Corporate accountability - Called to account
Sian Harrington, March 28, 2008
Human Resources magazine unveils its first ranking of UK companies specifically measured on how well they are embedding accountability for their environmental and social impacts into their HR strategies
When TNT's CEO Peter Bakker went to rub shoulders with the world's most influential leaders at Davos earlier this year, he travelled there in a Smart car.
Bakker is one of a growing band of business leaders who is leading by example in setting an agenda to embed in his company - and its employees - a more responsible attitude to their social and environmental impact. In fact, it is highly likely he is not the only member of staff driving one of these eco-efficient vehicles - all employees are offered a £2,280 incentive to make the switch for themselves.
TNT's mission is for clear and transparent corporate accountability. With recent resignations of leaders at HP and Deutsche Post for hidden dealings, to criticism of companies such as Gap and Mattel for their management of global supply chains, a swathe of high-profile incidents show that companies need to be more accountable for their social and environmental impacts.
But which large corporations are actually meeting these commitments? Which are building management systems and processes that embed accountability into the heart of their core business strategy? And what impact does this have on employees and HR?
Human Resources teamed up with think-tank AccountAbility (partnered by leading consultancy csrnetwork, as well as Fortune Magazine and Swiss- ratings agency Asset4) to look at those companies with significant UK interests or are headquartered in the UK (see table opposite) that feature highly in its Global Accountability Rating, 2007. The rating looks at the accountability performance of the world's 100 largest companies to identify those best-equipped to successfully compete in tomorrow's markets. It does this through analysis of corporate strategy, governance, engagement and actual impacts.
The rating draws on a careful analysis of publicly-available information and an assessment of 100 indicators of corporate performance for each company, based on information disclosed by the company itself in reports and websites. It also undertakes a 'reality check' on the impacts of performance, looking at controversial impacts, carbon emissions and success in forming partnerships for sustainable development.
The results show that energy firms, banks and car manufacturers have the strongest accountability performance - companies whose core business has high environmental or social impacts. Firms such as BP (top of both the global and UK ratings) and Barclays (second in both) have developed robust processes to integrate sustainability into their core strategy.
HSBC is the top performer on business strategy. This looks at how social and environmental goals are incorporated into business decisions. HSBC has built a strong position recently on climate change. It is "providing real investment solutions", says group chairman Stephen Green, "which enable our clients to incorporate climate change into their investment decisions." Other banks such as ABN Amro and Barclays also score well here, emphasising the huge importance of managing who they lend to and what they lend for.
Governance examines the processes that hold executives and board members accountable for achieving social and environmental targets. Oil companies such as Shell are strong performers here, being under the spotlight for both climate change and health and safety.
Stakeholder engagement, the third domain, encompasses quality of public disclosure, assurance and involvement with stakeholders, including employees. Vodafone and Tesco are good performers, with comprehensive processes to engage with stakeholders, identify issues and back-up communications from trusted auditors.
General Electric is among the best performers when it comes to the impact domain. This takes into account comprehensive data on media controversies, for example if a country is operating in countries with weak or bad governments. Second, it looks at public disclosure of carbon emissions per dollar of revenue. And finally, how involved firms are with multi-stakeholder initiatives on issues such as human rights, climate change and HIV/AIDS.
So what are the most accountable companies doing to support the development of staff to promote individual responsibility at work and encourage employees to be more accountable?
The rating identifies a range of examples, from smart recruitment strategies and staff training to engagement with employees on key strategic issues that show how companies are moving to embed accountability into core systems through HR practices.
HSBC, for example, has an ambitious training scheme. It is looking to provide 3,000 employees with the skills to understand a range of social, environmental and governance issues with a view to incorporating them into day-to-day decision-making. Elsewhere, firms are linking financial incentives with good accountability performance. HBOS ties 25% of its managers' bonuses to scores on key sustainability indicators.
Employees are a key stakeholder and firms such as Procter & Gamble and ABN Amro engage with trade unions, direct employees and indirect employees to understand key social and environmental issues. One example of what this means in practice is from Shell. Its social responsibility committee is free to talk to staff on site visits. They are encouraged to speak frankly to understand the challenges to Shell's social and environmental performance.
Employees are also being empowered to help drive the performance of management systems and promote organisational learning. GE's employee opinion survey allows staff to provide feedback across a range of issues to identify opportunities and challenges in the workplace, allowing management to learn and measure the impact of organisational changes on employees.
Companies recognise that strategies are needed for emerging sustainability challenges. A welter of firms, including Barclays, Citigroup and HP, are looking to create tools to accurately measure and manage new value drivers, from absenteeism and ethnic diversity to employee fundraising and the impact of new products and services on work patterns, for example the impact of teleworking on work-life balance.
One area receiving much scrutiny is gender equality. Numerous studies have identified that there can be significant benefits to productivity and the working culture if the ratio of male to female employees is reduced, yet consistently companies complain there is a lack of quality female workers. Leading firms are adopting strategies to help plug this gap. One such is IBM, which trained 1,000 secondary and high-school pupils in France to learn science and technology with a view to building a richer pool of talent for the future.
Smart HR benefits companies in all sectors, no matter what the size. It is not just about volunteering. Increasingly firms are doing more for their workers. From the Danish pharmaceutical company Novo Nordisk's NovoHealth, which looks to promote healthy lifestyles among employees, 3M's policy to continuously train directors in corporate governance, and TNT's car scheme, leading companies recognise that successful business tomorrow needs concrete actions today.
As Vodafone's chief executive officer, Arun Sarin, succinctly put it: "Trust is a pre-condition for doing business and it is directly linked to being accountable for your actions as a company."
HR is a fundamental foundation in this starting block.
Alex MacGillivray is head of programmes and Paul Begley is a senior researcher at AccountAbility www.accountability21.net. For more information and the global listing go to www.hrmagazine.co.uk
UK ranking Global Overall Strategy Governance Engage- Impact
ranking score ment
1 BP 1 75.2 82.9 85.4 73.7 58.9
2 Barclays 2 68.5 81.7 60.7 43 88.4
3 HSBC Holdings 4 67.2 93 66.4 59.5 50
4 Vodafone 5 66.3 88.1 70.9 81.9 24.6
5 Shell Group 6 66 81.2 78.9 68.1 35.7
6 HBOS 8 62 76 71.7 56.4 43.8
7 Tesco 11 60 65.6 62.9 49 62.5
8 General Electric 13 59.1 67.9 53.9 26.1 88.4
9 ABN Amro 14 57.6 85.4 52.9 35.8 56.3
10 E.ON 16 56.5 78 58.1 52.6 37.5
11 EDF 20 54.3 82.3 47.3 50 37.5
12 HP 24 52.6 84.7 54.5 40.1 31.3
13 Nestle 25 51.7 73.6 52.4 27.2 53.6
14 Ford Motor 27 50 77.7 57.1 27.6 37.5
15 P&G 31 49.1 58.2 40.6 22.7 75
16 Citigroup 32 48.6 61.2 54 23.1 56.3
17 Aviva 35 45.8 69.6 49 27.1 37.5
18 RBS 37 44 62.1 43 27.3 43.8
19 AXA 43 41.9 70.9 36.8 22.3 37.5
20 Exxon Mobil 48 40.3 49.2 35 27 50