09_12_17 debatte 03 engl ohne editorial

published by

CCCD Centrum für Corporate Citizenship Deutschland

PRAGMATIC VISIONARIES

Difference Makers as Social Entrepreneurs

Sandra Waddock

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About the author:

Sandra Waddock is the Galligan Chair of Strategy and Professor of Management at Boston College's Carroll School ofManagement, and Senior Research Fellow at BC’s Center for Corporate Citizenship. Widely published, she holds MBA andDBA degrees from Boston University.

Sandra Waddock Boston College Carroll School of Management Chestnut Hill, MA 02467 617-552-0477 [email protected]

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CCCD – the Center for Corporate Citizenship Germany is a non-profit organisation at the interface between business,academia, and politics. In cooperation with leading companies, both domestic and foreign, academic institutions andcivil society organisations, CCCD acts as a think space and competence centre, providing a platform for dialogue;acting as catalyst and host.

In this capacity, the CCCD arranges forums for exchange between corporate citizens, business, academia, politics andcivil society, supplies and carries out applied research, facilitates learning processes through debate and skilling oppor-tunities, and supports cooperation between businesses and partners from civil society, academia, and/or politics.Using workshops, publications and public events, CCCD also acts as a driving force for the corporate citizenship deba-te in Germany and for the practical efforts by businesses taking an active role in society.

CCCD is the German partner of the Center for Corporate Citizenship at Boston College, USA, as well as a partner of Busi-ness in the Community, UK.

Kontakt:CCCD – Centrum für Corporate Citizenship DeutschlandKollwitzstr. 73D-10435 Berlin+49 (0)30 – 41 71 72 [email protected]

Executive Summary

I. Introduction

II. SEEDS OF RESPONSIBILITY ASSURANCE

III. DIFFERENCE MAKERS

• Social Entrepreneurs• Pragmatic Visionaries• Working at the Edges• Working for System Change from the Interstices• The “Luck” of Working Toward System Change

IV. EMERGING STANDARDS AND ACCREDITATION

• Pragmatic Vision• Systems Thinking, Leverage Points• Act Boldly • Keep Social Vision in Mind• Start Small, Think Big, Political Savvy• Systems Thinking, Networking• A Process of Emergence

V. STANDARDIZED SUSTAINABILITY REPORTING

• Bold, Pragmatic Vision• Challenge the System Incrementally• Be Inclusive—Create a Big Tent• Business Uptake

VI. MAKING A DIFFERENCE FOR CORPORATE RESPONSIBILITY

VII. Selected Bibliography

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Pragmatic Visionaries: Difference Makers as Social Entrepreneurs

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Today there is a growing infrastructure around corporateresponsibility that pressures companies to become moreaccountable, responsible, transparent and sustainable.Seeds were planted by a group of individuals, called dif-ference makers. These individuals took multiple smallsteps toward system change, found leverage points forchange, and were guided by values-driven vision that ledthem to work toward a better world. The work of a few ofthe difference makers is highlighted to illustrate their prag-matic vision and social entrepreneurship. The paperfocuses on one important aspect of the growing infra-structure, which can be called responsibility assurance.Responsibility assurance encompasses generally accept-ed standards and principles; credible monitoring, verifica-tion, and certification systems; and a standardized report-ing system.

Difference makers evidenced pragmatic vision – a long-term view built on smaller initiatives, which includes a pas-sionate desire to make a positive difference in the world,particularly around end values of social justice and equi-ty, sustainability, and solving related social problems. Theirvisions tend to be both very big and very small at thesame time. They have a pragmatic capacity to allow theentities they create to evolve and grow as they gain cred-ibility, legitimacy, and acquire resources. Feeling the heataround corporate responsibility and in response to thisemerging infrastructure, many corporations today partici-pate in a wide variety of responsibility related initiatives.Companies create and implement their own codes andstandards, ask suppliers to adhere to them as well, andare beginning to issue non-financial reports that demon-strate the corporate responsibility activities of the firm.

Executive Summary

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In the early 1970s, barely a trace of what is today a rap-idly growing infrastructure on corporate responsibility exist-ed. Overall, the responsibility infrastructure encompassesa variety of different institutions that place pressures oncompanies for greater accountability, responsibility, trans-parency, and sustainability. Some of these institutions, likesocial investment, an emergent responsibility assuranceinfrastructure, business associations, and internal responsi-bility management approaches, are market based in thatthey rely on market mechanisms. Others are based in civilsociety, including multi-stakeholder dialogues and collab-orations, NGOs, activists, interest groups, and watchdogs,and ratings and rankings. In parts of the world, legislativeand regulatory action is also beginning focus, in particu-lar, on issues of disclosure and transparency around ESG– environmental, social, and governance – aspects offirms.

