Corporate Social Responsibility and the economic downturn

Given the unstable nature of the world economy at the moment, how will the latest corporate trend, Corporate Social Responsibility, fair as companies tighten their belts and look to cut costs?

All major retailers have Corporate Social Responsibility (CSR) statements proudly displayed on their web sites, and being green and being seen to be green, is high up the agenda in all PR and Marketing departments. Retailers are fighting to have sector leading green credentials with the humble carrier bag thrust into the limelight, centre stage. Corporate Social Responsibility is not just about being green though, it's about promoting sustainability and one of the leading bodies to define standards for business sustainability, the Global Reporting Initiative, defines five areas where business needs to focus;

o Economic
o Environmental
o Human Rights
o Labour
o Product Responsibility

With the price of energy increasing all the time, it's easy to see that focusing effort on reducing your Carbon Footprint, is good business sense, as well as providing good PR material. The green movement has successfully persuaded companies that being green makes commercial sense. However being green is only a part of a companies CSR strategy, so as times get harder will we see a relaxing of the commitments made across the other key areas.

With sales weakening across the high street many retailers will be asking their supply chain to bear the costs of poor trade. Changing payments terms for suppliers and asking suppliers for extra discount are some of the ways retailers can put the squeeze on their suppliers. For suppliers though, struggling with their own increased energy costs, this additional pressure will be most unwelcome and for many, could push them close to the edge.

This doesn't strike me as a sustainable business strategy. Sure, your suppliers will need to bear some of the costs, but the sustainable way out of the downturn would be to work together. How sustainable can it be to destroy your supplier base?

Corporate Social Responsibility Reporting

Corporate Social Responsibility (CSR) is becoming ever more important. Some recent headlines;

Tesco is to test putting "carbon labels" on its own-brand products next month in a move to enable consumers to choose products which are less damaging to the environment. Guardian

Marks and Spencer is to begin charging its food shoppers for carrier bags. BBC

Of course Corporate Social Responsibility reporting isn't new in itself, it's the increased focus and level of detail that is changing. As a result, companies will report in ever more detail on these issues and refine their definition of Corporate Social Responsibility. CSR is an increasingly important part of a company’s annual report and CEO’s are making ethics and sustainability claims that need to be backed up. The trend therefore is that CSR data is being treated like financial data which requires greater accountability and accuracy in the reporting of Corporate Social Responsibility objectives, increased levels of corporate governance, and stronger internal control documentation across the enterprise. On the back of increased CSR reporting will come increased auditing requirements as mandated by good corporate governance.

Several governing bodies have arisen to provide guidance and best practice such as the Global Reporting Initiative (GRI) and the World Business Council for Sustainable Development (WBCSD). Each of these has their own protocol for calculating and reporting environmental KPI's such as carbon emissions. Invariably these rely on excel spreadsheets that are manually entered, in disparate locations around the field of operation. This is going to become less and less acceptable.

Corporate Social Responsibility data will need to be audited and we'll see security, workflow and audit trail issues seeing increased focus in the capture and reporting of CSR data. Here at Retail Monster Consulting we can help you deliver CSR reporting in a robust and usable manner through Business Intelligence (BI) technology. Our CSR dashboard and data model experience, can help you fast track a CSR implementation.

We are actively blogging about CSR related topics such as Green Credentials and Carbon Labelling.

If any of this interests you then please talk to us

Carbon labelling comes to a supermarket near you...

Tesco opens up another front on the green supermarket war today, by announcing that products will now be labelled with their individual carbon footprint. Tesco are hot on the heels of Marks and Spencer who stole a march on their rivals to lead the sector on green credentials, by being the first to charge for carrier bags. A move that sounds as good for business as it does for the environment.

Tesco is to become the world’s first supermarket group to launch a major trial of carbon labelling on its own-brand products. The Carbon Reduction Label developed by the Carbon Trust will soon appear on 20 Tesco products in four different categories: laundry detergent, orange juice, potatoes and light bulbs.... Read the full press release here.

Product level carbon labelling was bound to happen sooner or later, and I don't take any credit for predicting it here some weeks ago. Whether this takes off or not, and leads to a genuine reduction in the production of CO2, only time will tell. It's easy to think that people will see this and think twice about which product to buy, searching and substituting for greener alternatives. That might certainly be true of hardened environmentalists but for the ordinary shopper this additional dimension of choice may not come in to play very much at all.

Today's ordinary shopper has a vast array of choice in picking between variants of a similar product. On top of the traditional hard-core options of brand and price, we can opt in for healthy eating (Be good to yourself), quality (Finest, Taste the Difference), ethics (Fairtrade), organic (inc non GM) to name but a few. How 'carbon' as an option competes amongst these existing choices will be interesting to see. i.e. High Carbon but Fairtrade vs Low Carbon non Fairtrade etc.

Whilst I might be questioning the effectiveness of carbon labelling in driving consumer choice, what I think is more certain is that labelling of products will drive down the carbon footprints via the suppliers. Some suppliers will want to be seen at the cutting edge of green manufacturing and will lead the reduction in Carbon values. For those that don't want to lead from the front, they won't want to get at the back of the back either. Once product level carbon measurement becomes more common, it won't be long before the media start running column inches and documentaries exposing high polluting suppliers.

Whilst consumers might find it hard to differentiate products, on the basis of their green credentials, at the shelf edge. They might find it easier to do from the comfort of their living room...

M&S start charging for food carrier bags

5p for Carrier bags, good for the environment and good for business...

