CORPORATE SUSTAINABILITY INDICATORS AT TEXTILE INDUSTRY: A NEW PROPOSAL

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1 CORPORATE SUSTAINABILITY INDICATORS AT TEXTILE INDUSTRY: A NEW PROPOSAL Juliana Scapulatempo Strobel UFSC juliana.strobel@gmail.com Eliza Coral UNIVALI eliza@iel-sc.com.br Paulo Maurício Selig UFSC selig@deps.ufsc.br Abstract: The main objective of this paper consists in presenting an alternative model for the evaluation of corporate sustainability taking into consideration the environmental, social and economic dimensions. Three approaches were studied to embase the new model: the Dow Jones Sustainability Index, the Global Reporting Initiative, and the initiative of Ethos Institute. Based on a comparative analysis from a previous study (Strobel, Coral & Selig, 2004), an alternate model to measure the corporate sustainability through indicators is proposed. The model was applied to companies from the textile sector in the state of Santa Catarina, Brazil, through a fast and simple questionnaire, covering indicators corresponding to all variables defined in the model. The results indicate that the model makes it possible to verify the differences between the Corporate Sustainability Degrees of the researched companies, and to identify the discrepancies. The conclusion validates the proposed model as a tool for evaluating corporate sustainability through indicators. Keywords: Sustainable Development, Sustainability Indicators, Corporate Sustainability, Corporate Social Responsibility.

2 1 Introduction Nations, institutions, communities and individuals who are conscious of the importance of the principles for the sustainable development should participate in the search for the "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (WECD, 1987), although the three pillars of sustainability - economy, environment and society - are seen some times as conflicting to the neoclassical economy (Coral, 2002). The definition of methodologies that could make the evaluation of the sustainable development possible began in fact after the Conference Rio ECO 92, as means of implementation of the recommendations of the Agenda 21. According to Arthur Dahl (2002), in the beginning, the available environmental statistics would be used and organized in accordance with the three pillars of sustainability: the economic, the environmental and the social dimensions. At this time, the focus was given in the sustainability of the society and communities. Today, tools as the Dashboard for Sustainability (Hardi, 2000) and Ecological Footprint (Wackernagel & Rees, 1996), have been trying to supply the needs of the society related to indicators of sustainable development in a broadly way. In this context, companies have a definitive role once the productive activity cause great environmental, social and economic impact on the society as a whole. Themes as globalization, corporate governance, accounting and citizenship became key factors to the debates of the politics and administration in many organizations during the last years. According to Hazel Henderson (2003), the social contracts of the corporations need to be redrawn to reflect new realities, in which the knowledge is recognized as a key factor of the production and the social and environmental performance is a point of reference and exam. To evaluate the results of business actions towards sustainability it was necessary the use of measurement tools - the indicators of corporate sustainability. Among the initiatives developed for this end, three of them, of larger importance in the Brazilian context, stand out: Global Reporting Initiative - GRI, Dow Jones Sustainability Índex, and Ethos's Institute initiative. In a previous study (Strobel, Coral & Selig, 2004) a comparative analysis was accomplished among these approaches that revealed the existence of important

3 differences among them in what refers to objective, range, and applicability of the initiatives. Therefore, an alternative model was developed for the measurement of the corporate sustainability degree with the use of indicators, which gathered all the strengths of each one of the approaches studied previously. This article presents the formulation and application of this new proposal, in order to supply the institutions with an important tool for the achievement of goals for sustainable development in the business context. 2 Corporate Sustainability Indicators As definition, an indicator is a tool that makes it possible to obtain information about a given reality, having as main characteristic the synthesization of much information, keeping only the essential meaning of the analyzed aspects (Mitchell, 2004). The indicators measure the success' degree of a strategy's implantation in relation to the achievement of the established objective. Each indicator, when together with others, can increase the quality of the intended information. According to Sustainable Measures (2003), sustainability indicators are different from traditional economic, social and environmental indicators of progress, because these measure the changes of an aspect as if it was entirely independent of the others. However, sustainability requests an integrated vision of the world, with multidimensional indicators that show the interrelations among the economy, the environment and the society. Arthur Dahl (2002) comments the two existent challenges in the definition of indicators for sustainability. The first is that it is necessary to capture the dynamics of sustainability through the indicators, as it is the case of the future generations' perspective. The second challenge is transmitting a wide development concept that is beyond the economic aspect, which is measured merely through material wealth. The definition of appropriate indicators for sustainable development should be thoroughly studied and, once established, it should be flexible enough so that the group of indicators could be altered when reality changes happen. For the development of the model proposed in this paper, a comparative analysis among three important approaches for the measurement of corporate sustainability was accomplished (Strobel, Coral & Selig, 2004) and it is briefly described below.

