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Blog | Friday August 18, 2017

Reflections from a BSR Summer Intern: How to Create Maximum Impact

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When I began my internship at BSR, I had one overarching question: Which organization in the business and human rights space is best positioned to have the greatest impact?

Unfortunately I still cannot answer that question with certainty. However, I leave BSR much less convinced that that is the right question to ask. In my previous blog post for the Kenan Institute for Ethics at Duke University this summer, I touched on the necessity of all the players across the business and human rights space: businesses, nonprofits, and organizations like BSR that negotiate the space between the two.

Now, I find myself asking what is perhaps a much more critical question: What strategies can BSR and all other organizations working on business and human rights employ to accelerate change and maximize impact?

My experience at BSR has exposed me to a few of these strategies. They can be just as applicable to other organizations as they are to BSR.

1. Stakeholder Engagement: Internal and External

At BSR, I worked as part of the human rights team to conduct human rights impact assessments for companies in the extractives and information and communications technology industries. Stakeholder engagement in these projects entailed interviews with international experts on certain human rights issues, members of local communities affected by companies, and employees within the companies conducting the assessments.

These interviews allowed BSR to holistically view both the impacts of the issue at hand and the potential implementation challenges a company might face in addressing them. BSR could then cater its strategy to address the concerns raised throughout the process. This information, only accessible through these conversations, guides further research and informs BSR’s recommendations to the company so that it can maximize its positive impacts and mitigate any potential negative impacts.

2. Careful Choice of Language

Using the language of international human rights, often full of legal jargon, can make it more challenging for businesses to understand why they should take human rights considerations into account. It is important to translate language into terms that will resonate with the intended audience. Employees working at an apparel company, for example, may not realize the relevance of human rights in their company’s operations until they understand that human trafficking could be widespread in its supply chain. To maximize impact and accelerate change, people and organizations must cater their language to resonate with those that would need to take action to affect the desired outcome. Even those within the human rights departments of companies must make human rights language understandable and relevant to their colleagues across departments for a more integrated approach to respecting human rights.

3. Continued Consultation

For one of the human rights impact assessments that I participated in, BSR met regularly with human rights and sustainability leads in the company. This consultation not only allowed those within the company to stay informed of the project’s progress, but also influenced BSR’s research and overall strategy. The human rights and sustainability leads, who are inherently more familiar with the internal workings of their company, contributed insights into the most relevant language to use and the people within the company whose approval would be critical for the project’s implementation and success. This regular exchange will be key in helping maximize the potential impact of the project inside the company.

Each player in the business and human rights space plays a necessary role. What I learned at BSR is that discussions should focus less on comparisons of importance among players and more on ways for each to maximize impact and accelerate change. Stakeholder engagement, careful choice of language, and continued consultation are three possible strategies to achieve meaningful results. 

Blog | Thursday August 17, 2017

Next Steps for the (Former) Members of the Business Advisory Councils

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In the wake of yesterday’s collapse of the advisory councils assembled by Donald Trump, the question of which CEOs will stay and which will go is now moot. The core issues, however, remain, and the need for business leadership is stronger now than ever.

While the impact of these councils was questionable even before they imploded in the aftermath of the President’s response to the tragic events in Charlottesville, their members have perspectives—and voices—that are sorely needed to shape an economy that works for everyone.  

Specifically, here are five key principles that the business leaders who were on the councils can rally around to make good on their original intent in joining the councils—that is, to help define and promote a thriving economy, both here in the United States and abroad.

Prioritize Climate Action: The business community has overwhelmingly expressed its desire to see the U.S. stay actively engaged in the Paris Agreement. Despite the Trump Administration’s wrong-headed decision to withdraw from the agreement, international momentum toward long-term decarbonization is strong. American businesses, like their peers globally, are making commitments and generating innovation to make the vision of Paris a reality. It remains crucial for business leaders to focus the public, as well as policymakers, on the imperative need—and the economic benefit—of remaining committed to decisive climate action.

Ensure Support for Diversity and Inclusion: The majority of the American public was appalled by the hate expressed last week on the streets of Charlottesville, Virginia, and this sentiment has spread beyond the borders of the U.S., with the Prime Minister of Great Britain, amongst others, expressing her revulsion at the events and the response from the White House. Businesses know that our economy—and our societies—thrive when diversity is respected. The time is right for business leaders to reinforce their commitments to diversity and respect for everyone, to reassure a nation that is uncertain whether these core principles are being upheld.

