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Blog | Wednesday March 6, 2019

#ThisIsALeader: Raising the Profile of Women Making a Difference

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When you think of inspirational women leaders in business, who comes to mind? Is it Mary Barra, Chairman and CEO of General Motors—the first female CEO of a major global automaker? Or maybe Indra Nooyi, who served for 13 years as CEO of PepsiCo, one of the largest food and beverage businesses in the world? 

With women at the helm of such large enterprises, it’s hard to believe that there had not been a woman CEO of a Fortune 500 company until 1972—when Nooyi was 17. No doubt she and Barra faced formidable obstacles in their journeys to leadership, including discrimination against women in education, in business, and across societal expectations. In spite of this, they rose to prominence and success, blazing a trail for others to follow, and we are right to celebrate what they have achieved.   

However, the celebration of women leaders should not be limited to the C-suite. Out of the spotlight and away from the media attention, women throughout global supply chains are quietly taking on leadership roles and driving change for their colleagues, families, and communities. To highlight these lesser-known leaders on International Women’s Day, we have partnered with four committed partners of BSR’s HERproject—The Estée Lauder Companies, Inc., Nordstrom, UGG®, and Williams-Sonoma, Inc.—to raise the profile of and increase support for women leaders right across the supply chain, from corporate offices to the factory floor.  

Out of the spotlight and away from the media attention, women throughout global supply chains are quietly taking on leadership roles and driving change for their colleagues, families, and communities. 

Our #ThisIsALeader campaign celebrates workers from factories in China, India, Vietnam, and other countries where HERproject is active. Through HERproject, these women have become peer educators: sharing knowledge and skills on health, financial inclusion, and gender equality with their colleagues. And as leaders in their respective communities, these peer educators advocate on behalf of their colleagues, provide them with support, and show what is possible even in societies where women often face overwhelming challenges. 

Take Sapna, a HERproject Peer Educator in Agra, India: 

I was the sole breadwinner of my family for a long time and I was responsible for the overall well-being of everyone at home. For reasons we never discovered, one of my brothers fell ill and suffered a paralytic stroke. He was bedridden for months. My mother was also unwell and eventually passed away after a heart attack. That happened just after my engagement. 

Because of this series of sad events, culminating in my mother’s death, the groom’s family decided that I was a bad omen and called off our engagement. These were really bitter and tough experiences for me. But they only strengthened my determination to succeed in life.  

I didn’t know what the HERfinance program was, but when I heard about it, I was curious, and I thought that I wouldn’t lose anything by attending it. So, I took part in the trainings at the factory and they helped me to regain the confidence I had lost. I realized that, along with education, financial planning is critical for our generation. The trainings made me decide to spend wisely and save so that my future is secure. 

My brother has now recovered from his illness. He recently started a new job and is looking forward to a bright future. For myself, I’m pursuing higher education again and I’m hoping to graduate.  

That’s just one of the amazing stories we hear through HERproject. Like Sapna, women leaders within brands are driving commitment to women’s empowerment. They are connected across geographies by the belief that they can help others and improve the lives of people around them—especially fellow women.  

In addition to our #ThisIsALeader social media campaign, we are hosting an evening event on Thursday, March 7, to celebrate women’s leadership. Senior leaders from The Estée Lauder Companies, Inc., UGG®, and Williams-Sonoma, Inc. will join nonprofit leaders, public officials, and members of the media for a discussion on what is needed to ensure that women around the world can fulfil their potential as leaders. If you would like to join us, please register your interest here.  

We invite you to join the conversation on social media by sharing a photo of an unsung woman leader with the sentence “#ThisIsALeader because…”.

Beyond celebrating women across the global supply chain, we want to catalyze support so that they can go further as leaders: spreading knowledge, belief, and confidence, and unlocking the potential of women around them. Because we believe that when business and partners work to unlock this potential, the impact will be unprecedented.  

Ahead of International Women’s Day, we call on businesses to commit to empowering women leaders right across your supply chain. And we invite you to join the conversation on social media by sharing a photo of an unsung woman leader with the sentence “#ThisIsALeader because…”. Together, we can raise the profile of the women who are making a difference and step up our support for them as they drive positive change.  

