GEMI - BSR Survey. Sustainable Business & Strategy: Views From the Inside

Transcription

1 GEMI - BSR Survey Sustainable Business & Strategy: Views From the Inside November 15, 2006

2 Participant Overview This survey examines aspects of corporate social responsibility (CSR) programs management within GEMI and BSR companies. 54 responses to the survey; not all respondents completed all questions. Broad industry coverage; however, most respondents are headquartered in North America Q1. Which industry best describes your company's primary business? (n=54) Q2. In what region is your company headquartered? (n=53) Other (not specified) 31% 35% Products 11% Europe Food & Agric. Transportation 2% 4% 6% Finance 7% IT & Communications 15% Oil, Gas, Minerals North America 89% 1

3 Participant Overview Annual sales of participants ranged from $2 million to $95 billion, with an average (mean) of $21 billion Q3. What is your company's most recently reported annual sales? (n=45) # of Companies <1 Billion 1-10 Billion Billion Billion Billion Billion Billion > 60 Billion Sales (US $) 2

4 Participant Overview The majority of respondents (77%) are with companies that are BSR members; 46% of respondents are with companies that are GEMI members. Q4. Is your company a member of BSR, GEMI or both? (n=53) Both 23% GEMI (Only) 23% BSR (Only) 54% 3

5 Participant Overview A majority of respondents are at the VP or Director level and work within the EHS or CSR function. Q5. What is your position within your company? (n=53) Q6. What function do you work in within your company? (n=51) Other* Other* Officer 2% 9% Director Legal (2%) Supply Chain (2%) 12% EHS Manager 17% 49% Communication (2%) Public Affairs Community Outreach/ Relations 4% 6% 41% VP 23% CSR 31% *Other includes: Senior Director, Executive Director, Executive, Assistant VP, Analyst *Other includes: Sustainability (2); Gov't Affairs & Corp Responsibility; Director of Global Business Development and CSR; Foundation; ESH/CSR/Supply chain/communications 4

6 CSR Ownership Twenty percent (20%) of respondents are with companies that have a functional area dedicated to CSR; most companies house CSR within some other function. Other includes: HS and Public Affairs Corporate Citizenship Sustainability Executive level sustainability committee External Affairs Gov't Affairs & Corp Responsibility Business Development and CSR Environment & Social Responsibility report to SVP legal and ESR HSEC (Health, Safety, Environment, Community) Marketing Research Foundation People and Culture Policy Committee Shared responsibility Global, cross-functional team Q7. Which functional area in your company "owns" or "leads" the CSR function? (n=50) Other* 30% 20% 14% CSR EHS Legal 4% 6% 12% Supply Chain 6% 8% Public Affairs Community Outreach/ Relations Communication 5

7 SD Champion For 28% of respondents, the CEO is the main champion of sustainable development for the company. Other includes: COO Vice Chairman SVP Marketing and Chief Marketing Officer Head of the Foundation VP, Supply Chain Sustainability VP, Environment & Sustainable Development Head of Sustainability (2) Chairman of Sustainable Development Leadership Panel Director of Environmental Affairs CSER Council EVP Community Affairs Q8. Who is the main champion of SD in your company? (n=49) Other* Head of Public Affairs 6% Head of CSR 24% 28% 18% 24% CEO Head of EHS 6

8 CSR Stage of Evolution Most respondents (73%) are with companies that have moved beyond the initial stages for CSR and have at least begun implementation (with 21% considering themselves champions). Q9. Where does your company operate on the following CSR experience continuum? (n=48) Response Percent 50% 40% 30% 20% 27% (13) 29% (14) 73% 23% (11) 73% of respondents have moved beyond the initial stages for CSR and are either implementing, integrating, or championing the programs. 21% (10) 10% 0% 0% PREPARE (minimizing CSR opportunities while assessing opportunities) COMMIT (choosing a strategic direction for CSR actions) IMPLEMENT (make CSR a part of daily life within the organization) INTEGRATE (make CSR a part of daily life within the organization CHAMPION (act as a CSR champion within your industry) 7

