commissioned the independent study conducted by Econtech, to determine the costs/benefits of environmental, social and corporate governance for sustainability reporting to business and the overall economy. They refer to this style of reporting as sustainability risk reporting (SRR).
The report is part of Finsia’s Tip of the Icebreg – investing for the long-haul campaign on sustainability risk reporting. The report was released at a sustainability summit in Sydney and is now available to download (large 7M paper).
He spotted a new report that reveals strong economic case for sustainability risk reporting to be adopted by Australian businesses.
On August 1st 2007, the Financial Services Institute of Australia (Finsia) released the first economic analysis to examine the costs/benefits to business and the economy of sustainability risk reporting in Australia.
The report, Tip of the Iceberg, found that benefits arise because companies with sustainability risk reporting benefit from lower corporate borrowing costs as a result of reduced risk, and higher labour productivity and sales from the boost to their reputation with employees and customers.
“In short, there is a strong economic case – to the tune of $1.2 billion GDP per annum and a significant profit gain of 2-3 per cent for medium and large companies that voluntarily report on sustainability risks”.
“Overall, the voluntary adoption of SRR [sustainability risk reporting] by more Australian businesses appears to be a worthwhile investment for them, as well as having wider economic benefits, and so should be encouraged by Australian Governments”.
The report also found that the proportion of Australian top 100 companies reporting of sustainability risks was likely to increase from 23 per cent to 60 per cent within three to five years.
Finsia commissioned the independent study conducted by Econtech, to determine the costs/benefits of environmental, social and corporate governance for sustainability reporting to business and the overall economy. They refer to this style of reporting as sustainability risk reporting (SRR).
The report is part of Finsia’s Tip of the Icebreg – investing for the long-haul campaign on sustainability risk reporting. The report was released at a sustainability summit in Sydney and is now available to download (large 7M paper).
Thursday, August 23, 2007
Mattel: Hindsight 20-20
I covered the case of Mattel on August 2nd - an article appeared in the New York Times a few days earlier that praised Mattel for avoiding major social and environmenal crises by having more control over suppliers since they were actully owned by Mattel outright.
But in the days and weeks that have followed the press has been overrun with stories about product safety scandals and guess who is right in the middle of the scrum? Mattel! The company has been hard hit with recalls of some of its highest profile products due to quality issues arising out of factories in China.
A blog reader pointed out the strange 'coincidence' that the positive article ran only days before the product safety expose. This inspired me to take a closer look at the situation. Sure enough, Mattel owns many of its suppliers in China and Indonesia. Its hard to tell if the factories that issued Barbie dolls with lead paint (presumably not part of the original specs!) are owned or not.
Here is a letter to the editor that my colleague Katherine submitted to the Financial Times today (not sure if it will get published):
Rather than avoiding purchasing products from China, consumers should push for greater transparency and accountability by companies sourcing from Chinese suppliers and from Chinese companies themselves. Sustainability reporting is integral to improving transparency and a valuable tool for companies who want to manage their economic, environmental, and social impacts.
If companies working in China want to differentiate themselves from those caught up in these scandals, they should be promoting their sustainable credentials through sustainability reports. As well as bringing many other internal and external benefits sustainability reporting using a globally recognized framework, such as the Global Reporting Initiative’s G3 Guidelines, can build customer confidence in a company’s brand, products and services and be used to mend the damaged “Made in China” brand.
I will let you know if it gets published!
But in the days and weeks that have followed the press has been overrun with stories about product safety scandals and guess who is right in the middle of the scrum? Mattel! The company has been hard hit with recalls of some of its highest profile products due to quality issues arising out of factories in China.
A blog reader pointed out the strange 'coincidence' that the positive article ran only days before the product safety expose. This inspired me to take a closer look at the situation. Sure enough, Mattel owns many of its suppliers in China and Indonesia. Its hard to tell if the factories that issued Barbie dolls with lead paint (presumably not part of the original specs!) are owned or not.
Here is a letter to the editor that my colleague Katherine submitted to the Financial Times today (not sure if it will get published):
Rather than avoiding purchasing products from China, consumers should push for greater transparency and accountability by companies sourcing from Chinese suppliers and from Chinese companies themselves. Sustainability reporting is integral to improving transparency and a valuable tool for companies who want to manage their economic, environmental, and social impacts.
If companies working in China want to differentiate themselves from those caught up in these scandals, they should be promoting their sustainable credentials through sustainability reports. As well as bringing many other internal and external benefits sustainability reporting using a globally recognized framework, such as the Global Reporting Initiative’s G3 Guidelines, can build customer confidence in a company’s brand, products and services and be used to mend the damaged “Made in China” brand.
I will let you know if it gets published!
Wednesday, August 15, 2007
We've entered a new archaeological period (apparently)
I mentioned yesterday that I was a fly on the wall recently at a gathering of very unique and creative thinkers - members of the Association of Management for Innovation.