Today, Marks & Spencer begin charging 5p for food carrier bags. That's good for the environment because alongside the reduction in plastic that will be sent to landfill, the profit from the sale of the bags will go to Groundwork, an environmental charity which creates and improves green spaces across the UK. In preparation for this, M&S have been giving away free Bags for Life over the last month, with 15 Million given away so far. Customers will now be able to choose either a 5p food carrier or a Bag for Life costing 10p, to take their shopping home in. This is all part of Marks and Spencer's Plan A initiative which commits to, amongst others, reducing carrier bag usage by a third and to sending no waste to landfill by 2012.

With those free Bags for life costing £1.5M, how can that be good for business? Of course the key word in the above paragraph is profit. 'All of the profit from the sale of the bags'. Officially, that means 1.85p from the sale of single use food carrier bags will be donated to Groundwork. That's a nice 3.15p recouped per bag for M&S, which previously was bearing the costs of the plastic bags. So aside from the benefits of all the positive publicity, column inches, air time etc. On top of the competitive advantage gained by making the first move and being seen to set the standard for sustainability within the retail sector. You get to wipe out a very sizeable revenue charge in one fell swoop and get sector leading green credentials at the same time.

Now that's good business!

Green credentials : altruism or commercial interest?

I recently facilitated a Retail Business Intelligence Seminar, which was attended by many of the UK's leading retailers. The format of the day was a number of presentations and some round table discussions on topics that had been selected by the attendees in advance by way of a questionnaire. The Butler group presented on the leading topics of the day within business intelligence and we heard from Conchango's David Ellis, on web performance management.

Corporate Social Responsibility reporting, colloquially referred to as 'Green' reporting, was one of the latter topics of the day for the round table discussion. Green credentials are obviously top of the agenda at C-level of the top retailers and are filtering their way down the organisational hierarchy. IT departments haven't yet got to grips with this in any serious way although departments like Marketing are in full swing, which is why we're all familiar with stories about Marks and Spencer, who are soon to start charging for carrier bags as part of their Plan A initiative, but in the meantime have been giving away free 'Bags for Life'. Sainsbury's have dipped their toe in the 'free Bag for Life' water too. Tesco of course are in on the act with the Future Store initiative, check it out next time you're in Wick (!), and have installed, reputedly, the worlds largest solar panel roof at their Fresh and Easy distribution centre in the US.

The discussion at the table rounded very squarely at one point on 'Are they doing it for money or because they care for the planet?'. Unanimously, instantly, 'for the money!' was the response. Was I the only person slightly disappointed by this response? Or have I bought into the marketing message and believe they do care after all? Who knows? but later when I reflected back on this, I thought, 'If they are in it for the money, in what directions could they take it?'

If you shop with a Tesco, and use your clubcard, then Tesco will know every item you buy. Tesco could therefore work out an individuals customers green credentials from the products they buy, assuming they work out individual product greenness, which surely is a first step. They'll already use some Fuzzy definition of greenness probably linked to a measure of ethicalness for segmentation purposes, but this will allow a whole new measure of granularity.

Doing this would of course give rise to opportunities to up-sell people to more 'green' products, that as well as espousing their green credentials, probably cost more and have a greater margin. This has profit implications but also huge customer satisfaction potential. Imagine how powerful Tesco online shopping could be if you could be presented with greener alternatives to those Kenyan strawberries, right there on the page? This has the added advantage of being applicable to all customers for as we have all heard, there are those vocal customer groups who shun the mighty clubcard for big brother reasons. For the many who carry one though, (13.5 Million), I wouldn't be surprised if they actually wanted Tesco to go this far. Why try and work out your own carbon footprint when someone else can do it for you?

As I stated above, 'Green' is big at C-level and has slowly started filtering down, at some point in the near future green credentials will filter it's way into mainstream BI. Expect more blogs on this in the future....

Corporate Performance Management

A healthy and stable business finds the balance between, often competing, stakeholders. A point I try and make in a humorous way in my previous post about my local Off-License. Corporate Performance Management is the new name for what was referred to as the 'balanced scorecard' approach to executive management. This approach aims to balance the competing stakeholders such as employees and shareholders, customers and suppliers.

Limited companies need to provide a good return for their shareholders to do that they need the best staff, who like to be paid well. The more you pay your staff, the less profit you have to distribute amongst your shareholders, or the more you need to charge your customers for goods in order to make the profit, or the harder deal you need to negotiate with suppliers in order to minimise costs, etc etc.... So we have many stakeholders who all have individual needs, which often compete against each other, but to create a sustainable business they all need to be managed well.

Corporate Performance Management, or CPM for short, is about setting upper and lower boundaries for each of these stakeholders and their interests and then monitoring the performance of each to keep within these boundaries. It's CPM that we can blame for staff survey's, who want to know if 'My contribution is recognized by my manager', 'I have an opportunity for career progression' and 'the pay I get for my job is fair'. It's also behind Retailer/Supplier code of ethics and for the rise in Corporate Social Responsibility.

Whilst mostly CPM is used at the executive level, the principal applies equally well within departments. Shops need to balance the wishes of the customer in not having to queue, with the impact on the retail wage budget in having excessive staff manning the checkouts. An area where retailers invest heavily to create the right balance, as discussed in an earlier post on queueing theory. Inventory levels are another key area where the balance between stock and availability needs to managed closely, to minimise the costs of out of stocks and the lost interest of having money tied up in stock instead of in the bank.Sustainable business isn't "all about the numbers", it's a balancing act.