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A beginner’s guide to CSR

Presented to: CIM, Financial Market Interest Group

Presented by: Jolyon Ridgwell, Lighthouse

3rd October 2007

www.lighthouseglobal.eu.com

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About LighthouseOpportunity Analysis in Financial Services

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Lighthouse’s servicesWorking with companies in your sector

Our expertise

Tacticalbusiness research

Devising thought

leadership campaigns

Client insight & loyalty

Successfulmarket entry

New product development

Rigorous competitor

analysis

Financial services areas in which we advise

Private Banking

Credit cards

Business Banking

TreasuryInstitutional

and retail asset

management

Private Equity

Capital markets

Insurance

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‘Financial services organisations must demonstrate appropriate CSR activity for the sake of their long term reputation’

Column headJolyon Ridgwell, Director

Jolyon manages market strategy projects for Lighthouse’s financial services and accountancy clients, including Merrill Lynch, Dresdner Kleinwort, Coutts & Co, Baker Tilly and the ICAEW.

Before joining Lighthouse, Jolyon worked in the financial services sector. For eight years he was in research-based equity sales, five of which were spent with the institutional team at the US broker, Prudential-Bache.

He completed his MBA at Cambridge University in 2000.

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Some of Lighthouse’s clients

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“CR is not an overhead – it’s part of the value proposition”

The future of corporate responsibility communications Radley Yeldar

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What we will cover in today’s discussion

1. CSR – its origins and definition

2. The key components of CSR

3. The importance and benefits of CSR to FS organisations

4. Key trends in CSR

5. CSR trailblazers – who’s doing it well and why

6. How can marketers make an impact on their organisation’s CSR policy

7. Useful sources of CSR information for FS marketers

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CSROrigins and definition

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CSROrigins and definition

"Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.“

World Business Counsel for Sustainable Development

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CSROrigins and definition

• Debate about corporate social responsibility began in the early 20th century.• E.g. Ida Tarbell’s 1904 work The History of the Standard Oil Company helped lead to the US Supreme

Court’s decision to break up the company on antitrust grounds.

• Term Corporate Social Responsibility came into use in the Early 1970s.• The term stakeholder, meaning those impacted by an organization's activities, was used to

describe corporate owners beyond shareholders from around 1989.• CSR is generally seen to extend beyond the statutory obligation to comply with legislation.

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The key components of CSR

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A CSR policy should take responsibility for the organisation’s impact on…

The customer / market place The employees / workplace

Communities The environment

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The CR Index provides a benchmark for companies to evaluate their performance in four key areas

Source: Business in the Community, Corporate responsibility Index

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Key elements of CSRCommunities

• Companies’ performance in the CR Index for community management was steady in 2006

• Community issues can relate to:• geographic location (being a responsible neighbour)

• issues (relating to a particular product or sector)

• Key topics for community CSR: • skills

• education

• employability

• social exclusion

• access to facilities

• welfare provision

• The CR Index survey identified a need for companies to develop better performance measurement on the “outputs” of their community investment.

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Key elements of CSREnvironment

• Environmental responsibility covers a range of areas including:• Carbon emissions (use of energy)

• Waste generation and reduction

• Use of recycled materials

• Impact of construction and development

• Most companies identify climate change and resource-use as key issues for their business.

• 78% of companies participating in the CR Index publically report on climate change. However, for the first time since the Index began the Environment scores did not go up

• 85% of companies manage their impacts through an Environment Management System

• 66% of companies participating in the Index ask their suppliers to provide information on their environmental performance.

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Key elements of CSRThe customer / marketplace

• Companies are showing an increased understanding of marketplace issues relevant to their business.

• Issues frequently cited by companies are:• Responsible selling and marketing (particularly important for FS organisations)

• Procurement and supply chain (including outsourcing and shared service / call centres)

• Financial inclusion (providing access to financial services to low income groups)

• Product safety

• Significant increase in the number of companies working with their suppliers to help them improve their social and environmental management.

• Also, more evidence of attempts to generate stakeholder engagement through focus groups and workshops etc.

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Key elements of CSRThe employees / workplace

• This is a critical issue for financial services, in light of the fierce war for talent• In the 2006 CR Index, workplace remains the strongest performing management area

since most companies have established frameworks that cater to HR issues as they arise.

• Companies increasingly place emphasis on internal communications and training.• Health & wellbeing issues are now being tackled on top of traditional health & safety• Key workplace issues include:

• recruitment

• retention

• succession planning

• work life balance

• employee consultation (e.g. feedback surveys and suggestions)

• Many businesses are also focusing on diversity issues.

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The Triple Bottom Line

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The Triple Bottom Line

• “The Triple Bottom Line - economic, social and environmental - is a practical method for companies that want to become sustainable businesses” CIM;Shape the Agenda, issue no. 11 2007.

