CSRHub Blog Research on ESG metrics and comments on sustainability best practice

This blog was originally posted on Sustainable Industries and Triple Pundit.

In honor of the release of Trendwatch 2012, follow posts about sustainability and economic recovery on Sustainable Industries all week. Please also join Sustainable Industries and CSRHub Co-founder Cynthia Figge for a free webinar on February 29th on the role of sustainability in economic recovery.

By Cynthia Figge

Shakespeare’s dictum came into its own last year, as truth-telling drove the Arab spring, stirred the Wikileaks controversy, and brought down a series of politicians and candidates. We believe that corporate truths “will out” soon, thanks to the convergence of a number of powerful trends that will encourage more corporate transparency.

Corporations and other organizations have been gradually increasing their disclosure about their non-financial activities and behavior for years. A KPMG study recently found that 95% of the 250 largest companies in the world now report on their corporate responsibility. The penetration of reporting in Europe is especially high—over 70% of the companies they studied.

% of Companies Reporting CR Performance By Country for 2008 (green) and 2011 (blue)

According to Corporate Register, the number of companies that issue corporate social responsibility (CSR) reports has climbed spectacularly, since the middle 1990s.

Corporate Responsibility Reports Submitted Per Year Since 1992, As Tracked by CorporateRegister.com

Social changes remain gradual and linear until we reach a “tipping point” where a sudden shift occurs in “norms” and behavior.  We believe several trends are driving corporate transparency and disclosure towards a tipping point where disclosure will be normal and opaque behavior will be aberrant:

1. The power of crowds.  There is no point trying to hide a secret that a lot of people know.  Through social media (Facebook and Twitter), sustainability-oriented Web sites (such as TriplePundit, Greenbiz, JustMeans, and EnvironmentalLeader), and thousands of bloggers, activists, and non-governmental organizations, a company can no longer “control” disclosure.  Companies must instead participate interactively via social media to help shape how their behavior is perceived.

2. Mainstream media is starting to notice.  We’ve recently seen or heard from Bloomberg, Yahoo!, and the Huffington Post that they are starting or expanding coverage of sustainability.  These channels are both responding to market demands for this information and are helping to grow and define that demand.

3. Government regulation. Regulation is a dirty word currently, in the US. But, we have seen significant new rules regarding disclosure of social issues both in the US and overseas.  Some companies have seen enough demands for social information that they have decided to integrate their CSR reporting with their financial reporting in an “Integrated Report.”  If this becomes the norm, there could be a significant increase in both the amount and quality of data companies disclose. For instance, we expect the EPA’s implementation of its Greenhouse Gas Reporting program will increase resource and energy use reporting, despite an uncertain regulatory future for carbon pricing in the US.

4. The power of employees. Increasingly, employees want to work for a company whose social performance is consistent with their values. Eighty-eight percent of graduate students and young professionals factor an employer’s CSR position into their job decision and 86% would consider leaving their job if their employer’s CSR performance no longer held up according to PriceWaterhouseCoopers.  Employees can tell if their company is not progressing or just not communicating its progress. Employee dissatisfaction with their employer’s social performance may contribute to poor productivity and high turnover.

5. Supply chain management. Corporate supply chains are large, complex, fast-changing and critically important. In addition to a fast-growing suite of supply chain management tools to squeeze cost and performance advantage from their suppliers, companies are now starting to use these and other tools to generate social performance from them.

6. Competition. A company’s social responsibility posture reflects on its relationship with its customers, suppliers, and other stakeholders. As such, it is a component of any serious brand discussion and a component in corporate strategy. Companies who benchmark themselves will find places where they are doing well, but may be communicating their performance poorly. Stepped up communication of one company’s performance will drive a cycle of additional disclosures from its competitors.

7. The tide is turning. There is enough information available on about 5,000 companies and organizations to generate a broad and fair picture of their social performance.  (For example, the performance information and ratings on CSRHub.) But, there are millions of organizations that do not report much or any information. Each wave of disclosure into new areas such as second and third world companies, private companies, and not-for-profit organizations helps start sweeping everyone else along.

8. CSR is a profession. A growing cadre of corporate managers have experience managing programs that improve corporate sustainability. Some of these professionals have benefited from formal training programs—some even hold a degree from one of the sustainability programs that have been established at schools such as Columbia, University of Michigan, Bainbridge Graduate Institute, and Stanford. These managers will seek to incorporate the skills they have learned in more programs and—as they rise up the chain of command in their companies—they will communicate these skills to others.

9. A distinct and fast-growing market. According to a recent study by OgilvyEarth, at least 16% of US consumers already strongly identify themselves as sustainability-oriented. This is double the 8% estimate we had from another source three years ago—and we expect this market to keep growing rapidly.

