Pioneering CSR

- An analysis of Danish frontrunners in Corporate Social Responsibility

Authored by

GLOBAL CSR

for

The Danish Business Authority

Developed by GLOBAL CSR for the Danish Business Authority

Disclaimer: This report was prepared by GLOBAL CSR for the Danish Ministry of Business & Growth, and was financed by the Danish Business Authority (Erhvervsstyrelsen). The report does not necessarily reflect the official view of the Danish Government.

Cover photography: Henrik Brahe for GLOBAL CSR©

February 2013, Copenhagen, Denmark

This publication can be downloaded from: www.samfundsansvar.dk

1

Table of Contents

1 Executive Summary...... 4

1.1 Key Findings - CSR compliance ...... 4 1.2 Key Findings - Beyond Compliance ...... 5 1.3 Challenges and Opportunities ...... 5 2 Introduction ...... 6

2.1 The Triple Bottom-Line ...... 8 2.2 CSR Compliance ...... 8 2.3 Beyond CSR Compliance ...... 9 3 Reflections and experiences in relation to CSR Compliance ...... 11

3.1 Social Compliance ...... 12 3.1.1 Policy commitment - Social ...... 14 3.1.2 Due Diligence - Social ...... 15 3.1.3 Remediation - Social ...... 18 3.2 Environmental Compliance ...... 19 3.2.1 Policy Commitment - Environment ...... 20 3.2.2 Due Diligence – Environment ...... 21 3.2.3 Remediation - Environment ...... 21 3.3 Economic Compliance ...... 22 3.3.1. Policy Commitment - Economy ...... 23 3.3.2. Due Diligence - Economy ...... 24 3.3.3. Remediation - Economy ...... 25 3.4 Danish Frontrunners and CSR Compliance ...... 26 4 Beyond CSR Compliance ...... 27

4.1 Best Practice Strategic CSR Focusing on Social Sustainability ...... 28 4.1.1 ISS: Diversity as a Competitive Advantage ...... 29 4.1.2 DONG Energy: Multi-Stakeholder Initiative on Responsible Supply Chain Management ...... 30 4.1.3 Carlsberg: Initiative on Responsible Drinking ...... 31 4.1.4 Novo Nordisk: Integrating CSR in Business Strategy for China ...... 32 4.2 Best Practice Strategic CSR Focusing on Environmental Sustainability ...... 33 4.2.1 Maersk: Triple-E ...... 33 4.2.2 DONG Energy’s Climate Partnerships ...... 34 4.2.3 Carlsberg: Sustainable Packaging ...... 35 4.3 Best Practice Strategic CSR Focusing on Economic Sustainability ...... 36 4.3.1 ISS: Business Integrity is non-Negotiable ...... 36 4.3.2 Novo Nordisk: Learning the Hard Way ...... 37 4.3.3 Maersk: Maritime Anti-Corruption Network ...... 38 4.4 Danish Frontrunners and Strategic CSR ...... 39 5 General Challenges and Opportunities ...... 42

2

5.1 CSR; A Moving Target ...... 42 5.2 Lack of Awareness and Capacity ...... 42 5.3 A Business Case to End Them All...... 44 5.4 The Importance of Ownership ...... 44 5.5 Context Matters ...... 45 5.6 Concluding Remarks ...... 45

3

1 Executive Summary

This report provides an analysis of five Danish frontrunner companies’ Corporate Social Responsibility (CSR) approaches and activities. A.P. Moeller Maersk, Carlsberg, DONG Energy, ISS World Services and Novo Nordisk have shared their manifold CSR-experiences, as well as their insightful views on the challenges and opportunities that the CSR agenda holds. The analysis is based on the internationally recognised framework for CSR, consisting of the triple bottom-line of the UN Global Compact and the UN Guiding Principles for Business and Human Rights (UNGPs).

The report is aimed at inspiring more Danish companies to become CSR pioneers. It offers a current insight into what these five frontrunners currently do in relation to social, environmental and economic compliance. In addition, it describes best practices in relation to voluntary initiatives that go beyond compliance on all three bottom-lines; commonly referred to as strategic or proactive CSR. Such efforts are showcased and connected with interesting examples from international frontrunners.

1.1 Key Findings - CSR compliance

Recent developments, i.e. the adoption of the UNGPs, the updated OECD Guidelines for Multinational Enterprises and the EU Strategy for CSR, have had quite an impact on how the compliance dimension of CSR is understood internationally.

The five Danish frontrunners are all experienced CSR practitioners. This means that they have many policies and processes in place to ensure a solid foundation for their CSR activities. However, even among these frontrunners there is a need to adjust existing processes to ensure alignment with current compliance expectations.

When it comes to environmental compliance, Danish companies are generally characterised by strong and robust management systems, mostly due to strong regulation and the obvious business case related to reducing energy consumption. Anti-corruption has been characterised by increasing regulation, most notably through the adoption of the UK Bribery Act in 2010. This has spurred quite a bit of action among Danish companies, many of whom have since created policies, conducted training and set up whistleblower hotlines. When it comes to social compliance however, the case is somewhat different. The emphasis of the UNGPs on the need to incorporate the full spectrum of human rights in compliance activities requires a new mindset in most Danish companies. For example, all of the frontrunners have to adjust the scope of their processes to include all human rights. In addition, the expectation that companies have to ensure access to remedy for victims is a challenge for companies, including the Danish frontrunners, most of which have yet to set up operational level grievance mechanisms.

Although the business case for investing in environmental compliance is initially clearer, the frontrunners highlight how being able to display an equally sound compliance system and a good track record on social and economic sustainability means good business. Firstly, because a strong CSR-profile can heighten motivation among employees, attract new investors, pave the way for new business partnerships, and open up new market opportunities. Secondly, some of the participating companies highlight how drawing a strict line between compliance and beyond compliance can be counterproductive. To them, compliance is a valuable element in identifying areas in which the company can work strategically with CSR. As such they stress the synergies between the compliance and beyond compliance dimensions.

4

1.2 Key Findings - Beyond Compliance

The five Danish CSR-frontrunners display an interesting portfolio of strategic CSR initiatives. Within all three bottom lines they work strategically with minimising risks, reducing costs, developing products, building brand value, improving employee satisfaction, stakeholder relations and the like. Simultaneously their efforts contribute to bettering global standards on health, safety, diversity, education, environment, anti-corruption, etc. The Danish frontrunners do this via multi-stakeholder initiatives, partnerships, CSR based innovation, base of the pyramid investments, organisational learning and lobbying. This report further highlights corresponding examples drawn from international giants like Coca Cola, Hitachi, Siemens, General Electric, Novartis and Cerrejón. These examples can help expand current perceptions of what strategic CSR initiatives can consist of.

The proactive CSR dimension can help companies stand out among peers. According to the frontrunners, however, voluntary CSR efforts have to be strategic and add value to the company. When carried out in a strategic manner, this part of CSR is about competitiveness and improving the core of the business.

1.3 Challenges and Opportunities

Throughout the report, readers are presented with a range of challenges and opportunities in making more Danish companies CSR pioneers. Five key and crosscutting areas, which are closely interconnected, are worth highlighting:

Moving target: To many, CSR is still a somewhat intangible and complex business area. Recent years have brought about much change, which puts pressure on companies that have to adapt to ever-evolving regulations, demands and expectations. Current convergence trends can help simplify the area and enable more companies to work with CSR in a manner that corresponds with international trends.

Awareness and capacity: The constant development in the field of CSR results in a constant need for awareness, capacity development and not least corporate agility. Authoritative guidance and awareness raising activities are therefore essential in order to inspire more companies to join the forefront of the CSR agenda.

Business case: The need for a demonstration of the financial prospects of CSR is perhaps the most recurring remark among the five frontrunners. A clear business case is the most effective driver for the CSR agenda and key to getting more companies on board.

Ownership: While there is little doubt that hard law and regulation can fast-track CSR implementation and change, companies and their employees need to have a sense of ownership for the changes to be substantial and sustainable. Dialogue and engagement are crucial for the inclusion of more companies in the CSR agenda.

Context matters: Operating across borders means operating within different laws, levels of enforcement, traditions etc. This is challenging for many companies that often find it difficult to exert their influence on CSR issues across contextual differences. Often the global challenges require global solutions and collective action is necessary. As such the role of international multi-stakeholder initiatives is important, especially for frontrunners.

5

2 Introduction

This report presents an analysis of Corporate Social Responsibility (CSR) efforts of five of the largest companies with headquarters in Denmark. The report describes aspects of the CSR work carried out by A. P. Moeller Maersk, Carlsberg, DONG Energy, ISS World Services, and Novo Nordisk.

The report provides insights into the perception of CSR in leading Danish businesses and discusses the challenges and opportunities they face. It also presents examples of strategic CSR activities and initiatives. The participating companies represent different business sectors and a variety of CSR strengths and weaknesses.

The aim of the report is to inspire and assist more Danish companies in becoming CSR pioneers. It is worth noting that even the five ambitious Danish CSR frontrunners selected for this report face challenges and barriers in their CSR work. CSR is an ever-evolving field and in light of recent changes all large Danish companies are in a continuous learning process. Even the best in the field continuously experience room for improvement. Annette Stube, Director of Group Sustainability in A. P. Moeller Maersk (hereafter: Maersk) explains:

”CSR takes time. It needs to settle in our minds to make sure that it becomes part of our daily routines. In fact CSR is about change management.”

Examples of CSR challenges are integrated throughout the report. In addition the report highlights best practice on business-related proactive initiatives and seeks to inspire other companies to identify and reap the benefits of strategic CSR.

Table 1 presents the key characteristics of each company. These include industry, revenue, geographical spread, and number of employees. The interviewed representatives from each company are presented in the last column. GLOBAL CSR is very grateful to all of the respondents who were kind enough to share their valuable knowledge and time.

Table 1. Key characteristics of participating companies including names of respondents

Company Industry 2011 Geographical CSR Revenue presence and representatives no. of – interview employees respondents

Brewery group 63,561 The Carlsberg Morten Nielsen, million DKK Group employs Director CSR & 41,000 people. Public Affairs &

Activities in Eskild Northern & Andersen, Western Europe, Group Eastern Europe Environmental and Asia. Manager

6

Energy 56,842 Operating in Filip Engel, million DKK Northern Europe Head of The business is

with Stakeholder based on procuring, approximately Relations producing, 7000 employees distributing and trading in energy and energy related products in Northern Europe.

Healthcare focusing 66,346 Novo Nordisk has Susanne on diabetes care. million DKK 33,900 Stormer, Vice employees in 75 president, Novo Nordisk also countries and Corporate works within markets its Sustainability & haemophilia care, products in more Peter Munch- growth hormone than 190 Madsen therapy and countries Programme hormone Manager, replacement Corporate therapy. Sustainability

Facility 77,644 ISS operates in Joseph Management million DKK more than 50 Nazareth, Group countries with Vice President, Cleaning Services more than Group Health, Support Services Safety and 530,000 Property Services Environment employees Catering Services (HSE) and Corporate Security Services Responsibility (CR)

The Maersk Group 322,520 The Maersk Annette Stube, operates in two million DKK Group employs Director of Group main industries: 117,000 people Sustainability shipping and oil & and has a global gas. presence.

7

2.1 The Triple Bottom-Line

What is CSR? In order to ensure a common framework for understanding the findings, it is important to define what the term CSR covers. Answers to the questionnaire and interviews with participating companies revealed that each company has its own perception of what CSR means. Susanne Stormer, Vice president Corporate Sustainability, Novo Nordisk explains:

“We use the TBL (Triple Bottom-Line) as a filter for decision-making, which aims to ensure that we always consider the implications of our actions on people, communities and the environment.”

Morten Nielsen, Director CSR & Public Affairs, Carlsberg, explains that their company has a different approach to CSR:

“We work with CSR as a central part of our business, we do not divide it into bottom-lines; not in communication nor in processes. We focus on the functions and the business processes.”

Four of the five companies use the TBL as the overall framework, but it is apparent that even within this framework, the perception of CSR and how to work with the concept varies from company to company. Annette Stube, Maersk explains:

”The past four years we have been focusing on mastering the responsibility agenda so that we can pick up pace and focus more on the positive contributions, that Maersk has on sustainable development.”

Filip Engel, Head of Stakeholder Relations, DONG Energy, explains how DONG Energy has found it necessary to focus their efforts within CSR:

“The transformation to green energy is an integrated part of our company strategy. We invest in green energy because it is profitable. But it is also one of our most important CSR efforts because we are contributing to the development of concrete responses, such as offshore wind, to one of our big challenges: climate change.”

