directions

the full
report 2008
trends in corporate
responsibility 2007/08
Contents

BIOFUELS T
 hirst for fuel vs 04/ Dr Peter Cotgreave
Director of Public Affairs,
hunger for food
The Royal Society
Page 02
05/ Chris Carter
Director of Corporate Affairs,
British Sugar plc
06/ Sagarika Chatterjee
Associate Director,
F&C Asset Management plc

09/ Dick Searle

PACKAGING Are we suffocating Chief Executive,
under the weight of the packaging The Packaging Federation

problem? Page 08 11/ Alasdair James

Director of Waste,
Recycling & Packaging,
Tesco plc

13/ Leo Horn-Phathanothai

National Coordinator,
CHINA It’s not as black UK-China Sustainable
and white as a panda Page 12 Development Dialogue,
DEFRA

17/ David Grayson

Director, Doughty Centre
CREDIT CRUNCH for Corporate Responsibility,
Will corporate responsibility crack Cranfield University

under the strain of the credit 18/ Barry Clavin

Ethical Policies Manager,
crunch? Page 16 The Co-operative Group
20/ David Godden
Chief Operating Officer,
Land Securities Trillium

26/ Top 50 European companies

ANALYSIS
And if you are looking for the analysis
Are businesses making the tables you usually find at the end of
shift from CR 1.0 to 2.0? Directions, these are now online at:
Page 22 www.salterbaxter-rethinktank.com
/directions/analysis

We are launching the

Re-think tank, an online forum
for everyone to share their
views. Join the debate at:
salterbaxter-rethinktank.com

Copyright © 2008 salterbaxter


For many years now we have seen businesses starting to do their CR
housekeeping. Some big and some small, there have been leaders and
criticism of those that are lagging behind. But now things are getting
tough. 2008 saw some really hard to handle issues rise to the surface
– and it’s not as if tackling sustainability isn’t a challenge in the first
place. This year we sense a clear difference: these are issues that aren’t
just hard to handle, they are complex, full of paradoxes and beset with
conflicting agendas making it really tough for businesses to develop clear
strategies or tactics to deal with them. It’s almost as if the work to date
has just been the groundwork for the real challenge ahead – and not all
businesses will be ready to face up to the scale of this challenge.
To mirror the online world, it’s as if CR 1.0 is over. This is the brave
new world of CR 2.0.
nigel salter So for this year’s Directions we have invited comment
from specialists and businesses who are battling with
director,
these conflicts, trying to find a way through the maze
salterbaxter
of economic, social and environmental pressures
lucie harrild involved. There are uncomfortable trade-offs at every
head of cr practice, turn and even some generally held beliefs exposed
salterbaxter as myths. The issues we put in the spotlight are:
Biofuels – saint or sinner? Packaging – scourge of
the developed world or energy and waste saviour?
And China – derailing global sustainability or
alleviating poverty and implementing world class
environmental technologies? Plenty of debate there.
01
But these issues cannot be debated outside of the
context of the economic climate we are operating in –
a tough issue itself. So we have also invited discussion
on the topic “Is corporate responsibility going to be
smashed by the credit crunch?”
To find ways forward businesses need to be
communicating about these big issues and inviting
stakeholders in to help create solutions – it’s going
to be incredibly difficult for them to work this out on
their own. But are they ready, willing or able? It’s going
to take a shift in their approach from focusing on
CR housekeeping to broadening their outlook to true
sustainability and how they function amongst shifting
economic, environmental and social agendas all
around them. This is the shift from CR 1.0 to 2.0 and
we’ve researched what the biggest 50 companies
across Europe are doing to see if there are any
indications of change. We hope you find it illuminating.
We’ve thrown down the gauntlet on how
businesses need to engage in the toughest of
sustainability issues. And as part of the debate we
have launched the Re-think tank. This is a place
where everyone can air their views, discuss possible
ways forward, find information and network to find
partners who are tackling the same things. Discussion
and debate is essential for progress, so log on to
www.salterbaxter-rethinktank.com to have your say.
SALTERBAXTER  DIRECTIONS 2008
 531 million
vehicles on the road

FOR FUEL
Five hundred million cars, one planet. Our thirst for carbon
intensive fuels means something has to change. Is it possible
that biofuels still hold the answer?

During 2008 we’ve seen biofuels go from the answer to our prayers on transport
and climate change, to the pariah of the world’s food supply and agents of rainforest
destruction. So which one are they? Well it’s just not that simple.

Crops that take over food-growing land, or cause the clearing of our precious rainforest
carbon sinks can’t be a direct substitute to fossil-based fuels. But is that the end of the
road for biofuels? What are the alternatives? And after the early rush of enthusiasm,
what should a business do with commitments already made? Should others continue
to introduce biofuels into carbon management programmes and green transport policies?
With a changing agenda, knee-jerk reactions to this issue won’t do the business or the
agenda itself any good. But it’s not clear which way to turn – our three contributors shed
some light on how they see this issue developing.

SALTERBAXTER  DIRECTIONS 2008

 02/03

6.7 billion
people in the world

HUNGER
FOR FOOD
Every second five people are born and two people die.
With an extra three mouths a second to feed, can we
afford to lose crop growing land to biofuel production?

SALTERBAXTER  DIRECTIONS 2008

BIOFUELs
CAN BIOFUELS MAKE A POSITIVE
DIFFERENCE? IS THEIR IMPACT
REALLY UNDERSTOOD?
Dr Peter Cotgreave
Director of Public Affairs,
The Royal Society
Energy is one of the biggest issues in the UK.
How do we meet our growing energy needs while
also tackling climate change and doing all of this
in a secure environment? It is an incredibly complex
problem, yet if you are to believe the hype of various
lobby groups you could be forgiven for thinking it is
not. Soundbite campaigning has become the order
of the day, with each technology in turn pitched as
a silver bullet or a catastrophe with ‘evidence’ to
back up the case. In this environment it is difficult
for policy-makers to make rational decisions based
on an assessment of all the evidence.
The current debate on biofuels is a classic
example of this. We have seen biofuels presented
as a totally green alternative to fossil fuels and
massive subsidies thrown at specific crops in some
countries. We were then told that biofuels were the
main reason for global food shortages and rising
prices. The fact is, like most things, it is never that
simple. Assessing these fuels is a complex task
made even more complicated by the diversity of
products that fall under the biofuels banner.
It is this diversity that makes it foolish to
decry the technology and call for blanket moratoria.
We should be looking to see what practices in the
industry are causing problems and seek to replace
them with good practice that is also common.
These good and bad practices do not only
relate to what crops are being used. We also need
to look at where the crops are being grown. Are they
displacing food crops, are rainforests being cleared
to grow them, can they be used to restore degraded
land, are people being exploited in the farming of
them and many other factors?
In relation to the increase in global food prices
caused by biofuels we have seen estimates that
range from 3% through to 75% and the lobbyists
on all sides will choose the numbers that best fit their
SALTERBAXTER  DIRECTIONS 2008
preordained dogma. What is required is rational
debate based on all the available evidence. The
Royal Society recently published a report based on
a year-long study that concluded that biofuels have
real potential but that we must have the systems in
place to ensure that investment is put into the most
efficient and sustainable types and practices.
We are at a critical point in relation to biofuels
policy. The UK and EU have suggested adjusting
the targets, to allow time to gain a greater
understanding of the impacts of these biofuels.
They have recognised the problems but have not
forgotten the fact that there are examples of ‘good’
biofuels which can play an immediate and important
part in helping to tackle climate change without
triggering other crises.
Biofuels must be part of a sensible debate
about energy that looks at all the technologies.
That debate must include energy efficiency and
seek to address the need to meet energy demand
and effectively tackle climate change while not
creating other serious problems.
Science and technology underpin most of
our lives. Electricity, transport, computers, phones,
iPods, medicines – without science we would have
none of these things that we take for granted. It also
offers us the potential to solve many of the problems
that we face. Whether it is meeting energy needs,
tackling climate change or feeding the world – we
need to make our judgements and our policy based
on real evidence about the risks and benefits.
We are at a critical point in relation
to biofuels policy. The UK and EU
have suggested adjusting the targets,
to allow time to gain a greater
understanding of the impacts of
these biofuels.