9 CSR Definition Definitions for CSR vary among the respondents. Corporate Citizenship We tend to call it "Corporate Citizenship". Planning a discussion on opportunities to improve, including defining exactly what Corporate Citizenship means to our company. We say corporate citizenship, and it is how we run the business responsibly. If sustainable development is the goal then corporate citizenship is how we can get there. Health is critical to a sustainable future. Being a better corporate citizen. Affecting our social and environmental footprint in our communities in a positive way. CSR within our company is defined as Corporate Citizenship and is our internalization of the commitment to the UN Global Compact. It includes HSE and is linked with our Compliance & Ethics program. We define CSR as Global Citizenship and it is an outgrowth of our company values: we create long-term shareholder value through a sustainable, responsible business model, we strive to make a positive contribution in all our communities, provide an open and respectful workplace, and engage our employees with opportunities to grow. Aligned with External Definitions In line with the 1987 Brundtland Report we define sustainable development as: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs. The idea that economic, social and environmental interests are not separate, but dynamically interdependent, is central to this definition, and we try to balance these interests in everything we do We don't use the term CSR, but instead use "our contribution to sustainable development", for which we use the Brundtland definition. Meeting the needs of society today, while respecting the ability of future generations to meet their needs. We support the BSR definition of CSR: "Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of our business." 8

10 CSR Definition Definitions for CSR vary among the respondents. (Continued) Responsible Business/Business Ethics Responsible business. Sustainable business. It is about being a good business in every sense: socially aware, commercially successful, and environmentally friendly. CSR is about having a positive and lasting impact in our communities, our workplace, the marketplace, the environment. Encompasses Ethical Business Practices Social Responsibility issues = Code of Conduct Environmental best practices Philanthropy. Conducting business in a manner that reflects the high ethical and moral values of our company, and assuring that our vendors do the same. Promoting commercial success in ways that honor ethical values and respect people, build communities and preserve the natural environment. Assure that working and environmental conditions and payroll and employment practices in factories where our merchandise is produced meet the standards the company has defined in our code of ethics. It is the pragmatic way to do the right things while doing business in respect to the law, society, business environment, environment, peers, and all the stakeholders involved in a civilized society. Positive Impact (or No Adverse Impact) That our business shall have an overall positive impact on people and the environment. Ultimately, every decision business makes positively impacts planet and people. Contributing to the social development of the communities in which we operate. Not just financially, but socially. Continually working to understand your impact and make it positive / regenerative. Our purpose is to improve lives day in and day out. We contribute to improving quality of life for people around the world both through what we do and how we do it. 9

11 Definitions for CSR vary among the respondents. (Continued) Triple Bottom Line CSR Definition Transforming our core values and brand into an operating system that balances the economic, social, and environmental demands of society, including key stakeholders. Managing to the triple bottom line - environmental, social, economic. Externally: triple bottom line Internally by our core values. The commitment the company has to integrate ethical, social and environmental concerns into its business. CSR on a global scale means reducing our impact on the environment, protecting the safety of our employees and customers, and supporting the communities where we do business-- while ensuring the sustained growth and profitability of the company. Corporate responsibility combines financial performance with commitments to employees, the environment, and communities. We don't believe that one substitutes for the others and our record sustains this. Successfully running the business so that all stakeholders - stockholders, employees, customers, business partners and the community - benefit. Finding intersections between the needs of the globe, and the goals of our company, and making investments and taking actions that benefit both. Sustainability is an approach to balanced decision making that takes into account social,economic and environmental factors. We have five focus areas that guide our efforts: Reduce our carbon footprint; Provide products and services for a competitive, carbon constrained world; Attract and retain a high quality workforce; Help build sustainable communities; Practice transparency and good governance. 10

12 Definitions for CSR vary among the respondents. (Continued) Other CSR Definition With Our Credo -- a 60+ year-old document that outlines our strategy to be successful/sustainable. The Credo permeates every aspect of business and decision-making. Best defined in (internal company) Pledge. How our company advances business objectives, implements policies, applies social investment and philanthropy and exercises our influence to make a productive contribution to society. Our social responsibility effort consists of three core components: a) HES systems, structure and performance b) Community enrichment c) Ethical business conduct. Company's ability to manage Society and stakeholders expectations and interests in a SD framework. Freedom to operate and sell without regulation or restriction while protecting the environment, returning value to the shareholders, and creating a culture of excellence within the company. To operate in an environment where living the mission is valued equally to performing one's job well. This refers to individual well-being, human rights for employees and business partners, environmental sustainability, work-life integration, and more. It is partly about how you treat employees and contractors, the management of this are is already well embedded within Human Resources and Health & Safety functions. The newer areas include how you manage the positive and negative impacts that the company's activities can have on communities and environment; how you influences national and regional governments in things like the management of security forces and redistribution of taxes. It is about communicating to external stakeholders about the company's activities and intention through face to face engagement, and inclusion in decision making or written reports. 11