Provide Good Jobs in an Era of Automation: It is widely understood that profound technological and demographic changes are reshaping manufacturing, the nature of work, and the social contract. Businesses are driving many of these innovations, some of which are decoupling productivity from employment. Business leaders should be promoting this kind of progress; they should also be playing a key role in ensuring that people who are displaced by these changes are able to participate fully in the economy and secure stable livelihoods. The former members of the councils are uniquely well placed to catalyze and shape a national dialogue on what the future of employment will look like: Washington is hardly driving that debate today.

Promote Human Rights in Global Trade: While this issue has not gotten as much attention as some others, such as the U-turn on climate change, support for human rights in global trade is clearly being de-prioritized, if not undermined, by the administration. Business leaders understand that global trade—and yes, global trade agreements—that integrates respect for human rights and rule of law not only protects individuals, but provides a more stable basis for a thriving economy. Businesses that have embraced the UN Guiding Principles on Business and Human Rights should remind Washington that trade based on human rights rewards companies that do things the right way and enhances American competitiveness.

Support Multilateral Solutions: Finally, it is essential the business community raise its voice in support of collaborative, multilateral solutions to our shared challenges. The history of the 21st century will depend on how well we all join together to shape our future. Business thrives on competition, but companies also know that their success depends on stable frameworks founded upon respect. We all have a stake in ensuring that a retreat into xenophobic mindsets does not throw the global economy into reverse. And business leaders can be a powerful voice promoting the notion that interdependence and collaboration are key to unlocking human progress and prosperity.

The ending of the two councils established in January was the latest chapter in the tragicomedy that is our current reality. Nonetheless, it remains possible for this shambolic and unfortunate process to lead to something positive. The CEOs that were on the councils (and others) have an opportunity to demonstrate leadership at a time when it is sorely needed. These five steps would go a long way to restoring faith in the direction of the American economy—and our institutions.

Blog | Wednesday August 16, 2017

Now Is the Time to Examine (and Re-Examine) Your Commitment to Diversity and Inclusion

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From weekend events in Charlottesville, Virginia, to a leaked internal memo at Google just a couple of weeks ago, the conversation around diversity, particularly in the United States, has dominated the news in America.

While the scenarios are entirely different—and take place in very different settings—they are both a reminder that harmful narratives, stereotypes, and, in the case of Charlottesville, violence and hate, continue to exist in our society and in our workplaces.

These recent events remind us of the importance of corporate action on diversity and inclusion, as well as the need to defend equality and fairness. These events raise important questions about the true meaning of these terms today.

In this context, all companies would do well to ensure they are clear on their commitment to diversity and walking their talk when it comes to their values.

This means that any workplace across the world, in any sector, of any size—a Fortune 500 technology company in Silicon Valley, a manufacturing company headquartered in the southern United States, or a factory operating in India—needs to examine, and reexamine (and then examine again), its approach to and voice on issues of diversity and inclusion.

This also means that reinforcing corporate values is critical. While this might not please everyone, doing so is the best way to make clear for your employees, your community, and your customers know where you stand on equal rights, diversity, and inclusion.

For some companies, this means holding town halls to provide a space for employees to share their thoughts and reactions to recent events; for others, this means looking at their products and services and how they are being used to promote discriminatory actions.

For others still, it means responding to actions by public officials. Just this week, we saw the CEOs of Intel, Merck, and Under Armour resign from the President’s American Manufacturing Council following his response to the violence in Charlottesville. The CEOs of Walmart and GE expressed their support for diversity in direct response to the White House’s reaction to the events in Virginia.

Earlier this year, CEOs from a range of companies voiced their concerns about recent immigration bans and transgender bans. Airbnb cancelled user accounts linked to the White Nationalist Rally, as these violated the Airbnb Community Commitment to “accept people regardless of their race, religion, national origin, ethnicity, disability, sex, gender identity, sexual orientation, or age.”

All companies will have to continue to ask themselves tough questions and find their voices on issues that are impacting their communities. Increasingly, your employees and your customers will demand it of you: a recent survey from Povaddo shows that more than half of employees working in America’s largest companies believe their employers should be more vocal on social issues.

As Martin Luther King, Jr. once said, "The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy."

If ever there were a time for companies to double down on their commitments to equality and diversity and show the world what values-based leadership can look like, that time is now.

Blog | Tuesday August 15, 2017

Climate Risk and Resilience: South African Companies Paving the Way

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South Africa is the 30th driest country in the world, and it is currently experiencing the worst drought in more than 100 years. This was apparent to us in Cape Town as soon as we walked through the airport, which has beautifully artistic but sobering signage displaying the reality of drought in the Cape. The message was further reinforced at local hotels that used creative displays to educate guests on water conservation techniques to endure the prolonged drought. Climate change is expected to further intensify this water shortage, increasing climate risk to businesses.

