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Blog | Wednesday April 25, 2018

We Need to Talk about Blockchain—Together.

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This is the second in a series of blog posts BSR will publish in 2018 exploring the intersection of disruptive technologies and sustainability. The first post was on artificial intelligence.

We need to talk about blockchain. Blockchain offers immense opportunities to achieve business and sustainability goals, but it is going to take serious collaboration to unleash its full potential.

Companies are experimenting with applications of blockchain to reach competitive objectives, and why wouldn’t they? But blockchain is not software as a service: The promise of the distributed ledger system is to radically change a system; it provides a unique opportunity to create accountability, transparency, and privacy all at the same time. This is appealing at a moment when trust in institutions is declining. Blockchain offers the very real possibility to truly transform supply chains—to create the transparent, traceable, equitable supply chains that many of us envision. And to do that, we need collaboration, not competition.

When to Consider Blockchain

Companies and global organizations are starting to apply blockchain to solve problems. Some companies are creating smart contracts that only execute when sustainability or other conditions are met. Others are using it to overcome “first mile” traceability challenges, where tracking a commodity in the first instance is difficult in the absence of formal markets or identities. There are burgeoning applications that create identities and payments for farmers or miners where formal markets are scarce—and applications that identify exactly how your tuna got into that can. There are even opportunities for companies to trace the origins of their electricity back to its source. 

We’ve identified four situations where a collaborative blockchain effort may be a particularly effective solution:

• When there is fraud or lack of trust in a system;
• When there are multiple parts to a transaction;
• When there is alleged inequity at key points in a system; and
• When there is a need to align disparate incentives in a system.

These are situations wherein a central authority is an impediment; where blockchain’s decentralized, distributed approach can create trust, transparency, and security. Some or all of these situations likely arise at some point in your supply chain. However, it misses the point of decentralization for individual companies to apply this technology independently in their own supply chains, particularly when companies’ supply chains overlap. Collective action will be more effective.

Consider this: If a blockchain solution for traceability in sustainably grown cotton is not trusted by the spinners and thus not used, the value of that cotton gets lost before it is even spun into thread. If apparel companies haven’t agreed on the kind of data they’d like to see or the underlying blockchain fabric to use before deploying a solution, they risk a duplication of systems, which would run fully counter to the blockchain promise.

The Weakest Links in the Blockchain

Another compelling reason for collaboration is that the world of blockchain is still the wild west. It’s easy to forget that there are currently a limited number of live projects, most still in pilot phase, many of which will never emerge beyond that phase.

There are risks of blockchain we don’t fully understand or even know about yet. There are also risks that we are aware of: First, blockchain is inherently virtual, which can heighten the likelihood of dealing with unsavory actors.

Second, the energy demand for certain blockchain systems can be astronomical. While new designs are coming into practice to mitigate that energy use, it remains a consideration.

Third, blockchain is not immune to the “garbage in—garbage out” challenge; much needs to be done to ensure the information entered into a blockchain is an accurate digital recording of what is happening in the real world.

Finally, information security is critical. A well-designed system should be secure and very difficult to access, but experts agree that it could be possible to hack a blockchain.

How to Realize Blockchain’s Potential

Critics may say that blockchain is overhyped, but it should not be underestimated. According to Joseph Lubin, one of the founders of Ethereum and now Consensys, “It took about 10 years from when the world wide web [started] … to when my mother started hearing about email.”

This is a critical moment for the sustainability profession—a moment to come together around big ideas, like accountability, transparency, and privacy, and be the change we want to see.

To use blockchain to radically change supply chains, we will need the right players around the table—from farmers to workers and factory owners; from financiers to global buyers and government officials. We are just at the beginning of this journey, and at BSR, we are optimistic about the prospects of collaborating to leverage this technology in service of a better world.

Blog | Monday April 23, 2018

Five Years after Rana Plaza, We Still Must Do More to Empower Women Workers in Bangladesh

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Five years ago, a building housing a garment factory in Dhaka, Bangladesh, collapsed, killing 1,134 people. The deadliest structural failure in modern human history, the Rana Plaza tragedy turned the eyes of the world to Bangladesh and sparked a conversation about compliance and building safety.

Since then, brands and the development community have come to acknowledge that the workplace presents an opportunity not just to strengthen safety norms, but to address the needs of workers more broadly. Workplaces today are so much more than physical structures: They are places of opportunity for an income, and they are spaces for change.

