The latest batch of social reports shows the progress made by leading companies that have embraced stakeholder accountability. For others, changes to corporate governance rules especially on risk control will gradually lead them in the same direction.
PEOPLE, PLANET AND PROFITS
In April Shell published a second report to society, charting its progress along a ‘road map’ towards integration of sustainable development into the way the group conducts its business. People, planet & profits: an act of commitment explains the management processes which ensure adherence in a very decentralised company and at a time of harsh financial pressure. The report shows performance in implementing business principles, using 70 separate measures in addition to environmental indicators. Examples include:
646 billion in tax revenue generated;
fines paid in 150 cases for breaches in health, safety and environmental regulations;
of the 6,600 most senior executives, 7.4% are women – the target is 20% by 2008.
Shell has nine Business Principles covering its mission, responsibilities to stakeholders and key policies such as integrity. On social investment specifically, Shell companies contributed 692 million in 1998 (worth 19% of post tax profits). The five year average contribution (1994-98) was 1.2% of after-tax profits.
Last year, the Shell Report was published in five languages and distributed in more than 20 countries, incorporating nine ‘Tell Shell’ cards. Fewer than 300 responses were received back. Contact Shell International on 0171 934 5293 (www.shell.com)
POSITIVE CONTRIBUTION
BP Amoco published its 1998 Environmental and Social Report in April, describing its positive contribution to the development of society beyond achieving a competitive return to shareholders. The report comprise a main document, with two in-depth supplements: BP Amoco in the Community and health, safety and environmental data. The main report focuses on a series of detailed case studies incorporating independent comment and assessment, including Alaska, China, Egypt and South Africa. The section on performance centres around new policy commitments on ethical conduct, employees, relationships and HSE.
On community expenditure specifically, the group contributed 664.9 million, equivalent to 1.6% of post-tax profit.
For copies, contact BP Amoco on 01202 244030 (www.bpamoco.com)
STAKEHOLDER COMPANY
The airports company, BAA, has produced a environmental, social and economic performance report, entitled Towards sustainability – growing with the support and trust of our neighbours. The world’s largest commercial operator of airports describes itself as a stakeholder company, saying neighbours not only have a genuine stake in the company but can also obstruct, delay and even stop growth.
The delivery mechanism for BAA’s new mission is a ‘contract with the community’ containing ten commitments, promising to think long term, listen to concerns and produce growth strategies incorporating environmental and social objectives. Contact BAA on 0171 932 6672 (www.baa.co.uk)
SOCIAL IMPACT
In May, NatWest Group issued a Social Impact Review, bringing together for the first time communication on community, environmental and social activities. In addition to details about the environment, highlights include:
the community programme, particularly NatWest’s financial literacy programme, Face 2 Face with Finance;
ethical issues such as funding arms deals and;
access issues for customers and staff, such as people with a disability, low income households and businesses from minority ethnic communities.
The report builds on early experience with environmental management and reporting, NatWest having set targets for energy management since 1991; for example, CO2 emissions have reduced by 37%, saving ?47 million. The report comments that clear evidence of the business case is needed if progress is to be made. Also included are independent commentaries by Jonathon Porritt and Rabbi Julia Neuberger. Contact NatWest on 0171 726 1720 (www.natwestgroup.com)
GLOBAL STAKEHOLDERS
The OECD annual ministerial meeting at the end of May approved a new set of international principles for corporate governance, based on international best practice. In contrast with most of the 50 or so existing national codes, the principles take a broad view of the governance framework and explicitly address the needs of stakeholders other than shareholders. The intention is that international companies and national codes gradual follow the agreed approach, and the OECD is working with the World Bank on an initiative for the developing world.
