EU strategy for CSR 2011-14

The European Commission recently published a communication on a renewed EU strategy (2011-2014) for Corporate Social Responsibility (CSR). The communication notes the relevance of CSR to the current economic landscape in Europe. The lack of trust in business, such as banks, has led to growing public focus on the ethical aspects of companies and the larger scope of CSR.

In general I find the term CSR rather poor for describing its intended scope, and it does not have a universal definition which contributes to confusion around the topic. The Commission has simplified its definition of CSR to “the responsibility of enterprises for their impacts on society”. The earlier definition was more comprehensive: “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.

For me, the crucial part of CSR is the importance of environmental and societal factors in company’s core strategy as a tool for both risk mitigation and innovation. The CSR concept has in some way been damaged by companies that have used it purely for marketing purposes (sometimes exaggerated or ‘green washing’) without linking it to the actual company business and the expectations of  its stakeholders.

The EU Commissions states that its CSR policy will be further advanced due to factors including:

- The need to better clarify what is expected of enterprises and to make the EU definition of CSR consistent with new and updated international principle and guidelines.

- The need to give greater attention to human rights, which have become a significantly more prominent aspect of CSR

- The need to acknowledge the role that complementary regulations plays in creating an environment more conducive to enterprises voluntarily meeting their social responsibility.

The EU has launched various initiatives to advance CSR within EU based companies, such as the European Multistakeholder Forum on CSR and the European Alliance on CSR but the new CSR policy also refers to more global initiatives such as ISO 26000, Global Reporting Initiative and the OECD Guidelines for Multinational Enterprises. I must say that I have not heard much about the EU based initiatives but they may play an important role in giving a common discussion base for CSR policies in EU member states and serve as a forum for exchanging best practices.

The Commission’s communication on CSR can be found here.

Greening the Icelandic Economy

There are probably few optimistic about the global economy at this moment, in particular the EU and the US (although Warren Buffet is apparently one…), but crisis can lead to positive change. I hope that the crisis can lead to fundamental changes to systems that are no longer serving us well with a new emphasis on sustainable profits with a view on responsible growth considering environmental, social as well as economic factors.

In line with this, a report on greening the Icelandic economy recently came out with proposals towards the aim of placing Iceland at the forefront of green economies with emphasis on a clean environment, sustainable energy, innovation and education. Iceland was hard hit in the 2008 crisis but seems to be on a steep recovery path. There is a large public demand for fundamental changes towards a more humane financial and corporate systems with emphasis on transparency and equality.

One of the principles in the this green economy is the precedent that the state should set in terms of sustainability initiatives. Examples include responsible procurement policies, mandatory sustainability reporting of state owned companies (goal of 80% reporting in 2014) and implementation of ISO 14000 environmental management standard. Aid for green start up firms is proposed in the form of funds supported partially by the state. The report was prepared by a dedicated parliamentary committee and will doubtlessly be debated shortly in the parliament.

Carbon Storage in Iceland – Lock in Rock

An exciting experiment of carbon storage is currently starting in Iceland. The experiment will take place close to Reykjavik’s geothermal plants and aims at capturing the carbon dioxide rising from underground by the geothermal power stations, which would make them truly carbon neutral.

The storage works by pumping CO2 into the basalt rock which turns it into limestone. The CO2 would thereby become part of the rock and locked away underground avoiding negative effects on the climate. The method uses seltzer water which reacts with basalt (ancient volcanic lava) and turns the dissolved CO2 into harmless limestone.

The company undertaking the experiment is a joint Icelandic-American venture CarbFix involving the US Energy Department, the EU, Reykjavik Energy and others.

If successful this method could be very promising for fighting climate change given the huge areas of basalt ground on Earth including offshore under the seabed.

See original article in Times of India

 

 

 

 

Harder stance on sustainability

Those of us that care about the general wellbeing of the Earth and its inhabitants inevitably feel frustrated about the slow advancement of genuine Corporate Responsibility. Some companies of course are more responsible than others, and should get credit for their efforts, but profit priority gets in the way of other important successes in many companies. Of course companies do need to follow applicable laws, be it general corporate laws or environmental or human rights laws but at the moment these laws are not universal and even if they exist in some places of the world they may not be enforced.

I was pleased to see that in a recent report of the UN Conference on Trade and Development (UNCTAD) – The World Investment Report 2011  it is recommended that governments take on a wider role in enforcing Corporate Responsibility. According to its website one of UNCTAD’s focuses is “ensuring that domestic policies and international action are mutually supportive in bringing about sustainable development.”
Some initiative is already being taken on the governmental of certain countries to require reporting of environmental and social factors (e.g. Swedish state owned companies are required to report and listed companies in the UK and France).