This recognition has led to an increased focus on women workers and the particular challenges they face—and addressing these challenges begins with listening to women. BSR’s HERproject has been working in Bangladesh since 2010. By bringing together brands, their suppliers, and local partners, HERproject has been able to drive significant progress through workplace-based training and guidance. In total, HERproject has reached 240,000 women workers in 165 Bangladeshi factories since 2010. As one example of the impact this has had, HERproject has measured a 49 percent increase in Bangladesh in the number of women using sanitary pads during menstruation, which reduces the possibility of infection, across 10 factories.   

However, major challenges remain. Almost 60 percent of female garment workers in Bangladesh have experienced some form of physical or verbal violence at work. Women workers also often lack basic health information and access to healthcare, which has a negative impact on their working and personal lives (only 45 percent of Bangladeshi women are using a modern contraceptive method). Occupational segregation and discriminatory social norms continue to ensure that women remain anchored in low-paying production jobs.  

The Rana Plaza tragedy stimulated progress, with organizations working to address building infrastructure and give workers a voice. Through the Accord on Fire and Building Safety in Bangladesh, brands have invested heavily in the modernization of supplier factories. As another example, the Alliance for Bangladesh Worker Safety has provided a helpline for workers to report issues anonymously.

We believe that brands, suppliers, and the development community can do four things to further the empowerment of women workers:

• Listen and respond to the voice of women workers. This means collecting quantitative and qualitative data on worker well-being to inform the design of programs, including on the knowledge and agency that women may possess and lack. It also means rigorously measuring the impact of programs and revising them based on the evolving needs of women.
• Make women’s empowerment part of business as usual. Both suppliers and brands can put women’s empowerment at the heart of business processes. Factories involved in HERproject, for instance, are working to revise healthcare systems to ensure that they work for women. Through its recent WE Women initiative, Lindex is incorporating gender equality into its supplier business scorecard, thereby according preference to suppliers that demonstrate commitment to women’s empowerment. The ascena Retail Group has also worked with BSR to revise its Code of Conduct for suppliers. These efforts suggest that resources should be allocated to ensure gender considerations are included in management systems.  
• Support suppliers to increase ownership. For gender equality to take hold, factory managers must understand and own the change process. Brands can accelerate this by acknowledging that a “one-size-fits-all” approach will not be sufficient. Rather than delivering one-off projects, brands and suppliers should work together to build the capacity of factory managers, support them in setting goals, and drive sustainable long-term progress.   
• Don’t go it alone—collaborate. Many challenges, such as sexual harassment or cash wage payments, stem from social norms and policies. Tackling these effectively will require forming alliances to create an enabling ecosystem. In Bangladesh, brands and suppliers can begin to tackle sexual harassment and gender-based violence by working together to operationalize the High Court Order to establish anti-harassment committees. They can also collaborate to advocate for and implement digital payrolls, which are particularly beneficial to women workers.

Women still make up the majority of the workforce in ready-made garment factories in Bangladesh. On the fifth anniversary of Rana Plaza, it is critical to ensure that the needs of women workers remain a key consideration for companies looking not just to ensure basic safety, but also to improve the welfare and well-being of their workers.  

Blog | Friday April 20, 2018

The Business Case for Empowering Women through Climate-Resilient Supply Chains

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For the past three years, the World Economic Forum’s annual Global Risk Report has ranked climate risks high priority in terms of likelihood and impact. For business, this includes both supply chain risks, like water scarcity, and general physical and operational risks that will require resilience and adaptation solutions.

In addition to the economic impacts on physical assets and infrastructure, climate change will have a profound effect on people in supply chains and the communities in which they operate. This human dimension is often overlooked but extremely important in addressing climate risk and ensuring business continuity.

Climate risk, climate resilience, and women

Mary Robinson, former President of Ireland and former UN Commissioner for Human Rights, said, “Climate change is the greatest threat to human rights in the 21st century,” and, “People who are marginalized or poor, women, and indigenous communities are being disproportionately affected by climate impacts.”

This is especially true for women. Women already face various underlying economic, social, cultural, and political barriers that limit their choices: barriers related to their access to income, education, and technology, as well as obstacles to exercising their public voice and decision-making. Climate change is only predicted to exacerbate these barriers.

For sectors that heavily depend on a female workforce, this presents a high material risk. Take, for example, the agriculture sector. Estimates show that in some developing countries, women make up over half of the agricultural workforce. Systemic barriers for women therefore prevent agricultural supply chains from reaching their full productive potential. These barriers can also limit the ability of a business to react, respond, and adapt to the unpredictable realities of a changing climate.  

The business case for intervention—to challenge risk as well as create opportunity—is clear. A truly climate-resilient agricultural supply chain should be able to anticipate and respond to climate risks and vulnerabilities across commodities, geographies, and communities.