Joseph Nazareth, Head of Group Health, Safety and Environment (HSE) and Corporate Responsibility (CR), ISS World services (hereafter ISS), stresses the business case for CSR:

“CSR used to be a luxury. Now it is fundamental to our business strategy and our business growth.”

This report rests on a widely recognised understanding of CSR, which is based on the TBL. The TBL consists of internationally agreed upon principles as represented by the UN Global Compact (UNGC): Social sustainability (human & labour rights), Environmental sustainability and Economic sustainability (anti-corruption).1

Although not every company perceives or undertakes CSR with consideration to international principles, such categorisation provides for a structured and globally acknowledged understanding of CSR, enabling comparison between companies and a meaningful categorisation of CSR efforts.

2.2 CSR Compliance

CSR and CSR activities related to the three bottom-lines can be divided further into two dimensions; 1) CSR compliance and 2) activities that go beyond compliance; often referred to as proactive or strategic

1 http://www.unglobalcompact.org/

8

CSR. This two-dimensional understanding of CSR is in line with the EU Commission’s CSR strategy from 2011, in which CSR is defined as;

“The responsibility of enterprises for their impacts on society … with the aim of:

- maximising the creation of shared value for their owners/shareholders and for their other stakeholders and society at large;

- identifying, preventing and mitigating their possible adverse impacts”. 2

According to the EU, CSR compliance is about identifying, preventing and mitigating possible adverse impacts. This understanding is derived from the concept of due diligence as defined in the UN Guiding Principles on Business and Human Rights (UNGPs).3

The UNGPs were unanimously adopted by the UN in 2011. Although these principles were developed with the purpose of defining the universal responsibility connected only to the social bottom-line, they have been applied to cover all three bottom lines by e.g. the OECD’s Guidelines for Multinational Enterprises4 and the EU. In other words the UNGPs have influenced the entire CSR field, including how businesses are expected to manage adverse impacts on environmental and economic sustainability.

In addition the UNGPs have been incorporated into the latest Danish Action Plan on CSR (March 2012) and form the cornerstone of the Danish Mediation and Complaints-Handling Institution for Responsible Business Conduct.5 The relevance to all companies of this globally agreed upon CSR compliance standard is evident. This report explores how Danish companies act in light of this new CSR compliance framework. An international and systematic approach further enables translation of these companies’ CSR efforts into a global business context.

2.3 Beyond CSR Compliance

When expecting that all companies will align their processes for CSR compliance with international standards in the next few years, it is useful and motivating to also portray companies that have proactive or strategic CSR activities. Strategic CSR initiatives cover inter alia voluntary sustainability projects as well as programs and activities that Danish companies carry out in order to respond to major risks or to achieve business advantages. The report pinpoints a few of the strategic focus areas of participating companies. By showcasing key learning points from current experiences in this dimension of CSR6, the report seeks to inspire more Danish companies to work strategically with CSR. As a comparison the report highlights a few best practice strategic CSR initiatives from non-Danish companies. These examples were chosen from sectors or topics similar to the Danish companies or their initiatives to bring further inspiration. Table 2 illustrates the analytical framework of this report.

2 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0681:FIN:EN:PDF, p. 6 3 http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf 4 http://www.oecd.org/daf/internationalinvestment/guidelinesformultinationalenterprises/48004323.pdf, p. 23, art. 14. 5 http://www.businessconduct.dk/due-dilligence 6 What Porter and Kramer refer to as ‘creating shared value’; confer also the new CSR definition by the EU

9

Table 2. Analytical CSR Framework

The The economical The social bottom-line environmental

bottom-line bottom-line (UNGC 1-6) (UNGC 10) (UNGC 7-9)

Policy Section 3.1.1 Section 3.2.1 Section 3.3.1

Due diligence

- Identification

- Prevention Section 3.1.2 Section 3.2.2 Section 3.3.2

- Mitigation - Accounting for

Access to remedy Section 3.1.3 Section 3.2.3 Section 3.3.3 Compliance

Strategic CSR e.g.:

Multi-stakeholder initiatives Section 4.1.2 & Section 4.3.3

4.1.3

Partnerships Section 4.1.1, 4.1.3 Section 4.2.1,

& 4.1.4 4.2.3

CSR-based Innovation Section 4.2.1,

4.2.2, 4.2.3

Base of the pyramid Section 4.1.4

pliance

Organisational Learning Section 4.1.1, 4.1.2 Section 4.3.1,

& 4.1.4 4.3.2

Lobbying Section 4.3.1

Beyond Beyond Com

The table synthesizes what the report covers and indicates how CSR can be implemented. As indicated, the report describes CSR from a compliance and beyond compliance angle across the three bottom-lines. Furthermore it showcases a sample of best practices on different types of strategic CSR. References on where to find specific content is indicated in the table. The empirical data of this report has been collected through desk research, questionnaires and interviews.

10

3 Reflections and experiences in relation to CSR Compliance

The CSR governance expectations set forth by the UNGPs are used to contextualise the Danish frontrunners’ approaches to CSR compliance. In effect, this means that their commitment, their due diligence processes and how they deal with victims of possible or actual adverse impacts on all bottom- lines are presented below. However, this understanding of CSR compliance is still new. CSR and how companies understand the concept is evolving. Therefore, to most companies, CSR compliance is not yet a concept that is set in stone. One could also rightly ask whether the term ‘compliance’ should be used to describe compliance with legal requirements only, or whether the term also covers alignment with international expectations.

Obviously companies must, as a minimum, comply with national law. Legal compliance thus forms the basis of CSR. A company that does not live up to national law cannot be considered socially responsible. But for many of the frontrunners, meeting expectations, for instance by implementing the UNGPs, which in most places are not yet incorporated into binding legislation is equally important. Susanne Stormer, Novo Nordisk explains:

”Compliance is a broad concept, from legal compliance at the base to compliance-plus. For example the UNGPs are not a legally binding set of rules. Still, I think of them as a set of minimum standards and they have to be understood as part of the compliance work.”

Thus, to many of the frontrunners, CSR compliance is not just about meeting legal requirements; it is also about being one step ahead of public regulation by complying with soft law instruments and even frontier expectations and issues that might become business demands over time. Figure 1 below illustrates the idea of an issue’s life cycle, i.e. how an issue often travels from being an issue of public debate to ending up as a hard law requirement.

Figure 1. An issue’s life cycle, McKinsey & Co 2006

11

The frontrunners argue that if you want to maintain a frontrunner position, you need to be able to navigate in the ever-changing landscape of CSR expectations. A skilled CSR department can help spot trends and tendencies and determine which expectations have come to stay. Annette Stube, Maersk explains:

“The legal department appreciates the CSR department’s role in picking up frontier expectations, as our company needs people that can pick up on those things. But it is very important that the lawyers also understand this part of CSR.”

CSR compliance is often perceived as the ‘boring’ or ‘cumbersome’ part of CSR, because it is about complying with demands and expectations, rather than forming voluntary initiatives. In contrast to this view, the frontrunners highlight how this perception of compliance might be counterproductive. Susanne Stormer from Novo Nordisk emphasises the dynamics between good compliance work and strategic CSR initiatives:

“When you do your compliance work properly, you identify areas that would be relevant to approach proactively. In effect you are turning a risk into an opportunity. Working diligently with compliance gives you a good opportunity for understanding where the company has significant untapped potential.”

The strict dichotomy between compliance and beyond compliance activities is questioned by Maersk. Annette Stube highlights the synergies that often exist between the two dimensions and stresses that they should be utilised wherever possible:

“Instead of compliance and beyond compliance we talk about risk mitigation and opportunities. With that we deliberately try to blur the distinction between compliance and beyond. The interesting initiatives often arise when we are able to bridge the divide and make it more value adding to work with risks.”

Such perspectives add to the relevance of sharing more information and good practices on the compliance side of CSR. Companies can learn from and be inspired by more than just the voluntary proactive initiatives of other companies; they can just as easily and readily benefit from experiences in relation to risk identification, prevention, mitigation, etc.

3.1 Social Compliance

While the UNGPs are relatively new to CSR (June 2011), they have already made an impressive mark on the CSR field. In particular the UNGPs have made strong progress in regards to the social part of the compliance agenda, i.e. the field of business and human rights. As mentioned, the importance of the UNGPs is well reflected in their broad international recognition; e.g. by the UN, the EU commission, the OECD and ASEAN.7

The UNGPs have also influenced the Danish business environment and all interviewed companies were familiar with them. However familiarity does not mean that the companies have implemented the UNGPs in their entirety or that they have even begun implementing the principles. Filip Engel from DONG Energy highlights that this area is new to many:

7 Working Group Report to the UN General Assembly, 2012, p.10 ff http://www.business- humanrights.org/media/documents/un-working-group/un-working-group-business-human-rights-report-to-gen- assembly-10-aug-2012.pdf

12

“Some parts of social compliance are unchartered territory for most companies; especially in relation to supply chain management.”

While many of the companies have robust and comprehensive environmental management systems, the same is not always true for social sustainability or human rights. Susanne Stormer indicates how this picture is about to change:

”Just as you expect companies to manage their environmental impacts, we must also expect companies to do the same in relation to human rights. This would result in a level playing field.”

Most of the frontrunners have several existing processes in place that can be aligned with the UNGPs without too many efforts. Joseph Nazareth, ISS exemplifies:

“The UNGPs help a lot in developing the foundation. We have all the policies and systems in place, and that is the first step. We are now on the next step of ensuring that we are implementing the processes throughout our operations and that they are fully aligned with the UNGPs. This is a continuous journey.”

Nearly all of the companies further share the challenge of having to adjust the scope of their current processes to include all human rights. Morten Nielsen, Carlsberg, states:

”We do have all the processes, but our scope is different.”

When looking at most companies’ Codes of Conduct there is, for instance, a clear trend to focus on selected human rights, most often 4-8 core labour rights.

The companies appreciate that human rights compliance may add value. Therefore some companies might feel that implementation of the principles brings value in itself. Several of the companies emphasise that ‘respect for human rights’ is integral to their company’s performance. ISS, with 535,000 employees worldwide and 10,000 employees in Denmark, understands and appreciates the importance of ensuring respect for human rights. The company just won a contract for a major pharmaceutical company and is in no doubt that its strong CSR profile played a decisive role. Joseph Nazareth, ISS:

“Ensuring human rights is part of our value proposition – we offer credible and effective risk management. Our value proposition is to take on the risk from our customers such as the risks related to human and labour rights.”

Filip Engel from DONG Energy further reflects on the added value of the UNGPs:

”We have considered human and labour rights part of our responsibility since the creation of DONG Energy in 2006; it is also part of the UN Global Compact. So it has always been part of our mindset, but it will definitely be more institutionalised with the UNGPs. It is a strength that the UNGPs offer a framework and an authoritative reference point that we can use in our dialogue with external stakeholders.”

In 2012 Maersk used compliance with the UNGPs as a way to enter the Myanmar market. Annette Stube, Maersk explains:

“We initiated a project with Danish and UK human rights institutes, governments and other international companies to use human rights as a "market opener". If companies, including our own, proactively, openly and sincerely incorporated the UNGPs, when operating in Myanmar, the company would be well

13

protected to work in the country, which had so far been very high risk for reputation reasons. We’ve further stressed the importance of engaging in multistakeholder dialogues to understand the risks and impacts.”

Maersks recent involvement in Myanmar is a very Human rights open a door for Maersk in interesting example of how the CSR dimension, Myanmar which is often claimed to bring little value to the Following speedy reforms, Myanmar, home to companies, namely compliance, can have quite the about 60 million people, was opened to business opposite effect. Annette Stube, Maersk elaborates: in 2012. Many companies see new business ”We are curious to see if human rights can be a opportunities, but are equally wary of risks. market opener – and that is a big value to a In 2012 the Danish Institute for Human Rights company. Until now it has been too risky, but so far and the Institute for Human Rights and Business this actually seems to be working although it is still began to lay the foundations for a resource early days.” centre on responsible business in Myanmar. As

Through this project Maersk hopes to be able to part of this initiative representatives from Maersk participated in a fact finding mission to fulfil several ambitions: Build their own business Myanmar in March 2012. Subsequently a mainly for the subsidiaries Damco and Maersk Line resource centre was established in Yangon. while mitigating Maersk’s risks, and assisting customers in doing the same. As such, Maersk is aiming to be a preferred long-term partner in Myanmar.