The considered approach to biofuels
technology taken by the UK and EU so far offers
hope for the future. Policy must provide industry
with a clear way forward so that long-term
investment can be directed with confidence to
‘good’ biofuels. Industry must in turn ensure that
it is responsible in its investment, ensuring that
supplies are properly assessed for their overall
impact. Those who chase the quick and easy
profit could destroy the biofuels industry and
deprive us of a useful tool in tackling climate
change and energy issues.
Chris Carter
DIRECTOR OF CORPORATE AFFAIRS,
British Sugar plc
55,000
tonnes per year is the
Biofuels are being introduced throughout the world
to address two main issues: climate change and fuel
security. Because they are produced from renewable
capacity of the UK’s sources like plants or waste materials, biofuels
first bioethanol plant. can make a contribution by avoiding burning fossil
energy reserves and lessening dependence on
oil imports. The relative importance of these two
objectives depends where you are. In Brazil and the
USA, biofuels programmes have been introduced
12%
increase in UK
mainly for fuel security reasons. In Britain the main
driver is climate change, although continued
high oil prices may increase future emphasis on
transport emissions, fuel security.
and continuing to rise. Both the EU and UK regard climate change
as a key policy issue, and have set ambitious goals
to address it. The UK has taken a lead in Europe
by agreeing a long-term target to cut emissions by
60% by 2050, and supported the EU Heads of State
04/05
Can biofuels help? The answer
is yes provided they are produced
efficiently and sustainably.
agreement in March 2007 to introduce a Renewable
Energy Directive with binding targets for renewables
and biofuels.
Transport accounts for one quarter of all
greenhouse gas emissions. However, transport
is the only significant sector which has not shown
a reduction in emissions against the 1990 Kyoto
baseline year. On the contrary, transport emissions
have increased sharply – by 12% in the UK – and
are continuing to rise. The conclusion is clear: unless
transport emissions are brought under control,
longer term climate change goals will be jeopardised.
But can biofuels help? The answer is yes provided
they are produced efficiently and sustainably.
On 22 November 2007 Lord Rooker, on behalf
of DEFRA, opened the UK’s first bioethanol plant
at British Sugar’s Wissington facility in Norfolk with
a capacity of 55,000 tonnes/year. This delivers a
greenhouse gas emissions saving of 71% reported
under the UK’s Renewable Transport Fuel Obligation
(RTFO), compared to petrol. It is also highly
sustainable. Detailed standards governing soil, air,
water, biodiversity and social operating practices
are set out in a sustainability manual, available for
public scrutiny.
At a time when biofuels are under the spotlight,
this British success story demonstrates that biofuels
can make a positive and immediate contribution to
tackling the urgent issues of transport emissions and
fuel security.
Government support is needed to introduce,
and enforce, performance standards in the RTFO
and Renewable Energy Directive to ensure that
biofuels – from all sources – deliver what they
claim to.
To
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uels
SALTERBAXTER  DIRECTIONS 2008
BIOFUELs
3 REASONS TO THINK HARD ABOUT
BIOFUELS – UNLESS THE INDUSTRY TAKES
ACTION THIS YEAR
Sagarika Chatterjee
Associate Director,
F&C Asset Management plc
In 2006, the capital markets witnessed a series of
initial public offerings (IPOs) of biofuel companies.
Promising high returns, energy independence and
a way to reduce greenhouse gas emissions from
transport, the fledgling biofuels industry shot to
prominence in the City as the latest hot investment.
Two years on, chastened by a series of profit
warnings that have disappointed investors,
the biofuels industry has been stunned by an
aggressive political backlash, led by environmental
campaigners, that has steadily snowballed into a
chorus of concerns voiced by United Nations’ food
and agriculture officials and the Organisation for
Economic Cooperation and Development (OECD).
For investors like F&C, who seek to invest in
climate change solutions, first generation biofuels
producers have become unattractive as investment
opportunities. Biofuels present political risks, with
speculation that governments may reverse current
biofuels-related targets and incentives, and exposure
to commodities markets means profit margins are
squeezed. In looking at any company involved in
biofuels, our three main concerns are:
1 Are the carbon savings genuine?
Brazilian ethanol, derived from sugarcane,
produces less greenhouse gas emissions than
conventional transport fuels, but US corn-based
ethanol has emerged as energy intensive; and
in some cases produces more greenhouse gas
emissions than are saved. A further concern is the
extent to which US corn-based ethanol contributes
to food price inflation; faced with government
subsidies for ethanol and protection from cheaper
Brazilian imports, US farmers have switched from
producing food crops to producing crops for ethanol.
Environmentalists have also linked biodiesel based
on palm oil with the destruction of tropical
SALTERBAXTER  DIRECTIONS 2008
rainforests and peat bogs – these are critical carbon
sinks and in need of protection to mitigate the
impacts of climate change.
2 Is the company exposed significantly
to political risks?
Biofuels crops have been criticised for
competing with food crops and contributing to food
price inflation, severely impacting the food intake
and nutrition of low-income people in emerging
markets. Biofuels were discussed at the UN’s recent
World Food Summit, but countries were unable to
reach any agreement on the extent to which biofuels
contribute to food security concerns and failed to
agree on public policies for tackling this. It remains
unclear to F&C to what extent biofuels have
contributed to food price inflation, with potential
contributory factors including land availability,
population growth and speculation. One thing is
clear – the lack of agreement among global public
policy-makers increases political uncertainty for
investors. Meanwhile, campaign groups have
questioned how smallholder farmers will benefit
from biofuels, and allegations of human rights
abuses have surfaced; including forcible removal
of farmers to make way for biofuels crops in
Columbia, and of slave labour on Brazilian
sugarcane plantations.
3 Are second generation biofuels on the horizon?
Oil and gas majors, including BP, Chevron and
Total, have made investments in second generation
biofuels (e.g. lignocelluloses), which may have lower
sustainability impacts and offer higher carbon
Biofuels producers face a profit margin
squeeze due to rising commodity prices,
and many are sourcing low-cost
feedstocks regardless of the long-term
environmental damage they cause.

Biofuels could be a real climate
change solution, but investment must
be put into the most energy-efficient
and sustainable types.
savings than many first generation biofuels.
However, second generation biofuels are far from
commercialisation and still in the research and
development stage, with virtually no opportunities
for an investor such as F&C to invest in publicly
listed second generation biofuels companies.
F&C’s analysis is that the biofuels industry
partly has itself to blame for the political backlash.
Companies underestimated the supply chain
environmental risks involved in feedstocks for
biofuels; they miscalculated political concerns
about food security and food price inflation; they
mistakenly believed that governments would turn
a ‘blind eye’ to negative impacts when devising
biofuels targets; and they failed to work together
four key actions to create a sustainable biofuels industry
1 3
Governments need to set a clearer
political and regulatory framework for
a sustainable and competitive biofuels
industry, and remove European and US
trade barriers such as tariffs on Brazilian ethanol
imports. Governments need to promote investment
in new technology, as this will be key to the
industry’s success. Biofuels policies must enhance
climate change prevention strategies and subsidies
should be linked to achieving real carbon savings.
2 4
The biofuels industry needs to work
more closely with governments to promote
political objectives on carbon savings,
technology, food prices, food security
and international development.
To s The industry also needs to
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thou are yo encourage governments to
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ret erba to of biofuels.
hink x
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dire nk.com
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biof ns/
uels
06/07
to find industry solutions to sustainability challenges.
Biofuels could be a real climate change solution,
but investment must be put into the most energy-
efficient and sustainable types.
Governments should not throw out biofuels
targets, but instead review how incentives and
public policies can encourage a sustainable biofuels
industry. In addition to Brazilian ethanol, there are
other biofuels that offer carbon savings, including
biodiesel based on used cooking oil and ethanol
from municipal waste. Greenergy International is
among a handful of biofuels producers managing
carbon savings and sourcing impacts proactively;
it buys ethanol from Brazil, palm oil from members
of the Roundtable on Sustainable Palm Oil and soy
from members of the Roundtable on Responsible Soy.
In spite of the obstacles, it may yet be possible
to create a sustainable biofuels industry. To rebuild
public confidence and to deliver sustainable
investment returns, the biofuels industry must take
action in 2008. F&C encourages companies and
government to take the following four key actions
before the year end:
Global industry-wide standards must
be implemented to ensure biofuels have
a net positive impact on ecosystems.
This needs to happen fast, as biofuels
producers face a profit margin squeeze due to
rising commodity prices, and many are sourcing
low-cost feedstocks regardless of the long-term
environmental damage they cause. The new
Roundtable on Sustainable Biofuels presents
an opportunity for this.
The industry must engage more actively
in the public debate about biofuels and
demonstrate transparency on carbon
savings and sourcing impacts. The
biofuels industry stands at a crossroads and must
collectively address public concerns. If companies
do not convince the public that they will move
towards sustainable business models, they may find
that governments change course on the targets and
subsidies that are driving their industry’s growth.
SALTERBAXTER  DIRECTIONS 2008
 ARE WE
SUFFOCATING
UNDER THE
WEIGHT OF THE
PACKAGING
PROBLEM?
It has to be said, packaging gets a lot of bad press. Whether it’s plastic bags at
supermarkets or over-packaged items using an array of plastic and cardboard, most
people have a pet hate linked to packaging. Landfill is full of it, recycling rates aren’t
climbing quickly enough – and nobody wants rubbish in hedgerows or on beaches.
It feels like we are suffocating under a mountain of packaging waste.
But is it really that simple – is packaging really the scourge of our society? Would we
be better off without it? Should other consumer issues be getting more attention? The
paradoxes within the packaging debate make it difficult for businesses to explain where
efforts should be focused. We’ve asked Dick Searle, Chief Executive of The Packaging
Federation and Alasdair James, Director of Waste, Recycling & Packaging at Tesco plc
to drill a bit deeper into the packaging paradox – waste creator or waste saver?

SALTERBAXTER  DIRECTIONS 2008

 08/09

ENVIRONMENTAL
SAINT OR SINNER?
THE PARADOX OF PACKAGING

dick searle
chief executive,
the packaging federation

Where did all this packaging come from? 50 years

ago very little of the packaging that exists today
had even been invented. As the affluence of the
consumer society increased dramatically, there
was a seismic change in the variety of packaging
available in all types of materials but particularly
in plastics. This was driven by customer demand
for a wider range of products and convenience
and led to the explosive growth in supermarkets
(which wouldn’t exist without modern packaging)
– accompanied by moves to weekly shopping as
storage facilities in the home developed and
packaging enabled product protection including
vastly extended product lifetimes. Many brands
and sectors were also ‘created’ and defined by
their packaging.

So is packaging as big an issue

as consumers, the media and
politicians seem to think?
Particularly at a time when
food prices and security of
supply are a major issue?

Overall, our packaging ‘consumption’ in

the UK puts us at number seven in the EU league
table and our growth per head is one of the lowest
– indeed in the last seven years, packaging growth
at 3% is less than one fifth of GDP and consumer
spending growth over the same period.
So what are its real environmental impacts?
Packaging is highly visible, particularly once it is
used. It receives an enormous amount of media and
political focus – at a level wholly disproportionate to
its true impact. Less than 20% of household
waste is packaging and the amount of packaging
going to landfill is less than 3% of total landfill.
Its carbon footprint is less than 2% of the UK’s
footprint and the carbon impact of the wastage
that it prevents would be much higher than
this figure. The growing use of plastics for load
wrapping has also enabled transportation
economies as lighter loads are moved.
The whole issue of the material used is highly
complex with the first consideration always that
the packaging works. Environmental impact covers
a range of issues including carbon footprint,

SALTERBAXTER  DIRECTIONS 2008

PACKAGING
recyclability, ‘sustainability’, replenishability and
weight. Not one of these should be the sole
determinant of the material used. It is the overall
net environmental impact that has to be assessed
– providing the pack functionality is correct.
The problem is that most consumers look
at used packaging with little thought for
the role that it’s played in getting goods
safely from producer to point of usage.
Contrary to popular belief, the whole
packaging supply chain has been working for
decades to minimise the impact of packaging.
Most recently, the focus has been on primary
packaging but a substantial amount of packaging
is used for actually getting the goods into retailer
outlets and is never seen by consumers. And most
of what is seen as excessive is more to do with gift
experience or retail methodology including theft
minimisation. The problem is that most consumers
look at used packaging with little thought for the
role that it’s played in getting goods safely from
producer to point of usage and the role it continues
to play in preserving products until they are used.
Arguably, the biggest area of criticism is fruit,
vegetable and meat packaging in supermarkets
(mostly in plastics) and yet this represents just
1% of all packaging used. What consumers don’t
see is all the packaging used to get goods into
store which are then sold loose. A recent survey
by one retailer showed that more energy was used
in ‘loose’ apples than those pre-packed in fours.
And another retailer saw wastage levels double
when all their fruit was sold loose – and the
environmental impact of that waste was far
greater than that of the packaging ‘saved’.
And what about all the focus on recycling
– and should we countenance the remainder being
put into landfill? The packaging industry welcomes
the use of recycled materials but the availability
of these is constrained by the quality of recyclate
currently delivered from the household waste
stream. Consumer concern is primarily prompted
by the apparent lack of facilities in many areas for
the collection of waste packaging. The extent to
which plastics should be recycled in the UK is a
matter of considerable debate – particularly in the
context of what makes most environmental sense.
Our performance in using unrecyclable packaging
waste (mostly plastics) for energy production is
one of the poorest in Europe so we shouldn’t be
sending to landfill those materials that could be
used to generate energy. There is an urgent need
for more joined-up thinking between local
authority, industry targets and improvements
in packaging recycling.
So is packaging as big an issue as
consumers, the media and politicians seem to
think? Particularly at a time when food prices and
SALTERBAXTER  DIRECTIONS 2008
security of supply are a major issue? A recent
survey by one retailer discovered that twice
as many of its customers were worried
about ‘excessive packaging’ as were worried
about global warming! As a result of modern
packaging and distribution methods, food
waste in the UK is 3%, where in less
developed countries like Russia and India,
food waste is +40%. With food supply,
security and cost at the forefront of most
consumers’ minds, packaging is playing
a vital role in minimising waste and
maximising availability, choice and value.
The Government’s obsession with
‘one-trip bags’ as an environmental menace
and a totem of the throwaway society is
another example of getting it wrong. True,
they are very unsightly as litter but they
don’t throw themselves away – people do it!
Prompting behavioural change is good but
leading the public to believe that bags are
a major threat to the environment is not
– it trivialises a very important debate.
A recent Government advertising campaign
pointed out that 40% of carbon emissions
were linked to household activities such
as car use and home heating – massive
contributors to the UK’s footprint – and
massively more than that of packaging. If the
Government wants to see a serious reduction
in consumers’ carbon footprints, it needs to
stop trivialising the message by focusing on
issues like packaging.
Whether packaging is a ‘Saint’
or ‘Sinner’ will be, like beauty,
in the eye of the beholder.
As long as consumers want to buy the
widest range of goods all day and every day,
there will be a need for modern packaging.
Without it, there would have to be a return to
living styles of 50 years ago. There would be
no supermarkets, much less choice, vastly
increased product wastage and a general return
to austerity experienced only by those of us of
more advanced years! The packaging supply
chain will continue, as it has for many years,
to strive to minimise the impact of packaging
whilst continuing to provide the wherewithal
for consumers to live as they do. Life is about
choices and as long as consumers choose to
live as they do now, modern packaging will
continue to be an integral and necessary part
of their lives. Whether packaging is a ‘Saint’
or ‘Sinner’ will be, like beauty, in the eye of
the beholder. But, as a major contributor to
the way in which society functions, it’s difficult
to see many products which have made a
more significant change to consumer lifestyles.
 Is fresh thin
to prolong king needed 5 10/11
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Without pa
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have to reve e would eit
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50s or watc s last
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as the incre climate change
sends meth ase in food
ane levels waste
soaring.

