1. 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
2. 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
3. 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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
4. 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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
5. Do companies measure impact?
(n=116)
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
6. 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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
7. 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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
8. Tying impact to performance or
business strategy? (n=116)
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
9. 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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
10. #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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
11. 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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
12. #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.
Accountability to whom?
Primarily aimed at the global ‘CR community’
How it’s developing
More intelligent targeting of standards to be relevant to
particular industries
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
13. 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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
14. #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
Accountability to whom?
Primarily designed to show accountability to local communities
However, also useful in demonstrating globally a responsible
approach
How it’s developing
Such assessments increasingly required as part of the due
diligence approach for new projects to get sign off
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
15. 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.
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
16. #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
Accountability to whom?
Demonstrating to customers that goods and services
are abuse free
How it’s developing
Companies
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
17. 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
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
18. Sample strategic approach: DCED
Standard, www.enterprise-development.org
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
19. A few existing models being
reviewed
WBCSD Value Accounting
LBG
Poverty Footprint of Business
Five types of capital
Good for Business
Accounting for Sustainability
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
20. 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?
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com
21. Social and economic impact
Thank you
The full report will be published in
September at
www.ethicalcorp.com/impact
More info: visit www.ethicalcorp.com/impact or email Pam Muckosy at research@ethicalcorp.com