Blog | Tuesday March 5, 2019

How Private Equity Can Address TCFD and Climate Change

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In the face of mounting global climate action and inquiries from institutional investors, private equity firms should anticipate that addressing climate change will move from being an emerging interest to a fundamental expectation—just as it has for environmental, social, and governance (ESG) issues. 

We are in the midst of a new era of climate action. The UN Principles for Responsible Investment (PRI) recently announced that reporting based on the Task Force for Climate-related Financial Disclosures (TCFD) will become mandatory for PRI signatories. The proposal for a Green New Deal is expanding the boundaries of the US political conversation. More companies are making commitments to science-based targets for emissions reductions, and in December, investors managing $32 trillion in assets called on governments to accelerate climate action. 

The upshot for private equity firms is this: It is imperative to better understand, manage, and disclose climate risks and opportunities in your investments. While some call for firms to conduct carbon footprinting for their entire portfolios, others in the industry have expressed concerns that such an undertaking would be resource-intensive and of unclear value. Firms should consider how climate trends affect their investments, not just in terms of flood risk or energy costs, but in terms of the technologies they use, the products they source, and the labor forces they employ. 

So the question arises: What courses of action will help private equity firms address climate risks and opportunities in an actionable, meaningful way? BSR suggests two types of approach. 

TCFD Maturity in Climate Management 

Private equity firms should be in the business of building better managed, more valuable companies.  That same objective applies in responding to climate change: Private equity firms should engage with portfolio companies to ensure that all parties can effectively understand and manage climate risks and opportunities. Further, firms should be able to demonstrate such an understanding to investors and stakeholders in relation to the TCFD framework. Firms can do this by applying similar approaches as have been used to address other ESG topics, such as responsible sourcing.   

Major steps to improve TCFD maturity in climate management would include: 

1. Assessing portfolio companies’ exposure to climate risks and opportunities using simple, open-source tools to evaluate physical and transition risk (e.g. the Climate Policy Tracker for Business, developed by BSR) 
2. Evaluating companies’ climate maturity using the TCFD framework  
3. Mapping climate exposure vs. maturity for the portfolio to identify the most significant sources of climate risk, the highest priority companies, and the most common gaps in practice 
4. Using the results to inform firm-level reporting and to enable portfolio companies to report their own information 
5. Providing guidance, resources, and tools to improve practices for high-priority companies and topics (e.g. sample policies, data sources, and position descriptions) 

By using such an approach, private equity firms can avoid more academic exercises and use the TCFD framework to support practical actions, meaningful reporting, and improved business outcomes.   

Strategic Foresight and TCFD Climate Scenario Analysis 

Given the uncertainty surrounding the cascading impacts of climate change, as well as society’s collective response to the issue, the TCFD has recommended that all firms undertake “climate scenarios analysis” to assess their exposure to a range of climate-related risks and opportunities and enhance their strategic resilience. To derive the true benefit of this methodology, climate scenario analysis should not treat global temperature increase (e.g. 2 degrees vs. 4 degrees) in isolation or as a one-dimensional quantitative calculation.  

Unlike forecasts or predictions, scenarios describe multiple plausible futures that may confront a business. Scenario analysis offers a multidimensional perspective that examines how inter-related social, technological, economic, environmental, political, and business factors can drive highly divergent outcomes, with profoundly different impacts on investments. These additional dimensions of information transform scenario analysis from a dry accounting task to a robust, generative activity with major strategic implications, as was illustrated in BSR’s Doing Business in 2030 report. 

Scenario planning is a prudent undertaking for current portfolio companies. By assessing companies against relevant scenarios, a firm can better understand the potential impacts of climate change and other related factors; optimize company governance, strategy, risk management, and measurement; protect against future risk and pursue future opportunities; and report on findings to key stakeholders. 

Strategic foresight may be even more exciting for assessing future investment opportunities. By exploring multiple plausible futures, scenarios can help companies and investors move beyond present-day thinking, envision disruptive new possibilities, and be proactive in seizing emerging opportunities. Furthermore, unlike large players within industry, private equity investors have the advantage of being able to act quickly to integrate lessons into their investing decisions without major damage to their incumbent interests.  

As climate impacts become increasingly material and the pace of change in climate action and expectations increases, it is critical for private equity firms to begin acting now. Through pragmatic, strategic approaches, there are valuable opportunities for firms to ask the big questions on climate change and begin taking action, both to support the long-term success of their investments and the economic, social, and environmental imperatives for climate action. 

