The Future of CSR: CSR in 10 (2013)

The Future of CSR: CSR in 10 (2013) Emerging trends and issues for corporate social responsibility over the next decade CSR Asia 2013

Content Methodology Slide 3 Hot topics over the next ten years Slide 4 Who matters in Asia Slide 10 How will companies have to respond Slide 14 Top ten takeaways Slide 19 2

Methodology Identification of 70 CSR experts in the Asia-Pacific region Interviews based on three questions: What trends and hot topics do you see emerging over the next ten years? Who or what is going to shape these topics? How will businesses have to respond and prepare for these new and emerging trends and issues? Frequency counts and further content analysis of responses, providing a top 10 ranking of issues and responses 3

Hot topics over the next ten years 1. Supply chains and human rights Ongoing concerns about of human rights issues and risks to businesses Serious risks linked to human trafficking, forced labour and child labour Human rights impacts on reputation, trust and potential damage claims Risks of abuse of labour and community rights deep down supply chains Increased product risks leading to a need for full traceability Increased transparency of supply chains and more disclosure Which areas of human rights assessment and management do you think your company needs the most assistance with: Support for issues management Stakeholder engagement Training and capacity building 9% 46% 64% 2. Community investment and shared value Need for community investment strategies linked to shared value philosophy Importance of measuring and reporting on community impacts Need to develop inclusive business models for value chains Importance of community based stakeholder engagement Involvement in pro-poor community development and poverty issues Role of businesses in supporting social enterprises and social entrepreneurship Capacity building, skills development and employment creation Impact assessment Value chain issues Screening for impacts in specific country contexts Developing policy 18% 27% 46% 46% Source: CSR Asia s Human Rights Brief, September 2012 4

Hot topics over the next ten years 3. Climate change and energy issues Need to focus on climate change mitigation and adaptation Importance of new energy initiatives to reduce carbon impacts Increasing emphasis on renewable energy Concerns over energy security and the cost of energy in the future Business continuity and resilience, supply chain security Concerns over environmental refugees 4. Corporate governance, disclosure and anti-corruption Importance of increased transparency and accountability Need for sound governance systems and procedures Stronger focus on anti-corruption needed Importance of partnerships to combat corruption Pressure from investors and stock exchanges for disclosure Expectations of better communications and openness from stakeholders Importance of reporting using international standards (GRI, ISO26000) 5

Hot topics over the next ten years 5. Wealth gaps, poverty and social imbalances Increasing rich-poor divide across many countries in the region Potential for social unrest from those not benefiting from growth Poor people often remaining poor and not benefiting from development Role for business in job creation and poverty alleviation Engagement with poor, vulnerable & marginalized groups Youth unemployment as a source of considerable conflict in the future Unsustainable consumption patterns of the rich 6. Disasters Companies should undertake risk assessments, determining threats Assess opportunities to engage in disaster preparedness Recognition of the likelihood of increased disasters Disaster responses including long term disaster relief and redevelopment Importance of business continuity planning and climate change adaptation Impacts on the security of supply chains after disasters Annual expected loss due to disasters in ASEAN % of GDP USD Million USD Million 0 500 1000 1500 2000 Cambodia 41.6 70% Indonesia 20% 1300 Lao PDR 52.3 70% Malyasia 10% 174.6 Myanmar 184.8 90% Philippines 80% 1600 Thailand 10% 255.6 Vietnam 800 80% 0% 20% 40% 60% 80% 100% % of GDP Source: World Bank, 2012 6

Hot topics over the next ten years 7. Water Assessment of business risks associated with water shortages Need for increased measurement and water foot-printing Water pollution and contamination Floods and droughts linked to climate change and disaster preparedness Community impacts and tensions over access to water Overall water risk 8. Access to natural resources, pollution and food security Increasing scarcity of resources and competition over access to resources Unsustainable depletion of natural resources limiting future options Diversion of resources away from food provision Food safety and concerns over food security Depletion of natural resources linked to land rights disputes Ongoing concerns about impacts of deforestation Need to reduce waste and increase re-use and recycling Concerns over air pollution and human health impacts Source: World Resources Institute, Aqueduct 7

Hot topics over the next ten years 9. Population Unsustainable levels of population and consumption in the future Need for new models of sustainable consumption to feed seven billion Challenges of over-consumption emerging middle class Impacts of an aging population in many countries in the region Consider engagement in family planning and birth control for staff Importance of generation Y and young people on the sustainability agenda 10. Biodiversity and conservation Businesses need to better understand their links to and impacts on biodiversity Need for biodiversity policies and action plans with high risk activities Recognition of a serious loss of biodiversity in most countries Actions required on endangered species Recognize links between community investment initiatives and biodiversity Engage with and support conservation initiatives CSR Asia s Business and Biodiversity Brief Recommendations for Action Assess Making a Start Strategic Focus Biodiversity Assessments Reporting Partnerships Raising Awareness Staff Involvement Policies Action Plans Biodiversity Initiatives Source: CSR Asia s Business and Biodiversity Brief, February 2013 8

