Advertising Media investment management Corporate Social Information, insight & consultancy Public relations & public affairs Responsibility: Branding & identity Healthcare and Specialist communications A Review
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Note on scope and accuracy: This Review describes WPP’s CSR activities worldwide. Data relates to the calendar year 2001 unless otherwise indicated. The information has been collected by an internal survey of all our businesses. We believe the survey provides a good indication of the scale of activity within the Group but as is normal with new reporting systems, coverage and accuracy were less than 100%. Information has not been independently audited. We are working to improve the accuracy of future surveys. About WPP
WPP is one of the world’s largest Every WPP company is a distinctive brand in communications services groups. It is made its own right; all have their own identities and up of leading companies in: own areas of expertise. That is their strength. What they have in common is in harnessing Advertising intelligence, talent and experience to bring Media investment management competitive advantage to their clients. Information, insight & consultancy Public relations & public affairs Collectively, the Group has 69,000 people Branding & identity working in 1,700 offices in 104 countries. Healthcare and Specialist communications WPP, the parent company, has a relatively small WPP companies provide communications team of approximately 200 people, predominantly services to clients worldwide including more based in London and New York, with support in than 300 of the Fortune Global 500; over one- Hong Kong and São Paulo. half of the NASDAQ 100 and over 30 of the Fortune e-50. Our companies work with over WPP is a UK FTSE 100 company and is quoted 330 clients in three or more disciplines; and on the London Stock Exchange and NASDAQ well over 100 clients in six or more countries. in New York. For further information about WPP, please visit our website, www.wpp.com.
Corporate governance at WPP
WPP’s Board of Directors is accountable to WPP’s business policies are set out in the its share owners for good corporate governance WPP Policy Book, which has been prepared for and is committed to achieving compliance with the managers of all WPP operating companies. the principles of corporate governance set out WPP’s Code of Business Conduct (see page 8) in the Combined Code in the Listing Rules of the sets out in detail the expectations we have of our UK’s Financial Services Authority. The Board is people. All directors and senior executives from also committed to implementing recommendations our companies are required to sign an Annual proposed in the Higgs Report, the Smith Report Certificate of Compliance with the Code. and the Hermes Principles. WPP also complies with the US Sarbanes-Oxley Act, as it affects Further information on our corporate governance ‘foreign registrants.’ policies can be found in our Annual Report and Accounts, available online at www.wppinvestor.com. WPP operates a system of internal control, which is maintained and reviewed in accordance with the Combined Code and the guidance in the Turnbull Report, as well as the Securities Exchange Act 1934.
2 WPP CSR Review WPP AND CSR Corporate Social Responsibility and communications Sir Martin Sorrell, Group Chief Executive
hy should WPP bother about Corporate Social a fast moving creative environment made more WResponsibility (CSR)? We are not a major challenging by the need to balance commercial polluter. We don’t employ garment workers in goals with changing social expectations. WPP developing countries or make potentially dangerous director, Howard Paster discusses marketing products. But CSR remains highly relevant to us ethics and other related issues on pages 20 and 21. because it affects our vitally important relationships Sustainable development will increasingly shape with our people, our clients and our investors. consumer products. Some far-thinking companies We are a people business and our people don’t are already building sustainability into strategies leave their values at home. We want to create a and products. workplace where nobody needs to compromise Unilever, for example, has three sustainability their ethics and where difficult issues are openly initiatives in agriculture, fish and water. They discussed. Our chief talent officer, Beth Axelrod, have started these to secure their supply of raw describes how we attract and nurture top talent ingredients and they are on the way to creating on pages 16 and 17. products that are more sustainable. When the car We also make a strong positive contribution to industry produces automotive products running society through our pro bono work for charities. on a fuel cell (Ford and others are working on This is of great value to them in recruiting members, this now), all that will come out of the exhaust is collecting donations and communicating campaign water so pure that you can make an espresso in the messages. Our agencies have a long and trunk. As companies begin to create new resource- distinguished history of providing this support, efficient products like these, our job will be to which bolsters important social causes and stretches communicate the benefits to consumers. our creative talent. Green and ethical products have often been Our work for clients, helps them develop marginalised by their price or performance and and deliver information to the market. This is the benefits not sufficiently appreciated by
4 WPP CSR Review WPP AND CSR
consumers. As they become more widely available relationship that companies have with investors. and competitive, communications services will In the future, access to capital will be influenced play a vital role in their success – informing by CSR ratings. consumers of the social and environmental In the long term, successful companies will significance of their purchase decisions. be those that have a strong reputation for Business leaders know – now more than ever corporate responsibility and respond creatively – they must establish and maintain a reputation to the challenges of sustainable development. for social responsibility and good governance. This Review explains what WPP is thinking and This fortifies the brand and reassures investors. doing about CSR. We welcome your comments. WPP director, Jeremy Bullmore looks at the link between corporate reputation and product sales on pages 10 and 11. Investors, particularly pension and insurance funds, have become increasingly concerned about the social, ethical and environmental performance of companies. I am pleased that WPP is included in two of the leading socially responsible investment indexes, the Dow Jones Sustainability World Index and the FTSE4Good Sustainability Index, whilst recognising that we will have to work to maintain this position. While the direct financial benefits of CSR should not be overstated, increased interest from the financial community is beginning to shape the
WPP CSR Review 5 WPP AND CSR WPP’s approach to How we manage Corporate Social Corporate Social Responsibility Responsibility
We recognise that the reputation of our business depends WPP has two formal documents to guide our people on our people acting with honesty and integrity in all of their in dealing with ethical, social and environmental issues. business dealings. We are also keenly aware that our activities Our Code of Business Conduct covers a broad range of involve us in debates about prevailing social standards of taste, business issues and is supported by our new CSR Policy decency and ethics. We do not duck these issues. that elaborates on key subjects.
