Communicating Responsibility: Capstone research prepared for NYU M.S. in PR & CC

Communicating Responsibility: Capstone research prepared for NYU M.S. in PR & CC

by Elizabeth Ghormley, New York University and Toni Muzi Falconi (Advisor) May 2010

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Table of Contents Chapter 1:: Abstract & Introduction……………………………………………..3 Chapter 2:: Fertile Ground: Theoretical Foundation…………………..…6 Chapter 3:: Definitions……………………………………………………………….23 Chapter 4:: Case Studies…………………………………………………………….24 Timberland………………………………………………………………………24 Brown-Forman…………………………………………………………………32 Hess Oil Company…………………………………………………………….39 ***** MS&LWorldwide………………………………………………………….…..43 WalMart…………………………………………………………………………..44 Chapter 5:: Conclusions……………………………………………………………..46 Discussion of Trends…………………………………………………………46 Going forward………………………………………………………………….49 Works Cited……………………………………………………………………………….51

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Abstract This paper is a two-tiered exploration of Corporate Responsibility and Communication. It begins with an exploration of the history, theory, and other drivers of Corporate Responsibility, and is matched with qualitative research with representatives from companies heralded for their CR practice to answer the questions: ―what drives an organizations‘ CR communication? How does the organization‘s communication support or conflict with its efforts to be sustainable and meet stakeholder expectations?‖ Ends with commentary on trends in the data, in the industry, recommendations for further research, and thoughts on the future of CR. Chapter 1

Introduction

Corporate Responsibility (CR), Sustainability, Corporate Citizenship and Corporate Social Responsibility (CSR) are ubiquitous in the leading business press right now. The Harvard Business Review, The Economist and the McKinsey Quarterly are just some of the leading outlets to recently produce major research, significant reporting, and profiles of leading experts on these issues. They are tapped into a larger trend: in the wake of the most recent economic crisis, companies around the world are being called to operate more responsibly and CR is now a focal point for business. What it means, who it targets, and how it is done is still nebulous to many, though. As the world builds forward from the recent economic crisis and corporations recognize their responsibilities beyond stock price, the ―who,‖ ―what,‖ ―why,‖ and ―how‖ of CR is being navigated on many fronts. Governments have legislated reporting on environmental indicators like carbon. Some nation-states are considering legislation and regulation corporate reporting on Responsibility and Sustainability issues. Corporate governance boards are shifting their understanding of fiduciary duty. Supply-chains are being re-understood through a lens that considers the commitment to sustainability of each contributor along the chain. Products are

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being designed from inception as sustainable and responsible. Consumers and employees are being understood via their ability to champion or be lured by corporations‘ efforts on sustainability and/or responsibility. KPMG found that nearly 80% of the world‘s largest enterprises report on sustainability (The Economist, 2010, 16). And corporations of all kinds and sizes are doing this: small-to-medium sized companies (SME‘s), private companies, government, non-profits, educational institutions, and others, are also starting to report using GRI, UNGC, and other standards. At the heart of corporate responsibility is an effort to address a myriad of issues, in a way that protects a business or organization‘s license to operate. The execution of CR by different organizations fills a large spectrum of commitment, strategy, and authenticity. Leaders recognize their impacts and goals and balance them against each other to strategize, and possibly even protect, the company by being more responsible. Many companies do not understand or recognize their impacts as deeply though. In those cases, the critical eye properly recognizes ―green-washing‖ including throwing money at charities or creating taglines to seem more responsible, but not addressing practices and impact on the environment, society, or cultures. With so many corporations claiming their commitment to CR, so many consultants claiming expertise in CR, so many stakeholder groups being considered, addressed, and engaged in CR, and so many different understandings of what that means, finding clarity in the cacophony is a challenge. To understand how a body takes responsibility, however, is a first step to clarifying this. Relationships and communication are an intrinsic element in CR. I have sought to answer the questions: What drives organizations‘ CR communication? How does an organization‘s communication support or conflict with its efforts to be sustainable and meet stakeholder expectations? I argue that effective communication and stakeholder engagement is

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integral to corporate responsibility — not icing, but an inherently driving factor — and will demonstrate with examples. The paper will include:    

    

A look at history to understand the roots, the complications, and drivers of CR Exploration of underlying economic, governance, stakeholder, and communication theories that inform CR practice Mapping of key issues emerging in the CR practice Primary research focused on leaders in CR from a variety of industries, who have been awarded for their CR execution and communication1: o Timberland o Brown-Forman o Hess Oil Company o MS&L Worldwide o WalMart A discussion of the definitions of key terms and their use in practice The challenges, patterns, and successes found in their practices A comparison of these to the theory Notes on trends going on now and for the future in CR and reporting And, finally, suggestions for further research and final insights I have gleaned from this research.

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A note on awards as a measure of leadership: I do not believe that awards for “best practice” are necessarily the best measure of leadership, innovation, or success. Often, awards winners are chosen from a small group of companies that have been self-selected or do not represent a full spectrum of those who could qualify. There are other issues with award systems, as well. With hundreds of different companies awarded for issues related to CSR, CR, etc. every year, the pool of award-winners, however is quite large. The effort here was to focus on companies that are being innovative or are heralded on some level as leaders, and include this point in the analysis of what they are doing and why. Also, there was an undeniable issue of access to people who were willing and able to be interviewed for this paper, and that accessibility of course influenced who was profiled.

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Chapter 2

Fertile Soil: Theoretical Background

Asking if a corporation‘s responsibility to society is purely profit-based or if it includes more social goals has been contentious for centuries. The body of knowledge on economics, capitalism, and corporations is infused with this conversation. Adam Smith, forefather of modern capitalism supported more social responsibility in his seminal works (Smith, 1759). In response to the push for a more socially minded corporate world in the 1970s, a student of Mr. Smith‘s school of economic thought and renowned economist himself, Milton Friedman dismissed the value of CR, writing in the New York Times, ―‗business‘ as a whole cannot be said to have responsibilities‖ (Friedman, 1970). Friedman said famously, ―there is one and only one social responsibility of business — to use its resources to engage in activities designed to increase its profits so long as it stays within the rules of the game‖ (Friedman, 1962). This perspective is firmly rooted in the debate on corporate governance: how should the governance board be designed and driven? The two dominant theories in this area are the stakeholder model and the shareholder, or Agency, model. Friedman and his work as a rational economist from the University of Chicago neo-liberal school of thought is founded in the dogma that profit is the only responsibility of a company and thus the shareholders – or owners – of a corporation are the primary stakeholders of the organization. This model sprouted an understanding of a governing board‘s fiduciary duty to be centered on making profit, only. Core elements of this model include the ideas that ―Maximizing value for shareholders is the right social goal for corporations because it is equivalent to maximizing the overall wealth being created by a corporation‖ and, ―Financial markets do a good job of assessing the true value of financial securities such as common stock. Hence stock price performance is the best measure of value being created for shareholders‖ (Blair, 2002).

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The alternate view, or the Stakeholder theory perspective, argues that ―…the primary responsibility of the executive is to create as much value for stakeholders as possible, and that no stakeholder is viable in isolation of the other stakeholders‖ (Freeman, 2008). Contemporary business literature defines stakeholders as ―those groups without whose support the organization would cease to exist‖ (Stanford Research Institute, 1963, via Freeman & Reed, 1983). Freeman says now that joint interests of the stakeholder group and the organization often forge stakeholder relationships. He says, ―it depends on how value is created or destroyed‖ (Freeman, 2010). Donaldson and Preston offer categories into which stakeholders can be grouped: (a) organizational (e.g. employees, customers, shareholders, suppliers); (b) community (e.g. local residents, special interest groups); (c) regulatory (e.g. municipalities, regulatory systems); (d) media stakeholders (Maignan, 2004). Others through a larger net including all groups who have a stake in the corporation – including, but not limited to employees, government, local communities, business partners, customers, public interest and non-profit organizations, unions, trade associations, and investors of all kinds (Freeman & Donaldson, 1983). The role of the board in this kind of organization is not to be a monitor but, rather, a mediating hierarch—someone who balances the often competing claims and interests of the groups that contribute to the team production process, makes decisions on the allocation of team surpluses, and is legally ultimately in control of a corporation’s assets and key strategic decisions (Blair & Stout, 2001). Drawing from team production theory and organization theory, we offer three prioritization criteria for this mediating process: the team specificity of each stakeholder’s investment, the need to satisfy outcomes, and the power of each stakeholder (Lan & Heracleous, 2010). Understanding historical context for the theory can shine light on the issues raised and theories presented. For example, looking only at the time period between 1960 and 1990, ebbs and flows on the practical level undulate between a more stakeholder-based understanding of a corporation in the United States, as compared with more shareholder-focused governance.

