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Sustainability and the Corporate Responsibility Index

by Simon Longstaff

It is not so long ago that many people in business (perhaps even the majority) argued that the debate about 'sustainability’ was just a passing fad – the province of market-place ‘fringe dwellers’ like environmental NGOs and 'social capitalists’.

That prevailing mood seems to have changed; with a realistic appraisal of long-term self-interest combining with a growing community concern to ensure that the benefits of business activity not be limited to employment and financial rewards.

Although these remain important goods, valued by individuals and communities alike, there is emerging support for businesses who offer a more holistic range of benefits – adding value to the social and natural environment from which all wealth is ultimately derived.

The response of Australian companies to the call for more sustainable business practice has been mixed. Some have felt the ‘lash of necessity’ applied over many years. Concerned to protect their ‘licence to operate’, they have led the way in developing new models for environmental stewardship and engagement with local communities affected by their operations. Others have done the bare minimum necessary to avoid scandal by playing a game of ‘regulatory arbitrage’; managing public perceptions by presenting a ‘good enough’ image where it counts.

The best responses have probably come from those who have moved beyond mere compliance to embrace innovative programs that exceed minimum requirements. In many cases, the decision to do so is driven by recognition of the fact that prosperity can be enhanced as a direct consequence of the levels of innovation and enthusiasm unleashed in companies that find smart ways to achieve their business objectives in a sustainable manner.

Unfortunately, the community tends to be highly sceptical (if not cynical) in its assessment of corporate Australia. It might be argued that the scepticism is the product of just a few spectacular examples of bad corporate behaviour and that the tarring of all with the same brush is unfair. However, it could also be argued that businesses have shown a collective indifference to the declining levels of trust – failing to realise (or even care) that what the community thinks of business really matters.

It is against this background that St James Ethics Centre joined with The Sydney Morning Herald and The Age to introduce the Corporate Responsibility Index in Australia.

The Index has been developed and is owned by Business in the Community (BITC), a British not-for-profit organisation that has spent the last twenty years pioneering ways to engage business in the task of building social and environmental capital. The Index was initially developed by around eighty business organisations supported by experts like John Elkington (the inventor of the 'triple bottom line’).

Using its own well-established environmental index as the starting point, BITC then moved to incorporate the relevant principles of the Global Reporting Initiative (GRI) as the ‘backbone’ of the new instrument. In doing so, BITC's principal aim was to develop a rigorous assessment tool that would provide first class information to businesses wanting to improve their practice.

The Index was developed to help improve corporate responsibility by providing a systematic process that compares companies’ management processes and performance with those of others in their sector. It provides a benchmark for companies who are committed to managing, measuring and reporting their impact on society. The Index is based on a framework of four components shown in the following model:

The Corporate Strategy section looks at how the nature of a business’ activities influence its company values, how these tie into strategy and how they are addressed through risk management, development of policies and responsibilities held at a senior level in the company.

The Integration section looks at how companies organise, manage and integrate corporate responsibility throughout the operations. Is it part and parcel of the company culture? Is it integrated into the strategic decision-making processes of the company and linked through into internal governance and risk management systems?

The integration is assessed through the Management section where we review processes for managing different stakeholder relationships. This section looks at what the key issues are for the business in the Community, Environment, Marketplace and Workplace, the objectives and targets set to manage these issues and how it communicates, implements and monitors its policies, objectives and targets.

Community relates to the interface between business and society that can be both positively and negatively affected by a project, product or investment on a local or global level.

The Environment comprises the world's ecosystems and natural resources and is affected directly and indirectly by a company's operation, products and services. Being responsible means safeguarding both the systems and resources for future generations.

Responsibility in the Workplace is the creation of a working environment where personal and employment rights are upheld.

Responsibility in the Marketplace is maintaining the highest standards of business practice when developing, purchasing, selling and marketing products and services.

The Performance and Impact section looks at companies’ performance across a range of social and environmental impact areas. Companies were asked to complete a total of six impact areas consisting of:

• two core Environmental Impact Areas: Global Warming (or Energy and Transport together) and Solid Waste
• two core Social Impact Areas drawn from: Product Safety, Occupational Health and Safety, Human Rights in the Supply Chain, Workplace Diversity and Community Investment
• two self–selected Impact Areas: Companies were asked to complete two additional relevant environmental and social impacts.

Following an introduction to BITC by Pilotlight Australia, the Ethics Centre was able to work in partnership with BITC and introduce the Corporate Responsibility Index in Australia.

The importance of doing so was (and remains) that it is (as far as we can tell) the best tool we know for providing really valuable information to companies. However, it is also valuable as a tool for demonstrating what companies are doing to improve the quality of their social and environmental performance. That is, the Index allows the businesses leading in this area to distinguish their performance from others – providing evidence that is independently validated, on a pro bono basis, by Ernst & Young.

The significance of this is not that it allows some businesses to shine at the expense of others. Our aim, in offering a truly voluntary index, is not to ‘name and shame’. Rather, we believe that when businesses begin to share their experiences and as the index highlights discernible best practice, so all of Australian business will begin to compete to perform better in those areas that underpin long-term sustainability.

It is for this reason that the Ethics Centre has joined with the Business Leaders Forum for Sustainable Development (BLFSD) to produce an annual conference at which the performance of participating companies can be reported, celebrated and analysed. Importantly, the partnership with BLFSD allows for the creation of a forum where innovation and best practice can be shared amongst Australian companies.

It is important to note that St James Ethics Centre does not rate any business participating in the Index. The survey (some 111 questions) is completed on a self-assessment basis by companies. All submissions must include substantiating evidence. Submissions are then assessed for completeness by Ernst & Young and the substantiating evidence is validated. Final scores are produced by BITC and held (along with the data) on a server in the United Kingdom.

The role of the Ethics Centre in this is to serve as 'trustee’ for the process – ensuring that the integrity of the process is maintained.

Of course, for all of its qualities the Index is not a perfect instrument. It is, in fact, a work in progress that will evolve in order to ensure that the performance bar continues to rise. It is for this reason that we have established two reference groups to provide advice on how the instrument can be improved. One comprises representatives of participating businesses. The other, led by Phillip Toyne and Molly Harriss-Olson of EcoFutures, comprises NGOs with an interest in this area.

As noted above, the partnership with BLFSD is an essential element in the promotion of better practice. across the Australian corporate landscape.

Together, we hope to provide a forum where even the most sceptical businesses can find case studies and speakers, drawn from around Australia and overseas, that demonstrate a commitment to sustainable social and environmental performance is the key to long-term prosperity for all.

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