Beyond Green: the Expanding Role of Corporate Sustainability Why “Corporate Sustainability Storytelling” Is Increasingly Important to Any Business

N0 3 parathinkTM Beyond Green: The Expanding Role of Corporate Sustainability Why “corporate sustainability storytelling” is increasingly important to any business

(A quick-reading ParaThink Briefing for really, really busy people)

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Paragraphs is an award-winning, strategic marketing agency and design firm specializing in branding and corporate communications across all media. Since 1984, we’ve helped leading companies around the world do one thing exceptionally well: build powerful brands that grow their business.

Executive Summary Corporate sustainability has been gaining momentum for a while, but it’s become increasingly mainstream in the last five years. Many successful organizations now consider corporate responsibility as a daily part of “business as usual” that affects the bottom line—in a positive way.

While some of the changes are the result of cultural shifts, the business In this parathink briefing, we’ll case for green practices is a more significant driver. Simply put, corporate give you a quick overview of: sustainability has proven not only to be good for its own sake, but good for • A strategic and tactical process business too. At the same time, the landscape of corporate sustainability you can implement today to start is changing. The most successful players in the near future will be those getting the most out of your own who master the art of “sustainable storytelling” while keeping pace with corporate sustainability story. the evolving expectations of what defines corporate responsibility within a business. • Why corporate sustainability is now an integral part of how successful companies are doing business every day. • How the definition of corporate social responsibility is expanding, and what that means in today’s business world.

The unexpected win: corporate sustainability meets the bottom line A major shift in how business in America thinks about its corporate social responsibility have been underway for some time, but it’s gained considerable ground in the last several years. Sustainability initiatives that were once seen as nothing more than loss leaders or plays for good PR are becoming an integral part of how successful companies do business.

To some extent these changes are driven by grassroots trends. More people are concerned about corporate social responsibility issues than ever before, and it’s not just consumers. Some of the largest companies in the world are making corporate sustainability a top priority, including healthcare names like Novo Nordisk, Biogen Idec, Agilent Technologies, Life Technologies, Eisai, Coloplast, Ramsay Health Care, Cie Generale d’Optique Essilor, AstraZeneca; plus CPG corporations such as Intel, Cisco Systems, Alcatel- Lucent, Siemens, Clorox, General What would have seemed remarkable Responsible business is Electric, Royal Dutch Shell, Motorola, just a few decades ago is that most becoming big business Prudential, UCB, Unilever, Nestlé, and of these companies aren’t acting in 1 The business case for corporate even the Campbell’s Soup Company. response to regulation. They’re doing social responsibility was slow to come it on their own initiative because It’s not surprising that all of these to light because consumers typically there’s a growing realization that companies are multi-national aren’t the primary driver, especially corporate sustainability can be corporations with significant European if responsible products come with profitable in a big way. operations. While the US is making a higher price tag. According to a great strides in the green universe, This insight, however, is creating recent survey by McKinsey, more it’s still several kilometers behind a trickier challenge for many than 70 percent of consumers when compared to its EU counterparts organizations. A key part of reaping surveyed are willing to pay about when it comes to sustainability the benefits of responsible business five percent more for “green” processes and business practices. is finding the right way to tell your products, but that number drops “corporate sustainability story.” quickly as the premium rises, with less than 10 percent willing to pay an extra 25 percent or more.2 1 All of the companies named here appeared in the 2013 Global 100 List of the world’s most sustainable corporations. http://global100.org/2013-global-100-list/ 2 http://www.mckinsey.com/insights/manufacturing/how_much_will_consumers_pay_to_go_green

Look at the bigger picture, however, Along the way, the definition of 1. Environmental and sustainability initiatives have a what makes a business socially There’s no question that the lot to offer the bottom line of any responsible has broadened and environment was the first issue to organization, including: matured. Standards of corporate put the “green” into green business, social reporting (CSR reporting) are but even this category is evolving • Reduced energy costs still evolving and gaining support, as the trend goes mainstream. but they’re a great place to start • More efficient supply chains Reducing pollution was the original looking for the key elements of the driver, and it remains an important • Reduced waste throughout the story your company needs to tell the component. Today, however, many product life cycle world. Here’s what’s considered the companies that produce little or “green standard” today: • Improved employee health, no pollution to begin with have an productivity, and motivation interest in doing as much as they can Three faces for the environment. In recent years, • Greater opportunities with this has led to a greater interest in governments and organizations of corporate social conservation. that value sustainability responsibility Many companies, for example, are • Tax incentives now finding ways for their facilities As business interest in sustainability to recycle water, provide alternative • Better-educated customers has grown, three major components power generation for heating and (with more money to spend) have become an integral part of cooling facilities, making greater use many corporate sustainability • Consumer goodwill and preference of natural light, and to utilize many stories. Inspired by guidelines first other resource-saving strategies. • Preferential treatment from established in 2000 by the nonprofit A great deal of work is also being major retailers Global Reporting Initiative (GRI), a done to optimize the efficiency of sustainability initiative plan should supply and logistics chains, and • Financial support from funds address environmental, economic, to learn more about how products that invest exclusively in and social elements. affect the environment throughout green companies

