Boots - Directions Supplement - Boots Prescription For a Responsible Business

1. DIRECTIONS
MONTHLY
SUPPLEMENT
DECEMBER 07
TRENDS AND ISSUES IN THE WORLD
OF CORPORATE REPORTING
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2. Directions Monthly December 2007 Issue 18
Welcome to the December edition of Directions Monthly. In the past year
we have seen private equity companies scrutinised over the takeovers
of some of the most respected and trusted businesses. So this month we
have invited Richard Ellis of Alliance Boots to provide his take on working
with KKR, the challenges they faced and reasons why private equity firms
are not really ‘barbarians’. He outlines his prescription for all businesses
that are addressing the responsible business agenda and explains why it
is so relevant to private equity-owned businesses.
Lucie Harrild Pavan Athwal
Everyone watched anxiously as Boots was taken over by KKR
– so how has Boots continued to maintain such a healthy
responsible business strategy?
Following the merger between Alliance Boots’ CSR credentials were established
UniChem plc and Boots Group plc, Alliance by the founders of the Company, the Boot
Boots plc was formed on the 31 July 2006. family, in the 1850s. In 1914 electrically
At the time there was doubt, particularly powered vehicles were introduced, in 1915
among the broader CSR community, as to a Combined Heat and Power Plant was first
whether the new Company’s approach to established and in the 1930s glass and
CSR would match that of Boots. In June cardboard were recycled. This agenda has
this year the uncertainty grew further not suddenly been discovered by Boots. It is
following the high profile private equity part of the DNA of the Company; it’s not an
acquisition of Alliance Boots plc by KKR add on, but something which is embedded
and Stefano Pessina. into the way business is done.
The question on most commentators lips was The new owners could see that CSR was not
– how would one of the UK’s most trusted a cost but a vital ingredient in the success of
Richard Ellis companies be affected by this ownership Boots. The CSR activities gave the brand its
Head of Corporate Social Responsibility, change and what impact would it have on personality. It was the reason why customers
Alliance Boots their CSR credentials? Some six months on “TRUST Boots”.
I can report it’s, “Business as usual”.
But KKR and Stefano Pessina needed more
Very few, if any, private equity-owned than just a compelling story – they needed
businesses have successfully introduced a proper business case. They wanted to see
CSR programmes. They have a reputation that this activity delivered economic as well
for being secretive; very few people outside as environmental and social benefits.
the world of private equity really understand
how these businesses operate. This lack of Central to this is the information gathering
transparency was one of the key drivers system, Credit 360. This provides the
for the Walker Review. Whilst some “numbers” which enable the CSR agenda to
recommendations have been made available be managed and KPIs to be set. It provides
there is still further work to be done before the data in reports and various surveys such
final publication. How Alliance Boots deals as the Business In The Community CR Index.
with these issues could well impact the final Without it CSR would not have been taken
version of this review. seriously at Board level. CSR today is judged
in exactly the same way as any business
At the heart of these findings is the need discipline. It is not given any special
for increased stakeholder dialogue. This has “favours” but must deliver value in the
been fundamental to the success of the same way as any Business Unit does.
Boots programmes and is the central plank
around which the new Company is building Through this process it was possible to
its CSR strategy. describe the real benefits of pursuing CSR
initiatives. For example, a range of transport
❝ For the paston-going two-way has
maintained an
five years Boots activities reduced the road kilometres driven
on behalf of Boots by 8.5 million. This saved
communications process with all its 5% in transport carbon dioxide emissions
stakeholders. They have helped shape the and £1.4 million in fuel costs. It was because
strategy and decide the priority areas; and we could articulate the business, as well as
exactly the same process continues today
as a private equity-owned company.
❞