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Milton Friedman‘s piece in the New York Times was written at the end of the 1960s: a decade filled with social upheaval from the Civil Rights, Women‘s Rights, Environmental, and other movements (Freeman & Reed, 1983). These movements included rioting and protesting in the streets that made the issues tangible and put pressure on companies and business in the United States to re-conceive of themselves not just as businesses who wanted to make profit but ―corporate citizens‖ who had responsibilities to participate in improving the country. Professor Robert Tomasko of American University cites examples including the ―National Alliance of Businessmen‖ and then-President Johnson‘s work bringing business leaders together in summits to get their commitment to addressing issues of unemployment and work opportunities for non-whites, and also comments that there was huge social pressure in the business governing elite at that time to try to make things better (Tomasko, 2010). Friedman‘s response to the business activity was a voice against this expansive view of responsibility that came on the cusp of economic hardship in the United States throughout the 1970s, and validated cutting CR programs, reinforced a lean focus on profit, and brought regulation that changed the landscape. In the 1980s in the United States, hostile takeovers pushed business managers and boards to focus on short-term financial results, necessarily focusing on shareholder perception and disconnecting from other stakeholder views (Blair, 2002). This type of dynamism around CR is not unique to this time period. The stock market crash in the United States in 1929 also pushed for stakeholder interests beyond stock ownership to be considered by Boards and managers (Duarte, 2009). And most recently, we see corporations turning in the wake of the 2008-2009 economic crisis to a more expansive understanding of what their responsibility is. Recently, Bonime-Blanc and Mark Brzezinkski wrote on the same Op-Ed page of the New York Times where Friedman made his famous

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declaration 29 years prior, ―we are currently witnessing a transformation of global corporations from a more or less opaque shareholder-centric model to a more transparence multi-stakeholder model (Bonime-Blanc & Brzezinksi, 2009). They continue, ―as to global companies, increased government pressure and stakeholder demands for accountability (from employees, investors, customers, non-governmental organizations, and others) are creating a similarly catalytic turning point that is beginning to yield a more transparent business model‖ (Bonime-Blanc & Brzezinksi, 2009). Indeed, the Economist recent survey of business leaders presents a growing acceptance of the stakeholder model, citing findings that ―many firms are stepping up efforts to identify existing and emerging stakeholder issues…using issues management and analysis matrix to filter and refine groups‖ and that ―…innovative firms see issues management and stakeholder engagement as an opportunity for competitive advantage rather than an obligation‖ (The Economist, 2010). This shift back towards the stakeholder model builds upon the long-standing model, but also is expanding the legal and practical definitions. On April 14, 2010, ―Maryland Governor Martin O'Malley signed into law the nation's first legislation creating Benefit Corporations, a new class of corporations required to create benefit for society as well as shareholders. Unlike traditional corporations, Benefit Corporations must by law create a material positive impact on society; consider how decisions affect employees, community and the environment; and publicly report their social and environmental performance using established third-party standards‖ 2 officially creating the first legally-binding stakeholder incorporation model. At this point, the legal incorporation is possible in seven states and is gaining traction in others, as well.

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http://www.csrwire.com/press/press_release/29332-Maryland-First-State-in-Union-to-Pass-BenefitCorporation-Legislation

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Benefit Corporations, or ―B-Corps‖3 most likely will not represent the majority of forprofit corporations. However, the legislation both represents the current effort to push for accountability and responsibility to issues beyond profit by companies, and resonates with the stakeholder ideals being more widely adopted. Post and Preston argue what that ―responsibility‖ looks like: ―mobilizing resources for productive uses in order to create wealth and other benefits (and not to intentionally destroy wealth, increase risk, or cause harm) for its multiple constituents, or stakeholders‖ (Post & Preston, 2002). Similarly, Maignan argues ―a business acts in a socially responsible manner when its decisions and actions account for, and balance, diverse stakeholder interests‖ (Maignan, 2004) and ―…organizations act in a socially responsible manner when they align their behaviors with the norms and demands embraced by their main stakeholders‖ (Maignan, 2004).

The Role of Relationships. With the onus on corporations shifting from responsibility to solely producing profit, and thus serve shareholders, to a broader responsibility to a variety of stakeholders, the concept of CR overlaps with the need to communicate with a wider pool. Post and Preston‘ assert ―…corporate citizenship policies depend fundamentally on an understanding of voluntary and involuntary stakeholder relationships, with special concern for any negative impacts the firm may have on the involuntary community stakeholders‖ (Post & Preston, 2002). Of course, the process of building relationships and acting in response to them is not one that happens unconsciously. Vos is clear that ―the system of stakeholders … involves an element of choice‖ and ―the implication of a stakeholder perspective is a normative one [wherein] managers should acknowledge the validity of diverse stakeholder interest and should attempt to respond‖ (Vos, 3

http://www.bcorporation.net/

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2003). Corporations‘ strategies to address different stakeholder groups cannot be determined without communication between the two. So, communication theory helps to realize how CR is defined, is strategized, and is successfully achieved, or not. Freeman argued in 2008 ―to understand business is to know how [stakeholder] relationships work‖ (Freeman, 2008). Wheeler and Davies call on governance boards to engage with and recognize relationships and ―social capital‖ — defined as ―the goodwill available to individuals or groups… derived from a network of relationships possessed by an individual or social unit‖— ―across the firm and with key stakeholders‖ (Wheeler & Davies, 2004). This recognition of relationships between stakeholders and corporations brings the theoretical conversation of stakeholders to a practical level where communication theory and public relators are essential. James Grunig‘s decades of research on communication, relationships between groups of people, or publics, and given organizations informs the concept of CR in many ways. Grunig defines Public Relations as ―the management of communication between an organization and all of its publics — employees, members, the community, investors, donors, government representatives and regulators, as well as customers and the media.‖ He continues, ―the central focus of public relations is making the organization and its management more responsible to the publics it affects. …Public relations is the practice of public responsibility‖ (Grunig, 1992). Research shows that practically, communicators and PR people are increasingly working for business leaders who recognize the stakeholder reality: ―Our leaders are seeking influence and even decision-making power in a growing array of interests and activities, because our companies‘ fortunes depend more and more upon the success of partners, suppliers, clients, national economies, the global economy, university curricula and the health of our communities‖ (Arthur

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Page Society, 2007).

Reading from a PR perspective, it is difficult to deny the repetitive claim in Corporate Responsibility literature that sustainability or corporate responsibility are ―not just PR‖ (UNGC). This misnomer equates PR green-washing and other superficial approaches to CR. This misunderstanding cripples the body-of-knowledge, as it cuts out theoretical models and ideas that help build relationships that define the boundaries of responsibility for each organization, give voice and balance to the conversations. In fact, Public Relations, the strategic practice of managing relationships with publics or stakeholders, informs Corporate Responsibility in this increasingly stakeholder-driven business world. Using the PR lens to understand best ways to engage stakeholders and build relationships is vital to understanding CR, and should also be considered in conjunction with the historic perspectives, research that has been driven by other communication-related departments like marketing, and those who have written specifically about sustainability (Werbach, 2009). The tone of the research that hopes to stake claim to corporate responsibility and push other disciplines from the conversation does not serve the practice nearly as well as overlapping the lenses and looking through the myriad of perspectives will. Public Relations research has explored the nature of relationships between organizations and publics from many perspectives. Given the need to communicate with stakeholders, how to do it is a necessary question. Grunig‘s Excellence theory set forth four models of public relations, as outlined below:

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Model

Description

One-Way Asymmetrical Press Agent/Publicity One-Way Symmetrical Public Information Model Two-Way Asymmetrical

Goal: favorable publicity for the organization.

Two-Way Symmetrical

Organization makes information available to the public. Organization researches publics to help communicate with them to achieve organizational goals. Organization researches publics to help achieve the objectives of both groups.

Figure 1 -- (Grunig in Doorley & Garcia, 2007).