Blog | Monday March 4, 2019

How Private Equity Firms Can Develop Responsible Investing Policies

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Over the past 10 years, the private equity sector has seen responsible investment approaches move from exception to expectation. Recently, PRI reported that over 60% of its private equity firm signatories surveyed have implemented responsible investment strategies, an increase of 25% from 2015—and over a third are linking responsible investment objectives to key performance indicators of their investment staff. It’s clear that the formalized integration of environmental, social, and governance (ESG) considerations is becoming the norm. 

As a result, General Partners (GPs) that do not yet have these formalized approaches to responsible investment are moving quickly to develop the policies, management systems, reporting tools, and follow-up initiatives to meet evolving stakeholder expectations. For all firms, a meaningful policy is fundamental to responsible investment and ESG integration.

Furthermore, while there has been some useful guidance for asset owners, there is limited current guidance for GPs about what should go into a responsible investment policy.  Many firms end up using generic language, leading to policies that are not well-tailored to the individual firm’s investment profile, creating a disconnect between the firm’s investment strategy and ultimate ESG objectives, leading to less effective and less efficient approaches.

That’s why we have developed a white paper that outlines guidance on a straightforward approach, relevant principles, and practical tips to use in developing a responsible investment policy.

Why Firms Need a Responsible Investing Policy

A responsible investment policy is a firm's commitment to incorporate ESG factors into investment decisions to better manage risk and generate sustainable, long-term returns. The policy serves as the cornerstone of a firm's responsible investment efforts in the following ways:

• Establishes a “North Star” by providing direction to employees and other external stakeholders in understanding the firm’s core investment beliefs
• Communicates commitments to Limited Partners in a clear, consolidated, effective statement
• Aligns expectations and builds trust with broader stakeholders including investors, investment professionals, regulators, portfolio company employees and local communities where portfolio companies operate
• Establishes the framework for a consistent approach to implementation by clearly describing the scope, governance structure, actions, and reporting to support the integration.

Who Develops the Responsible Investing Policy

Typically, an executive or member of senior management will lead the process of drafting the policy, securing buy-in, and assigning resources needed for its implementation. This person ought to work in tandem with a cross-functional working group of committee to help steer the policy through the different steps of policy development. In all cases, it is essential for investment and portfolio teams to play a role in policy development and sign-off in order to develop a policy that can be successfully operationalized.

What a Responsible Investment Policy Includes

There is no one-size-fits-all approach to responsible investment—the investment strategy of the fund will be key to determine the responsible investment approach, and the policy ought to be tailored to the investment profile and beliefs of the fund.  BSR recommends that policies indicate that the firm will focus on “material” ESG issues. At the same time, several foundational elements are considered best practice to include in the policy. Our paper delves further both into definitions of materiality as well as the elements of a responsible investment policy listed below.

• Title and approval date
• Purpose and priorities
• Scope
• Governance structure
• Implementation approach
• Reporting
• Regular revisions of the policy
• External collaboration

How To Implement a Responsible Investment Policy

Once the policy is finalized, the real work starts. The firm ought to act to implement and uphold the policy, including developing an implementing plan, effective governance structures, regular teach-ins for investment professionals, and taking action to enhance portfolio performance. The policy should not sit on a shelf—it should be the impetus for action and results.

We hope our paper will provide GPs a blueprint to write policies that align with their unique investment principles and strategies.  If you’d like to reach out to us with feedback or start a conversation about developing your own policy, please contact us at web@bsr.org.

Reports | Monday March 4, 2019

ESG in Private Equity: How To Write a Responsible Investment Policy

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Over the past 10 years, the private equity sector has seen responsible investment approaches move from exception to expectation. Formalized integration of environmental, social, and governance (ESG) considerations is becoming the norm.

A diverse group of stakeholders—from investors to portfolio companies to employees—increasingly expect that General Partners (GPs) at private equity firms to demonstrate that they invest responsibly and incorporate ESG factors into their investment decisions. Furthermore, as ESG factors increasingly affect the business value of portfolio companies, GPs are recognizing the benefits of taking a more structured approach to ESG integration.

As a result, GPs that do not yet have formalized approaches to responsible investment are moving quickly to develop the policies, management systems, reporting tools, and follow-up initiatives to meet evolving stakeholder expectations. GPs already pursuing formalized approaches ought to update their efforts on an ongoing basis to match evolving practices. For all firms, a meaningful policy is fundamental to responsible investment and ESG integration.