13 Linking CSR and Strategy Sustainability is treated as an important subject at the highest level of respondents companies. Q11. Our CEO has made the company commitment to sustainability clear in a public manner. (n=46) Q12. SD is discussed at the Board of Directors level. (n=46) Neither Disagree or Disagree 15% Disagree 7% 7% 36% 72% Don t Know Disagree 2% 7% Disagree 9% Neither Disagree or 17% 28% 65% 35% 37% 72% of respondents agree (or strongly agree) that the CEO has clearly communicated the company s commitment to sustainability to the public. 65% of respondents agree (or strongly agree) that SD is discussed at the Board level. 12

14 Linking CSR and Strategy Most respondents are with companies in which sustainability concerns are considered as part of annual strategic goal setting at all levels of business. Q13. Sustainability concerns are an integral part of our annual strategic goal setting process at the following levels of our business. (n=43) = Business Unit 12% 52% 26% 7% 2% = = Neither Disagree or Company Wide 21% 37% 21% 14% 7% = Disagree = Disagree Site Level 7% 46% 29% 10% 7% Individual 2% 43% 38% 10% 7% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Response Percent 13

15 Linking CSR and Strategy Typically, respondents companies have KPIs for all aspects of CSR. Q14. Has your company established organization-wide targets or KPIs (key performance indicators) around the following? No Yes 14% Employee H&S 86% 16% Environmental 84% 23% Ethics 77% 30% Supplier 70% 30% Labor 70% 42% Community & Social 58% 100% 80% 60% 40% 20% 0% 0% 20% 40% 60% 80% 100% Percentage of Companies Percentage of Companies 14

16 Linking CSR and Strategy Environmental and health & safety KPIs are the indicators most commonly shared publicly. Q15. Are KPIs for the following areas shared publicly? Employee H&S Practices 28% 62% 10% = All Shared Environmental Practices 27% 61% 12% = Some Shared = None Shared Ethics Practices 24% 44% 32% Community and Social Practices 23% 48% 29% Labor Practices 23% 40% 37% Supplier Practices 17% 50% 33% 0% 20% 40% 60% 80% 100% Percentage of Companies Responding 15

17 Linking CSR and Strategy Most respondents (70%) believe that their company s organization-wide KPIs have been an effective tool to focus internal attention on CSR issues. Only one respondent strongly disagrees that KPIs have been an effective tool for focusing attention on CSR issues Q16. Our organization-wide KPIs have been an effective tool that focuses staff attention on these issues. (n=43) Neither Disagree or Disagree 23% Don t Know 5% 2% 37% 70% 33% 16

18 Linking CSR and Strategy Most respondents (over 70%) are with companies that have KPIs related to CSR at the business unit and site level. Q17. We have established KPIs at other levels of the organization including the following. (n=36) Business Unit 78% Site Level 72% Division 50% Individual Other (please specify) 11% 47% Other includes: Factories Each business unit sets its own KPIs Process not fully implemented Goals for CSR not set 0% 20% 40% 60% 80% 100% Response Percent 17

19 Linking CSR and Strategy Almost half (47%) of respondents believe they have the resources necessary to meet sustainability goals. Q18. The resources necessary to meet our sustainability goals are made available to me. (n=43) One quarter (25%) of respondents believe that they do not have sufficient resources to meet sustainability goals. Disagree 2% Disagree 23% 9% 38% 47% Neither Disagree or 28% 18

20 Linking CSR and Strategy Most respondents (58%) are with companies that, at the corporate level, have relationships with several CSR organizations. Q19. At the corporate level we have primary relationships with the following number of CSR organizations. (n=43) Number of Companies Four companies had a primary relationship with only one CSR organization Twenty-five companies (58%) had a primary relationship with four or more CSR organizations. 0 Don't Know >5 Number of CSR Organizations 19

21 Collaboration & Integration Sixty one percent (61%) of respondents believe that their company s sustainability work is aligned and coordinated with its overall business strategy. Q20. Our sustainability work is well aligned and coordinated with our overall company strategy. (n=43) Disagree Disagree 16% 2% 16% Neither Disagree or 21% 61% 45% 20

22 Collaboration & Integration Most respondents are with companies in which both environmental and social responsibility efforts are managed at the Vice President or other officer level. Q21. The leader charged with our environmental efforts has the title of... (n=40) Q22. The leader charged with our social responsibility efforts has the title of... (n=41) Manager 8% 10% Officer Manager 3% 7% Officer Director 30% 52% Vice President Director 41% 49% Vice President 21