While Grunig highlights a place for each of these communication formats in different settings, his research shows that the two-way symmetrical model produces better long term relationships with publics, generally is conducted more ethically, and produces effects that balance the interest of organizations and the publics in society (Grunig, 1992). To effectively exist, organizations must engage stakeholders and understand their relationship to them. Says Duarte, ―organisations cannot achieve legitimacy from simple acclamation in the sense of published opinions. Organisational (and decisional) legitimacy comes from the ―opinion of the public‖, this time interpreted as a collective opinion achieved by a group with a certain degree of consensus, which results from a debate of differing views. This opinion becomes a form of social will, not necessarily dependant on publicity or mass media. Those with whom we communicate are conceived as a special form of human association capable to produce an autonomous and free collective will and with a wide range of interests which go beyond its relationship with ―my‖ organisation. In this approach, decisions of course imply bi-directional and simultaneous exchanges based on equality and dialogue.‖ (Duarte, 2007) The Arthur Page Society echoes this in two of their three recommendations for practice in 13

an authentic enterprise. They say, ―We must not only develop channels for messaging but also networks of relationships‖ and, ―we must shift from changing perceptions to changing realities. In a world of radical transparency, 21st century communications functions must lead in shaping behaviour – inside and out – to make the company‘s values a reality‖ (Arthur Page Society, 2007). Falconi argues that public relators―… not only support organizations in modifying the external scenario by influencing stakeholders (and this is the most commonly understood and the more operative role) but also – and possible more importantly – support organizations in modifying themselves by correctly interpreting stakeholder expectations (and this is the least commonly understood and more strategic role).‖ In his 21st century model for effective PR and effective corporations he sees PR as a ―bridge rather than buffer relationships with influential publics‖ – or stakeholders (Falconi, 2010). Joao Duarte argues that a third party could be included in the conversations currently held between organizations and their publics. He poses this third party potential as civil society and suggests, ―...one central part of PR‘s responsibility is to help organizations involve third-party interest in decision-making processes… [which] incorporates diversity in the sense that no longer does is suffice to adjust or accommodate interests of two parties … but it is required that decisions conform to patterns and values that represent the common good‖ (Duarte, 2007). In all, the deeper understanding of Public Relations and the communication between organizations and their publics is a driver in understanding how organizations deal with Corporate Responsibility. Many researchers and writers have called Corporate Responsibility a marketing or strategy issue. It is clear from the exploration of how communication occurs between an organization and its stakeholders, or publics, that the strategy is dependent on the

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relationships and awareness of those stakeholders. The marketing element – driven towards external publics – is inherently part of the normative public relations practice as described above. Marketers note that ―…marketers can contribute to the successful management of CSR by expanding their focus beyond consumers to include other stakeholders and by bundling together various social responsibility initiatives‖ (Maignan, 2004) Indeed, this overlap happening in organizations, as we will see later in this paper, where organizations have new roles focused on communication and collaboration with those driving strategy and responsibility programs. What do these communicators do? This is also part of the in-depth exploration later in this paper of different company‘s approaches to the concept of Corporate Responsibility and Communication. As before-mentioned, though, 80% of 250 leading enterprises around the globe are now creating Sustainability Reports of some kind, this figure that is up 30% from measures just three years ago (Economist, 2010). Reporting, which started for many companies an annual way to demonstrate efforts on a variety of social, environmental, and cultural issues to key stakeholders has evolved. Guidelines, initiatives, and advisory models including the Global Reporting Initiative (GRI), the United Nations Global Compact (UNGC), and the King Reports (King I, King II, and King III) from South Africa, respectively, are all global leaders in addressing the issues of how and what is reported when. With organizations of all size and sophistication, located around the globe, reporting in multiple languages and to a universe of stakeholders, setting standards is difficult. GRI provides a set of guidelines and suggestions for reporting, including a list of ―indicators‖ — or issues that a company could be expected to be responsible for and report their performance on vs. the possibility for it. KPMG‘s research as of June 2009 showed that 77% of the companies issuing sustainability reports used GRI standards (Ethical Corporation, 2009).

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GRI-tracked reports match their presentation of information against the indicators and then are graded on their level of transparency and delivery of information, as well as their actual performance. The extensive list of indicators is not intended for everyone to report on fully, however. GRI is very much defined as a ―voluntary tool‖ to aid with reporting. It is a tool for demonstrating issues of importance to stakeholder groups that the company many not yet have identified as part of its active publics audience, but could, and even should. Issues that are intrinsic to the business — for example water for a beverage company and human rights for a manufacturing company — are considered material and recommended as the cornerstone issues of reporting — and practice — for those companies. The most recent form of the GRI, the ―G3 Guidelines‖ addresses the concept of materiality directly and includes recommendations for content, quality, and boundary for the report.4 The debate around GRI fills a wide spectrum. On the one end, there is desire to create a reporting standard that is required on some level by all companies as to aid the process of comparing them to see who is ―most responsible.‖ This desire, however, is met with many, many qualifiers. In Denmark, companies are currently all required to report, or explain why they are not reporting. This attempt at transparency resonates with what Mervyn King, GRI leader and writer of the King Reports considers ―essential.‖ He says, ―you cannot legislate honesty or competency‖ and that a law that required reporting would simply drive ―mindless compliance.‖ He believes the best way to address the topic is in mirror of the Danish model, pushing for reporting and communication, not with legal force, but as an opportunity for quality, governance over an abundant or ―quantity-focused‖ governance approach, that reports superfluously but does nothing. ―Over-reporting is green-washing,‖ he says (King, 2010).

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http://www.globalreporting.org/Home

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On the other side of the argument are those that feel GRI misses the point of stakeholders, as it has grading systems and other comparative models that have not been perfected to adjust for size, sophistication, etc. and drive companies to report, report, report as much as possible to meet as many indicators as possible, and hope for a good ―grade.‖ This side of the argument aligns with what GRI states as their goal: providing a framework for communication to aid the process of both providing and receiving information. Critics like Mallen Baker point out that ―most companies are writing reports for multiple stakeholder groups, and no one is reading them.‖ He says, communication should start by asking stakeholders – a company‘s specific stakeholders -- what they want to know and then report directly to them about that (Ethical Corporation, 2010). GRI says they do just that, and empower both sides by providing indicators that could or could not be relevant to seek and or provide above and beyond on a global standard, but Baker says this is not what happens (Ethical Corporation, 2010). The UNGC is ―a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, [sic] environment and anti-corruption‖ (UNGC). Companies participate in the UNGC by reporting annually on their work vis-à-vis those indicators. The UNGC has over 7,700 participants from all sectors from hundreds of nations around the entire globe, including close to 5,300 for-profit corporations (UNGC). The UNGC hosts and joins conversations on the issues related to reporting and responsibility, but does not act as a regulator. Critics say this lack of teeth makes the UNGC an easy way for companies to look good without having to deliver on any deep level of responsibility, or in some cases, any level of responsibility at all.5 The King Report on Corporate Governance is a code that must be followed by all companies listed on the Johannesburg Stock Exchange. The most recent version of the report, 5

http://globalcompactcritics.blogspot.com/

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the King III, calls for increased governance measure, provides recommendations for how to engage stakeholders and communicate with them, pushes for accountability to be assigned and owned by specific members of the governance team, and seeks reporting on all issues, or an explanation why the reporting is not done. It is comprehensive and complex, but still clear, and recommends the use of the GRI recommendations as a guide for reporting (King, 2010). Mervyn King argues, ―Stakeholders are the ultimate compliance officers. They will quickly tell you if the corporation is not acting in line with their interests by either fleeing or supporting the company once information comes to light‖ (King, 2010). Because of this, he believes the mandated reporting with the voluntary option built in to explain why a company is not reporting is essential, but that it also must be coupled with a law that ―when corporations fail, provides someone for you to apportion blame to so that governance bodies do not push the responsibility away‖ (King, 2010) to keep reporting and information available to the stakeholders who need it, but keep punishment for irresponsibility off of those who find it and fixed upon those who were and are in fact responsible. With all these different standards, companies and organizations still report and communicate in a wide variety of ways. While most reports began as books, similar to traditional annual financial reports, the internet has provided interactive and customizable options that make one set of data interpretable in many different ways (Elaine Cohen, 2009). The internet not only serves to reach known stakeholders with data and information, but it fosters the possibility of two-way symmetrical communication and the development of new stakeholders, active publics from latent publics, and other relationships (Grunig, 2009). Integrated reporting — that publishes required financial reporting with all sustainability information for a company — is the way of the future, according to Eccles and Krzus. By

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combining the two sets of information, organizations demonstrate the intrinsic business strategy elements of all sustainability issues, force any stubborn latent publics to face this interwoven nature of financial information and responsibility indicators, and creates a process that forces a company to ―locate any gaps in embedding sustainability into the company‘s strategy and operations and be motivated to correct the situation.‖ They also note that public and governmental interest in issues like climate and carbon are forcing more and more of this information to be reported publicly, driving transparency standards up, and companies who fully embraces this ahead of the requirements being legislated will be served (Eccles & Krzus, 2010). Stakeholders are dynamic groups, simultaneously and continuously assembling and disassembling themselves (Falconi, class notes 2009). Grunig defines stakeholders as ―broad categories of people who might be affected by management decisions or who might affect those decisions – such as employees or community residents‖ and ―active publics‖ as those who ―typically make issues of the consequences of organizational decisions‖ (Grunig, 2009). Other groups he identifies include those ―who are not members of active publics, … passive or nonpublics — even though [an] organization might want them to be publics‖ (Grunig, 2009).

