Delhaize Group: A Case of Centralizing CSR Strategy

Transcription

1 Delhaize Group: A Case of Centralizing CSR Strategy THE EVENT Although Delhaize Group, one of the world s largest food retailers, has been active in CSR for more than 100 years, they did not have a coordinated agenda at Group level. Interestingly, until 2008, its operating companies spontaneously developed their CSR initiatives, without central direction, demonstrating that CSR is a natural expression of who Delhaize is. From being part of Europe s top ten green energy user with Delhaize Belgium to introducing a pioneering Guiding Stars nutritional information system in the U.S., Delhaize associates surely have a lot to be proud of. Who says you can t teach an old lion new tricks? Delhaize Group took a more centralized approach in 2008 to organizing its corporate social responsibility and citizenship agenda after a century of allowing its operating companies to locally develop their own. The results were rather impressive, as Delhaize s new-found CSR focus translated into a #5 global ranking in Citizenship in the 2009 Global Reputation Pulse study of the world s largest 600 companies. BACKGROUND The story begins back in 1871 with Jules Delhaize. A professor of commercial sciences, Jules dreamt of revolutionizing food retailing in Belgium by creating a branch network, charging set 2010 Reputation Institute. All rights reserved 1

2 prices and cutting down on the succession of intermediaries by opening a warehouse. He was helped in this by his brother Edouard and his brother-in-law Jules Vieujant, who were also teachers. For their new company, they chose the lion, a symbol of strength and the national emblem of Belgium, together with its motto: unity is strength. Today, Delhaize Group is a Belgian-based international food retailer with activities in six countries (US, Belgium, Greece, Indonesia, Luxembourg and Romania) on three continents. Delhaize Group is listed on Euronext Brussels (DELB) and the New York Stock Exchange (DEG). At the end of 2008, Delhaize Group posted 19 billion in revenues, 467 million in net profits and employed approximately 141,000 associates worldwide. Delhaize America is one of the leading supermarket operators in the United States with over 1,500 stores in 16 states in the eastern United States. Delhaize America is comprised of Food Lion, Bloom, Bottom Dollar, Harveys, Hannaford Bros., and Sweetbay stores, each of which has a distinct strategy and a well-established brand image. Belgium is the historical home market of Delhaize Group. Over the years, Delhaize Group has built a strong market position (second in terms of sales), providing its customers with quality products and services at competitive prices. At the end of 2008, Delhaize Group's sales network consisted of 775 stores in Belgium under the Delhaize Le Lion, ShopnGo, Red Market, Caddy- Home and Tom & Co. banners. Delhaize Group also operates as Alfa-Beta (Greece), Mega Image (Romania) and Super Indo (Indonesia) around the world. Each of Delhaize Group s operating companies has acquired leading positions in food retailing in key markets through a distinct go-to-market strategy. The Group is committed to offering its customers a locally differentiated shopping experience, to delivering superior value and to maintaining high social, environmental and ethical standards. Delhaize s global strategy is threefold: Generate strong and profitable revenue growth; Pursue best-in-class execution; and Operate as a good corporate citizen, acting responsibly towards all its stakeholders. REPUTATION IMPACT In its 2008 Corporate Responsibility report, Count Jacobs de Haden (Chairman of the Board) and Pierre Olivier-Beckers (President & CEO) extolled Delhaize to do even better with a common Group-wide CSR strategy that enables us to share our collective expertise and concentrate our energy on well-chosen objectives: 1. Food safety reduces business risks while ensuring quality and affordable food products for customers; 2010 Reputation Institute. All rights reserved 2

3 2. Health and wellness increases revenue by enabling company to offer customers affordable, nutritious products at a time of rising pressure on consumers; 3. Associate development enhances associates motivation, loyalty and productivity, helping boost revenue and reduce associate turnover; 4. Energy conservation cuts costs and positively impacts the environment; and 5. Responsible sourcing mitigates business risks and protects corporate reputation. Delhaize first published a Corporate Responsibility Report in 2007, where it took the bold step of making 13 commitments across Products, People and Planet categories and promised to measure the progress made and give a score to each commitment on an annual basis starting in One year into its reporting, Delhaize made forward progress in 8 of the 13 categories, and made plans to address the 5 commitments that were behind schedule. It also focused on 9 other 2008 achievements beyond the 13 commitment areas that are nevertheless important for Delhaize s citizenship bona fides with both internal and external stakeholders, including: Products: promote healthy eating, ensure rigorous food safety and responsible sourcing; People: enrich the health of associates and communities, embrace diversity while developing talent and help the disadvantaged; and Planet: power ahead with energy conservation, reduce greenhouse emissions and waste less while recycling more. Each of the 9 achievement areas were governed by a Group level strategy, goals and tools, but the implementation and activation was left up to the local operating company executives and associates. This glocal approach in 2008 served Delhaize Group well, as the CSR history and entrepreneurial aspect of the local company culture was respected and preserved while a global scorecard and common set of tools helped to foster a spirit of competitiveness to see which operating company would be the pace-setter by racking up the most industry accolades or thirdparty endorsements and recognition along the way. CSR Governance at Delhaize Group What s clear about Delhaize Group s recent decision to centralize its CSR strategy is that the company decided that Corporate Responsibility (CR) needs to be seen as everybody s responsibility and not just an add-on function operating outside the day-to-day management of the Group. Ultimately, the CR strategy is defined by the Executive Management under the guidance of the Group s Board of Directors. Since 2007, Delhaize developed a 12 person CR Steering Committee (shown below) that works to communicate and report overall efforts, coordinating CR strategy at Group-level while making sure CR considerations are integrated locally throughout the business around the world Reputation Institute. All rights reserved 3