The good thing is that increasingly, businesses understand the importance of climate resilience strategies. Furthermore, doing so in gender-friendly ways will be a critical element of this work, although to date it has been less commonly understood and thus overlooked. 

Effectively tackling climate risk will be impossible without involving women. Although they are disproportionately affected by its impacts, women bring unique skills and perspective toward climate-resilience efforts.

Applying a gender lens to resilience activities can help companies develop new solutions for anticipating, absorbing, accommodating, and rapidly recovering from climate events. Involving women in climate resilience planning and implementation fosters innovation. For example, women’s local knowledge of the land and of traditional and sustainable agricultural methods make them experts in natural resource management. And when women have information and access to tools and technology, they are more likely to adopt sustainable practices, which may include water management, terracing, composting, incorporating high-yield and stress-tolerant varieties of crops, and pasture management.

There are also many co-benefits that arise from empowering women across agricultural supply chains. Increasing women’s agency, enhancing the resilience of communities and livelihoods, and making progress toward closing the global gender gap are among them. Increasing agricultural productivity and stability of supply enables people, the economy, and natural systems to rebound quickly in the face of adversity.

Women spend 90 percent of their incomes on their families; therefore, when women make more money, more money is invested in school, health, and housing improvements. Efforts to empower women and close the gender gap in labor markets could add US$28 trillion to global, annual GDP within the next decade. It’s a clear win-win for companies to empower women through climate resilience activities.

What can companies do?

There are many actions companies can take, both within their own operations and supply chains as well as to enable and influence others, including:

• Ensuring internal policies and plans on climate change are gender-sensitive;
• Providing women with access to relevant and gender-sensitive trainings, inputs, financing, and technologies to strengthen stability in agricultural production and improve economic opportunities;
• Enabling women to effectively respond to climate-related events by linking them with local networks; and
• Advocating against underlying inequalities and removing systemic barriers that hinder the lives and livelihoods of women, such as the lack of decision-making power or land (and land inheritance rights), which exacerbate the disproportionately negative climate impacts for women.

To help business address this challenge, BSR’s Business Action for Women, “Empowering Women to Lead through Climate Resilience” cluster builds collaboration among companies with agricultural supply chains and leading women’s empowerment stakeholders. In the coming years, we will work to equip the private sector with a greater understanding of gender-sensitive climate resilience strategies and actionable methods to empower women through climate-resilient supply chains.

Companies can also engage on climate resilience and other nexus issues, including supply chains, women’s empowerment, and inclusive economy, at the Global Climate Action Summit from September 12-14 in San Francisco. Companies and other stakeholders will discuss the myriad ways to accelerate climate collaboration and action. To learn more about the Summit and how you can get involved, register for our webinar on May 16.

Blog | Wednesday April 18, 2018

An Exciting New Era for ESG and Socially Responsible Investing in Japan

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While the proportion of socially responsible investment (SRI) relative to total assets managed in Japan was only 3.4 percent in 2016, compared to 52.6 percent in the EU and 21.8 percent in the U.S., the growth of SRI in Japan has been significant—242 percent from 2016 to 2017 to approximately US$1.13 trillion, according to the 2017 Japan Sustainable Investment Forum Report. Why has this happened?

In recent years, Japan has made a massive shift to begin to integrate environment, social, and governance (ESG) factors into its investment strategies. For Japanese companies, this creates an environment of support for sustainability efforts, and we are likely to see these practices increasingly become the norm. Companies headquartered outside Japan, too, would be wise to take note, as this shift by the world’s third-largest economy is likely to have implications for not only their Japanese operations but across their value chains abroad.

In short, the pro-business Japanese government has made the nation’s expectations for sustainable business practices clear, helping investors understand a broad set of ESG issues that are material for their investment strategies and providing structure and support to enable social dialogue.

Japan’s changes to date and roadmap for the future are well-summarized in the Ministry of Economy Trade and Industry (METI) report commonly known as the Ito Review 2.0. The initial Ito Review, published in 2014, showed the challenges created by the lack of long-term asset management culture, combined with a lack of dialogue on investor expectations. In response, the Japanese government has taken a systematic approach to address this issue. 

The next year (2015), the Tokyo Stock Exchange, with support from the Financial Service Agency (FSA), issued the Japanese Corporate Governance Code, which established fundamental principles for effective corporate governance at listed companies in Japan, with the intention of encouraging sustainable corporate growth and increased corporate value over the mid- to long-term.