4 The Dow Jones Sustainability Index - DJSI was the first corporate sustainability indicator of global level released in September 99 to watch the companies leaders performance in terms of corporate sustainability (Dow Jones, 2003). It supplies the companies with a financial evaluation of its sustainability strategy, as well as of its administration of the opportunities, risks and costs attached. It is derived and integrated with Dow Jones' traditional global indicators, having the same calculation methodology, revision and publication of the indexes. For Dow Jones (2003), the corporate sustainability is a business approach that creates value to the long term shareholders, through the use of opportunities and the risks' administration that come from economic, social and environmental aspects. The Global Reporting Initiative - GRI was developed by the American nongovernmental organization CERES - Coalition for Environmentally Responsible Economies and by the United Nations Environmental Program. The objective of GRI is to increase the quality, the rigidity, and the usefulness of reports for corporate sustainability. According to Global Reporting Initiative (2003), the report should be voluntarily used by the organizations that want to report the economic, environmental and social dimensions of their activities. It aims for advising organizations and stakeholders in the articulation and understanding of companies' contributions to the sustainable development. It can be used as much as an informal reference, as to be compared to other companies. The Ethos Indicators for Corporate Social Responsibility were developed in Brazil in 2000 to serve as a self-diagnosis tool whose main purpose is to assist companies to manage its current social and environmental impacts. Ethos Institute's objective is to mobilize companies for the cause of corporate social responsibility through a tool of broad administration and to improve the quality of social reports. Ethos Institute (2003) informs that, at first, the use of indicators is essentially internal, but the companies that want to compare their results with the best practices of corporate social responsibility should send them to the Ethos Institute. The company will then have access to the comparison of its indicators with the benchmarking group. After the accomplishment of the comparative analysis (Strobel, Coral & Selig, 2004), it was observed the possibility of an alternative model proposition, that could combine the strengths of each initiative. It was developed and applied in companies of the textile sector.

5 3 Model proposal For the definition of the group of indicators for corporate sustainability of the proposed model, it was necessary to identify the main themes that influence the environmental, social and economic realities of an organization. Through the comparative analysis of the initiatives, themes were rearranged under the form of the variables of the model, each one composed by indicators that are the means of verification of the corporate sustainability (Strobel, 2005). Once the indicators, themes and variables were identified, a questionnaire was elaborated with 34 questions with multiple answers, representing 19 variables, 34 themes and 124 indicators defined in the model. This questionnaire was applied in companies of the textile sector, making the accomplishment of a comparative analysis of their sustainability results possible. For the calculation of the Corporate Sustainability Degree (CSD) of the researched companies, the weights of each item of the questionnaire were established, in order to make the transformation of qualitative indicators into quantitative ones possible, and to enable a quantitative analysis of corporate sustainability. The weights were calculated through the software Macbeth (Bana, Costa & Vansnick, 1995). The method consists of comparing fictitious actions with different performances in only two criteria, and with identical performances in the others. Once the problem is structured and the group of potential actions is determined (in this study, the answer alternatives), the evaluation of the potential actions is realized according to the developed model. The sum of the maximum weights is equal to the maximum punctuation that a company can obtain when answering the questionnaire. The sum of the actual punctuation obtained in the answers is called "Corporate Sustainability Degree" (CSD), that can be subdivided in the Environmental Dimension (CSD-En), Social Dimension (CSD-S) and Economic Dimension (CSD-Ec). Each dimension represents 33,3% of the total, so that they have equal weights and represent the concept of sustainable development (Strobel, 2005). 4 Application and results The application of the proposed model has counted with the participation of four companies of the textile sector, with the involvement of a person responsible for the answer of the questionnaire, who also worked as a facilitator in the contact with several