23 Collaboration & Integration Leaders of both environmental and social responsibility efforts typically report at high levels within their organizations. Q25. The leader of our environmental efforts is how many steps removed from the CEO. (n=40) Number of Companies (72%) companies (72%) report that the leader of their environmental efforts is only one or two steps removed from the CEO. 9 Mean Value = 2.2 Steps Steps Removed from the CEO Number of Companies Q26. The leader of our SR efforts is how many steps removed from the CEO. (n=41) (83%) Almost half (49%) of companies report that the leader of their social responsibility is only two steps removed from the CEO Steps Removed from the CEO 7 Mean Value = 2.2 Steps 4 11 companies (27%) one quarter of companies report that the leader of their social responsibility effort is only one step removed from the CEO. 22

24 Collaboration & Integration Seventy nine percent (79%) of respondents are with companies that publicly report on sustainability goals; however, only 45% believe that reporting is an invaluable business tool. Q23. We report our sustainability goals and progress publicly in print or on the web. (n=42) Q24. Reporting is seen widely as an invaluable business tool for us. (n=42) 26% disagreed that reporting is an invaluable business tool. Disagree Disagree Disagree Neither 7% 2% 5% Disagree or 12% Disagree 21% 17% 46% 79% 45% 28% 33% Neither Disagree or 29% 23

25 Collaboration & Integration Forty-two percent (42%) of respondents believe that their company s government affairs efforts are well aligned with sustainability goals. Q27. Our government affairs efforts are excellently aligned with our stated sustainability goals. (n=43) Don t Know Disagree 18% 7% 5% 37% 42% Neither Disagree or 33% 24

26 Collaboration & Integration Many respondents (38%) do not agree that sustainability is built into brand messaging and marketing in their companies. Q28. Sustainability is built into our brand messaging and marketing. (n=43) Disagree 2% 9% Disagree 38% 36% 23% 30% Neither Disagree or 25

27 Collaboration & Integration Many respondents (47%) are with companies that collaborate with NGOs to deliver on environmental goals. Q29. We are actively engaged in collaboration with NGOs to deliver our environmental goals. (n=43) Disagree Don t Know 28% 2% 16% 47% 31% Neither Disagree or 23% 26

28 Collaboration & Integration Respondents companies split on whether they form strategic partnerships with governments to solve environmental and social challenges. Q30. We have formed strategic partnerships with governments to solve environmental challenges. (n=43) Disagree Disagree 7% 19% Q31. We have formed strategic partnerships with governments to solve social challenges. (n=43) Don t Know Disagree 5% 5% 16% 36% 29% 45% 39% 34% 49% 26% 33% 19% Disagre e 7% Neither Disagree or Neither Disagree or 45% of companies indicate that they form strategic partnerships to solve environmental problems, while 36% of companies do not. 49% of companies indicate that they form strategic partnerships to solve social problems, while 39% of companies do not. 27

29 Collaboration & Integration Most respondents are with companies that integrate environmental considerations into both the product design and procurement processes (61% and 53%, respectively). Q32. We have integrated environmental considerations into the core of our product design processes. (n=43) Q34. We have integrated environmental considerations into the core of our product procurement processes. (n=43) Disagree 2% Disagree 23% 33% Disagree 20% 17% 61% 53% Neither Disagree or 14% 28% Neither Disagree or 27% 36% 28

30 Collaboration & Integration Respondents companies also tend to integrate social considerations into product design and procurement. Q33. We have integrated social considerations into the core of our product design processes. (n=43) Q35. We have integrated social considerations into the core of our product procurement processes. (n=43) Disagree 26% 7% Disagree Don t Know 19% 2% 16% 39% 46% 51% 28% Neither Disagree or Neither Disagree or 28% 35% 29

31 Tying CSR to Performance Most respondents (56%) do not agree that management compensation ties directly to environmental performance in their companies, and 47% do not agree that it ties to social performance. Q36. Executive business management compensation is tied directly to our environmental performance. (n=43) Q37. Executive business management compensation is tied directly to our social performance. (n=43) 56% Disagree 16% Don t Know 40% Disagree 7% 21% 16% Neither Disagree or 47% Disagree Disagree Don t Know 14% 33% 7% 2% 32% 12% Neither Disagree or 34% 30

32 Tying CSR to Performance Almost half (48%) of respondents believe that board-level oversight of social performance is strong at their companies, while fewer (36%) believe the same of environmental performance. Q39. We have strong board-level committee oversight of our social performance. (n=42) Q38. We have strong board-level committee oversight of our environmental performance. (n=42) Don t Know Disagree 5% 2% Disagree 21% 17% 48% Don t Know Disagree 2% 2% Disagree 29% 19% 17% 36% Neither Disagree or 24% 31% 31% Neither Disagree or 31