And when the Japanese Government Pension Investment Fund (GPIF), the world’s largest pension fund, with approximately US$1.3 trillion in assets under management today, signed the UN Principles for Responsible Investment (UNPRI) in 2015, the impact had on not only Japan’s investment landscape, but also globally, was catalytic. It demonstrated how an asset owner with an ESG champion at its helm can swiftly translate its conviction into change in the marketplace.

GPIF has emphasized the relationship between ESG and long-term value, explaining that for long-term investors, material ESG factors have implications for investment performance by definition. By extension, this means that taking these factors into account in investment analysis and decision-making is consistent with fiduciary duty.

Pressure for both investors and companies to change toward responsible investments and sustainability has come not only from the Japanese government but also from civil society. In the past few years, both international and local NGOs in Japan have started voicing concern on topics including climate change, investment in coal/fossil fuels, and the sourcing of paper/pulp and palm oil.  

This year’s Responsible Investor conference, RI Asia Japan, was held in Tokyo on April 10-11. The event attracted both local and international audiences, and reflected the changing focus of Japan’s investment landscape. Discussions have moved beyond whether investors should integrate ESG or not, and instead focused on the “how,” including addressing the more nascent areas of ESG integration into fixed income and passive strategies. This shift alone represents significant progress from where Japan sat in its closed ecosystem just a few years ago.

The framing of the opportunity to connect an ESG investment strategy to the UN Sustainable Development Goals (SDGs) has been rapidly accepted by Japanese investors and businesses alike. As Hiromichi Mizuno, Executive Managing Director and Chief Investment Officer of GPIF, explained at the event, the number of articles talking about ESG in Japan has quadrupled over the past two years.

Yet at both at RI Asia and two BSR side events around the conference, it was clear that Japanese investors seek deeper guidance on how to properly integrate ESG considerations into their investment strategies. A few key learnings from the event for the investor community included the following:

• Mainstream Japanese investors new to ESG can learn a great deal from international players who have long integrated ESG in the core of their investment strategies, such as AXA, Clearbridge, Wellington, BNP Paribas, UBS, and others.
• ESG reviews of companies commonly use information from major ESG date/rating providers; investors should leverage this data as a starting point. In-house analysts can use it to inform their own deeper research and analysis, but they should also engage in dialogue with companies directly.
• Socially responsible investments are not only about integration and engagement, but can also take the form of innovative products. There could be a new market opportunity to attract various investors by developing innovative financial products, including fixed income and impact investments, unique to the communities addressing ESG challenges in line with SDG goals.

The next few years are likely to tell the story of how SRI takes hold, proliferates into the Japanese investor and business communities, and, hopefully, helps define ESG leadership in Asia and around the world. At BSR, we’ll continue to watch this space and and work with our member companies, including our banking and investment members, to assist with their responsible investing needs.

Case Studies | Monday April 16, 2018

Creating an Internet Powered by 100 Percent Renewable Energy

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Data center operations account for two percent of all U.S. electricity use—and this proportion is unlikely to shrink. In 2012, BSR brought tech leaders together to form the Future of Internet Power, a collaborative initiative working toward a shared vision: an internet powered by 100 percent renewable energy.

The Challenge

While the thriving technology sector provides significant business and social benefits—many of which help to reduce negative environmental impacts—data centers are energy intensive. In 2010, data centers represented 2 percent of all U.S. electricity use, and that percentage is unlikely to decrease, given our increasing reliance on mobile and internet communications.

Today, internet companies and data center operators are addressing their impacts by considering the source of the electricity that powers their data centers, which is often a mix of renewables, natural gas, and coal. Moving beyond incremental improvements in the energy mix requires access to and use of sustainable, low-carbon electricity at scale. To make this a reality, companies will need to both collaborate across the industry and partner with local utilities and policymakers to develop the infrastructure and promote the regulations that will enable renewable energy procurement for internet power.

Our Strategy

In 2012, BSR launched the Future of Internet Power (FoIP), a collaborative initiative composed of some of the world’s most influential companies working to power the internet with 100 percent renewable energy. Today, FoIP members include Adobe, Akamai, Autodesk, Bank of America, eBay, Facebook, Hewlett Packard Enterprise, Salesforce, Symantec, TimeWarner, VMware, and Workday.

For internet companies, powering data centers with renewable energy can require clearing a number of hurdles: navigating regional environmental policies and incentives, in some cases paying cost premiums for renewable versus coal power, and addressing challenging infrastructure requirements for offsite power generation. These and other factors make sourcing low-carbon power difficult for individual companies to manage alone. Through FoIP, companies collaborate with peers, suppliers, and power developers to build smarter approaches and identify opportunities for shared or joint investment.

