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Board EuropeA newsletter for members of The Conference Board in Europe Volume 20 • Number 3/4 • March/April 2005 BuildingBuilding SustainableSustainable EnterprisesEnterprises 1 ompanies are increasingly being assessed on their environmental, social and In this Issue corporate governance performance. Failure to live up to stakeholder C expectations can threaten corporate brands, reputations, and long-term 1 Building Sustainable shareholder value. Enterprises At The Conference Board’s “Building Sustainable Enterprises” forum, hosted by 3 New Research TOTAL in Brussels on 26-27 January, executives from Europe-based businesses • EU Productivity Growth explained how they are integrating environmental, social and corporate governance • Human Capital Measurement reporting into their mainstream activities. The forum was linked to four European Councils: Corporate Governance and Board Effectiveness, Environmental Interview with Barbara Reno 4 Management, Sustainability Reporting and Corporate Citizenship. 5 China Centre for Business and Economics CRH focuses on Sustainable Performance and Growth Keynote speaker Liam 0’Mahony, Global Counsellor for The Conference Board, 6 Council News and Group Chief Executive of CRH, the international building materials group, said • Innovation that his company has grown steadily and profitably for the past 15 years. Building a • Sustainability Reporting sustainable enterprise “the CRH way” is fuelled, said O’Mahony, by relentless • Investor Relations operational best practice throughout the organisation, supplemented by dynamic yet • Corporate Communications prudent acquisitive growth, with rigorous corporate governance throughout. • Strategic Risk Management (NEW) CRH balances local autonomy and entrepreneurial drive with prudent operating 8 Good Practice in practices that require sharing of best practice in every area of the business including Workplace Diversity environmental and people management. It is a formula that enables performance and growth to satisfy the most demanding stakeholders on all fronts, financial and non-financial. (➢ 2) 1. Liam O’Mahony, Group Chief Executive, CRH plc, addresses www.conference-board.org participants at the “Building Sustainable Enterprises” forum. 1 (➢ 1) Growing Shareholder Value focus when companies consider One of the main drivers of the trend sustainability. They are also generated towards sustainability reporting is from improvements in corporate the growing body of evidence that image and values, which can help in environmental, social and corporate recruiting and retaining people, governance issues positively impact in increasing employee productivity, financial performance. Anthony Ling, as well as in marketing and selling Managing Director and Co-head of products and services. European Research for Goldman Sachs International Co., pointed to a report SAP reviews Citizenship Spending published in 2004 by the United Nations Until recently, software developer SAP Environment Programme Finance 3 was investing more than 10 million a year Initiative (UNEP FI) which states that 3. Guy Jubb, Investment Director, on a range of corporate citizenship effective management of these issues Head of Corporate Governance, programmes, yet its efforts went largely contributes to growing shareholder Standard Life Investments unnoticed. Christopher Sorek, SAP’s Senior value. It advises that they be taken into Vice President for Public and Global account in fundamental financial Communications explained that, to rectify analysis and investment considerations. The Business Case for adopting the situation, the company first undertook Sustainability Initiatives extensive benchmarking and regional “One of the biggest barriers is that surveys. Results pointed to the need managers think sustainability has for more education-oriented corporate nothing to do with business”, said Bob citizenship programmes. Today SAP aims Willard, author of “The Next to build stable economies and create Sustainability Wave” and former IBM shared economic benefit through senior manager. He produced charts to transparency and education, particularly show that large companies can achieve a in science, technology, and innovation. 