Ethical corporation lccge impact debate muckosy 14 07 10

Social & economic impact of big
business on local communities

WELCOME

An Ethical Corporation and LCCGE
roundtable debate, 14 July 2010

Pam Muckosy, pam.muckosy@ethicalcorp.com

From measurement to management
 A marked shift in how companies are approaching this
topic
 How and why do companies measure socio-economic
impacts?
 A need to look beyond measures and KPIs:
 Companies seek to measure what they do in order to
report externally
 But, increasingly the aim is to understand the external
system in which the company works for better
management of the business

More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com

The study, www.ethicalcorp.com/impact
Looks at understanding the true impact of business.

 In-depth interviews with >30 corporate sustainability,
community programme and ethical sourcing managers
 Survey of 116 sustainability professionals worldwide
 Review of over 60 corporate sustainability reports
 Literature review of initial impact research
 Analysis of existing tools and processes available to
help you measure impact
 Case studies on companies that have begun to test
impact measurement methods

Conducted by Peter Davis, Isabelle Fredborg & Pam Muckosy


What drives a company’s approach?
How a company approaches this topic is driven
by a number of factors:
 What is the company’s business?
 Where does it operate?
 What is the company trying to achieve?
 Demonstrating accountability?
 If so, to whom?
 May be many different stakeholder groups who are
reached in different ways
 Seeking to understand its context
 So that it can better manage its business


Do companies measure impact?
(n=116)


Reasons companies measure impact
(percentages, n=116)

Communicate to stakeholders

Build reputation

Inform community programmes

Other

Secure a license to operate

Encourage infrastructure development

Monitor local activities that may do harm

Increase supply chain effectiveness


What impacts companies measure
(n=116)

Economic livelihoods for local community
Engagement, volunteering and charity
Job creation
Other
Human rights
Labour equality and rights
Poverty and economic equality
Local infrastructure
Access to basic resources
Tax contributions
Gender equality


Tying impact to performance or
business strategy? (n=116)


4 models of socio-economic impact
1. Management of supply chain
 What are the impacts of what we buy?
2. External benchmarking against globally-
defined standards
 GRI the best known
3. Management of ‘fence-line’ communities
 What is the local impact of a company’s operation
4. Contribution to local economy
 Corporate role in a host country’s development
trajectory


#1. Supply chain management
 Who?
 Large retailers and branded goods companies
 Why?
 To respond to consumer and media pressure to ensure that
supply chains do not contain labour, environmental and other
abuses.
 How
 Questionnaires and audit processes of supplier sites and
factories
 Accountability to whom?
 Demonstrating to customers that goods and services are abuse
free
 How it’s developing
 Companies increasingly asking all suppliers, not just
manufacturing sites, about their processes
 Increasingly a genuine desire to understand value chain


I.e. Sedex
 Exponential rise in the number of company
standards
 Often similar in scope but not co-ordinated in
application
 With the result that some factories found
themselves almost always monitored to slightly
different standards
 Sedex seeks to help companies collaborate in
their factory audits
 Repository of information
 Can still have company-specific questions/ issues
raised
 But bulk of information is shared

#2. External benchmarking
 Who?
 Many companies of all sizes
 Why?
 To respond to the pressures from international NGOs
and others to report and
 How
 Audit against an externally-generated set of
benchmark standards designed to allow comparability
between companies.
 Primarily aimed at the global ‘CR community’
 More intelligent targeting of standards to be relevant to
particular industries

I.e. GRI
 GRI is “world’s most widely used sustainability
reporting framework”
 Seeks to make social reporting as comparable as financial reporting
 Comprehensive reporting framework including:
 Corporate internal processes, for example
 Strategy and planning
 Report parameters
 Governance and engagement
 Performance indicators on 6 key issue areas, including:
 Environment
 Human rights
 Labour practices
 Sector supplements developed
 To tailor the broad framework more precisely to specific industries
 Examples include: financial services, mining and metals, financial
services and electric utilities
 More being developed


#3. Managing fence-line
communities
 Who?
 Predominantly extractive firms, or other industries with a
significant local footprint
 Why?
 To understand the inter-relationship of the site and the local
community and environment
 To guide corporate managers in behaviours in relation to local
people
 How
 Detailed assessment process to understand different aspects of
the relationship and to establish relevant benchmark metrics
 Primarily designed to show accountability to local communities
 However, also useful in demonstrating globally a responsible
approach
 Such assessments increasingly required as part of the due
diligence approach for new projects to get sign off


I.e. Anglo American SEAT Toolkit
 “Socio-Economic Assessment Toolbox”
 Designed to allow “operations to identify and
manage their social and economic impacts (both
positive and negative)”
 Designed as a management tool for Anglo’s site
operations in relation to their local communities
 4 stage process:
 Profile operation and local communities
 Identify socio-economic impacts and share that
assessment
 Develop management responses to each impact
 Report results to community
 Reporting is relevant only as a communication tool
with communities, not as a benchmarking exercise
or compliance exercise.

#4. Contribution to local economy
 Who?
 Large companies with significant investments in
particular countries
 Why?
 To understand the role that the company plays in the
society and economy of the host country
 To guide corporate managers in decision-making
 How
 Detailed analyses, conducted by development
specialists
 Demonstrating to customers that goods and services
are abuse free
 Companies


I.e. Unilever
 Increasingly seeking to understand the part
that its operations play in development
 Reports commissioned from development
specialists to understand impacts, e.g.:
 Oxfam on operations in Indonesia
 INSEAD study of operations in South Africa
 Some key findings of South Africa study:
 Unilever provides 0.9% of all tax revenues
 For each direct Unilever employee, there are 22
further jobs created in the value chain.
 Thus Unilever represents 0.8% of total
employment in South Africa


Sample strategic approach: DCED
Standard, www.enterprise-development.org


A few existing models being
reviewed

WBCSD Value Accounting
LBG
Poverty Footprint of Business

Five types of capital

Good for Business

Accounting for Sustainability


Ideas raised during the debate
 Address other motives such as: responding to investors,
differentiation, product impact and innovation
 What are the best units for measuring outcomes. $s,
equality?
 Include case studies on local developing country
companies
 Risk is a major motivator
 Localisation of strategy is a must
 How to work with in partnership with an NGO
 Incorporate the role of stakeholder engagement
 How can we assess ‘cultural integrity’?
 What can companies do with their findings? Is a new
business model required?
 Are there any lessons or is there cross-over with
environmental impact assessments?


Social and economic impact

Thank you

The full report will be published in
September at
www.ethicalcorp.com/impact


Ethical corporation lccge impact debate muckosy 14 07 10

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