3. Directions Monthly December 2007 Issue 18
❝
But KKR and Stefano Pessina needed more
than just a compelling story they needed a
proper business case. They wanted to see
that this activity delivered economic as well
as environmental and social benefits.
❞
the broader social and environmental Boots business understands the importance paper, cans and plastic. Such actions might
benefits, that the new owners were willing of CSR to its brand, but as the new business not in themselves save the world, but they
to encourage the “Business as usual” operates internationally some countries are send a very clear message to our people that
approach. only just starting their CSR journey. All parts CSR is an important part of the business
of the business need to be helped to improve agenda. It’s the start of our journey to create
Talking about CSR in business language their performance and achieve their full 100,000 ambassadors for CSR across the
to Stefano Pessina was key. He could potential. The first step on this journey for Company.
understand the strategic relevance of some of our international colleagues begins
supporting breast cancer charities when when they attend the CSR Training Course, But businesses, even passionate ones, cannot
79% of the employees were women and which equips them to become the tackle the responsible business agenda
83% of our customers are women! It wasn’t “champion” for CSR in their country. alone. The government could aid this process
just about doing good things for their own by offering more incentives to companies
sake but embedding these principles into As all parts of Alliance Boots become to follow sustainable practices. It needs
the fabric of the business. familiar with this agenda it becomes possible to develop joined up thinking between
to integrate Company-wide policies and central and local government on things
The importance of CSR to the new business introduce worldwide campaigns such as the like the building of wind turbines – National
was understood even before the acquisition. eradication of counterfeit drugs. government wants more but the local
In the Prospectus document three very clear government planning process often hinders
measurable CSR commitments were given
and have been met…
❝ Communication of our achievements
and aspirations will be key. I admire the
this. Legislation can too often be a blunt
instrument because it captures all companies
way Marks & Spencer have communicated irrespective of their type or past CSR record.
1. That CSR reports written along Global their “Plan A” CSR strategy; it is a great For example: if laws were to be introduced
Reporting Initiative guidelines would example of where a CSR programme requiring businesses to reduce their carbon
continue to be produced – the first CSR has been aligned to business strategy footprint by a fixed percentage, what would
report for Alliance Boots was launched successfully. This is not something Boots the base point be? For a Company like Alliance
on the 9th October this year. has done previously but the new owners Boots that has been doing lots of things
2. That a Board CSR Committee would be are giving us the confidence to maximise across our property portfolio for five years,
established to oversee CSR activities
across the whole Company – the first
the benefits of our CSR programmes.
❞ this would be much more difficult to do than
for a company that had done nothing.
meeting was in September 2007 and it Stakeholders want to know more about CSR
comprises Ornella Barra, Marco Pagni and in particular climate change issues. My prescription for private equity-owned
and Steve Duncan who are all full I think it’s fair to say the green consumer companies, which is equally applicable to
Management Board Members. is on the march. But they personally don’t all businesses, is to understand where CSR
3. That Alliance Boots would complete the know what they can do to solve this problem sits within the business agenda and who
BITC CR Index and allow its results to be and they don’t want to change their lifestyle is responsible at Board level. Explain CSR
published – Ornella Barra formally signed too much. So they want to buy from brands in terms that the rest of the business
the submission in November 2007 and that have done this for them. This means understands; don’t get bogged down with
receipt has been acknowledged by BITC. when they buy our products they can take some of the CSR jargon, particularly around
them home and enjoy them – safe in the carbon management. Make it relevant and
There is clear leadership for this agenda. knowledge that we have done what can be measure and report on what you do.
People at the very highest levels accept done to tackle climate change.
responsibility for the delivery of CSR The new owners of Alliance Boots are,
objectives. They do this because they This was why we worked with the Carbon after all, business people who want their
understand the real value it delivers for the Trust to obtain “Carbon Labels” for our investments to succeed – they will listen
business. Equally they recognise that they Botanics and Essentials shampoos. It shows and support strategies that deliver value
are members of society and that we all consumers that we are serious about this and exceptional returns, as well social
benefit from such activity. It is a passion agenda. Similarly we are encouraging our and environmental benefits.
that lives on in the new Alliance Boots. people to bring their personal behaviours to
work. At home we are used to recycling and
Looking forward, what are the challenges? turning off lights. So why don’t we do similar
things at work? We are encouraging such
Well, CSR is now firmly embedded on the behaviours by taking away personal waste
management agenda but we must integrate bins at Head Office. Now employees have
it across the whole business. The former to segregate their own waste and recycle

4. ABOUT US
SALTERBAXTER ADVISE
COMPANIES ON STRATEGY,
BRANDING, CORPORATE
COMMUNICATIONS AND DESIGN.
Our clients are extremely varied and include FTSE 100 companies; some
of the world’s most exclusive brands; independent, entrepreneurial
businesses; world-leading educational establishments; law firms; private
equity firms and media companies.
We name companies, re-invent companies and re-position companies.
We help companies communicate with shareholders and advise them on
how to address corporate responsibility. We launch, brand and re-brand.
A key area of our expertise is corporate reporting and we advise leading
UK and European organisations on strategy and design for their financial
and CR communications programmes. We currently work with 11 of the
UK FTSE 100.
Contact:
Lucie Harrild Pavan Athwal
lharrild@salterbaxter.com pathwal@salterbaxter.com
Tel: +44 (0)20 7229 5720 Tel: +44 (0)20 7229 5720
Directions Monthly supplements our main Directions report. This report is published each
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