33 Measuring Results and Outcomes According to respondents, positive media coverage was the most important measure of CSR success. Q40. Indicate the importance of the following measures of CSR success by your organization. (n=39/40) Positive Media Coverage 43% 33% 10% 13% 3% = Very important = Important Relationships Developed 38% 28% 23% 8% 3% = Somewhat Important = Not Important External Rewards/Recognition 31% 36% 18% 10% 5% = Not Applicable Return On Investment 18% 46% 23% 8% 5% Internal Rewards/Recognition 10% 44% 28% 10% 8% 0% 20% 40% 60% 80% 100% Percentage of Companies Responding 32

34 Measuring Results and Outcomes Companies measure CSR by a number of different ways. Q41. Other ways we measure our social and environmental successes include: (n=17) Evaluation By External Organizations How we're rated by the SRI community as compared to our peers Results of key CSR surveys such as: UK Business in the Community Corporate Responsibility Index, SAM - DJSI assessments, inclusion in FTSE4Good, Carbon Disclosure Project Inclusion in the FTSE4Good or DJSI Inclusion in SRI indexes and ratings by SRI or other external groups DJSI/ FTSE4Good/BitC and other analyst ratings Performance Against Internal KPIs and Measures Through internal global Employee Climate Survey and through progress made against our commitments and KPIs targets Measure select social and environmental successes through Corporate Health, Safety and Environmental Assessment program Incidents, permits gained on time, non-compliances, CSR training completed, SIA's completed and up-todate 33

35 Measuring Results and Outcomes Companies measure CSR by a number of different ways. Q41. Other ways we measure our social and environmental successes include: (n=17) Business Measures Low employee turnover and high productivity at our factories Social/environmental product sales Business value in promoting products License times for new projects Employee morale Reputation/Relationships Local consensus around operations. Good relationships with communities and national-local authorities. Reputation and minimization of risks and negative events such as sabotage, oil spills, protests, boycotts. Volunteerism within the community Feedback from customers and employees about products and practices. Employee surveys, government agency feedback The way colleagues feel about and speak about the efforts 34

36 Measuring Results and Outcomes Sixty-seven percent (67%) of respondents agree that their companies have realized gains in process and product improvements as a result of sustainability efforts. Q42. We have realized important gains in process and product improvements as a result of our sustainability efforts. (n=40) Don t Know Disagree Disagree 14% 3% 3% 10% Neither Disagree or 13% 67% 57% 35

37 Measuring Results and Outcomes Strong systems to measure environmental impacts appear to be more prevalent than those to assess social impacts. Q43. We have strong measurement systems to assess our environmental impacts. (n=40) Q44. We have strong measurement systems to assess our social impacts. (n=40) Don t Know Disagree 3% Disagree 5% 8% Neither Disagree or 23% 32% 61% Don t Know Disagree 3% 5% Disagree 28% 10% 27% 37% 29% 61% of respondents agree that their companies have strong measurement systems to assess environmental performance, while only 37% believe their companies have strong systems to assess social performance. 27% Neither Disagree or 36

38 Measuring Results and Outcomes Almost half (49%) of the respondents have confidence in the ability of their companies to effectively measure company environmental and social impacts. Q45. We have confidence in our ability to effectively measure our impacts in these areas. (n=40) Disagree Disagree 15% 3% 5% 49% Neither Disagree or 33% 44% 37

39 EHS&S + CSR Roles Q46. If your CEO could only add one more person to support sustainability in the company where would this person likely be positioned in the organization and what skills must they possess? (n=31) Senior Management We truly need a Sustainability/Corporate Citizenship Champion. This person should report directly to the CEO and serve as an adviser to the Management Committee or be on the Management Committee. The CEO her/himself Regardless of solid line reporting relationship, the person would be accountable to the Board through the Audit Committee on CSR issues. CSR/Sustainability/EHS Function VP CSR reporting directly to CEO. Strong experience base in CSR leadership. VP for Social Director of social & environmental affairs Director in Corporate EHS. Either in the Foundation, specifically assigned to work on CSR or added to the EH&S team, again, specifically focused on the broader issues of CSR In the Sustainability department working with a product area In Corporate Social Responsibility department. Skills in public policy, writing, negotiating. This person would report to the manager in charge of environmental sustainability and would possess technical, environmental science knowledge 38