With this partnership, Maersk hopes to support the opening of one of the world’s last untouched markets and help Myanmar gain entry to global trade through improved infrastructure. A foundation of social compliance brings new business opportunities for Maersk in Myanmar.

The US government has made reporting on US investments in Myanmar mandatory. The report has to be forwarded in two versions – one for the government and one for public use, which the State Department will make publicly available. The information that companies have to report on includes information regarding policies and procedures with respect to human rights and workers’ rights, among other areas.8 In addition, the EU encourages European companies to explore business opportunities in Myanmar and expects companies operating in Myanmar to do so with:

“the highest standards of integrity and corporate social responsibility.” 9

The EU explicitly refers to the OECD Guidelines for Multinational Enterprises, the UNGPs, and the EU's own CSR strategy, as this standard of CSR.

3.1.1 Policy commitment - Social

Most of the five Danish frontrunners commit to respecting human rights in differing ways. For some it is via their participation in the UN Global Compact, whilst others make direct reference to Human Rights in their Code of Conduct, their CSR policy or in a specific human rights policy. As an example of such a policy, Novo Nordisk’s commitment to human rights is presented below.

8 Administration Eases Financial and Investment Sanctions on Burma, Office of the Spokesperson, Washington DC, July 11 2012: http://www.state.gov/r/pa/prs/ps/2012/07/194868.htm 9 Council conclusions on Burma/Myanmar, 3159th FOREIGN AFFAIRS Council meeting, Luxembourg, 23 April 2012, section 7: http://eeas.europa.eu/myanmar/docs/council_conclusions_april_2012_en.pdf

14

Morten Nielsen from Carlsberg is Novo Nordisk’s commitment to human rights:10 well aware that there are certain At Novo Nordisk we are committed to respecting and supporting requirements to make globally recognised human rights throughout our operations and acommitment to human rights. business relationships. Governments carry the primary According to the UNGPs a responsibility for protecting human rights, but companies have an commitment to respect human independent responsibility to respect human rights. Our human rights needs to include several rights management approach builds on the UN Guiding Principles elements and these are yet to be on Business and Human Rights and our objectives are to: fully implemented by many  Identify, prevent and mitigate human rights risks throughout companies. Morten Nielsen, our operations and business relationships Carlsberg explains:  Remediate any adverse human rights impacts that our business causes or contributes to “Our Labour and Human Rights  Account for how we address our impacts on human rights  Promote the respect and protection of human rights with those policy, which was implemented in we do business with 2010, is in line with the United  Positively influence business respect for human rights through our example and presence Nations Universal Declaration of  Contribute to promoting the implementation and dissemination Human Rights and the International of international standards on human rights for business Labour Organisation's Declaration on Fundamental Principles and Rights at Work. However, we are aware of the broader interpretation of Human Rights as set forth in the UNGPs and this will be reflected in our policies and procedures as part of their continuous development.”

The UNGPs set forth five explicit and one implicit expectation to companies’ policy commitments. For instance, companies have to state that they respect all human rights and that they expect the same from entities that they do business with. In doing so, they should also empower employees and relevant stakeholders with clear guidance on the desired way of doing business with respect for human rights. 10

In addition companies need to embed, or integrate, the policy commitment in relevant internal systems so that there is an adoption of such principles in practice and a change in an organisation’s culture for all employees. Top management also needs to approve of the policy commitment. Ensuring compliance with all of the UNGPs’ expectations of a company’s policy commitment has not been ensured by all five companies, although some elements were implemented by all of them.

3.1.2 Due Diligence - Social

A policy commitment is only the start of a company’s social compliance work. The commitment then has to be reflected throughout a company via an ongoing due diligence process. The due diligence process has four elements: identification, acting (preventing and mitigating), tracking and communicating, see figure 2 below.

The human rights due diligence process is similar to other existing management processes, e.g. safety management systems (SMS) or environmental management systems (EMS). In effect most companies already have similar processes in place, but might still need to adjust the scope of such processes to include human rights.

10 http://www.novonordisk.com/sustainability/sustainability-approach/human_rights.asp

15

Figure 2. The Due Diligence Process To start the due diligence process, companies are expected to assess all parts of their business identifying any potential or actual Identify negative human rights impacts. In this regard Maersk has carried out a gap analysis across 11 units. Annette Stube, Maersk elaborates: Act – Prevent Communicate and mitigate “It started out as an exercise of duty. But it resulted in some good discussions in the business units. Now people understand the agenda. In addition we identified issues that we were aware of, but had not considered in a human rights context. You discover new Track aspects by approaching your business through a human rights lens. As an example, 90,000 external truck operators work at our terminals in the ports every day. If something happens it is our responsibility, and accidents do happen in dealing with heavy materials. Today, this issue is becoming more prominent, as it is understood as a human rights issue.”

The remaining companies are yet to carry out human rights impact assessments in full alignment with the UNGPs. Most carry out risk assessments that include selected human rights. Susanne Stormer from Novo Nordisk explains:

“We have had an external gap analysis, and while the conclusion was that human rights impacts appear to be well-managed, the report recommended that we conduct a more comprehensive risk assessment in relation to all human rights. This is still to be done. It is huge task that we have to break into smaller pieces. We have started to address potential risks. As an example we are reviewing internal labour conditions across the global organisation to ensure that our practices are consistent with standards we require of our suppliers.”

ISS has included human rights in their internal audits and established targets to carry out audits in at least 20% of the countries they operate in. Historically internal audits were focused only on financial indicators; however a growing trend has emerged towards corporate governance audits that focus on compliance with certain human rights. Carlsberg has such a process in place. At Carlsberg, the Group Internal Audit function identifies risks across the company on an annual basis and includes CSR risks. At Carlsberg each policy owner is responsible for addressing potential risks, including adverse social impacts. In contrast to Carlsberg, DONG Energy finds it necessary to prioritise where to start the identification process. Filip Engel, DONG Energy explains:

“Right now we prioritise working with our supply chain over assessing our own operations. That decision was based on a risk assessment. DONG Energy operates in North Western Europe where human rights standards are high. In contrast some of our suppliers are based in countries where negative impacts on human rights occur more frequently. So we decided to start with our supply chain where the risks are

16

biggest. But we also need to look at our own operations to determine if and where we have human rights challenges.”

As a part of ISS’ overall CSR work and participation in the UN Global Compact, they have assessed the regions where they do business and the possible challenges each area might raise from a CSR perspective. As a result, ISS is aware of the special conditions connected with doing business on the West Bank.

In recent years, ISS has been contacted by Danish ISS responds to criticism: research media DanWatch concerning the company’s In 2011, when ISS was first approached by activities in Israel; particularly in the Golan Heights Danish research media DanWatch who was and on the West Bank. Critics have argued that ISS’ critical of the company’s activities in the West activities are problematic and risk infringing on Bank and the Golan Heights, they tried to human rights. In 2012, Danish mainstream business organise a meeting with them. Initially media picked up on the story, which led to a high DanWatch was not available, but in 2012 profile interview with ISS’ CEO on the subject. ISS DanWatch interviewed ISS twice and were in contact via phone and email. ISS is strongly disagrees with the criticism, which they committed to continuing the dialogue with have clearly stated. Joseph Nazarath from ISS other relevant organisations, but has not explains: been in contact with DanWatch since. “We are doing everything possible to ensure that human rights are not negatively impacted. In addition, we firmly believe that our activities on the West bank are positively contributing to ensuring a number of human rights, e.g. the right to work, the right to a healthy work environment, and acceptable minimum wages. In other words, it is ISS’ opinion that we contribute to ensuring human rights and the dignity of the local Palestinian population.”

Engaging in constructive dialogue with NGOs can be a valuable element in a company’s due diligence process. NGOs can be a good source of information for identifying adverse impacts.

As the first step in the due diligence process, identification is naturally the focus of most of the companies at this early stage of implementation. However, it is worth noting that our frontrunner companies have relevant experience preventing and mitigating negative impacts on selected human rights; especially in responsible supply chain management programs and in dealing with the right to safe and healthy working conditions. Filip Engel, DONG Energy outlines DONG Energy’s approach:

“When a risk is identified in our supply chain, we seek to prevent and mitigate it by engaging in dialogue with the supplier. A basis for such dialogue can be an audit undertaken by a third party. The audit is followed by a dialogue with the supplier on the findings and a corrective action plan is developed in order to mitigate identified negative social impacts.”

Susanne Stormer from Novo Nordisk finds that some prioritisation may be relevant in future prevention and mitigation efforts:

“Not all adverse impacts are equally important, or equally urgent to address. We will rank our adverse impacts from critical over significant to minor. We do the same in our responsible supply chain management.”

17

The UNGPs allow for prioritisation where a company operates in a context or under circumstances where prioritisation is necessary.11 However, for most companies it should be possible to address all identified potential and actual adverse impacts.

DONG Energy, ISS and Maersk display a lot of experience with tracking performance, as part of the due diligence process. Due to sector risks all three companies have been tracking performance on one human rights issue, the right to safe and healthy working conditions, for years. Annette Stube, Maersk explains:

“All safety incidents are systematically tracked and monitored. We annually report publicly on safety incidents, including fatalities. We do not systematically track all social impacts, but do publicly report, if significant gaps have been identified and how we have approached mitigation.”

Joseph Nazareth from ISS similarly explains:

“People are our business. If we use the hearts and minds analogy, ensuring the health and safety of our employees is fundamental to how we work and the way we run our business. We have therefore implemented a systematic approach of risk management in this area and also a systematic approach to reporting and monitoring across the ISS group.”

In addition, Carlsberg highlights how they track CSR performance on a broad scale. Morten Nielsen explains:

“Annually we measure our CSR performance through our CSR reporting system (total amount of users: 650), where we measure on more than 600 indicators in total, spanning all our CSR areas, environment, business ethics, labour and human rights, consumer issues, community engagement, responsible drinking and marketing communication.”

None of the companies systematically identify adverse impacts on all human rights and thus do not track performance on the prevention and mitigation of adverse impacts.

Due to the Danish Annual Accounts Act, all interviewed companies report on CSR. In addition, all of the companies are UNGC participants and publish annual communications on progress. From 2013 and onwards the amendment to the Danish Annual Accounts Act requires reporting on human rights impacts. Susanne Stormer from Novo Nordisk explains how reporting on human rights impacts is a challenge:

”Reporting meaningfully on human rights is not easy – there is a lack of good reporting guidelines. The UNGPs require of companies that we report on respect for human rights, but we need to figure out how; for instance, how to identify meaningful performance indicators.”

In other words, good practices for reporting on human rights impacts will evolve over the coming years.

3.1.3 Remediation - Social

According to the UNGPs, companies are expected to have an effective grievance mechanism in place, and provide for, or cooperate in, the remediation of any negative impacts on human rights once they have been identified. The issue of remediation, or making right what went wrong for victims of negative human rights impacts, is the one compliance issue where most of the companies acknowledge that they are not yet compliant. Thus three of the five companies openly state that they do not yet provide access to

11 UNGPs principle 24

18

remedy as per the UNGPs. Providing access to remedy for victims of a company’s negative human rights Morten Nielsen, Carlsberg: ”It is quite interesting actually. The impact is therefore new ground to most companies, environment has no voice to advocate for including the Danish frontrunners. itself, but nevertheless it is the area that we However, when it comes to establishing a grievance have primarily focused on so far. It is due to mechanism, Novo Nordisk has taken advantage of the the fact that the business case is so evident.” fact that they already had a whistleblower mechanism in place connected mainly to business ethics or anti-corruption. Susanne Stormer, Novo Nordisk explains:

“Our compliance hotline12 is run by our business ethics department, but complaints can be about anything relating to the Novo Nordisk Way, which includes human rights. The hotline is flagged on our webpage, but we need to make it more visible. A challenge relating to human rights is how to articulate the subject in a way that is relevant for the people we want to target.”

The company has not had any complaints related to human rights yet. Hopefully this is simply because there are no serious infringements, but some alternative explanations should also be considered. Lack of complaints could be attributable to the fact that the hotline is not widely known or that understanding human rights in a business setting is still new to many. Thus companies and even frontrunners with quite advanced due diligence systems have a considerable task in making the link visible and evident for relevant stakeholders. Annette Stube from Maersk is well aware of this challenge:

”There is a translational task to be done in relation to human rights, which is much more demanding than with other issues. There is a basic conception that human rights are issues for states. So we put quite an effort into translating it to ‘safety’, ‘labour standards’, and so on.”

