20 August 2013 — Is corporate social responsibility all its cracked up to be in the context of increasingly urgent environmental challenges? Leon Gettler takes a look at CSR reporting and how it has influenced company sustainability outcomes.
Sustainability has transformed corporate social responsibility. Traditionally CSR was about working with communities. With climate change starting to have an economic impact, sustainability for corporations has gone mainstream, and businesses must now work to reduce carbon emissions.
As ethicist Paul Monaghan writes in The Guardian, socially responsible investment has grown to become a $US13 ($A14.2 trillion) trillion global industry. And sustainability is driving the change.
“Food retailers are tripping over themselves to demonstrate who was the first to eliminate waste to landfill. Big energy users vociferously contest who has realised the better energy efficiency savings… Despite its fuzzy, evolving definition and essentially contested status, CSR has grown in depth and numbers and is as strong as at any time in the last 100 years. It has weathered the financial collapses of 2001 and 2008 amazingly well. Assuming there is light at the end of the current economic tunnel, it can be expected to get stronger still as business re-enters a profit growth phase.”
Indeed, it’s now easier to do it than ever before. In this video interview, executive editor of GreenBiz Joel Makower says the convergence of information, building, energy and transport technologies will transform business, cities and society.
“It’s doing what sustainability should be all about, which is radical efficiencies, innovation and breaking through barriers.”
How mainstream is it?A study by the MIT Sloan Management Review and the Boston Consulting Group has revealed that sustainability is now on 70 per cent of management agendas. Not only that, businesses are now saying it drives bigger profits.
The study found that businesses are adapting to it in three different ways: they’re creating organisational structures which support sustainability, they’re linking sustainability activities with performance metrics; and they’re becoming more collaborative not only with customers and suppliers but also with local communities, NGOs and competitors.
There are many examples of companies that do it well.
One is Unilever, the company behind such brands as Lipton, Vaseline and Omo. Since implementing its Sustainable Living Plan, Unilever has increased growth and profits. The plan is working to big goals for 2020. First, it’s aiming to improve health and well-being. It also plans to reduce environmental impact by halving the greenhouse gas impact of products across the lifecycle and halving the water associated with the consumer use of products by that date. Unilever is looking to source 100 per cent of the company’s agricultural raw materials sustainably and enhance the livelihoods of people across the company’s value chain.
For Unilever, doing good is good for business. How so? By being a sustainable business, Unilever has saved money (energy, packaging etc.), won over consumers and fostered innovation. At the same time, it’s managed to inspire and engage its people.
In his review, the company’s chief executive Paul Polman explains:
“The lens of sustainable living is helping us to drive brands that have strong purpose in people’s lives, to reduce costs and take waste out of the system and to drive innovation that will make a positive difference to the environmental and social challenges facing us all. The Plan pushes us to think ahead, reducing risk and making the business more resilient for the long term. In 2012 we continued to make good progress delivering the Plan’s commitments. Our factories made great strides in cutting energy, water and waste. For example all our US operations have moved to purchasing their energy from certified, renewable sources and more than half our sites worldwide have achieved zero nonhazardous waste to landfill.”
Another example is Disney. Apart from making cartoons, the Walt Disney Companyalso owns the ESPN and ABC networks, holiday resorts and publishing businesses to name a few. The result: massive social and environmental impact, not to mention the ability to influence a huge amount of people.
In 2009, the company set out its environmental agenda which included achieving zero net direct greenhouse gas emissions, reducing emissions from electricity consumption, sending zero waste to landfills, minimising water use and the product footprint. As a result, the trains at Disneyland Resort now run on biodiesel made with cooking oil from the resort’s restaurants and hotels.
Then there is the world’s biggest retailer Walmart, which innovates relentlessly to be more efficient than its competitors. It’s developed a range of green initiatives that are not only about generating good press but also aimed at getting a better return on investment.
For example, it has massive roof-mounted refrigeration units at pilot stores. It uses a closed loop system to increase energy efficiency and reduced its refrigerant charge by 90 per cent. The company saves on hot water with units reclaiming waste heat to provide hot water in restrooms and kitchen areas. Indeed, 70 per cent of the hot water in stores now comes from refrigeration units. Walmart also has bio-diesel trucks that run on cooking grease extracted from its stores.
Walmart claims to be a leader in sustainable corporate social responsibility, reducing energy consumption in stores, installing solar panels on its rooftops, curbing emissions from its trucks and recycling millions of tons of trash. According to its global responsibility report, renewable energy now provides 21 per cent of Walmart’s electricity globally. It claims it is the largest on-site green power generator in the United States.
The company has also created a supplier sustainability index to thousands of suppliers, asking them pointed questions about their operations and prodding them to better understand and manage their own supply chain.
Critics, however, have accused Walmart of greenwashing. Take, for example, the amount of Walmart’s electricity that comes from renewable sources. There have been thousands of news stories and blog posts on the company’s renewable energy activities since 2005. But environmentalists have looked into it and claim that less than two per cent of its electricity actually comes from solar sources and wind power.
The problem is the business model. American environmental activists at the Sierra Club say that Walmart’s underlying model includes several key unsustainable features including reliance on energy-intensive 24-hour operations, location of stores outside of urban cores, sourcing at a distance and expanding retail space. Even with a 15 per cent reduction of energy use, the daily energy consumption of one Walmart Supercentre is equivalent to the daily energy usage of 1095 homes in the US. It claims that any reduction in energy consumption is also related to the underperforming US economy.
The Sierra Club writes: “At best, Walmart’s environmental initiatives have taken a limited approach to reducing environmental impacts and costs. As the world’s largest retailer, Walmart’s public commitments have not translated into drastic greenhouse gas emissions cuts and sweeping environmental change. The sustainability measures Walmart has taken within its business model fail to compensate for the environmental harm inflicted by the business model as a whole.”
Certainly Walmart has room for improvement. But given its size and business model of providing the lowest priced goods, you have to wonder how far Walmart can go. While the criticisms are valid, Walmart is at least doing more than many other retailers. That includes Coles and Woolworths here.
Companies are assessed on their corporate social responsibility in the Dow Jones Sustainability Index. Significantly, ANZ and the property investment outfit GPT Group are the only Australian companies on the list. They’re right up there with companies like Siemens, Roche, Swiss Re and Air France.
Now ANZ’s corporate responsibility report claims the bank’s “financing decisions take into account social and environmental impacts before and during customer relationships”.
Sounds good? Think again. Greenpeace points out that ANZ is the biggest funder of coal.
“Over the past five years, Australian bank ANZ has poured nearly $1.6 billion dollars into coal mines, coal ports and coal power stations. At a time when we need to be cutting pollution and investing in renewable energy, ANZ is using our money to expand Australia’s coal industry,” Greenpeace says.
Another Australian bank Westpac early this year that it would invest $8 billion over the next five years to double its investments in clean technology, environmental services, including $2 billion for social and affordable housing.
- See an article on this in The Fifth Estate, Westpac: We’re back! …with an $8 billion commitment to sustainability
Certainly, the ANZ and Walmart stories suggest people need to look deeper behind claims of sustainability. But it’s important nonetheless that these companies are in that space and more will be going there.
As Forbes tells us, corporate social responsibility around sustainability helps companies innovate, delivers cost savings, provides brand differentiation and can create employee and customer engagement.
Of course, CSR won’t solve the world’s problems or fix climate change. But it helps move the needle towards an economy that might be prepared to deal with the challenges.