Below, I explore how a select group of individuals calleddifference makers used pragmatic vision and socialentrepreneurship to build some of the pioneering institu-tions of the responsibility assurance framework now

emerging. This framework is part of a much more exten-sive network of emerging institutions around corporateresponsibility more generally. It encompasses:

1) standards, codes, and principles to which businessesare increasingly expected to live up;

2) credible monitoring, verification, and certification sys-tems to provide assurance that what is stated by compa-nies is what is actually being done; and

3) generally accepted reporting standards comparableto financial reporting standards but focused on non-finan-cial or ESG matters.

This infrastructure has created both new visibility for issuesof corporate responsibility and also numerous responsesand increasingly proactive momentum among compa-nies, particularly multinational corporations who are in thelimelight, around ESG issues. Although there are manyindividuals whose work could be highlighted, space con-straints focus this manuscript on the work of only a few ofthe many difference makers.

I. Introduction

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Seeds of the responsibility assurance infrastructure wereplanted in the US with an organization called the Councilon Economic Priorities founded in the late 1960s by differ-ence maker Alice Tepper Marlin. The Council on Econom-ic Priorities did research on companies and “namednames” in publishing that research, an early effort at cre-ating visibility around the social issues facing specificcompanies. Of course, the environmental movementwas beginning to take root, too, spurred by tracts likeRachel Carson’s 1962 book Silent Spring. During the1960s, there had been much criticism by activists andprotestors about corporate practices from consumeradvocates like (Ralph) Nader’s Raiders and others.

At the time, there were few ways other than activism andprotest of holding companies accountable, or pressuringthem for greater responsibility, accountability, or trans-parency. Talk of ecological sustainability (though the wordhad not yet been invented) was reserved for “tree hug-gers” and scarcely found within the corporate domain.

By the late 2000s, in part as a result of the type of socialentrepreneurship based on pragmatic vision of individualswho can collectively be called difference makers, com-panies, in the words of the conservative Economist mag-azine, which published a special issue on corporateresponsibility in January 2002, “ignore corporate responsi-

bility at their peril.” Although there are certainly manysocial entrepreneurs within and outside of companiestoday, I want to look at the work of a subset of differencemakers, who used social entrepreneurship and pragmat-ic vision to build early elements of the corporate respon-sibility assurance infrastructure.

The responsibility assurance infrastructure is enhanced, ofcourse, by many other institutions, including many exter-nal non-governmental organizations, activists, and interestgroups, as well as by work of other difference makers notincluded here. The specific examples are illustrative, how-ever, of the pragmatic vision and social entrepreneurshipthat underpin these types of initiatives. Working from theperiphery of the business system – at the intersticesbetween business and society – difference makers builtnew entities that leveraged the current system towardpositive change. These institutions put pressure on corpo-rations for positive change and greater corporateaccountability, responsibility, and transparency.

Below, I will try to frame the difference making capacity –a combination of social entrepreneurship and pragmaticvision that enabled these pioneers to do their work. Then Iwill briefly assess some of the ways in which companieshave responded to this emerging infrastructure.

II. SEEDS OF RESPONSIBILITY ASSURANCE

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Social entrepreneurship has become a hot topic in man-agement thinking since the publication of C.K. Prahalad’sThe Fortune at the Bottom of the Pyramid in 2005. Differ-ence makers about both social entrepreneurs and prag-matic visionaries.

Social Entrepreneurs

The classic definition comes from Gregory Dees, whoargues that social entrepreneurs are individuals whoadopt a mission to create and sustain social value (notjust private value). They recognize, then relentlessly pursuenew opportunities to serve that mission, engage in aprocess of continuous innovation, adaptation, and learn-ing, and act boldly without being limited by resources cur-rently in hand. They also exhibit heightened accountabili-ty to the constituencies served and for the outcomes cre-ated (Figure 1).

Pragmatic Visionaries

Difference makers supplement their social entrepreneur-ship with what we can call pragmatic vision. Notably,pragmatic vision is not the grand vision that one typicallythinks of when discussing, e.g., corporate strategies. Whiledifference makers might have had a long-term vision of abetter world, they typically took multiple small and prag-matic steps toward system change. They found leveragepoints for change where they could in the face of skepti-cism from others. This pragmatic vision combined with aset of values and a passionate desire to make a positivedifference in the world. Difference makers focus aroundend values of social justice and equity, sustainability, andsolving related social problems. Their values were fre-quently instilled by family or transformative life experi-ences that led them to want to work toward a better world

Working at the Edges

The difference makers typically work at the edges of busi-nesses not from within business; that is, they work at theinterstices between business and society. They attempt toeffect change by using the system, and working with it,while simultaneously attempting to raise consciousnessabout corporate practices they view as negative. Oneexample of this is the work of difference maker Alice Tep-per Marlin, who founded the Council on Economic Priori-ties, which then published major research studies on spe-cific companies. Alternatively, difference makers attemptto shift, for example, the level of transparency around cor-porate activities.

