Growing into Your Sustainability Commitments: A Roadmap for Impact and Value Creation A Preview of AccountAbility & UN Global Compact Research 2013 World Economic Forum, Davos, Switzerland
Overview Companies today are increasingly being asked to commit to higher levels of performance through an expanding number of sustainability commitments. 51% of participants responded to the 2012 Global Compact Annual Implementation Survey indicating they join other voluntary initiatives in addition to the Global Compact. Of these companies: 57% have developed criteria for joining voluntary initiatives 70% have adopted 1-5 voluntary initiatives 19% have adopted 6-10 voluntary initiatives 5% have adopted 11-15 voluntary initiatives 6% have adopted more than 15 voluntary initiatives The Sustainability Commitment Arena Companies today are increasingly being asked to commit to higher levels of performance through an expanding number of sustainability commitments, at times having to navigate through a cumbersome mix of performance standards, outcome metrics, and reporting requirements. The cost to organizations in terms of time and money has prompted them to ask: Which initiatives should companies commit to? How can companies get the most value and impact out of the commitments they have made? How can these commitments be leveraged to reinforce business performance and existing corporate sustainability efforts? The Research Initiative To better understand the challenges and opportunities companies face within the sustainability commitment arena, AccountAbility, in partnership with the UN Global Compact (UNGC) Office, conducted structured research to find out how companies are approaching and implementing sustainability commitments, and to identify and highlight good practice for future adoption, implementation, and advancement of the commitments a company chooses to make. The research findings show there is high potential for companies to extract value from making sustainability commitments. Deriving value requires companies to: Integrate commitments into governance, risk, compliance, management, and operational processes and procedures. Understand that implementing commitments is not a static process. Successful companies progress through a Sustainability Commitment Growth Curve (SCGC) that builds the skills, capabilities, and strategies to find ways to make commitments an increasingly complementary tool to support productivity improvement, cost-control, reputation enhancement, risk management, and license to operate, among other benefits. The way a company grows with its sustainability commitment influences the relationship it has with the standard-setting body that stewards the commitment. There is both a pressing need and opportunity for the relationship between standard-setting bodies and their signatories to mature. The Sustainability Commitment Growth Curve & Key Findings With this research we introduce the concept of a Sustainability Commitment Growth Curve (SCGC). The SCGC is a powerful framework that enables companies to: Determine why and how it makes a commitment. Map where their sustainability commitments currently function to provide impact and value. Identify and implement what needs to be done to derive increased return and impact from these commitments over time. Utilize sustainability commitments as a strategic governance and management tool. Utilize commitments to achieve improved business and sustainability performance. A company s level of engagement and the value it is able to extract from a commitment will increase as it adopts, implements, and advances certain characteristics plotted along the SCGC. However, a company s progress along the SCGC may not be uniform. With regard to the Global Compact, the research finds that a company can exhibit a deeper level of integration with Principles in one area, such as the environment, but face challenges with Principles in another area, such as of labor. Progression along the SCGC across all commitment areas is the desired outcome and will yield the greatest return on investment. Source: 2012 Global Compact Annual Implementation Survey 1
The Sustainability Commitment Growth Curve (SCGC) Key TakeAway How deeply the Commitment is embedded into a company s strategy and core business practices. Integration Time Mature Corporate Responsibility (CR) Strategy with Deep Integration into Policy, Code of Conduct, and Governance, Risk and Compliance Processes Maturing CR Strategy with Goals to Align Core Business Strategy & Operating Activities An Emerging CR Approach & Strategy creates value by: Building internal & external credibility Improving risk management processes & systems Enhancing brand reputation Identifying new business opportunities Developing innovative practices & policies Attracting & retaining talent I ADOPTION Identification with a Commitment A company s relationship and performance to a Commitment will evolve over time. creates value by: Adopting performance management systems that increase organization efficiency Engaging in more constructive dialogue with all stakeholders Improving reporting processes & external accountability Enhancing human capital through education and training of employees II Implementation Mobilization around a Commitment III ADVANCEMENT Leadership around a Commitment Creates VALue by: Setting new industry standards and aspirations Promoting shared values and collective benefits Improving business performance through the creation of new business practices & systems of governance Engaging in policy development to advance sustainability commitment adoption The SCGC is a dynamic system. The value proposition of a commitment will change over time, and where a company starts and progresses along the SCGC will vary and depend on factors such as: 1. The existing level and maturity of a company s sustainability performance. 