This paper will outline a straightforward approach, principles, and tips to use in developing a responsible investment policy. We aim to provide firms with general guidance to facilitate the development of strong policies that address common policy considerations while at the same time tailoring the language to suit its unique circumstances and material ESG considerations. In doing so, we hope that we will enable the adoption of more effective responsible investment approaches and ESG management practices at firms and their portfolio companies, and to encourage capital deployment towards a more sustainable future.

Blog | Monday February 25, 2019

A New Transparency Challenge for Business and Human Rights

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What’s the harm in sharing company data with the government? Three recent news stories demonstrate the significant human rights risks that arise when companies share data with law enforcement agencies: Motel 6 was fined over US$7 million for sharing guest lists with U.S. immigration authorities. Bloomberg News reported that 7-Eleven Inc. had shared information with U.S. immigration that led to raids in over 100 of the company’s franchises. And in China, the Associated Press revealed that more than 200 automotive manufacturers, including Tesla, Volkswagen, BMW, Daimler, Ford, General Motors, Nissan, and Mitsubishi, are sharing location information and other important data to government-backed monitoring centers.

There are many good reasons why companies share data with law enforcement agencies. This can include transport and logistics companies addressing human trafficking and smuggling, travel and tourism companies seeking to prevent child sexual abuse, and financial services companies tackling money laundering and the illegal funding of terrorist organizations. There are also many ways in which companies are called upon to assist with criminal investigations or with matters of public safety and national security.

However, these scenarios come with two common challenges: The first is providing appropriate assistance to law enforcement efforts that have the protection of human rights as a core purpose, while at the same time protecting the privacy rights of customers and users. Second, companies must work out how to constrain assistance to law enforcement efforts that may not have the protection of human rights as a core purpose, as can be the case in governments that don’t respect the rule of law, or that regularly violate the human rights of their citizens.

This leads me to my central theme: the public currently lacks sufficient insight into how companies are navigating these two challenges, the strategies companies and governments can deploy to enhance human rights protections, and the transparency necessary to scrutinize whether these human rights protections are being implemented.

The public currently lacks sufficient insight into ... the strategies companies and governments can deploy to enhance human rights protections and the transparency necessary to scrutinize whether these human rights protections are being implemented.

Encouragingly, the technology industry has developed practices that indicate a path forward. In 2010, Google published the world’s first law enforcement relationship report (which the company called a “transparency report”) listing the number of requests the company received from governments to restrict content or hand over user data. The report explained how relevant legal processes worked and described when and how Google chose to challenge these requests to protect their users’ rights to freedom of expression and privacy. Since then, more than 70 internet and telecommunications companies have started publishing regular law enforcement relationship reports.

While much remains to be done to ensure that data are managed appropriately, this transparency has brought three essential benefits:

• Awareness: The reports have substantially raised awareness about the complex data sharing relationships between governments and companies, resulting in higher quality public policy proposals on key human rights issues.
• Advocacy: The reports have enabled civil society organizations and human rights defenders to advocate for improved privacy protections. More strikingly, companies have used the reports to expose privacy violations committed by governments and advocate for greater human rights protections on behalf of their users.
• Accountability: The reports have provided a place for companies to explain the processes and procedures in place to respect and protect the human rights of their users, allowing them to be held accountable for their approach by civil society organizations and users. The reports have also enabled civil society organizations around the world to better understand the nature and volume of data requests made by their home governments, advocate for improved rule of law and data protections, and hold governments to account.

However, as the three cases of Motel 6, 7-Eleven Inc., and automakers in China illustrate, technology companies are not the only ones receiving requests for data and assistance from law enforcement agencies. These requests extend to companies in the transport and logistics, travel and tourism, retail, healthcare, financial services, and other sectors as well.

Indeed, with the emergence of the internet of things, facial recognition, and artificial intelligence, the amount of data collected, processed, and shared by non-technology companies is exploding. And there is no doubt that law enforcement agencies will increasingly demand access to this information. In a world of increasingly ubiquitous data, it is essential that all companies incorporate data sharing considerations into their human rights due diligence and strategies.

There is an urgent need to enhance disclosure practices across all industries that receive requests for data and assistance from law enforcement agencies.