I had the pleasure of introducing the concept of sustainability to this group. I used illustrative examples to show how the increasing interconnectivity of a fast growing human population is creating a whole new set of conditions within which businesses need to learn how to operate. In this new era there are risks - such as diminishing resources and variable human rights standards - and there are opportunities - such as greater mobility and access to new markets at the 'bottom of the pyramid'.
The group pondered and discussed this new set of conditions and concluded that they did agree - business has never before done business under these circumstances. A re-writing of the rule book is underway.
It was during this discussion that one of the participants shared that he was recently on an archaeological tour of Greece and his guide pointed out that it is generally accepted that we have indeed crossed into a new and distinctly defined archaeological period. 10,000 years from now scientists examining their ice & soil cores and digging up ruins from human settlements will notice a distinct delineation around the time of the 20-21st centuries. This will mark the start of an era where humans significantly impacted their environment.
Will they find evidence of large scale urbanization? Open pit mines? Deforestation? Elevated carbon levels? Ruins from manufacturing sites? Will they find differing clues on different continents? What will they conclude about the civilization that dominated the globe during the period 1900-2500?
I had the pleasure of introducing the concept of sustainability to this group. I used illustrative examples to show how the increasing interconnectivity of a fast growing human population is creating a whole new set of conditions within which businesses need to learn how to operate. In this new era there are risks - such as diminishing resources and variable human rights standards - and there are opportunities - such as greater mobility and access to new markets at the 'bottom of the pyramid'.
The group pondered and discussed this new set of conditions and concluded that they did agree - business has never before done business under these circumstances. A re-writing of the rule book is underway.
It was during this discussion that one of the participants shared that he was recently on an archaeological tour of Greece and his guide pointed out that it is generally accepted that we have indeed crossed into a new and distinctly defined archaeological period. 10,000 years from now scientists examining their ice & soil cores and digging up ruins from human settlements will notice a distinct delineation around the time of the 20-21st centuries. This will mark the start of an era where humans significantly impacted their environment.
Will they find evidence of large scale urbanization? Open pit mines? Deforestation? Elevated carbon levels? Ruins from manufacturing sites? Will they find differing clues on different continents? What will they conclude about the civilization that dominated the globe during the period 1900-2500?
Tuesday, August 14, 2007
Diversity: are we looking deep enough?
I had the pleasure of spending a few days with members of the Association for Management Innovation when they met here in Amsterdam late last week (explains my absence from the blog!). This is group of people spanning nearly every industry and consultancy-type you can think of, and have absolutely nothing in common except that they are in charge of innovation and/or change in their organizations. (Sidebar: They also knew nothing of sustainability or corporate responsibility but decided that this would be the theme of their August meeting so they invited me to come along.)
In one of the sessions a member of the group presented her thoughts around diversity in organizations. She argued that although there will always be room to improve, most companies DO have solid diversity policies and procedures in place - ensuring a good blend of people from different genders, age groups, races, religions, nationalities, sexual orientation, languages, and other measures. In this globalized world most companies see diversity as a competitive advantage.
Although some companies performance on diversity may fall short of the mark, the presenter identified what could be a potentially bigger problem when it comes to diversity: character.
She claimed that companies consciencely or sub-consciencely carved out a "keyhole" in terms of the type of person that they would like to promote and succeed and lead the organization. This results in a very homogenous top tier of executives - typically a set of clones of the CEO. She said it takes great courage for a CEO (and the organization at large) to break out of this tendency and hire or promote people of very different character. She argued that although the day to day interactions may be more difficult due to the natural tensions that would exist due to the diveristy of perspectives, in the long run players would build up trust and respect for one another, and the organization as a whole would be strengthened by this diversity of character.
Although the GRI indicators do cover diversity in its various forms, there isnt one to measure the range of character diversity!
In one of the sessions a member of the group presented her thoughts around diversity in organizations. She argued that although there will always be room to improve, most companies DO have solid diversity policies and procedures in place - ensuring a good blend of people from different genders, age groups, races, religions, nationalities, sexual orientation, languages, and other measures. In this globalized world most companies see diversity as a competitive advantage.
Although some companies performance on diversity may fall short of the mark, the presenter identified what could be a potentially bigger problem when it comes to diversity: character.
She claimed that companies consciencely or sub-consciencely carved out a "keyhole" in terms of the type of person that they would like to promote and succeed and lead the organization. This results in a very homogenous top tier of executives - typically a set of clones of the CEO. She said it takes great courage for a CEO (and the organization at large) to break out of this tendency and hire or promote people of very different character. She argued that although the day to day interactions may be more difficult due to the natural tensions that would exist due to the diveristy of perspectives, in the long run players would build up trust and respect for one another, and the organization as a whole would be strengthened by this diversity of character.
Although the GRI indicators do cover diversity in its various forms, there isnt one to measure the range of character diversity!
Tuesday, August 07, 2007
The two "i"'s of business: innovate and integrity
A nifty little report landed on my desk today from Arthur D Little, the consultancy. It has a complex mathematical equation as its title:
Integrity + Innovation = Sustainable Performance.