40 EHS&S + CSR Roles Q46. If your CEO could only add one more person to support sustainability in the company where would this person likely be positioned in the organization and what skills must they possess? (n=31) (Continued) Supply Chain Supply Chain -- customer focus on sustainability Positioned within Supply Chain. Process improvement/industrial engineering Marketing In the Corporate Marketing group focusing on strategic business development with skills in developing emerging business opportunities. Sales/Marketing. Need to be able to bridge our work in CSR/SD with effective consumer messaging. External Relations Public Affairs. Global Business Experience, Scientific Background, Strong relationship with medical experts and a broad array (even EHS) regulators, Influence within the company Corporate Communications...they would need a broad view of organizational challenges, successes and a deep understanding of CSR in its many forms/definitions Integration outside with efforts; ability to know how to engage and move through NGOs, Governments, world bodies and other corporations. I think we are still missing expertise in Stakeholder relations 39

41 EHS&S + CSR Roles Q46. If your CEO could only add one more person to support sustainability in the company where would this person likely be positioned in the organization and what skills must they possess? (n=32) (Continued) Other In the design and development organization; must have a materials science background so they can bring alternative materials into the new products that are designed annually. Planning and Strategy Department reporting to the VP or to the Board. Legal Asia Office. Able to work directly with factories on a host of social and environmental issues. Quality Having a person at a fairly high level in production management who really understands how the concept of SD can be incorporated into business/production processes would help integrate SD into the business. Field Auditor...monitor and assess the effectiveness of third party auditor program Where the person should be is less critical than the knowledge and skills they should possess. Deep understanding of the business and its culture, strong team coalition building skills, excellent verbal and written communication skills. understanding of the external CSR agenda and how to value and articulate that in the business. Not Needed/Under Evaluation We already have a number of key senior officer, VP, and director level roles that oversee and drive various aspects of CSR across the business. Additionally, managers have individual objectives on CSR that support this. Our CEO believes he has the people in place, mainly at the VP level, to advance our CSR agenda. The various VPs and functional leaders throughout the company are well aware of the concept and, given budgetary constraints, are amenable to implementing CSR initiatives. As our CSR program is integrated across the company, no specific sustainability personnel are needed. Staffing in support for sustainability practices is currently being evaluated. 40

42 EHS&S + CSR Roles Q47. What conditions or mechanisms are missing that would embed sustainability more deeply into company strategy? (n=32)* Top Management Commitment / Champion We need a champion. Reporting up through legal is all about "minimizing risks" vs. "looking at opportunities." The CEO being more vocal about sustainability both internally and externally. Increased Board level commitment. While there is top management commitment, it does not get mentioned often enough at meeting and in communications. It should also be included more in our internal training programs. Much more visible top down support and goal setting. I think just the one key person above to tie everything together. Clearer view of sustainability issues by the top management and commitment to ensure medium level management working on CSR-SD can adequately serve the business in an appropriate cost-effective manner. Business Value / Business Case Strong demonstrable links between CSR/SD programs and traditional business results (i.e. hard evidence that when we do this, that follows). Showing a profit Defensible and intuitive business case for CSR ROI strategy; valuation of social/environmental R&D A globally used method to put monetary value onto environmental and social issues to incorporate them into NPV calculations *Total responses exceed 32 since companies may have provided more than one condition/mechanism. 41

43 EHS&S + CSR Roles Q47. What conditions or mechanisms are missing that would embed sustainability more deeply into company strategy? (n=32)* (Continued) Integration into Business Processes Stronger ties between sustainability areas and the strategic planning process Integration of design and development process with procurement practices of raw materials. Developing a more robust supplier scorecard for sourcing, procurement, design and development, and sustainability departments. Full integration across all functional teams in the corporation. At site and business unit level, driving and embedding more deeply the discipline of setting aggressive CSR targets and working to achieve these - but done in a way that drives and supports the overall commercial business agenda. Developing a corporate wide strategy aligned with business strategy and across global organization. Upstream purchasing and building engineering involvement. A better process of product approval from R&D and Marketing. Measurement / Reporting / Incentives Board level metrics; internal reward mechanisms. Ties to executive compensation. More measures and metrics integrated in the organization to focus and drive performance. Robust social and environment measurement systems would embed sustainability more deeply into the Company's overall strategy. More comprehensive metrics dash board of CSR. Including the environmental/social impacts of outsourced activities (e.g., contract manufacturing) and purchased goods in our metrics and public reporting. Community and government mandates/rewards/incentives. *Total responses exceed 32 since companies may have provided more than one condition/mechanism. 42