For this reason, I believe there is an urgent need to enhance disclosure practices across all industries that receive requests for data and assistance from law enforcement agencies. By establishing the norm that all companies, regardless of sector, issue thorough, transparent, and informative law enforcement relationship reports, we increase the likelihood that personal data will be better managed by the private sector and that civil society, business, and governments are more able to hold each other accountable.

Blog | Tuesday February 19, 2019

The Future of Sustainability Reporting

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Sustainability reporting and environment, social, and governance (ESG) disclosures are on the rise around the globe—we’ve seen increased regulation in Asia, it has become expected practice in Europe, and investors in the U.S. are increasingly using this information to inform their decision-making.

2018 saw some of the first communications in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, the codification of the Sustainability Accounting Standards Board (SASB) Standards, and a new draft standard from the Global Reporting Initiative (GRI) on tax and payments to governments. The field—and what is expected of companies—is evolving at an accelerating pace.

The most essential development that we need to see in the coming years, however, will be the alignment and harmonization of reporting standards to enable more efficient reporting processes that result in more user-friendly, comparable reports on the most important sustainability topics. For this reason, we strongly support the continued work of the Corporate Reporting Dialogue.

As one interviewee for our recent report, Redefining Sustainable Business: Management for a Rapidly Changing World, told us, “It is like the wild west out there in terms of what is reported. We would really like to see the reporting standards organizations get together and streamline.”

Over the past year, BSR has been working with over 20 companies to explore and influence this field through our Future of Reporting collaborative initiative. This group of companies seeks to shape the future of reporting by sharing reporting best practices, exploring ways to improve the decision-usefulness of reports, and informing the work of various reporting organizations. (While this post is informed by that work, the opinions expressed here are those of BSR.)

These are the five innovations that we would like to see improve reporting and disclosure in 2019.

1. Reporting practitioners play an essential role in shaping the future of reporting, including through the work of the Corporate Reporting Dialogue. We heard loud and clear in our conversations with companies that they want to play a role in shaping the future of reporting; practitioners are, after all, the ones who hold the pen when reports are written. Because they are most closely involved in the use of reports to improve performance, they have fundamental insights into how harmonized reporting standards can improve company performance. Standardization across various frameworks should be a central aspect of this work, as this will both help companies disclose the most decision-useful information for their stakeholders and increase efficiency.
2. We look forward to continued effort from companies and investors to meaningfully quantify and report on impact, including related to the SDGs. This applies to both the impact of the company on sustainability and the impact of sustainability on the performance and direction of the company. Companies should move from mentioning the SDGs and mapping their existing programs to them to prioritizing those SDGs most relevant to their business and measuring their contributions and impacts. Ideally, this measurement should also inform company strategy—it creates an opportunity to link disclosure with performance. Investors are increasingly using this information both in individual decisions and the creation of new funds.
3. We hope to see increasing efforts to apply the TCFD recommendations, including to undertake and report on scenario analysis. Implementing the recommendations may be challenging for many companies, but companies looking do so don’t necessarily need to implement them all immediately—they can start with those that are most closely aligned with their existing reporting. Those elements that pertain to organizational change are likely to be the most difficult for companies to implement, but this creates an opportunity for them to make progress over time. Companies can also use their sustainability reports and CDP disclosures as a testing ground for information that may ultimately reside in mainstream financial disclosures.
4. More involvement and oversight of ESG disclosures at the board level will help raise the profile of sustainability efforts as a contributor to long-term value for companies and society. Increasingly, forward-looking companies are appointing directors with specific sustainability-related expertise, and boards and board committees are including aspects of sustainability into their charters to govern ESG issues at the highest levels. Board oversight of sustainability strategy and performance overall is increasingly common; a recent study of the S&P 500, State of Integrated and Sustainability Reporting 2018, found that 212 companies (42 percent) have a formal board committee overseeing sustainability.
5. We hope to see more sustainability information included in mainstream financial disclosures (including the Form 10-K), yet we also hope to see more detailed issue-specific sustainability reporting targeted at specific audiences. The Future of Reporting group had energetic discussions across these aspects. Companies should not try to include all disclosures in one report, but issue different reports focused on the differentiated needs of different target audiences.

If you’d like to be a part of the conversation about the next generation of sustainability reporting, please contact us to learn more about how you can participate in the Future of Reporting group in 2019. 

