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By Robert Colman
Corporate responsibility, sustainable development, social responsibility - these terms have been used interchangeably over the years to describe how some companies now create effective businesses by addressing the economic, environmental and social management of their operations.
But creating and maintaining programs that ingrain those practices within an organization are a challenge. Much of the first annual Green Business / PricewaterhouseCoopers Executive Roundtable on Sustainability was spent discussing these challenges, and where sustainable management goes from here.
Of the roundtable attendees, three are relatively new to their companies. Ryan Fabi, director of environmental health and safety (EH&S) for Husky Injection Moldings, joined the business early this year. Nelson Switzer, director of corporate responsibility at Direct Energy, has been there just over six months, although he has a long tenure in the corporate sustainability field. And Jim Johnston has been in his role as director of environmental sustainability at BMO Financial Group for about 15 months (although he has had a long career at the bank).
Interestingly, their experiences represent a number of the most substantial challenges that sustainability management faces in organizational cultures: maintaining sustainability management programs after the initial champion leaves the company, and maintaining and developing sustainability programs throughout an organization once those programs are initially introduced.
Centralizing the message
Ryan Fabi is a case in point. When he took over as director of EH&S early in 2008, Husky had a legacy of strong environmental management and employee engagement on the issue. But the company had also recently been purchased by Onex Corporation, and the original corporate champion, former owner Robert Schad, had left the day-to-day operations of the organization, along with a number of his management team.
"Some of those programs were put aside for a little while when Onex purchased the company," notes Fabi. "But now that Onex is learning about the history of some of the programs, such as the Greenshares program, they’re asking our new president and CEO, John Galt, to reestablish them."
The Greenshares program formerly awarded staff shares in the company to employees based on their demonstration of environmental responsibility. The original program had 40 per cent company-wide participation.
"Because it’s now a privately owned company, the Greenshares program can’t operate precisely the same way, so we are changing it slightly to include more environmentally friendly habitual activities like purchasing a hybrid car or biking to work and other similar actions," says Fabi.
At Direct Energy, Switzer was not presented a company with quite the storied history of green initiatives, but quickly found that there were many corporate responsibility activities well embedded within the corporate culture.
"It’s considered part of our strategic imperatives," says Switzer. But that wasn’t his initial reaction.
"When I looked at Direct Energy before I took the job, I thought, ’Wow, I get to start (a corporate responsibility practice) from scratch,’" he recalls. "But I got into the company and found there’s a tremendous amount of activity going on. It is simply not coordinated from one office."
Switzer’s first move when he joined the organization was to make an inventory - of the impact areas across the organization, and all of the programs and initiatives that have already been developed to address these areas. He bases his corporate responsibility program on three basic platforms: to reduce and manage company risk, protect and enhance the company’s reputation, and realize the opportunities and enhance company returns as a result.
"Whenever I talk about our program, it’s really to do with three things - to educate, inspire and empower," Switzer notes. "I think to have a truly sustainable operation, corporate responsibility needs to be a part of your business and just the way you do business. But to get to that point you need to centralize your operation first. Once you have that, you need a consistent message, and you need to empower people with the tools to make the decisions and develop the programs and initiatives."
Jim Johnston from BMO noted that engaging employees is an essential tool in the growth of corporate responsibility (CR) as part of an organization’s culture.
"We’ve gone down the road of looking for what we call environmental ambassadors - agents in the field that essentially can be out there to spread the word," says Johnston. "It’s the education piece that’s critical at this point - you’ve got to give them the tools and inspiration to do what’s right. I think we’re making progress in this area, but we’re not quite there yet."
And yet BMO has made strides, as Johnston notes. The organization recently combined its social responsibility and environmental policies under one CR umbrella to strengthen the overall alignment.
"Environmental sustainability is becoming increasingly engrained in the organization, and part of my role is to make that happen," Johnston stresses.
Fabi has seen the same dislocation that Switzer and Johnston have encountered at their companies.
"We do many good things but those efforts aren’t always coordinated across locations," he notes. "Our Milton, Vermont, Luxembourg and China facilities are all doing good things, and Bolton has always done great things but we’re not always doing it together. This is because not everyone reports to the same function, so efforts are driven by HR in one operation, and by Operations at another location. It’s not one person rolling it out. That’s what we’re trying to move towards."
Blair Feltmate, director of sustainable development at Ontario Power Generation (OPG) suggests this is one of the advantages of writing a sustainable development (SD) report - you are able to see what the company is truly doing.
"It’s amazing to read about what companies are doing," he says. "Indeed, when you put the collective of a company’s environmental, social and economic initiatives under the umbrella of a report, very often even the company itself is surprised by its overall commitment and performance."
Mike Harris of PwC would agree that this is how many of his clients view their reporting today as they create more substantial corporate social responsibility (CSR) reports.
