PROOF: CSR mitigates risk and saves money. Shame about the strategy.

By CSRwire Contributing Writer Elaine Cohen

New groundbreaking research from SLM Insights™ shows that most sustainability initiatives of 100 companies in 2009 relate to risk mitigation and cost-saving, with low focus on embedded sustainability strategy.

The Sustainability Initiatives Report, which was published in July 2010, is the product of a joint venture between SLM Insights, a research division of Sustainable Life Media and Zumer.com. The report analyzes the sustainability activities of 100 corporations in 10 industry sectors, following a rigorous program involving thousands of hours of research, a review of 6,047 distinct sustainability activities, 1,700 customer survey responses and interviews with many experts. The report makes a distinction between corporate sustainability initiatives which are responsive and tend to be driven by risk mitigation, compliance and short term cost-saving opportunities, and proactive, value-generating initiatives which are driven from the very heart of business strategy, reflecting a sustainable way of doing business. This research is actually quite groundbreaking as it provides a clear picture of the practices, trends, movers and shakers by sector and by company against a set of 38 sustainability activity categories, with analysis for tactical and strategic impact. Not surprisingly, for anyone who is familiar with today's current sustainability landscape, the tacticians well outweigh the strategists. One of the report's key conclusions is: "Few companies view sustainability as a core part of their global strategy; most still view sustainability policy as a means to mitigate risk and achieve operational efficiencies."

The research reveals that most of today's corporate sustainability time and energy amongst the 100 companies surveyed is taken up with environmental initiatives - 56% of the total initiatives related to environmental responsibility (GHG emissions reduction in the main), whilst 29% relate to social responsibility, 9% to product responsibility and 6% to governance-type initiatives. Preoccupation with the environment is understandable; this is where the greatest risks threaten, the more complex regulatory demands lurk and comfortingly, significant operational cost savings offer a promise of attractive environmental ROI which CEO's can appreciate. However, a disproportionate level of attention to environmental risks can mask other equally expensive risks - just ask Novartis, who was fined a record $250 million this year in a sex discrimination suit, to name but one example.

A useful aspect of the report is comparability across sectors. The Oil and Gas Industry, for example, accounts for well over 1,000 separate initiatives, almost 20% of the total, with consumer electronics, footwear, clothing and automotive sectors accounting for around 10 - 12% each. The laggards are paper and airlines sectors which have equally as much to risk but also to gain from sustainable practices. Qualitatively speaking, the picture is a little different, as the overall highest scoring sector is consumer electronics, led by Companies such as Sony, Samsung, Toshiba, Motorola and Nokia, followed by the alcoholic beverages and automotive sectors. Key areas of strategic (revenue-generating) activities in this sector are highlighted as environmentally conscious packaging initiatives, usability assessments for new product development and production of cell phones using recycled plastic. Not rocket-science, it seems to me, but more advanced than the rest. The Oil and Gas sector, despite its dominance of initiatives at the quantitative level, ranks only 6th out of the 10 sectors in terms of the quality and strategic value of these initiatives, which tends to indicate that this sector is doing the most and achieving the least. With BP ranked 5th of the 10 companies in this sector, this may prove this point. Interestingly, attention to the risks of hazardous spills accounted for only 9% of this sector's environmental initiatives in 2009, a number which Zumer.com says is likely to rise significantly in 2010. The paper and airline sectors come out bottom in the qualitative analysis as well, so these sectors are at least consistent in their lack of investment in sustainable development. What an opportunity!

Whilst the research does not disclose how the companies in each sector were selected, many of the big names are represented, alongside some of the smaller but significant players such as Seventh Generation, Tom's of Maine and Lululemon Athletics. The overall top scorers across the 100 companies are Procter and Gamble, Timberland and Gap Inc, all consumer products manufacturers who achieve equal near-perfect scores, higher than any other company in any sector. P&G's success is attributed to massive community investment programs, strong advances in alternatives to animal testing and transparent reporting on political donations. GAP launched a comprehensive environmental footprint assessment in 2009 designed to educate consumers on impacts throughout supply chain, alongside outstanding supply chain monitoring and improvements and the founding of the Better Cotton Initiative, whilst Timberland scores highly on transparency with quarterly reporting, high levels of women in management and raw material sourcing initiatives.

The good news is that this report offers a wealth of insights and makes a great contribution to understanding where we are in the development of sustainable business. The bad news is that where we are is not so impressive. Whilst there are some inspired activities leading the pack which others should be encouraged to emulate, the fact that the most significant sustainability initiatives are (still) about reduction of Greenhouse Gas emissions or improvement in occupational health and safety tells us that most companies are still grappling with the basics of compliance and reducing risk. The question remains as to what is needed for companies to elevate their thinking to the level of strategic sustainability to provide benefits of market differentiation and value generation whilst protecting the ecosphere and our quality of life along the way. This report shows that good housekeeping characterizes the state of sustainability today, when what we really need is good leadership.

Despite this mildly depressing conclusion, this is a very important report and my comments only skim the surface of the breadth of data provided. Of course, it's encouraging to see 100 leading companies involved in some level of sustainability activity. But I can't stop myself thinking: shame about the strategy.

Elaine Cohen (elainec@b-yond.biz) is a Sustainability Consultant and Reporter at Beyond Business and blogger on sustainability reporting.