Market News

 February 25, 2007
Spreading the Voice of Sustainability

 (BSR) was founded a decade and a half ago by a group of about 50 mostly small and medium-sized companies such as Ben & Jerry's, Patagonia, and Tom's of Maine that had social responsibility baked into their DNA. As corporate social responsibility (CSR) gained increasing relevance in the 1990s, larger corporations joined BSR to help them address social and environmental issues and integrate CSR into their business model.

Now, BSR is helping lead its larger corporate members to where its progenitors started out -- by creating value through sustainable and responsible practices at the core of their business models. SocialFunds.com recently spoke with Aron Cramer, CEO of BSR, who had just returned from the World Economic Forum (WEF) in Davos, Switzerland.

SocialFunds: What is your vision for the future of BSR, touching on both opportunities and also roadblocks to greater adoption of CSR?

Aron Cramer: I think the real challenge for all of us -- BSR as well as others working in this area -- is to help companies translate the very broad commitments they've made into action that infuses attention to corporate responsibility into core business strategies, but then also making it real in the operations companies undertake in all corners of their company and in all corners of the world.

SF: What do you think those opportunities are, both from a business perspective and also from environmental and social perspectives?

AC: If you look back over the last ten to 15 years, there have been some distinct phases in how companies have thought about corporate responsibility. It started out in the early to mid-1990s with reaction, as companies responded to a pretty fast-changing set of social expectations around human rights and water and stakeholder engagement landed on companies' laps -- I think somewhat to their surprise, quite frankly.

We then went into an era of innovation in the late '90s, where best practices was the mantra and companies were trying to undertake new steps -- but many of them were probably one-shot demonstration projects or serial innovations.

By the turn of the decade, many companies realized this might not be the best way to approach this set of questions, so third came a period where we find integration. Companies were really trying to figure out how to align their product development and purchasing and core business activities with social and environmental questions.

I think we're entering into the most interesting phase right now, which is about value creation. Companies are increasingly seeking to create value by coming up with products that don't have a sustainable layer on top of an unsustainable product, but in fact a product that is all about sustainability -- that delivers profits for the company and also helps improve the social and economic and environmental conditions that companies influence in so many parts of the world. If you want to point to the starting date, it's probably when GE CEO Jeff Immelt gave his speech launching Ecomagination in May 2005 in Washington.

SF: Shifting focus to BSR itself now, how does BSR balance its work as both a leader in mapping the intellectual and theoretical landscape of CSR with its hands-on work of implementing CSR?

AC: We're very consciously a hybrid organization, and an organization that considers a core part of our mission to be about innovation, about helping companies understand emerging trends and opportunities they may not see directly in front of them. We have a portion of the organization that is dedicated specifically to that kind of work. Our R&D group generates dialogues and discussion papers and proto projects -- we try to take forward some ideas companies may not otherwise be thinking about and we very much consider it our role to bring ideas to our members and the broader business community -- and then try to transform those ideas into reality.

On that side of the coin, we really are and always have been about helping companies make these commitments real and getting them integrated. At most companies, you find a very small number of people who are paid to think about CSR as CSR -- but then the real progress comes from the more prosaic steps of getting the ideas baked into what a company is doing. We spend a lot of time working on that aspect.

One without the other wouldn't work -- without the vision of what we want to accomplish, the implementation isn't that important, and ideas that are generated only for the sake of generating ideas don't really move things much either.

SF: What are specific examples on each side of that line -- of theoretical work and of implementation work you do?

AC: Let me start with something that's a little more conceptual at this stage. We're just about to launch a project with a group of companies to look at the question of how public governance failures get in the way of sustainable business. The project is determining how business can be in dialogue within its own community and also with the public sector and civil society to figure out how more effective public governance can create an enabling environment in which boundaries are clearer for business, in which partnerships between the public and private, independent sectors can be more effective and achieve more systematic results.

So many of the questions companies end up dealing with -- from human rights to the availability of water and certainly on climate change and bribery and corruption -- result to a significant degree from public governance failures. If we get at the root cause collectively of how business can help to strengthen public governance, I think societies would be healthier and I think business would find that it might have a shorter set of issues it needs to deal with because government might be dealing with public goods-related issues that it is uniquely designed to approach.

On the practical side, we are working with a wide range of companies now on supply chain-related matters. Whereas ten years ago we tended only to see light consumer products companies engaged in this, today the electronics and automobile industries are deeply engaged, the food and agriculture is engaged, and the pharmaceutical industry is beginning to get engaged.

