Over 30 years ago, the Blue Angel label came out in Germany. It was significant – a label for consumers to recognize what was the more environmentally sound choice, backed by a standard and certification. Years later, many others followed – including many well-known ones such as Fairtrade, Marine Stewardship Council, Energy Star, Organic – and as of several days ago on the Ecolabel Index, the tally was at 424 labels. But what we needed in the past is not what we need any more. It’s time for a change.

In a recent research piece from SustainAbility called Signed, Sealed…Delivered? that I co-authored with my colleague Patrin Watanatada – we looked at the value and challenges that businesses find in using certification and labelling as tools to improve economic, environmental and social outcomes across global value chains.

What we have found is this – certification, labelling and the standards-setting organizations behind them have been pioneers in building a more sustainable economy. For businesses, they provide a credible, consensus-set reference point for collective action, access to expertise and networks, and can spur demand for certified or labelled goods. This is particularly the case in the B2B space, where labels and sustainable attributes are built into institutional purchasing agreements, such as within large companies or municipalities.

However, there are also a number of challenges. The traits that are the strengths of consensus-based standards – governance and inclusiveness — also pose challenges. For one, some businesses are seeking to advance sustainability as quickly as possible – but sometimes the agreement required in a consensus based model can slow things down. In addition, what is best for all stakeholders is not always perfect for sustainability – for example with many of the forestry standards it is a compromise between best available science and what the industry can handle. Also – the issues that are covered by specific standards may not be entirely appropriate for the business, so there are many cases where companies such as Innocent Drinks have developed their own standards for sustainable sourcing. As labels become more known in specific product categories, they also become a mere condition of entry, which has been the case with Energy Star in electronics. This does not suit most marketing departments who seek to differentiate, first and foremost.

Another challenge to labelling is that it has limits – in particular, limits to scale. Labels are mostly recognized and understood by a niche group of consumers – a typical consumer will not buy an ecolabelled product unless it has a clear “what’s in it for me?” for them. For example, organic products have done well because many believe it to offer them a significant health benefit. This is also why we see an increasing number of B2B standards and certifications that have no consumer facing element, including the Better Cotton Initiative and UTZ Certified for coffee and cocoa, which allows companies to focus solely on making the commodity more sustainable.

What then needs to happen? We think that the model of standards + certifications + on-pack ecolabels needs to evolve, where they are separated and each are used and recognized as part of a larger sustainability toolkit. Standards would provide an increasing, pre-competitive baseline, and brands could compete around this, such as what apparel manufacturers are planning with the Sustainable Apparel Coalition’s index. In concert, partnerships and collaboration with civil society would help to transform supply chains and consumer norms and behaviour, for example with Procter & Gamble’s Turn to 30 cold water washing campaign. Certification could take the form of civil society and government evolving to be more effective and efficient in developing ways to hold business accountable. And lastly, brands – which intentionally started off as trustmarks themselves – would be the main focal point with labels becoming a complementary “back of pack” instrument, such as the case with Method using Cradle to Cradle certification as a design tool to reinforce the brand’s design focus, and using the label for the 1% of its customers who are interested in it.

It’s a tall order to be sure, and a lot needs to happen before this vision can be realized. But in a quickly changing space as sustainability – it’s time that ecolabels had their change too.

In a previous post, I shared some insights on open data’s relevance to sustainability reporting and stakeholder engagement. While the move to open data has many benefits, including enabling stronger stakeholder connections, companies have been slow to voluntarily go public with their datasets. At the same time, companies that are already moving down this path have recognized the challenge of ensuring the data they release is truly useful to stakeholders.

For example, in the pharmaceutical industry, the European Federation of Pharmaceutical Industries and Associations recently recommended that virtually all data from relevant clinical trials should be disclosed once a new medicine is cleared for marketing. That could push many companies in the industry to embrace a wider degree of transparency sooner than expected, but new tools will also be needed to help users navigate and understand the vast amount of data that is released.