Tracking the issues in Asia 1 2 2011 2012 2013 Climate change and water Corporate governance, disclosure and reporting 3 Supply chains 4 5 6 Community development and measuring impacts Biodiversity and access to natural resources Consumer pressure and sustainable consumption 1 Supply chains and human rights 2 Climate change 3 Corporate governance, disclosure and reporting 4 Water 5 6 Community investment and development Access to natural resources and energy 1 2 3 4 5 Supply chains and human rights Community investment and shared value Climate change and energy issues Corporate governance, disclosure & anti-corruption Wealth gaps, poverty and social imbalances 6 Disasters 7 Health issues 7 Poverty and social imbalances 7 Water 8 Environmental pollution and competitiveness 8 Disasters 8 Access to natural resources, pollution and food security 9 Increased regulation and standards 9 Population 9 Population 10 Human resource pressures 10 Biodiversity 10 Biodiversity and conservation 9

Who matters in Asia? 1 NGOs, civil society organizations and local communities 6 Employees (particularly generation Y) 2 Investors, financial institutions and stock exchanges 7 CSR consultants and think tanks 3 Media (particularly the social media) 8 High net worth individuals and celebrities 4 Governments and politicians 9 Consumers 5 Companies and business associations 10 International organizations 10

Who matters in Asia? 1 2 NGOs, civil society organizations and local communities Investors, financial institutions and stock exchanges Increasingly influential, sophisticated and vocal Effective use of the social media Networks of grassroots organizations growing in importance Wanting to partner with the private sector on creating real change Local communities understand how to engage in localized business operations Many stock exchange initiatives, driving increased disclosure and reporting Increased pressure from investors for transparency and disclosure of risks Increasingly concerned about risks impacting brands and reputation 3 Media (particularly the social media) Social media as a source of radical transparency Increasing discussions about companies and their activities and impacts online Media increasingly interested in social and environmental impacts of business 4 Governments and politicians Increase in regulation and requirements from government (national and local) Support and advocacy for CSR from many leading politicians Governments leveraging the private sector to help in achieving social objectives 5 Companies and business associations Need to demonstrate responsiveness to stakeholder concerns Growing importance of business-business partnerships and industry initiatives Leadership from brands in the region, larger local companies now following 11

Who matters in Asia? 6 Employees (particularly generation Y) Generation Y creating new expectations that businesses are responding to Employees want to work for companies they trust and respect: They expect CSR Important links between HRM and CSR initiatives and volunteering Skills based volunteering increasingly part of a good CSR strategy 7 CSR consultants and think tanks Growth of consultancy capacity and capability in the region Increasingly number of think tanks in the region, publishing interesting reports Asian consultants replicating best practice from elsewhere 8 High net worth individuals and celebrities High profile individuals advocating a role for the private sector Philanthropists and celebrities taking the lead on certain issues Use of the social media in creating a following on hot topics 9 Consumers Increasing number of consumers going green in the region Scandals around food, toys and other products driving more consumer concerns 10 International organizations International standards and initiatives important (e.g. ISO 26000 and GRI) UN, ILO and development agencies pushing the CSR agenda 12

Who matters in Asia? The stakeholders influencing CSR are, in order: 1 2011 2012 2013 NGOs, civil society organizations, local communities 1 NGOs, civil society organizations, local communities 1 NGOs, civil society organizations, local communities 2 Investors and financial institutions (stock exchanges) 2 Governments and politicians 2 Investors, financial institutions and stock exchanges 3 Governments and politicians (new regulations and incentives) 3 Companies themselves 3 Media (particularly the social media) 4 Companies themselves 4 Consumers 4 Governments and politicians 5 Consumers and consumer organizations 5 Media (including social media) 5 Companies and business associations 6 Media (including social media) 6 CSR consultants and think tanks 6 Employees (particularly generation Y) 7 Employees (particularly Generation Y) 7 Investors, financial institutions and stock exchanges 7 CSR consultants and think tanks 8 Standards organizations (ISO, GRI, national bodies) 8 Employees (particularly generation Y) 8 High net worth individuals and celebrities 9 CSR consultants and think tanks 9 International organizations 9 Consumers 10 High net worth individuals and celebrities 10 Academics and educational institutions 10 International organizations 13

How will companies have to respond? 1. Stakeholder engagement Crucial to defining CSR in terms of materiality Need to embed stakeholder concerns into governance structures Stakeholder dialogue central to risk management and ongoing risk reduction Engage stakeholders and working in partnerships on global challenges Engagement of poor, vulnerable and marginalized stakeholders on development New models of stakeholder engagement to overcome stakeholder fatigue 2. Reporting and disclosure Focus on transparency, accountability, openness to stakeholder concerns Publish values statements that lay out the CSR philosophy Find new and innovative ways of reporting that gets read Provide meaningful, targeted communications to different stakeholder groups Develop indicators and targets for tracking of performance over time Extend the scope of reporting to include value chains Respond Review Concerns Identify Partnership Building Map Concerns CSR Asia s stakeholder engagement model Prioritize Engage 14