DITCH PACKAGING? Best before

: Better than
packaging? before Waste:
NOT AN OPTION
Would incr
Energy:  ots wasted
L
ea
without pa se dramatically
ckaging?
wrong issu on the
es? Price to pa
y: Potentially
high?
alasdair james
director of waste,
recycling & Packaging,
Tesco PLC

It sometimes feels as if packaging carries the weight 4 Can we reuse it?

of the nation’s environmental ambitions on its Packaging and recycling should always Household
shoulders: if we can banish it, we will be cured from be considered together. As the UK Government waste
every eco-ailment around. Of course, this simply continues to build a coherent recycling
isn’t true. Without packaging, we would either have infrastructure, we can support them by choosing Less than
to revert to shopping patterns last seen in the 50s
or watch climate change accelerate as the increase
to use packaging that most councils accept for
recycling – such as PET – over materials like PVC
20%
in food waste sends methane levels soaring. which few can handle yet.
of household waste
However, this highly tangible example of waste is packaging
is important to our customers and, as a responsible 5 What’s its carbon footprint?
– and responsive – retailer, we are doing what we When thinking about how you pack a product,
can to reduce it. it pays to look at the big picture, not just the product
We have approached the problem by introducing in isolation. We’ve done a great deal of work recently Packaging
a simple check-list which allows us to make the best to understand carbon footprints and know that,
decisions for the environment. while packaging typically makes up a small part of
the overall footprint, there are opportunities here to Less than
1 Does it do its job?
It hardly needs saying but the whole point of
make a real difference. We now receive New World
wine in barrels and bottle it ourselves in this country
2%
packaging is to keep a product in peak condition to save thousands of tonnes of glass from being
until it has reached the customer’s home or been shipped half way round the planet. This new of the UK’s carbon
footprint
consumed. This is why, despite some vocal approach is cheaper, more efficient and much
opposition, we still sell soft fruit in sturdy plastic better for the environment.
trays. Without them, millions of strawberries,
peaches and avocados would wind up in the bin. By 2010, we aim to have reduced the packing Food waste
on all the products we sell by 25%. It is a stretching
2 Can we use less of it? target but, by stating our ambitions clearly, we
We spend £600m every year on packaging know that everyone in our business – and in all Only
so it is in our interest to keep on finding ways to
reduce what we use. This can be a simple case of
those businesses that supply us – can appreciate
what we are trying to achieve.
3%
light-weight wine bottles and tin cans, or rethinking The real challenge now is to communicate
how we package a whole range. Last year, we to our customers the reductions we are making in the UK’s
supply chain
dropped bulky blister packs from our electrical and why the packaging that remains is essential,
products and used shrink wrap instead. We saved and not the whim of unthinking manufacturers or
72 tonnes of mixed packaging as a result. retailers. We must get better at explaining why
strawberries sold in a plastic tray are likely to be
3 Is there a better material? greener than those without, and we must help To r
e
them to embrace innovations that may not feel M&S ad ab
Once we’ve thought about the perfect design, ’ vie o
we can think about the best material to make it from. quite right first time, like wine sold in cartons or salt w g ut
e rb o to
reth
We are trying to increase the amount of recycled shower gel in pouches. inkt axter-
a n k.co
content in the materials we buy. For instance, we There is still a lot of work to be done but dire m
c
now sell our freshly baked buns and cakes in clear it is work worth doing – and our customers will pac tions/ /
plastic boxes made from 50% recycled PET. thank us for it. ka ging

SALTERBAXTER  DIRECTIONS 2008

 ENVIRONMENTAL DEGRADATION vs ECONOMIC GROWTH IN CHINA:

IT’S NOT AS BLACK AND

WHITE AS A PANDA

A growing economy
ent
BUT a damaged environm

China is now buildin

g 2 power stations
ever y week BUT it is
set to become the w
largest producer of orld’s
wind power by 2020

10 million people with no access to

electricity BUT by 2020 there may be 140 millio
n
cars on China’s roads

When you look at the facts and figures, China’s development rate can be mind
boggling. On the one hand, millions are benefiting from an improving economy
and opportunities. On the other hand, millions are locked in poverty and oppression
and the environmental cost of that developing economy is almost catastrophic.
So how do foreign, responsible business investors reconcile their role working with
arguably the most important economy in the modern world, which is also a country
of contradictions? There are no easy answers, but Leo Horn-Phathanothai, National
Coordinator for the UK-China Sustainable Development Dialogue, DEFRA, discusses
the changes in China.

SALTERBAXTER  DIRECTIONS 2008

 12/13

80% of the world’s zips and toys

are produced in China YET
58% of Chinese exports come
from foreign-invested enterprises

106 billionaires in Chin

YET there are 300 milli a
on people
living below the povert
y line

The US produces 19 tonnes of

CO2 per capita BUT China produces
only 4.7 tonnes

Leo Horn-Phathanothai
National Coordinator,
UK-China Sustainable
Development Dialogue,
DEFRA
China’s environmental crisis has caused much
public concern in the West. This is understandable:
as the world’s top emitter of greenhouse gases,
China’s domestic environmental problems have
global impacts, and therefore should concern us all.
But public debate has often been one-sided and
vindictive: politicians and the media alike have
over-indulged in vilifying China as the number one
global eco-delinquent. This narrow typecasting of
China as villain is fundamentally misleading and
blinds us to the opportunities that China’s
transformation presents us with.
China’s environmental ills have been widely
documented and reported on. Many of the dizzying
statistics about China’s air and water pollution,
its acquisition of natural resources abroad, and its

SALTERBAXTER  DIRECTIONS 2008

china

All this is significant because it means that

China has the potential to be a major positive
influence on the international scene. By dint
of its sheer market size, whatever technology
China adopts is likely to become an industry norm.
China will be an increasingly important contributor
to the setting and protection of global standards.
As a heavyweight in global trade and environmental

r t tr a d e r ather than driving negotiations, China will have a strong vested interest
Expo n sumption is
in creating predictable international environmental
e s tic c o rules under which its businesses operate, and
dom
g r o w ing pollution under which its own goods and services are traded.
China’s There is of course an important moral
dimension to the debate that needs to be taken into
account. Alongside pollution and environmental
depletion, poverty reduction has been the most
notable output of China’s rapid growth. Indeed
China has rendered a great service to humanity:
without her we would be nowhere near achieving
the Millennium Development Goal of halving
impacts on global commodity markets are well poverty in the world: China has been responsible
known, and will not be repeated here. Suffice to for 80-85% of global poverty reduction in the
say that China’s environmental crisis is real and last 20 years.
it is planetary in scale. China’s per capita ecological footprint is still
As a resident of Beijing, I am reminded of low, at 1.5 global hectares per person, compared
this almost every day as I breathe in the thick soup to a world average of 2.2, a whopping 9.7 for the
of cough-inducing urban smog. It is worth recalling United States and 5.6 for the UK (according to
however that air pollution is not a modern Chinese the WWF). We should be fair. Economic growth
invention: not very long ago (in the winter of 1952) is fundamental to China’s future and China has a
the ‘London fog’ claimed the lives of thousands right to develop.
of people. If one could peer back in time from the
London Eye, the view in the 1950s would not have
been worth the ride!
The broader point here is that China is in the In short, we are getting all the ‘goods’
midst of its industrialisation drive, and nowhere
has this kind of transformation been a clean one.
at a cheap price, while China absorbs
By 2015 China will have completed its first round most of the ‘bads’.
of industrial modernisation, by which time it will
have reached a level of economic development
comparable to most western countries in 1960.
In the sixties the environmental movement had
only just started to emerge in the US.
In comparative terms the Chinese government
is responding much sooner and resolutely to the
environmental problems caused by industrialisation.
The government’s macroeconomic plan for 2006-10
is the nation’s first to focus on a comprehensive
range of sustainable development priorities.
China is also serious about meeting the international
commitments it has made. The recent White Paper
on Environmental Protection in China reaffirms
China’s commitment to sign and ratify international
obligations. Under the Montreal Protocol, China
a s r e s p onsible for
China w al pover t y rs
has already adopted more than 100 policies and
measures to reduce ozone-depleting substances
% o f g lo b
8 0 -8 5 ea
(ODS), accounting for half all ODS eliminated by
tio n in th e last 20 y
developing nations.
redu c