Aside from drought, the country is exposed and vulnerable to climate change from flooding, extreme weather events, and wildfires. Moreover, climate change will worsen additional underlying social, political, and economic vulnerabilities, including the years of political instability and lack of rights for marginalized populations, making it difficult for organizations to operate as usual.

To discuss what these issues mean for business, BSR worked with our South African partners National Business Initiative (NBI) and KudosAfrica to convene South African companies and other stakeholders in June. We presented our private-sector climate risk and resilience framework, and we sought to learn more about climate risk in the region and specifically how companies are building climate resilience strategies in an effort to cope.

Climate risk can span all aspects of business, from operations, human resources, finances, and raw materials procurement to marketing, sales, and legal. The good news is that many companies in South Africa are already assessing their climate risk and developing associated strategies to enhance the resilience of their own operations, supply chains, and local communities.

Incorporating climate risks in standard business practices is essential to adequately manage risk and build resilience across a company. A starting point is the enterprise risk management (ERM) assessment; however, integration with corporate strategic planning and specifically broadening the planning time horizon are critical to actively managing unavoidable climate risks that may have severe implications.

Overlooking these risks can impact business. Failure to manage and build resilience to climate risks impacting local communities could result in a depleted workforce. Similarly, failure to identify and build resilience against climate risks and extreme weather events can result in supply chain disruptions that can hinder or halt a company’s ability to produce its products and result in significant loss of revenue, decreased stock prices, and reputational damage.

Emerging best practice is to place a climate lens on the existing ERM frameworks companies already complete so that these potential impacts are captured. When it comes to taking this comprehensive approach to risk management, South African companies across industries are leading the way:

• Chemicals and Energy: Sasol, in an effort to not re-invent the wheel, integrates potential climate risks into its already well-developed ERM. This allows them to be addressed at business unit, functional, and process portfolio levels within the company. The resulting insights have allowed Sasol to align climate risk and financial implications, and in turn begin developing a resilience strategy.
• Extractives: Exxaro considers operational, economic, social, and environmental risks in its ERM, which allows it to use a more holistic approach to addressing climate risk and resilience. This approach addresses underlying vulnerabilities, which climate change could further exacerbate.
• Consumer Sectors: Woolworths South Africa has identified its suppliers as the source of most of its climate risk. It has therefore designed initiatives that boost suppliers’ resilience through the Farming for the Future initiative and Ceres Water Stewardship project.
• Financial Services: Santam, an insurance company, decided that instead of increasing the price of insurance, it would invest in community resilience projects after noticing an increase in insurance claims due to climate-related events. Addressing the underlying vulnerabilities has additional benefits, such as building community resilience to climate change and strengthening public and private organization engagement with local communities.

These companies have business-forward climate risk and resilience strategies that reach beyond infrastructure to vulnerable communities. While these methodologies may seem hyper-local, in practice, companies—from SMEs to multinationals—can learn valuable lessons from the work being done in South Africa.

BSR’s multisector climate risk and resilience framework includes assessing climate risks across a business, through its supply chain and within vulnerable communities in which companies operate. Building upon existing risk management systems and programs, BSR works with companies to integrate climate risk and resilience strategies.

Are you looking to better understand the impacts of climate change across your value chain? We’d be thrilled to discuss opportunities to help you identify and manage climate risks and opportunities.

Blog | Thursday August 10, 2017

Stakeholder Groups Extractives Companies Should Engage to Be Inclusive and Effective

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Stakeholder engagement is a cornerstone of BSR’s work, and our recent report looks at the future of stakeholder engagement, with input from eight companies that participated in our collaborative initiative dedicated to that subject.

Often, engaging with the right groups of stakeholders can mean the difference between a successful project with community support and a project with lengthy delays that threaten (or prevent) its existence. In the mining sector, stakeholder engagement is particularly relevant given the close proximity to and impact on local communities through the use of resources such as water, energy, and land.

In our work with extractives companies, executives often point to the importance of stakeholder engagement in developing comprehensive social risk management processes. Building relationships with community members can enhance trust and foster local support for a project.

While every company’s specific stakeholders depend on its operating circumstances, mining companies should consider the following groups when developing an engagement strategy. Within these groups, it’s important to include women, the elderly, and youth to access a range of perspectives.