4 The CR Steering Committee is composed of at least one senior representative from each operating company. The CR Steering Committee acts as Delhaize Group s Executive Committee s advisory board on CR matters. It also provides support and is accountable for the local implementation of Group-level CR guidelines. The operating companies have the flexibility to complement Group CR strategic guidelines. CR Steering Committee members keep the Executive Committee and the CR team informed on local CR development. In addition, Delhaize Group invited Business for Social Responsibility (BSR) to conduct an independent review of its 2008 Corporate Responsibility Report and published BSR s findings in the final printed and online versions of the CR Report. In the first year of a centralized global CSR effort after decades of local autonomy for the various operating companies, this was somewhat of a reputation risk for Delhaize Group to co-create its CR report with a third-party NGO. As the BSR note indicates, Delhaize s citizenship efforts and advocacy are hardly perfect but appear to be on the road to more transparency where future reports can speak more clearly to the culture, strategy and practices of the Company. RI ANALYSIS What should reputation practitioners and researchers make of Delhaize s second annual CSR report and their impressive #5 Global Pulse dimension ranking for Citizenship of the world s largest 600 companies in 2009? How should stakeholders value what the company measures and reports out on an annual basis? Should there be standards to judge Delhaize s CSR effectiveness from various points of view? One way to do this is through the inaugural SICCA Social Monitor, which was launched in 2009 in an attempt to objectively value how comprehensively and fully companies communicate about their CSR initiatives and programs across 10 key dimensions. Using the Social Monitor lens to analyze the Delhaize Group s 2008 Corporate Responsibility Report helps shed some light on why the move from operating company CSR autonomy and historical success to a centralized strategy, goals and tools approach was seamless and effective in the eyes of Delhaize s diverse group of stakeholders. Environment: Delhaize scores very well in the green zone of the CR Report (high number of US Energy Star stores in the US, the fact that no CFCs are used anywhere in the company plus their corporate zeal to embrace solar and wind power as renewable sources of energy across the six countries where they do business) and is seen as an innovator in their industry in Belgium and the US Corporate Citizenship: Delhaize s community development and corporate philanthropy are both well documented and well established from the local operating company s heritage Reputation Institute. All rights reserved 4

5 Workers & Supply Chain: Delhaize does not employ labor outsourcing or have global supply chain compliance issues like others in the food industry, so its characterization of its workplace and supply networks at the local operating company level in its CR report rings true, though BSR still feels it can improve in future reports in making the Delhaize culture come to life Executive Message: the decision to centralize CSR efforts and investments came from the top in 2008, and the executive message about the need for Delhaize to focus on strategies, goals and tools that can be measured and replicated around the world was crystal clear and unmistakable in the report. Integrity Assurance: like the majority of CSR reports today, Delhaize did not include a formal statement about verification (the substantive accuracy of the report itself) or any commentary about it, so this is one area for improvement in Stakeholder Engagement: Delhaize Group is engaged with a surprisingly small number of NGOs for the size of the holding company and the breadth of its operations in the six countries where it operates. Co-creation of its CSR strategy in the future would greatly enhance Delhaize s credibility among external stakeholders who are invited in to help shape its community outreach and investments. Codes of Conduct: this is another work in progress area for Delhaize in year #2 of its CR Report, as it is behind its 2007 estimates to have a Supplier Code of Conduct completed and only 300 of its 3800 private label products have been covered by Guidelines Daily Amount (GDA) labeling guidelines by the end of Corporate Governance: this section is covered in greater detail in Delhaize Group s Annual Report, but the new centralized approach to CSR and a renewed focus on fewer Citizenship priorities with clear measurement and reporting speaks to the company s commitment to greater transparency and a desire to go beyond compliance. Bribery & Corruption: not surprisingly, this was not squarely addressed in the 2008 CR Report as Delhaize did what most companies do around the topics of bribery and corruption: they don t want to highlight the countries they operate in that do not score well in Transparency International s annual rankings (in Delhaize Group s case, Indonesia and Romania are in the bottom half) for fear of guilt by association. Corporate Reputation: it is very clear that Delhaize Group sees its annual CR Report as a critical component of its reputation management efforts around the world. The improvement in both quality and quantity from the inaugural 2007 report to 2008 shows a renewed sense of purpose that Delhaize senior management wants to project to stakeholders during the worst financial crisis in decades: this 140 year old lion still believes its motto: unity is strength Reputation Institute. All rights reserved 5

6 Another important success factor is Delhaize Group s new Corporate Responsibility Steering Committee which is very similar to the Reputation Councils employed by many of the world s most reputable companies. The CR Steering Committee is a prime example of the power of integration, as no one function is the default owner of corporate responsibility at Delhaize. When functions as diverse as government relations, merchandising and distribution, strategy and external communications, business development, internal communications, corporate development, human resources and legal all have a seat at the CR table, there is less chance of group think or turf wars breaking out. In conclusion, Delhaize Group s new centralized, four-pronged approach to CSR is as simple as it has proven to be effective. It can serve as a blueprint that other holding companies with decentralized global operations can consider: Target issues where Delhaize can make a difference Strike a balance between global and local needs Measure CSR programs more systematically Maintain a dynamic CSR strategy Further information 1. RI online course, Reputation module: Managing social issues Delhaize Group, 2008 Corporate Responsibility Report Business for Social Responsibility 4. Sethi International Center for Corporate Accountability S-CSR Report Monitor 5. Michael Blowfield. Corporate Responsibility: A Critical Introduction. New York: Oxford University Press, Jeremy Moon. The Oxford Handbook of Corporate Social Responsibility. New York: Oxford University Press, S. Prakesh Sethi. Setting Global Standards: Guidelines for Creating Codes of Conduct in Multinational Companies. Hoboken, NJ: John Wiley & Sons, Reputation Institute. All rights reserved 6