SALTERBAXTER  DIRECTIONS 2008


Underlying all this is the reality of global
interdependency. This interdependency is ecological
as well as economic. China is the global manufacturing
hub of the world. Export trade rather than domestic
consumption is driving China’s growing pollution
and resource demands. The average Chinese
person in fact consumes very little: 48% of Chinese
GDP goes to savings. On the other hand, China is
the world’s third largest exporter, after the United
States and Germany.
On a more upbeat note, China’s
environmental crisis is also presenting
huge commercial opportunities that the
international business and investment
communities are just waking up to.
Significantly, most of China’s exports are
primary goods or manufactured products that create
heavy pollution and require intensive resource uses.
A whopping 40% of China’s energy use goes into
its exports. With tighter environmental regulation
in the West, the manufacturing of many energy-
intensive goods has shifted to China. This means
that the West has effectively outsourced much of its
energy consumption and pollution often to facilities
with lower efficiency and environmental standards
in China.
In short, we are getting all the ‘goods’ at
a cheap price, while China absorbs most of the
‘bads’ such as pollution and a depleted environment.
Responsibility, clearly, is shared.
The Chinese government has set specific
targets for environment conservation in its current
five-year plan, including reduction in energy intensity
by 20%, reduction in the emission of major
pollutants by 10%, attainment of 20% forest
14/15
live in China
1.3 billion people
AND the average
life expectancy is 72
coverage rate, and treatment of 70% wastewater
and 60% residential garbage in urban areas by
2010. These objectives are backed by a raft of
measures designed to mobilise massive investment
and knowledge transfers from the private sector.
These cover legislative change, fiscal and financial
incentives, regulatory reform, public private
partnerships, training and education, and subsidies
to research and development.
Perceptive investment analysts such as
Morgan Stanley’s Stephen Roach see in these
changes signs of a new ‘commodity-lite’ model of
development in China, “in effect retrofitting China’s
commodity-guzzling production platform with more
commodity-efficient technologies”. The government
is indeed stepping up its investment to support this
economy-wide environmental upgrading.
The environmental protection industry in
particular will benefit from targeted programmes
of support aimed at building up specific market
segments. Key industries benefiting from policy
support include water treatment, air purification,
natural gas, hydropower and solar power. These
market segments have huge growth potential.
Deutsche Bank predicts the growth of demand for
water treatment, waste gas treatment and natural
gas will reach 20% per year and that for solar power
will be as high as 35% per year.
Thus China has become a global laboratory
of change and an incubator of technological, design
and policy innovations. To
you have
We can point fingers and cry foul play, but r sa
sal y go
we’ll have much more to gain from constructive reth terbax to
engagement with China. China is hungry for the inkta ter-
technology, investment and know-how needed to dire nk.com
ctio /
remedy the damaging consequences of economic chin ns/
growth. Responsible governments and smart a
businesses should see vast opportunities in this.
SALTERBAXTER  DIRECTIONS 2008
With all businesses currently looking at how to survive the economic slump,
are corporate responsibility practitioners feeling the heat from the finance
department? Or are they being consulted on ways to help the business move
forward? Does that mean they can tackle the toughest issues in sustainability
or will they be fighting for survival? Will consumers continue to support and
champion responsible businesses and look for products that last, or go for the
cheapest on the shelf whatever the consequences?
There might well be a bit of all these things in corporate responsibility and
sustainability in the short-term future while businesses accommodate the downturn.
But where will corporate responsibility and sustainable business practices end up?
We get the low down from David Grayson at the Doughty Centre for Corporate
Responsibility at Cranfield University, the consumer view from Barry Clavin at The
Co-operative Group and the business view from David Godden, chair of the Corporate
Responsibility Committee at Land Securities and COO at Land Securities Trillium.

SALTERBAXTER  DIRECTIONS 2008


David Grayson
Director, Doughty Centre
for Corporate Responsibility,
Cranfield University
Various commentators have suggested that the
current economic downturn is going to be bad
for corporate responsibility. It is just as plausible
to argue the opposite: that hard times could
improve the embedding of responsible business.
How so? Businesses which have spent the past
decade painstakingly establishing their credentials
for corporate responsibility are not going to
throw that away lightly. Indeed, aborting their
commitment now would create a reputation
for being superficial and deceptive about their
original commitment. Such a negative reputation,
once created, would be very hard to shake off.
“It takes twenty years to build a reputation,”
says Warren Buffet, “and it can be lost in five
16/17
minutes”. And – one might add – it will then take
far longer to rebuild than it did to establish in the
first place.
In contrast, in the tough economic conditions
that we are likely to experience for several years at
least, businesses are going to be looking for every
means possible to differentiate themselves from
competitors; and to make themselves more
attractive to customers and talented employees.
And, contrary to popular misconceptions, responsible
business can save a firm money – or even make money
– rather than necessarily having to create extra costs.
Furthermore, employees whose loyalty and
commitment to ‘go the extra mile’ will be even more
important to help businesses to get through the
lean years, will be de-motivated by any perceived
backsliding on the corporate responsibility
commitment. Doing good in the good times takes
vision. Sticking with it in the tough times, takes
vision and determination.
Of course, those companies who do not take
their commitment seriously, who have just paid
lip-service and treated it as ‘a launch, a lunch and
a logo’ – a bolt-on to business operations and not
built-in to business purpose and strategy – these
companies will probably peel off. They will be no
loss. On the contrary, it will sharpen the gap
between the committed and others.
For the committed, it should speed up the
process of innovation: finding more cost-effective
and creative ways of improving sustainability.
Already, we are seeing how escalating oil prices
are stimulating more smart money to go into green
energy projects. Similarly, companies are now
trying to find more efficient ways of advancing their
commitment to be a responsible business. During
the aftermath of the dotcom bubble bursting,
some of the big information and communications
technology companies chose to give staff unpaid
leave, or half-pay secondments to community
organisations where they could keep using their
skills, with a job to come back to in the business,
rather than laying people off. It will be that kind of
ingenuity and sharing of the short-term pain that
will differentiate the best companies through the
recession. Hard times do not have to mean a
reversal of long-term commitments to sustainability
and business responsibility if managers use their
entrepreneurial flair and creativity.
To s
h
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ghts ur
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SALTERBAXTER  DIRECTIONS 2008
CREDIT CRUNCH

ARE ETHICAL CONSUMERS A

FACTOR IN KEEPING SUSTAINABILITY
ON THE BUSINESS AGENDA EVEN
DURING THE CREDIT CRUNCH?
Barry ClAvin
Ethical Policies Manager,
The CO-OPerative group

For the last ten years, when faced with the question
“How big can ethical consumerism become?”
economists have tended to have a stock response
ready: “First, let’s see how it deals with a recession!”
So, as we enter an economic downturn,
all eyes are on ethical consumerism and certain
reputations are on the line.
Predicting the effect the credit crunch will have
on ethical consumerism is difficult, because it’s not
a situation we’ve had to deal with before. At the time
of the last recession, in the early 1990s, ethical
consumerism as a market was wholly insignificant:
the International Fair Trade Association was in its
infancy and brands such as Café Direct had yet to
be launched in the UK. As such, economists’
reticence reflects, in part, their analysis of charitable
giving as a model for ethical shopping. The
contention is that they both reflect an economic
decision that is almost totally emotional rather than
rational, as well as reflecting our propensity to be
good when we can afford to be good. Charitable
giving, unsurprisingly, tends to fall during a
recession, as it did in the last recession.
It is probably fair to say that had a significant
downturn come earlier in its growth, ethical
consumerism may have been dealt a severe blow:
consumer awareness of ethical consumerism was
low, there was limited availability, often raised prices,
and quality was questionable. However, these early
issues have been mostly overcome, and advocates
of ethical consumerism are quick to point to the
growth in sales of ethical products and services over
the last ten years, which have consistently outgrown

At a time when the global food crisis

may have contributed to 100 million
people being pushed further into poverty,
it is hard to conceive of those informed
consumers switching their priorities to
marginal cost savings.

DIRECTIONS 2008
SALTERBAXTER  DIRECTIONS 2008

overall household spend and are estimated to stand
at well over £33bn. Though, as economists point
out, this has been achieved against a backdrop of
relative economic prosperity and still accounts for,
at best, just five per cent of overall consumer spend.
The received wisdom goes that when money
is tight our rational side comes to the fore and
pushes emotional attachments, brand loyalty etc.
to one side. So the potential for ethical products
and services to survive, or even prosper, in an
economic downturn, may be reliant on the extent
to which they can satisfy these two drivers: the
depth of emotional attachment to an issue, or the
appeal to our rational side.
18/19
For some products, the emotional attachment
to the underlying ethical issue has ensured that
certain ethical purchases are firmly entrenched for
a core constituency of consumers. The UK Fairtrade
markets stand at over £500 million and loyalty to
the Fairtrade brand for certain purchases (e.g. coffee)
is well embedded. At a time when the global food
crisis may have contributed to 100 million people
being pushed further into poverty, it is hard to
conceive of those informed consumers switching
their priorities to marginal cost savings. Likewise,
for consumers concerned about animal welfare,
it is hard to conceive of such consumers switching
from free-range eggs, purchases of which are now
more common than for those produced under
intensive conditions.
Inevitably, some will find it more difficult to
prosper in a downturn. For example, the organics
market, in particular box schemes, may find that
they need to convey a stronger emotional or rational
argument to secure ongoing consumer loyalty.
With rising energy prices, consumers are
already looking at managing their utility and fuel
costs more efficiently. In a time of economic
prosperity it has been difficult to engage many
consumers on the most basic (if not tokenistic)
energy efficiency measures: two thirds of people
still boil more water than needed in the kettle.
Indeed, this is also a reflection of the fact that when
money is not scarce, time is valued as a more
scarce resource and influences numerous poor
sustainability decisions, e.g. it’s so much quicker
to use a tumble dryer than line dry.
An economic downturn could refocus
consumer minds and spark off the sustainability
agenda in many unexpected ways. There is already
anecdotal evidence that people are choosing to
drive slower to save on petrol, to waste less food
(Gordon Brown will be pleased), or to walk to
their local shops. Of course, the vulnerable need
to be protected but an economic slowdown could,
in many ways, turn out to be good for sustainability.
Indeed, we may be moving towards a ‘quality’
agenda and away from a ‘quantity’ agenda wherein
as consumers we feel more satisfied by the quality
of the food we buy rather than the quantity. And
this can only be good for sustainability. However,
the bigger risk is that it will be politicians rather
than consumers who go into knee-jerk mode and
take the opportunity to de-prioritise green issues.
To
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SALTERBAXTER  DIRECTIONS 2008
CREDIT CRUNCH
SUSTAINABLE BUSINESSES WITH
EMBEDDED CR MUST LOOK TO THE
LONG TERM FOR THE REWARDS
david godden
chief operating officer,
land securities TRillium
Property and finance have been two sectors hit hard
by the credit crunch and the resulting economic crisis
that seems to be unfolding before us. It is no secret
that the property sector has been feeling the pain
of the credit crunch. But at the same time the sector
is one of growth in sustainability terms. The past
five years have shown a marked increase in the
understanding of sustainable building design, the
necessity of responsible operations, the value of
environmental management and the understanding of
the effect buildings have on communities. Of course,
as in most sectors, there are pockets of good and
not so good practice, and there are varying degrees
of understanding of the true value which is added to
business through a focus on corporate responsibility
and sustainability. Architects and building contractors
probably understand the roles they can play more
clearly than agents and lenders but on the whole it
is a sector whose understanding and therefore its
activities are on the up. So do these two trends sit
together – an economic slowdown and a commitment
to corporate responsibility? The common denominator
is value. When a business understands what is
meant by corporate responsibility, and can therefore
use it as a business decision-making tool for the
benefit of all stakeholders (the bottom line included),
then the trends sit together. The management team
of any business is looking for ways to maximise and
build value. The tension comes when those who
haven’t discovered the value see corporate
responsibility purely as a cost.
A significant part of Land Securities’ business
is based in the long term – buildings can take
15 years to go from design to occupation. So a
retreat from adopting innovative building techniques
that will pay environmental and financial dividends
when a project is completed is not just the wrong
thing to do, it is costly. It is a similar story in
other areas of our business: retail parks without
engagement with the community would be car
parks without customers; offices without a focus
on delivering service and developing relationships
with its occupants would be costly shells. Corporate
responsibility is not an add on for Land Securities,
it is a must have.
SALTERBAXTER  DIRECTIONS 2008
But that is not to say there aren’t pressures.
We know the value of efficiencies and of working
with our customers, but we have to assess carefully
the financial and sustainability value of our projects.
Many of these pressures are growing around the
climate change agenda. The Carbon Reduction
Commitment is currently due to come into force
in 2010 and will put carbon emissions trading into
play for lower energy users. The price of carbon
is going to become more and more important to
investment decisions. Regulation from government
on zero-carbon housing and on the use of on-site
sources of renewable energy are going to be very
difficult to implement economically. So in the current
market, property companies are going to have some
difficult decisions to make. New and innovative ways
of building will be needed. And that is one reason
why businesses should not shy away from corporate
responsibility and sustainability in a tough market
– they are drivers of innovation which provide new
ways of generating value for the business.
In the current economic climate, businesses
are right to question everything they do to make
sure they are ready to face any challenges ahead.
But if sustainability and corporate responsibility are
genuinely integrated into the business and delivering
value, then the commitment to them should remain.
That is the view Land Securities is taking.
Corporate responsibility is not
an add on for Land Securities,
it is a must have. But that is
not to say there aren’t pressures.
We know the value of efficiencies
and of working with our customers,
but we have to assess carefully
the financial and sustainability
value of our projects.
 20/21