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What is it that makes a stakeholder and that pushes an organization to react to one, to partner with one, to engage, to communicate? The stakeholder concept doesn‘t explain what moves groups to action. Let‘s start with the question of how and when corporations engaged

Figure 2. Chart from Center for Corporate Citizenship at Boston College. their responsibility. Different theories approach the question from different angles. The Center for Corporate Citizenship at Boston College has presented a model of the five stages of Corporate Citizenship measured by the organization‘s behavior versus a list of issues. This model moves progressively towards full disclosure, innovation, and full business strategy integration. The pinnacle or ultimate point of responsibility includes transparency. Many argue that this needs to be included at step one.

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The chart raises the question: what does corporate responsibility look like for the corporation that does not integrate the issues deeply into their strategy. For example, what is the value of community volunteering, giving to charity, cause marketing and other ―lower hanging fruit‖ ways of participating in social, environmental, or cultural issues. Kevin Martinez, who has run Corporate Responsibility various responsibility functions – at companies including Starbucks, Home Depot, and KPMG notes ―it is important to do both, especially depending on the kind Figure 3. Chart from Harvard Business School Publishing. of company that you are.‖ He cites Home Depot‘s volunteer work building playgrounds as a very important part of the business taking action in an area that pertained to their business, even if it wasn‘t fundamentally strategic (Martinez, 2010). Then, is the chart above measuring grades of commitment to a responsibility, or is it a tool for organizations to understand their potential and act as they see fit? I agree with Maignan and Ferrell on this point when they say, ―we argue

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that organizations act in a socially responsible manner when they align their behaviors with the norms and demands embraced by their main stakeholders.‖ (Maignan, 2004) Harvard Business School has a different model to understand how corporations start to understand their role as Responsible, based on ―organizational learning‖ (see: Figure 3). This chart suggests that the end goal of acceptance and civil participation in responsible activity is the goal and that all other stages are simply steps along the process. Neither of these seems possible, despite the practical need for organizations to start their recognition process somewhere, when the organization is understood as fully dependent on its stakeholders. Resource-dependency theory ―states that an organization must attend to the demands of those in its environment that provide resources necessary and important for its continued survival‖ and since organizations‘ stakeholders were previously defined as ―those groups without whose support the organization would cease to exist‖ (Stanford Research Institute, 1963, via Freeman & Reed, 1983). Thus, due to the dependency of the organization on the stakeholder, the demands of the stakeholder are dictates for the organization. An organization cannot, though, respond to all demands of all stakeholders simultaneously or at the depth the stakeholder seeks. The governance board must be the fulcrum over which the organizations and stakeholders balance. The prioritization of publics creates a natural and practical need for communication. Freeman highlights what this communication should include. He says, ―stakeholder theory has gone off the rails by focusing too much on what to do when stakeholder interests conflict. … The key insight of stakeholder theory is that there are many stakeholders and they conflict. … Where there is conflict there is an opportunity to use innovation and imagination to create more value for both parties, rather than picking one interest over another‖ (Freeman, 2010).

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Chapter 3

Definitions

I have chosen to wait to define Corporate Responsibility and sustainability until the end of this theoretical section of this paper because the definition requires an understanding of the relationships between an organization and its stakeholders is necessary to define what Corporate Responsibility and even Sustainability are. While Corporate Responsibility, CSR, etc. are thought of commonly as addressing impact on issues of social (including human rights), environmental, cultural, governance (including anti-corruption), etc., the reality is that the responsibilities are to the existence of the organization wherein it is conceived as a body to serve and be supported by stakeholders. Thus, definitions like ―A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis‖ (Dobers, 2009) do not accurately fit Corporate Responsibility. Sustainability, defined as ―meeting the needs of the present without compromising the ability of future generations to meet their own needs‖ shares more of the meaning, though including perhaps the future as a stakeholder. Unfortunately, it seems these definitions are the most common. Managers understanding Corporate Responsibility to be superficial acts of ―greening‖ rather than deeper issues cripple those who do understand and have the vision to change strategy. Corporations are turning more and more to consultants to understand what programs and plans can help them address their corporate responsibility, but consultants who do not understand these deeper issues will further cripple both the practice by doing with the misnomer CR — or CSR or Sustainability — and will not deliver top-tier consulting because they will not understand the fundamental issue.

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Case Studies6

Chapter 4

My primary research on this topic has centered around five companies — Timberland, Brown-Forman, Hess Oil Company, WalMart, and MS&L— and these questions: What drives organizations’ CR communication? How does the organization’s communication support or conflict with its efforts to be sustainable and meet stakeholder expectations? Below I demonstrate my findings from reviewing public documents and interviewing leaders of Corporate Responsibility, CSR, Communications, and Sustainability – depending on their chosen or appointed title -- at these companies. These companies were chosen because I had access to them and they are considered by many sources to be leaders, especially for their company sizes. Timberland, Brown-Forman, and Hess Oil Company were researched in great depth. A pharmaceutical company and WalMart were not as available for extensive interviews, but were researched for their perspectives on the issues, as well. Finally, MS&L Worldwide brings the perspective of a company that deals with CR internally, but also advises on the topic as external consultants. In the final section, information about other players in CSR includes indices and other tools will be briefly explored.

Timberland7 History & Structure & Philosophy Timberland is an apparel company with close to 6,000 employees and a long-standing commitment to CR. ―Our mission is to equip people to make their difference in the world,‖ explains Beth Holzman, head of CSR — Corporate Social Responsibility — at Timberland. The company defines their commitment to ―CSR‖ as being deeply embedded in their business 6

Case studies are based on my analysis of public documents and cited interviews. Interview: Beth Holzman, April 15, 2010. Phone interview. Jeff Swartz Stakeholder Call April 8, 2010. 7

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strategy and view of the company. ―We probably err on the most transparent side of the spectrum,‖ says Holzman, but she explains, that is part of the culture and the company‘s understanding of what drives the best CSR and most authentic practice. ―Our approach to building and sustaining strong communities includes civic engagement, environmental stewardship and global human rights.‖ Says Jeff Swartz, CEO of the company, ―Moral mission is imperative.‖ In 2007, the company recalibrated their CSR efforts, establishing four pillars – energy, products, workplaces, and service – which speak to the company‘s core material impact. At that point, the company began quarterly reporting through a variety of channels, including biannual reporting on GRI indicators and quarterly abbreviated reports demonstrating impacts on a list of metrics. The company believes that ―engaging with stakeholders every quarter fosters transparency and accountability and creates actionable insights‖ and that ―only by building a real network of real engagement through time will we be able to address the kind of multidimensional solutions that are needed for the kind of challenges we are framing.‖ The overhaul lasted into 2008, when EarthKeepers.com was launched and other transparency and accountability initiatives were unveiled. EarthKeepers is an interactive website designed with the fundamental belief that Timberland is one player in the larger movement to address issues all businesses should be worried about. The site hosts conversation spaces, where the company has posted one question for each of the pillars — questions they do not have the answers to — to seek stakeholder input. The site also hosts archives of Timberland‘s impact reporting, stakeholder engagement calls between Swartz, leaders at Timberland, other industry voices, and any stakeholders who care to join and ask questions. There is information about the tree-planting initiatives that Timberland runs, profiles of ―EarthKeeper heroes‖ from outside of

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Timberland, and many other tools for visitors to engage with other stakeholders, learn about Timberland, follow dynamic conversations on key issues, and more. The CSR team runs CSR as a subsection of the overall marketing department that also oversees Public Relations, Corporate Communication, Sales, and a new department called ―Values-Marketing.‖ While the CSR team focuses on developing the strategy that covers target setting and impact reporting, communication, reporting, and engagement over the four pillars, they integrate their work across the larger group of departments. Corporate Communication collaborates with CSR to develop ―CSR-branding‖ strategies. The Values Marketing team also collaborates significantly with CSR, as they serve as a ―direct bridge between marketing and the CSR team‖ focusing on how to translate information on impacts and other activity that has traditionally been communicated on a GRI-level of sophistication to the broader consumer audience.8 According to Beth Holzman, the current and recent economic hardship has not had much effect on the CSR strategy overall, or the communication of it. Throughout Timberland, she notes ―communication has changed to recognize and even greater need for credibility and authenticity to get trust‖ from stakeholders across the board, and notes that now there is an increased awareness and engagement with stakeholders in this current climate on issues like the environment and social change. She adds, though, that Timberland very clearly understands that all communication and all CSR must be done credibly and must start by ―walking the talk.‖

8

Since this was written, I watched a presentation by the head of this department at a conference. I was struck by her tone and her approach to the information about CSR at Timberland. The authenticity of interest and use of inclusive language that reflected a deep understanding of the issues was nowhere at the level I had seen with Swartz or Holzman.