Reports | Tuesday February 19, 2019

Five Reporting Trends for 2019: Insights on the Future of Reporting

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Over the past year, BSR has been working with over 20 companies to explore and influence this field through our Future of Reporting collaborative initiative. This group of companies seeks to shape the future of reporting by sharing reporting best practices, exploring ways to improve the decision-usefulness of reports, and informing the work of various reporting organizations.

Here are the five innovations that we would like to see improve reporting and disclosure in 2019.

Please note that the opinions expressed here are those of BSR. While informed by the Future of Reporting group’s work and other engagement with our member companies, this document does not necessarily represent the opinion of BSR’s members.

Blog | Tuesday February 12, 2019

Getting to a Price on Carbon: Opportunities for a New Generation of Collaboration

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As discourse on climate change continues to grow in the political, public, and business spheres, the outstanding question remains: What is the best solution? While advocates have long touted its promise, there is no consensus on the most effective form of a carbon pricing scheme or how to achieve it. This is the question we, along with business leaders and NGO partners, will explore at our CoLab event at GreenBiz 19.

The private sector and other key “non-state actors” in the U.S. have stepped up in a big way on climate action. More than 100 U.S. companies have committed to science-based targets, and over 3,600 companies, cities, universities, and other organizations have sent a clear message that We Are Still In with respect to the Paris Agreement, regardless of the position of the current administration.

As discourse on climate change continues to grow in the political, public, and business spheres, the outstanding question remains: What is the best solution? 

And yet, we know that this is not nearly enough to secure the prosperous low-carbon future we want while avoiding the worst impacts of climate change. Recent IPCC and other reports indicate that we are running out of time to take the bold, large-scale action needed and, despite the leadership shown by many organizations, we simply won’t get there without leveraging corporate and citizen ambition to drive changes in public policy that will enable faster and larger scale change.

Smart public policy will be critical to accelerate action and increase ambition on the part of thousands more companies, cities, and other players, while unleashing the massive capital needed to drive innovation. The Green New Deal introduced last week was met with both enthusiastic praise and harsh criticism—which raises the question: What exactly are these “smart” policies, and what can we do to achieve them?

Progressive policy advocacy is a tricky undertaking for business at the best of times, and in our current highly polarized political environment, it seems even more so. Earlier failed attempts (remember cap-and-trade?) cast a long shadow. And yet, there is reason to believe the time is right for an attempt that builds on lessons learned and takes advantage of bigger and more diverse constituencies for change.

There is broad agreement across the ideological spectrum that policies that put an effective price on carbon, while not a silver bullet, will be a key ingredient in enabling and accelerating our transition to a low-carbon economy. There is no shortage of specific policy ideas to consider, from fee-and-dividend, to tax shifting, to new and improved cap-and-trade schemes. What is far less clear is how we can best mobilize people and organizations around one or a small number of potential solutions in a way that enables durable political change on a national level.

As members of the We Mean Business coalition, BSR and CERES—together with many partners in the U.S. and internationally—have been working to catalyze the kind of business leadership we believe can drive policy ambition and accelerate the energy transition. While much of the recent activity in the U.S. has necessarily been “defensive” in nature (maintaining commitment to the Paris Agreement, preserving key government programs and policies, etc.), we are also working to develop a longer-term positive strategy for change. Ambitious new forms of collaboration between private-sector and other key players will be critical to any successful strategy, and we launched the BSR CoLab last year with exactly this kind of challenge/opportunity in mind.

Ambitious new forms of collaboration between private-sector and other key players will be critical to any successful strategy.

CoLab is BSR's incubator and accelerator of private-sector collaboration, mobilizing the collective power of business to solve some of the world’s biggest sustainability challenges. Driven by the collective ingenuity of business and stakeholders, CoLab ideates, designs, and scales collaborations that have transformational impacts.

On February 25, BSR and CERES will co-host a half-day workshop at GreenBiz 19 in Phoenix, Arizona, in which we will put our new CoLab methodology to work, exploring the prospects for powerful new collaboration(s) in pursuit of an effective public policy advocacy strategy to support climate ambition in the U.S., with a focus on, but not limited to, a price on carbon.