The pioneering social research KLD Research and Analyt-ics initially created more transparency by selling systemat-ically collected, annually gathered research on the Stan-

dard & Poors 500 (largest) companies social, ecologicaland stakeholder performance to social investors. Otherdifference makers tried creating new standards of prac-tice that raise stakeholder expectations about companybehaviors. For example, the United Nations Global Com-pact’s more than 5000 signatories to date signed on touphold its ten principles, where are based on internation-ally agreed treaties.

Other institutions provide mechanisms for in-companyassurance that stated values are being met, as we shallsee below that Social Accountability International does.And these are only a few of the new mechanisms that dif-ference makers and those who worked alongside creat-ed to pressure companies for greater responsibility,accountability, and transparency.

III. DIFFERENCE MAKERS

Mission and Values Driven

Creative Problem-Solvers

Focus on Opportunity in Social Problem

Persistent, Passionate, and Purposeful

Work Incrementally using a Process of Continuous

Improvement

Act boldly with being limited by current resources

Constantly learning, adapting, and innovating

Accountable to Their Stakeholders

Figure 1. Characteristics of Social Entrepreneurs as Defined by Dees

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Working for System Change from the Interstices

The difference makers’ work, supplemented by the work ofnon-governmental organizations and other activists, aswell some internal corporate leaders, has significantlyinfluenced the responses and actions of businessesaround issues of corporate responsibility. Although it isclear in light of the financial meltdown of late 2008 thatthere is much work be done to ensure real transparency,the work of difference makers has laid a foundation forhaving that conversation. In addition, it has createdframeworks and mechanisms for providing assurancethat what companies say they are doing is what they areactually doing.

Difference makers are not “of” business as are practition-ers, but nor are they necessarily outsiders as activists, inter-est groups, non-governmental organizations, and aca-demics are. Instead, they work from a place on the inter-stices between business and the societies where businessoperate, often using well-understood business mecha-nisms to gain a foothold. The relevant domain of the work

reported here can generically be termed corporateresponsibility, since the focus is generically on makingcompanies more accountable, responsible, transparent,and ecologically sustainable.

Difference makers’ vision tends to be both very big andvery small at the same time. While they passionately wantto make the world a better place, difference makers fre-quently start with one relatively small initiative, with a

longer-term goal of systemic changes over time. Theyallow the entities they create to evolve and grow as theygain credibility, legitimacy, and acquire resources. Simul-taneously, they are forward-looking and can see the worldas it might be if the system changed.

The “Luck” of Working Toward System Change

Difference makers also tend to be politically savvy, not inthe sense of running for political office, but in the knowl-edge of how the real world works. They know how to getthings done in the world, even when significant obstaclesare in the way. In that regard, they are also systemsthinkers who find leverage points for change and under-stand the dialectical nature of that change. As systemsthinkers, they understand the current system and knowhow to articulate and frame issues in new and compellingways, thereby bringing others into networks of like-mindedallies who help foster legitimacy and build out the impactof their initiatives. And they understand the nature of thedialectical processes involved in system change (see Fig-ure 2).

For many difference makers, there is also some luck (inThomas Jefferson’s sense of the word: “I’m a great believ-er in luck and I find the harder I work, the more I have ofit.”) or even synchronicity involved. Difference makers areoften in the right place at the right time with the right idea,in part because they laid the groundwork for that ideathrough their hard work. Then like all successful social (orregular) entrepreneurs, they work hard to bring that ideainto reality.

Pragmatic visionaries: start small, think big

Strongly held values and passionate desire to make

a difference in the world

Forward looking—ability to see the world as it might

be

Systems thinkers who find leverage points for social

benefit

Understand dialectical processes inherent in system

change

Politically savvy in the ways of the world

Networkers

“Lucky” and hard working

Figure 2. Capacities of Difference Makers as Pragmatic Visionaries

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A core element of responsibility assurance is that keystakeholders can learn what companies are actuallydoing and what the impacts of those activities are. Yetuntil quite recently most companies revealed little abouttheir environmental, social, and governance (ESG)impacts beyond financial information required in annualreports. From the interstices between business and socie-ty, the insights of some of the difference makers were thattransparency – even unwilling transparency that hascome about because of the internet – was one of thekeys to change. Thus, early initiatives that form the foun-dation of responsibility assurance tended to involve datagathering and research about specific company prac-tices. The work of Alice Tepper-Marlin, a true pioneer in thisregard, is typical.

Pragmatic Vision

Vision and inspiration are hallmarks of any type of realentrepreneurship, including social entrepreneurship andpragmatic vision. Alice Tepper Marlin, for example, found-ed the Council on Economic Priorities (CEP) in 1969 thenserved as its CEO for 33 years, until CEP spun off SocialAccountability International, where she still serves as CEO.

CEP was a nonprofit public interest organization focusedon researching corporate responsibility, a pioneer in thatfield – and ultimately publicly “naming and shaming”companies when problematic practices were uncov-ered. Its systematic methods of analyzing companieswere first publicly evidenced in the 1986 book RatingAmerica’s Corporate Conscience and the somewhatlater spin-off shopping guide, Shopping for a BetterWorld. These publications helped prepare the book’s leadauthor Steve Lydenberg for his later role as one of the co-founders, with Amy Domini and Peter Kinder, of KLD (forKinder, Lydenberg, Domini) Research and Analytics, thepioneering social research firm.