The principles assert that securing a competitive return on investment to shareholders is the central goal of companies. But they recommend governance frameworks that encourage active co-operation and participation for sustainable wealth creation. Companies are also encouraged to disclose information to employees, creditors, suppliers and local communities. Contact Richard Frederick, OECD, on 00 33 1 4524 1802 (www.oecd.org)
BROAD VIEW OF RISK
The committee charged with completing the corporate governance framework in the UK has decided to extend the requirement to review and report on internal control systems beyond narrow financial issues, and not as Cadbury had recommended. The Turnbull Committee on internal controls, which was set up by the Institute of Chartered Accountants and reported on April 20, follows Hampel in saying management should consider all risks that threaten business viability. It explicitly warns that existing audit committees may not have sufficient understanding of environmental, safety or other risks. After amendment following consultation, the code will be incorporated in Stock Exchange listing requirements. Companies will have to comply, or disclose why they have not. Contact ICAEW (www.icaew.co.uk)
BLINKERED VIEW OF RISK
Only one in three British companies have a proper plan to cope with major business risks, according to a survey of 300 business leaders published on April 26 by SGS which offers risk management training. Nearly half the sample experienced at least one incident in the last two years which threatened some part of the business. Only a third have documented procedures. Adverse affect on corporate reputation was identified as the most significant overall impact. Contact Barry Holland, SGS, on 01276 691133
ENVIRONMENTAL REPORTING
There has been only a marginal improvement in environmental reporting over the last year, with the ‘green gap’ between the best reporters and the rest widening, according to a report produced by Pensions Investment Research Consultants. Environmental Reporting 1999: The PIRC Survey of the FTSE 350 recommends that responsibility for environmental matters be assigned to a designated board member, environmental and financial reporting be synchronised and sector-by-sector benchmarks developed. Contact PIRC on 0171 2503311 (www.pirc.co.uk)
NEWS BRIEFS
Financial services company, Provident Financial, has issued its first community report, documenting commitments in four areas: national charity partner to NSPCC, local community involvement especially in West Yorkshire, support for the arts and social investment in debt counselling. The 1998 community contribution totalled ?452,800 following London Benchmarking Group guidelines. Contact Sandra Larmour, Provident Financial, on 01274 731111 (www.providentfinancial.co.uk)
The BG Foundation, which coordinates and implements the social responsibility programme of BG, the international gas company formerly part of British Gas, has issued a brochure, focusing on its three priority themes: developing community well-being, improving local environments and life-long learning. Contact Mary Harris, BG Foundation, on 0181 663 3086
Natural resource group, Rio Tinto, has issued a summary of responses received to its 1998 environment and community issues survey, based on responses from 270 opinion leaders in more than 20 countries. They said running a successful business and protecting the environment are their two most important priorities. Contact Rio Tinto on 0171 930 2399 (www.riotinto.com)
Comment
The combination of a dynamic business leader like Sir John Egan, a knowledgeable environmentalist like Des Wilson in corporate affairs and some sound community relations has transformed BAA, albeit in an industry where the challenges are clear. For them and others, however, embracing the concepts may prove the easy bit – reporting on performance will take longer, as the BAA report fully acknowledges.
The recently published reports showing companies adopting differing approaches. Some have grown the traditional community report. Others just focus on difficult issues. Few embrace the full `triple bottom line’ agenda, including the economic impact (which is, after all, the biggest contribution which firms make to society).
Even the best, like Shell, have few targets and little trend data outside the environment, and virtually no external benchmarks. These are essential to see whether things are getting better or at least are better than others. Often with social performance, there isn’t a single right answer. We must wait for several round reporting rounds before anything like standard practice emerges.
So far, so good for companies which have positively embraced their stakeholders and want to make a wider social contribution. What about the bulk of companies, for whom the risk of getting it wrong is a cost-driven (negative) concern? Here the corporate governance rules and the example set by leaders will gradually have a long term impact. Of course the new Turnbull approach won’t work on those that don’t perceive social and environmental factors to be a risk at all. These won’t be convinced until their shareholders have paid the price of another Brent Spar or Nigeria crisis.
COMMENTS