DIRECTIONS

MONTHLY
SUPPLEMENT
DECEMBER 07

TRENDS AND ISSUES IN THE WORLD

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 Directions Monthly December 2007
Welcome to the December edition of Directions Monthly. In the past year
we have seen private equity companies scrutinised over the takeovers
of some of the most respected and trusted businesses. So this month we
have invited Richard Ellis of Alliance Boots to provide his take on working
with KKR, the challenges they faced and reasons why private equity firms
are not really ‘barbarians’. He outlines his prescription for all businesses
that are addressing the responsible business agenda and explains why it
is so relevant to private equity-owned businesses.
Everyone watched anxiously as Boots was taken over by KKR
– so how has Boots continued to maintain such a healthy
responsible business strategy?
Following the merger between Alliance
UniChem plc and Boots Group plc, Alliance
Boots plc was formed on the 31 July 2006.
At the time there was doubt, particularly
among the broader CSR community, as to
whether the new Company’s approach to
CSR would match that of Boots. In June
this year the uncertainty grew further
following the high profile private equity
acquisition of Alliance Boots plc by KKR
and Stefano Pessina.
The question on most commentators lips was
– how would one of the UK’s most trusted
Richard Ellis companies be affected by this ownership
Head of Corporate Social Responsibility, change and what impact would it have on
Alliance Boots their CSR credentials? Some six months on
I can report it’s, “Business as usual”.
Very few, if any, private equity-owned
businesses have successfully introduced
CSR programmes. They have a reputation
for being secretive; very few people outside
the world of private equity really understand
how these businesses operate. This lack of
transparency was one of the key drivers
for the Walker Review. Whilst some
recommendations have been made available
there is still further work to be done before
final publication. How Alliance Boots deals
with these issues could well impact the final
version of this review.
At the heart of these findings is the need
for increased stakeholder dialogue. This has
been fundamental to the success of the
Boots programmes and is the central plank
around which the new Company is building
its CSR strategy.
❝ For the past five years Boots has
maintained an on-going two-way
communications process with all its
stakeholders. They have helped shape the
strategy and decide the priority areas; and
exactly the same process continues today
as a private equity-owned company.
❞
Issue 18
Lucie Harrild Pavan Athwal
Boots’ CSR credentials were established
by the founders of the Company, the Boot
family, in the 1850s. In 1914 electrically
powered vehicles were introduced, in 1915
a Combined Heat and Power Plant was first
established and in the 1930s glass and
cardboard were recycled. This agenda has
not suddenly been discovered by Boots. It is
part of the DNA of the Company; it’s not an
add on, but something which is embedded
into the way business is done.
The new owners could see that CSR was not
a cost but a vital ingredient in the success of
Boots. The CSR activities gave the brand its
personality. It was the reason why customers
“TRUST Boots”.
But KKR and Stefano Pessina needed more
than just a compelling story – they needed
a proper business case. They wanted to see
that this activity delivered economic as well
as environmental and social benefits.
Central to this is the information gathering
system, Credit 360. This provides the
“numbers” which enable the CSR agenda to
be managed and KPIs to be set. It provides
the data in reports and various surveys such
as the Business In The Community CR Index.
Without it CSR would not have been taken
seriously at Board level. CSR today is judged
in exactly the same way as any business
discipline. It is not given any special
“favours” but must deliver value in the
same way as any Business Unit does.
Through this process it was possible to
describe the real benefits of pursuing CSR
initiatives. For example, a range of transport
activities reduced the road kilometres driven
on behalf of Boots by 8.5 million. This saved
5% in transport carbon dioxide emissions
and £1.4 million in fuel costs. It was because
we could articulate the business, as well as
 Directions Monthly December 2007
❝
But KKR and Stefano Pessina needed more
than just a compelling story they needed a
proper business case. They wanted to see
that this activity delivered economic as well
as environmental and social benefits.
❞
the broader social and environmental
benefits, that the new owners were willing
to encourage the “Business as usual”
approach.
Talking about CSR in business language
to Stefano Pessina was key. He could
understand the strategic relevance of
supporting breast cancer charities when
79% of the employees were women and
83% of our customers are women! It wasn’t
just about doing good things for their own
sake but embedding these principles into
the fabric of the business.
The importance of CSR to the new business
was understood even before the acquisition.
In the Prospectus document three very clear
measurable CSR commitments were given
and have been met…
1. That CSR reports written along Global
Reporting Initiative guidelines would
continue to be produced – the first CSR
report for Alliance Boots was launched
on the 9th October this year.
2. That a Board CSR Committee would be
established to oversee CSR activities
across the whole Company – the first
meeting was in September 2007 and it
comprises Ornella Barra, Marco Pagni
and Steve Duncan who are all full
Management Board Members.
3. That Alliance Boots would complete the
