Friday, March 31, 2017

Three Strategies to Get Ahead of Wellness Trends

Employers are eager to increase employee health engagement to drive value for employees while improving the bottom line. But of course, not all health engagement initiatives are worth the effort or investment. Employers who develop good engagement strategies are leveraging cutting-edge technology, expanding the meaning of well-being, and utilizing analytics to break the mold and drive substantial financial value.

The Multi-million-dollar Financial Value

A new report, The Business Case for Employee Health Engagement by Welltok, a consumer health SaaS company, revealed that businesses could produce almost $300 per employee in new value by increasing employee health engagement rates by ten percent. This value is made up of reductions in medical and direct HR costs as well as improvements in workplace productivity. The value proposition, in combination with the positive impact on employees, makes the business case for increasing engagement very strong. However, employers struggle with how to strategically gain significant improvements in engagement. It takes a thoughtful, evidence-based strategy.

Strategies to Increase Engagement

To dramatically increase employee health engagement, employers should focus on four specific enterprise-wide strategies:

1. Focus on Impact: Employers who try to engage employees in every aspect of health become disorganized, unfocused and are not likely to succeed. Employers need to build a plan that emphasizes the programs, services, and activities that are both important and interesting to employees, and have the largest potential financial benefit to the employer. In almost every case, this requires applying analytics to help you determine where to start first.

2. Build Employee Trust: Like any relationship, trust and transparency are key. If employees truly believe that employers want them to be happy, healthy and resilient, they are more likely to participate and stay engaged in initiatives.

3. Personalization is Key: The more personalized and tailored an initiative is, the more likely an employee will remain engaged. The best approach leverages advanced analytics that integrate a wide variety of consumer and clinical data. By utilizing such advanced capabilities, employers can create programs that resonate with each individual’s experience, needs and wants.

4. Make it Easy: Living less out of habit and more out of intent is understandably difficult. It is essential for employers to do whatever they can to make it easier for employees to make changes. Among other things, they must take into consideration the user experience and make sure that programs are straightforward, intuitive and built with the end-user in mind.

 Key Trends Worth Leveraging

The design and implementation of well-being programs are rapidly changing. Employers are leveraging a range of new capabilities in their efforts to improve employee health engagement, including:
  •  Utilizing advanced analytics: Employers are capitalizing on advanced analytics to understand their population at the deepest level. They are integrating consumer data with clinical information to enable a rich understanding of each employee. 
  • Rethinking the definition of well-being: Employers are broadening their well-being focus to include financial well-being, emotional health and integration of devices to create holistic strategies. 
  •  Increased understanding of health literacy and consumerism: Employers are providing new tools and resources to help employees gain an understanding of the financial and health implications of the providers they use and the choices they make about treatments. These efforts are being driven by the imperative of increased financial responsibility that employees have for health services and insurance coverage.

The Effort and Investment are Worth it

Increasing employee health engagement is not only beneficial for employees, but it is also good for business.

Meaningful employee health engagement requires more than just participating in a single activity or going to a website. It is important for employers to focus on what matters and what works. To achieve this, employers need to be dedicated, intentional and focused on effective strategies while keeping current with key trends shaping the well-being industry.

Get a full view of the value of engaging employees in key health decisions and action by downloading the comprehensive report, The Business Case for Employee Health Engagement.

 —David Veroff, senior vice president, evidence and value science, Welltok

Wednesday, March 29, 2017

The Evolving Role of HR in Corporate Responsibility

Today, Gallup reports that more than half of employees in the U.S. (51 percent) are not engaged with their jobs; while 16 percent are actively disengaged. If we use Gallup’s definition of an engaged employee, that means more than half of the workforce is not involved in, enthusiastic about, and committed to their work and workplace. This should scare employers. But it’s not all bad news—over the past few years we’ve seen one trend emerge that can play a role in mitigating this employee indifference and to an extent, has the potential to recapture some of employees’ interest in the work they do and the companies they work for: the opportunity to do social good.