38% increase in profits by implementing environmental and social strategies. DuPont aspires to For small and medium-sized companies Sustainable Growth the figures is even larger – about 46%. Pierre Trauffler, Director EHS Europe, 2 DuPont de Nemours International S.A., 2. Anthony Ling, Managing Director, These savings come from more than cost said that DuPont aims to achieve Co-head, European Research, Goldman reductions in electricity, fuel and waste, profitable revenue growth targets of 6% Sachs International Co. which are often the first areas of a year, but has also set ambitious environmental, health and safety “Boards of directors must play a direct and targets, including zero waste, emissions, active role if their companies are to injuries and incidents. minimise the risks and reap the rewards of good corporate governance”, said Guy “The goal of zero for waste and Jubb, head of Corporate Governance emissions, which we set a decade ago, with global fund manager Standard is to create a mindset within the Life Investments. “Shareholder activism company. It is a constant reminder that – I prefer to call it investor activism – is not we have to move to the next step and part of the corporate governance tool kit… continually pursue new developments Boards should not be afraid to embrace and new products that perhaps active shareholders. If they can work eliminate emissions,” said Trauffler. together, they can build a bond of mutual 4 trust, which helps to nurture a common 4. Bob Willard, author and former IBM understanding of the long-term and senior manager sustainable objectives of the enterprise.” “Corporate Social Responsibility (CSR),”continued Jubb, “is no longer an optional extra for boards, it is a core responsibility. A failure to deliver on generally accepted CSR principles as well as the company’s stated policy is a huge risk for companies, especially when they’re consumer-facing.” 5 6 5. Exchanging views during the break 2 6. Robin Aram, Vice President, External Relations, Policy and Social Responsibility, Shell International Ltd. New Research European Union shows Productivity Gains, ExecutiveAction No. 129 January 2005 but US continues to lead Productivity and Global Competitiveness… EU Labor Productivity and Employment Improve in 2004— The European Union, spurred by gains Conference Board and a co-author of but U.S. Still Leads by Robert H. McGuckin and Bart van Ark by both its old and newest members, the report with Dr Robert McGuckin, With improved performance from both old and new member countries, the EU-25 saw productivity growth recover from 1.3 to 1.6 percent in 2004 and labor input growth increase has registered rising productivity The Conference Board’s Director of from an anemic minus .2 percent to a positive .7 percent. However if Europe is going to provide the leadership needed for global prosperity, these results must be sustained and growth, but it still significantly trails the Economic Research. “If Europe, the improved upon. Key Findings The new member states from central and eastern Europe were United States, states a recent Conference world’s second largest economy, is going Productivity and employment growth accelerated in the also able to maintain very high productivity growth (on average European Union (EU-25) with the old EU membership (EU- more than 4 percent) as the structural reforms continue. 15) increasing productivity growth from .9 to 1.3 percent from 2003 to 2004. Simultaneously, the EU recovered from U.S. Still Leads Board report. to provide the leadership and drive negative growth in total hours worked (-.2 percent in 2002 Despite the improved performance, the European Union and 0.0 percent in 2003) to a positive .8 percent growth in remains behind the United States which improved both labor 2004. The new EU membership (EU-10) accelerated their productivity and labor input in 2004 at about double the hours worked growth to .4 percent—a rate well above the EU-25 growth rates. The United States maintained a high needed for global prosperity as stated in 1.8 percent decline experienced over the previous three years. productivity growth rate of 3.1 percent in 2004. With a big Editor’s Note: This Executive Action report offers the most up-to-date full report, Performance 2005, Productivity, Employment and Income in Productivity in the EU-25 nation bloc its Lisbon goals, the 2004 results must and timely look at key productivity and income trends through the the World’s Economies, to be released in March, will provide a wider end of 2004 based on The Conference Board & Groningen Growth and range of country specific analysis and trends, including additional Development Centre’s Total Economy Database. The four statistical productivity tables and cover 97 economies and 98 percent of world tables provide a comprehensive look at productivity growth rates and output. The data are available on an annual as well as country-by-country grew from 1.3% to 1.6% in 2004 and be sustained and improved upon. levels for 36 of the more developed economies, including complete basis from http://www.conference-board.org/ economics/ research.cfm coverage of Europe, North America, and Japan. The Conference Board’s or http://www.ggdc.net/deseries/totecon.shtml. labour input growth increased from an Although European productivity growth anaemic minus