The tension comes

when those who haven’t
discovered the value see
corporate responsibility
purely as a cost.

To s
h
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dire nk.com
cred ctions/ /
itcru
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SALTERBAXTER  DIRECTIONS 2008

ARE BUSINESSES
MAKING THE SHIFT
FROM CR 1.0 TO 2.0?

LUCIE HARRILD So 2008 appears to be the year when CR has become a two-speed affair. Are businesses simply doing
housekeeping or are they facing up to some of the tougher, more fundamental sustainability issues?
HEAD OF CR PRACTICE,
SALTERBAXTER Unfortunately in a world where issues around climate change, energy security and globalisation
sit firmly under the heading of corporate sustainability headaches, the housekeeping approach is not
the final solution. Businesses need to talk about where they stand on the more complex challenges that
don’t have a KPI attached or a right or wrong answer, and look for innovative solutions. That’s the next
step in sustainability – what we are calling the shift from ‘CR 1.0 to 2.0’.
Part of the shift to CR 2.0 is how businesses are working with stakeholders to find a way through
the complexities and conflicts thrown up by sustainability. It’s not about single-handedly solving the
world’s problems and then putting out a press release, but working through an approach and how they
see the future developing.
To get an overview of who is doing what, we’ve done an assessment of the top 50 European
companies, as ranked by the FT (March 2008). We based our research on external communications,
a mark of whether businesses are confident enough to talk about their views on the big issues as an
organisation. And we limited time spent on each company to only a few hours – so if we couldn’t find
the key issues within that time then they don’t have very effective communications! Here is a list of
the questions we considered and why:

1 Is the business showing signs of embedding corporate responsibility and

sustainability into its strategy and articulating where it sees the business value?
If a business has not addressed how to embed corporate responsibility it is unlikely to be
moving beyond the housekeeping approach.

2 Is the business engaging with stakeholders?

Having a dialogue with stakeholders outside of the business is more likely to provoke a
move to CR 2.0 and encourage businesses to address tough issues.

3 Does the business work through a materiality process to define its issues?
Those that do are more likely to spot big issues coming over the horizon, even if they
aren’t ready to tackle them yet.

4 What issues is the business considering?

We used this to assess whether the really complex issues are being talked about, or
whether more standard environmental and social impacts were the ones being covered.

5 And lastly, do we think the business is making a shift from CR 1.0 to 2.0?

DIRECTIONS 2008
SALTERBAXTER  DIRECTIONS 2008
 22/23

GLAXOSMITHKLINE
NestlÉ
Contributing to
Nutrition and
well-being Packaging
Global Health
Sustainable Agriculture Public Policy &

ROYAL DUTCH SHELL
External Affairs
Difficult Oil
Climate change
SO WHAT ARE
THE ISSUES BEING
TACKLED? The following pages provide our overall assessment
of the top 50 European companies. We’ve identified
the ones that have now made that shift to CR 2.0,
tackling the big issues outside of what are now
recognised as ‘business as usual’ issues. Here are
just some of the companies that have made the
shift to CR 2.0, with a few of the
issues and impact areas that they
communicate as important to them. ROYAL bank of scotland
Financial Crime Selling
and lending practices
Financial inclusion

TelefÓnica
Digital Inclusion
Responsible use
of ICT Interactive
Generations
and Child VOLKSWAGEN
XSTRATA

Fatality Prevention
Protection
Climate change
Biodiversity
Globalisation &
local responsibility
Demographic change
& employment
Megacities,
rural exodus

SALTERBAXTER  DIRECTIONS 2008

CHANGING FROM CR 1.0 TO 2.0
INVOLVES COMPANIES TACKLING
THE CONFLICTS THAT WILL AFFECT
THEIR BUSINESS
We set the boundaries and distinguished what
we felt warrants being given the mark of CR 2.0.
If a business has: not addressed how to embed
corporate responsibility; not actively engaged its
stakeholders; and not assessed the impacts of the
big issues and prioritised tackling them, then it is
unlikely to be moving beyond the housekeeping
approach. Overall it was found that, although 80%
of businesses have integrated sustainability into their
business strategy, only 22% of them are effectively
communicating their approach to complex issues
and making the shift to CR 2.0.
The energy and fuel sector appears to be at
the forefront of making the shift. This sector is often
in the headlines being challenged on big issues that
are both hard to handle and where the potential
solutions conflict with each other. How do you
secure energy and fuel supplies at the right cost
while tackling climate change, safeguarding the
environment, operating responsibly and safely, and
conducting business in areas of the world that are
unstable with risks to the business and the people
who live and work there? There are no black and
white answers for this sector for certain. And, to
make it even more of a challenge, a trust deficit is
developing and general society is getting more and
more disillusioned with what they are hearing from
this sector about what the future holds. So it is
encouraging to see some of those companies really
hitting CR 2.0 head on and openly discussing the
challenges they face.
As we anticipated, the mining sector as a
whole is moving toward CR 2.0 with strong CR
strategies and engagement in place. Although
material issues have been developed following
dialogue with stakeholders, some organisations
ANALYSIS contents
Sector Page
AUTOMOBILES 26
BANKS 26
ELECTRONICS & EQUIPMENT 28
FOOD & CONSUMER GOODS 28
GAS, WATER & MULTIUTILITIES 29
INSURANCE 30
MINING 31
OIL & GAS 32
PHARMACEUTICALS 34
TELECOMS & TECHNOLOGY 34
TOBACCO 35
SALTERBAXTER  DIRECTIONS 2008
are still conducting housekeeping – just on a large
scale. One key issue addressed across the sector
is the impact on communities, with the majority
of the companies considering the end of life of
their operations. Not only is the environment of
the particular site following the closure of the
mine considered, but also the economic impact
of the action such as the removal of employment
and its effect.
However, in other sectors there is less
evidence of companies tackling more than just the
housekeeping areas. There are some good examples
of companies making inroads on embedding CR
into their business, even integrating CR concerns
into products and services, for example in the life
insurance sector. That’s a big step forward and
certainly part of a move from CR 1.0 to 2.0. But
there are also a significant number of companies
that are stationary at CR 1.0.
The banking sector shows signs of tackling
some of the hardest hitting issues as identified
through dialogue with stakeholders, such as
financial inclusion and capability. There is evidence
of this sector integrating CR into business strategy,
communicating an understanding of the importance
they place on it. The current turmoil and accusations
of financial irresponsibility would, however, suggest
that their collective radar has been switched off.
It'll be interesting to see how the sector responds
next year!
There is a feeling that a ‘two-speed’ approach
to CR is developing: those that are rising to the
challenge of really tough sustainability issues, and
those that are sticking to incremental improvements
in their housekeeping. The overall trend looks like
this: the answers to the majority of our questions
indicate that there are signs of a beginning of a shift
from CR 1.0 to 2.0 as more businesses show signs
of embedding CR and sustainability into their
strategies. But those who are really tackling CR 2.0
and talking about it are a minority.
So this is the year that sustainability got tough.
At present, too few of the top 50 European companies
are effectively communicating on how or why they
are tackling the most complex issues. There are
no more easy choices, but the business case for
tackling these challenges is strong. It will not be an
easy task, but businesses need to learn from others
within their sectors and be willing to take on the
challenge to make the shift in this testing time.
 24/25

58% of reports are Sustainability

reports, 30% are Corporate
Responsibility or CSR reports.

22
74% successfully articulate what CR or

%
Sustainability really means to their business,
going beyond saying that it is just the right
thing to do. 80% have integrated CR and
sustainability into the ongoing business
strategy and discuss how it will enable
the business to be successful.

22% of the top 50 European

companies are talking about
the complex issues of CR 2.0
and beginning the shift.

60% effectively communicate

how they assess materiality.
78% are engaging with stakeholders
and incorporating their expectations
of the business into their approach.