How will companies have to respond? 3. Enhanced value chain risk management Need for clear policies and codes of conduct Supply chain auditing and inspections seen as necessary but not sufficient Consider human rights risks along the value chain Recognize deep supply chain challenges, based on changing local situations Move towards full traceability along the value chain Need to consider the full social and environmental lifecycle impacts of products 4. Community investment and shared value Emphasize the importance of shared value in all dealings with communities Importance of measurement of impacts on communities (positive and negative) Consider, assess and report on the impacts that activities have on development Support SMEs, social enterprises, entrepreneurship and income generation Create inclusive business models that include bottom of the pyramid initiatives Build relationships with communities based on free, prior and informed consent CLP Holdings Community Investment Report 2012 15

How will companies have to respond? 5. Partnerships Business to business partnerships emerging as significant successes Joint industry initiatives seen as being particularly successful Create innovative partnerships with government and civil society organizations Importance of partnerships with local communities and grassroots organizations Community involvement in project monitoring and evaluation Emphasis on partnerships for development and poverty alleviation 6. Advocacy and thought leadership Provide leadership and advocacy based on material issues and challenges Support CSR and sustainability initiatives Leadership to change management mindsets Engage in public policy debates and advocacy initiatives Consider flagship CSR initiatives that involve advocacy and leadership UN Report on child workers Funded by Aviva with support from local partners 16

How will companies have to respond? 7. Strengthen environmental initiatives Assess, disclose and minimize all environmental impacts Measure carbon and water footprints and develop climate change strategies Develop strategies for water, natural resources and biodiversity Undertake comprehensive risks assessments to enhance business resilience Consider climate change adaptation needs and implications for business continuity 8. Human resource development and CSR Recognize the links between human resources and CSR in the need to recruit and retain talent Develop strategic, goal driven employee volunteering Develop expertise-based volunteering initiatives matching skills with needs Survey staff on the own sustainability concerns Help to develop CSR knowledge and skills internally and externally Recognize the need for training and capacity building Consider the needs and demands of generation Y and their influence on CSR Swire Beverages setting a water neutrality goal 17

How will companies have to respond? 9. Management systems, research and innovation Ensure that CSR is implemented and embedded through effective systems Put management systems in place linked to accountability and transparency Ensure leadership and commitment from the top of the organization Develop innovative approaches to CSR and be prepared to experiment Sponsor and/or undertake research into effective forms of CSR 10. International standards, guidelines and good governance Growing importance of initiatives such as GRI and ISO 26000 Recognize international norms of behaviour Develop anti-corruption strategies Benchmark operations and assess progress towards sustainability Be part of globally recognized industry initiatives and partnerships Consider good governance as the foundation of good CSR Undertake regular governance reviews ISO 26000 International guideline on social responsibility 18

Top ten takeaways 1 Although still important, the issue of climate change has been falling down the CSR agenda, a worrying trend Engaging staff in CSR initiatives is an important way 6 to recruit and retain talent. A new emphasis on skills based volunteering matching staff expertise with needs is a powerful tool for development. 2 The influence of stock exchanges in the region has had a significant positive impact on CSR, particularly on disclosure and reporting. The social media is now influencing CSR with a 3 number of stakeholders and local community groups making effective use of online platforms and communications channels. 4 There are ongoing concerns over human rights issues and the supply chain is seen as a source of considerable risk. Full value chain management and traceability needs to be enhanced. The importance of community investment based on a 5 shared value philosophy is gaining traction in the region and is likely to drive significant changes in the way that companies move beyond traditional philanthropy. Wealth gaps are appearing in many countries in Asia. 7 Many people in poverty remain marginalized and vulnerable. They are an important group for companies committed to poverty alleviation. 8 Disasters are on the increase in Asia, many directly related to climate change. There is much that the private sector can do to help with disaster preparedness and disaster response. Partnerships between businesses and industrylevel initiatives are increasingly important. Business 9 to business partnerships can bring brand benefits to all parties. Businesses can be advocates for change and 10 should recognize that they can use their power and influence in a positive way, delivering sustainability benefits. 19

About CSR Asia CSR Asia is the leading provider of information, training, research and consultancy services on sustainable business practices in Asia. CSR Asia occupies the unique middle ground between civil society organizations and fully commercial consultancies. This enables us to provide independent and cutting edge services and expert insight into the Corporate Social Responsibility (CSR) issues facing companies in Asia. Through our offices in Bangkok, Hong Kong, Kuala Lumpur, Singapore, Sydney and Edinburgh, CSR Asia builds capacity and promotes awareness of CSR in order to advance sustainable development across the region. At CSR Asia we value the economic sustainability of organizations as well as their environmental and social sustainability, therefore we operate according to professional business principles in order to promote CSR across the Asia Pacific region. Our principal sources of funding come from our Strategic Partners, training and conferences, advisory services to companies and advertising. 20

Richard Welford rwelford@csr-asia.com www.csr-asia.com 21