Although CSR reporting requirements are a positive development, most of the requirements leave companies a lot of flexibility in terms of what and how to report. Even when information disclosure is a legal requirement companies can largely choose the information they put out and avoid putting out information which is likely to be seen in a negative light, even if this information is key to the sustainability of the company.

Hopefully the UN recommendations will influence governments to take further measures to increase the transparency of companies. As European governments are amongst the most advanced in promoting responsible practices perhaps the EU could take a lead and develop a legal framework using the most prominent standards as basis such as the OECD Guidelines for MNEs and the reporting guidelines of GRI to ensure coherence and build on best corporate practices.

The OECD Guidelines

The OECD Guidelines for Multinational Enterprises were adopted by the OECD in 1976. The Guidelines are principles and standards which apply to multinational corporations belonging or operating in countries which have adhered to the OECD Declaration on International Investment and Multinational Enterprises, to which the guidelines are annexed. The Guidelines are a tool to increase sustainable practices of corporations in countries where the legal enforcement of human rights and environmental laws is weak. Corporations to which the guidelines apply are urged to apply the strictest standards regardless of their country of operations.

Although the Guidelines are not legally binding NGOs (and others) increasingly submit formal complaints to the OECD where they suspect that corporations are in breach of the Guidelines. To facilitate the handling and conclusions of these cases, there are National Contact Points for the Guidelines in key OECD countries. These contact points launch investigations into the cases brought forward to them. The progress of cases can be followed on OECD Watch  which is a network of NGOs following the effectiveness of the Guidelines.

The Guidelines were revised in 2000 and another revision is currently in preparation. New rules will include clarification of the responsibilities of the companies regarding human rights, working conditions and climate change.

Incorporating Sustainability

Companies are increasingly considering sustainability aspects when forming their business strategies. Although  for many companies non-financial factors, including environmental risks and human rights, still receive limited attention of Board and top management there seems to be growing awareness of their importance in creating company value.

Investors increasingly appreciate insight into areas such as natural capital (e.g. access to water and energy) and the company’s human capital (e.g. turnover rates and availability of technical expertise) in addition to the traditional financials. Employees as well as the general public is also becoming more aware of sustainability issues amidst public discussions of climate change, increasing energy use and waste, impacts of multinational companies in developing countries, etc.

Once companies have figured out and started improving the various areas of their operations that impact the sustainability of the company, they should communicate to stakeholders. Sustainability reporting is becoming mainstream, at least for the larger corporations. The key standard being used for these reports is the guidelines of the Global Reporting Initiative (GRI).

There has been valid criticism that sustainability reports are used by companies as public relations tools to hide irresponsible practices. If a company’s key challenge is limiting negative environmental impact at its Asia operations, it should not spend most of the pages on the success of its community initiative in the US (although it should of course be covered as well). The intention of sustainability reporting is to cover the topics most relevant (material) to the sustainability of the company.

The upcoming challenge for companies is merging sustainability information with financial information to give the clearest view of the company’s performance. This applies both to the strategic planning, which now needs to incorporate sustainability issues, as well as the communication side. Planning for sustainability with other business factors is important to ensure support from management and adequate funding. Governments, notably in Europe, are increasingly asking for non-financial information from the largest (notably public) companies.

A new multi-stakeholder initiative, Integrated Reporting, is developing a framework to integrate sustainability reporting with traditional financial reporting. The project is managed by the Global Reporting Initiative and the Prince’s (of Whale’s) Accounting for Sustainability Project and involves investor, standard setters, companies, international organizations and other stakeholders. A discussion paper for public consultation is expected to come out soon followed by the development of the reporting framework in 2012.

What about the nature?

Following up to yesterday’s post I wanted to touch on environmental activism in Iceland which has developed gradually along with the increasing exploitation of the energy resources and the opening of their access to foreign corporations. One of the most visible environmental activist group in recent years has been Saving Iceland, which includes a mix of people with different nationalities including Icelanders. The group formed as a response to Icelandic environmentalists needing outside support “to drive away the corporate threat to their island”, as stated on the group’s website. Perhaps due to the small population of Iceland, and arguably the limited need until recent years, activism (be it environmental or for human rights) has been limited in the country. The large scale  and impact of the Karahnjukar project I mentioned in my last post was the trigger for organized international activism joined by both Icelanders and other nationalities in the Saving Iceland group.