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Definitions Timberland emphasizes its commitment to being accountable, having authentic CSR, and being responsible repeatedly and in various communications. Because these words mean so many different things to so many organizations, I asked Beth Holzman to please define what these terms mean to Timberland. ―Accountability,‖ she says, ―is something you own. It‘s about what you are doing and what is worth doing. You are held accountable for the things you can control, and following through on your promises for them make you authentic and credible.‖ ―Responsibility,‖ in contrast, ―is what you‘re charged with implementing‖ and involves taking a look at the bigger picture to ask, ―where can we be an agent for change?‖ When I asked her why Timberland uses the term CSR to describe her practice and all the work described above she said frankly, ―it was the catchall phrase five to seven years ago‖ and has carried with it the association with green awareness and internal conversations about the issues. She notes, ―Maybe it would be preferable to call it Corporate Responsibility because it includes social, environmental, and more, and that would more accurate and comprehensive.‖

Stakeholder Engagement & Communication Timberland identifies their stakeholders as anyone that can impact the company or that the company can impact. That includes NGOs, civil society, peer companies, investors, employees, consumers, etc. Different stakeholders are communicated to differently, though primarily in public. Reporting and engagement are the two dominant ways that Timberland communicates with the different stakeholder groups. They ―engage in a spectrum of reporting‖ that includes quarterly reports to ―tell stories and look at progress along the line in a more digestible and shorter format‖ and biannual reports with updates along the way.

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Biannual reporting is more dense and impact focused – though quarterly reports also post updates on environmental and other impact-related indicators such as 2.5% emissions reduction in the first quarter of 2010. These reports are based on GRI indicators and are dense. Says Holzman, ―there is a place for that density across the stakeholder conversation, but we believe we must fundamentally be walking the talk, and figure out how to talk about what our walk is, to demonstrate our authentic ability to engage these issues.‖ Why does Timberland communicate about their CSR? Their goal is to ―create value and manage risk‖ for the company. Holzman explains, engagement helps the company measure and understand its impacts and also plan more effectively to build a collective understanding of responsibility on larger issues like climate and social issues, but also intimately plan for Timberland‘s approach to those issues. Holzman explains, and it can be heard many times over on Jeff Swartz‘ stakeholder engagement calls that Timberland believes that business has a role to play in impacting and improving climate change and social issues. The EarthKeeper portal is the primary arena for conversation and interaction for Timberland and its CSR stakeholders. Holzman notes about the internet and the changes it has brought for engagement that, ―The web has changed everything because there is no more ‗control‘ of brand or conversation about it; the web forces a conversation that we hope to engage and respond to appropriately.‖ Stakeholder conference calls are also used, and then archived on the EarthKeeper site. Between the online and phone tactics, the company hopes to engage a wide breadth of constituencies. And it seems they do. Though it is not visible who is on any given call, it is clear that stakeholders including other companies, media, consumers, and non-profits are there as they ask questions or speak with Jeff Swartz. Online, it is more public who participates, and a

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combination of activists of many kinds seem to be the predominant group engaging there, though profiles are posted for a wider range of folks. Timberland asserts repeatedly that they are ―very much seeking ideas from all these conversations‖ on issues ranging from human rights to carbon. Jeff Swartz refers to stakeholder as ―other sources of wisdom‖ and describes his interaction with them as ―valuable engagement.‖ Of course, stakeholder engagement is not always pleasant for a company with a very transparent record, like Timberland. A viral campaign launched by Greenpeace following the release of 6 years research on Amazonian deforestation and its connection to apparel and shoe companies supply chains put severe pressure on Timberland to address and change their leather sourcing policies in Brazil in 2009. Online searches on the issue now demonstrate Timberland‘s quick reaction to the campaign, signing on with Greenpeace to address the issue and partnering with peer companies to address that and similar issues as an industry. Offline, though, the conversation and situation seem to have been less cordial; Jeff Swartz often references the letters he received from Greenpeace that read ―Die Corporate Scum.‖ Says Holzman of activist engagement, ―Activists are challenging to engage but we don‘t have a choice and we learn a lot from working with them.‖ She adds that they are part of the process of refining the issues, understanding how to walk the talk, and that, ― Activism and partnerships allow for deeper conversations and contrast to ‗greenwashing‘.‖ One of Timberland‘s challenges in their very open online approach to stakeholder engagement, including activist engagement, has played out through their ―Voices of Challenge‖ element of the EarthKeeper site. There, Timberland has posed questions pertaining to each of their pillars to the public. These are questions ―that we don‘t have the answers to,‖ says Holzman. The conversation or online comment thread that has followed from some of the

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questions — specifically the ―Workplaces‖ themed question — has led to an aggressive set of labor activist attacks on Timberland and a sort of dialog between the company and these select folks over specific issues. These kinds of challenges demonstrate the reality that no matter how ubiquitous or infinite the possibilities of engaging all English-speaking people with internet access may be; the conversation can still be limited and get caught within a few nodes. Holzman also notes that not all engagement happens in the public eye. She mentions the extensive partnering Timberland has done across the apparel industry, but also the fact that in certain settings, to move contentious issues forward, the conversation is better held in person, or more intimately the on public showcase. Other challenges Timberland faces regarding CSR are focused on two specific stakeholder groups: consumers and employees. The most recent stakeholder engagement call on April 8, Swartz highlighted the challenge posed by consumers, who are not already issuesactivated and his deep interest in over-coming this challenge. Said Swartz on that call, ―we have an obligation to include consumers in engaged citizenry‖ and to push more mainstream consumers to think about carbon. Given that the research shows that ―consumers couldn‘t care less‖ and that ―no consumer reads GRI reports,‖ Swartz believes there must be another way to push the issue. He says, we realize now the ―need to integrate climate change almost invisibly into the marketplace.‖ The EarthKeeper line of shoes was the first way they have tried to do this. The shoes, which are made wholly from recycled and ethically sourced materials, also offer consumers design and performance excellence, because, Swartz says, ―that is what consumers demand. You cannot sell an ugly or underperforming product to consumer simply because it is good for the environment… If you say carbon to consumers, they want to run out of the store.‖ Plans stand to

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expand EarthKeeper standards to other shoe lines— and the communication with consumers through signage and labeling that Timberland already uses — to grow the line and include more and more of Timberland‘s products. This use of the product line to force the conversation is an example of a company using the product to push the issue into the marketplace and forge a conversation with consumers, who may not have asked for it. Employees are the other challenge for Timberland right now regarding CSR and communication. Beth Holzman says, ―We could be doing a better job of leveraging employees, both as consumer citizens and brand advocates.‖ Issues standing in the way have included the fact that resources have been primarily allocated to focus on conversations with external stakeholder groups about the CSR program, achievements, and challenges. A varied level of interest and education is also a challenge when looking at a very diverse group of employees across the $1.4 million dollar company. Holzman candidly and repeatedly acknowledges this challenge, though, and says the company is in a position to try to be more creative and engage employees going forward.

Materiality & Conclusions On stakeholder engagements call and on public panels, I have heard both Swartz and Holzman say something to the effect of: ―We are a boot company. A hiking boot company. The environment is important to us.‖ The company has defined the material issues it is accountable for through its pillars, set targets to measure it‘s accomplishments, and metrics to determine its impacts. Timberland has also creates a huge number of deliberate channels for communication and constantly and dynamically engages transparently. They receive awards for reporting innovatively and effectively. Even when criticized by hostile stakeholders as has happened

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through Voices of Challenge, the communication resonates with their commitments. Though clearly driven from internal motivation, the company reacts. As they make an effort to push the CSR conversation to consumers and employees — new stakeholder groups who are not demanding the conversation, it will be interesting to see what models of communication work. Currently, a two-way symmetrical model works for the organization, but if the external party is an active public but not around the issues brought to the table by the corporation – will it work?