The issue of remediation is further complicated by the fact that the concept of adverse or negative impacts is new to companies – at least in a remedy context. Maersk explains how the relevance of remediation depends on the impact. Annette Stube, Maersk elaborates:

“I believe there can be many definitions of "social impacts" and therefore many interpretations of when remedy is required. Examples of remedies we provided earlier on include the offering of jobs and compensation to workers illegally employed by a hiring agency on a rig in Australia; compensation in case of accidents etc.”

3.2 Environmental Compliance

Environmental compliance is a much more established part of the compliance dimension of CSR than social compliance. Not only is the area subject to more public regulation, companies have also been quicker in establishing management systems with the aim of controlling their environmental performance.

This is mainly due to the somewhat obvious business case connected to environmental risk management. The potential for cost reduction and the added value connected to environmental management are perspectives the frontrunners all agree on. Filip Engel from DONG Energy exemplifies how the status of environmental sustainability is different from other CSR topics:

12 http://novonordisk.com/about_us/contact_us/contact_audit_committee.asp

19

”In DONG Energy environmental sustainability is not really understood as CSR, but more as core business.”

Similarly Susanne Stormer from Novo Nordisk highlights that:

”Using sustainability as a competitive edge contains a very powerful rationale; especially concerning the environment. It is good business to think about energy-savings.”

The obvious business case has helped cement the environmental area in company policies and processes to an extent that is difficult to find replicated in social and economic compliance approaches. The special nature of environmental compliance has led to a very high degree of institutionalisation for example in the form of ISO 14001 certifications.

Further guidance on the area is found in the UN Global Compact principles 3-6:13 UNGC’s 3 principles on environmental Principle Seven: Business should support a responsibility (see box to the right).13 precautionary approach to environmental Key documents such as the Rio Declaration, challenges;

Agenda 21 and the Brundtland report underpin Principle Eight: Business should undertake these principles and have helped form the initiatives to promote greater environmental environmental CSR compliance agenda over the responsibility; and past decades. Principle Nine: Business should encourage the To demonstrate compliance with these principles, development and diffusion of environmentally many companies including the Danish friendly technologies. frontrunners have established processes similar to the ones outlined by the UNGPs.

Examples of how the Danish frontrunners have integrated respect for the environment in their practices are presented below.

3.2.1 Policy Commitment - Environment

The companies generally commit to environmental sustainability through formal and written policies. Morten Nielsen, Carlsberg exemplifies:

“Our Carlsberg Group Environmental Policy sets the environmental standards to which all our production facilities should adhere. It thereby aims to reduce the negative environmental impact of our operations and increase the efficiency with which we use natural resources. The focus areas of our environmental policy include waste, waste water, water, packaging, energy and emissions, systems and documentations and stakeholders. We have further strengthened our commitments to environmentally responsible operations through our 3 year targets for energy, water and CO2 emissions.”

Environmental policy commitments are mandatory requirements for companies in certain sectors, which is a good example of the institutionalisation of environmental CSR compliance.

13 http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/environment.html

20

3.2.2 Due Diligence – Environment

Among most, if not all, of the frontrunners, environmental due diligence is completely integrated in company processes via management systems such as ISO 14001. Carlsberg exemplifies how environmental due diligence is comprehensively integrated in the company and many processes run automatically with fixed intervals. In order to keep their ISO 14001 certification the company identifies its impacts, acts on the results, and tracks and communicates its actions. Morten Nielsen from Carlsberg explains:

“According to our ISO 14001 certifcation it is mandatory to review the enviromental aspects, which are relevant for the brewery sites, regulary. Periodically, we also do thematic assessments for high risk aspects such as water scarcity. An extensive survey was done in 2011 to understand our exposure to water risk. Each year, we collect global information about the environmental impacts of our operations. These findings are included in our annual CSR report.”

Furthermore several of the due diligence elements are required by law, as Filip Engel from DONG Energy exemplifies:

”Environmental impact assessments are part of every major construction project we initiate – it is integrated in the business and required by law. We have to be able to prove that we do not have negative impacts. We consistently screen for environmental risks in relation to all our operations. This is the case when it comes to our individual operations, such as power plants or wind farms, where we conduct environmental impact assesments. But it is also the case on an aggregated level where we asses the company's overall impact in relation to a number of environmental variables such as emissions of carbon, sulphur dioxide, impact on biodiversity and waste production. At DONG Energy our responses to environmental challenges go beyond trying to limit potential negative impacts from our activities. The production of clean energy is at the core of DONG Energy's business strategy.”

In other words, environmental due diligence activities are just the foundation for DONG Energy’s CSR activities within the environmental bottom-line. Joseph Nazareth from ISS explains how environmental due diligence is also central to their services:

“We work to limit the impact from the activities, which we can influence – at our own sites and the process and equipment at our customers’ sites. We are well positioned to deliver environmentally friendly facilities services, such as Green Cleaning. We have documented processes, supplier relationships and a structured management approach to help our customers reduce their risks in this area.”

3.2.3 Remediation - Environment

When companies have adverse impacts on the environment it is the environment itself that is the ‘victim’. However, negative environmental impacts might spill over into negative human rights impacts. An example is Coca Cola’s water use in Kerala, India, which led to accusations of the company having caused water shortage and drought ultimately impacting people’s right to adequate food and water and their right to health14. In other words, there is often a connection between negative environmental impacts and negative human rights impacts. However, sometimes it is difficult to determine actual victims of environmental impacts.

14 http://www.righttowater.info/ways-to-influence/legal-approaches/case-against-coca-cola-kerala-state-india/

21

Environmental remediation is therefore less about ensuring that victims get access to remedy and more about cooperating with relevant authorities if and when damage has been done. Morten Nielsen explains how this responsibility is met in Carlsberg:

“Violations or negative environmental impacts are recorded and reported to the authorities where applicable. An example is our approach to our waste water effluent. Depending on the region, specific agreements are made between our local production site and the local authorities regarding quantity and quality of waste water. In cases of non-compliance, these are reported to the local authorities and agreements are made to solve the issues.”

Filip Engel from DONG Energy also explains:

“In general, dialogue with the authorities on our various initiatives to minimize environmental impacts is strong, comprehensive, and on-going as it should be. And if, for instance, an accident was to occur in our operations that would lead to serious adverse environmental impacts, we would of course always report it and find solutions in collaboration with relevant authorities.”

In cases of negative environmental impacts, possible victims are often compensated indirectly via agreements made with relevant public authorities.

3.3 Economic Compliance

The field of economic compliance is, in close competition with social sustainability, perhaps the bottom- line, which has experienced the most significant increase in attention over the last couple of years; typically under the umbrella term ‘business ethics’. Annette Stube, Maersk explains:

“The pace of change from frontier expectations to hard law is faster than ever before. That makes it extra relevant for us to be able to identify frontier expectations. Anti-corruption is an example where the journey has been very quick.”

Since 2004 companies’ responsibility connected to economic sustainability has been internationally defined by principle ten of the UNGC, which reads:

“Businesses should work against corruption in all its forms, including extortion and bribery.”15

The UN Convention against Corruption, which was adopted in December 2003 and entered into force in December 2005, is the underlying instrument of this UNGC principle.16 However one of the big motors behind the mentioned growth of this area has been the adoption of the UK Bribery Act in July 2011.

This Act holds any company with activities in the UK legally accountable for acts of bribery.17 Understandably, the act has therefore spurred a range of activities connected to anti-corruption. Filip Engel, DONG Energy says:

“We have always taken anti-corruption very seriously but after the UK Bribery Act we decided to conduct a thorough revision of our processes.”

15 http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html 16 http://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=XVIII-14&chapter=18&lang=en 17 http://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf

22

According to the UNGC, economic compliance is only understood as an anti-corruption matter. A number of the participating companies highlight how the UNGC does not capture all relevant areas related to economic sustainability. Susanne Stormer from Novo Nordisk elaborates:

”The UNGC only has weak links to what is usually considered core business, namely financials. The economic dimension is much more than anti-corruption. Tax is for example not part of the UNGC, so if you want to be a pioneer in CSR you have to think beyond the Global Compact.”

Annette Stube from Maersk explains how it is increasingly interesting to understand economic responsibility as more than anti-corruption:

“We are working more and more systematically to understand our broader economic impacts throughout our industries, not confined to corruption, but as a key actor in the industries we are operating in. Economic sustainability is more than anti-corruption, and there is much potential in this agenda. International trading companies ought to focus more on this aspect. We need to improve our understanding of the economic contributions that we make to society, in order to mitigate the negative impacts and accelerate the positive impacts. The economic bottom-line is misunderstood in Denmark as simply ‘financial’ or even ‘anti-corruption’, and we need to challenge that to fully unfold CSR and its potential.”

There is a high probability that currently unregulated topics within economic sustainability will become compliance issues in the future, but at the moment anti-corruption is still the only topic that has moved in to the sphere of regulation and law; see Mckinsey & Co. in figure 1 for an illustration of how topics move to become regulation and law. In the future, new topics can potentially go through the same transformation, but currently companies that establish CSR projects or initiatives related to other topics under the economic sustainability heading – e.g. tax – must be considered as going ‘beyond compliance’ and can rightfully be acknowledged as CSR pioneers.

Due to the lack of internationally recognised agreements on other potential areas within the economic bottom-line, the compliance framework of this report – similar to the UNGC – is limited to anti- corruption.

3.3.1. Policy Commitment - Economy

All five companies have a policy on anti-corruption or a business ethics policy. Carlsberg’s business ethics policy is available online and states that:

”In the Carlsberg Group, we believe in fair and transparent business practices. Our Business Ethics Policy seeks to ensure ethical business conduct by guiding our employees when they face dilemmas of a business ethics nature in their day-to-day tasks.”18

ISS’s Business Ethics philosophy is presented below. The company tries to be very clear in its approach to anti-corruption, Joseph Nazareth explains:

18 http://www.carlsberggroup.com/csr/ourfocusareas/BusinessEthics/Documents/Business%20Ethics%20policy%20- %202010.pdf

23

“We have a zero-tolerance commitment to anti-corruption and we take that very seriously. Business integrity is non-negotiable in ISS. Business integrity is a central element of the terms on which we hire and potentially give members of our staff disciplinary sanction. We recognise that the challenge to avoid unethical business practices is greater in some areas of the world than others, but cultural factors or weak legal frameworks are not valid excuses: the ISS Code of Conduct and the Anti-Corruption Policy apply everywhere we do business.”19

Business Ethics in ISS:19 In 2012 Denmark once again came in at the top of the  Conducting our business in a lawful Transparency International’s yearly Corruption 20 manner Perception Index . This year Denmark shares the first  Competing for business on fair terms place with Finland and New Zealand. Danish and solely on merits of our services companies, in other words, have a number of best  Combating corruption and bribery practices on anti-corruption to share with international  Carrying out our activities according to peers. Finally, some companies have a more inclusive principles of good corporate governance commitment to economic sustainability. Susanne  Ensuring that the social, environmental Stormer, Novo Nordisk explains: and ethical commitments of ISS are “In terms of economic responsibility, we have reflected in dealings with customers, company-wide policies for business ethics, finance, tax suppliers and other stakeholders. and purchasing.“

However, these steps were not common among the other companies and demonstrate Novo Nordisk’s desire to be a frontrunner and their eye for upcoming issues on the CSR agenda.

3.3.2. Due Diligence - Economy

The next step for a company that wishes to steer clear of corruption is an efficient due diligence system. Apart from the procedural requirements for such a system Annette Stube, Maersk: – identification, prevention and mitigation, tracking and “Make bribery a No-Go; Identify biggest communication – the practical implementation of due risks; Work with your commercial and diligence and the tools used, vary from company to operational people for practical company, and from setting to setting. Filip Engel explains solutions; Monitor compliance.” how DONG Energy approaches the issue:

”In the second half of 2011 we made a comprehensive risk analysis with an external consultancy on anti- corruption. As expected the analysis found very few risks, because the countries where we operate are ranked very highly on the Transparency International anti-corruption list. But we are, for instance, operating in Poland and there are some risks related to being there. In Poland it is normal that companies make smaller donations to the local society, when you are there. We do not do that. The reason is that we want to avoid accusations that we are buying our way in. We have implemented some specific initiatives after the analysis. For example, 95 per cent of our employees have been trained in good business conduct via e-learning. And we have clear guidelines on what types of gifts and hospitality that can be accepted and under what circumstances.”