2. The global context in which the company exists the economic, regulatory, societal, and competitive dynamics. 3. What is driving the integration of the commitment, and the value a company expects to or understands it can derive from integrating a commitment. 4. A company s ability to translate commitment requirements into performance management processes. Key TakeAway A company s progression along the SCGC may not be uniform. A company can exhibit different characteristics depending on the commitment in question. Identifying where a company s commitment falls on the SCGC will inform the opportunities and challenges it faces. The SCGC functions to enable a company to chart the way forward for enhanced integration and value creation. 2 3
Growing Into Your Sustainability Commitments Adopting good practices along the SCGC will allow for the strategic integration of sustainability commitments into business operations and performance, thereby reducing risks and spearheading actions that create tangible value for companies. Over time, with experience and incentives, a company can progress along the SCGC to deeper integration and better practices and performance. ADOPTION A commitment should promote continuous improvement in sustainability efforts. Adoption creates value by: Enhancing brand reputation and attracting talent. Adoption signals to your internal and external stakeholders that sustainability is a part of the company s agenda and long-term management and growth plan. Guiding behavior and enhancing risk management systems. Adoption can provide a roadmap to shape and develop policies and practices, as well as identify and mitigate areas of risk. Building a business case around other sustainability activities a company would like to pursue. Good practice of adoption & value creation looks like COMPANY A IMPLEMENTATION When a commitment both relates to core values and helps create value, a company can climb up the learning curve and progress to deeper integration and better practices and performance. Implementation creates value by: Identifying and promoting material issues inside and outside of the company through education and training. Assisting a company s engagements with stakeholders. Inspiring or advancing management and compliance processes and systems that increase organization efficiency, reduce risks, set metrics, and establish incentives for advancement. Good practice of implementation & value creation looks like COMPANY B ADVANCEMENT Commitments should be dynamic in order to provide companies with continuous opportunity for leadership and improvement. Advancement creates value by: Acting as a platform or vehicle to organize around and to advocate sustainability commitments more broadly. Demonstrating leadership with various stakeholders around material sustainability issues and activities in the areas of the environment, human rights, labor, and anti-corruption. Good practice of advancement & value creation looks like COMPANY C Defines the commitment value and goals, and fully engages leadership to support the commitment aspirations. Approaches a commitment with a compliance mindset and evaluates whether the commitment aspirations and requirements are already a part of the company s DNA. Performs a policy review and gap analysis to identify areas of risk and opportunity and develops new performance management systems that increase revenues while reducing costs. Integrates commitment requirements into the reporting process and leverages them to build internal and external credibility and reputation. Uses commitments as a framework to help shape policies, guide decision-making, and explain what corporate responsibility and sustainability means to the company. Takes advantage of commitment resources and events to enhance human capital by training and educating employees. Advances management and compliance systems through creating processes to collect and monitor performance data related to the implementation of a commitment. Uses commitments to support a company s activities and dialogue with stakeholders. Uses commitment frameworks and requirements to enhance reporting processes and bring about higher levels of rigor and external accountability. Establishes internal and external governance systems such as Executive or Board level sustainability committees to govern activities and select, advise, and review sustainability commitments and efforts. This helps compliance efforts and risk mitigation. Exhibits leadership and advocacy around a commitment. Commitment leadership is about collaboration instead of differentiation, and the adoption of shared values that consider the broader good and collective benefits gained and shared by all. Engages in advocacy and policy development to advance sustainability commitment adoption on a regional, national, or global scale. Encourages and polices peers in the industry to uphold sustainability commitment aspirations and requirements. 4 5