Brown-Forman9 History & Structure & Philosophy Brown-Forman, the parent company of alcohol brands like Jack Daniels®, Chambord®, Southern Comfort®, and Sonoma-Cutrer® Wines, defines its CR mission as ―Corporate Responsibility at Brown-Forman means putting our values into action throughout our business and in our relationships with suppliers, distributors, customers, employees, consumers, and our shareholders. We must listen to feedback on issues of shared concern and importance. We are determined to promote social and environmental responsibility, transparency, and dialogue.‖ They say their purpose is to ―to enrich the experience of life, in our own way, by responsibly building beverage alcohol brands that thrive and endure for generations‖ through five strategic initiatives that focus on bringing trust, integrity, respect, teamwork, and excellence to their interactions with exceptional people – as employees, responsibility in ―all we do,‖ superb resource allocation, making sales, and consumer franchises.10

9

Interview: Rob Kaplan, April 20, 2010. Phone interview. http://www.brown-forman.com/responsibility/priorities/mission.aspx

10

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This corporate strategic language is translated into action by the CR department is made of up three people: the Director of Corporate Responsibility, a manager of communication to stakeholders, including reports, internal communications, research, and a brand communications manager who translates Brown-Forman‘s CR concepts to brands, ultimately to communicate with consumers through them. The department reports to the department of Corporate Affairs, who also manage Government Affairs, Philanthropy, Internal and External Communications – including PR and Employee Engagement. That office reports to the Vice Chairman of Strategy and Human Resources. Rob Kaplan, Senior Corporate Responsibility Analyst at Brown-Forman says the department feels confident that the top of the company supports it. The strategic model of the company, known as ―the Brown Forman arrow‖ articulates ―being responsible in everything

Figure 4, Chart from Brown-Forman11 we do‖ as a key piece of the company‘s vision of its success.

11

http://www.brown-forman.com/responsibility/priorities/mission.aspx

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At Brown-Forman, definitions regarding responsibility are cut and dry. ―We rarely use Corporate Citizenship, unless we are talking about our citizenship in the local Louisville community, including local philanthropy,‖ explains Kaplan. When defining their ―responsibility, the company includes environmental issues, alcohol responsibility, and community – including philanthropy in Louisville and relationships with the global employee base, as the key elements. They also consider these the most material issues to Brown-Forman. Why these issues? First, Brown-Forman is a publicly traded company, the founding family, though, still holds the majority share. ―The Brown family has a long-standing commitment to environmental issues‖ explains Kaplan, ―and obviously, any corporation impacts the environment.‖ The company also spends a significant amount of time talking a lot about ―what a responsible alcohol company should look like,‖ says Kaplan. They are founders of industry groups focused on responsible drinking and continue to be involved in industry groups like Distilled Spirits Council of the United States (DISCUS) and International Center on Alcohol Policies (ICAP).12 Says Kaplan, the standard has been to be involved in industry-level dialog about responsibility, but now Brown-Forman is looking to exceed that standard.‖

Stakeholder Engagement & Communication Brown-Forman officially defines its stakeholders around a wheel that includes communities where they have facilities, employees – both current and future, the Brown-Forman Family and other investors, the media, customers – who in the case of Brown-Forman, operating in the three-tier alcohol distribution system, focuses on the retailers and distributors who deal with their brands, other companies, legislators or regulators, civil society, and an outer layer that

12

http://www.ourthinkingaboutdrinking.com/marketing-access-issues.aspx?id=258

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exists beyond these specific spokes of the wheel, defined as ―consumers that flow through all groups, but are not a direct stakeholder group.‖ To communicate with and engage stakeholders, they operate under the ―first rule of communication,‖ according to Kaplan: ―customizing to the audience.‖ He explains that someone in the company deals directly with each of the stakeholder groups and is involved in designing the communication for the specific group. While the CR department drives messaging on ―green‖ and alcohol responsibility message consistency, Kaplan explains that the communication and messages are not overly controlled, but than an effort is made to keep them consistent. Notably, he says that Brown-Forman ―is not getting a lot of either media or investment requests for [CR-related] information.‖ Brown-Forman reports on a biannual schedule with online data updates in between. The reports are third-party audited. To date, they have produced two full reports. The company started full reporting upon GRI indicators when the current head of CR was brought to the company. At the time, the Brown family focused much of their CR efforts on environmental issues. As the CR department has matured, it has expanded to include the company‘s longstanding commitment to responsible depiction of their product to evolve into proactive engagement of the issue of responsible consumption of the product and other alcohol-related issues, as ―they are our most natural match,‖ says Kaplan, and thus the most ―material issues‖ for the company. The company uses the internet as a tool in their reporting and engagement. Their biannual report is customizable through internet selections, so readers can choose the issues most relevant or important to them, and reduce the inundation of information that reports can sometimes mean. They also have built feedback channels to glean responses to the reports

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themselves, including using email and other surveys to engage certain groups. The most interactive attempt to use the internet, though is a site that has proven to be a challenge to the company. Ourthinkingaboutdrinking.com is an engagement platform Brown-Forman designed to articulate their position, goals, and issues around drinking. The public site addresses issues including youth and alcohol, drinking and driving, alcohol and health, overconsumption, and marketing and access. There are posted opinions, standards, and company positions. Emails are posted to receive feedback, and a comment board that visitors can add to. Kaplan explains that ―getting people on there has been hard.‖ The company has ―started conversation to drive ‗consensus; definition of what responsibility on alcohol is going to mean‖ he explains, so even internally it has presented a challenge. The site was conceived as a means to force BrownForman into conversations with scientists, academics, regulators, etc. and find stakeholders to whom the issues matter with an open-source approach. It has not yet taken off and the company is strategizing to increase the online conversation and engagement. They will start with a faceto-face summit to bring folks together and force the conversation, as right now ―we are trying to have a conversation without another side to it,‖ says Kaplan. The need to force the conversation comes from two difficult points. One, the issue of alcohol responsibility brings challenges that aren‘t present with environmental issues because the stakeholder groups, and specifically activist groups, that are the most active publics on the issues are much more extreme than with ―green‖ interest groups, says Kaplan, and thus the conversation becomes very specific to the one or two issues they champion in relationship to alcohol, and not about the bigger conversation at the same time. Two, surveys and poll information Brown-Forman has collected from their stakeholder groups all find that key

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stakeholders perceive Brown-Forman doing well on responsibility issues. ―This makes it difficult to figure out what we need to improve without forcing it upon ourselves,‖ says Kaplan. Employee CR engagement is a very active and innovative space for the Brown Forman CR department. Focused primarily on the alcohol responsibility issue, Brown-Forman aspires to have ―every employee be an alcohol responsibility champion on both 1) being responsible and 2) advocating responsibility as designated drivers and/or on the job promoting alcohol.‖ Kaplan explains this is ‗difficult because employees can‘t be ‗responsible in everything‘ without an understanding of the Brown-Forman perspective on the issues.‖ So, education has been the first focus. The CR department invented the ―World‘s First Responsible Drinking Game‖ -- a trivia game with scenarios and teams; use it to get employees to spend an hour talking about responsibility. The game is being rolled out in phase one, being played literally in groups of employees in different manufacturing and business offices in different regions. Because BrownForman is a global company, though, it is being developed into an electronic experience that every single employee will be required to play to expand the employee involvement and flexibility of the program‘s use. Right now, the company is not really engaging programreflective conversation about this beyond surveys. However, the plan is for the next phase to include more response and data collecting mechanisms. The goal of this initiative is to ―encourage and empower the employees to change their behavior and other‘s behavior.‖ Modeled after the WalMart PSP (personal sustainability plan), is called the PRP (personal responsibility plan). Kaplan notes that there has been an active philosophical discussion about the boundary between consumer and employee responsibility and the responsibility of the company itself in driving that. He says, ―while people will of course make

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their own decisions, we cannot ignore our influence over those decisions as an alcohol company and still call ourselves responsible.‖