Following the Icelandic banking crisis of 2008 there has been a slowdown in industrial developments and foreign investments but this is likely to change. With the arrival of a new government in 2009, led by the Social Democratic Alliance and the Left-Green Movement, there is now greater emphasis on environmental protection although environmental concerns have been raised about the new Energy Master Plan (see last post), notably by Saving Iceland. The group points to the fact that the committee assigned to divide the different country areas into three different categories: protection, hold and utilization, did not include any representative from an environmental organization whereas it had representatives from energy and tourism industries and representatives from the industry and environmental ministries. This criticism was backed up by the Minister of Environment who, according to Saving Iceland, stated that “there is, and has always been, and enormous disadvantage difference between environmentalists on the other hand and those in favour of extreme exploitation on the other.” For further details please consult this link.

It is positive that these issues are being raised as Icelanders might currently not be receiving adequate and balanced information on the stakes at hand. Prior to a final decision on the energy strategy, and the extent of the future resource exploitation, environmental considerations will need to be to be fully taken into account. I am sure that Saving Iceland will play its part but hope that other concerned groups, including organizations and individuals as well as politicians will join in to arrive at a sustainable solution, equally fuelling economic, environmental and social interests.

Icelandic Energy

I just came back from a holiday in Iceland, my dear home country, where I did some tourism and got inspired to revive my dormant blog and switch from Icelandic to English to reach a wider audience…

As I came across some of the country’s geothermal and hydroelectric power plants I was reminded of the country’s gift of renewable energy. It also brought back recent and current questions and choices facing Icelanders – how best to manage the country’s vast energy sources.

It is a fact that currently only half of Iceland’s energy production is used for local Icelandic consumption. The rest is allocated to foreign production companies, namely aluminum factories. Companies such as Alcoa and Rio Tinto import raw material to the island in the North where the aluminum is produced and then exported to the global market place.

The most controversial of the Icelandic power plants has been the Karahnjukar hydroelectric plant which became operational in 2008 and is the most powerful hydroelectric plant in Iceland (690 MW). The plant required five dams to create a huge reservoir which water powers an underground power station. The energy is used by Alcoa to produce aluminum. While some admire the magnificence and sophisticated design of the plant others grieve its impact on the otherwise intact nature and the fact that Iceland’s natural beauty and energy is being sold for the profit of foreign corporations.

Following a widespread international and local controversy associated with the Karahnjukavirkjun, and in line with the international sustainable development debate, recent years have seen increased focus on careful consideration and planning of the country’s energy use formalized in the ‘Icelandic Master Plan for Hydro and Geothermal Energy Resources 1999-2010′. The planning started with a focus on economic energy opportunities but added an emphasis on nature protection in the spirit of sustainable development. Information in English can be found here. The plan was submitted to the Icelandic ministries of industry and environment for review earlier this month. A process of review and governmental discussion will follow, including a public comment period, with the aim of finding the optimal solution for sustainable energy use in Iceland for the coming years.

It will be interesting to follow the outcome of these important discussions.

CSR in Iceland

Eftir langa þögn, þá birti ég hér grein sem ég hef unnið að á siðustu vikum – Corporate Social Resonsibility (CSR) in Iceland. Greinin mun birtast í bókinni ‘World Guide to CSR’, sem ritstýrð er af Wayne Visser. Bókin kemur líklega út í haust. Eftir að greinin hefur verið ritskoðuð mun ég einnig þýða hana á íslensku.

Mig langar til að þakka Páli og Stefáni hjá Eþikos fyrir þeirra stuðning við gerð þessarar greinar.

CSR in Iceland

 

Góð frammistaða ‘grænna’ fyrirtækja í fjármálakreppunni

A.T. Kearney Inc. birti nýverið niðurstöður rannsóknar sem nefnist Green Winners: The Performance of Sustainability-focused Companies in the Financial Crisis. Rannsóknin bar saman frammistöðu 99 helstu sjálfbæru og samfélagslega ábyrgu fyrirtækjanna við meðaltal úr viðeigandi atvinnugreinum.

Niðurstöðurnar leiddu í ljós að í 16 af 18 atvinnugreinum stóðu samfélagslega ábyrgu fyrirtækin sig betur sem nemur 15% á tímabilinu maí – noóvember 2008, þegar ástand efnahagsmála um allan heim fór ört versnandi.

Það sem helst aðgreinir sjálfbær / samfélagslega ábyrg fyrirtæki frá öðrum, skv. Dr. Daniel Mahler sem leiddi rannsóknina, eru eftirtaldir þættir:

• Áhersla á langtíma í stað skammtíma hagnað
• Ábyrgir stjórnunarhættir
• Markviss áhættustýring
• Fjárfestingar í umhverfis- og samfélagsvænum nýjungum

Skoða skýrslu (pdf)