6 internal departments. The interaction with this person was made mainly through telephone and , and it was not the objective of this model to accomplish an auditing of the rendered information. The results obtained for each sustainability dimension are following commented. The environmental dimension of the researched companies is very specific because the Brazilian textile sector is characterized as a great consumer of process water, colorants, and chemical products used through a complex productive chain. Due to the great production volume, it is also bulky the volume of residues generated, and their waste incorporate substances coming from all the productive stages of textile fibers (Knuth, 2001). The following table demonstrates the results obtained by each researched company, by variable of the environmental dimension: Table 1 Environmental Dimension Results Corporate Sustainability Degree (CSD-En) Variable Maximum weight A B C D Environmental Strategy 7,7% 7,7% 2,7% 4,0% 4,8% Environmental Legislation 5,3% 4,0% 4,0% 4,0% 4,0% Environmental Management Tools 6,7% 3,6% 3,3% 1,2% 3,3% Emissions, waste and residues 4,7% 4,7% 3,7% 3,7% 3,7% Water and Energy Consumption 5,7% 0% 5,7% 1,7% 1,7% Natural Resources Conservation Projects 3,3% 2,2% 0,0% 3,3% 3,3% Total Environmental Dimension (CSD-En) 33,3% 22,1% 19,5% 17,9% 20,9% Source: Strobel (2005) The researched companies already hold a special attention for environmental subjects. Three of the four researched companies have ISO14000, certifying the establishment of a formalized Environmental Management System. It is interesting to observe that in the variable "water and energy consumption", only the company B was able to improve the consumption' efficiency. The biggest differential of the company A in the environmental dimension is the fact of affirming to possess development projects of new products with reduced impact during the whole life cycle, as well as to use ecodesign tools. Such attitude is fundamental for the commitment to the principles of sustainable development. In a general way, the environmental strategy of company A is the most complete among the researched companies.

7 At the social dimension, it was observed an increase in the companies' attention of the Corporate Social Responsibility subject during the last few years. More and more the importance of business attitude towards the improvement of the quality of life is recognized, through the treatment of the employees, of the customers, and even of the community. The following table demonstrates the results obtained by each researched company, by variable of the social dimension: Table 2 Social Dimension Results Corporate Sustainability Degree Variable (CSD-S) S) Maximum weight A B C D Social Strategy 5,3% 4,9% 2,9% 2,9% 5,3% Employment 4,7% 2% 1,6% 1% 2,3% Training. 4,7% 4,7% 0,9% 1,2% 1,6% Society 4,7% 2,6% 0,4% 2,9% 3,2% Ethics 4,7% 0% 0% 0% 0% Health and Safety 4,7% 3% 0,8% 1,2% 2,0% Responsible Product 4,7% 4,7% 0,4% 0,6% 0,8% Total Social Dimension (CSD-S) S) 33,3% 21,8% 7,0% 9,9% 15,2% Source: Strobel (2005) It is noticeable that the conscience of corporate social responsibility is already a reality, in an informal or openly recognized way. The use of social attitudes is sometimes used as marketing, because it is believed that it can be a differential before other companies. Anyway, this is a process that is still beginning. The researched companies affirm to attend to the effective legislation as well as to respect the Human Rights. On the other hand, no researched company attends to the index of employees' satisfaction. Between 2002 and 2003 the medium real wage of those researched was reduced, as example of what was observed in this period in the Brazilian economy as a whole. In general, there is still a lot to be improved in the requirement "Health, safety and work" conditions, and the politics for valorization of the diversity, when existent, are pretty informal. The most relevant point at this dimension is the fact that none of the researched companies possesses a formalized ethical code, which would contemplate items as corruption, discrimination, environment, employees' safety and information confidentiality.