19 http://www.issworld.com/corporate_responsibility/approach_to_cr/pages/vision_and_approach.aspx 20 http://www.transparency.org/cpi2012/results

24

DONG Energy’s risk analysis is a good example of how an initial identification phase is followed up with different actions to prevent and mitigate identified risks: e-learning and a special caution in areas with certain risks.

Tracking and communicating on the implementation effort are also important aspects of maintaining a solid system. Annette Stube explains how Maersk tracks and communicates on its performance:

“All facilitation payments and incidents of bribery are tracked. Furthermore, Business units are required to answer a questionnaire which monitors progress in terms of implementation of policy or rules each year. We report annually in our Sustainability Report on implementation progress and incidents.”

However, incorporating a well-functioning compliance system on anti-corruption in business operations is not a clear and straightforward journey. As specified in the box below, the interviews uncovered a range of challenges related to implementation of anti-corruption policies. Filip Engel explains one of DONG Energy’s biggest challenges:

“The biggest challenge was to develop an implementation plan that developed the awareness of employees so that they know that even to accept a sincere appreciation from a commercial partner - such as a dinner above a certain price level - is not in line with good business conduct. We put a lot of initiatives in place to reach the employees.”

3.3.3. Remediation - Economy

Companies need to have an established channel for victims or stakeholders wanting to complain about breaches of a company policy or due diligence processes. As mentioned, several of the Danish frontrunners have such ‘whistleblower mechanisms’ or Identified implementation challenges: hotlines. Internationally speaking, best practice - Cultural differences whistleblower mechanisms are open to internal and - Wide-spread demand for facilitation external stakeholders alike. Carlsberg describes their payments whistleblower mechanism, aimed at employees only, on - Lack of awareness their webpage. Morten Nielsen, Carlsberg explains:

”The Carlsberg Group Whistleblower System enables employees to report activities that may involve criminal conduct or violations of our company policies and guidelines. It consists of a website and a hotline phone number, which are managed by an independent third party to ensure the highest level of security and confidentiality.”21

In June 2012 ISS launched a whistleblower system that is open to all their stakeholders and linked to the ISS Code of Conduct.22 The whistleblower system is available on their corporate website.23

Companies furthermore have to cooperate with relevant authorities once negative impacts have been identified and according to the Danish frontrunners this is currently the case. Morten Nielsen, Carlsberg states:

“We cooperate with the authorities, when relevant.”

21 http://www.carlsberggroup.com/csr/ourfocusareas/BusinessEthics/Pages/BusinessEthicsPolicy.aspx 22 http://www.publications.issworld.com/ISS/External/issworld/Career/ISS_Code_of_Conduct/ 23 https://iss.whistleblowernetwork.net/About/TermsAndConditions.aspx

25

But as the compliance dimension of CSR is constantly expanding, there is room for improvement in most companies. Annette Stube, Maersk explains:

“We sometimes collaborate with local authorities when identifying negative impacts related to anti- corruption, but this will be approached more systematically in 2013.”

3.4 Danish Frontrunners and CSR Compliance

CSR Compliance is regarded by many as the boring part of CSR, a cost that rarely brings added value. However, valuable experiences are hidden in the Danish frontrunners’ CSR compliance activities, especially when these companies bridge the divide between risks and opportunities; between compliance and beyond. Furthermore, Danish companies are often far ahead of their international peers in many aspects of CSR Compliance via legal compliance. For example, Danish companies often give employees 36 weeks of maternity leave, despite the fact that the international minimum is only 14 weeks.24 Maternity leave is an example of an ‘undiscovered’ CSR story, which Danish companies and Denmark in general could benefit from, and market themselves, on in international markets. The same could be true for anti-corruption.

There is, however, always room for improvement. The CSR compliance bar is constantly moving and therefore even frontrunners have challenges, when it comes to implementation and documentation. This is also the case with the UNGPs, which are still new and challenging to many. The UNGPs pave a way for a level playing field that can create convergence in a very diverse area. Susanne Stormer, Novo Nordisk highlights the need for such a trend:

“It would be really helpful if there could be consensus on one definition of CSR. For companies wanting to embrace this mindset, there is a risk of just drowning in commitments.”

Usually it is difficult to compete on the compliance level as demands and expectations are the same for all companies. However, right now there is a window of opportunity for competing on compliance, because the UNGPs are rather new and the whole world is looking for best practice examples of implementation. Danish companies, and Denmark as such, have the opportunity of turning an expectation or a duty into an opportunity.

Susanne Stormer from Novo Nordisk emphasises that public regulation, or lack thereof, has a decisive effect on company behaviour and incentives in this area:

“Implementation of the UNGPs is not an impossible task. What would be an incentive is a deadline determining, when we are expected to have the processes in place. Without a clear timeline companies are likely to keep postponing it. Internally we have not set a deadline. A signal would be helpful to create a ‘burning platform’ and incentives to put efforts behind compliance with the UNGPs, but that may not come.”

24 ILO Maternity Protection Convention (No. 183), http://www.ilo.org/dyn/normlex/en/f?p=1000:12100:0::NO::P12100_ILO_CODE:C183

26

4 Beyond CSR Compliance

All interviewed companies engage in CSR activities that can be described as proactive in relation to sustainable development; i.e. beyond compliance with international expectations. This section presents examples of ‘best-practice’ proactive CSR or strategic CSR among Danish companies. The five participating companies represent major actors in different Danish business sectors. The diverse representation of businesses seeks to enable an appreciation from all Danish businesses that strategic CSR makes good business sense.

Whereas CSR compliance is defined by a set of standards that specify certain requirements that companies should meet when claiming to be responsible, the second dimension of CSR, how business can contribute to sustainable development, is more flexible and dynamic. Due to the less formalised nature of the ‘beyond compliance’ dimension of CSR, it is difficult to clearly determine what constitutes good examples of strategic CSR. A few criteria have been applied in the selection of examples presented.

Strategic CSR initiatives should be closely linked to the core business in question. Companies should be able to achieve greater and more sustainable impacts where CSR initiatives tie into key products, services or capacities or where the initiative provides for sustainable solutions to major business risks. Joseph from ISS explains how beyond compliance is closely linked to core products and services:

“Our strategy is to move beyond compliance; it is to build CSR as a competitive advantage offering CSR as a value proposition to our customers. CSR is key to our delivery model and is becoming a key differentiator.”

Secondly, proactive initiatives should contribute to fulfilling one or more key internationally recognised principles for social, environmental, or economic sustainable development. Thus, ‘beyond compliance’ efforts on the social bottom-line, should contribute to social sustainability, i.e. the enhanced protection or fulfilment of one or more human rights.

Table 3 below presents the proactive part of the analytical framework for the report. It illustrates how proactive CSR efforts can be captured within the same bottom-lines as CSR compliance. It may be difficult to capture a project within a single bottom-line, as initiatives may have positive impacts on more bottom lines; e.g. initiatives in relation to clean water have direct positive impacts on both internationally agreed principles on environmental and social sustainability. In the column to the left a few examples of methodologies applied by corporations in achieving their positive CSR impacts are outlined. The list is not exhaustive but covers the examples represented in this report.

27

Table 3. The analytical framework for beyond compliance CSR activities

The social The environmental The economical

bottom-line bottom-line bottom-line

(UNGC 1-6) (UNGC 7-9) (UNGC 10)

Strategic CSR e.g.:

Multi-stakeholder initiatives Section 4.1.2 & Section 4.3.3

4.1.3

Partnerships Section 4.1.1, 4.1.3 Section 4.2.1,

& 4.1.4 4.2.3

CSR-based Innovation Section 4.2.1,

4.2.2, 4.2.3

Base of the pyramid Section 4.1.4

Organisational Learning Section 4.1.1, 4.1.2 Section 4.3.1,

& 4.1.4 4.3.2

Lobbying Section 4.3.1

Beyond Beyond compliance

Most of the examples of best practice listed below are relatively novel, paying testimony to the fact that CSR is a field in exponential growth. What was considered best practice only ten years ago has been exceeded by new and improved CSR initiatives. As the boundaries for what can be considered best practice continue to move, it becomes an increasingly more demanding endeavour to remain a CSR pioneer. Susanne Stormer from Novo Nordisk remarks:

”CSR has become mainstream and that makes it even harder to maintain a pioneer position.”

However, the Danish companies have a wealth of innovative strategic CSR initiatives and approaches, some of which are presented below. These cases are mixed with examples of international best practice. Whenever international best practice is presented it is matched by a Danish company either by industry or substance – i.e. the focus area for the CSR initiative in question.

4.1 Best Practice Strategic CSR Focusing on Social Sustainability

The best practices on social contributions are presented below. The CSR projects vary, ranging from improving diversity, a single human right, i.e. the right to safe and healthy working conditions, to addressing the full spectrum of human rights. In addition contributions vary in terms of their delivery from multi-stakeholder initiatives on responsible supply chain management to CSR-based innovation, and from specific efforts in China or France to global or regional efforts.

28

4.1.1 ISS: Diversity as a Competitive Advantage

ISS has continually had a global focus on minimising negative impacts in relation to freedom from discrimination and the right to equal opportunities. Its efforts are enhanced by proactively contributing to diversity. The company is able to display a comprehensive portfolio of diversity initiatives across nations and has also won recognition and received GAP Inc. – P.A.C.E. awards for their efforts. In Australia the company received an award from the Australian In 2007, GAP Inc. launched the P.A.C.E. (Personal Employment Covenant Chairman and in Advancement & Career Enhancement) program to Portugal, the EDC Group named the company enable female garment workers in economic ‘best supplier’ in the Corporate Social developing countries to advance beyond entry-level positions and fulfil their potential. Responsibility category for the fifth time. Joseph Nazareth, ISS explains: P.A.C.E. was designed and developed in partnership with Swasti Health Resources and the International “Diversity is a key issue for us. We have more Center for Research on Women (ICRW). CARE than 160 nationalities in ISS – and we International is a key implementing partner and sometimes say that we speak more languages GAP Inc.’s vendors also play a critical role. The than the foreign ministry. That is why we’ve programme currently operates in Bangladesh, chosen to work proactively with diversity – it is Cambodia, China, India, Sri Lanka, and Vietnam one of the focus areas in our CSR strategy.” and is globally evaluated by the ICRW.

In Australia ISS is making use of affirmative Evaluation reports demonstrate that programme action to enable employment of a previously participants feel they gained greater confidence, suppressed Australian minority. Specifically, ISS built stronger communication skills, and learned the Australia operates an Indigenous Employment importance of goal setting and practical financial Programme within the Human Resources practices. Additionally, factory managers report Division, which has an objective of providing improved efficiency, increased professional training and employment to Aboriginal and advancement and lower rates of absenteeism from 25 Torres Strait Islanders who are significantly P.A.C.E. graduates. disadvantaged in areas of health, employment Contributing to the fulfilment of women’s rights and housing. The programme has assisted in makes good business sense for GAP where providing for more than 500 employment approximately 70 % of employees and 70 % of opportunities to indigenous Australian’s since customers are women. mid-2008. 25

In France, ISS has focused on improving job opportunities for people with disabilities. Actively favouring people with disabilities has been supported by a series of initiatives:

 Awareness raising among all employees  Management of a network of division correspondents  Direct and indirect recruitment systems for employees with disabilities  Induction support for employees

25 http://www.gapinc.com/content/gapinc/html/csr.html; http://www.gapinc.com/content/gapinc/html/media/pressrelease/2012/med_pr_Gap_Inc_PACE_Program_to_Expand0 92412.html

29

 Work station adaptation  Development of external partnerships and insertion of committees within each division.

This initiative has resulted in employment of 1,614 people with disabilities from 2001 to 2011.

The appreciation of diversity is engrained in ISS’ values and leadership principles, which applies to all staff members. ISS Finland has signed the Finnish Diversity Charter as one of the first Finnish companies and joined the Finnish Diversity Network. HR Director, ISS Finland Sirpa Huuskonen says:

“Diversity creates competitive advantage. Diversity and equality, their management and measurement, is an integral part of the way we work. Our staff is our most important resource. It is our strength to be able to employ persons of different ages, genders and nationalities, as well as a variety of people with different educational backgrounds for short- and long-term, part-time or full-time employment according to each employee's life situation. Our managers have an important role in managing diversity. They offer their team members equal opportunities for career development and ensure that tasks are truly open to everyone. Diversity is also reflected in managers' training programs.”