Our Outcomes and Impact

FoIP has played a foundational role in helping the technology sector set aggressive and achievable commitments to renewable energy. As of April 2018, nine FoIP members had committed to 100 percent renewable energy: Adobe, Autodesk, Bank of America, eBay, Hewlett Packard Enterprise, Facebook, Salesforce, VMware, and Workday.

FoIP also launched the Corporate Colocation and Cloud Buyers’ Principles, which outline six criteria that companies would like their data center service providers to meet. This includes providing data on customer energy consumption, disclosing facility energy sources, and supporting renewable energy advocacy. As of early 2018, 17 customers of industrial data center service providers (also known as “colos”) and cloud services became signatories, demonstrating their support for the six Principles, and four cloud and colo providers became Principles supporters, committing to work with their customers to put the Principles into practice.

In 2018, FoIP’s focus will be on finalizing and rolling out new tools for companies choosing renewables when making data-center siting decisions, encouraging colos to procure renewables, streamlining and standardizing the documentation required to make data-center-related renewable energy claims, and continuing to collaboratively tackle greenhouse gas accounting challenges in Scope 3 emissions.

Lessons Learned

In addition to sharing best practices and collaborating on solutions through FoIP, BSR’s one-on-one work with companies creates a model that we can customize for other businesses to develop and manage renewable energy infrastructure projects.

We have learned that big challenges like these require collaborative solutions. Building on the FoIP approach, we have been able to expand the group’s mission by working through other partnerships, including the Renewable Energy Buyers Alliance, a collaboration with the World Resources Institute and World Wildlife Fund Buyers' Principles initiative, and the Rocky Mountain Institute's Business Renewables Center. By working together, we can scale our impact even more, while making it easier and more efficient for businesses to help shift the energy mix powering the internet toward renewables.

Reports | Monday April 9, 2018

Women in the Jewelry Supply Chain: Landscape Review of Barriers to Women’s Economic Empowerment

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This white paper explores the role of women in the jewelry supply chain and the challenges they face to their well-being and advancement. The study focuses on precious metals (primarily gold), diamonds, and colored gemstones and highlights three key phases: mineral and gemstone extraction, diamond and colored gemstone cutting and polishing, and jewelry manufacturing.

While this paper is not an exhaustive review of all the ways the jewelry industry impacts women, it provides emerging perspectives, analysis, and observations designed to stimulate dialogue and inform ongoing debate.

This paper was prepared for a convening in April 2018 to bring together key stakeholders in the jewelry value chain—from mining companies and manufacturers to retailers and brands—and explore how the jewelry industry can be a positive driver of women’s empowerment and gender equality.

This research was supported by the Ministry of Foreign Affairs of the Netherlands and Swarovski.

Blog | Wednesday March 28, 2018

Next-Generation Private-Sector Collaboration for Sustainable Development: Q&A with Neste

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This blog post is part of a series of interviews on how the private sector contributes to sustainable development through collaboration. It is adapted from an interview that BSR’s Cecile Oger and Laura Marie Uhlmann held with Adrian Suharto, Sustainability Manager at Neste, as research for Private-Sector Collaboration for Sustainable Development, a new report from BSR and The Rockefeller Foundation.

BSR: What role does multistakeholder collaboration play at Neste?

Adrian Suharto: Collaboration is anchored in Neste’s sustainability strategy. As a company, we seek to act responsibly in society and in the use of natural resources, and one way to do so is through multistakeholder collaboration. Neste is an active member in collaborations like the Roundtable on Sustainable Palm Oil (RSPO), the International Sustainability and Carbon Certification (ISCC) Association, the RSB, and other industry collaborations or working groups, all of which help us address sustainability challenges crucial to not only our company but our industry more broadly. Hence, there is a strong internal drive at Neste for collaboration motivated by both our sustainability goals and business goals, as we understand that we cannot tackle industry-level problems in isolation.

BSR: How does collaboration start?

Suharto: Collaboration can be used to leverage influence and economic power to drive positive—even transformational—change. A natural starting point for collaboration is when an organization realizes that it has a stake in a certain issue that aligns with the interests of other stakeholders.

If you take the example of RSPO, one of the key reasons that global brands and retailers, palm oil processors and traders, manufacturers of consumer products, social and environmental NGOs, smallholders, investors, and many others started collaborating on palm oil sustainability was that there was increasing pressure to act as civil society organizations were raising public concern and awareness about the adverse environmental and social impacts associated with palm oil cultivation and increasing use. Companies quickly understood that this issue touched upon different sectors, and the challenges could not be addressed by any single actor or even a single industry alone. Hence, the RSPO was founded as a platform to convene a diverse range of stakeholders around this one common challenge and seek to collectively and effectively address the sustainability challenges of palm oil.