10. Integration. Sustainability is being integrated into company business models. Vanguard companies such as Nike have already benefited from integrating sustainability principles into their innovation, employee engagement and marketing practices.  For example, Nike has partnered with nine organizations, including Yahoo, Best Buy, Creative Commons, IDEO, Mountain Equipment Co-Op, nGenera, Outdoor Industry Association, salesforce.com, and 2degrees to form the GreenXchange, a Web-based marketplace that Nike claims will allow "companies [to] collaborate and share intellectual property (IP) which can lead to new sustainability business models and innovation."

These ten trends are all moving companies and organizations towards greater disclosure and greater strength.  They are near the tipping point.  It is time to do all we can, to help push them towards transparency.

Cynthia Figge, co-founder and COO of CSRHub, is a forerunner and thought leader in the corporate sustainability movement. In 1996, she co-founded EKOS International, one of the first consultancies integrating sustainability and corporate strategy. Cynthia has worked with major organizations including BNSF, Boeing, Coca-Cola, Dow Jones, Noranda and REI to help craft sustainability strategy integrated with business. She was an Officer of LIN Broadcasting/McCaw Cellular leading new services development, and started a new “Greenfield” mill with Weyerhaeuser. She serves as Advisor to media and technology companies, and served as President of the Board of Sustainable Seattle. Cynthia has an MBA from Harvard Business School. Cynthia is based in the Seattle area.

By Carol Pierson Holding

In the early 1980s, Daniel Yankelovich, the master market researcher, gave a presentation to ad agency staff about coming demographic trends. His analysis came to the conclusion that the growing income gap would produce an increasingly angry underclass, a boiling cauldron that would one day explode. He showed us the future through demographics. I was hooked and subscribed to the magazine American Demographics.

So, 25 years later, when I saw the name of its founder, renowned demographer Peter Francese, in the e-newsletter Ad Age, I eagerly read his article. The piece “The Need for a New Baby Boom” proposes that two demographics, which taken together, could help with the U.S. economic recovery: The top 5% of baby boomer earners could lift consumer spending by $3-400 billion if they could be induced to spend another 10% of their incomes. By reversing the decline in birth rates, Francese argues, we would create grandchildren that boomers would lavish that extra cash on. The chart he uses to illustrate his point shows birth rates declining in every age group except the 40-44 year-olds – a small segment.

The comments that followed the article mostly excoriated poor Mr. Francese. Only one conceded that it might be a joke, but even giving Francese that license, what modern man in his right mind would suggest that women having babies is a solution to economic woes? Especially when his primary audience, ad industry employees, is 70% women. Even a kindly gent pining for grandchildren will get no quarter in this era of Mad Men-induced hypersensitivity to sexism in the ad industry, where women are still only 7-13% of top management

But an equal number of comments pointed out that Francese’s recommendations were far more dangerous: the environmental ramifications of promoting population growth are lethal. As we near the date in October when the UN projects global population will reach 7 billion (ahead of original projections), the conversation is already jumping ahead 72 years to when the UN projects population will hit ten billion globally and 483 million in the U.S. A population pressure that will likely result in mass species extinction and put “extreme pressure on food production, water and non-renewable resources.”

I do not have to enumerate to this audience what human activity is doing to our environment or why promoting higher birth rates is such a bad idea. In fact, Francese’s chart seems to be a good sign, rather than a problem that needs to be fixed.

These issues – birth rates, income and environmentalism – came together again on Saturday in Charles Blow’s NY Times column, albeit in a different way altogether. Blow highlights the fact that nearly one in four children in the U.S. go hungry and links child poverty to the 50% increase in unwanted pregnancies as Congress continues to enact laws that restrict abortion.

Maybe Francese is tone-deaf on the issue of too many pregnancies and child poverty because his own state, New Hampshire, has so many retirees, who moved there to take advantage of its lack of state sales tax. Accordingly, New Hampshire’s proportion of hungry children, 15.6%, is second to last in the U.S. (Only South Dakota has a lower rate; in Washington DC, the highest, 32.3% of children are hungry.)

Francese hears the numbers talking — there is a relationship between income and birth rates — but he allows the appeal of grandchildren to get in the way of what could be a real solution. I’d love to see him examine the inverse: What is the relationship between increasing poverty and environmental degradation? How would increasing birth rates worsen those factors?

Maybe he’d come up with a prescription that would still encourage baby boomers to spend 10% more, but on solutions to these closely linked problems: Sponsoring a hungry child? Adopting an unwanted baby? Buying an electric car? Retrofitting houses with insulation and Energy Star appliances? What about buying a tiny jewel of a house that’s totally self-sustaining? That would be almost as smart a move economically as moving to New Hampshire.

Carol Pierson Holding is a writer and an environmentalist; her articles on CSR can be found on her website.