In the above box a strategic CSR initiative focussing on gender diversity, by the international clothing company GAP Inc., is briefly described.

4.1.2 DONG Energy: Multi-Stakeholder Initiative on Responsible Supply Chain Management

In the coming years DONG Energy will continue to reduce its use of coal in preference of biomass. This will lower the groups' ability to influence supplier practices in relation to the coal fired Cerrejón and human rights power plants that will still remain in the group's portfolio. As an active participant in various CSR initiatives, such as the Global Business Initiative on Human Rights and Even today DONG Energy is a small importer the UN Global Compact, Cerrejón has focused heavily on of coal and therefore a small customer for responsible mineral extraction as part of its strategic the coal producers. But the company still CSR efforts. considers the coal supply chain a complex Cerrejón appreciates the role that local communities and high-risk area. Given its limited play in the effectiveness of its operations. Consequently leverage, DONG Energy has come to realise the company has focused on creating clear mechanisms that sustainability concerns in the coal in which to engage with local communities and unions, industry are best addressed in collaboration so as to enable effective remediation if and when things with others. Therefore, the company works go wrong. as a founding member of ‘Bettercoal’.26 27 This includes implementing human rights due diligence Bettercoal is a global, not-for-profit initiative and a five-year community engagement plan. Following established in 2010 by a group of major recommendations from the UN Guiding Principles on energy companies. The Bettercoal vision is a Business and Human Rights, Cerrejón also opened a coal supply chain that protects the grievance office and established an operational-level environment, respects the rights of people grievance mechanism.27 and contributes positively to the livelihoods

26 http://bettercoal.org 27 http://www.unglobalcompact.org/Issues/conflict_prevention/Colombia_webinar_2012.html

30

of workers and communities.

DONG Energy has two central aims with its involvement: the development of a robust framework for managing the sustainability challenges in the coal supply chain and an increase in leverage when engaging with coal suppliers. Filip Engel, DONG Energy explains:

“We have initiated the set up of a multi-stakeholder initiative that is to create progress on social standards in the coal supply chain.”

Bettercoal is working with a variety of global stakeholders on the development of the Bettercoal Code, which will set out the principles and provisions that members expect coal mining companies and other stakeholders to align their activities with. These will include the UNGPs. When implemented during the course of 2013, this globally recognised code of practice will form the basis for self-assessments by mine operators, independent third party site assessments in the mines themselves, and continuous improvement plans. In the above box you can read how one of DONG Energy’s large suppliers works with human rights.

4.1.3 Carlsberg: Initiative on Responsible Drinking

In October 2012, Carlsberg joined 12 other producers in a set of unprecedented commitments to reduce the harmful use of alcohol together with global producers of wine and spirits. Morten Nielsen, Carlsberg elaborates: Carlsberg is committed to: - Reduce underage drinking ”We have entered into a partnership with twelve global - Strengthen and expand marketing companies on five areas of action related to harmful alcohol codes of practice consumption that we will implement over the next five years. - Provide consumer information and We will then monitor and track our performance. That is a step- responsible product innovation change to us, in relation to how much we are willing to do, - Reduce drinking and driving when you compare with our recent history of proactive social - Enlist the support of retailers to sustainability.” 28 reduce harmful drinking The new commitments clearly signal that the 13 global signatories fully support the aims of the WHO’s Global Strategy to Reduce Harmful Use of Alcohol and stress the active role the industry is envisioned to take in an attempt to achieve Coca Cola – Improving Water Efficiency this objective. Commenting on these global Coca-Cola set itself a goal to improve water efficiency by commitments, Jørgen Buhl Rasmussen, 20% by 2012. However, it achieved this goal in 2011 not President and CEO of Carlsberg Group said: only within its own company, but in its independently “We will be inviting other brewers from our owned bottling companies as well. markets to join us in implementing these In order to achieve this goal, Coca-Cola partnered with commitments and will be collaborating with the WWF and developed a Water Efficiency Toolkit aimed local and international stakeholders to specifically at bottling plants. It also worked with the combat harm and misuse while continuing WWF to conserve seven of the world’s most important to promote the responsible consumption of freshwater river basins.28

28 http://worldwildlife.org/projects/wwf-coca-cola-s-work-to-conserve-fresh-water

31

beer as a unique, refreshing drink of moderation. It is our commitment to implement them over a five‐year period commencing in 2013, recognising that some of them will already be in place in some markets or already subject to local legislation, whilst others will take significant time to implement. From 2013, we will be reporting on how we are progressing with these commitments.”29

In the above box you can read how one of the biggest companies in Carlsberg’s industry, Coca Cola, works proactively with one of its risks.

4.1.4 Novo Nordisk: Integrating CSR in Business Strategy for China

Since 1994, Novo Nordisk has followed a long-term business strategy in the Chinese market. Central elements of its business strategy include the need to create strong relations with Chinese society and cooperate with local actors. Specifically, Novo Nordisk has established research and production facilities in China and cooperated with the World Diabetes Foundation, the local ministry of health, and local patient associations to educate doctors and patients in the treatment of diabetes. Awareness campaigns to prevent diabetes are another example of Novo Nordisk’s CSR activities in China.

Today, Novo Nordisk is the insulin market Novartis – Implementing Living Wage leader in China measured by market share as well as reputation. The share has been growing Starting in 2005 Novartis was one of first steadily with around thirty percent since 2002 international companies to implement a living wage and in 2011 sales amounted to 5 billion Danish in its associate businesses. The programme works continually to implement a living wage and in 2011, kroner. The company’s investments to 17 associate salary levels were adjusted. To strengthen the local health care system have calculate a living wage, Novartis works with a non- created value for both society and business. For profit organisation, Business Social Responsibility example Novo Nordisk has documented that (BSR) and categorises living wages for either OECD education increases the lifetime sales per countries or economic developing countries. educated patient by 3400 DKK and saves For instance, in OECD countries these calculations society a cost of 13,000 DKK per educated are based on the cost of a market basket of goods patient. and services for a male aged 25-50 living in the US. At the same time Novo Nordisk’s activities have This figure is then converted based on purchasing inspired others, which means that the company power parity, food consumption patterns, and the can gather various actors around common assumption that each family has more than one solutions to diabetes, creating value for all wage earner. A similar methodology is applied in stakeholders.30 economic developing countries.30

An example is a new partnership between the World Diabetes Foundation, Novo Nordisk and HE eye-care clinics, a local eye-care clinic chain. The collaboration was established after the owner of HE eye-care clinics became aware that Novo Nordisk in cooperation with the World Diabetes Foundation – among others – had experience in educating doctors and patients on late diabetes complications. The owner of the eye-care clinics was becoming more and more frustrated that an increasing number of patients in his

29 http://www.carlsberggroup.com/investor/news/Pages/PR19_ICAP_10102012.aspx 30 http://www.novartis.com/downloads/corporate-responsibility/responsible-business-practices/living-wage.pdf; http://www.novartis.com/corporate-responsibility/responsible-business-practices/caring-for-our-people/living- wage.shtml

32

clinics were suffering from bad sight because of Lessons learned: diabetes. At the same time he was lacking Think long-term and build strong relations. competencies to educate doctors and patients on Novo Nordisk’s success in China is based on a prevention and treatment of these problems. In the long-term business strategy, which, apart above box you can see how one of Novo Nordisk’s from offering quality products, also focuses on industry peers, Novartis, works proactively with the strengthening the health care system building right to a fair remuneration. strong relations with local stakeholders. This creates value for Novo Nordisk, Chinese society and people with diabetes in China.

4.2 Best Practice Strategic CSR Focusing on Environmental Sustainability

The examples of best practice on proactive environmental sustainability presented below cover a variety of different types of proactive CSR initiatives. The five companies seem to agree that environmental sustainability is the area within CSR where the business case is the most obvious. Therefore all of the companies are proactive on environmental sustainability. Presented below are three cases, focusing mainly on partnerships and CSR-based innovation. All cases clearly show the obvious financial as well as societal benefits of these efforts.

4.2.1 Maersk: Triple-E

Deliveries of Maersk’s twenty Triple-E class vessels are scheduled for 2013-2015. The name Triple-E means Economy of scale, Energy efficiency, and Environmentally improved, and the vessels are built for Asia-Europe trade.31

Currently, Maersk Line has the largest market share of Hitachi’s Smart Cities any container shipping line, moving 18 percent of the A smart city is one that establishes a “well- container cargo leaving Asia for Europe and 15 percent balanced relationship between people and of the container cargo travelling from Europe to Asia. the Earth.”

The Triple-E vessels are expected to call five Chinese According to the UN’s forecasts the world’s ports (Shanghai, Ning-bo, Xiamen, Yantian and Hong population will reach nine billion by 2050 of Kong), and the entry of the vessels will make it possible which an estimated 70 % will be living in to replace less efficient ships which will then be cascaded cities. Hitachi’s concept of a smart city to other trades, where they will be superior to the responds to this development and refers to vessels currently deployed there. This cascading will urban designs that maximize conservation essentially mean that the Triple-E vessels will not only of the environment by utilising renewable benefit the Asia-Europe trade, they will increase energy energy sources based on the introduction efficiency of a larger part of Maersk Line’s network.32 of a next-generation power supply control technology called a smart grid.32 The vessel’s dramatically improved efficiency will also

31 http://www.worldslargestship.com/shipping/ 32 http://www.hitachi.com/rev/archive/2012/__icsFiles/afieldfile/2012/08/08/r2012_technology02.pdf; http://www.hitachi.com/products/smartcity/vision/index.html;http://www.yomiuri.co.jp/dy/business/T120115001472. htm

33

help limit the environmental impact of the region’s increasing trade. The Triple-E vessels will produce 20 percent less CO2 per container moved compared to Emma Mærsk (Maersk’s biggest ship before Triple-E) because they are designed for slower speeds and therefore able to carry more containers, with a smaller engine, than Emma Mærsk. And they will produce 50 percent less CO2 emissions per container moved than the industry average on the Asia-Europe trade lane. The vessels´ capacity is also 16% higher compared to Emma Mærsk. Triple-E is a good example of how sustainable development can drive product innovation and bring value to business and society simultaneously.33 In the above box you can see how another major international company, Hitachi, works with CSR and infrastructure.

4.2.2 DONG Energy’s Climate Partnerships

DONG Energy’s climate partnerships build on the premise that CSR and profitable business go hand in General Electric – Ecomagination hand. In the partnership DONG Energy’s consultants Ecomagination is General Electric’s (GE) help climate partners get an overview of their energy commitment to imagine and build innovative consumption and their potential for reduction, which solutions to today’s environmental is typically between ten and thirty percent. The challenges, while driving economic growth. energy consultants then cooperate with the climate Since the launch of this green research and partners in setting goals for energy reductions, development programme in 2005, it has prioritising energy saving efforts, calculating a reached more than $100 billion in revenue timeframe for return on investment and preparing an proving that green business is good business. action plan for future energy improvements. Filip The holistic approach to environmentally Engel, DONG Energy explains: 34 sustainable product innovation has seen the ”Energy efficiency is an obvious driver for us. birth of more than a hundred new products Obviously the cheapest and cleanest energy is the one and services.34 that we do not use. This understanding is integrated in our DNA. We work to get people to become more energy efficient. This is perhaps a bit surprising, but that is how we look at it. Energy efficiency is an area where many companies can win a lot, and the return of investment timeframe is relatively short.”

Lessons learned: In January 2006 WWF and Novo Nordisk made a Partnerships drive innovation. partnership agreement, by which Novo Nordisk committed Collaboration between WWF and Novo to reduce C02 emissions from its production by 10% from Nordisk gave Novo Nordisk a clear goal 2004 to 2014. Therefore, in May 2007, Novo Nordisk for reductions that that required entered a climate partnership with DONG Energy, building innovative solutions. In the partnership on a unique combination of energy reductions and with DONG Energy a new model was renewable energy production. Novo Nordisk receives developed which has inspired more than assistance from DONG Energy to reduce energy a hundred new partnerships benefitting both business and the climate. consumption, while Novo Nordisk earmarks the energy savings for buying certified green power from the wind

33 http://www.worldslargestship.com/sustainability/ 34 http://www.ecomagination.com/; http://news.cnet.com/8301-11128_3-20008698-54.html; http://www.reuters.com/article/2012/06/28/idUS208085+28-Jun-2012+BW20120628

34

farm Horns Rev 2. At the time of the partnership’s inception, Horns Rev 2 was still on the drawing board and financing was not in place.