KLD Research and Analytics took research on companies’environmental, social, governance, and stakeholder per-formance to a new level. It systematically, annually, andwith specified criteria analyzed the entire S&P 500 (nowthe entire Russell 3000 largest companies, and, increas-ingly, global firms as well). This type of research provideda core foundation for the social investment movement –systemic data on a broad array of companies, gatheredregularly by a non-corporate entity.

Tepper-Marlin’s initial vision for the Council on EconomicPriorities was to create an organization that would doresearch on individual companies and sell that informa-tion to investors. Visions sometimes come up short when

the realities of the world make themselves known. Whenthat happens, a little pragmatism helps. For example, theCouncil on Economic Priorities was originally called theCouncil on Investment Priorities. It broadened its focus toeconomic priorities and an audience beyond investorswhen it became clear that few data were available at thetime and that primary research on companies would benecessary. The original vision thus morphed into doing pri-mary research, developing a methodology for doing so,at least for widely recognized consumer-oriented compa-nies. The Council on Economic Priorities emerged, in a“naming and shaming” form focused not just on investorsbut also consumers and the general public.

Systems Thinking, Leverage Points

The practical realities of the Council on Economic Prioritiesachieving its long-term goals focused Tepper-Marlin onfinding leverage points for system change. Progress wasslow going and the forward-looking dream of publishing aconsumers’ guide for the general public was many yearsin coming. The research tended to be taken up by thethen nascent social investment community and befocused intensively on individual companies, but it wasmany years before there was sufficient breadth of cover-age for the work to be of interest to consumers.

Pragmatic vision evidences itself in the ability to stick withthe dream, starting small and growing bigger or morecomplex, despite obstacles and lack of resources, and toshift that dream to conform to the realities that the organ-ization faced, along with a degree of political savvy thatenables the difference maker to move the enterprisealong in the world effectively. Despite the nascent state ofsocial investment, the Council’s research began impact-ing corporate practices, as the New York Times reportedin 1991 when the Council on Economic Priorities releaseda series of company profiles that, supplemented by thework of social investors, created waves of activism withinthe environmental community.

“Sunlight” or transparency around environmental issuesresearched and published by CEP created momentumfor company responses. One type of response includedprotests by company representatives from target compa-nies like Mobil and American Cyanamid. These compa-nies were being targeted for Superfund clean-up sites bythe Environmental Protection Agency based on the Coun-cil’s findings.

IV. EMERGING STANDARDS AND ACCREDITATION

Act Boldly

The Council on Economic Priorities research on brand-name consumer companies was eventually published ina 1986 book entitled Rating America’s Corporate Con-science. The lead author was, as noted above, was SteveLydenberg, later a principal in the pioneering socialresearch firm KLD Research and Analytics ) (with co-founders Amy Domini and Peter Kinder, also differencemakers).

By the late 1980s, the book finally morphed into the long-sought consumers’ guide, which was called Shopping fora Better World. To Tepper Marlin’s amazement, the guidesold more than a million copies and garnered a greatdeal of publicity. Notably, difference maker John Elking-ton, later founder of SustainAbility and more recent asocial entrepreneurship enterprise called Volans, pub-lished a similar “Green Consumers Guide” in Englandabout the same time period.

As the Boston Globe reported in 1988, these guidesallowed consumers to begin to make choices based acompany’s responsibility profile. One consumer, theGlobe reported, refused to buy Ralston-Purina’s “MeowMix” because she disagreed with the company’s policieson women and philanthropy. Such responses createdreputational problems for the brand, and created someawareness of environmental, social, and governanceissues in and about companies.

Today, as a ripple effect from these initial efforts, suchconsumer information is still available from the socialaction group Coop America, which has a website entitled“Responsible Shopper” that helps guide consumerstoward more responsible companies. Further, many con-sumers are aware of the fair trade movement, in whichsuppliers of raw material are guaranteed fair prices fortheir products. For example, large branded companieslike Starbucks work hard to ensure that at least some oftheir product carries the fair trade label. Starbucks doesthis in part because of its long-standing commitment tocorporate responsibility and in part as a response togreater awareness of fair trade issues raised by externalstakeholders and organizations like the Council on Eco-nomic Priorities (CEP).

Keep Social Vision in Mind

CEP had credibility as a responsibility assurance entitybecause of its “outsider” status, but it focused first on indi-vidual companies and only later on brand-name con-sumer goods companies in an effort to move its socialvision forward. Many companies were still under the radarscreen. The long-term vision of CEP was to reach thebroad audience of investors, consumers, employees,

managers, and the general public. It soon became clear,however, that neither a single product, nor one way ofapproaching the problem, or even a single entity like CEP,would be sufficient.