BITC CR Index and allow its results to be
published – Ornella Barra formally signed
the submission in November 2007 and
receipt has been acknowledged by BITC.
There is clear leadership for this agenda.
People at the very highest levels accept
responsibility for the delivery of CSR
objectives. They do this because they
understand the real value it delivers for the
business. Equally they recognise that they
are members of society and that we all
benefit from such activity. It is a passion
that lives on in the new Alliance Boots.
Looking forward, what are the challenges?
Well, CSR is now firmly embedded on the
management agenda but we must integrate
it across the whole business. The former
Boots business understands the importance
of CSR to its brand, but as the new business
operates internationally some countries are
only just starting their CSR journey. All parts
of the business need to be helped to improve
their performance and achieve their full
potential. The first step on this journey for
some of our international colleagues begins
when they attend the CSR Training Course,
which equips them to become the
“champion” for CSR in their country.
As all parts of Alliance Boots become
familiar with this agenda it becomes possible
to integrate Company-wide policies and
introduce worldwide campaigns such as the
eradication of counterfeit drugs.
❝ Communication of our achievements
and aspirations will be key. I admire the
way Marks & Spencer have communicated
their “Plan A” CSR strategy; it is a great
example of where a CSR programme
has been aligned to business strategy
successfully. This is not something Boots
has done previously but the new owners
are giving us the confidence to maximise
the benefits of our CSR programmes.
❞ this would be much more difficult to do than
Stakeholders want to know more about CSR
and in particular climate change issues.
I think it’s fair to say the green consumer
is on the march. But they personally don’t
know what they can do to solve this problem
and they don’t want to change their lifestyle
too much. So they want to buy from brands
that have done this for them. This means
when they buy our products they can take
them home and enjoy them – safe in the
knowledge that we have done what can be
done to tackle climate change.
This was why we worked with the Carbon
Trust to obtain “Carbon Labels” for our
Botanics and Essentials shampoos. It shows
consumers that we are serious about this
agenda. Similarly we are encouraging our
people to bring their personal behaviours to
work. At home we are used to recycling and
turning off lights. So why don’t we do similar
things at work? We are encouraging such
behaviours by taking away personal waste
bins at Head Office. Now employees have
to segregate their own waste and recycle
Issue 18
paper, cans and plastic. Such actions might
not in themselves save the world, but they
send a very clear message to our people that
CSR is an important part of the business
agenda. It’s the start of our journey to create
100,000 ambassadors for CSR across the
Company.
But businesses, even passionate ones, cannot
tackle the responsible business agenda
alone. The government could aid this process
by offering more incentives to companies
to follow sustainable practices. It needs
to develop joined up thinking between
central and local government on things
like the building of wind turbines – National
government wants more but the local
government planning process often hinders
this. Legislation can too often be a blunt
instrument because it captures all companies
irrespective of their type or past CSR record.
For example: if laws were to be introduced
requiring businesses to reduce their carbon
footprint by a fixed percentage, what would
the base point be? For a Company like Alliance
Boots that has been doing lots of things
across our property portfolio for five years,
for a company that had done nothing.
My prescription for private equity-owned
companies, which is equally applicable to
all businesses, is to understand where CSR
sits within the business agenda and who
is responsible at Board level. Explain CSR
in terms that the rest of the business
understands; don’t get bogged down with
some of the CSR jargon, particularly around
carbon management. Make it relevant and
measure and report on what you do.
The new owners of Alliance Boots are,
after all, business people who want their
investments to succeed – they will listen
and support strategies that deliver value
and exceptional returns, as well social
and environmental benefits.
ABOUT US
SALTERBAXTER ADVISE
COMPANIES ON STRATEGY,
BRANDING, CORPORATE
COMMUNICATIONS AND DESIGN.

Our clients are extremely varied and include FTSE 100 companies; some
of the world’s most exclusive brands; independent, entrepreneurial
businesses; world-leading educational establishments; law firms; private
equity firms and media companies.

We name companies, re-invent companies and re-position companies.

We help companies communicate with shareholders and advise them on
how to address corporate responsibility. We launch, brand and re-brand.

A key area of our expertise is corporate reporting and we advise leading

UK and European organisations on strategy and design for their financial
and CR communications programmes. We currently work with 11 of the
UK FTSE 100.

Contact:
Lucie Harrild Pavan Athwal
lharrild@salterbaxter.com pathwal@salterbaxter.com
Tel: +44 (0)20 7229 5720 Tel: +44 (0)20 7229 5720

Directions Monthly supplements our main Directions report. This report is published each
year and is now regarded as the UK’s most comprehensive analysis of the trends and
issues in CR communications. If you want a copy of the full Directions Annual Survey and
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