BSR: In your experience, what are some of the key challenges that companies face when engaging in collaboration, and how can these be overcome?

Suharto: A major obstacle to collaboration is a lack of consensus. This is especially common in large, multistakeholder collaborations. Although all actors might acknowledge the need for collaboration, reaching consensus to take action and move ahead on certain issues can be a real challenge.

Competition between companies can also impede successful collaboration. While large companies have a lot of leverage in collaborations due to their economic power, some can be afraid to compromise their competitiveness, be accused of antitrust violations, or lose face in collaborations for which they do not feel prepared. Neste’s commitment to sustainability is very strong, and our palm oil supply chain is 100 percent traceable. We additionally use only certified palm oil. We have experienced cases in the past when other companies that were less advanced in terms of their sustainability commitments on certain issues have been reluctant to collaborate with us.

At the RSPO, we have been successful in avoiding these challenges by working with selective suppliers with similar ambition levels to push forward on the sustainability of palm oil. The lesson here is the role of leadership: If you want a collaboration to be successful, it is important to have a few strong leading organizations that set an example and demonstrate how shared challenges can be solved collectively.

BSR: You mentioned leadership as a success factor for collaboration. What are additional drivers that make collaboration successful?

Suharto: Collaborations are successful if they are relevant to the companies that participate in them, or, in other words, if there is a strong value proposition for companies to collaborate. The RSPO is again a good example. But companies also need to recognize that collaboration requires dialogue, rather than competition. Hence, dialogue and the intention of different actors to collectively tackle shared sustainability challenges are what truly drive successful collaboration.

BSR: What role will collaboration play in the future, and what are the opportunities for companies in engaging with different stakeholders to address sustainability challenges collectively?

Suharto: I believe that the private sector will increasingly look at collaboration as a means to tackle major sustainability issues because it is the most effective way to achieve improvements and transformational change. This will become the new norm.

I also expect to see an increasing level of consolidation in the collaboration space. Many collaborations target similar sustainability challenges and operate in the same region. Understanding common goals through dialogue, not only between companies but also between and across collaborations, is the way forward.   

Blog | Tuesday March 27, 2018

Corporations as Citizens: Have We Come Full Circle?

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From the business leadership that helped to deliver the Paris Climate agreement, through Larry Fink’s recent letter to CEOs about social purpose and long-term growth, to the even more recent examples of Citigroup, Walmart, and Dick’s Sporting Goods changing their approaches to gun sales, business is leading on a wide range of sustainability and social issues.

What this fundamental shift really calls out is the idea of a corporation as a person coming full circle. Whatever one may think about the implications of the Citizens United decision on campaign finance in the U.S.—and the impact of corporate money and influence in our democratic system has been widely criticized—it clearly expanded the definition of corporate “personhood.” In the case, the majority ruled that corporations, as associations of individuals, have free speech rights under the First Amendment.

As Wikipedia states, “a person is a being that has certain capacities or attributes such as reason, morality, consciousness or self-consciousness, and being a part of a culturally established form of social relations, such as kinship, ownership of property, or legal responsibility.” This is very different from the institutional concept of a corporation defined by Milton Friedman: specifically that a company's sole responsibility is to increase profits for its shareholders.

If companies are like people, it follows that they should act more like people, or at least members of a community. You don’t take care of your family members because you are legally required to; you do it out of love. You don’t shovel your elderly neighbor’s sidewalk because you have to; you do it out of companionship. Thousands don’t donate money, supplies, time, and even their own blood to victims of natural disasters because of a legal obligation; they do so because they have empathy for other people.

Yet until the past few years, our society has not expected corporations to act in the same way. We might look to governments, religious institutions, or nonprofit organizations to “take care” of society, but not our corporations. Despite great work in the corporate sustainability field, we have not expected, or even wanted, corporations to truly act like citizens.

In fact, with Citizens United, there have been legitimate concerns that the power of corporations to capture government to serve narrowly defined short-term shareholder interest has grown too strong.  But does it have to be this way?  Could Citizens United actually be a path for companies to leverage their influence for the good of society? We are seeing hopeful signs that this could be changing, as more companies behave as institutions that have the rights—and the responsibilities—of good citizens.