To Novo Nordisk the deal was a cost neutral way to achieve substantial CO2-reductions, while at the same time the company was contributing to building a market for renewable energy in Denmark. Even though wind power is more expensive than conventional power the partnership was, and still is, good business. Each year Novo Nordisk saves more than ten percent of its electricity bill in Denmark and the energy reduction projects have an average pay-back time of two years. In the above box you can read how GE works proactively with environmental sustainability.

4.2.3 Carlsberg: Sustainable Packaging

Packaging is a vital part of the identity of a beer brand. Consumer research shows that packaging influences consumers’ buying behaviour. This means that packaging can lead to a negative brand image, for example if cans and bottles are disposed of in natural environments or on the street.

In the case of Carlsberg, packaging is the single largest contributor to Carlsberg’s CO2 footprint. It amounts to 45% of the Group’s total CO2 emissions, when looking at the full impact throughout the value chain. Figure 3: Carlsberg - Sustainable Packaging As a consequence, Carlsberg Group has initiated a large-scale programme in 2012. The programme revolves around four principles (see figure to the right) with the aim of reducing the environmental impact, while maintaining first class design and consumer appeal.

In order to measure the company’s

Coca Cola – Sustainable Packaging and Recycling success in relation to the four principles, a range of activities will be launched in Packaging accounts for nearly half of the carbon emissions 2013. Examples include a weight in Coca Cola’s value chain. To reduce this carbon footprint reduction initiative, communication with the company must reassess its packaging from design to disposal and make better use of natural resources by consumers on recycling, and the using renewable and reusable materials and ensuring that development of a sustainable packaging its own packaging is recyclable. catalogue. The company will also commence a Cradle-to-Cradle project, Coca Cola has made a commitment to set the standard for focused on generating positive impacts. 35 low-carbon, sustainable packaging, zero waste in its operations and recycling more packaging than it uses.35 The sustainable packaging programme is

35 http://www.cokecce.com/corporate-responsibility-sustainability/sustainable-packaging-and-recycling

35

expected to drive a number of operational and commercial benefits. In addition to the environmental benefits, the use of more sustainable packaging is expected to generate cost savings and strengthen the Group’s relationship with key customers. It will also enable Carlsberg to meet future legislative demands related to packaging and waste, thereby serving as a means of risk mitigation.

In Poland, Carlsberg has already initiated a project under the name ‘ECO-ACTION’. Through a focus on educating consumers, the project has increased the collection of bottles and cans, enhanced waste segregation and recycling as well as promoted the use of returnable bottles. In a span of only three years, the project has lead to 242 tons of waste packaging being collected. For this reason Carlsberg Polska has been applauded by Tesco for supporting Tesco’s CSR activities. In the above box you can see how one of Carlsberg’s industry peers, Coca Cola, works with sustainable packaging.

4.3 Best Practice Strategic CSR Focusing on Economic Sustainability

As stated in the CSR compliance chapter in relation to economic sustainability, internationally agreed upon principles on anti-corruption is one of the fastest growing CSR areas. Due to the emergence of extraterritorial national law and regulation in this field, the scope of what companies are expected to do has widened significantly. By raising the bar, going beyond compliance on anti-corruption becomes increasingly demanding as compliance in itself is challenging even for frontrunners. Initiatives that were seen as extraordinary efforts on fighting corruption only a couple of years ago now represent nothing more than the minimum standards with which all companies are expected to comply. Nevertheless, the Danish companies in this report have strategic initiatives worth mentioning. Three are presented below.

4.3.1 ISS: Business Integrity is non-Negotiable

Corruption and bribery are considered General Electric and the Anti-corruption Agenda serious threats to ISS’ business practices. As signatories to the UNGC, ISS has General Electric (GE) has taken a strong stand against committed to combat the use of corruption. It contributes with human, financial and corruption, extortion and bribery, political capital to Transparency International and the broader anti-corruption movement. wherever the company does business. Below is an example of implementing Specifically, GE has pushed for an “open reporting anti-corruption policies in a global environment” whereby employees are encouraged to report company and the case of a successful issues of integrity and feel confident that such actions will whistleblower mechanism is explained. 36 not lead to retaliation. GE uses such reporting proactively, embracing open reporting as the “first and best line of The ISS Anti-Corruption Policy from 2010 defence”. cemented and elaborated the company’s Notably, GE pushed negotiations forward and US position on corruption and bribery set out ratification of the OECD Convention on Bribery of Foreign in the Code of Conduct. To ensure that all Public Officials and the UN Convention against Corruption.36 managers and key employees understood and recognised the position, the company created an e-learning based training module which was rolled out in 2011. In 2012, the e-learning module was translated and launched in German, French, Spanish and simple Chinese. These new

36http://www.gecitizenship.com/focus-areas/economy/governance-compliance/; http://www.transparency-usa.org/news/documents/TI-USA2010AwardsDinnerBooklet.pdf

36

languages enable ISS to reach out with the training across the company. Prior to the launch in October 2012, the company had trained 1,330 managers on anti-corruption. In the period from October to December 2012 another 1,223 persons completed the module, which means that in total 2,553 employees have been trained.

In 2012, Slovenian ISS employees confidentially contacted the regional management for Eastern Europe to report observations of what they believed were irregularities in the Slovenian branch. They stated that they were worried over a number of lost contracts, where the reasons for the losses were unclear. They were also worried that the country’s top management showed very little concern or surprise over the repeated loss of business.

An analysis of materials obtained showed that members of the management team were channelling business into a competing company in which they had a financial interest. Financially, this situation led to a significant loss for the Slovenian business, but due to timely action made possible by the employees the predominant part of the business was retained. In the above box you can see how GE has tried to push the anti-corruption agenda forward.

4.3.2 Novo Nordisk: Learning the Hard Way

In the 2000’s Novo Nordisk realised how the absence of an effective business ethics Siemens fights corruption compliance process can put a company in a Following a 2006 bribery scandal, Siemens took vulnerable position. The Oil-for-Food scandal, extensive action to rebuild public trust. This described below, hit the company hard. included appointing the co-founder of Transparency

The Oil-for-Food Program was established by the International, Michael Hershman, as the company’s United Nations in 1996 to enable Iraq to sell its external adviser on anti-corruption. oil for humanitarian purposes, in the context of Further, Siemens took more than 900 internal an extensive international sanctions regime. In disciplinary actions including several high-ranking 2005 a UN report indicated that Novo Nordisk dismissals. Siemens also trained more than half of was one of 220 companies that had paid kick its 400,000 employees in anti-corruption issues and backs to the Iraqi authorities amounting to 1.4 announced that it would voluntarily refrain from million USD. Such payments were not permitted markets where corruption was particularly prevalent, for example in Sudan. Notably Siemens under the Oil-for-Food Program or other sanction also agreed to voluntarily suspend its applications regimes then in place. for funding from the World Bank for two years. It After thorough investigations of the matter Novo also agreed to a 15-year program to donate $100m Nordisk made a settlement in 2009 with the U.S. to non-profit organisations that fight corruption.37 Securities Exchange Commission, the U.S.

Ministry of Justice and the Danish State Prosecutor for Serious Economic Crime (SØK). Following the settlements CEO, Lars Rebien Sørensen stated:

“We have recognised that we have made a mistake in relation to the oil for food programme. We are sorry and we will do what we can to avoid similar situations in the future.” 37

37 http://www.guardian.co.uk/sustainable-business/recovering-business-trust-siemens

37

In Novo Nordisk internally, the Oil-for-Food program case Lessons Learned led to a new strategy for business ethics heavily “Learn from your mistakes. The Oil-for- emphasising that bribery and corruption are unacceptable Food case was an example of how a and that there is no room for compromise when it comes to company can improve from crisis by business ethics. The new strategy contains clear procedures admitting your mistakes and intensively for ethical business behaviour, an intensive training working to prevent similar programme for employees, enhanced governance, auditing, occurrences.” reporting and finally a ‘compliance hotline’, where employees as well as external stakeholders can anonymously report suspected violations of the company policy on business ethics. Looking back, Susanne Stormer from Novo Nordisk chooses to reflect on the Oil-for-Food incident in a positive way, stressing that the crisis proved to be an invaluable source of learning and improvement for Novo Nordisk. She says:

”It was an example of ‘learning the hard way’. With the settlement, we were subject to a deferred prosecution agreement - we could not afford to make any mistakes. And on top of that, we constantly see compliance demands related to business ethics increase, particularly in the industry we are in. Even staying in compliance is actually a big task. Recent analyses tell us that we have a very robust system in place, and we would not have built that without Oil-for-Food. When you are under pressure and have to pull your act together it often leads to better compliance.”

In the above box you can see how a large company such as Siemens responded to a bribery scandal.

4.3.3 Maersk: Maritime Anti-Corruption Network

In 2010, Maersk initiated the Maritime Anti-Corruption Network (MACN). MACN is a global business network working towards its vision of a maritime industry which is free from corruption and enables fair trade to the benefit of society at large. Today the network has grown to more than fifteen members and includes both companies and associations.

MACN Members promote good corporate practice in the maritime industry for tackling bribes, facilitation payments, and other forms of corruption by adopting the MACN Anti-Corruption Principles, communicating progress on implementation, sharing best practices, and creating awareness of industry challenges.

External stakeholders including Poul Riiskjær Mogensen, Chairman of the Danish Branch of Transparency International, have applauded Maersk for their leadership in this field:

“There is no doubt that this [corruption] is a serious problem in the business. Thus these are three good initiatives presented in the report by Maersk. First of all, they clearly signal that they will not accept it. Secondly, they launch an internal training programme to create awareness of the problem among the employees, and third, and probably most importantly, they establish a network with other players. There is no doubt that the effect will be much greater if they work with others. A single company would have a very hard time getting the job done.”

38

MACN also collaborates with key external stakeholders, including governments, authorities, and international organisations in markets where corruption is prevalent, to identify and mitigate the root causes of corruption in the maritime industry.38

4.4 Danish Frontrunners and Strategic CSR

As mentioned in the above introduction to this section, a minimum of two elements can assist in evaluating the quality of a company’s voluntary CSR initiatives: Firstly, how is the initiative strategic to the company, and secondly, in what way does the initiative contribute to the fulfilment of internationally agreed principles for sustainable development? Table 4 below illustrates how each of the Danish cases above fit these criteria.

Table 4. The value and key contributions of Danish Strategic CSR initiatives

Danish Cases Company Type of How is it ‘strategic’ In what way does the initiative to the company? initiative contribute to sustainable development?

Diversity ISS Organisa- Proactively turns an Promotes the right to non- tional identified risk into a discrimination and diversity learning strategic advantage; improves work efficiency of employees

Responsible DONG Multi- Minimises identified Improves the standards of Supply Chain Energy stakeholder risks in DONG Energy’s global coal production, Management initiative operations especially with regards to labour rights

Harmful Carlsberg Multi- Minimises a significant Promotes the right to health Alcohol stakeholder risk in Carlsberg’s and reduces alcohol related Consumption initiative operations accidents and negative impacts globally

Integrating Novo Partnership Helps Novo Nordisk win Improves the health care CSR in the Nordisk and Base of market share and system in China; contributes China the Pyramid increases the profit per to the right to health, access Strategy patient to medicine and right to education

Climate DONG Partnerships Novo Nordisk minimises Lowers the adverse partnerships Energy and and CSR- its energy costs environmental impact of Novo based DONG Energy and all DONG Energy promotes Nordisk innovation companies engaged in climate its green alternatives partnerships, promotes green and gets access to

38 http://www.bsr.org/en/our-work/working-groups/maritime-anti-corruption-network

39

funding energy sources

Triple-E Maersk CSR-based Improves the cost- Lowers the adverse innovation efficiency and capacity environmental footprint of of Maersk’s cargo Maersk and, in the future, transportation potentially the whole shipping industry

Sustainable Carlsberg Partnership Strengthens relations Lowers environmental impact Packaging and CSR- with important of Carlsberg, promotes based stakeholders and builds recycling procedures innovation brand value

Zero ISS Organisa- Minimises and identifies Improves the global Tolerance tional risk and adds brand standards of anti-corruption learning value

Learning it Novo Organisa- Turns reputational risks Improves standards of anti- the hard way Nordisk tional into a source for corruption learning organisational improvements

MACN Maersk Multi- Minimises a significant Elevates global standards of stakeholder identified risk in anti-corruption in the initiative Maersk’s operations maritime industry

All of these initiatives are strategic. Some address identified major risks whilst others expand business opportunities by incorporating CSR into their core business. In addition the initiatives contribute to fulfilling internationally agreed principles for sustainable development; e.g. by promoting the fulfilment of one or more human rights, or by enhancing environmental or economic sustainability. Please note that, some initiatives seek to minimise adverse impacts on the international principles, whereas others contribute actively to their fulfilment. Table 5 below illustrates how each of the international cases described above fit the same criteria as the Danish cases previously presented.