In this light, we offer the following steps to help companies think through how to make data both open and useful:

1. Do an information inventory. Examine company policies and programmes for privacy, security, and intellectual property, check how the company uses and shares information, determine opportunities and threats in releasing specific data sets. Having a good understanding of the ecosystem that the open data thrives in will allow a company to understand potential feedback.
2. Be strategic with the data you are releasing. Be clear about what you hope to achieve with your data – for example, do you want your stakeholders to look for patterns or help you determine better ways of measuring impact? Nike, for example, had a hackathon with $6 million worth of its life cycle data, in hopes of unlocking more value and creating greater impact beyond usage at Nike. This coincides well with Nike’s desire for innovation and to drive system-level change.
3. Manage data, change, and people. Make data usable and accessible for stakeholders, raise awareness of its availability, ensure your internal and external stakeholders have the right skills to use it, and provide incentives for stakeholders to use the information. For example, the MTA, the largest transit authority in the US, found that releasing schedule information in a useful format, removing licensing hurdles, and providing incentives for developers has yielded apps that facilitate improvements in rider experience.

While the concept of open data is still in its infancy in the corporate world, there is evidence that it is increasingly seen as an effective way of driving greater transparency, building trust and yielding key insights for both the providers and users. Those companies taking early steps to ensure that this data is available, accessible and useful, will be the ones who are best placed to build trust and stronger connections with stakeholders.

Organisations as diverse as the US Government, the New York Mass Transit Authority and the World Bank have started publishing their previously-closed data for the world – and more particularly, their stakeholders – to see and use. This move to open data has many benefits, from fostering stakeholder participation in solving complex problems, to enabling third parties to dream up completely new services (such as mobile applications that tell you the fastest way to get around your city).

Companies, however, have been slower to embrace the move to open data, and this was the subject of a recent webinar for our Engaging Stakeholders network members.

Max Ogden (2011 Fellow at Code for America) and Laura Adams (Digital Advocacy Lead for Sustainable Business and Innovation at Nike) joined our members to talk about Nike’s own progress in opening data, to explore how a similarly active approach can benefit other companies, and to discuss open data’s relevance to sustainability reporting and stakeholder engagement.

I thought others might benefit from a few of the session’s insights:

• Open data does not mean revealing every confidential piece of information in your arsenal.  It might simply mean publishing previously disclosed data in ways that afford easier analysis. For example, key data from previous financial and sustainability reports – revenues, GHG emissions, electricity usage, community funds, etc. – could be aggregated into and shared as an Excel spreadsheet.

• Open data enables stronger stakeholder connections. It can involve them in finding solutions, and can facilitate the discovery-making process.

• Many companies don’t realise that the information they have may be of value to third parties other than competitors. For example, a company’s information regarding a particular factory might help a non-profit seeking to research and improve worker conditions across that region of operation.

• Not everyone will utilize your data. But whether it ends up being used or not, opening it up builds trust among stakeholders.

• Be strategic with the data you are releasing and be clear with what you hope to achieve by doing so. There are risks associated with putting any information into the public domain, but clarity of purpose reduces them.

In a follow-up post I’ll be looking at some specific steps that you can take to determine how open data can derive value for your company.

In 2009, author Daniel Goleman wrote a book called Ecological Intelligence: How Knowing the Hidden Impacts of What We Buy Can Change Everything. In it, he argued that we were facing an age of radical transparency – the underlying concept being that decision making will soon be public, and has to be transparent from the beginning of the process.

Yet, we are in an era where there are many companies, private or otherwise, that pride themselves on being secretive. Private, family-run companies like Ferrero, ALDI, and Forever 21, and publicly traded companies like Apple, thrive on secrecy. Yet there other companies that, by virtue of their private ownership, could be more secretive but choose not to be – for example, SC Johnson and IKEA. Can secretive companies still survive in the shift to radical transparency?

Let’s take a look at the examples mentioned above.

Apple is a publicly traded company, known for its beautiful, functional devices, and not a day goes by without newspaper headlines speculating on details of the next Apple gadget or photos of line-ups snaking around city blocks for the latest iWidget. Profits have never been better. Yet, with success comes higher expectations and greater scrutiny. Apple came under fire from Greenpeace several years ago for lagging behind its competitors in reducing the use of toxic chemicals in its products, and it drew criticism last year for a number of suicides at one of its key suppliers, Foxconn, but neither instance has made much of a dent in Apple’s near angelic reputation. Apple still managed to be first on the list of most valuable/trusted brands in the world and 9th on Landor & Associates’ 2011 Green Brands List. So what’s going on? For one thing, Apple’s legendary design and dedication to product experience do keep consumers enamoured of the company, which surely contributes to trust. Also, pre-emptive moves at the product level – like the company quietly moving to secure EPEAT gold certification for some of its laptops – help reduce suspicion before issues begin to escalate.