SALTERBAXTER  DIRECTIONS 2008

ANALYSIS BY SECTOR AND FT EURO RANKING
Volkswagen
Volkswagen’s sustainability communications
21 FT EURO RANK
AUTOmobilES
are an example of absolute best practice,
tackling the key material issues for this sector
and considering issues much larger than it.
The communications, based on these issues,
are well thought out, easy to understand and
to the point. This approach is embedded as
‘doing business as usual’ and is being used
to form long-term strategy. Throughout the
website and sustainability report, stakeholders’
expectations are referenced and the resulting
actions described. Volkswagen is looking at
all aspects of its operations and the possible
implications. Dialogue is transparent and
frequent with use of success stories and,
more unusually, the disclosure of problems.
Globalisation, and the challenges and
opportunities this presents, is one of the
issues looked at in depth.
Daimler
Daimler is at a relatively early stage of
30 FT EURO RANK
AUTOmobilES
incorporating sustainability into its business,
with a sustainability committee established
in July this year. It is currently working on
embedding sustainability as part of business
strategy rather than a separate consideration.
Although the communications look very
impressive with a magazine, interactive
report and downloadable report all entitled
‘360 Degrees’, the issues are unfortunately
relatively introspective, and the analysis
isn’t quite as comprehensive as 360 degrees
would suggest. It would be interesting to
understand how Daimler has analysed its
material issues and whether this process
involved its stakeholders. Daimler would also
benefit from making communications more
open and transparent with information easier
to find as well as being more comprehensive.
It’s a good start, but Daimler has a long way
to go to be in the same league as Volkswagen.
HSBC
HSBC has a sustainability strategy, which
4 FT EURO RANK
BANKS
recognises that its continued financial
success depends on the way it manages
and addresses issues material to the
business. It also shows an understanding
that these ‘non-financial’ issues need to be
integrated into the way HSBC does business.
Following various initiatives to engage with
stakeholders, climate change, forestry, and
sustainable lending and finance are the issues
identified as key impact areas. A number of
‘key sustainable issues’ are identified and
broken down by customer group. This is
SALTERBAXTER  DIRECTIONS 2008
HSBC  »
CONTINUED
inconsistent as on the website issues identified
are related to customer groups. Although
some very hard issues are addressed, this
inconsistent approach to the prioritising and
rationalising of some 14 issues leaves the
reader unclear as to how or why issues are
being tackled.
BANCO SANTANDER
13 FT EURO RANK Although there is little information within the
BANKS
online CR web pages, there is a good overview
of where sustainability fits into the business
structure. The map of sustainability focuses
on business operations, where issues are
addressed in order to ensure the continued
success and stability of the business. The
materiality study with detailed analysis of
the financial sector’s main reputational risks
determines which issues are addressed.
These appear to be those that have impact on
the ‘confidence of society in the bank’ leading
the reader to question whether the integration
of CR into the business is really apparent?
Given the current climate in the industry,
it is fair to say responsible financial advice
to customers is one of the key issues the
bank needs to address, however the bias of
stakeholder engagement towards customers,
and the frequent mention of reputational risk
results in a lack of communication on its
wider responsibilities.
BNP PARIBAS
25 FT EURO RANK It seems to be a trend within the banking
BANKS
sector that a large part of the CR report is
focused on the structure of the business units
with BNP Paribas at the forefront. The reader
finds little on the approach to sustainable
development and issue areas until page 76
of a 211-page report! Although the group’s
responsibilities are identified as integral
and ‘rooted in its founding values’, there is
unfortunately little if any understanding of
the key impact areas. Communications with
stakeholders are merely listed and there is
no clarity on reasons to engage. In fairness
it appears to be a work in progress and the
bank does have a committee responsible for
identifying the challenges for the following year
– let’s hope that big issues will be part of this!

INTESA SANPAOLO
26 FT EURO RANK Communications are focused on the formation
BANKS
of the new group. Although working towards
CR 2.0 status by tackling both housekeeping
and thorny issues, the structure of issues is
a little unclear. The current report is split into
an economic report and social report – the
social section looks at all stakeholders and
the banks’ responsibilities, and the economic
section sheds light on the banks’ value adding
capacity. And online you will find information
on environmental objectives. Perhaps a simple
explanation of this could be the challenges in
bringing together the focus of the two major
banks and communicating it as one? A section
identifying the issues that are most important
to stakeholders is developed to discuss
how the business rationalises the way it
tackles them with a section on ‘improvement
objectives’. If volume is anything to go by then
clients and customers are the main focus. The
need to assist customers in the investment
sector and the protection of savings is
identified as a top priority. Although such
issues are identified, they are not really
discussed in depth.
Unicredito Italiano
27 FT EURO RANK Another example from the banking sector
BANKS
that has a clear focus on communicating
value added, ‘expressing in monetary terms
the relationship between the business and
the socio-economic system with which it
interacts’. A little unsure of its understanding
of reasons for tackling certain issues, the
group makes statements such as: ‘during
2007, the media and the public focused
their attention on global climate change and
UniCredit Group stepped forward to address
this vital issue’. The group appears to be
working on a process where it can define
priority areas through internal analysis of
its impact on stakeholders. For the 2007
reporting period, focus was placed on
‘The Art Experience’ described as a ‘formative
year for the bank’s international activities in
culture’ – this is part of its aim to ensure all
employees understand what is required for
long-term sustainable growth, including the
issues most material to stakeholders.
26/27
BBVA
33 FT EURO RANK CR is discussed on equal par with corporate
BANKS
reputation so at first it’s a little dubious
as to whether the business will show any
understanding of moving away from compliance
to tackling the hardest hitting issues. But
encouragingly, BBVA communicates a really
good understanding of stakeholder expectations
and the issues that are prioritised. The bank
also shows good progress on integrating CR
into the fabric of the business with a strategy
and business model demonstrating that all
group activities are aimed at ‘building a future’.
Although the web structure is based on the
‘major issues’ affecting the business, as
identified by stakeholder expectations, there
is no clear rationale for why they are prioritised
in that order. The issues also appear to be
general housekeeping issues with ‘customer
focus’ and ‘financial inclusion’ being the first
two impact areas identified.
SBERBANK OF RUSSIA
42 FT EURO RANK With minimal communications on CR issues,
BANKS
the bank is primarily committed to domestic
and international programmes to further
develop social welfare. Reporting as part of
the annual report only, there is no indication
of the business tackling any hard-hitting
issues; in fact even the housekeeping is a
bare minimum.
ROYAL BANK OF SCOTLAND
45 FT EURO RANK The current CR report is titled ‘10 issues that
BANKS
matter most’, with a website following the
same structure. CR is central to the way the
business is managed. This is reflected by the
identification of both the areas where they
can have the most impact, and the issues
that can make the most difference to RBS.
Senior management also appear to have a
clear understanding of the risks these issues
present. There is clear rationale behind how
these hard to handle issues are prioritised,
emphasising that RBS is clearly at level CR 2.0.
From large-scale quantitative opinion surveys
to small, local sessions on issues, the bank
has a sound stakeholder dialogue process
in place which reassures that this is not a
passing trend but a way of doing business.
Watch this space next year though.
SALTERBAXTER  DIRECTIONS 2008
ANALYSIS BY SECTOR AND FT EURO RANKING
Siemens
CR is part and parcel of Siemens’ core values
22 FT EURO Rank
electronics
and driven from the top. Communications
& equipment
appear to be promising, stating high aims
of being the ‘Best-in-Class’ in CR – although
unfortunately there is no real explanation
of how or what this actually means. There
is evidence of understanding stakeholder
expectations – but little evidence of engaging
with them in any dialogue. Compliance is
identified as its ‘number one priority’, followed
by climate protection and education. Siemens
insist that managers and employees must
comply with all regulations. Could this be
identified as a priority purely as a result of
recent media attention, or an example of a
business tackling a hard to handle issue?
In their own words this ‘program should not
be understood merely as a response to past
actions, but is aimed at achieving long-term
changes in the thinking and behavior’
of Siemens managers and employees.
Responding to media attention or tackling a
thorny issue – this is a difficult one to judge!
ABB
The language used to define CR and
50 FT EURO Rank
electronics
sustainability makes it difficult to understand
& equipment
what issues are a priority for ABB. Sustainability
is referred to as balancing economic success,
environmental stewardship and social progress
to benefit all stakeholders. With little mention
of strategy, it’s not clear if sustainability or
CR is integrated into the business at all, even
though CR is identified as one of seven priority
areas that form the issues of focus. Priority
areas are also fragmented. Attention on the
high impact issue of climate change, has no
clear rationale behind it, and gets lost amongst
the other priorities which are more general
– like CR itself!
NestlÉ
Nestlé’s ‘Creating Shared Value’ approach
3 FT EURO Rank
Food &
for 2008 gives a good insight into how it is
CONSUMer goods
integrating sustainability into the business
– in short how sustainability brings value to
shareholders and stakeholders, and is not just
a bolt-on to operations. By virtue of its supply
chain, Nestlé is tackling some significant
issues around sustainable agriculture, energy
and biofuels, water supplies and nutrition.
Interestingly, it is putting those tough issues
into a global context in its report, discussing
the complexities around the issues before
describing its own actions. So Nestlé is
developing an approach that both embeds
sustainability into the business while also
SALTERBAXTER  DIRECTIONS 2008
NESTLÉ  »
CONTINUED
making the point that its sustainability work
is more than housekeeping, but there isn’t
always a black and white answer to the issues
they are tackling. There is definitely room
for more but it will be fascinating to see
how Nestlé progress this as it’s looking like
the beginnings of a real shift from standard
CR 1.0 to embedded and challenging CR 2.0.
Unilever
20 FT EURO Rank Unilever does describe sustainability as an
Food &
CONSUMer goods integral part of the way it does business and
a crucial factor to growth, and indeed to even
existing as a business. The general sense of
sustainability being embedded in the business
is quite strong. And through the supply chain
and the sustainable agriculture initiatives
there are some really difficult issues being
tackled – water, biofuels and palm oil to name
a few. However what is missing is the context
– why they are tough issues, how the agendas
change and how Unilever navigates a path
through that. Otherwise it feels more like a
list of initiatives and achievements rather than
a dialogue with stakeholders about how the
business is sustainable. This is a tough one.
Based on actual activity in the business
we know that Unilever is at CR 2.0. But its
communications don’t reflect this – so for
now it has to be CR 1.0.
L’OrÉal
35 FT EURO Rank There is some level of articulation of CR at
Food &
CONSUMer goods a strategy level but any sense of integration
or embedded CR is lost when you find the
actual approach relies on the housekeeping
of environmental and social impacts of the
operations of the business. So the big issues
in this sector don’t really feature – things like
the perception of beauty, teenage anorexia
and the choice of models. L’Oréal do feature
diversity as a significant issue and rightly so,
but the context of why it matters so much in
this sector and why they should be leaders
isn’t well explained – apart from mentioning
that there isn’t just one type of beauty in the
world. L’Oréal could go a lot further with its
sustainability approach, go beyond monitoring
operational impacts and really tackle societal
pressures in the sector. Especially given that
it has The Body Shop to learn from!