Materiality & Conclusions Brown-Forman is actively trying to address and build their responsibility through two points. They are building upon a legacy of marketing responsibly. The company has a long-standing commitment and self-regulates internally above and beyond standard legal compliance requirements for marketing for alcohol companies. For example, the company never produces advertisements or other materials that link the consumption of their product to success – monetary, status, sexual, etc. They also do not market their products in outlets that can reach children. Kaplan notes, though, that this legacy has been stated in the negative, i.e. ―this is what you cannot do.‖ The company is working to balance that legacy conceived through a negative idea of what not to do with a more positive approach of marketing responsibility. This approach addresses their hope for fundamental behavioral change. The idea: How do you market the idea that consumers behave responsibly is a good idea? Kaplan says they have asked, ―is this forcing the issue into the marketplace?‖. He says they have spent a lot of time thinking about and understanding consumer insights. They have refrained from doing own research because there is a large existing body that speaks to the issue already, but they have used it to inform and that they are now working with partners like the AdCouncil to address and really shift both corporate behavior and general behavior from the ―please drink responsibly.‖ Clearly, the company is innovating in their practice and trying to find ways to communicate their strategic innovation, with end goal of improving behavior. They are trying to employ two-way communication that is symmetrical, but are not finding publics to engage with 38

as they have hoped, and are thus restricted to engage narrowly focused publics. So, they are left writing their own scripts to create space for the sough communication in the plans they use going forward. Brown-Forman is an example of where fundamentally engaging beyond the issues raised by publics may speak immediately to issues of responsibility most intrinsic to the company‘s business. It will be interesting to watch this conversation evolve, or become directed communication driven by the company. Unlike Timberland, the company is not publicly seen as skirting an issue by activists, but as Kaplan says, the process is halted by the lack of external impetus.

Hess Corporation13 History & Structure & Philosophy At Hess, a family-run and publicly held oil company, Sustainability Reporting and conceptualizing have been part of the company for years. The company website hosts archived reports dating back to 2000. Says Paula Luff, Director of Corporate Social Responsibility for the company, ―CR includes the broader citizenship in the way that we interact with stakeholders. Sustainability is really integrated with the way we operate and we see it as a competitive advantage. We‘re not big so we feel that if we can make an economic impact and social impact in a country, that is a competitive advantage as a company of our size.‖ Why do they call their practice ―Sustainability‖? Says Luff, ―we just did it. It captures what we are doing as a group more effectively than CSR. CSR means that you did something wrong so you are assuming the responsibility. It‘s narrow, weak, reactive. Sustainability is a broader concept and a more proactive descriptor that takes the long view of what you‘re doing.‖

13

Interview: Paula Luff on April 22, 2010. Phone Interview.

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The company drives sustainability focused on three general categories: energy and carbon, environment, and social issues, through both business strategy and philanthropy. The company reports based on GRI standards annually and has all their reports audited and verified by third parties. Beyond audits, the majority of the work is done by Luff, in-house. Right now, she runs the entire department by herself, though she has strong collaboration relationships with both the corporate communication department and significant support from CEO John Hess. Soon, she says, the department will grow.

Stakeholder Engagement The company is very involved in industry groups including International Petroleum Industry Environmental Conservation Association (IPIECA), the Retail Energy Supply Association, the National Petrochemical and Refiners Association, the Corporate Council on Africa, and others. They contribute intellectual capital (best practice, guidelines, etc.) to social responsibility, environmental, and other industry conversations. Luff herself works with BSR around Human Rights issues and is very active on the UNGC Human Rights working group. The relationships are helpful for providing feedback and review of their strategies, refining language and raising interesting points. She describes the relationships as ―extremely helpful third party engagement.‖ When building programs in communities where they operate, including education programs, the company focuses on building something that will have lasting value for the community past the time bracket where Hess is there. In cases where there are third parties who know the political, social, or other climate well and know details of how to build the kind of program sought, Hess may partner with them, though they will remain very active and engaged

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in the strategy and execution. Part of being authentic and credible in recognizing where the specialties of an oil company are exceeded by other groups, like with AED in Equatorial Guinea, where they built a program. The primary stakeholder audiences are host country governments, host communities, and business stakeholders. Others include government, regulatory bodies, consumers, community members where they practice, the opinion-leader elite – including votes and educated groups, employees, non-governmental organizations, and others. Since the primary audiences are very focused, the company does not do a lot of media around sustainability. Other key stakeholders include consumers. The company does not interface on their more strategic business elements of the sustainability strategy at the point-of-sale, but they do voice long-term philanthropic commitments to March of Dimes and St. Jude Hospital. The conversation on sustainability and energy Hess focuses towards their institutional marketing stakeholders. Regarding their international philanthropy, Luff says they don‘t really look outside the company, but do engage deeply with stakeholders in the country and say ―You tell us where we add value; you tell us where things are possible.‖ She says, ―We focus on capacity building and sustainability of programs to keep it going, which is a lot of work as compared to check writing.‖ Regarding reporting to stakeholders, the company is dedicated to being relatively transparent, ―especially for an oil company.‖ Says Luff, ―We believe those transparencies are the right way to go about it. We have nothing to hide. Senior management understands that expectations have shifted and companies are expected to be transparent, not proprietary or competitive disclosure, but transparent.‖ Though 13,000 employees are stakeholders, the focus on employees from the strategy perspective emphasizes safety. The company has an excellent safety record, especially for an

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extraction company. The Corporate Communication office runs the communications about these issues, though they are reported in the annual sustainability report. Luff comments that even in countries where Hess builds programs to serve the communities the employees are not necessarily part of the conversation to construct those projects. Instead, they speak with civil society leaders, government and key stakeholders in the country — leaders, civil society, etc. — are the first entry point, What are your priorities where we might add value? Then technical partner, understand feasibility, and then craft program. Stakeholder engagement even at community level pretty intensive throughout. By the time a program launches, have had community and employee support; not generally asked about

Materiality & Conclusions Hess reports and communicates transparently and has deep commitment to building strong and sustainable initiatives. With their strength holding fast, the role of communication comes into a new light. If key stakeholders are engaged on specific issues and through specific channels, with partnerships and advisory relationships on very particular industry or even human rights-related concepts, the requirement for more ubiquitous communication comes into question. The power dynamic appears imperial as set forth here.

*****

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MS&LWorldwide14 The widening landscape of Corporate Responsibility consulting includes a myriad of specialties. Traditional PR firms, though, are taking a leading role in many ways. MS&LWorldwide was named the best PR firm for CR by CRO magazine15 and Scott Beaudoin, leader of their practice, is widely regarded in the field for his leadership and vision. I spoke with him and explored some of the MS&LWorldwide CR practice to better understand what drives it. Beaudoin explains that many companies are awakening to the need to articulate and incorporate CR into their business strategies, but do not know how to start the process. The role of a company like MS&LWorldwide is to educate the company about CR, how they are already practicing, and where the opportunities lie, because Beaudoin says, ―We understand how this is part of how they communicate, act, and we help the companies identify what CR is to them and where they fall in the greater business — and societal —landscape on these issues.‖ His description of how and why MS&LWorldwide practices CR consulting mirrors the theoretical arguments for why communication theory informs CR strategy and understanding. Fundamentally understanding stakeholder relationships, how to create real ones, and how to prioritize them is a specialty of a firm like MS&L, and this knowledge is a cornerstone of building a CR strategy and articulating the CR practices of a company, explains Beaudoin. The ―business case‖ — demonstrated financial value — of CR is inherently part of what MS&L must do, as well, says Beaudoin. He parallels this process with the same issues face by other PR consultants: ―unless you can show the businesses value there is friction‖ from the companies, he says. So, they look at employee engagement and retention, stock success, and

14 15

Interview: Scott Beaudoin, April 23, 2010. Phone interview. http://www.environmentalleader.com/2008/02/28/msl-tops-list-of-csr-pr-firms/

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other indicators that lead directly to a monetary ROI. He also says that the MS&LWorldwide proprietary ―Influencer Marketing‖ model that engages social activism is a key tool in differentiating their practice. He says the model facilitates engaging the right influencers, driving desired reputational and financial outcomes. This marketing style influence notably underscores the impetus for CR as a marketplace advantage and a way to make more money, rather than an altruistic one. Notably, though the MS&L practice echoes strategic vision that serves organizations along a spectrum between developing full business strategies to systemically incorporate CR and taking smaller steps towards CR, MS&L itself is still in the process of internalizing their own best practices. For example, this year they will produce their first sustainability report and release information about their own CR practices. Beaudoin and his colleagues explain that MS&L employees are engaged on the topic and that social and environmental awareness is in their ―ethos and DNA.‖ Of course, this action has more impact than perhaps reporting on it does, but the communication of these practices, and the chance for them to be audited and/or reviewed by the public seem like an important step in truly driving internal credibility on the issues. I have found that this is a trend for consultancies: understanding the issues and advising others on them but not fully integrating them into their own practice.