Stakeholder Groups Extractives Companies Should Engage

• Employees, contractors, and business partners: Internal stakeholders and those stakeholders with a business relationship with the mine or company are often overlooked, but they are important to consider and interact with on a regular basis. Often, these groups are the primary contact point with community members, and many of them live in the community itself. When companies have a positive relationship with these groups, it not only improves direct relations with them; it can have a wider impact on the community’s perception of the company.
• Communities directly affected by mining operations: For communities to accept a mining project, they must perceive the project’s potential benefits as greater than its risks. Companies can support this by engaging community members, knowing and proactively addressing their concerns, and creating a shared vision of the community’s long-term future. For example, our work in Chile with Freeport-McMoran’s community relations team helped the organization shift from a philanthropic to a participatory approach that satisfied the needs of the company and the community. 
• Advocacy organizations, including religious and environmental groups: It can be challenging to engage effectively with local and international groups that oppose a mining project. But by engaging with these organizations, companies can understand new perspectives, and can address concerns in a proactive way, even if neither party changes its position.
• Small-scale miners: Before large-scale mines arrived in many locations, these areas were used for generations by small-scale or artisanal miners. Artisanal miners are often displaced, losing access to the land that provides their livelihoods. The AngloGold Ashanti partnership with artisanal miners in Ghana is one example of a new way to approach collaboration with this stakeholder group.
• Food and agriculture industry and farmers: The mining industry can compete with agriculture when it comes to land use, access to water, and availability of workers. Mining operations can affect agriculture livelihoods, as well as food access and security. Many extractives companies have found ways to work with the agriculture industry to address issues like water shortages and quality, as is detailed in a recent report from the International Council on Mining and Minerals and the International Finance Corporation.
• Government: The government is an important stakeholder to engage as a regulator and the beneficiary of royalties. In many cases, the government is responsible for providing services in the community, and if the government is absent, stakeholders often look to the company to fill that role. While mining companies should not replace governments, it is important for the businesses to understand government priorities and plans, identify overlapping and shared interests, and determine clear roles and responsibilities in ongoing maintenance and funding of community investments.
• Indigenous people: In addition to individual universal human rights, indigenous peoples have special and collective rights to their land and its resources. Given these rights, as well as the unique impacts that mining projects can have on indigenous peoples, companies should take special consideration in relation to community engagement and consultation through free, prior, and informed consent (FPIC). (For more details on what FPIC can look like in practice, see the law firm Foley Hoag’s recommendations regarding engagement with indigenous peoples in the context of the U.S. Dakota Access Pipeline Project.) Developing an honest, transparent dialogue and understanding perspectives, cultures, and goals are important steps for meaningful engagement that can lead to positive outcomes, including agreements that help communities manage the impacts and receive the benefits associated with a mine.

Engaging effectively with these stakeholder groups can increase a company’s understanding of the likely impacts of its activities, ideally maximizing the benefits of investment while minimizing consequences.

To continue this conversion, join us at the BSR University session on the “Future of Stakeholder Engagement” in Huntington Beach, California, on Tuesday October 24.

Blog | Tuesday August 8, 2017

Leveraging Mobile for Workforce Engagement: Opportunities and Recommendations from HERhealth

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Three years ago, BSR launched a partnership with Qualcomm Wireless Reach to amplify the outcomes of BSR’s HERproject program in China through mobile technology. Our work together focused on enhancing HERhealth, the pillar of HERproject that aims to empower low-income women working in global supply chains to take charge of their health.

Through this collaboration, we developed a mobile app to digitize the HERhealth curriculum so that workers could conveniently access health information and a range of other features to improve access to health services, including a map of hospitals and clinics near the factories, and links to official websites where women can make doctors appointments online. We also interviewed representatives from companies participating in HERproject to both understand how they are currently using technology in their supply chain initiatives and identify perceived barriers and opportunities for using it in workplace engagement programs.

Here are some of our key takeaways:

• Mobile technology has clear benefits for workers and suppliers: Based on feedback from our HERhealth app, we know that workers value convenient access to health information and the ability to share content. 95 percent of workers we surveyed reported that the app helped them increase and retain the health knowledge they acquired through HERhealth. 51 percent reported that the app helped increase their confidence in using mobile technology. Mobile apps can also improve workers’ access to financial resources, as well as raise awareness of important company policies. For employers, mobile applications and online surveys can help them collect information on workers’ views and satisfaction levels.
• There is an opportunity to better capture the impact of these interventions: Most brands that use mobile technology in their supply chains do so to gather data from workers, enhance compliance processes, assess the impact of worker programs, or communicate simple messages using SMS. However, there seems to be a gap in translating whether the content shared or the data collected led to improvements in workers’ lives.
• Gamification can be an incentive: A fun element can help incentivize workers to download and use mobile apps. Workers often do not have access to their phones during the workday, but an entertainment or competition feature can help encourage them to use educational applications during their free time.
• Lack of resources, support, and integration are obstacles to success: The greatest barriers to implementing and scaling technology-based programs are cost, resource intensity (including time involved to train users and factory management about the technology), low uptake among workers, lack of support from factory management, and difficulty integrating with other factory-based systems, e.g. training and compliance.