Ferrero and ALDI, on the other hand, are both privately owned companies that have managed to keep expanding worldwide, without the help of any public relations departments. Ferrero SpA, a confectionery company, has topped lists of the most trusted companies in the world, yet is also known as being one of the most secretive. ALDI is owned by the low-key Albrecht family, and are known for grocery stores with low cost, high quality products and minimal assortments. What is common between the two companies beyond secrecy? Along with Apple, each has approached their products and customer experience with a laser-sharp focus on quality and consistency for many decades, which has helped them to engender trust.

Then, there are companies like Forever 21, a family-owned “fast fashion” company. The company has been growing exponentially, taking up real estate from former department stores and rapidly expanding its product lines. Stores are constantly bustling with shoppers. However, the company has been accused of, among other things, giving preference to suppliers who adhere to the Christian faith, using sweatshop labour, creating clothing that “sexualizes” children, preying on harmless bloggers with aggressive lawsuits, taking intellectual property from other designers, and encroaching on local community initiatives. Not surprisingly, in the absence of more information on social responsibility and community initiatives, many assume the worst. Herein lies the danger of secrecy: what we do hear about these companies, even if it is not true, quickly becomes real in the public’s mind.

Still, there are companies that are privately held and have committed to significant transparency, even if the absence of any requirements to do so. SC Johnson, for instance, claims that “sustainability is just the right thing to do” and have been publishing sustainability reports for 18 years. The company has fully embraced radical transparency with its recent disclosure of all the ingredients in its products at its www.whatsinsidescjohnson.com website and Greenlist rating system.

IKEA offers another example of a privately held company that takes an interesting approach to transparency. On the sustainability front, IKEA has been forthcoming – it has published a comprehensive CSR report for years, collaborated with competitors and peers as part of the Global Social Compliance Programme, and pre-empted consumer concerns about its products by placing environmental labels at shelf-level. After a recent exposé on Swedish television, concerns were raised over the company’s governance and accusations of tax evasion and bribes, in response to which founder Ingvar Kamprad pledged, you guessed it, transparency.

So, what are companies to do in this age of radical transparency? We know that secrecy is often essential to maintaining competitive advantage. However, we also know that the more you don’t tell, the more people want to know and/or will fill in the blanks on your behalf. Ultimately, it comes down to building trust. Ensuring values are embedded throughout the organization, providing consistently high quality products and/or services, and pre-empting any public/consumer concerns before they become inflamed are all useful ways to do that. Lastly, just being transparent because your stakeholders want you to be is a radical idea for a secretive company – it may not always be right, but it’s an idea whose time has come.

The philosopher Sissela Bok summarizes the issue succinctly with this quote: “While all deception requires secrecy, all secrecy is not meant to deceive.” While deception is not usually the motive of most companies, sometimes they just need to let us in on a few of their secrets.

However, I think the greatest value that the article brings is Porter’s name – the well-respected father of modern business strategy, whose five forces are taught in business schools across the world – who might finally bring CSR into the mainstream.

And that is not to be underestimated.  Being out and about in London during the past couple of weeks and just having random chats with strangers, I have heard a number of skeptical comments about CSR.

“Isn’t CSR just PR?”

“CSR doesn’t even exist in London and probably never will…. Just take one step into the City.”

Even though the Porter/Kramer article is a bit of a rebranding exercise with a heavier focus on promoting the business case, perhaps it takes a trusted voice to move it to a particular tipping point for mainstream adoption.

The Porter/Kramer article aside, there was also an interesting interview with John Mackey, co-CEO of Whole Foods Market known for his controversial words and actions.  In one paragraph, he talked about the sustainable seafood program and how they had to start limiting the species they sell.

“You’re either committed to sustainability or you’re not.  You either do it or you don’t.  Sometimes that means you do things that might hurt you in the short term but will underscore your integrity as an organization, which ultimately proves to be valuable in competing with companies that maybe have less commitment to that type of integrity.”