WalMart16 Two stand-out sustainability initiatives at WalMart in the context of these other programs are the initiatives to (1) require all laundry detergents to be sold in concentrate, eliminating materials, transport costs, and shelf space required for them, and (2) the PSP – the Personal

16

Interview: Matt Kistler,

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Sustainability Project which engaged employees to live more sustainable lifestyles and be more sustainable – regarding their environmental impacts, their health, and more. These projects demonstrate both the (1) implementation of sustainability by the company, forcing the consumer to a new standard through product alteration, and (2) a successful employee engagement plan. WalMart‘s decision to push these initiatives served to open them up to new markets, but was not inherently driven by that opportunity. As the number one retailer in the United States, the decision to change a supply chain has major effects on all points along that chain. The company‘s decision to take this initiative is, necessarily on one level, a recognition of responsibility and one on the level that Mervyn King cited when recognizing the central role of the corporation in every element of society at this point (King, 2010). The corporation‘s decision to drive sustainability into all elements of the business has become almost a thing of legend in the conversation on CR. This makes people like Matt Kistler, WalMart, Director of Sustainability, into celebrities. The depth and breadth of the program though, and his repeated recognition that "Whenever authenticity is missing from a campaign, it fails" offers hope that this program will… sustain. But, his more flippant answer to why community and sustainability are part of every part of the corporate website offers room for more cynicism. He says of the dedication of corporate website to sustainability and communityrelated issues, ―Its not really that complicated; we just are doing it [sustainability] so we did it [communication about it].‖

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Chapter 5: Conclusions Discussion of Trends There are palpable trends in CR that I have seen in both broader industry conversations on CR and the focused research for this paper. The entire concept of what a corporation is and how it is legally driven is being addressed from different angles, many of which are drawing directly from a new focus and emphasis on CR. Yale School of Management is pushing for shifts in the construction of corporate boards to place more responsibility on the board members and away from the CEO of any given company. Benefit Corporation incorporation options, driven in the vein set forth by B-Corporation and other advocates for a legal standard for a shifted fiduciary duty driven by the stakeholder model is being legislated in regions across the United States. And, a dynamic debate between stakeholders who question the very essence of corporatism vs. business is resonating through books like Life, Inc. by Douglas Rushkoff and the writings of authors like Noreena Hertz in the CR conversation arena. Conferences, online communities, and other tools are bringing together voices from inside corporations, their largest critics, and results are happening. Boards are receiving new responsibilities, protections are put into place for those who audit reports to not be held liable for their contents and facilitate thorough review, carbon emissions are being cut, and more. The dominion and influence over business decisions, though, is inherently rooted in the actions and inactions organizations and companies are making. Looking at reporting and the trends around it offers interesting perspectives on how to act responsibly versus how to communicate about CR. Does reporting dull CR by focusing resources and energy away from the strategizing, does it serve as marketing material that is not necessarily useful or does it enhance practice by building credibility, highlighting holes and opportunity for improvement of

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CR practice and business strategy as interdependent issues? Trends are pushing towards reporting as a key element in driving strategy, demonstrating value to a wide collection of key stakeholders, and pushing the sustainability and CR conversation into the mainstream as integral to business practices. Efforts to mirror the Danish and South African reporting requirements are underway in the United States and the European Union, and auditors and consultants that develop tools to both produce reports and create comparable metrics are being established at a speedy rate. These efforts are in part shadowed by the fact that key stakeholders including investors and the media have not demonstrated interest in these issues as patently as non-profits and the businesses themselves have. The integration of reporting into business strategy is only one of the integration trends emerging, however. Cradle-to-cradle products that have traced the elements in a product from design to marketplace are on the rise. Nike is developing a shoe that is completely biodegradable. Timberland‘s EatherKeeper line of shoes is being expanded. These companies, however, are facing challenges in the tension between consumer interest and the CR vision for the business. One of the most palpable issues for businesses committed to CR right now hinges on consumer and employee engagement regarding sustainability and responsibility. The research above shows this issue at Brown-Forman and Timberland. The Body Shop has also expressed this to be one of their main challenges. Creative approaches to educate, engage, and essentially create an active posture for these two groups of stakeholders are being used. ―How do we communicate about this more effectively with these groups‖ seems to be the fundamental question. My findings, however, are concerning in that the tone seems to follow traditional marketing lane-markers. That is to say, the desire to motivate a new relationship or engagement

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with a stakeholder group – consumers or employees or any other – is parallel to the basic marketing goal of simply getting a consumer to buy a product. Taking this parallel tone in today‘s environment, amongst the online conversation and tools for criticism, highlights this marketing perspective as over simplification. So, corporations are positioned to drive the product development, the responsibility practice, etc. without the input of consumers as a driving force, but rather from their own altruism or risk-averse interests to avoid legal and monetary threats posed by external bodies? Theoretically. Timberland, as one example, is pushing for standardized labeling to drive the conversation, and reporting in one sense, at the point of sale. Without comparable standards for labels, though, this is impossible. So, thus emerges the less new but very powerful industry collaboration trend that companies like Timberland and Hess use to hold companies within a given industry accountable to each other, share best practices, and also create differentiation opportunities. Necessarily, the trends in communication, whether they be at the point of sale, in integrated reports, in employee engagement, or other points, rely on a lexicon that communicates consistent meaning and allows for comparability. The lexicon for sustainability and CR seemingly takes issue with the concept of PR. This emerges in both the theoretical texts and in the leading new books on what CR and Sustainability strategy in business look like. This is an oversight of what PR is — building relationships and managing them to serve an organization, not greenwashing. I submit that the best way to address the shortcomings of different company‘s superficial attempts at sustainability strategy should be criticized for those shortcomings, not for ―being PR.‖ The drive for credibility and authenticity that is driving the most ―advanced‖

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sustainability and CR strategies is necessarily anchored in relationships, respect and communication across them, and this is served by good PR.

Going Forward. CR practice, value, and meaning are being explored through a myriad of research right now. Having done this set of research, predominantly exploring business‘ perspectives on CR and how to communicate it to meet and drive goals, two topics stand out as possible contributions for those interested in doing further research on the topic. The first is in-depth research regarding transparency, how that is conceived of and understood by organizations, and analyzing any rifts between the projected valuation of transparency and the reality of practice. This research would necessitate strong theoretical exploration and articulation of what transparency is. As this is a core concept of conversations across sectors about accountability, improved practice, and innovation, this would be both valuable and most likely exciting. The second category of research would involve looking more closely at CR from ―stakeholder‖ perspectives. That is to say, instead of rooting research on CR through organizations at the center of a stakeholder wheel, start from a category of stakeholders or a spectrum of stakeholders and analyze trends, needs, and issues that are grounding CR practice through their actions, assertions, and goals. This research would enhance the understanding of what the stakeholder model is in the contemporary context and also be valuable to all players in the CR sphere to solicit best practices for affecting change, finding resolution, and addressing issues. Going forward, also, it is worth noting key issues to pay attention to, and to finally underline, again, the essence of why CR is important and what it may mean for a new and better reality.

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Key issues include developing language and comparable metrics to aid expansive lists of stakeholders: products, suppliers, investors, consumers, and employees leading that list. Materiality in this context will need deeper defining – either in relation to other ―material‖ issues that affect the stock price of a company or the value of that company by some other measure. The algorithms for these measurements are being developed by many players, and the coming year will undoubtedly shine light on which of those works and is best attuned to rounding out both the tools for measurement and the conceptualization of what good business means. Notably, the businesses interviewed for this paper all claim that the CR departments were maintained through the hardest economic moments for their companies, and that they did not undergo any more budget restraints than any other department. In the dire straits that many companies faced, this reality is testament to the fact that CR is not going away. CR communication highlights long-term trends and ideals focused on stakeholder relationships, understanding them, engaging them, and managing them appropriately. Doing so serves the business and the stakeholders. What is possible with this engagement is only limited by the viewfinder we place around what is inherently part of business. By including responsibility in it, by engaging for earnest relationships we have a chance at realizing what is at the core of better business – humanity. As Freeman recently stated, in awe of the ability for the conversation on stakeholders to drift from its core purpose: ―We need to build deeply human relationships with stakeholders‖ (Freeman, 2010).

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