Editor's Note: It's that time of the year again and we're ready to wrap up 2012. Like last year, we've assembled an impressive lineup of thought leaders and experts who will examine the year that was, guide us on what might be ahead and offer their advice on how our business, social and environmental consciousness continues to converge. They will spotlight achievements, highlight trends and activate the change makers among us in our end of the year CSR & Sustainability 2012 series. Consider this series a call to action.
Today's editorial is by Liz Gorman, a contributory writer for CSRwire and senior vice president with Cone Communications.
Reflecting back over the past 12 months, a few things stood out to me as significant events in the CSR world. Here are my top five.
A Bite out of Apple
The year began with a major story published in the New York Times on Apple [NASDAQ: AAPL]: In China, Human Costs Are Built Into an iPad. The story revealed the harsh conditions workers are subjected to in Foxconn’s Chinese factories, a supplier to Apple. These workers labor away for long hours, churning out iPads and iPhones at record speed in order to keep up with growing consumer demand for these products. Working conditions are undoubtedly better than in earlier years, but a lack of safety protections led to an explosion in the Chengdu factory last January, killing two workers and injuring others, as the crew on shift polished iPad covers.
While Apple has a supplier code of conduct mandating fair and safe working conditions, and a well-documented audit trail of inspections, it also has had its share of problems getting suppliers to comply with its code. The company has reported these violations publicly. But when the story broke, Apple tried to downplay the situation and provided evidence that it had done everything it could to prevent these issues. And like its peers, it had probably pressed hard on Foxconn to maintain good working conditions while pushing harder to meet its unrelenting delivery demands. There’s a relationship here, but that’s a topic for another time.
What the New York Times story did was serve as a reminder to all corporations that rely on contract factories to produce their goods: Your suppliers can be monitored but ultimately cannot be trusted to fully comply with corporate standards once the auditors leave the scene. And that is what we call a reputational risk – and in Apple’s case, a reputational nightmare.
GRI Goes G4
Now in its 15th year of providing organizations with a universal framework to guide their CSR or sustainability reporting endeavors, the Global Reporting Initiative will introduce the next version of its reporting guidelines in May 2013 – the G4. While there is much anticipation about them, there is also some fear and displeasure.
What’s the problem?
The GRI has proposed a number of changes to make the G4 more user-friendly through better guidance documents, additional disclosures for governance and supply chain, and placing a sharper focus on materiality. In theory, that’s all good and needed.
What worries some reporters, however, is the focus on materiality. The G4 will advise reporting organizations to conduct a thorough assessment of its material issues, considering the broader sustainability context and analyzing its impacts from one end of its value chain to the other. Will this lead to lengthier reports because of many more required disclosures, ranging from supply chain impacts to end-of-life disposal issues? Mindy Gomes Casseres sums up the implications of value chain assessments nicely on GreenBiz.
The other change GRI is proposing is to no longer include the Application Levels in the G4. This move would effectively eliminate the A-B-C self-grading system that reporters have grown attached to.
The exact changes the new G4 guidelines may include are not confirmed yet. Word is that the GRI is still mulling things over behind closed doors. One thing is certain: A lot can happen between now and May. Stay tuned on this.
FTC Draws a Greener Line
After more than two years of shopping around and getting input on its proposed update to the Green Guides, the FTC finally made them official on October 1, 2012. At last, some clarity for marketers of green products about what is acceptable language and what’s considered crossing the line.
My colleague Jonathan Yohannan succinctly captured what's essential about the updated guidelines on Talkback, explaining that broad claims like “green” and “eco-friendly” are no longer cool to use, unless the use of these terms are backed up with substantiated facts about the environmental attributes of the product in question. These attributes should be significant, say the FTC, otherwise don’t bother using these haloed terms.
The updated FTC Green Guides also provides specific guidance on the use of claims such as "biodegradable" and "compostable," terms often misunderstood and, therefore, misused. Marketers will also find clarity on acceptable and deceptive claims when marketing a product as being “free-of” something bad, non-toxic or ozone-safe, among other risky claims.
For more, you can review the 36-page document on the FTC website, which outlines all the changes to the Green Guides and offers specific examples to marketers so they will clearly know where to draw their lines. I suggest all green marketers read this carefully.
While the debate rages on about whether Hurricane Sandy was a demonstration of climate change or not, the impacts of this storm are still being felt and dealt with. And this is exactly what the New York City Council feared when it voted to expand the scope of the city’s Climate Change Adaption Task Force on August 22, 2012, two months before Sandy even reared her head. This task force is charged with evaluating the potential effects of climate change on the city’s infrastructure while developing strategies to protect the city from these impacts.
The implication here is clear: New York has accepted the notion that climate change is happening and has now moved on to figuring out how to adapt to new realities – from hotter summers to more severe and wetter storms.
But New York City is not alone. From Santa Cruz, Calif. to Philadelphia, cities across the United States are honing their climate change adaption plans and getting prepared to deal with changes to their regions.
While cities are busy planning to adapt, it’s not clear what major corporations are doing to evaluate the impacts climate change may have on their business – both good and bad – and plan for the future. Taking measures to plan are especially important to businesses with operations along shorelines or with distribution facilities in areas that could be subject to rising flood waters and potentially cut-off from transporting their goods.
Companies went crazy planning for Y2K. Maybe it’s time for them to begin forming their climate change adaption plans so they’re ready to counter possible impacts to their business?
More Sustainable, More Profitable
There were a number of reports out in 2012 that demonstrated the connection between robust sustainability practices and more impressive bottom lines. Of particular note was the Massachusetts Institute of Technology’s third annual Sustainability and Innovation Global Executive Study, released in January 2012.
The global study gathered insights from more than 3,000 business executives and found that 70 percent of companies have made sustainability a permanent agenda item for management. Their reason: Sustainability is a necessity in today’s competitive marketplace. Adding further evidence is that funding of sustainability initiatives has continued to increase, even in recent belt-tightening years.
While CSR or sustainability are still not the highest items on the corporate agenda, nearly a third of respondents to this study said sustainability activities are contributing to profitability.
Although many CSR executives continue to struggle with making the business case for their causes, this report may finally provide strong evidence that sustainability practices are not a fab, but a business imperative.
Let’s hope this continues to be the case in 2013.