We are inviting selected companies and expert stakeholders to join us as we consider key questions such as:

• Do we agree on the problem we’re trying to solve? What are best objectives for getting effective price on carbon in the U.S.?
• What can we learn from past efforts to build political will for climate action in the U.S. (cap and trade in 2007-8) and how should that impact our next run?
• For companies, how can we elevate and align climate policy with other priorities for government relations? How do we create and communicate a compelling business case for corporate action?
• For social and political leaders and advocates, how can we build truly bipartisan popular support that will in turn enable bipartisan action?
• What is the best pathway to build unstoppable political force at the national level, and what are roles for local and state action as well as direct national-level and “mass-market” advocacy?

If you are interested in joining us in Phoenix, and/or for any efforts which may follow, please reach out to us at web@bsr.org.

Blog | Thursday February 7, 2019

Large Companies Have a Key Role in Strengthening Small Supplier Integrity

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Last year, I was proud to participate as an adviser in a project commissioned by the U.K. Government’s Business Integrity Hub, which has been established to provide practical support for companies to help prevent bribery and corruption when doing business overseas. The project, run by Business Fights Poverty, has sought to find out how to encourage small and medium-sized enterprises (SMEs) to take business integrity issues more seriously and adopt meaningful anticorruption compliance.   

As part of the project, we conducted an extensive literature review and complemented it with an online survey, 24 interviews, and two business roundtables in which we gathered perspectives from both multinationals and smaller enterprises. This gives us deep insights into how corporate anticorruption efforts need to evolve—and enables us to make a strong case for fresh thinking from large multinationals.

SMEs and Issues of Business Integrity

The schizophrenic state of play in anticorruption efforts is highlighted in the research results: While 90 percent of the small and medium-sized companies with which we spoke consider doing business with integrity important for commercial success, fully 30 percent found that having a strong approach to integrity presents a disadvantage in winning business.

The barriers to a more robust implementation of integrity are considerable. Smaller companies feel that an overall lack of understanding of bribery and corruption issues persists, and that systemic corruption challenges in many markets may offer ‘no choice’. Finally, they cite a lack of direct control over their own agents, distributors, and suppliers. All these challenges, combined with familiar sales and commercial pressures, also confront large multinational corporations. But they are exacerbated in smaller companies by two factors: a lack of dedicated compliance resources, and—compared with large multinationals—a lack of leverage to drive behavioral change in third parties.

Smaller companies feel that an overall lack of understanding of bribery and corruption issues persists, and that systemic corruption challenges in many markets may offer ‘no choice’.

Despite the challenges, there is plenty of room for optimism. Strikingly, smaller companies do not view regulatory pressure as the strongest argument for anticorruption programs, having (rightly) assessed that regulatory resources are far more likely to be aimed at large multinationals. And SMEs understand the argument that integrity helps in winning and retaining customers, accessing finance, and building trust and reputation. Small companies fully understand that if they want to do business with large customers or credible financial institutions, having a basic anticorruption program in place is non-negotiable. Smaller companies also see that integrity risks are shared by businesses in the same value chain, and they are calling loudly for a more collective, collaborative approach to address them.       

The Role of Multinational Companies

The single, overwhelming message from this research? Multinational companies need to take a more active role in influencing supplier integrity via procurement processes enforced across their value chains. This is particularly important because only large companies have the financial resources to hire compliance consultants and the market clout to access regulators as needed. Smaller companies need concrete help from their biggest customers.

Large multinationals could start by applying the thinking they have used to drive sustainability into their supply chains. As we at BSR work with first-tier suppliers to multinationals such as Apple Inc., GlaxoSmithKline Plc, and Walmart Inc., we find that increasingly stringent environmental and social mandates from customers are driving transformative change along the value chain. These large companies have adopted an engaged perspective that gives their suppliers the necessary time and guidance to bring programs up to scratch, while also making it clear that adoption of sustainability standards is a condition for retaining their business over the long term. 

While these supply chain sustainability programs can be very effective, companies generally do not extend them to cover bribery and corruption issues. This is because legal liability is involved. This results in siloed and misaligned approaches to business-partner risk in many companies. When environmental and social ‘red flags’ are identified, a large company is usually prepared to collaborate with a small supplier to drive improvement; the standards in question are voluntary, and regulatory risk is deemed to be manageable. In contrast, a company compliance team conducting due diligence regarding suppliers and distributors under the U.K. Bribery Act will simply terminate relationships in which it identifies ‘red flags’ concerning integrity.