In this Review we set out to be transparent and candid about We adopted our CSR Policy in 2002 and have appointed our performance, progress so far and the agenda for the a WPP Board director, Howard Paster, to coordinate our future. We have begun to define more clearly what CSR approach to CSR. The Policy identifies the issues we see means for WPP and our operating companies. We encourage as most relevant to WPP and the principles we apply to them. debate and invite your comments, using the contact details on the inside back cover. WPP divides responsibility for CSR between two committees which report to the WPP Board. The Audit committee, We have assessed the full range of CSR issues in the context chaired by John Jackson, is responsible for social, ethical of our business and believe that the most significant areas and environmental issues. The Compensation committee, for us are: chaired by Stanley Morten, is responsible for employment issues including equal opportunities, diversity and harassment. Social investment, including donations and pro bono work. Our Code of Business Conduct and CSR Policy are set out The development of our people. on pages 8 and 9 respectively. Marketing ethics. Measuring performance A small environmental impact. To track and improve our performance we need to know how our companies are managing social, ethical and environmental This Review discusses our approach to these issues, gives issues, and how they perform. Since adopting our CSR Policy, examples of our recent work and outlines our plans for we have begun to collect performance information from our the future. operating companies annually.
Our first CSR survey covered 2001. We are extending and refining the survey and intend to undertake the survey annually beginning in the fourth quarter of 2003. The main information we track is:
Social Pro bono work (providing communications services for charities at no or minimal cost). Charitable donations.
Marketing ethics Infringements of regulations and marketing codes of practice.
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Employment Business partners and suppliers Employee training, diversity and grievance procedures. Our partners and suppliers have a right to fair and honest treatment and prompt payment. Employee volunteering. Charities Environmental These organisations benefit from pro bono work and have Energy consumption. a right to expect the same standards of professionalism Paper recycling and purchase of recycled paper. offered to our corporate clients. Recycling of other materials including toner cartridges, Environment cans, glass and computer equipment. The community at large has a right to expect us to minimise Engaging with stakeholders the impact of our operations on the environment. We recognise many different stakeholders have an interest in The investment community has become more aware of social, our business and we welcome discussion of our CSR issues ethical and environmental issues and we receive requests and performance. for information on our performance. We regularly meet with socially responsible investors (SRIs) and provide information Our stakeholders include: to them through questionnaires and surveys. Investors Our share owners have a right to expect a fair return on their WPP is included in the Dow Jones Sustainability World Index investment and the highest standards of governance, integrity and the FTSE4Good Sustainability Index. We are also members and reporting. of the UK Media Sector CSR Forum, a group of more than 10 media companies working to identify key issues for the Employees sector. WPP participated in Business In The Community’s Our people have a right to fair benefits, sharing in the company’s Corporate Responsibility Index. success, and a working environment that nurtures their talent, free from discrimination and harassment.
Clients CSR management targets Our clients have a right to the full benefit of our talent and Our targets for 2003/2004 professionalism and to trust that our conduct will not discredit them or their brands. Establish CSR committee across major Group companies. Consumers Each company to nominate a senior Consumers have a right not to be misled or unduly offended CSR representative. by the communications we create and to entrust that our companies comply with industry codes of practice and Companies to report annually to Group the law. via a strengthened CSR survey. Group audit to identify risks and confirm management practices. Continue to engage constructively with socially responsible investors.