Many organizations still considered these benefits hypothetical as recently as a few years ago. Today they’re recognized as competitive advantages that have earned their keep on the balance sheets of world-class companies. As a result, sustainability initiatives made the transition from fad to trend some time ago. A further shift from trend to best practice is already underway, and likely to evolve further in the next few years.

3 Short for Leadership in Energy & Environmental Design. Learn more at http://www.usgbc.org/leed

every stage of their life cycle from At the same time, stories about 3. Social design to disposal. In addition, economic sustainability can be Social sustainability covers a wide an entire system of sustainable proactive. Your economic contribution range of issues, from respecting the building practices, known as LEED3, to the sustainability landscape cultural norms of markets you do is now used as a baseline standard can include everything from business in, to customer satisfaction, for new construction by many encouraging employees to volunteer affordability, reliability, and even large corporations, schools, and with charitable organizations like innovation. How your company deals government agencies. Habitat for Humanity to internal with an aging workforce, diversity, communication aimed at getting and providing competitive salaries The short- and long-term benefits everyone engaged in your corporate and benefits are more important than go beyond cost savings. Some sustainability initiatives. powerful companies that wield ever before. Health and wellness considerable market influence like Some companies, for example, are are another component for both Proctor & Gamble and Wal-Mart funding organizations that need employees and customers—especially are more likely to do business with help or donating to causes they feel consumers with children. For proof, companies that employ sustainability strongly about. Some respond to look no further than your grocery initiatives. If your business relies disasters by providing funding or free store, where natural macaroni on relationships with players like products to aid organizations like and cheese brands like Annie’s these, the primary audience for your the Red Cross or Doctors Without Homegrown are gaining shelf space. corporate sustainability story may Borders. We’re also seeing many new Meanwhile, consumer complaints not be the general public. There are sustainability initiatives designed to are prompting industry giant Kraft also a growing number of Wall Street provide educational opportunities, to remove artificial dyes from some 5 funds that only invest in companies build infrastructure in developing of its competing varieties. PepsiCo that meet certain benchmarks for nations, or help consumers save on is another high-visibility brand corporate sustainability. energy costs. responding to consumer concerns. For several years the company has 2. Economic Consumer interest in economic produced “throwback” versions of initiatives like these is growing rapidly. How a business impacts the Pepsi and Mountain Dew made with According to a 2013 Nielsen survey, local economy is a topic that’s sugar instead of high fructose corn 50 percent of global consumers generating a lot more scrutiny and syrup, and recently announced plans are willing to pay more for goods awareness. Watchdog organizations to remove a controversial ingredient and services from companies that are asking questions that go beyond from Gatorade. have implemented corporate social environmental impact. How will a responsibility programs to give back Last, but far from least, corporate community benefit if you drill, fish, to society, an increase of five points social responsibility includes issues or mine in the area? Will it damage from 2011(45%). Willingness to relating to human rights, diversity an existing economy, create local jobs, spend more with socially responsible and inclusion, consumer safety and or cause other disruptive changes? companies increased in 74 percent consumer privacy. of the countries Nielsen measured. While many who were willing to pay more were age 30 and under, the percentages were up for both men and women across all age groups surveyed.4

4 http://www.nielsen.com/us/en/press-room/2013/nielsen-50-percent-of-global-consumers-surveyed-willing-to-pay-more-fo.html 5 http://bigstory.ap.org/article/kraft-remove-artificial-dyes-3-products