It caught my eye at first because the opening paragraph of the report states that the growth of the number of companies that have produced a report based on the GRI Guidelines has grown from 20 to 1000 in a 7 year period. It was presented as being an indicator of the growing corporate committement to sustianability. So I read on to discover that "...while this activity is taking off, the familiar competitive pressures of business are not going away. Instead they continue to mount, compelling companies to keep finding new and better ways to deliver the goods and services that socity wants more efficiently and profitably."
ADL's solution for companies is a twofold committment to integrity and innovation. The equation is simple:
INTEGRITY: consistently fulfull stated business principles as an integral part of decision making, rather than managing "CSR" as an additional business activity.
INNOVATION: find successful new ways of value creation in response to the changing needs of markets, societies, and the environment.
The result: sustainable prosperity. They only have anacdotal evidence compiled at this point to try and illustrate the success of this equation, but they outline evidence from successful companies such as Novo Nordisk, BT, and GE - and present these in sharp contrast to those companies that have lost their integrity such as WorldCom, Enron, etc.
Integrity + Innovation = Sustainable Performance.
It caught my eye at first because the opening paragraph of the report states that the growth of the number of companies that have produced a report based on the GRI Guidelines has grown from 20 to 1000 in a 7 year period. It was presented as being an indicator of the growing corporate committement to sustianability. So I read on to discover that "...while this activity is taking off, the familiar competitive pressures of business are not going away. Instead they continue to mount, compelling companies to keep finding new and better ways to deliver the goods and services that socity wants more efficiently and profitably."
ADL's solution for companies is a twofold committment to integrity and innovation. The equation is simple:
INTEGRITY: consistently fulfull stated business principles as an integral part of decision making, rather than managing "CSR" as an additional business activity.
INNOVATION: find successful new ways of value creation in response to the changing needs of markets, societies, and the environment.
The result: sustainable prosperity. They only have anacdotal evidence compiled at this point to try and illustrate the success of this equation, but they outline evidence from successful companies such as Novo Nordisk, BT, and GE - and present these in sharp contrast to those companies that have lost their integrity such as WorldCom, Enron, etc.
Thursday, August 02, 2007
For better results, own your supply chain
Buried so deep in this weeks New York Times was a story on toy giant Mattel (maker of Barbie, Hot Wheels, among others). Unlike most retail manufacterers based in the US and Europe, Mattel actually owns the factories in China and elsewhere in Asia where most of its core products are produced. They do outsource non-core products and components to other suppliers, but only amounting to about 35% of total production.
This practice runs in sharp contrast to most other retailers who contract with factories in Asia for the low cost production. The article cited quality control, a committment to decent workplace conditions, and toy safety as the key reasons Mattel has opened its own factories in China - as opposed to outsourcing. I do recall the Dateline episode about 10 years ago when secret camera's entered one of Mattel's contract factories in Indonesia and revealed horrendous workplace conditions - in the lead up to the busy Christmas toy season this was disasterous for Mattel.
Prakash Sethi, an internationally renowned supply chain, ethics, and work place condition expert was hired to help Mattel get back on track after that expose. To this day he still has open access to any Mattel owned factory for surprise visits and is allowed to post his findings publicly. Now that is a true test of how confident the company is in its factory conditions!
From the perspective of sustainability reporting this bodes well for the company. Most companies struggle with their report boundary. The boundary for financial reporting is clear - it includes all entities that a company owns. But for sustainability the boundary is not as clear. The classic example is supply chain issues. A big brand retailer typically does not own the factories that produces its goods - and therefore it does not directly control the performance of that factory. It does exert some level of influence over that factory however - and it is via this influence that it can insist on improved conditions. This can be reported as policy or procedures - but performance results are often difficult to track. Mattel has the benefit of being able to control their factories directly - and therefore know the performance results.
This practice runs in sharp contrast to most other retailers who contract with factories in Asia for the low cost production. The article cited quality control, a committment to decent workplace conditions, and toy safety as the key reasons Mattel has opened its own factories in China - as opposed to outsourcing. I do recall the Dateline episode about 10 years ago when secret camera's entered one of Mattel's contract factories in Indonesia and revealed horrendous workplace conditions - in the lead up to the busy Christmas toy season this was disasterous for Mattel.
Prakash Sethi, an internationally renowned supply chain, ethics, and work place condition expert was hired to help Mattel get back on track after that expose. To this day he still has open access to any Mattel owned factory for surprise visits and is allowed to post his findings publicly. Now that is a true test of how confident the company is in its factory conditions!
From the perspective of sustainability reporting this bodes well for the company. Most companies struggle with their report boundary. The boundary for financial reporting is clear - it includes all entities that a company owns. But for sustainability the boundary is not as clear. The classic example is supply chain issues. A big brand retailer typically does not own the factories that produces its goods - and therefore it does not directly control the performance of that factory. It does exert some level of influence over that factory however - and it is via this influence that it can insist on improved conditions. This can be reported as policy or procedures - but performance results are often difficult to track. Mattel has the benefit of being able to control their factories directly - and therefore know the performance results.
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