8 The companies in general are already used to working with the economic dimension, given that its survival is only guaranteed through financial health. Even so, it is observed among the researched companies a varied behavior, in that some already act in agreement with the consolidated precepts of business administration, while others still have a great gap to fill out. The following table demonstrates the results obtained by each researched company, by variable of the economic dimension: Table 3 Economic Dimension Results Corporate Sustainability Degree Variable (CSD-Ec) Maximum weight A B C D Economic Strategy 9,3% 5,8% 2,3% 5,3% 5,2% Management Tools 8,0% 5,3% 1,4% 2,7% 5,1% Tecnology 8,0% 4,1% 1,7% 3,6% 2,9% Quality 8,0% 5,6% 2,5% 4% 5,6% Total Economic Dimension (CSD-Ec) 33,3% 20,7% 7,9% 15,4% 18,6% Source: Strobel (2005) Just the company B doesn't possess a regular and formalized process of strategic planning with the establishment and attendance of short and long term goals. The competitiveness is evaluated through consultation of the commercialization channels, and not even the Brazilian Association for the Textile Industry possesses the information of market shares of the Brazilian textile sector. Anyway, the companies consider that they act at a stable market. All researched companies affirm to accomplish the processes control and the traditional analysis of financial demonstrations, but the companies A and D possess a larger range of administration tools, what enables a better control and power of decision on the part of the leaders. In the Technology item there is a great space for improvement from all of the researched companies, since technological leadership is a fundamental requirement for the maintenance of business competitiveness. The companies A and D possess certification ISO9000, but the index of defects is relatively big and the delivery of products on time can be still improved. 5 Conclusions The comparative analysis of three approaches for the measurement of corporate sustainability served as a base for the definition of indicators, themes and variables of a new model that converges with the precepts of sustainable development in the business context. This structure enabled the analysis of the companies by variable,

9 helping the identification of strengths and weaknesses in each sustainability's dimension. The evaluation of the obtained results made it possible to verify that, in a general way, the environmental dimension is the best assisted according to the proposed model, although it still have gaps to be filled out. This fact evidences that in the textile sector the environmental legislation is rigorous and it is assisted by the researched companies, independently of its economic or social situation. Referring to the social dimension, it is observed that there is a trend that the companies with better economic performance invest more in its social strategy, especially in those variables that involve their employees directly, like job and professional training. In the studied companies, the larger the Corporate Sustainability Degree - Economic of the company is, the greater is its dedication to themes related to the variable Society, like programs for diversity's valorization and the participation of the company in the community. However, an important component of the social dimension - the existence of an ethical code - is not found in any of the researched companies. The themes and variables defined in the proposed model proved to appropriately represent the concepts of corporate sustainability, reflecting the situation of the environmental, social and economic dimensions in each company. It was indeed possible to observe the difference among the sustainability degrees of the researched companies, and the proposed tool aids in the measurement of the Corporate Sustainability Degree, supplying subsidies for the identification of the strengths and weaknesses. Additionally, it indicates areas for improvement through the observation of the variables in which the company still didn't reach its maximum punctuation. In this way, the proposed model can be used to measure the degree of sustainability of an entire industrial sector, making the relative comparison of the companies possible, given the reality and specificity of the variables for the analyzed sector. A company cannot have a high sustainability degree if it doesn't observe the economic, social and environmental tripod, because, if it is not economically solid, it won't have enough resources to invest in the social and environmental dimensions. These are subjects that are usually beyond the day-to-day administration processes of producing goods and services. Therefore, the balance among all the variables that includes the concept of corporate sustainability is fundamental for the indicators to be effective at

10 medium and long terms, contributing to establish a solid and measurable relationship of the economic factors with the social and environmental ones. An initiative of indicators for corporate sustainability under the focus of sustainable development should aim for the return of medium and long terms, equally considering the economic, social and environmental dimensions. The proposed model proved to assist to theses requirements, and it can serve as a useful tool for the evaluation of the actions towards sustainability in Brazilian companies. Acknowledgments We would like to thank the Instituto Euvaldo Lodi de Santa Catarina for the support to this study. Special thanks to the companies for the participation in this study. References Bana e Costa, C. A., Vansnick, J. C. Uma nova abordagem ao problema de construção de uma função de valor cardinal: MACBETH. Investigação Operacional, v. 15, p Coral, E. Modelo de Planejamento Estratégico para a Sustentabilidade Empresarial. (Tese de Doutorado). UFSC. Florianópolis Dahl, A. Usefulness of indicators for sustainability. In: Forum on Science, Technology and Innovation for Sustainable Development, Genebra, Switzerland, Dow Jones Sustainability Index. Dow Jones Sustainability Index. In: Access: 11/17/ Ensslin, L., Montibeller Neto, G. Noronha, S. M. Apoio à Decisão: Metodologia para Estruturação de Problemas e Avaliação Multicritério de Alternativas. Insular. Florianópolis Global Reporting Initiative. Sustainability Reporting Guidelines. In: Hardi, P.; Zdan, T. J. The Dashboard of Sustainability. Draft paper, Winnipeg: IISD, 2000.

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