Although we still have more to learn about how to truly maximize the positive impacts of these solutions, we would recommend that companies contemplating these investments consider the following:

• Fully engage factory management from the start: Provide factory management with a comprehensive introduction to a mobile tool before introducing it, focusing on how the tool works and the value it can provide to the factory and to workers. This can also help prevent the perception that the tool is intended for monitoring or surveillance.
• Integrate mobile tools into existing channels used by workers: Several brands commented that mobile tools work best when they link to applications already widely used by workers, such as Facebook, WeChat, or WhatsApp. This can make the tools use feel more natural so they can become part of workers’ normal daily behaviors.
• Keep content simple and clear: When using mobile technology or applications to push messages to or collect information from workers, content and questions should be simple and straightforward to ensure clear understanding by workers and management.
• Tablets or computer stations can be alternatives to mobile phones: In factories or countries where mobile smart phone proliferation is low, companies can consider providing tablets or computers as another vehicle to increase digital access. Brands can also consider donating used computers or partnering with technology companies to set up computer stations to encourage additional learning on topics important to workers.
• Partner with others to scale effective mobile technology solutions: The costs of developing new technologies and introducing them at scale in global supply chains are significant. Companies should research existing technology solutions that have been successful and identify peers with whom they can collaborate and share costs.

By creating a mobile app for factory workers in China, BSR and Qualcomm Wireless Reach have been able to improve workers’ access to health information, creating value for workers and their employers. Have you used mobile technology to enhance worker engagement programs? We’d love to hear from you!

Blog | Wednesday August 2, 2017

How to Build Effective Sustainability Governance Structures

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Successful integration and effective management of sustainability at a company requires having committed leadership, clear direction, and strategic influence—and none of this will happen without a robust governance structure. Sustainability governance helps a company implement sustainability strategy across the business, manage goal-setting and reporting processes, strengthen relations with external stakeholders, and ensure overall accountability.

How and where sustainability fits into the overall corporate structure can be very revealing of a company’s direction and priorities. It’s important to keep in mind that there is no cookie-cutter structure that can be applied; every company must tailor its approach for what makes most sense given its business model, structure, resources, and level of sustainability integration into the business.

Based on BSR’s sustainability management work with our member companies, here are four considerations to keep in mind when building effective governance structures:

1. Commitment begins at the top. Reporting to the CEO or other key C-suite leadership can help demonstrate that a company is serious about sustainability.
2. Accountability must be established and communicated clearly. Accountability helps ensure that sustainability is integrated with other business goals. Including sustainability performance into the company’s annual goals and employee performance review and compensation processes may be helpful mechanisms.
3. Alignment between the structure and the business is imperative. Sustainability governance structures that align with and complement the existing business model and organizational structures can be more successful than creating redundant or competing structures.
4. Flexibility to adapt and build up on the sustainability program across business units and regions can advance the sustainability agenda. Allowing for some adaptation can help ensure the sustainability program’s relevance to a business unit’s own strategies or region’s local conditions. It also can generate employee engagement.

With these considerations in mind, below are examples of best practices in forming sustainability governance structures:

• Head of Sustainability: Having a dedicated “head” is necessary to ensure there is focus on driving sustainability strategy and advancing the company’s program—it can also signal the company’s commitment. A majority of top global corporations with which BSR works have dedicated sustainability leaders with varying levels and titles, like Chief Sustainability Officer. These people can be the internal and external “face” for sustainability for the company.
• Formal Board Committee: Sustainability oversight by the board of directors increasingly is integrated across several formal board committees, but also can be accomplished through a dedicated committee. Board committees can be an important vehicle for educating the board on sustainability issues and helping demonstrate corporate commitment to sustainability at the highest levels. Companies that have boards that review and monitor various aspects of their CSR programs include American Express, which has a dedicated Public Responsibility Committee, and Shell, which has a Corporate and Social Responsibility Committee.
• Cross-Functional Executive Sustainability Committee: Below the board level, having a cross-functional executive committee that engages leadership across business units, regions, and functions provides further oversight and strategic guidance. It also mobilizes employees to implement strategies. The functions involved can vary, but may include risk management, supply chain, operations and facilities, marketing, public affairs and communications, human resources, environmental health and safety, and investor relations. For example, Bank of America has a Global Environmental, Social, and Governance Committee led by the vice-chairman and composed of senior leaders across the company.
• Sustainability Teams: Having a core team can help coordinate daily activities and implement companywide initiatives. While a dedicated team is very common, it’s important for it not be siloed, but rather integrated and engaged with business units and functions. NIKE Inc., for example, has a Sustainable Business and Innovation team that plays a key role in helping integrate sustainability across the company’s value chain, from innovation to retail.
• Sustainability Supporting Structures: Working groups or committees, which may have a dotted-line reporting relationship to the head of sustainability, can assist integration of strategy and goals by supporting and even substituting sustainability teams. Individuals in these support structures may be the “owners” of priority sustainability topics and are responsible for implementing strategies, tracking performance, and engaging employees. Representatives may come from real estate and facilities, communications, human resources, risk management, supply chain, and other groups. IBM, as one example, has a Corporate Responsibility Working Group that meets monthly.
• External Advisory Councils: While external advisory councils may not officially be part of the governance structure, they can serve as a valuable mechanism to advance the company’s agenda and get outside perspective on a variety of ESG issues. Dow Chemical, for example, has a Sustainability External Advisory Council composed of global thought leaders from various organizations, such as environmental NGOs, academia, businesses, and governments.