EDF
9 FT EURO Rank EDF isn’t articulating the pressing conflicts
gas, water &
multiutilities in the energy sector in the same way as Suez
and E.ON are, but it is looking at big issues.
It references its activities in stakeholder
engagement and discusses how the sector
needs to develop over the next few years.
However, housekeeping issues dominate
the report and the articulation of big global
issues that are full of complexities is lacking.
Although tackling such issues as fuel poverty
is important, there is more EDF could be
doing. EDF does demonstrate in its business
strategy and values that sustainability is an
integrated part of the business. So a lot of
very positive sustainability work going on
but perhaps without the complexity and
context that others in the sector are clearly
thinking about.
E.On
14 FT EURO Rank This sector is beset by controversy and
gas, water &
multiutilities E.ON hits this head on – it confronts the
conflicting objectives of energy supply, price
and environment, the negative public and
stakeholder opinion it receives and the
technical complexities of the various types
of energy the sector provides. However,
although the report appears to be hard hitting
it doesn't actually get to grips with the issues
as we had hoped. Stakeholder engagement
is mentioned quite often but it comes across
more as the company justifying its actions,
rather than giving much exposure to the views
of the stakeholders themselves. The bold
communications approach of talking about
the paradoxes in the energy sector is confined
to the report – it would be great to see a more
integrated set of communications in the same
vein to engage a broader audience. E.ON is
still at CR 1.0 but with the relevant issues
being raised, we are hopeful to see them
moving to CR 2.0 in the near future.
28/29
Suez
31 FT EURO Rank Suez is upfront about five big and complex
gas, water &
multiutilities issues that the energy sector is facing,
with a monster document of pages upon
pages of box-ticking information. Other
communications primarily consist of
uninspiring web pages. Suez is on the
journey, however it needs to work a lot more
on its communications approach. The initial
pages of the report are interesting though and
put Suez amongst those energy companies
battling with the complexities of its sector
and how to balance conflicting economic,
environmental and energy policy pressures.
Interestingly, stakeholder engagement isn’t
presented as much more than standard
activity. Perhaps more engagement would
push it along that journey a bit faster.
Iberdrola
36 FT EURO Rank Iberdrola has a lot of sustainability work
gas, water &
multiutilities happening on the ground and is also showing
signs of integrating it into the business strategy,
with commitments to sustainable development
and renewable energy. But the communications
do not show signs of the business wrestling
with the really tough issues in sustainability.
And the report is such a long document
that it stops communicating with the reader
and just discloses activity. There is factual
information about energy policy in Europe
but the connections between that and the
company’s views gets lost.
RWE
44 FT EURO Rank RWE doesn’t seem to have tackled its sector-
gas, water &
multiutilities specific issues in the way E.ON and Suez
have – it’s still quite a predictable approach,
focused on identifying straightforward material
impacts and not getting across its thoughts
on the big issues. In fact the company openly
declares it is struggling to keep pace with
society’s demands and the loss of confidence
in energy suppliers. No doubt there is plenty of
work going into managing operational impacts
but in comparison to others and in light of what
this research is looking into, RWE rather fades
into the background.
SALTERBAXTER  DIRECTIONS 2008
ANALYSIS BY SECTOR AND FT EURO RANKING

Enel
47 FT EURO Rank
Enel communicates sustainability in a few
gas, water & ways – in a lengthy report, online and in
multiutilities
a stakeholder report. In fact, stakeholder
communications are extensive and there is an
interesting tool to gather stakeholder feedback
that is then disclosed in the report. But Enel
is operating a housekeeping approach,
however hard to manage some of the impacts
are. It does recognise the challenge of energy
supply, price and environment and how
difficult balancing those demands is – but it
is a reference not a strategy. So Enel is not
in the same league as some in its peer group.
Allianz
28 FT EURO RANK Allianz addresses materiality and stakeholder
INSURANCE
engagement in a clear and logical way. Plus
it integrates the issues it has identified into
products and services, displaying an embedded
approach – key topics are the impacts climate
change and demographic change have on
the insurance sector. And these are of course
key concerns. There is an underlying sense
of the difficulty in tackling these issues and
the lack of a black and white answer, but
no real discussion about the complexities or
how Allianz decides on its approach. It feels
like Allianz is more at the CR 1.0 end of the
scale than CR 2.0 – but there is definitely
material to work with.
Axa
39 FT EURO RANK AXA’s communications really focus on
INSURANCE
embedding sustainable development into the
business – obviously that is very important and
the report covers a lot of information about
product developments, tackling environmental
protection and health for example. However,
this research is looking for evidence of going
beyond that. And there is some – recognising
the difficulties of the economic climate and
changes in demographics for the insurance
industry, recognising that financial protection
and sustainable development go hand in hand.
But that recognition is not translated into
views. There is little evidence of stakeholder
engagement and with a long report and
straightforward web pages, communications
are generally not very engaging either. So
some interesting work but to reach CR 2.0
there is more to do.
Generali
49 FT EURO RANK Generali very much takes the housekeeping
INSURANCE
approach, although granted with a strong
focus on meeting stakeholders’ needs. The
report is lengthy and it is hard to get a sense
of how issues are prioritised, materiality or
even the impact the business approach is
having. Compared to the others in the sector,
it is very underwhelming.

ING
32 FT EURO RANK ING engages with stakeholders, considers
INSURANCE a variety of issues, and has evidence of
sustainability being incorporated into business
strategy and embedded into products and
services. It recognises the importance
of engaging employees. All positive, but
unfortunately this is only evidence of being
stationary at CR 1.0. There are some really
big challenges in sustainable finance and
investment that aren’t easily solved and it
looks like ING isn’t ready to get out there and
talk about them. So there is an opportunity
for this business, if it is ready to take it.

SALTERBAXTER  DIRECTIONS 2008


ArcelorMittal
16 FT EURO RANK As a new organisation, ArcelorMittal is at the
MINING
beginning of its CR communications and
approach. It is the only mining company to opt
for a CR rather than sustainability report. With
the recent merger of Arcelor and Mittal Steel
in June 2006, management appear to have
made CR a priority for the new business to
create a strategy and commitments befitting
a world leader. In terms of its approach, this
is an example of strategic best practice with
excellent communications on stakeholder
engagement and the establishment of
benchmarks to measure against in future.
12 commitments have been established
through its materiality assessment so it
remains to be seen whether these will be
tackled with the appropriate level of depth.
It’s not made the shift to CR 2.0 yet, but
we have high hopes for this company on the
basis of its strategy – and everything appears
to be moving quickly in the right direction.
Rio Tinto
18 FT EURO RANK Rio Tinto reports on its sustainable
MINING
development activities in the form of a review
contained within the annual report. Although
there is much reference to the materiality
process, key issues or priorities are difficult
to establish among all the topics covered on
both the corporate website and printed report.
Strategy is described in detail but there is little
information on the results. Rio Tinto admits
it does not report on all of its material issues
– claiming it will publicly communicate on
them if enough external interest is received.
Communications would benefit from being
more transparent with regards to Rio Tinto’s
operations. For example, providing the actual
criteria used to determine whether a site
is suitable for development rather than
describing a process that is used would be
more meaningful.
30/31
Anglo American
34 FT EURO RANK Safety and health are major issues for the
MINING
organisation as targets for zero harm aren’t
being met. However, the company is clearly
aiming to lead this sector by aiming for
best practice policies on the big issues it
is tackling. Although sustainability is clearly
embedded in the company strategy and it
does engage with stakeholders, information
is missing on how the issues have been
established and prioritised. If Anglo American
can demonstrate this, it will shift to CR 2.0.
Xstrata
43 FT EURO RANK From HIV and Aids to biodiversity, community
MINING
impact, water and air emissions, Xstrata has
addressed a range of material issues in its
communications. Reporting is well documented
with good disclosure, score cards and targets
on all of their issues. It has engaged with
its stakeholders in order to form the material
issues and prioritise these accordingly.
Above all there is a high level of transparency
throughout the report, information is easy
to find and simple to understand. However,
it could be argued that these material issues
should be part of doing ‘business as usual’.
Xstrata has the right process in place to
establish these issues but we’re keen to see
them developed in future to consider wider
impacts. As Xstrata currently does not report
on the impact of its supply chain we would
expect to see this made an immediate priority.
BHP Billiton
48 FT EURO RANK BHP Billiton has created logical and easy
MINING
to follow communications on sustainability
on both its website and report. Information
is accessible, provided in detail and also
summarised – important for readers looking
for an overview. Stakeholders are clearly
identified and have been engaged with to
establish key issues. Of particular interest
is the section entitled ‘what others say’.
BHP Billiton invited sustainability peers to
provide their perspectives on its key issues
and level of response. It is likely we will see
this style of communication more often in
future as it supports trust and transparency.
SALTERBAXTER  DIRECTIONS 2008
ANALYSIS BY SECTOR AND FT EURO RANKING
GAZPROM
1 FT EURO RANK Gazprom produces an environmental report
OIL & GAS
– not that surprising given the nature of the
business and the huge impact it has on the
environment. Although saying that, there is
no evidence of an understanding of how CR
fits into the fabric of the business or the real
impact of its operations. Little evidence of
understanding of the complexity of the issues
that need to be addressed was found. It goes
without saying that social issues wouldn’t be
addressed in this type of report – but upon
reviewing the website nothing could be found
there either. Various environmental issues
are described but there is little evidence in
its communications of how they are either
prioritised or linked to the business strategy.
There is little reference to stakeholders of the
business and no dialogue appears to be in
place to identify the thorny issues that this
business should be paying attention to.
ROYAL DUTCH SHELL
2 FT EURO RANK Communications are well structured and
OIL & GAS
the user gets a clear sense of the prioritised
issues. Top line information on an issue
within the report is further backed by detailed
content online. Sustainable development is
identified as the ‘right thing to do’, good for the
business and helps ‘meet the world’s growing
need for energy in economically, socially and
environmentally responsible ways’. Issues of
focus are those that will enable the business
to create value and reduce operational and
financial risk. It sees no trade-off between
being profitable and responsible, understanding
the need to identify, assess and manage
impact on stakeholders. Shell goes through
a process of opening itself up to an external
assessment to judge whether it selected the
most important topics to report on this year,
how well these hard-hitting issues were dealt
with and how it responded to stakeholder
interest. Shell is clearly on track, from use of
an ‘auditable content selection process’, to
tackling the hardest issues hitting the industry.
Communications effectively prioritise the issues
that are most material to the company, and of
greatest interest to Shell’s stakeholders, in
addition to covering one of the most significant
topics facing our world – climate change.
SALTERBAXTER  DIRECTIONS 2008
BP
5 FT EURO RANK BP’s materiality matrix is very thorough and
OIL & GAS
emphasises the issues that help deliver the
business strategy. Those that ‘have attracted
a high level of public exposure and awareness’
are also considered very important for
inclusion in the current report. However, BP’s
communications on CR are confusing as it
is difficult to distinguish between what is
identified as housekeeping issues and those
felt to be the hard to handle issues. There is
no doubt that BP has a clear understanding
of its most material issues – however, due
to the structure of the communications the
most significant are not brought to light.
TOTAL
6 FT EURO RANK It is quite difficult to work through how Total
OIL & GAS
defines and ranks the issues most material
to the business. Going by the structure of the
communications there appear to be many.
Perhaps the focus on biofuels, on the landing
page of the CR section where the reader finds
a special publication on work in the area, is
an indication of the importance placed on the
issue. With only generalised statements, the
importance of each issue is not really addressed.
It’s not clear how Total defines CR although it
does communicate an understanding of the
need to secure the longer-term future of energy,
and hence the existence of the business,
explaining the need to focus on biomass and
solar energy processes, along with evidence
of investment areas. All in all the reader is left
unclear as to what the business is tackling
and why.

