IBM Global Business Services IBM Institute for Business Value Corporate Social Responsibility Leading a sustainable enterprise Leveraging insight and information to act IBM Institute for Business Value IBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior business executives around critical industry-specific and cross-industry issues. This executive brief is based on an in-depth study by the Institute’s research team. It is part of an ongoing commitment by IBM Global Business Services to provide analysis and viewpoints that help companies realize business value. You may contact the authors or send an e-mail to [email protected] for more information. Leading a sustainable enterprise Leveraging insight and information to act By Eric Riddleberger and Jeffrey Hittner Organizations have recently sharpened their focus on sustainability, primarily in response to consumer and stakeholder expectations. Consequently, they face an entirely new set of decisions. However, most lack the information required to make these strategic choices. Based on what we’ve learned from outperforming organizations and leading CSR organizations, we believe businesses should develop new sources of operational, supply chain and customer information to gain new levels of insight for meeting strategic sustainability objectives. Today, more than ever, organizations are FIGURE 1. focused on environmental and social responsi- Change in importance of CSR to strategic bility as a strategic objective. Our 2009 survey objectives over the past year. of 224 business leaders worldwide shows that (Percent responses) 60 percent believe corporate social responsi- 60% bility (CSR) has increased in importance over the past year (see Figure 1).1 Only 6 percent say it is a lower priority. These responses defy the conventional wisdom that the new 34% economic environment dilutes CSR focus. The conditions of a faster, flatter and more 6% interconnected world are without question changing business strategy, as is a greater More Remained about Less important the same important awareness of systemic risk and its conse- Source: IBM Intitute for Business Value 2009 CSR Study. quences. These same conditions make a strong case for a sustainable approach to doing business, one that recognizes that the 1 Leading a sustainable enterprise long-term health of an organization is inextri- margin – the information they need to operate cably tied to the well-being of society and the as a sustainable enterprise. planet on which we live. Outperforming organizations have proven to To be sustainable, businesses are now be far better at casting a wide net for informa- embracing a relatively new objective: tion across their ecosystems.2 They are also optimizing their operations to minimize environ- collecting information that is more relevant to mental impact and improve social outcomes in understanding and meeting the performance a manner that also maximizes performance. challenges of operating in a sustainable manner. More than two-thirds of organizations we surveyed focus on CSR as part of an inte- What’s holding other organizations back? grated business strategy to grow new revenue There are some very real obstacles. As is streams and control costs. As a result, they the case with many new ventures, it can face an entirely new set of decisions. Can be difficult to determine what information is they cut down on waste without increasing needed. Should organizations seeking to the price of products? Do they need to rethink improve sustainability look into the tsunami of distribution options to reduce carbon and the realtime, unstructured information? If they do, impact of volatile energy prices? Should they will they know how to turn the information into segment products and services to meet a insight and action? What information should growing number of consumer sustainability they share and request of others? And how concerns? The answers to these and other do they manage all of these new information questions like them involve managing an needs in a cost-effective way? intricate new set of tradeoffs. Early efforts suggest that collaboration is Organizations are constantly assessing the the best approach. Instead of going it alone, current and future impact of their activities. leading organizations are exchanging infor- They’re introducing innovative processes to mation with customers, industry groups and source, distribute, develop and produce goods nongovernmental organizations (NGOs) and services in a sustainable manner. In taking to increase their access to a wider pool of on responsibility for waste and disposal, they knowledge and their ability to benchmark. are charged with reevaluating everything from They are joining with partners, suppliers product development to partnerships. and even competitors to exchange leading practices and ultimately build out common As might be expected, progress is mixed. standards for sustainability. Standards are a Challenges abound, especially in accessing requirement for effectively implementing a CSR the information needed to meet these new strategy over the long term. strategic objectives. Overall, organizations have intensified efforts to collect information By collaborating and utilizing up-to-date about their operations in areas from sustain- information and standards, today’s organiza- able procurement to ethical labor standards. tions can improve sustainability, while also However, many are still missing – by a wide increasing operational efficiency and perfor- mance. 22 IBMIBM Global Global Business Business Services Services Leading a sustainable enterprise Leveraging insight and information to act Leading organizations Emerging information requirements catch and without endangering other ocean species? How far was it shipped and who recognize that profit Demands for information pertaining to an organization’s social and environmental handled it? at the expense of impact – whether from consumers, regulators, All of this information can be made available environmental or social NGOs or conscientious investors – have risen with today’s technology. Ocean catch can good is ultimately not dramatically. Given today’s harsh realities of be location- and time-stamped using Global global warming, increased regulation, scarcer sustainable. Positioning System (GPS) technology that and costlier resources, and exploding popula- tracks the position of trawlers. The data is tions, attention to environmental, health and embedded in electronic tags and transmitted societal concerns will only intensify. all the way to point of sale so, for example, Global connectivity has raised the stakes shoppers in Norway can scan barcodes to relating to a corporation’s accountability for find out when and where the fish they selected 3 its actions. Points of view abound – on what’s was caught and packaged. harmful and what’s not, as well as what consti- Beyond reporting tutes good business, good practice or even Our 2009 survey reveals that sharing relevant good sense. With the advent of the Internet, information to educate and inform stake- NGO scrutiny is being matched by a new kind holders was a primary objective. Interestingly, of viral and pervasive consumer advocacy. using information to optimize supply chains, At the same time, the volume and granularity transport and logistics, waste management of information available have grown exponen- and product lifecycle was a far less prevalent tially. Realtime data streams fed by sensors, goal. Given that 87 percent of business satellite images, social networks, chats, videos leaders surveyed say they have focused their and other mediums have greatly increased CSR efforts to create new efficiencies, we see the potential to understand what’s going on a missed opportunity to connect operational anywhere in the world at anytime. information with this important CSR objective. Today, determining the exact field where a tree, Leading organizations, however, are reaping copper or ore is extracted is as feasible as cost efficiencies by making that connection. examining employees’ labor rights in a factory Chinese shipping and logistics giant COSCO located in a village of a thousand on the tip of was able to analyze its current carbon footprint an isthmus in Vietnam. With so much informa- and develop alternative logistics strategies 4 tion available, leading organizations are finding to reduce carbon. It calculated tradeoffs they can satisfy the demands of a new gener- between carbon prices and consumption, ation of consumers: the information omnivores. logistics costs, carrier types and load capacity, information on product demand, customer Buyers of fish, for example, have a number of service and the like. At the same time, it concerns beyond freshness. Is the seafood looked at alternative modes of transport, really wild, as advertised? Was it harvested freight consolidation and network configura- legally – under guidelines for total allowable tion strategies. As a result, it reduced the 3 Leading a sustainable enterprise number of its distribution points from 100 to Education (IERE) for a full “cradle-to-plate” 40, lowering costs by 23 percent and reducing evaluation of the environmental impact of its carbon dioxide emissions by 15 percent, which single-serving shelf-stable chili and beans equates to 100,000 tons per year. product. The study analyzed scientific data related to climate change, soil loss and Friesland Coberco Dairy Foods has taken ecotoxicity