Developing sustainability governance structures may take time, but it can help ensure successful management of ESG issues at your company. How does governance help you accomplish your goals?

Blog | Wednesday July 26, 2017

Luxury, Sustainability, and Desirability: Two New Rules of the Game

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On July 11, BSR brought together a group of luxury brands at Paris’ “Salon du Luxe” conference to talk about the new rules of the game when it comes to desirability, sustainability, and luxury.

In the past several years, the growth of the luxury industry has slowed, and aspirational brands such as Michael Kors and the Hoxton Hotels have disrupted the sector with different interpretations of “luxury” products and services that offer more open and experiential approaches or less expensive products. At the same time, industry demographics are changing: Millenials and Gen Z now account for about 30 percent of luxury shoppers and will represent 45 percent of the market by 2025. Luxury brands need to account for the preferences and shopping habits of these younger generations, who are more eco-conscious but also less loyal and more digital.

Some brands are suffering in this changing context. A Nelly Rodi/IFOP study based on a trends analysis and survey of 1,000 global luxury consumers found that consumers no longer find many traditional brands desirable. Instead, brands like Apple are capturing the hearts and minds of luxury clients.

So, how can traditional luxury brands adapt and stay relevant? During the Salon du Luxe event, we discussed two emerging and related rules of the game when it comes to changing consumer psychology and behaviors. First, sustainability creates desire; second, to be desirable, brands must be sustainable. These rules—two sides of the same coin—describe desirability for products and services in terms of both demand and supply.

Rule No. 1—The Demand Side: Sustainability Creates Desire

In some respects, Amazon’s acquisition of Whole Foods perfectly exemplifies status-seeking consumers’ new mood when it comes to all things organic, eco-conscious, and local: “I want it.”

Luxury status today is increasingly expressed in the “language of conscious consumerism.” Trendwatchers say luxury consumers are keen to express who they are in terms of being “ethical, creative, connected, and tasteful.” They are less keen to simply possess more goods.

Why do these choices symbolize luxury? Consumers are expressing their high education levels and cultural awareness through their purchases and lifestyle, which include everything from yoga to biodynamic wine. Brands are beginning to recognize this shift in mindset, which affects not only their clients, but also their employees.

During our panel discussion at Salon du Luxe, brands reported that customers are starting to ask more questions about the origin of ingredients and raw materials, animal welfare, and social and environmental impacts of products more broadly. Sandrine Noel, environment manager at Louis Vuitton, said that they can even “observe new demands from their 'VICs'—Very Important Customers,” like actress Emma Watson, who recently requested a selection of conscious garments.

Rule No. 2—The Supply Side: To Be Desirable, Brands Must Be Sustainable

Over the past several years, many luxury brands have adopted stronger environmental and social practices, prompted by a strong business case and stakeholder demands. Luxury brands are investing in sustainability to protect their exceptional quality raw materials from climate change, to respect implicit client expectations about social and labor practices, and to support community and cultural life alongside their top clients. For Jerome Schehr, CFO of the Shangri-La Hotel Paris, “luxury brands now have to be respected and respectable if they want to be desirable in the eyes of their customer.” From his perspective, companies can foster respectability by adopting a robust and coherent sustainability approach.

Indeed, a new argument in favor of brands adapting strong environmental and social practices is emerging: Sustainability is a lynchpin of desirability. The Nelly Rodi/IFOP study recommends that brands improve their desirability by activating certain levers that include proximity and taking a stand. Proximity is about how a brand positions itself from one of distant authority to one that facilitates sharing and interaction. Delving into the Hoxton Hotel example, the hotels’ positioning and communications reflect a warm, interactive mood, made tangible through curated events that are open to the public, lots of lobby space for communal working, and a tone that solicits guest feedback.