44 EHS&S + CSR Roles Q47. What conditions or mechanisms are missing that would embed sustainability more deeply into company strategy? (n=32)* (Continued) Training / Communication Time to train staff and develop organizational culture. Time to educate the staff widely on what environmental sustainability means to our company. Readily understandable grassroots definition of sustainability; the "elevator speech" as to what it means and why it's important. Establishment of training program with factories. Grass roots education to employees, first line supervisors and even middle managers around sustainability and CSR. Other Siloed corporate staff functions need to be addressed. The company would be more effective at executing its business strategy if cross-functional teams worked better. Funding available for pilot or experimental programs. Establishment of foreign office to enable more direct oversight of audit process. More time to focus on it, more communication about it, tying it more to goals and objectives, seeing it more as a business imperative. None None We have sufficient processes and procedures in place and we are following a plan to build on and continuously improve our CSR program. *Total responses exceed 32 since companies may have provided more than one condition/mechanism. 43

45 Dependent Variables Seventy-nine percent (79%) of respondents believe that there is a strong connection between their company's words and actual support for CSR. Q48. There is a strong connection between my company's words and actual support for CSR. (n=38) Neither Disagree or Disagree 18% 3% 24% 79% 55% 44

46 Dependent Variables Almost all respondents (94%) believe that CSR and EH&S will have important impacts on their company s business strategy over the next five years. Q49. CSR and EH&S will have more important impacts on our business strategy over the next 5 years. (n=38) Disagree 3% Disagree 3% 45% 94% 49% 45

47 Dependent Variables Most respondents agree that environmental (66%) and social (68%) efforts have had strong positive impacts on their company s business success. Q50. Our overall environmental efforts have had strong positive impacts on the success of our business. (n=38) Q51. Our overall social responsibility efforts have had strong positive impacts on the success of our business. (n=38) Don t Know Disagree 5% Disagree 3% 8% Neither Disagree or 18% 29% 66% Neither Disagree or Disagree 24% 8% 21% 68% 37% 47% 46

48 Dependent Variables Most respondents (63%) see the CSR function becoming more aligned with the EHS function within the next five years. Q52. I see the CSR function becoming more aligned with the EHS function within the next 5 years. (n=38) Don t Know Disagree 5% Disagree 3% 5% 21% Neither Disagree or 24% 63% 42% 47

49 Comments Q53. Please add any other comments about your CSR program or the interaction between CSR and EHS professionals within your organization. (n=20) CSR and EHS are well aligned / integrated In my world the CSR program and the EHS program are the same...we now call it Sustainability. They have been combined for over four years. The Director of Health, Safety, Environment and Vice President of Company is also the Global Champion for Corporate Social Responsibility. This allows for complete integration of critical Company sustainability practices. In our company CSR and EHS are directed by the same person and team. We are in the same department, and we work very closely together. Our goals are one in the same. In our organization, they are almost one in the same and work very closely together. It is critical for success that EHS and CSR work together to advance sustainability. We collaborate. EH&S is leading in setting goals and communicating...the Foundation acts as lead but involves people from all the teams that have CSR as part of their focus (law, office of business conduct, supply chain, etc.). EH&S is one of the strongest partners in this network. Typically, at the facility level the CSR and EHS function is handled by the same person. E and CSR are coupled in this organization and reports through the legal and ESR function. HS is separate and sits with operations. Each has it's role; our two organizations work well together. Public Affairs currently is co-owner of CSR along with EHS. In fact they own more of it than we do. Our recent efforts working together preparing our first Corporate Citizenship Report have been very positive. I also see that there are many other people who own bits and pieces of CSR within the company who are eager to see their efforts move forward. I do see tremendous opportunity to leverage that enthusiasm. CSR and EHS professionals work closely together and area aligned at a global level. This working together and alignment can be improved at regional and business unit levels. 48