WPP CSR Review 7 WPP AND CSR WPP Code of Business Conduct
The Group and its companies operate in many that minority be by race, religion, national different markets and countries throughout the origin, colour, sex, sexual orientation, age world. In all instances, we respect national laws or disability. and industry codes of conduct. We will not for personal or family gain directly or indirectly engage in any activity which We, the directors and employees of all competes with companies within the Group companies in the WPP Group (‘the Group’), or with our obligations to any such company. recognise our obligations to all who have a stake in our success including share owners, We will not offer any items of personal clients, employees and suppliers. inducement to secure business. This is not intended to prohibit appropriate entertainment Information about our business shall be or the making of occasional gifts of minor communicated clearly and accurately in a value unless the client has a policy which non-discriminatory manner and in accordance restricts this. with local regulations. We will not accept for our personal benefit We select and promote our people on the goods or services of more than nominal value basis of their qualifications and merit, without from suppliers, potential suppliers or other discrimination or concern for race, religion, third parties. national origin, colour, sex, sexual orientation, age or disability. We will not have any personal or family conflicts of interest with our suppliers or other third We believe that a workplace should be safe parties with whom we do business. and civilised; we will not tolerate sexual harassment or offensive behaviour of any kind, No corporate contributions of any kind, including which includes the persistent demeaning of the provision of services or materials for less individuals through words or actions, the than the market value, may be made to display or distribution of offensive material, politicians, political parties or action committees, or the use or possession of offensive weapons without the prior written approval of the on WPP or client premises. Board of WPP and the prior agreement of its share owners. We will treat all information relating to the Group’s business, or to its clients, as We will comply with all applicable local laws confidential. In particular, ‘insider trading’ and regulations, and any other laws with an is expressly prohibited and confidential international reach, such as the US Foreign information must not be used for personal gain. Corrupt Practices Act, where relevant. We will not knowingly create work which Actual or potential conflicts with this Code contains statements, suggestions or images should be reported promptly to the WPP offensive to general public decency or to Company Secretary. minority segments of the population, whether
8 WPP CSR Review WPP AND CSR Reality bites Jeremy Bullmore, Director
This was no conspiracy. These companies had nothing to hide. They were just conforming to a marketing policy that had grown up over time and had seldom been questioned. Good sense dictated that different categories of nce upon a time, when we were all young product should be kept carefully discrete: better to Oand innocent, most of the brands we knew have separate company names for human food and and loved were orphan brands: they seemed to animal food, for example; for confectionery and have no parents. pharmaceuticals. But by and large, most brands The chocolate spread, the toothpaste, the maple were expected to stand on their own two feet, syrup, the marmalade, the comics, the washing the identity of their owners familiar only to their powder, the candy bars, the potato crisps, the cat employees themselves and the business community. food, the bleach in the bathroom, the bread, the This policy did have at least one not wholly butter – and almost everything in the medicine accidental benefit: it strictly limited the potential chest: they all had their own names, and their viral effect of product calamity. If a tabloid own distinctive bottles and packages and bags newspaper reported the discovery in a product and boxes. They were as familiar to us as family: of a piece of glass or a cockroach – or even more but we very rarely had any idea who made them, seriously, a blackmailer’s claim to have introduced and nor did we greatly care. arsenic into infant food – the damage was strictly We knew who made the baked beans, of course, limited. Separate brand names provided firewalls and the corn flakes and the car and our bicycles: between products and prevented the bad news they all proudly proclaimed their makers’ names. emanating from one from contaminating the But most of the brands we knew and loved were many others. stand-alone brands, brands who came from no Today, for a variety of reasons, such damage known line of ancestors; orphan brands, with limitation is to all intents and purposes impossible. no brothers or sisters. The costs and risks associated with launching If you looked very carefully at the back of the new stand-alone brands has encouraged marketing pack, down at the bottom, in an 8 point typeface, companies to extend existing reputations rather you’d find the name of a manufacturing company; than attempt to establish new ones. Company but even then it was often a subsidiary of brands are now far more common and brand the ultimate parent company whose name was variants and brand extensions make up the great never mentioned. majority of new product introductions. The trust,