The sustainability blend Emerging trends “The evolution in corporate sustainability is moving from ‘what While this three-pronged view of For companies on the leading edge you do’ to your entire value chain,” corporate sustainability isn’t new, of corporate social responsibility, Gomes Casseres says. “I think the we’ve seen a growing number of two additional movements in changes are making companies organizations adopting it in the last sustainable storytelling are think a little bit harder about how to 3–5 years. Some companies follow gaining ground: curate, measure, and report on their the formal definitions in the GRI performance. It’s raising the bar to standards, while others “reference” The bigger story: thinking outside make them think more holistically these standards or create their the “checkbox” about the entire value chain. own way of telling their corporate In the past it was enough for Upstream, they have to consider how sustainability story. In practice, all companies to focus primarily on they’re sourcing things. Downstream three of these activity types are facilities they owned and operated. it’s how customers and consumers closely interconnected, so the lines Today, however, the conversation are using and disposing of products. between them can blur depending on is expanding to include your entire So you can get into some end-of-life the focus of any given organization value chain…and what you’re doing or cradle-to-cradle issues.” and what standard they use to to try and influence it. measure progress. The full story: Leaders in corporate sustainability This summary also represents Integrated Reporting have been doing this for some time, a snapshot in time. The process but in 2013 these practices were As a growing number of of defining corporate social incorporated into version G4 of the corporations work to integrate responsibility is ongoing, and further GRI guidelines. According to Mindy corporate sustainability in their changes are certain in the near Gomes Casseres, a Senior Consultant businesses models, a movement has future. The key takeaway for today’s for Environmental Resources emerged to combine financial and businesses, however, is that all three Management (ERM), the idea sustainability reporting in annual are now components of the corporate behind the change is to try to move corporate reports. “The idea is sustainability equation… it’s no longer companies away from a “check the that corporate sustainability issues just a question of “are you harming box” mentality. should be included in your annual the environment?” report because they could sway the decisions of investors,” Gomes Casseres says.

“Good sustainability reporting is not a glowing Integrated Reporting (IR) is the “bleeding edge” of corporate social review of the company, but a demonstration responsibility. It’s been discussed for of progress where you’re laying out what’s several years, but a pilot program for the first set of guidelines was important, what’s working well, where you’re announced in December of 2013. The driving force behind the IR having successes but also where the challenges lie movement is the International and what you’re doing to try and address those.” Integrated Reporting Council (IIRC), a global coalition of regulators, – Mindy Gomes Casseres, investors, companies, standard Senior Consultant for Environmental Resources Management (ERM) setters, accounting profession professionals, and NGOs (www.theiirc.org).

Inefficiencies in your internal pay for themselves in 3–5 years. Chasing processes or supply chains are Others with longer payback times are another good place to start. creating competitive financing deals. the green Even small changes can make a Several solar energy companies, for big difference. Are you trucking example, now have leasing programs components halfway across the that offer immediate savings on your goalposts country that you can get from energy bill even with the costs of While corporate social responsibility sources closer to your facilities? installation, maintenance, and is delivering ever-increasing Can you modify packaging to a monthly fee factored in. benefits to savvy corporations, the use fewer raw materials? Are trend poses challenges even for its you generating a waste product The moving target strongest supporters. Here are some that could be recycled or used What was “green enough” yesterday of the most common, along with the for something else? Encourage is a good first step today, but may strategies successful companies suggestions from your employees be the price of admission tomorrow. are using to overcome them. to get the ball rolling. Part of this is by design. Return on investment Another advantage enjoyed by Organizations like the Global today’s corporate world is the Reporting Initiative, the Green Sustainability initiatives often growing maturity of the green Building Council, and other advocacy increase short-term costs in movement, which has recognized groups regularly review and increase exchange for long-term savings, and adapted to more business their standards. Their unconcealed which can make it more difficult for realities. Many sustainable products intention is to raise the floor every small- and medium-size companies and services are now structured time they raise the bar—and to to implement big changes. This to deliver immediate savings or to some extent it’s already working. is especially true in the case of alternative energy. Despite ongoing improvements, today’s solar and wind installations still offer their most compelling cost benefits at the utility scale.

The easiest solution to this problem is to not do too much at once. Experience has shown that gradual transitions may be more effective in the long run than extreme green makeovers. Conservation and recycling, for example, cost comparatively little. If you can’t make major changes right away, look for ways to make regular upgrades. Infrastructure improvements can be budgeted over time as resources permit.