Not Your Father’s Corporate Responsibility 

 The notion of corporate responsibility and what it means to be a socially responsible organization is changing. We are shifting away from companies doing some fundraising, writing a check to a foundation or non-profit, marking “do good” off their corporate checklist, and moving on to the next thing with no further thought to where the money was going or whom or what it was impacting.

This change in what it means to give back has been impacted in part from within by employees themselves. According to the 2016 Cone Communications Employee Engagement Study, 74 percent of employees said their jobs are more fulfilling when they are provided with opportunities to make a positive impact on societal and environmental issues. Not to mention the impact of corporate social responsibility on recruitment and loyalty; 51 percent of people won’t work for a company that doesn’t have strong social and environmental commitments and 70 percent of employees say they would be more loyal to a company that helps them contribute to important issues.

Employee expectations on corporate responsibility factor into a larger trend around changing societal and cultural norms. Today, people are looking for companies to step up, to help, and to make a stand more so than ever before. The pressure for companies to give back is not only internal, but also coming from their customers and communities.

Looking back on our definition of an engaged employee—involved, enthusiastic, and committed—it seems like investing in a solid corporate responsibility program can help fulfill these criteria for employees.

Enter HR 

Historically, human resource (HR) involvement in corporate responsibility initiatives has not been a given. Some HR departments own corporate responsibility initiatives, some work in tandem with the corporate responsibility departments within their organizations, while many remain entirely disconnected from corporate responsibility efforts. But thanks to the growing link between employee recruitment, engagement and retention efforts and an organization’s commitment to social good, times are changing.

Many organizations may feel the pressure to create, ramp up, or expand their existing corporate responsibility programs, and HR can play a critical role in accomplishing these goals by clearly communicating and presenting defined social programs and employee volunteer campaigns that both current and prospective employees can feel good about.

HR professionals should view corporate responsibility as an integral facet of employee engagement and professional development. Volunteer programs can be used as a recruitment tool, and skills-based volunteer programs can be leveraged to develop talent internally. HR should be involved as a key stakeholder in scoping and administering employee volunteer programs.

When employees can participate in skills-based volunteering, they’re not only contributing to others, but also their own professional growth. Deloitte’s 2016 Impact Survey found that volunteering can play a significant role in building key leadership skills. As HR professionals are tasked with developing high-impact training and development programs with limited resources, corporate responsibility initiatives involving skills-based volunteerism may serve as an effective means of professional development and management training. For example, a marketing associate who helps a nonprofit organization design a fundraising campaign might have the opportunity to further develop skills for project management, lead generation, and strategic communications. For large enterprises with multiple locations, consider selecting people in each office to head up local volunteer efforts. This is a great way to organize at a local level while developing leaders throughout your organization.

The role that corporate responsibility initiatives and employee volunteer programs play in employee engagement, retention, recruitment, and development goals will only continue to expand. We’re in the midst of a sea change as CR and HR professionals feel both pressure and inspiration from all angles—employees, senior management, the community, and customers—to uplevel social good programs. As these voices become louder and the expectations placed on corporations continue to grow, it presents an opportunity for HR professionals to broaden their work within corporate responsibility, launch a new program, or become better connected to an existing program within their organization—and all while doing some good at the same time.

—Jamie Serino, director of marketing for Blackbaud, Corporations & Foundations Division

Monday, March 27, 2017

Will Humans Regulate Artificial Intelligence?

While the artificial intelligence revolution is coming quickly, economic adjustments take time. Therefore, dislocation, disruption, and suffering are inevitable. How can we ensure that the revolution empowers people—or “informates,” to use the term coined by Shoshana Zuboff—rather than denigrates us by leaving us without jobs and a loss of control over our lives? Renowned physicist Steven Hawking has warned that AI may become an existential threat to our species. He told the BBC "The development of full artificial intelligence could spell the end of the human race...It would take off on its own, and re-design itself at an ever increasing rate," he said. "Humans, who are limited by slow biological evolution, couldn't compete, and would be superseded.”