Table 5. The value and key contributions of International Strategic CSR initiatives

International Company Type of How is it ‘strategic’ In what way does the Cases initiative to the company? initiative contribute to sustainable development?

Enhancing GAP Inc. Organisational Improves efficiency, Enhances rights and Women’s learning and increases professional opportunities of women in Opportunities Partnership advancement and lower Asia; promotes equality in rates of absenteeism the workplace

40

Promoting the Cerrejón Organisational Minimises identified In line with the UN Guiding UN Guiding learning risks and strengthens Principles for business and Principles on dialogue with important human rights and best Business and stakeholders practice on the access to Human Rights remedy

Access to Coca Cola Partnership Improves the efficient Minimises environmental Water use of Coca Cola’s most footprint; promotes access important resource: to water water

Implementing Novartis Organisational Attracts and retains the Promotes the right to a fair Living Wage learning and best employees in each remuneration Standards Partnership of the markets they operate in

Smart Cities Hitachi CSR-based New products and Develops and promotes innovation services; establishes innovative, social and competitive advantage environmental in green markets sustainability, especially in Asia

Ecomagination General CSR-based Innovation of new Develops and promotes Electric innovation products and services; innovative, smart and establishes competitive green solutions, especially advantage in green in the U.S. markets

Responsible Coca Cola Partnership Strengthens relations Minimises Coca Cola’s Packaging and and CSR- with important environmental footprint Recycling based stakeholders and adds innovation brand value

Pushing the General Organisational Minimises an identified Improves international Anti-corruption Electric Learning and risk for General standards of anti- Agenda Lobbying Electric’s core corruption, especially in operations OECD countries

Fighting Anti- Siemens Organisational Turns a bad reputation Improves standards of corruption Learning into a source for anti-corruption organisational improvements

41

5 General Challenges and Opportunities

In many ways, CSR is still a contested and changing field and it will continue to be a ‘work in progress’. Whereas CSR in Denmark and in many other countries is becoming mainstream; approaches, definitions, and opinions on CSR still vary. However, there is a growing consensus that companies are responsible and should be accountable for their social, environmental and economic impacts on society. What appears to be a growing convergence within CSR, based on recently adopted international principles, may be one of the main opportunities for engaging more companies in CSR.

This final section outlines some of the challenges that may keep more Danish companies from engaging diligently with CSR. The challenges were identified and have been experienced by the pioneers represented in this report. The pioneers’ suggestions seek to provide guidance to minimise or overcome such challenges and possibly turn them into opportunities.

5.1 CSR; A Moving Target

The previous sections illustrate how elements of CSR are, and have been, characterised by frontier expectations transforming into soft law and eventually hard law requirements (see figure 1). Such dynamics make CSR a moving target. For example anti-corruption and human rights for businesses have moved from mere suggestions, over somewhat intangible and unclear expectations to becoming internationally recognised and regulated areas within CSR. Annette Stube from Maersk notes:

”The human rights agenda has evolved really quickly within the UN and OECD for example. The field is moving into a law-like-arena.”

The ever-evolving nature of CSR poses a challenge to many companies, because they have to keep track of the agenda and Susanne Stormer, respond to changes. Implementation of CSR requires strong Novo Nordisk: competencies in change management, and keeping up with the CSR “My best recommendation would be to refer to agenda requires strong corporate agility. What appears to be fringe international standards and CSR-topics or even outside the concept of CSR, such as tax guidelines, such as UN Global payments, may suddenly move fast on the agenda in coming years. Compact, UN Guiding Principles Internationally agreed upon standards and guidelines can help and the OECD guidelines.” create convergence and clarity in a multifarious area, where most companies need assistance navigating. An authoritative online portal with continuously updated references and tools would be useful in this regard.

5.2 Lack of Awareness and Capacity

An overarching challenge is lack of awareness. Creating awareness is necessary on several levels. Danish top-managers, who also occupy the vast majority of Danish Board positions, lack awareness. This represents a challenge; How to enable comfort zones in a new and rapidly evolving governance field, in which central actors are already among the busiest people in the country?

CSR departments need continuous internal capacity development to enable company advisors to keep abreast of developments. Meanwhile CSR professionals usually work long hours and manage very tight (if any) budgets which add to the pressure. Many efforts are made to create ‘buy-in’ with top management

42

and to influence all levels in the company to act and deliver. Spotting new developments, translating these into corporate actions, and ensuring corporate transparency around goals and actions are all highly challenging aspects for a CSR professional.

Finally, in order to integrate CSR in the core business, the Morten Nielsen, Carlsberg: entire organisation needs to build awareness. How does a “Obtaining management support company ensure that all communication channels, governance from the beginning is key to a systems and vocational trainings deliver updated and successful implementation process.” synchronised messages? Furthermore, lack of awareness among external stakeholders such as journalists, academia, civil society, and public authorities can be a big challenge for companies that fear their criticism.

The need for awareness on many different levels is closely connected to the nature of CSR as a concept that vertically transcends different levels of management and horizontally ties together different departments within a company. Morten Nielsen from Carlsberg explains:

“Our department [the CSR department] is very unique because it was born to be cross-functional; it has from the beginning taken a holistic approach and works across all other departments to support development of the business.”

Awareness has to be raised on a range of different issues. For instance, there is a need for more knowledge on well-documented and profitable strategic CSR initiatives with top-managers. Likewise, CSR departments may have insufficient knowledge about recent trends within the compliance side of CSR. Lastly, companies need all of their employees to understand core CSR principles, in addition to the specific corporate policies and strategies. Such awareness is needed to ensure that employees appreciate their own rights and act in accordance with corporate commitments.

When the CSR agenda shifts, as is the case with the EU strategy and the global uptake of the UNGPs, the need to raise awareness becomes more evident. The evolving nature of compliance demands and public expectations pose a challenge because skills and competencies need to keep up with such changes. Following the unanimous endorsement of the UNGPs, all companies are expected to use internal or external human rights expertise when designing their policy and when carrying out their due diligence process. For most companies this translates into a need for new capacities.

Professor John Ruggie, Special Representative of the Filip Engel, DONG Energy: Secretary General, and the architect behind the UNGPs was of “Companies need to learn what social course aware of this challenge and has therefore addressed compliance is about, how it matters the international need for capacity-building and awareness- and how they can make a difference.” raising in UNGPs principle ten.39 In this principle it is highlighted how states play a vital role in filling possible knowledge gaps.

Nonetheless companies are restrained in terms of capacity both technically and financially, thus the need to measure and document the business case for different parts of CSR becomes even more essential.

39 http://www.business-humanrights.org/media/documents/ruggie/ruggie-guiding-principles-21-mar-2011.pdf

43

5.3 A Business Case to End Them All

The importance of being able to demonstrate the business case for CSR has been highlighted by all participating companies. Experiencing longer returns on investment in sustainability and CSR than what other business units are used to, continues to be a key challenge. Morten Nielsen from Carlsberg explains:

“It is a challenge to manage a long term CSR vision against short term financial targets.”

Joseph Nazareth from ISS adds:

“The business case needs to be understood. We have to show how CSR impacts the bottom-line positively; CSR needs to be tangible.”

Long timeframes and the complex content of social, environmental, and economic sustainability pose a challenge Susanne Stormer, Novo Nordisk: for communicating the immediate business value of CSR - “Make it business-relevant, speak especially to those who are not familiar with the agenda. This with facts and data, select credible challenge does not only pertain to the proactive or strategic spokespersons from senior CSR dimension. There is, for instance, still a need to management who can be role communicate and develop the business case for respecting models and speak convincingly and human rights. For many companies the business case for not passionately about the issues.” respecting human rights appears more evident. It will be necessary to showcase the business case for respecting human rights, if more Danish companies are to take on this work, although respecting human rights is considered a basic requirement for all businesses today; whether they profit from it or not.

The frontrunners are well aware of the financial value connected to CSR compliance. Filip Engel from DONG Energy says:

”Whether it is B2C or B2B it is important that we are able to demonstrate that we are in control of CSR compliance. It is important in potential business relations. For example when oil and gas authorities look at whom to grant licenses they also look at CSR. It becomes a license to operate.”

As this report demonstrates, examples of the business case for both strategic CSR and CSR compliance exist and should continuously be shared. Public authorities play an important role in enabling companies to share examples of and document the business case.

5.4 The Importance of Ownership

Ownership is an absolutely crucial element of successful CSR implementation. This is pertinent to all levels of corporate organisations. Ownership is necessary at the management level, where it is often secured by linking CSR with core business. Top management buy-in is equally crucial for the commitment of the rest of the organisation.

Additionally, a sense of ownership among employees world-wide is also important. Employees are the main drivers of successful CSR integration; consequently a sense of ownership cannot be underestimated. The reverse situation, where CSR is perceived as a mandatory exercise somebody else wants you to carry out, is highly discouraging. Morten Nielsen from Carlsberg explains:

44

”CSR can easily become a bureaucratic exercise. After all it is already part of our core values, our policy, and our priorities. We already do a lot of work in this field.”

A sense of ownership can be a challenge in light of the regulations and requirements that have entered the CSR Annette Stube, Maersk: field in recent years; both nationally and internationally. “It is important for business leaders to While such instruments can spark progress, ownership feel in charge themselves, rather than within companies is a key driver for substantial and being pushed around by other people. sustainable change. Engagement and dialogue are key Listen to others, but make the decision elements when creating a sense of ownership. In addition yourself. Enable yourself to argue why frontrunners are increasingly making use of CSR you make the choices you make.” performance pay to ensure that selected employees are motivated to perform in this area.

5.5 Context Matters

CSR is about what goes on in company headquarters, but just as importantly, it is also about what goes on in global operations around the world. Furthermore CSR compliance increasingly covers not only a company’s own operations, but also its business relationships - such as suppliers, customers, investors, etc. The global aspect of CSR can be quite challenging: legislation and regulations diverge, social and cultural practices differ and some countries have weak institutions or lack good governance and law enforcement.

Transnational companies face many challenges in this respect, for instance when they manage operations in more than a hundred different countries. They continuously strive to achieve the right balance between centralised and decentralised solutions. Susanne Stormer from Novo Nordisk adds:

“Sometimes we experience institutional gaps – structural issues that are not being addressed either because governance is weak or regulation is not enforced. Gaps can also be seen as untapped potential for more sustainable solutions. In areas where we have a strategic interest, we participate in filling this space; for example in our climate partnership with DONG Energy or with diabetes prevention intervention in Malaysia.”

Addressing global issues proactively as described in Novo Filip Engel, DONG Energy: Nordisk’s approach is a major challenge to most “If risks are located in the supply chains, companies. But in realising the global nature of CSR, invest time in communicating with and frontrunner companies often look for global solutions. understanding the suppliers and their Many join global multi-stakeholder forums, because worldview. There is value in operating in knowledge sharing, common solutions and collective harmony with your surroundings.” actions sometimes are the best solutions to the challenges faced. Such forums are of importance when seeking to encourage more companies to become CSR frontrunners.

5.6 Concluding Remarks

It is difficult to determine which of the identified issues poses the greatest challenge for more Danish companies to become CSR pioneers. The way in which challenges manifest themselves differ across

45

industries and companies. Whereas most identified challenges appear to be general, some may be relevant to selected companies only. In addition, the challenges outlined above can be supplemented with a range of additional barriers that may keep companies from becoming more ambitious in dealing with CSR.

Some challenges are contradictory and some reinforce each other. For example building a sense of ownership takes time, which is challenged by the fact that CSR is a moving target and an ever-changing field. Public regulation seems to be the most efficient tool for creating convergence and a common framework, thereby minimising confusion and creating a level playing field. However, by increasing public regulation, governments run the risk of minimizing the much needed sense of ownership.

The challenges that keep more companies from pioneering in CSR might be as diverse as the field of CSR itself. The selection of challenges and opportunities identified in this report is intended to encourage and inspire more Danish companies to work diligently with CSR; to become CSR-pioneers. According to current frontrunners, challenging as it may be, there is actually no way around it, and most importantly; it is good business.

46