This is a logical response to the legal and reputational pressures facing large companies. It is essential in mounting an ‘adequate procedures’ defence and helps to shield large companies from regulatory risk. However, if the end game is to reduce corruption in modern society (as opposed to helping corporations deflect legal liability), this approach makes little sense. Companies that don’t treat workers properly and violate environmental standards are also highly likely to be paying bribes; these practices characterize a risk-taking, short-term culture. Indeed, such companies may be paying bribes to evade social or environmental regulations.

Multinational companies need to take a more active role in influencing supplier integrity via procurement processes enforced across their value chains.

What’s Next

New laws such as the Modern Slavery Act, combined with investor pressure, are encouraging a more integrated approach to environmental, social, and governance issues. Moreover, the anticorruption field could make far better use of the collaborative tools and approaches to systemic change that have been so effective in tackling such issues as human rights and climate change. The highly successful Maritime Anti-Corruption Network is a model that could be used to good effect in other industries.

Our research shows that U.K. suppliers to large multinationals hunger for more support from their customers, and that customer demand can best incentivize stronger integrity programs. If large companies were to begin advising their suppliers on how to address integrity challenges and navigate regulatory risk, this could help transform the anticorruption environment. Through collective action, we might also start to address some of the entrenched integrity challenges in high-risk markets: repeated facilitation-payment demands accompanied by extortion, for one. This would constitute a more effective, empathetic, and constructive approach than the protective, self-interested mindset that now dominates corporate anticorruption programs. The U.K. government is ready to work with companies to explore and encourage this new thinking.

Blog | Tuesday February 5, 2019

Improve Sustainability with New Air Freight Alliance

Preview

To protect people from the catastrophic effects of global warming beyond 1.5°C, business must continue to take action to limit climate change. As such, BSR is pleased to announce the launch of the Sustainable Air Freight Alliance (SAFA), a forum for buyers and suppliers alike to collaborate on air freight emissions reduction. The alliance is now open for membership, and we invite all interested parties to join an introductory webinar (U.S. time zone/Asia time zone).

While countries continue to make progress on their individual national commitments under the Paris Climate Agreement, industries have the power to mobilize large-scale emissions reductions. As an example, the International Maritime Organization (IMO) announced in April 2018 that the shipping sector would aim to halve its emissions by 2050 against 2008 levels.   

While countries continue to make progress on their individual national commitments under the Paris Climate Agreement, industries have the power to mobilize large-scale emissions reductions.

Currently, air transport represents around two percent of global carbon dioxide emissions. However, the air freight sector is projected to grow at five percent per year until 2050—faster than any other mode—and with potential to increase emissions significantly. In recent years, the industry has undertaken collective engagement through the Air Carbon Initiative and the development of a reporting protocol agreed via the Global Logistics Emissions Council in coordination with the International Air Transport Association (IATA). The aviation industry has also achieved performance improvements and commitments thanks to the leadership of the International Civil Aviation Organization (ICAO), IATA, and individual airlines.

However, there remains no consistent forum for direct business-to-business exchange between the various stakeholders, which is key to driving collaborative solutions. There is also a general lack of transparency around the application and use of the environmental performance information requested from airlines by shippers for their reporting and decision-making needs.

To address this gap, leading airlines, shippers, and freight forwarders have united to develop the Sustainable Air Freight Alliance—a unique buyer-supplier collaboration to track and reduce carbon dioxide emissions from air freight and promote responsible freight transport.

Following an incubation with active contribution from over 15 companies, SAFA is now open for membership. Participants include DB Schenker, DHL, Finnair, GEODIS, H&M, Maersk, Nike, and United Airlines.

The leading forum for air transport sustainability, SAFA provides a platform for collaboration allowing companies to:

• Build dialogue with business partners to understand needs and strengthen long-term business relationships
• Demonstrate company and industry leadership on sustainability
• Reduce exposure to risks (such as regulations) to the air freight industry by leveraging collective knowledge and action
• Credibly measure and report their emissions performance
• Help shape international standards, in line with ICAO, IATA’s work, and sectorial initiatives
• Access a collaborative forum for sharing sustainability information, best practices for reducing GHG emissions, and innovation opportunities to help achieve company goals

To find out more about the Sustainable Air Freight Alliance, please register for an introductory webinar (U.S. time zone/Asia time zone) and reach out to our team.