"When you look at CSR reports five or 10 years ago, there wasn’t a lot of data analysis behind what was presented," Harris explains. "It was a PR exercise. I think this is where a lot of the greenwashing comments in the marketplace come from. But we certainly see quite a shift to more focus on backing up what’s in these reports. And for most companies, that’s a journey that’s not going to happen overnight.
"We are now seeing more transparency in CSR reports," he continues. "And you can see who has got it all figured out and where they are further ahead. The key is getting external assurance on your CSR report, and this is an important component of a company’s sustainability management strategy. The assurance sends a message to the information users that a qualified, objective third party has checked the accuracy and completeness of the sustainability information prior to its release, and has determined that the report fairly represents the company’s performance."
Driving the message
Feltmate sees effective corporate responsibility management as "a means to foster support for a company’s license to operate."
"Wherever you have operations in the world, the expectation is that you’ve worked to minimize your environmental footprint, you’ve demonstrated that you care about your employees and you care about the communities in which you operate," says Feltmate. "And if you can’t demonstrate that meaningfully, the probability of you being granted a license to operate ongoing is very much limited."
Feltmate raises the apt example of Darlington B, a new nuclear facility that will help Ontario meet its growing energy needs. "To build support for OPG to ultimately run a new nuclear plant, as a company we served ourselves well by demonstrating to an array of stakeholders that we are, amongst other positives, responsible practitioners in the area of sustainable development. That effort paid off, because there is going to be a Darlington B and OPG will run it. Conversely, if we had not been viewed as a responsible practitioner, this would not have served us well."
But to have that attitude engrained within its culture, OPG is taking its efforts further. Feltmate has introduced a program whereby a large percentage of OPG employees now have to take sustainable development (SD) training.
"So far we have put about 3,400 of our 11,700 employees through SD training," explains Feltmate. "It’s actual in-classroom training, with an initial two-hour session to introduce them all to the concept - what it is, where it came from, why companies are doing it, what the return on investment is, how we are operationalizing it and what our challenges are going forward."
According to Feltmate, the response has been excellent.
"I find people really love this stuff," he says. "Most people, when they go to work want to do more than sell toothpaste. They want to do something that adds value. And they really seem to embrace it."
Other organizations around the table have also been trying to educate employees at different levels regarding what they can do to make a difference in the organization. At Husky last year, for instance, sessions were held for about 100 employees at a time to educate them about how to conserve energy at home and at the office. This mandatory session managed by EH&S and facilities "went a long way" to get the conservation message across, according to Fabi. More recently, the organization held a summer "carbon neutral" party for its employees as well, where cold, healthy food was served and everyone went away with an evergreen tree to plant, to offset the power used by the band that performed at the function.
Johnston, meanwhile, has had a push on at BMO to implement, in a more formal way, the company’s environmental management system "based on the ISO 14001 standard," he notes.
"In our building at Bay and Bloor in Toronto, where about 2,000 people work, we rented out a theatre and invited employees from that building to engage in these awareness sessions," Johnston says. "We talked about our achievements so far, the types of things we’ve been doing over the past little while, and what it is that employees in this specific building can do. It’s an exciting time, and the feedback and the passion from the people that attended the session was overwhelming. The key is to tap into those people and use that energy to move forward."
Changing behaviour is a challenge. That involves raising awareness and truly selling change within the organization. For instance, BMO recently introduced new video conferencing technologies in its Toronto and Chicago head offices to cut down on travel between the two cities for non-customer facing meetings.
"It’s phenomenal technology, we just have to get the usage of it up so that we’re actually changing behaviours," explains Johnston. "There’s a lot of tactical things like that we’re working on."
The issue of changing behaviour comes back to the central challenge of having corporate social responsibility spread throughout the organization.
"The only thing that keeps it going in a company is when everyone understands the business case," stresses Feltmate. "If you want to keep sustainable development alive in a company, it’s the business case you’ve got to have down pat when you’re talking to people, and they’ve all got to get that. If they don’t, it’s dead."
A strategic partner
Switzer would like to see corporate responsibility become so engrained in his organization that he puts himself out of a job. Failing that, however, he recognizes corporate responsibility as an important advisory centre.
"I think that’s the part that a lot of organizations miss," he says. "I’m not here to put your corporate responsibility program together for you, I’m not here to say, ’OK HR, you have to do this and I will write your policy for you.’ Rather, I’m here to help the business understand, ’this is an area where we have exposure or risk that’s going to be a potential reputation issue, or we will be unable to attract or retain top talent, etc., so we will work with you to help you manage this.’"
PwC has seen this strategic shift happening in a variety of organizations.