In the U.S., with our devotion to capitalism and the spirit of entrepreneurship, we’ve long held up the ideal of a company. And while a lot of societal challenges depend on cross-sector collaboration and a fair regulatory environment, perhaps it makes sense that we go back to that ideal of a corporate citizen. This entails acting with integrity, contributing positively to one’s community, and putting society above one’s self interest when the two are in conflict.

As Fink wrote recently, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

Those of us who work in corporate sustainability are familiar with a long-standing debate about what we call it—corporate responsibility, sustainability, corporate citizenship, shared value, etc. Many of us who moved away from “responsibility” language did so because it seemed to set the bar too low: Shouldn’t we aim for more than being responsible? What about the value creation opportunities and the need to drive positive change? On the other hand, a focus on the value creation side implies that it’s always a win-win; sometimes, companies have to make hard decisions where it may cost more in the near term to do the right thing.

Whatever we choose to call it, we can and should expect businesses to stand up for what they believe is right, to treat their workers and communities well, to act with integrity and as role models for society—not because the government requires it, but because that’s what it means to be an upstanding corporation. If a company is bestowed certain privileges from society, then they have inherent obligations to that society.

In many ways the shift we’ve been experiencing over the past year comes back to the idea of a company as defined by the Citizens United decision. If we believe in the promise of capitalism, then we should be looking to business to lead and to “take care” of society. We should hold all companies to the expectation that they be these ideal corporations—and in doing so, that they be exemplary citizens.  

Blog | Thursday March 22, 2018

Why Hiring 100,000 Impact Workers Is Only the Beginning: Interview with The Rockefeller Foundation

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This week, the Global Impact Sourcing Coalition (GISC) challenged the business process outsourcing (BPO) industry to hire 100,000 new impact workers by the end of 2020. The group also announced the launch of the world’s first Impact Sourcing Standard, designed to increase the adoption of Impact Sourcing by setting out uniform criteria for what it entails.

At the launch, we caught up with Mamadou Biteye, Managing Director, Africa Regional Office, The Rockefeller Foundation, as he reflected on the development of the GISC and its progress to date.

Mark Williams: What need led to the formation of the Global Impact Sourcing Coalition?

Mamadou Biteye: Economic inequality is one of the most threatening global challenges of our time, jeopardizing stability and social progress worldwide. The World Bank estimates that 2.1 billion people in the developing world are surviving on less than US$3.10 a day, and more than half of the world's poorest people are in sub-Saharan Africa. For these individuals and their families, income inequality creates a cycle of poverty that can persist for generations. One of the most sustainable means to reduce such inequality is to ensure that poor and vulnerable populations have access to formal employment and training, giving them the opportunity to lift themselves and their families out of poverty. GISC is trying to do this by creating access to opportunities of gainful employment.

Williams: How did the GISC come into being?

Biteye: As part of its Digital Jobs Africa initiative, whose aim was to catalyze new, sustainable employment opportunities and skills development for African youth through ICT, The Rockefeller Foundation had been working with the private sector for six years to influence their adoption of Impact Sourcing in their hiring practices. We later partnered with BSR, a global non-profit organization that works with its network of more than 250 member companies to build a just and sustainable world. BSR is today the secretariat and facilitator of the Coalition.

Williams: How has the GISC grown since its launch?

Biteye: In September 2016, The Rockefeller Foundation and BSR launched the GISC with 20 founding members, including companies and partner organizations. An additional 23 organizations have since joined. GISC’s member companies have a combined workforce of over 1.6 million BPO workers, representing an estimated 10 percent of the global industry.

Williams: How important is the collaboration for the BPO industry and can other industries follow its lead?

Biteye: The Rockefeller Foundation initially targeted the BPO industry in areas such as call centers and data entry, due to their fast growth and high potential for job creation. Today, leading BPO providers have become early champions of Impact Sourcing and are eager to prove the business case for this inclusive hiring practice. While the initial uptake has been a major success in the BPO sector, Impact Sourcing is applicable across sectors and across industries. The BPO sector serves as an excellent forerunner.

Williams: How does The Rockefeller Foundation support industry collaboration?

Biteye: For more than a century, we have worked through partnerships to create the change we want to see and improve the lives of poor and vulnerable. This has been the case not only via Digital Jobs Africa and GISC, but across many of our initiatives at The Rockefeller Foundation, so it is truly in our DNA to bring different organizations together and facilitate their working together to address our challenges for greater impact. We have been fortunate to work with very capable organizations, BSR being one, to catalyze our funding and especially our impact.

Williams: What do you predict for the future of Impact Sourcing?

Biteye: Since the formation of the GISC, we have seen the increasing positive social impact that can be achieved through Impact Sourcing and the power of procurement. The Global Impact Sourcing Challenge will take this ambition to the next level and, together with the new Impact Sourcing Standard, will be the catalyst for a global increase in inclusive hiring practices.