Taking a stand is about how a brand manifests its point of view on the world, makes commitments (whether to values, culture, the environment, ethics, or society) and shares it values. Tiffany and Company represents an envy-worthy example through its public activism on climate change, support of eliminating coral from jewelry, and work to protect special places such as Bristol Bay in Alaska. In this sense, sustainability commitments and activities are an ideal ally for a brand looking to reinforce its desirability.

Increasing the “supply” of sustainability in luxury is both about the substance of the company’s actions and its public communications about its activities and values. This presents the next question luxury brands and marketers need to tackle: how to credibly communicate on sustainability activities, ethics, and values in ways that fit with brand DNA and reinforce brand equity. Brands also need to summon their courage. Most companies are working to improve their environmental and social practices, and have long roads ahead. This shouldn’t stop brand owners from using their reach and influence to speak out in authentic ways that move the agenda forward.

Cécile Koenig, Guerlain’s skincare director, international marketing, explained that her company has made commitments to protect biodiversity, with a focus on its iconic raw materials such as orchids, vetiver, sandalwood, and lavender. These are the kinds of commitments that not only help protect luxury supply chains, but also enhance Guerlain’s ability to connect with customers and reinforce the brand’s appeal.

By following these two new rules of the game, luxury companies have the opportunity to expand the market for sustainable goods and services—something that’s desirable for customers, business, and the planet.

To learn more about sustainability and desirability, contact us or read about our Responsible Luxury Initiative.

Blog | Tuesday July 25, 2017

The State of Sustainable Business in 2017: Results from the Ninth Annual BSR/GlobeScan Survey

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Just how much change can happen in one year? The past 12 months have been incredibly volatile, with political, economic, technological, social, and environmental disruptions creating both challenges and opportunities for companies. BSR and GlobeScan’s State of Sustainable Business Survey 2017—our ninth annual survey of BSR members—explores what these changes mean for sustainable business.

The great news is that BSR members remain steadfast in their commitment to sustainability and recognize that business must play the leading role in advancing sustainability in the future. The question, therefore, is: How can business lead in this dynamic environment?

The State of Sustainable Business Survey, released today, includes responses from nearly 300 business leaders representing 151 global companies—more than 60 percent of BSR’s global membership network.

Interestingly, when asked about priorities for the sustainability function in 2025, most respondents said they expect to focus on the same kind of activities they are addressing today. But given the rapid pace of change, this will not be enough. To address the needs of 2025, businesses will need to evolve their sustainability efforts. Today’s incremental approach to improvements will be insufficient. 

The world is changing, and to keep pace, sustainability strategies must as well.

For example, less than a quarter of respondents said they believe addressing implications for workers due to automation/technology will be a high priority. Yet we know that labor is undergoing a profound transformation across nearly every sector, from retail to manufacturing. This means current activities on worker rights will need to change dramatically. Similarly, only 16 percent of survey participants said that responding to crises will be a high priority, and only a third said they believe scenario planning will be important.

At BSR, we believe both activities will be essential for sustainability teams. It is time to redefine sustainable business with a new agenda, a new approach, and a new voice. 

As we think about redefining sustainable business for the future, we know that it will include different issues and different partners. In terms of issues, it has become clear that basic economic fairness must be intertwined with sustainability. That’s why BSR is working with business to drive a more inclusive economy—one that enables all individuals and communities to participate in, benefit from, and contribute to the economy.

We were pleased to see that nearly two-thirds of respondents are prioritizing inclusive growth within their companies—a 7 percent increase over last year. Yet that means that one-third of respondents still have not made the connection between sustainable business and inclusive growth. And even among those who have, there is a huge opportunity to invest in areas that will drive the most impact. For example, 78 percent of those companies place low or no priority on locating facilities in areas of high unemployment, and only 14 percent place a high priority on influencing governments for more inclusive public policy. Last week, my colleague Susan Winterberg shared some great examples of how business can lead on driving inclusive growth, from improving retail jobs to impact sourcing.

In terms of different partners, sustainability practitioners have long focused on external collaboration and engagement, with peer companies, NGOs, multilaterals, and others. These partnerships have been critical in creating systemic change. But there is a clear opportunity for companies to integrate sustainability across more internal functions. This is happening in some companies, especially with CEOs and supply chain or procurement teams, but not with some critical internal functions. More than 60 percent of respondents state that customers/consumers, investors, employees, and governments influence their sustainability agenda. Yet those same respondents are not integrating with the key internal partners most likely to influence those key stakeholders. For example, less than 10 percent of respondents prioritize close partnerships with marketing, investor relations, or public affairs. And they prioritize human resources, at 12 percent, only slightly more.