Over time, CEP began giving Corporate ConscienceAwards to draw further attention to issues of corporateresponsibility. Further, CEP began using its emerging net-works and research base to work with various magazines on“best of” lists, particularly Fortune’s best places for womenand best places for minorities to work rankings. All of theseelements are part of the broader corporate responsibilityinfrastructure that has emerged in recent years.

The new institutions developed by difference makers cre-ated a need for companies who wanted to burnish theirreputations to be more transparent around some ESGissues. Corporations are by nature competitive. Place-ment on various rankings and receipt of awards for goodpractice serve as incentives for positive action, as well asenhancing company reputation. Reputation, in turn, iscritical today because so much of corporate valueresides not in tangible assets but in intangibles like reputa-tion and good will.

As part of the growing infrastructure on corporate respon-sibility, there are also now numerous ratings and rankingsof company’s social performance, broadly defined.Ranking include everything from Fortune magazine’s pio-neering ranking of corporate reputation, which encom-passes environmental and social responsibility, to the bestcompanies for women, for minorities, to work for, and forworking mothers, to name just a few.

That companies pay attention to these types of assess-ments – and proudly note them on their websites andemployee or other stakeholder communications – is evi-dent in the more than 120 million “hits” on Google for“100 best companies.” In addition, following the earlylead of CEP, other groups, like the US Chamber of Com-merce now give awards for corporate citizenship. PRNews gives an award for the best corporate responsibilityreport, and CRO (Corporate Responsibility Officer) maga-zine gives annual corporate responsibility awards, amongmany others. Again an indication of company respon-siveness to such awards is the more than five millionGoogle “hits” for the term “corporate responsibility award.”

Start Small, Think Big, Political Savvy

Political savvy in the ways of the world comes in whenthings need to change, as Tepper Marlin found out as CEPtried to go global. The need to go global also raised herawareness of the need for what has become a secondkey element of responsibility assurance – codes, stan-dards, and principles that guide action.

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Globalization, combined with CEP’s interest in publishing astudent-oriented shopping guide, had raised all sorts ofissues around labor practices, human rights, and environ-ment. These issues were particularly evident in developingcountries, where many large multinationals were sourcingthe kinds of goods (e.g., clothing, sports equipment) thatstudents bought, but few data were available.

In 1991, CEP gave a Corporate Conscience Award to LeviStrauss, which had under the guidance of differencemaker Robert Dunn, which had produced the first com-pany-based code of conduct applied to its supply chain.(Dunn, another difference maker, later ran one of the US’slargest business associations for corporate responsibility,Business for Social Responsibility). Levi-Strauss acted as aresult of internal recognition of some of the issues aroundsupply chain management that anti-sweatshop, labor,and human rights activists were later to publicize aroundcompanies like Nike, Liz Claiborne, and the Gap.

To gather momentum, CEP began convening a workinggroup of other companies interested in developing theirown codes. Tepper Marlin recalled that large multination-al companies in particular followed this lead and quicklybegan developing their own codes of conduct. The prob-lem was that although a the framers of these company-based codes looked at the model provided by Levi-Strauss, and the recommendations of the InternationalLabor Organization, the codes they produced were, inTepper-Marlin’s words, “vastly different.”

Systems Thinking, Networking

As Tepper Marlin considered how to effect change in thisbroader domain, the leverage point seemed to beexactly with codes of conduct. She added, however,another core element of responsibility assurance – theprovision of certification and auditing for companies withthese extended supply chain. Her networking hadexposed her and others at CEP to the new issues thatglobalization had raised, and being politically savvyallowed her to move a new initiative forward with a differ-ent framing than CEP.

The outcome of the struggle to rationalize codes of con-duct, along with some exposure to the ISO organization’sapproach to quality management, was key to the forma-tion of a new organization, Social Accountability Interna-tional (SAI), incorporated in 1997. As SAI evolved, itemerged as a leader in the second core element ofresponsibility assurance: credible monitoring, verification,and certification services for companies that want todemonstrate to stakeholders that their practices are in linewith their stated codes of conduct and values.

SAI has fundamentally the same goal as CEP of improv-

ing social and environmental practices of companies,but is much more focused on the globalized environ-ment. It uses three main strategies to accomplish thisgoal. The first is setting international social and environ-mental standards around labor issues. Second is accred-iting qualified auditing organizations who then certify thatfactories are in compliance with codes and meetingestablished standards. Third is building capacity throughtraining and technical assistance to facilities that want toimplement the SA 8000 labor standards, which are nowwidely accepted.

The original CEP lasted a few more years, but eventuallythe board shut it down and Tepper Marlin turned full atten-tion to SAI, which has become the world leaders in itsdomain. The emergence of SAI International highlightstwo key elements of the responsibility assurance system:clear standards, in the case of SAI, around labor issues,and credible monitoring, verification, and certificationprocesses for companies that seek to reassure activiststhat their supply chain practices are responsible.