In construction, for example, Consumer reluctance, brand with green brands, have been turned accessibility for wheelchair-bound loyalty, and skepticism off by past false starts, or are simply visitors is now a standard part of tired of hearing too many cookie- While the number of consumers who many building codes. Advocates of cutter, undifferentiated claims. claim to be willing to spend more green building practices are now with socially- and environmentally- working to bring about similar This challenge is often best responsible companies is growing, changes. While not every business confronted by positioning corporate the number who actually do so is can afford to build to the LEED sustainability as one benefit among progressing at a slower pace. In Platinum standard, the economic many. Don’t ever assume that it’s the Nielsen study quoted earlier, benefits of showcase projects have enough to be socially responsible 50 percent of respondents in Slovakia encouraged imitation and incentives. and eco-friendly. Your brand will claimed they would be willing to At the same time, the less stringent require the same strategic planning spend more, but just 22 percent said LEED Silver classification is becoming and tactical positioning as any other they had actually done so. Similar standard for many government and product or service. If possible, spreads were found in Bulgaria, public buildings. try to win customer loyalty by Peru, and Hong Kong.6 Many other demonstrating that your offering is These changes aren’t being countries had lower percentages the best possible choice on the basis implemented without resistance, willing to pay more in the first place, of its other merits, with sustainability and there is occasional backtracking, especially in Europe, which averaged as an extra benefit to tip the scales but architects and contractors who around 36 percent. against less-responsible competition. adopt them not only have a stronger Brand loyalty plays a role in these story to tell, they’re beginning If your sustainable solution has a results. Just as with generic to enjoy some advantages over higher cost, be wary of trying to medications, many consumers are competitors who do not. In addition, compete on price. Instead, look for unwilling to switch from trusted green building practices are becoming ways your corporate sustainability brands, even if there’s a greener more common even in projects that story can shift the conversation to alternative with a similar cost. “Green don’t seek official certification. an arena you can own—a benefit that fatigue” is also on the rise—some makes you more than just a “green Depending on your industry, you consumers have had bad experiences clone” of an established brand. may or may not have a choice about whether you need to address sustainability initiatives right now. But even if you don’t see a pressing need today, our advice to any business is to take a proactive approach now. Staying ahead of the curve is always less expensive than playing catch-up, and can have the added advantage of positioning you as a leader and trend-setter in your respective market space.

6 http://www.nielsen.com/us/en/press-room/2013/nielsen-50-percent-of-global-consumers-surveyed-willing-to-pay-more-fo.html

Communicating your 1. Issues of concern A food company’s material focus might include issues as broad as corporate sustainability story Identifying the most relevant issues sustainable agriculture, supply for your business is the starting point Whether you choose to pursue chain management, human rights, for any sustainability initiative. In a formal sustainability reporting nutrition, and obesity risks. GRI reporting, this initial phase is strategy like those developed by GRI called a “materiality assessment.” “You want to make sure that you’re or the IIRC, or merely model your communicating what’s important and efforts on their example, the process Gomes Casseres explains it this way: relevant so that you’re not criticized later for developing your sustainability “It’s a bit different from ‘materiality’ because you haven’t focused on the real story can be summarized in three as you would think about it for a story,” Gomes Casseres advises. major steps: financial analysis, but the premise is the same. You need to define 1. Identify the issues of concern for 2. Stakeholders what’s most important for your your business In terms of sustainability initiatives, company to be focusing on based stakeholders are a broad group 2. Identify the areas where your upon stakeholder input, not just what of individuals and organizations business goals interact with any you want to talk about. You can’t get that care about your company’s relevant stakeholders away with talking about just the good activities—whether or not they things your company is doing. You support your goals. These might 3. Develop your corporate sustainability really have to identify and address include your shareholders, your initiatives and communication issues of concern.” strategies to address employees, the socially responsible For example, for a company that investing community, activists, produces paper, the most material local communities surrounding issues might be sustainable your facilities, your vendors and forestry, water usage, and waste suppliers—in short, anyone with management. A power company a vested stake in your company. would need to address the It’s worth your while to know your environmental impact of energy stakeholders at least as well as generation, the reliability and you know your customers. Some cost-effectiveness of service, of them will be both, but even the and the safety of employees.

“When you develop your sustainability platform or program, it first and foremost needs to focus on the issues most material to your company and stakeholders. It also has to reflect the company culture and brand. Packaging and marketing it in a way that resonates with employees, customers and other stakeholders is key. Because if it’s not seen as credible and authentic, they will call you on the carpet.”