This beginning part of the quote was particularly interesting to me because he painted sustainability in a very absolutist fashion and If sustainability is something you’re committed to or not, then it looks like that most companies are not sustainable, which I would define as all stakeholder needs being met today and in the future, that companies are able to restore and/or improve on what they take away. This further pointed to me that corporate social responsibility is not the same as sustainability, and we’ll have to keep moving towards the latter to be more of the former.

What are your thoughts on Mackey’s quote?  On Porter/Kramer’s article?

In the corporate sector, not a lot. I have been finding that most people have been pretty bullish (bear in mind the small sample size), particularly for companies that are based out of London. Responses have been along the lines of:

- It won’t matter, since companies are not the ones that will be receiving cuts to funding;
- Most companies have been hoarding cash in the recession so they’ll be spending more;
- There may be an opportunity for companies to take on a more strategic, social innovation role that in a way “replaces” the government;

However, it sounds like non-profits and charities who receive government funding, particularly the ones that are outside the London bubble, have already seen some negative movement. There is a huge opportunity for corporations to help out during this time.

I recently sat in on a meeting of a group of executives of a blue chip Canadian company and their sustainability advisory council.  The company had always been fairly modest in their approach to things. They didn’t like telling people about things unless they had been completely successful and executed perfectly – they had piloted a number of products and environmental initiatives that didn’t fly, that the public and others in their industry would likely love to know about.  They said that if anyone asked them any questions about it, they would gladly tell them, but they didn’t proactively go out tooting their horn about it.

The council brought up a great point that it doesn’t matter if you make mistakes – as long as you learn from them, and if you can share them so people don’t make the same ones, all the better.  This shocked the executives, and strangely, this was definitely not the first time I had seen or heard this surprise.  But it makes sense – people are naturally drawn to stories of challenge, about slaying dragons and the journey it took to get there – it’s the material that most movies are made out of  (whether a movie about retrofitting a building with energy efficient lighting is movie material is another story.)

However, I should caution that in reporting it cannot all be about the story – you need to look no further than BP’s excellent, award-winning CSR reporting – you also need to show performance as well.

Moral of the story folks:  if you make mistakes, don’t hide from them.  Share them.

If you will indulge me in a cliché for one moment, the year-end or beginning-of-year bulleted list, I thought I would put together a couple topics that I think will get a lot more air time in 2011 based on a non-scientific combination of  wishful thinking, bellwether articles I’ve been reading, and conversations I’ve been having with other CSR practitioners.  Note that these revolve mostly around areas that I specialize in, that is reporting, consumer goods and food and beverage, and are in no particular order.