Among the many companies that work closely with SAIare Timberland, Gap, Toys R Us, and Chiquita Internation-al. All have taken seriously the need to assurance thattheir supply chains are in conformance with companycodes of conduct. They often become involved becausethey are clear about the corporate values that they wishto promote or because they have faced controversiesthat have forced them to focus on these issues.

A Process of Emergence

What some observers have called code mania has result-ed in a proliferation of codes of conduct, standards, andsets of principles, which are a key aspect of responsibilityassurance, since they set out expectations for companiesto meet. Perhaps the principles that have gained the mostcorporate attention are the United Nations Global Com-pact’s ten principles. The came about after a speech byformer United Nations Secretary General Kofi Anna to theWorld Economic Forum in 1999, when Annan called for anew social compact between business and society.

Difference makers John Ruggie, Harvard Kennedy Schoolof Government professor, and then special assistant toAnnan (and currently special representative to the UN onCorporations and Human Rights), and Georg Kell, nowexecutive head of the Global Compact, saw the poten-tial in articulating the principles based on globallyaccepted United Nations treaties and documents. Theyencouraged Annan to make the speech. The responsefrom business leaders to the speech was positive andstrong. Somewhat unexpectedly, Ruggie and Kell foundthemselves needing to create a new institution, the Glob-al Compact, which Kell has headed since its inception.

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Business uptake on the Global Compact, whose ten prin-ciples cover human rights, labor rights, environment, andanti-corruption, has been swift and widespread. In part,uptake has been so swift and global because of thecredibility that the United Nations itself provides. At this writ-ing there are more than 5000 corporate signatories glob-ally, who agree to uphold the principles and another 100or so joining each month.

The Global Compact’s principles are sometimes criticizedbecause the United Nations has no enforcement capa-bility to ensure that signatories are actually living up to thestandards. Several multinational companies at a recentGlobal Compact Leading Companies Retreat, however,demonstrated that they were taking the principles serious-ly. They use the principles as internal talking points for

issues like human rights, which were previously off thetable for discussion. They claim to have adopted theGlobal Compact part because the principles are in align-ment with stated company values and in part becausethey want to be in the company of other signatories,learning from them as they deal with the issues raised byglobalization.

The on-going work of difference maker Georg Kell, headof the UNGC, in seeing the big picture of systemicchange that is needed to ensure that companies live upto these standards and taking steps to “delist” companiesthat are not active, as well as establishing networks andlearning forums for signatories, has been instrumental increating a new conversation about the role of businessesin societies today.

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The third element of the responsibility assurance system isbeyond-financial – sustainability or environmental, social,and governance reporting. As we saw with the prolifera-tion of codes of conduct in their the early days, there wasa clear need for such a system to be standardized asfinancial reporting is if it were to be at all effective. Thestory of Joan Bavaria, founder of what is now Trillium AssetManagement (originally Franklin Research and Develop-ment) (and, sadly, recently deceased) and some of theindividuals who worked with her, helps to tie the pieces ofresponsibility assurance together.

Trillium, (then Franklin) one of the early social investmentfirms, was founded in 1983 by Bavaria, a consummatesystems thinker, networker, and forward looking differencemaker. Her skill in bringing others together around com-mon purposes was attested to by many of the other dif-ference makers. Based on listening to her clients’ con-cerns about putting their values into their investmentstrategies, Bavaria founded Franklin (Trillum).

Trillium proved a solid foundation for Bavaria’s social entre-preneurship, for she went on to found Ceres, the environ-mental organization that created the Ceres Principles,which are focused on environmental issues, and its net-work of 50+ environmentally-committed companies.Realizing the need for connection among social investors,she was also the founder of the (US) Social InvestmentForum, the social investment community’s main profes-sional association.

Using Ceres as ballast, Bavaria backed the founding ofthe Global Reporting Initiative, (GRI), today the de factostandard for environmental, social, and governancereporting. Difference makers Allen White (Vice President,Tellus Institute) and Robert K. (Bob) Massie (then executivedirector of Ceres), were the founders. White and Massiehad the initial vision of creating a global reporting initiativethat would do for environmental, social, and governancereporting what generally accepted accounting principles(GAAP) do for financial accounting and auditing.

Bold, Pragmatic Vision

The initial vision for GRI was bold albeit pragmatic, focus-ing on engaging investors more deeply in seeking corpo-rate responsibility – creating a corporate accountabilitystructure that companies would respond to that wentbeyond financial accountability. In line with the start small,think big element of difference making, the GRI got start-ed with a seed grant from an individual donor of$100,000, then the founders went on raised millions ofdollars to support the initiative, A co-founder Allen White

recalled, they “created a big tent” so that even potentialcritics, as well as supporters, could have a voice in its cre-ation.

Challenge the System Incrementally

The difference makers challenged the system incremen-tally, by finding leverage points like ESG reporting thatcould ultimately shift companies’ attention to those issues.During the late 1990s when GRI was getting started, manycompanies, led by pioneers like Royal Dutch Shell, Ben &Jerry’s, and The Body Shop, were already beginning toissue reports, variously called environmental, social, andgovernance, triple bottom line, or sustainability reports.