– Mindy Gomes Casseres, Senior Consultant for Environmental Resources Management (ERM)

ones who don’t buy from you need corporate sustainability story. Ideally, Internal engagement to be factored into your sustainability you want to highlight the issues that One of the biggest changes we’ve initiative. You need to know what’s are most important based on your seen in the last few years is that important to them, especially the materiality assessment or other corporations are doing a much better aspects of your business that affect stakeholder research. From there, job involving their employees in all their environmental, economic, and develop the themes you’ll use to tell of the corporate social responsibility social environment. your story—both to your insiders and aspects of their business. Many the world. These in turn will point the businesses now consider it essential 3. Developing your sustainability way to the content, data, and case to enroll and engage their own initiative studies you’ll need to back up your people, encouraging them to take claims and establish the credibility By this point you’ll probably start personal ownership of the company’s of your corporate sustainability story. to see clear lines of intersection sustainable values. between your company’s goals and the major issues of concern for your Today the message is no longer “you industry and your stakeholders. What’s should be proud of the company for Where they meet, or are likely to what we’re doing.” It’s “we need you meet as you grow, are the areas that working now to help with this every day so that we are most important for your company become the responsible company we In addition to the strategies detailed to be focusing on. want to be.” Some of these messages above, we’ve identified several eventually form the basis for external Use the issues that are most best practices that are delivering campaigns as well, but their first goal important to your company and consistently successful results for is to encourage internal staff and your stakeholders to outline your sustainable brands. corporate partners to live the ideals the organization wants to present to the outside world.

Choose achievable & quantifiable objectives Corporations, regulators, and consumers are all looking for more “teeth” when it comes to sustainability reporting progress. “Greenwashing” isn’t good enough— everyone wants results that mean something.

Whether it’s reducing your carbon footprint, reducing emissions by X percent or increasing recycling by Y, choose concrete goals that are within your grasp. Be realistic— you don’t want to reach so far that your goal is unreachable, or worse, incomprehensible. Make your objectives as specific as possible and

be clear about the benefits they’ll companies are no longer content to Get our corporate sustainability provide in both your internal and be compliant with regulations and storytelling worksheet—Free external communication. consumer expectations. They’re Get a copy of our free corporate going above and beyond what’s sustainability storytelling worksheet, Ac-cen-tu-ate the positive required to position themselves as featuring thought-provoking Corporate sustainability deals sustainable leaders, innovators, and strategies to help you position with serious issues that can seem trend-setters. To be sure, there’s still your organization as a responsible overwhelming, but nobody wants competition, but with a twist. There company without coming across to buy fear. There’s a true art to are very few trade secrets when it as self-aggrandizing. Just visit our motivating people for positive comes to corporate social responsibility website to download the worksheet. change: you need to convey the businesses practices—more often There’s no obligation whatsoever. severity and urgency of the challenge you’ll see competition to educate other Consider it our way of saying you’re taking on, without making companies by highlighting their own “thanks” for taking the time to read your message too depressing or initiatives. this briefing. morose. Transparency is great PR, but it Want to review your own corporate The best corporate sustainability also imposes greater responsibility, sustainability strategy—or anything storytelling encourages people especially in the harsh light of the else that’s on your mind? Set to think, “this is important and I Internet. Late in 2010, for example, up a complimentary 30-minute need to care about this,” promoting ConAgra made a big deal about strategy session with us by calling sustainable buying behavior (with removing high fructose corn syrup 312.828.0200 Ask for Robin you) without over-reaching on what from Hunt’s Ketchup. When the you can accomplish by yourself. You move failed to increase sales, the can’t whitewash or greenwash reality, company very quietly re-introduced but you’ll still need to be positive HFCS to its product, provoking outrage enough to prevent your audience on consumer websites. To reap the from forming the impression that benefits of transparency, you’ll need to your challenge is such a big problem keep your promises and walk the walk. there’s nothing they can do to change Get our the outcome. Corporate sustainability strategy you can use…today! corporate Wrap your sustainable efforts in Want to polish your own corporate transparency sustainability story? We’d like to give sustainability Early in the corporate sustainability you a free insider look at the process storytelling movement, companies worried that we use to create clear, compelling public disclosure would bring unwanted stories: worksheet scrutiny. In fact, the reverse has turned out to be true. The more effectively you tell your sustainability story, the more credible you’ll be, and the more your bottom line is likely to benefit.

Corporate strategy in this arena is seeing dramatic shifts. Smart

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