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a developing country to attract the attention of Western media. Today, an e-mail to a pressure group is all that’s needed to turn a local factory issue into a major threat to the reputation of a the equity, that’s been painstakingly and multinational company. With the firewalls down, expensively earned by one company brand deserved and adverse publicity can no longer be is legitimately employed to transfer instant safely contained within some remote corporate reassurance to another. silo – but will wash freely around every product The firewalls are disappearing; hundreds of they make and every enterprise they own. brands can now be seen to be interconnected: Conversely, of course, new opportunities open and therein lies the risk. up. Just about the only prediction on which all To which may be added an intensified interest marketing pundits and practitioners seem to be among consumer correspondents in the press, agreed is that the successful company brands of the growth of pressure groups – and, of course, the future are those which are most successful the internet. in earning and sustaining their consumers’ trust. In WPP’s 2002 Annual Report we discuss the Just as any company bad news will contaminate concept of the ‘objective disqualifier’. Most product that company’s entire product portfolio, so will sectors are crowded with competing brands where that entire product portfolio benefit from its parent the differences in performance are minimal and company’s reputation for thoughtful and ethical reducing. Consumers are faced with a dilemma practices. If you ask environmental and social of too much choice. They will increasingly search opinion leaders, “which are the best companies?”, not for reasons to choose a product but for reasons the names they quote are remarkably consistent. to eliminate brands from their shopping list – the The investment made now by companies that are ‘objective disqualifier’. A whiff of exploitation of establishing reputations for CSR leadership will workers in the developing world, or pollution of the be handsomely repaid by brand sales in the future. environment provides the rational reason consumers In a world more pure and saintly than our own, are seeking for striking a brand off their list. it could perhaps be expected for companies to So if there was ever a time when Corporate Social behave with consistent social responsibility – even Responsibility was thought to be a sort of optional when incurring additional cost and gaining no accessory, useful for casting the holding company’s commercial advantage from doing so. board of directors in a flattering light but with no Happily, however, when it comes to CSR, serious commercial implications, that time has gone a reputation for decency, if honestly earned, for ever. really does seem to offer tomorrow’s companies A company whose employment practices, respect an invaluable (and technologically unchallengeable) for the environment or production methods are competitive advantage. in the least bit flaky may now take it as certain that all such flakiness will be made widely known. The internet has transformed the way that stories of malpractice circulate. Before the internet it was almost impossible for a local community in
WPP CSR Review 11 WPP IN SOCIETY WPP’s contribution to society
By donating our time, money and intellectual capital to Donations to charity charities we can make a positive contribution to society. In addition to pro bono work, WPP companies and the parent company support local communities through direct donations. Through pro bono work, providing communications services for charities at no or minimal cost, our people use their In 2001, WPP companies gave about £3.6 million ($5.8 million) talents to produce innovative work for community projects to support good causes worldwide, including initiatives and not-for-profit organisations. We see this as the best in health, education, arts, environment, drug abuse, and way for us to benefit communities in the countries where projects to support victims of the September 11 attacks. we operate worldwide. Parent company support WPP companies also make financial donations to a wide for education and the arts range of good causes. The parent company focuses its support on education and the arts. Initiatives supported internationally include the Indian In 2001 our Group’s total social investment, including pro Business School in Hyderabad and the Red & Yellow School bono work and charitable donations, was worth £12.3 million in South Africa. ($19.7 million), equivalent to 0.3% of revenue or 2.9% of our pre-tax profits. In the UK, WPP sponsors the Charles Edward Brooke Girls’ School, which specialises in media arts; the Royal College Pro bono work of Art; and two bursary awards for D&AD, the professional WPP companies have the talent to market products. association for design and advertising. Through pro bono work we use the same skills to help charities, free of charge. In this way we support organisations WPP is also a corporate patron of the National Portrait Gallery working on some of today’s most compelling social issues, in London. The company supports The Media Trust which including AIDS, third world debt, disability, and the helps charities with their communications, and is a founder environment. member of the Royal Society of Arts and Commerce’s Centre for Tomorrow’s Company, a forum for good business practice. In 2001 the value of the Group’s pro bono work was equivalent to about £8.7 million ($13.9 million). However, because it helps charities to recruit new members, raise funds and support their campaign objectives the benefit to the charities may be many times that figure. Contribution to society plans Just one example of pro bono work comes from the Phoenix office of WPP company Fitch:Worldwide. Working with We do not set targets for our companies, many of which client Ben & Jerry’s, Fitch:Worldwide donated its design and have a long history of community and charity support. architectural talent to build The Scoop Shop at the Oriental We do have a guideline for the overall level of community Theater in Chicago. This ice cream eatery is run as a regular investment WPP intends to make as follows: business but with a difference: disadvantaged young people Undertake pro bono work and financial donations to are hired so that they can earn money and acquire job skills; charity and community organisations worth £15 million and all proceeds are donated to the Chicago Children’s Choir. or 0.4% of revenue (whichever is the greater). A showcase of some pro bono campaigns that WPP Achieve a rate of employee volunteering equivalent to one companies have created is reproduced in the supplement day per person per year (approx 69,000 person days). found in the pocket at the front of this Review.
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WPP companies’ pro bono value Total £8.7 million ($13.9 million)