The problem that Massie and White converged on wasthat there was no systematic approach or standardizationto this type of reporting. Companies were (and often stillare) issuing sustainability reports based on idiosyncraticcriteria, making comparing one company’s performanceto another very difficult.

Be Inclusive – Create a Big Tent

Sometimes, as Massie recalled, there is a degree ofopportunism involved. He points out that the internet real-ly was popularized only in the mid-1990s and email usewas just beginning around 1995. Creating what Whitecalls the “big tent” allowed GRI to develop with the partic-ipation of both supporters and critics.

This collaboration was only possible because the founderstook advantage of these new communications tools. Theinternet enabled them to get work done far more quicklythan would have been possible in an era without global,nearly instantaneous communication. The big tent need-ed to be inclusive of all different points of view, geogra-phies, company types, and interests, creating a globalnetwork of interested parties with input into developing thereporting framework and standards.

Political savvy manifested itself repeatedly in the develop-ment process for the GRI, because there were numerouscompeting systems and because businesses wanted toavoid overly stringent reporting requirements. As GRIbegan to develop, numerous competing groups – partic-ularly corporate-sponsored groups attempted to under-take similar projects to GRI and gain dominance, withtheir own (sometimes less rigorous) standards of reporting.But when competitors or for that matter critics becameevident, White and Massie went to them, talked to them,and invited their participation in the GRI project.

V. STANDARDIZED SUSTAINABILITY REPORTING

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As they continued this inclusive approach, their reach nat-urally included companies. For instance, members ofCeres, and other multinationals who, as White put it, “did-n’t want to dance to 50 to different drummers” on report-ing issues, i.e., numerous different standards in differentparts of the world, became involved. Massie and Whitealso brought in global non-governmental organizations,like World Wildlife Fund, Greenpeace, and TransparencyInternational, labor and trade unions like the AFL-CIO,accountants, academics, and business school facultymembers, all of whom gave input into the GRI, as well ascompany representatives. The participation of critics wasessential, too, to providing legitimacy to the emergingstandard, which is now offered as a public good, for freeon the GRI website.

Business Uptake

GRI’s reporting framework, though complex and not with-out criticism, has become the de facto global standardfor ESG reporting. More than 700 companies officiallyclaimed to use the GRI standards in their ESG reports in2008, including large multinationals like Volkswagon, Star-bucks, and Shell. But as Allen White recently noted, no oneknows how many companies are actually using GRI, since

it is a public good. There are actually many more com-panies that use the framework without necessarily report-ing it to the GRI.

The accounting firm KPMG, which claims a goal of further-ing “the ideal that corporate responsibility reportingbecomes as commonplace as financial reporting andassurance,” estimated in 2008 that some 80% of theworld’s largest 250 companies now produce some formof sustainability report. In addition, KPMG studied thelargest 100 companies in 22 countries, and found that45% of them are now issuing such reports.

Many critics of corporations suggest that sustainabilityreports are simply window dressing, or in the common jar-gon, greenwashing. In 2008, for the first time, however,KPMG’s global head of sustainability services stated thatsuch reports would likely pass a greenwashing test, if onewere available. As he noted, current reports have evolvedsignificantly over the 15 years that KPMG has been doingthese studies. They now typically include a corporateresponsibility strategy with specific objectives, maturingmanagement systems, and a seemingly credible desireon the part of companies to systematically manage theirstakeholder-related and environmental responsibilities.

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These stories, briefly told, illustrate how difference makershave over time built the organizations and institutions thatstill form the core of the evolving and rapidly growing cor-porate responsibility assurance infrastructure. Obviously,there are many more institutions – including some found-ed by other difference makers – that might be discussed.Their work was accomplished through social entrepre-neurship and pragmatic vision and as the uptake on var-ious initiatives by companies illustrates, with a good dealof impact. Along with activists, NGOs, pressure groups crit-icizing the system, numerous academics writing aboutcorporate (social) responsibility and business ethics, andmany individuals within corporations, the difference mak-ers have moved questions about the proper role of busi-ness in society to the fore.

Still, the economic downturn of late 2008 highlights thereality that much more needs to be done to ensure thatall companies set high environmental, social, and gover-nance standards for themselves – and live up to them.Collectively, the difference makers and their associatesare part of the broader movement that ecologist PaulHawken in a book by that name terms “blessed unrest.”

Organizations Hawken identified as shaping blessedunrest share a common set of human- and earth-cen-tered values focused on sustainability, social equity andjustice, and livability in all spheres of society. Unlike the mil-lions of NGOs studied by Hawken, however, the differencemakers have collectively attempted to create a connect-ed and systemic approach – in the cases addressed here– to responsibility assurance. More broadly, along withnumerous others, they have focused on pressuring com-panies for greater corporate responsibility generally.