To learn more, please email gisc@bsr.org, and visit our website at gisc.bsr.org. Read more about how The Rockefeller Foundation and BSR approach private-sector collaboration for sustainable development.

Blog | Wednesday March 21, 2018

Culture, Behavior, and Corporate Integrity 2.0

Preview

At the Organisation for Economic Co-operation and Development (OECD) Integrity Forum in March of last year, the OECD concluded that a narrow focus on anti-corruption and fraud prevention has proven insufficient, and companies must broaden their approach to building “cultures of integrity.” Since then, social and political dynamics have further sharpened the need for companies to rethink corporate purpose, values, and ethics beyond compliance. In other words, it is time to launch Corporate Integrity 2.0.

Corporate Integrity 2.0 means considering ethics and integrity across the organization, not simply delegating ownership to the compliance team or responsible business functions, and managing this as much more than a response to regulatory risk. It involves using the latest behavioral research to shape decisions on governance, incentives, and oversight and working collaboratively with other organizations in the public and private sectors to tackle systemic social challenges. It entails considering the meaning of corporate values and understanding that these are determined in practice by strategic decisions, reward structures, and political and commercial relationships.

As BlackRock’s 2018 letter illustrates, the mainstream investment community is becoming increasingly vocal in its demands for companies to demonstrate social value. Businesses are also being called to step up and take action on a range of societal concerns, such as tax transparency, lobbying, inequality, immigration, women’s rights, and climate change—all areas that traditionally sit more squarely in the realm of public policy.

In response to these dynamics, there has been a notable growth in willingness of companies to take public positions on key issues, and several commentators have noted the rise of “CEO activism” as part of a new effort to engage with society in a more impactful way. Questions of corporate values and purpose are front and center in the minds of senior leadership teams, and this trend is only set to accelerate.

One question that has received far less media attention is what this means for how companies structure, manage, and organize themselves internally. Shifts are occurring here, too, but progress is far more incremental, and many companies tell us that they lack concrete direction on their next steps. As we have argued elsewhere, how to build and sustain an organization whose employees are happy, motivated, and ethical is one of the most complex, elusive questions confronting business leaders today.

As the OECD’s upcoming paper on behavioral insights for public integrity argues, creating cultures of integrity is a complex and multilayered effort. Employees need support and guidance on the ethical aspects of their daily decisions, but the cues an organization gives via its structures and management decisions are equally important.

Most compliance programs assume that individuals are rational actors making cost-benefit calculations, deciding to avoid misconduct if they perceive that the likelihood of detection or punishment outweighs the benefit of the wrongdoing. However, a compelling body of academic research suggests that this is not the best way to understand unethical behavior. Humans have a propensity to rationalize and justify their own decisions, and the organizational and group context is of overwhelming importance in this regard. Risk is increased via a range of factors, including role stress, poorly designed incentives, time pressure, diffuse accountability, and overly draconian preventative regimes. Companies have a huge opportunity to incorporate these findings into their programs today, and in the process can reduce the enormous cost and compliance burdens of approaches whose effectiveness is questionable at best.

We think there is a bigger opportunity to more cohesively align the ethics and compliance and sustainability agendas within organizations. Given what we know about how humans are motivated, how they respond to situational cues, and how fear of punishment may have negative unintended consequences, the compliance team needs more tools in its arsenal to inspire, drive pride in the organization, and demonstrate a commitment to values that are about more than competitive advantage and growth. The work of sustainability teams to use business’s energy and innovation to drive positive change is invaluable in this context.

Many—if not most—of the pressing strategic questions facing corporate leaders today do not fit squarely into the remit of a single department. To drive coherence and alignment around values and integrity, we are working with companies to create advisory groups, board committees, or cross-functional management teams with representatives from various functions. This process challenges companies to pay more attention to the relationships, resources, and power available to different groups and teams. If rhetoric and resources are out of sync, that will be highly visible across the organization, and employees will draw their own conclusions about what is truly important. But when these governance approaches are designed using behavioral best practice, they provide the possibility of an entirely new approach to managing integrity.

Companies are re-examining their core values, stakeholder concerns, and the way they make decisions across diverse areas, such as policy engagement, lobbying, marketing, and risk. This has created the possibility of transformational change in tomorrow’s organizations, which is why I believe it’s time to launch the era of Corporate Integrity 2.0.

Join me at the 2018 OECD Global Anti-Corruption and Integrity Forum in Paris next week to discuss what this might look like for you.