ENI
2007 is identified as an important year for
11 FT EURO RANK
OIL & GAS
ENI as sustainability has become an integral
part of corporate processes. Importance
is placed on qualifying for indices such as
DJSI and FTSE4Good. Great use of interactive
features online allow ENI to explain its
‘conceptual model of sustainability’ where
social development and environmental
protection are part of the long-term benefits
that it can provide to the communities in
which it operates. ENI communicates how
being responsible can contribute to the
efficient management of an organisation –
however it’s unclear whether CR is identified
as an add-on or part of the fabric of the
business. It can only be assumed that the
importance placed on each identified issue
is reflected by the order in which they appear
in communications. ENI may well be tackling
hard-hitting issues such as climate change
but unfortunately it is not clear to the reader
why it is doing so.
Rosneft
Sustainable development appears under
23 FT EURO RANK
OIL & GAS
the ‘Social Issues’ tab of Rosneft’s website
navigation, emphasising the types of issues
prioritised. The CR strategy and initiatives
(explained in a very long report!) are more
based on donations and charitable giving than
specific long-term initiatives or programmes.
Given the nature of the business the reader
would expect more environmental issues to
be considered or communicated as important.
However, it is fair to say the issues tackled
do match up to what they consider CR to
be. The business strives ‘to achieve not only
high production and financial results, but
also to make a considerable contribution in
development and prosperity of the country
and improvement of living conditions of its
citizens’. They also consider stakeholders to
be shareholders, company employees and
their families, population of the regions of
presence, and society as a whole.
StatoilHydro
Although StatoilHydro appears to be primarily
24 FT EURO RANK
OIL & GAS
driven by the need to create shareholder value,
the group does clearly communicate the need
to consider CR as a factor in helping it remain
competitive and efficient. Unfortunately,
reasons for focus on particular issues, aside
from the direct business benefits rather than
the responsible thing to do, couldn’t be found.
Climate change, the first priority, is identified
32/33
STATOILHYDRO  »
CONTINUED
as a serious challenge for the industry – and
one which also ‘represents new business
opportunities’. But StatoilHydro does appear
to see the real value and reason for engaging
with stakeholders with a section of the reporting
dedicated to the initiatives in place. Although
tackling some thorny issues, it doesn’t explain
much more than the business benefits of
doing so. Clarity in its communications would
help this business make the shift to CR 2.0.
BG Group
37 FT EURO RANK For BG Group, CR stands for its core approach
OIL & GAS
to business and how it integrates business
principles into practice. Communications clearly
show how CR is integrated into business
processes, discussing stakeholder engagement
programmes and value through to corporate
governance. To determine which issues to
focus and report on, BG Group undertakes a
thorough risk and impact assessment. Due to
the nature of the business it is no surprise that
climate change is defined as the number one
priority and one that the group identifies it can
actively tackle. Although hard to handle issues
are a priority for the group, unfortunately
it does not distinguish the importance
between these, and those that are general
housekeeping, as through the materiality
assessment, it also considers ‘working to high
standards’ and ‘stakeholder engagement’ as
key issues. Taking good steps in the direction
of CR 2.0 but still at 1.0.
Lukoil
41 FT EURO RANK The sustainable development report is found
OIL & GAS
within the social section of Lukoil’s very
unstructured website. Placed within the ‘About
Us’ section, Lukoil defines CR as supporting
long-term economic growth, social stability,
prosperity and progress in the regions where
it operates. Its issues of focus are also very
broad with only ‘social and environmental’
issues identified. Aside from priority areas
identified as health protection and safety of
personnel and communities in the areas
where Lukoil operates, there is little evidence
of the business tackling the hard issues facing
the sector. For now this company is stationary
at CR 1.0 and needs to engage with its
stakeholders to appreciate what is expected of
the business and where its responsibilities lie.
SALTERBAXTER  DIRECTIONS 2008
ANALYSIS BY SECTOR AND FT EURO RANKING
ROCHE
7 FT EURO RANK Roche is aware of the importance of stakeholder
PHARMACEUTICALS
engagement and it is an integral part of its
business strategy. However, there appears to
be a gap between the company strategy and
its approach to addressing material issues
within its communications. Strategy has been
formulated without evidence, or disclosure, of
considering external stakeholders’ expectations.
Material issues were established at the start
of the year and Roche has begun collecting
information on each. Although ‘relationship with
stakeholders’ is considered a material issue,
which we would argue should be part of doing
business as usual. Next year, we hope to see
Roche conducting its materiality assessment
with all its stakeholder groups and taking the
next step towards CR 2.0.
Novartis
12 FT EURO RANK
 It was difficult to find all CR information for
PHARMACEUTICALS Novartis as the communications are a little
fragmented. There is a corporate citizenship
section contained within the annual report,
a separate corporate citizenship review, a
microsite, policies and guideline documents.
Further information is available on specific
topics as brochures and case studies, and
there is also a separate performance report.
The result is confusion, much repetition and
difficulties in finding complete information.
Although there is evidence of stakeholder
engagement and identification of material
issues, coverage seems lightweight and
standard for the sector. So the next step for
Novartis is to streamline all this information,
make the content easier to find, and delve
into these issues.
GlaxoSmithKline
17 FT EURO RANK
 Communications show evidence of material
PHARMACEUTICALS issues being tackled head on. GSK examines
its contribution towards global health, ethical
conduct, and access to medicines. However,
the real strength is that GSK looks in-depth
at each issue and discloses far more than its
competitors. It has transparent communications
across all its issues. A prime example of this
is the voluntary disclosure of GSK’s political
donations and the reasons behind them.
GSK’s latest CR report entitled ‘Answering the
questions that matter’ also does exactly what
its title proposes. It is obvious that GSK is
working on building trust in the organisation
through this transparent disclosure. The result
is incredibly engaging communications that
really do answer the questions that matter.
SALTERBAXTER  DIRECTIONS 2008
Sanofi-Aventis
19 FT EURO RANK
 Sanofi-Aventis has great communications on
PHARMACEUTICALS its sustainability issues which give a really
positive impression. Unfortunately, an in-depth
read shows this work is at a relatively early
stage and much more needs to be done just
to get up to speed tackling the issues that
matter, let alone going beyond them. A thorough
materiality analysis has been performed,
however Sanofi-Aventis has not managed to
tackle all these issues, of which the end of
product life cycle and influence on law-makers
are two examples.
BASF
46 FT EURO RANK
 For the first time, BASF has combined its
PHARMACEUTICALS financial and sustainability report into one
publication. The result is evidence of a coherent,
integrated strategy that sits within the business
principles. Within its communications, BASF
has identified its key material issues and has
produced information on these through the
report, the website and short videos as well.
Stakeholders’ considerations have been
considered with regular engagement evident.
The work investigating demographic change
is well thought out and relevant. BASF is
considering the much wider reaching issues
and has a strong sustainability strategy to
ensure its future.
Vodafone
8 FT EURO RANK
 Vodafone has taken a clear, transparent
TELECOMS & approach to CR communications. All
TECHNOLOGY
communications have been designed to
be easy to understand and easy to follow.
The strategy too, has been simplified with the
business as a whole applying ‘One Strategy’
as opposed to different techniques in different
markets. Vodafone applies a simple strap line
to its material issues ‘we said, we have, we
will’. This simple breakdown means that its
progress is easy to understand and can be
tracked over the years. This open and
transparent method of communication really
works for Vodafone and is the highlight of all
its CR communications.

TelefÓnica
10 FT EURO RANK
 Telefónica approaches a wide range of
TELECOMS &
TECHNOLOGY
issues relating to the organisation. Activities
are clearly not only for the financial benefit of
the company. Telefónica is actually trying to
promote responsible progress. Issues such as
‘the digital divide, accessibility, use of ICT and
child protection’ are all explained clearly with
transparent information on performance and
targets. This responsible approach is clearly
embedded in all aspects of the company and
its communications. The result is easy to
understand, relevant and engaging. A great
example of a company that has taken the
steps to CR 2.0.
Nokia
15 FT EURO RANK
 At first glance the communications on the
TELECOMS &
TECHNOLOGY
website appear well laid out, simple to find,
with an easy to navigate online report. Once
you scratch the surface of the content, you
find a wealth of information hidden beneath
the surface. Nokia is doing some great work
here but could do with communicating these
activities in a more obvious way. Its accessibility
micro site is a prime example of this: great
content but hard to find. Engagement with
stakeholders is referenced throughout its
communications and key issues are thorough
and relevant as a result. Although Nokia has
established its material issues, these are
mainly issues that we would expect to see as
doing business as usual – considering the
environment, supply chain and human rights.
Accessibility as its priority goes beyond this
and is considered in depth. Is the business
at the next stage? Almost, but not just yet.
34/35
France TÉlÉcom
29 FT EURO RANK
 France Télécom is the company behind the
TELECOMS &
TECHNOLOGY
brand ‘Orange’. For this reason, expectations
were high for France Télécom’s CR
communications. Although its work ticks
all the boxes, the messages are a little flat.
Stakeholders are clearly being engaged with
throughout the business and are an integral
part of company strategy. The establishment
of its material issues is thorough and considers
all stakeholders, however the outcomes are
introspective issues rather than the further
reaching impacts we were looking for. The
report would also benefit from disclosure on
feedback and priorities for the organisation.
Deutsche TeleKom
40 FT EURO RANK
 Deutsche Telekom, the name behind
TELECOMS &
TECHNOLOGY
T-Mobile, is currently reviewing its CR practice
and realigning responsibilities. As a result,
it has published ‘Facts & Figures’ which
is an interim report for 2007. Deutsche
Telekom has a long way to go in terms of its
CR communications, although it has been
reporting on these issues since 1996.
Hopefully, this is what Deutsche Telekom is
working on and we can hope to see the full
report next year. There is a fair amount of
work to be developed if it wishes to be in the
same league as its competitors. However
we are hopeful as the organisation intends
to ‘develop a CR strategy, which takes into
account the needs of society, the market
and our stakeholders in equal measure’.
BRITISH AMERICAN TOBACCO
38 FT EURO RANK
 The most interesting part of BAT’s
TOBACCO communications is a Q&A section of the
recent report where the CEO addresses the
question that everyone wants answers to.
‘How can a tobacco company be sustainable
and is CR used as a PR spin?’ BAT is open
for dialogue with all of its stakeholders to
debate the highly controversial issues it needs
to be addressing and there is evidence that
it is. Working with various scientific bodies
and health communities, it is working
towards developing and introducing potentially
reduced-risk products, identified as its number
one priority. Its sustainability agenda also
addresses the key issues of concern around
business operations, as well as the issues
related to the nature of the products. BAT has
no problem addressing general housekeeping
issues, although the thorny issues are definitely
much harder to handle for a business of this
kind, so it warrants the mark of CR 2.0.
SALTERBAXTER  DIRECTIONS 2008
 There’s now more discussion, opinion, research
and insight available online at the salterbaxter
re-think tank, an online forum focusing on the main
corporate communication issues that businesses
are needing to consider. To find out more visit

salterbaxter-rethinktank.com

join the debate at the re-think tank

The Re-think tank is the place where commonly held views

are challenged, new ideas flourish and boundaries are broken.

You’ll find articles, opinions and research on the big business

and communications issues of the day, from sustainability to
more effective digital marketing. Regular contributors include
leading players and thinkers in all the fields we operate in –
so you’ll be in good company.

SALTERBAXTER  DIRECTIONS 2008

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