Other experts assure us that people can always gain control, at least in the foreseeable future. They harken back to science fiction writer Isaac Asimov’s three laws of robotics:
  • A robot may not injure a human being or, through inaction, allow a human being to come to harm;
  • A robot must obey orders given it by human beings except where such orders would conflict with the First Law; and
  • A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.
Of course, while we are in the domain of science fiction, we remember the computer HAL in Stanley Kubrick’s classic 1968 film 2001 A Space Odyssey. HAL came to believe that the humans were a threat to the mission, and in the man versus machine battle that followed, HAL eventually was deactivated. (For a while, only, for those who watched the sequels!)

Without even getting into the existential threats, the AI revolution raises fundamental questions about who will win and who will lose. How will robotics impact the distribution of political, economic and social power across the globe? Will the current organization of nation states still make sense? Will transnational corporations control the means and effects of production and employment, with their systems beyond government access and understanding?

What about those whose work is no longer needed, be that executives, managers, production workers, service workers, agricultural workers, or anybody else? And particularly, what will happen to those who are not suitable for new jobs that may emerge? Do we need to fundamentally restructure access to income, adopting, for example, guaranteed minimum income or negative income tax schemes? Or will we be content to let the unemployed fall through overwhelmed safety nets?

Next, we can look at the ethical decision-making built into AI systems themselves. We all are familiar with the self-driving car question: The car has a choice of slamming into a wall, killing its occupants, or running over a group of pedestrians. Networking among vehicles should make this event rare, but it will come up. What should the car be programmed to do? Should the car owner have a say?

The U.S. military is already a parallel issue in drone attacks on targets by requiring a human action to order a kill. In the future battlefield, if the AI system determines that the time for human action will result in significant loss of friendly life, what should it do? Our forces are now testing swarms of smaller drones that use “colony” behavior modeled on ants and bees to identify and eliminate risks. As one officer explained, when you eliminate the human pilot, you can buy a lot more of them. So how much autonomy should we give the swarms?

Of course, AI also gives us the capacity to understand more than we literally can imagine ourselves. Companies are already using AI to analyze supply chains to eliminate human rights abuses, minimize environmental risks and reduce carbon footprints. The very modeling of our planet’s atmosphere, oceans and surfaces gives us knowledge that we may use to address the existential risks of climate change. AI in the end will do what we tell it to—unless Steven Hawking is right.

So, what are the rules going forward? How do multi-national organizations, governments, companies and citizens have a say?

Last September, the New York Times reported that tech companies’ main concern is having regulators jump in and create unworkable rules around their AI work. Peter Stone, one of the authors of a Stanford University report titled Artificial Intelligence and Life in 2030 remarked, “We’re not saying that there should be no regulation. We’re saying that there is a right way and a wrong way.”

The Stanford report itself states that “attempts to regulate AI in general would be misguided, since there is no clear definition of AI, it is not any one thing, and the risks and considerations are very different at all levels of government.” David Kenny, general manager for IBM’s Watson AI division, is quoted as saying, “There is a role for government, and we respect that. The challenge, he said is “a lot of times policies lag the technologies.”

Five tech giants—including Alphabet, Amazon, Facebook, IBM, and Microsoft—recently agreed that industry self-regulation, in the context of appropriate government regulation, is the way forward. The Times reported a new tech group modeled on a similar human rights effort known as the Global Network Initiative, in which corporations and nongovernmental organizations are focused on freedom of expression and privacy rights. Specifics of the effort, including its name, are still being hashed out.

I am encouraged by self-regulation of AI, particularly if the self-regulation process, standards and underlying values are fully transparent and open to broad input, debate, review and modification. Computer scientists will need to interact with social scientists and philosophers, as proposed by Joi Ito, director of the MIT Media Lab and a member of the New York Times Board. In this schema, AI and robotic systems have what they term “society in the loop.” This means that we humans still need to be a integral part of any system.

While the workings of AI systems will be well beyond our common understanding, their impact on our lives will be quite obvious. Like generations of our ancestors, we will be on a transformational journey with winners and losers, this time at blinding speed. It’s going to be quite a ride.

In these situations, we used to say, “Fasten your seat belts.” But soon, the robots will do that for us. Should we trust them?