1. CSR Rankings, Ratings are going to be held to account – SustainAbility had already begun an excellent study called “Rate the Raters” in 2010 that provided the much needed service of making CSR rankings, ratings and indices more transparent.  After all, hell hath no fury like a company scorned by a sudden drop in performance due to a change in the black box of a rater’s CSR criteria.  I think the third or fourth phases are going to do a lot to make this niche more accountable.
2. CSR reports will be less boring – companies are beginning to realize that not everyone reads reports except for us CSR nerds in competitive CSR departments, non-profits, investor organizations, and NGOs.  I think companies will realize that like any other communications that companies put out, they have to be in channels and media that are relevant to the stakeholder group.   Now let’s just get companies to finally invest resources into making this happen…..
3. More companies will embrace social media – Harvard Business Review put out a great issue in December 2010 called “Social Media and the New Rules of Branding”.  A bunch of CEOs, such as Brian J. Dunn at Best Buy and Jeff Swartz at Timberland, have started using vehicles like Twitter to communicate to their employees and wider public.  Loblaw has used Facebook really well to educate, communicate, and generally interact with the  public on their sustainable seafood initiatives. (Full disclosure: at CBSR I worked with Loblaw on projects, however, not on sustainable seafood)
4. More active philanthropy from the world’s wealthy – Warren Buffett and Bill Gates started The Giving Pledge in order to convince the world’s wealthiest people to donate a good chunk of their fortune to charitable causes.  If Bill Gates’ work is any indication with the Bill and Melinda Gates Foundation, this could be the beginning of a golden era in the professionalization of charitable giving.  Let’s hope that the pledge ends up resulting in a lot of constructive action.
5. Supporting small producers in a large supply chain – Behemoth retailer Wal-Mart came out with an ambitious sustainable agriculture plan with some great goals to help smaller producers in 2010.  Their efforts to direct ship merchandise to stores has also helped, and I expect that other grocery retailers will recognize that they will also have to modify their supply chain systems to do the same to meet the growing demand for locally produced food and for efficiency’s sake. The requirements for food safety reporting from small producers will likely require greater support from large retailers with the passage of  SB510 in the US.
6. Sodium – sodium is something that is mandatory for living, and also makes food tastier and prevents the growth of bacteria.  However, too much salt, and there are negative health implications, such as with high blood pressure.  Governments and food producers this year will need to find that balance, create sodium reduction plans and rejig their recipes.
7. Greater government oversight on green claims – fundamentally, businesses need to make claims about their products to attract consumers, but we have seen over the past couple of years green claims getting a bit like the Wild West.  The Federal Trade Commission in 2010 asked for comments on their “Green Guides” – my hope would be that with further clarity, and the capacity to accommodate emerging terminology (carbon negative, for example) this guide would make things clearer for manufacturers.  This might also reduce the number of greenwashing complaints coming in to trade authorities both in the US and globally.
8. Although it’s been prominent in UK/EU for quite awhile, I believe that Animal Welfare will finally get its place in the sun in 2011 in North America.  Whole Foods has already implemented an intriguing  5-Step Animal Welfare Rating with the Global Animal Partnership for Broiler Chickens, Pigs, and Beef Cattle.
9. Refrigerants – One of the lesser-known nasties of food retailing is the huge global warming potential of refrigerants.  Because refrigerants are invisible and have no effects at the ground level, their escape into the atmosphere is often undetected.  However, at the atmospheric level, refrigerants such as R-507A, which is commonly used at many grocery stores, has a global warming potential (GWP) of 3900, which means that it is 3900 times more potent than CO2.  The good news is, if leaks are controlled, then they are harmless (in practice however, it is hard to control leaks!).  Also, some companies have been proactive in phasing these refrigerants out for “natural’ refrigerants, such as CO2.  This report from the ATMOsphere conference are helpful in the phase-in of natural refrigerants.
10. Climate Change Adaptation – seeing the continued lack of buy-in on tangible goals for climate change mitigation at Copenhagen and Cancun, for businesses this year many of the mitigation goals will be accompanied by the discussion on adaptation.  Here is an outcomes document from Cancun on a recent working group on adaptation.

What are your predictions for 2011 and beyond?  Is there an 11^th CSR topic that you think we’ll see a lot more discussion on?

PS. I would be remiss to mention that this post is an extension of a comment that I put on Dan Caunter’s blog post “Sustainability in 2010: A Year in Review” at the Sustainability Learning Centre blog.  Thanks Dan, for the inspiration!

I find that reading her writing is such a breath of fresh air – she writes simply, in a way that shows her purity of thought.  She exposes things to us that seem so simple but are never things you considered – for example, the fact that animals with more fear end up surviving longer, that single trait genetic breeding eventually backfires, that all animals are inherently intelligent in their own way.

Beyond the topic of animal welfare, one of the ideas that struck me was her idea of animal welfare audits, and it got me thinking of audits that we use for CSR in general, whether they are factory audits, environmental audits, social compliance audits.  I remember reading a McDonald’s CSR report several years ago and reading about Grandin and not really understanding the relevance of her metrics:

• percentage of animals stunned, or killed, correctly on the first attempt
• percentage of animals who remain unconscious after stunning
• percentage of animals who vocalize during handling and stunning
• percentage of animals who fall down
• electric prod usage

However, the book explains that she used a HACCP (Hazard Analysis Critical Control Point) style which is typically used in food safety audits, completely simplifying audits to have a “single measurable element that cover a multitude of sins”, which in turn has revolutionized the way that cattle are handled in the US.  So in the age of  proliferating audit criteria and efforts to simplify them through initiatives such as the Global Social Compliance Programme, how can we apply HACCP principles to reduce audit fatigue for social and environmental compliance audits?

“It may simply not be possible to convince human beings rationally to take a long-term view. People do not focus on the long term because they have to, but because they want to.”

How can we get people to want to focus on long term concerns when their short term ones are barely being satisfied?