While every organization has its own unique structure, deeper partnership inside companies with these key functions will be essential to achieve greater progress. For example, Intel’s corporate responsibility team has worked for many years with investor relations and corporate governance to drive an integrated approach with investors on ESG. And BSR’s Sustainable Lifestyles Frontier Group—AT&T, eBay, Johnson & Johnson Consumer Inc., McDonald’s, and Walmart—recently published "Big Brands, Big Impact: A Marketer’s Guide to Behavior Change."

As we get ready for BSR’s 25th Anniversary Conference, I look forward to discussing how companies can redefine sustainable business to meet the challenges of the future, and how we can rethink our approach to change inside and outside companies. 

We have finally reached the point where there is no question if business will lead. Now we must answer how. 

Blog | Wednesday July 19, 2017

Inclusive Growth: How Business Leads

Preview

Turn on the news on any given day and the lineup of stories is often the same: an economic report of flat wages and rising financial insecurity combined with tales of social unrest and political instability around the world. Beneath all these seemingly disconnected events lies one common thread—inclusive growth.

The Organization for Economic Cooperation and Development (OECD) defines inclusive growth as “economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society.” A lack of inclusive growth has been tied to everything from higher rates of cancer and crime to voting for populist leaders to joining terrorist groups.

Creating more inclusive forms of economic growth has long been seen as the responsibility of governments and civil society. Yet in the last few years, it is increasingly being taken up by the private sector as a central pillar of company sustainability platforms. According to the 2017 BSR/Globe Scan State of Sustainable Business report, which will be published later this month, the number of companies that say they consider inclusive growth a "high priority" for sustainability efforts has increased almost 10 percent since last year.

Companies are taking action on promoting inclusive growth through three main mechanisms: creating good jobs, expanding access to products, and engaging with society.

Creating Good Jobs

A 2016 survey by JUST Capital found that the U.S. public considers providing good jobs as the most critical sustainability issue facing companies today. Some companies are rising to this challenge. IKEA, for instance, made a commitment in 2014 to pay its U.S. retail workforce a living wage. Other areas where companies are beginning to think about good jobs include treating contingent workers more fairly, investing in training and career paths, creating predictable scheduling, increasing benefits coverage, and developing profit-sharing programs.  

Companies are also starting to develop ways to expand their diversity and inclusion efforts to include more groups who face challenges in employment. Member companies of the Global Impact Sourcing Coalition are focusing on ways to improve inclusion in their supply chains through encouraging their suppliers to offer job opportunities to neglected groups, such as long-term unemployed persons, informal sector workers, and “neurodiverse” workers. Some companies are exploring how to bridge geographic divides through “rural sourcing” programs, which hire people from high unemployment rural communities in the United States. There’s even a small group of companies focusing efforts on preventing violent extremism by offering economic opportunities to youth in communities that are targeted by terrorist recruiters.

Expanding Access to Products

Access to affordable and high-quality products in housing, basic infrastructure, healthcare, food, and financial services is a critical component to inclusive growth. Many companies now have access policies and programs for their products. One example is MasterCard’s Center for Inclusive Growth, which uses proprietary technology platforms and big-data capabilities to connect microentrepreneurs, refugees, and other excluded groups to affordable financial services products. The United Nations’ Business Call to Action has secured inclusive business commitments from more than 190 companies to expand access to critical goods and services to the poor in developing countries. Chobani’s founder and CEO Hamdi Ulukaya formed Tent Partnership for Refugees which has organized commitments from companies to improve critical product access to refugees. Doug Rauch, a former president of the grocery store Trader Joe’s, started the The Daily Table, which has organized more than 40 grocery chains and food brands to tackle the challenges of food deserts and malnutrition in U.S. inner cities.

Engaging with Society

Community and government engagement for inclusive growth has long been a focus in the extractives industry, where maintaining a ‘social license to operate’ has been a central focus. Yet the range of industries, geographies and policy issue areas in which business is engaging is expanding.

The last few years have seen a growing tide of "CEO Activism." Earlier this year more than 150 CEOs signed an amicus brief on the U.S. executive order on immigration. This trend could continue in the coming years as businesses weigh in on other critical inclusion policy issues such as U.S. universal access to health care. Other dialogues are also forming at the multilateral level such as the OECD’s Business Leaders for Inclusive Growth and at the “B20,” which is the business platform at the G20. These platforms can provide ways for business’ collective voice to promote fairer and more inclusive policy frameworks for global trade, immigration policy, digitalization and skills, and other global economic challenges.

Inclusive growth is one of the great challenges of our time. Yet through commitment, collaboration, and action, business is showing that it can move from being a central source of the problem to a central driver of the solution.