The UN Global Compact as a Filter & Guide The UNGC and its Principles Signatories can and should use their UN Global Compact Commitment as a filtering mechanism to focus on material issues, select what other commitments to join, and as a guide to advance along the SCGC to capture incremental value. First, the UN Global Compact serves as a filter to decide what other commitments to join. In this sense, you can utilize the UN Global Compact to: Review corporate policies and codes of conduct and the universe of existing commitments against UN Global Compact Principles. Identify gaps, opportunities, and risks. Consider other initiatives and commitments to address the gaps, opportunities, and risks identified. The UN Global Compact, with its four focus areas (environment, labor, human rights, and anti-corruption) covers a broad spectrum of sustainability commitments and thereby can help companies identify where they stand in each, as well as where their commitments fall short, meet, or exceed their aspirations in each of these areas. Second, the UN Global Compact can serve as a guide to help companies make progress on the SCGC, increase the impact of their sustainability practices, and create value. In this sense, companies can: Utilize UN Global Compact local networks and convenings as networking and learning opportunities to address challenges of implementing other commitments. The UN Global Compact is a safe space for companies to discuss and learn without naming and shaming. Consider the UN Global Compact as a gateway into broader UN goals and issues. One of the compelling features of the UN Global Compact is that it is timeless maintaining its relevance at all stages of the SCGC. No matter where a company is on the SCGC, the UN Global Compact can be helpful for a company to frame issues, learn from others, and improve its practices. Human Rights Environment Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses. Labour Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour; Principle 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of employment and occupation. Principle 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies. Anti-Corruption Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery. Can act as a filter to select what other commitments to join Through assessment of corporate material issues and policies against UNGC Principles Through networking and learning opportunities By identifying potential gaps, risks, and opportunities Can serve as a guide to help companies make progress on the Sustainability Commitment Growth Curve As a gateway into broader UN goals and issues To increase the impact of sustainability practices and create value 6 7
Partners AccountAbility is a leading international organisation focused on mainstreaming sustainability into business thinking and practice. Since 1995 we have been helping corporations, non-profits and governments embed ethical, environmental, social and governance accountability into their organisational DNA. Our unique value proposition brings together leading-edge research, widely-recognised standards and strategic advisory services to deliver practical solutions for our clients. More information: www.accountability.org The United Nations Global Compact is a call to companies everywhere to voluntarily align their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment, and anti-corruption, and to take action in support of UN goals and issues. The UN Global Compact is a leadership platform for the development, implementation, and disclosure of responsible corporate policies and practices. Launched in 2000, it is the largest corporate sustainability initiative in the world, with more than 10,000 signatories based in 145 countries, and Local Networks in over 100 countries. More information: www.unglobalcompact.org WE WOULD LIKE TO THANK the Sponsors of this Research Initiative AccountAbility helps its clients and members improve business performance and build sustainable, competitive advantage by: Increasing revenue Mitigating risks Engaging stakeholders Reducing costs Facilitating innovation Enhancing reputation To know more about AccountAbility and this research initiative, and to receive your copy of the research report and best practice guide to making the most of your sustainability commitments, please: Contact research@accountability.org Call us at +1 646 495 1624 or +44(0) 207 549 0400 WE WOULD ALSO LIKE TO THANK THE participants of this Research Initiative Abraaj Group Anglo American Aviva Investors BBVA Bloomberg BP plc BT Infosys Limited Merck Natura Nestlé Novo Nordisk Novozymes Petrobras Pfizer RBS Group Sompo Japan Insurance Swiss Re Tata Group The Dow Chemical Company Design: Stislow Design, NYC www.accountability.org www.unglobalcompact.org 8
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