50 Comments Q53. Please add any other comments about your CSR program or the interaction between CSR and EHS professionals within your organization. (n=20) (Continued) Alignment of CSR and EHS will / should increase As global environmental issues become more widely recognized as having a large social impact, interaction or alignment between CSR and EHS functions will increase. I feel that as time goes on that EHS will become folded under CSR and that you will only see the position of VP, CSR and no longer any positions of VP, EHS, but instead Dir, HSE reporting to the VP, CSR. I see EHS as a part of an overall CSR-SD strategy and approach. Separation between EHS company management system and CSR is a source of problems and it needs to be overcome through a deep integration and a clearer strategic view and leadership in this field. Integration into operations and other functions is critical For CSR to be successful, it has to be aligned with the business objectives of the organization and as such, the key business operations should manage the program not EHS. CSR at our company = Our Credo...it's not treated as something different; it's fully embedded organizationally. We have an active program with full-time staff to integrate CSR into the EHS, supply chain, investor relations, HR, community and customer relations, philanthropic, and other functions of the company. We see this as a critical element of our freedom to operate for the benefit of all stakeholders. Hopefully, the CSR effort in ESH will become less as effort better integrated into OPS and marketing. EHS is a small part of CSR As a pharmaceutical company, CSR is about a wide variety of issues, and EHS is a small part of that. The major issues of CSR for our industry are addressing unmet medical needs and access to medicines. Beyond that, strong EHS programs and community support are important. The questions in the survey were sometimes leading and sometimes narrow - over emphasizing the role of EHS in CSR. 49

51 Industry Analysis In non-consumer product companies (35), the champion of SD is more likely to be the CEO; in consumer product companies (19), the champion of SD is more likely to be the head of CSR. Q8. Who is the main champion of SD in your company? Non- CEO Head of EHS Head of Pub. Affairs Head of CSR 18% 12% 6% 6% 9% 30% 30% 35% 0% 10% 20% 30% 40% 50% 50

52 Industry Analysis Non-consumer product companies appear to be further along in the establishment and use of goals and performance measures related to CSR. Q13. Sustainability concerns are an integral part of annual strategic goal setting process at the following levels of our business Non- Q16. Our organization-wide KPIs have been an effective tool that focuses staff attention on these issues. Company wide Business unit Site level Individual 46% 40% 48% 40% 64% 67% 60% 62% Non- 50% 79% 0% 20% 40% 60% 80% 100% % or Q17. We have established KPIs at other levels of the organization including: 0% 20% 40% 60% 80% 100% Q23. We report our sustainability goals and progress publicly in print or on the web. Non- Division Business Unit Site Level Individual 27% 52% 46% 54% 56% 76% 82% 80% Non- 62% 86% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% 51

53 Industry Analysis Non-consumer product companies are more likely to form strategic partnerships to solve social and environmental problems than consumer product companies. Q30. We have formed strategic partnerships with governments to solve environmental challenges. Q31. We have formed strategic partnerships with governments to solve social challenges. Non- 55% Non- 58% 21% 28% 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% 60% 70% 52

54 Industry Analysis With one exception, non-consumer product companies seem to be further along in integrating CSR into business processes. Q32. We have integrated environmental considerations into the core of our product design processes. Q33. We have integrated social considerations into the core of our product design processes. Non- 73% Non- 51% 36% 36% 0% 20% 40% 60% 80% Q34. We have integrated environmental considerations into the core of our product procurement processes. 0% 20% 40% 60% Q35. We have integrated social considerations into the core of our product procurement processes. Non- 60% Non- 45% 39% 64% 0% 20% 40% 60% 80% 0% 20% 40% 60% 80% 53

55 Industry Analysis Non-consumer product companies are more likely to have senior management compensation tied directly to CSR performance than are consumer product companies. Q36. Executive business management compensation is tied directly to our environmental performance. Q37. Executive business management compensation is tied directly to our social performance. Non- 28% Non- 41% 7% 21% 0% 10% 20% 30% 0% 10% 20% 30% 40% 50% In addition, 71% of consumer product companies disagree that executive business management compensation is tied directly to environmental performance, compared to 48% of non-consumer product companies. 54

56 Industry Analysis Results are split whether companies have strong measurement systems to assess environmental and social impacts. Q43. We have strong measurement systems to assess our environmental impacts. Q44. We have strong measurement systems to assess our social impacts. Non- 74% Non- 30% 39% 54% 0% 20% 40% 60% 80% 0% 10% 20% 30% 40% 50% 74% of non-consumer product companies believe that they have strong measurement systems in place to assess environmental impacts, compared to only 39% of consumer product companies. However, most consumer product companies (54%) believe that they have strong measurements systems in place to assess social impacts, compared to only 30% of nonconsumer product companies. 55

57 Industry Analysis Non-consumer product companies are more likely than consumer product companies to see the value of CSR efforts. Q50. Our overall environmental efforts have had strong positive impacts on the success of our business. Q51. Our overall social efforts have had strong positive impacts on the success of our business. Non- 34% 82% Non- 58% 73% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% 56