"It’s not unlike how finance was historically viewed as a machine unto itself, focused on corporate reporting, rather than being viewed as a strategic internal advisor," says PwC’s Harris. "Although the CR group will focus primarily on the sustainability report, they are available as experts to advise other parts of the organization on such issues as managing their carbon footprint. It’s a business model that creates centres of excellence in different disciplines that can assist each other to better manage the company in a sustainable manner."
Feltmate believes that there has to be this central corporate champion and department to set the rules and the corporate direction. "But on a more idiosyncratic basis, the plants, the field operations and so forth, they have to operationalize that vision as it makes sense to them. For example, from my experience working with various mining companies, what made sense for an operation in Sudbury didn’t necessarily fly when you were in Chile."
Supply chain engagement
Peter Johnson of PwC raised perhaps the most pressing question of the morning - how to drive sustainability practices out beyond large corporations. "If we’re going to make a fundamental change beyond large corporations, what do we have to do?" he asks. "How do we start to get this down to other large companies? Many organizations still don’t see the value that sustainable management, processes and reporting can have. Eco-efficiency and awareness of the social and economic impacts of business operations are essential to a businesses success in today’s world. Companies that demonstrate environmental and social leadership, and share with their stakeholders the principles and practices they adopt, build public trust and strengthen their reputations and brands."
One way to achieve the movement of further integration, is by driving change through the supply chain, and this is happening by degrees in many of these large corporations. Direct Energy, for instance, has recently introduced a Responsible Procurement and Supplier Management policy.
"It’s a broad public document for our entire operation," says Switzer. "It helps to clarify what our risks are, and it makes our suppliers start asking themselves the question, what’s the risk of non-compliance with these policies?"
Direct Energy is considering measures to take this further - for instance, possibly having suppliers sign a commitment to a set of principles that the company also follows. But Switzer wonders how far this will take things down the supply chain. "We’re getting much of our stuff from companies that are probably ahead of us - companies like GE and Bell," he explains. "It’s the guys who are driving the van, the subcontractors - those are the ones that are difficult to convince and to get to."
Feltmate disagrees. "I think there are a lot of things you can do to influence suppliers," he says. "For instance, with OPG’s Sustainable Development Report 2007, the company that was going to be our printer, a medium-sized operation, we asked them if they were FSC certified and they said yes. However, when we asked for their FSC certification number, and they couldn’t produce it, they lost our business. I’ll bet that that printer now has true FSC certification: number and all."
That doesn’t mean working with suppliers is a simple matter for OPG, or that it can act in such a firm manner every time. The company, after all, has 14,000 suppliers, and regulations for nuclear plants allow very little flexibility about supplies.
"But what we’ve done, and continue to do, is focus on selected items in the supply chain that we can work with, to green if you will, and we focus on stewardship surrounding those items," explains Feltmate. "We are focusing on establishing a benchmark - say 15 per cent - of the decision making surrounding who we will use as suppliers, as being influenced by the suppliers’ environmental track record. So the process of selecting a supplier is positively influenced if they have their environmental house in order."
BMO has developed a similar program that it launched last fall.
"We have a sustainable procurement portion to the bid process now, and it’s environment plus some other social aspects as well," says Johnston. "It’s a two-part assessment that asks questions about the proponent’s values — do they have an environmental program, do they have someone responsible for these initiatives, do they have a value set proposition. And secondly, what’s unique about their product or service offering from an environmental and social perspective.
"All of this is a portion of the quantitative scoring of that particular bid," he continues. "We have now implemented for all competitive bids, and believe that over time we’ll cover our supply chain. It’s a sort of a heads-up to say, ’if you’re not doing this, maybe you should be thinking about it for the next time.’"
One of the first applications of this new system for BMO was when the company rebid its office supplies last fall. It wouldn’t take bids from suppliers unless they were providing their paper from sources certified under one of the internationally recognized sustainable forestry management standards.
So where are the big players putting their energies for the future?
"I think that thinking about climate change, for instance, is out of date," Feltmate says. "We’ve got to think about global change. In other words, how will the inter-relationships between environmental degradation, violent conflicts, invasive species, global food shortages, etc., collectively interact to affect business, society and the well being of nature in the long-term? Currently, views on sustainable development tend to be incredibly parochial, which to me is frightening for a host of reasons.
"One of my primary areas of focus is that companies don’t manage by disaster," Feltmate continues. "I find that a disproportionate number of companies across the board manage by disaster. When something is tearing up the place, that’s when they focus on it." Feltmate is interested in thinking beyond today or tomorrow and looking at the long-term impacts of OPG’s operations, and how those operations may be affected by external forces.
Every company should do the same.
The greenhouse gas emissions associated with the energy used during this event have been offset by Direct Energy through the permanent retirement of high-quality carbon offsets.
To read the related feature Material disclosure - Is your company disclosing everything it should to stakeholders? featuring details about the Ontario Securities Commission's OSC Staff Notice 51-716, click here.
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