What's interesting is, there's a lot of experience around these various tables, and we're working with companies in all of these industries, and the notion is to try to achieve systematic results by looking at the purchasing practices that companies undertake, by looking at the capacity of suppliers to meet social and environmental standards that are established, whether by law or by companies, by looking at the role the public sector plays, by looking at the role workers themselves can play.

To look at this more on a systems basis and use the notion of what we call going "beyond monitoring" to achieve better results and better returns on the very significant investment companies are making on supply chain.

SF: It sounds like you're dealing on a systems level both with implementation and with theory by asking, what are the systematic impediments and systematic opportunities to drive CSR forward?

AC: That's absolutely right. We know we've built up a big industry to deal with some of these supply chain-related issues and I think there certainly have been some successes but it's our sense and the sense of many others that progress has probably plateaued and there's lots of evidence of that.

We did some work with the World Bank over the last few years to analyze the progress that has and hasn't been made. The Ethical Trading Initiative has been talking about the shortcomings in social auditing. So there's a widespread sense that commitments are there that weren't there ten years ago, some progress has been made, but if we really want to get at the core of it, we do have to look at the system on a more comprehensive basis and not just see how companies can monitor five percent more factories next year than they did this year -- that's not going to get the job done.

SF: What are the biggest challenges companies face in pursuing CSR and sustainability now and going forward?

AC: I actually think the greatest challenges really come in three areas. First, companies have to decide to look at CSR and sustainability as a core part of their business. Many more companies are looking at the world that way today than they were ten years ago, but it probably still is a minority opinion and so part of the challenge is simply about the political will on the part of companies to look at their impact through the prism of sustainability.

Secondly, there are two communities out there that exert immense influence on business across all sectors: consumers and financial institutions. Financial institutions have actually started to move significantly over the last couple of years -- a very important development because it's remaking the way markets work. On the other side, despite all the polling data, I'm not sure consumers do particularly exert their will on companies to look at sustainability more thoroughly. So long as those two groupings -- financial institutions and consumers -- are ambivalent about this, markets don't push companies in a more sustainable direction.

The third actor is government, and we've lived through a generation where the market has been paramount, eclipsing the role of government. I think we'll continue to see some decentralization of power, but governments can still make significant decisions. Whether it's through global trade agreements and the WTO or whether it's their own enforcement of laws or "smart" regulation that looks at creating incentives to engage the business community as a partner, government remains an incredibly significant actor and can be a net negative, net positive, or neutral in terms of influencing the kinds of decisions that businesses make.

At Davos, the CEO of one of the largest oil companies in the world said, it's for government to decide what the energy mix is, and when government makes that decision, we'll use our knowledge and expertise to move in the right direction, but we really need government to play a leading role in sending signals to the market about the direction we want to go in.

SF: Following up on the issue of consumers, what can companies do to get consumers to demand more sustainability out of products and services?

AC: One underutilized mechanism that companies have is communicating about sustainability with the public. Consumer products companies reach tens of millions of people around the world every day. There's an opportunity through products, through what's called the retail experience and other interactions with the public, to educate people.

Interestingly, all five of the largest oil companies in the world -- Total, RD, BP, Chevron, and ExxonMobil -- are running very major ad campaigns talking about the energy challenge. Some people question that. I see it as being very, very positive, because it's adding to the public debate about what our sustainability and energy challenges are all about. So business has that immense power, and I think there are ways, as some of these companies have shown, that it can be done with integrity.

It's about helping consumers understand the choices they're making, and also about giving them different kinds of choices. Fair Trade is still a small slice of food and beverage markets, but it is growing and might move into apparel in the coming year, and then there's organic cotton. So there is an increasingly diverse range of products on the market.

SF: Any words of wisdom for companies that may have an interest in CSR, but thus far have not embraced it (or at least not vigorously)?

AC: My first piece of advice -- after encouraging them to talk to BSR so we can help them out -- is not to address sustainability as a losing strategy. The number of large and even small and medium-sized companies that consider sustainability a key business strategy is continually increasing, so the first step is to jump right in.

The second is to focus on what is most meaningful for your business. Materiality has become a widely-used phrase in the last couple of years in these circles, and I think that's really important and significant. It doesn't make sense to do things that are unrelated to the core activities that a given business is undertaking.

The third piece of advice is to listen to voices outside those that companies typically listen to -- there's a lot to be learned from other companies, from experts on CSR strategy, or from experts on discrete questions, so listening is a key part of it.

And the fourth thing is to take some risks. I think the companies that have established themselves as leaders and have really derived the most value from CSR efforts are the ones that have taken some risks. Not all of them succeed, but when they do, they can be quite powerful.