The work is clearly not yet done. The dialectical processinvolved in any social movement and large-scale systemchange such as the building of an infrastructure around

corporate responsibility continues. It evolves as newneeds emerge and things shift and change. The dynam-ics of the current system, with corporate emphasis onshort-term profits and shareholder wealth maximization,and a mantra of growth at all costs, always in question bythe difference makers, are being more seriously consid-ered by the broader public in light of the dramatic eco-nomic failures of 2008.

With continued work by difference makers of all stripes,including many within companies and non-governmentalorganizations, it is possible that in the future we will seeeven more demand for companies to be accountablefor their impacts. Responsibility assurance asks that com-panies be responsible for their practices, actions, andimpacts. It asks that they actually live up to their statedvalues and codes of conduct in all respects. It demandsthat companies be significantly more transparent in waysthat are credibly verified, typically by external agencies.Arguably, such assurance might have provided enoughtransparency that some of the dramatic problems in thefinancial community, not to mention in US automakers,might have more been readily seen by key externalobservers earlier – and, one could hope, forestalled.

The corporate responsibility infrastructure that hasemerged to date is still in is early days. GRI, for example,was founded only in 1997 and actually released its firstguidelines only in 2000; the UN Global Compact was offi-cially launched as an entity in 2001. All of these initiativesare voluntary and some critics argue that only mandato-ry requirements will prevent the lack of transparency thatin the case of some financial institutions has resulted ineconomic disaster. Nonetheless, the difference makers’work has made a difference in point out what can andneeds to be done to hold companies up to the kinds ofstandards that societies expect of them.

VI. MAKING A DIFFERENCE FOR CORPORATE RESPONSIBILITY

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Social entrepreneurship is a topic that has recentlyreceived a great deal of attention. The term has beenaround for a while, and the classic definition of socialentrepreneurship comes from J. Gregory Dees, “TheMeaning of Social Entrepreneurship.” Duke University, post-ed at: http://www.fuqua.duke.edu/centers/case/docu-ments/dees_SE.pdf, 1998, revised 2001, accessed June17, 2008, the term was popularized by C.K. Prahalad in his2005 book The Fortune at the Bottom of the Pyramid:Eradicating Poverty through Profits (New Delhi: PearsonEducation/Wharton School Publishing).

Roger Martin and Sally Olsberg provide further insights intothe role of entrepreneurship more generally and its link tosocial entrepreneurs in “Social Entrepreneurship: The Casefor Definition,” Stanford Social Innovation Review, Spring,29-38.

Corporate managers and leaders these days play rolesas social entrepreneurs, too. For instance, Manuel Londondescribes such social entrepreneurship within companiesin a recent article in this journal, “Leadership and Advoca-cy: Dual Roles for Corporate Social Responsibility andSocial Entrepreneurship” Organizational Dynamics, 2008,37 (4): 313-326.

The work of the difference makers is described in depth inmy book The Difference Makers: How Social and Institu-tional Entrepreneurs Created the Corporate Responsibili-ty Movement. Sheffield, UK: Greenleaf, and the infrastruc-ture that they built is discussed extensively in “Building aNew Institutional Infrastructure for Corporate Responsibili-ty,” Academy of Management Perspectives, August2008, 22 (3): 87-108.

Among other sources, the New York Times reported onsome of the impacts of CEP’s research in a December 9,1991 article by John Holusha entitled “EnvironmentalistsAssess Corporate Pollution Records.”

The Boston Globe reported on the impact of CEP’s Shop-ping for a Better World on consumers on December 29,1988 in an article by Beth Rabinowitz entitled “A Guide forthe Consumer with a Conscience.” The accounting firmKPMG biannually assesses the state of corporate non-financial reporting. Its most recent report at this writing is:KPMG (2008). International Survey of Corporate Reporting2008, which can be found on-line athttp://www.kpmg.com/SiteCollectionDocuments/Interna-tional-corporate-responsibility-survey-2008.pdf, accessed12/17/08.

More information about the Global Reporting Initiativecan be found at www.globalreporting.org. Informationabout the UN Global Compact can be found at:www.unglobalcompact.org. Information about SocialAccountability International can be found at:http://www.sa-intl.org/.

We can view the creation of the responsibility assuranceinfrastructure as part of a broader social movementaround corporate responsibility. Background on socialmovements can be found in Timothy J. Hargrave andAndrew H. Van de Ven, “A Collective Action Model of Insti-tutional Innovation,” Academy of Management Review,October 2006, 31 (4): 864-888. Further, Paul Hawken hasdescribed a yet not widely recognized movement aroundthese broad issues in Blessed Unrest: How the LargestMovement in the World Came into Being and Why NoOne Saw It Coming. New York: Viking Press, 2008.

VII. Selected Bibliography

VerantwortlichCCCD - Centrum für Corporate Citizenship DeutschlandKollwitzstr. 73D-10435 Berlin

Lektorat: Serge Embacher

Gestaltungwww.nepenthes.biz

Berlin 2009

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