• The concept was introduced in the early 1990s• This approach includes CSR within its framework• Focus on balancing performance in the three areas should be seen as a key driver of

sustainability for a business• Beyond financial profits:

• Environmental (e.g. use of, and attitude towards, resources)

• Social (e.g. impact that the company has on people, directly or indirectly. This may include suppliers or consumers for responsible lending issues)

• Economic (e.g. ensuring longevity of the company’s financial health, minimisation of detrimental impact to other economies)

• Marketers can play a key role here because of the closeness to customers

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Three significant initiatives

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Three significant initiatives

1. The Companies Act 2006• Directors’ duty to promote the success of a company in a way that is consistent with the concept

of enlightened shareholder value• Directors are also required to give due regard to (among other things) the impact of their

decisions on employees, communities and the environment• Quoted companies must now report information on environmental matters, the company’s

employees and social and community issues that are material to business

2. UN-PRI (the United Nations Principles for Responsible Investment)• A significant extension from the niche investors in the Socially Responsible Investments sector

into mainstream financial analysis• Defines principles of responsible investment, not requirements• Represents a commitment to incorporating principles into approach• Encourages greater use of GRI

3. The Global Reporting Initiatives (GRI) Third Generation Sustainability Reporting Guidelines• Cf The Triple Bottom Line• GRI’s objective is to help organisations give a balanced overview of their economic,

environmental and social impacts

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The importance and benefits of CSR for organisations

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The business case for CSR depends on risks and opportunities

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Risks

Reputational risk management• Reputations that take decades to build can be

ruined in hours through:• Corruption scandals (BBC phone-ins)• Environmental incidents (Shell’s

dumping of the Brent Spar oil rig)• Building a reputation of “doing the right thing”

within a corporation can mitigate these risks.

Licence to operate• Corporations will attempt to avoid interference in

their business through taxation and regulation.• Substantial voluntary steps on current issues like

the environment organisations can allow companies to escape intervention from governments, regulators and the media.

• Particularly important for firms seeking to justify eye-catching profits (e.g. private equity)

The business case for CSR depends on risks and opportunities

Opportunities

Human resources• CSR programmes can aid recruitment and

retention.• Giving staff the opportunity to take part in

fundraising activities or community volunteering can improve their perception of their employer, reinforce internal relationships and increase sense of well-being.

Brand differentiation• CSR can play a role in differentiating

organisations and building customer loyalty based through a distinctive set of ethical values, e.g. Co-operative Group and Body Shop.

• Positions organisations as being in-touch with sensitive issues.

• Encourages introduction of new products and services (e.g. carbon neutral credit cards, online statements) .

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The recent controversy about ‘unfair’ bank charges exemplifies potential risks

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CSR trailblazers – who’s doing it well?

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Source: http://www.bitc.org.uk/resources/publications/cr_index_2006_exec.html

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Some examples of recent award winners

• Kick-starting the careers of young people in the arts since 1993 with the "Pyramid Awards“

• The Pyramid Award scheme was launched in 1993 to offer practical and financial support to freelance artists, craftspeople, designers and performers to start a business or conduct a project in the crucial year after leaving college.

• Ten years of helping the homeless in partnership with Shelter.

• Bradford & Bingley launched its Community Affairs programme in 1996, identifying homelessness as one of its core areas of support, and in the same year entered into a relationship with Shelter.

• EDF Energy Environmental Leadership Award 2007 in association with the Institute of Environmental Management and Assessment

• By considering the environmental impact of its products and services, Barclays PLC is accessing new markets and helping customers cut their carbon footprint.

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Key trends in CSR

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Responsible business a source of competitive advantage

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How can marketers make animpact in relation to CSR?

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Analyse your company’s CSR policy and turn it into action

Articulate

• Understand your objectives• Define key messages• Relate to brand• Understand your target

audience• Tailor to different stakeholders

Communicate

• Target all stakeholders• CSR reports• Website• Marketing comms• Advertising• PR• Beneficiaries (e.g. charities)

Demonstrate

• Relate to activity and action• Integrity• Commitment• Evidence• Pictures• Reinforce your brand

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A few useful sources of information on CSR

Business in the Communitywww.bitc.org.uk/crindex

FORGE Group guidelineswww.abi.org.uk/forge/ForgeText.pdf

Harvard article: the link between CSR and competitive advantage (Michael Porter)http://harvardbusinessonline.hbsp.harvard.edu/email/pdfs/Porter_Dec_2006.pdf

Radley Reldar report on Corporate Responsibility Communicationswww.ry.com/files/news/4418/BiTC_RY_Brochure_FINAL.pdf

Article on Triple Bottom Linewww.cim.co.uk/mediastore/_Insights/Triple_Bottom_Line_Booklet_web.pdf

Companies Act 2006 (all 740 pages)www.opsi.gov.uk/acts/acts2006/ukpga_20060046_en.pdf

United Nations Principles of Responsible Investmentwww.unpri.org/

Global Reporting Initiatives G3 guidelineswww.globalreporting.org

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Questions?

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