—Barton Alexander, Principal, Alexander & Associates LLC

Friday, March 24, 2017

25 Years of World Water Day – Continuing the Mission to Provide Clean Drinking Water

March 22, 2017, marked the 25th anniversary of World Water Day, an annual date to encourage action to tackle the global water crisis. Access to safe drinking water is essential to overcoming extreme poverty across the world by 2030. Safe drinking water and proper sanitation not only greatly reduces infant mortality and water-borne diseases, but it is also an enabler for socioeconomic development and global gender equality.

P&G is committed to playing its part to help achieve the United Nations Sustainable Development Goals by providing clean drinking water to those who need it most and increasing safe sanitation and hygiene behaviours. The company has committed to delivering 15 billion litres of clean drinking water by 2020 through the P&G Children’s Safe Drinking Water Program (CSDW), its signature initiative to address the critical need for clean drinking water around the world. For the past 12 years, it has worked with more than 150 partners to provide P&G Purifier of Water packets for emergency relief, in the event of natural disasters, and in hard-to-reach rural areas where people don’t have access to clean drinking water. Invented by P&G scientists, each 4 gram packet treats 10 litres of water by effectively killing bacteria and viruses and removing parasites and solid materials.

To celebrate World Water Day 2017, P&G partnered with Upworthy to highlight the power of clean water in two videos that show how the CSDW Program is helping empower women around the world.

In the first video, Bechibila is featured; she is committed to educating her community about the critical importance of clean water. In the second film, three more women entrepreneurs are leading businesswomen in their communities now that they have access to clean water.

In Latin America, P&G has partnered with Fox/National Geographic to produce a 60-minute documentary segment to raise awareness about the water crisis in the region and the CSDW efforts in Argentina, Brazil, Panama and Costa Rica. The program will be televised in more than 10 countries from now until May 2017. To see the English subtitled trailer spot, click here.

—Allison Tummon Kamphuis, P&G CSDW program leader

Monday, March 20, 2017

The Artificial Intelligence Revolution is Now

Humankind has engaged technology to do more with less labor for as long as we have lived. In fact, somewhere between 2.5 and 3.4 million years ago, the common ancestors of humans and primates began to make and use crude tools. It took at least another million years before our early ancestors first learned to control fire; widespread use of fire for cooking is relatively recent, somewhere between 50 to 100,000 years ago.

It was about 12,000 years ago that hunter-gathers began to use cultivated agriculture for food. Somewhere around 30,000 years later, in the 9th century, gunpowder and early machinery marked a new technological era. A thousand years later, in the late 18th and early 19th century, the industrial revolution vastly accelerated our use of technology for production of goods. Mechanical calculators became commercially viable in the mid-1800’s, early analog computers came about 100 years later.

I remember first using a time-share computer terminal in my high school in 1968. Personal computers became commercially viable in the early-mid 1980’s, with the World Wide Web coming into its glory in the following decades. The new millennium, beginning only 17 years ago, was marked by widespread adoption of the smart phone, which seemed like a tremendous upgrade from the old PDAs. We bragged that our phones now had more computing capacity than the computers that guided moonshots. Computer networks and new and cheaper storage and processing exploded computer capacities. Now, we are now at the cusp of a new revolution based on quantum computing.

Throughout this several million year history, each technological revolution was met with both excitement and dread. Each time, the social, economic, and environmental impacts were profound. Disruptions were real. Family life changed. Work changed. Community changed. Political structures changed. Wars grew in scope and devastation. People migrated. There were winners and losers. And yet, somehow, the species adapted. It took time to adjust, but we survived and thrived.

Today’s artificial intelligence revolution isn’t leaving us much adjustment time. In 1984, Shoshana Zuboff, a Harvard Business School Professor, wrote In the Age of the Smart Machine: The Future of Work and Power. She described how the new machines may be used to empower—she called that “informate”—or to control, demean, and impoverish. Her book echoed the challenges faced in all our prior technological revolutions and foreshadowed the artificial intelligence debate today: Will technology create opportunities that we cannot even imagine and free us to pursue more lofty ambitions or take away our jobs and livelihood, our privacy, and our very dignity?

We have already experienced significant manufacturing job losses due to automation. A Ball State University study attributes 85 percent of U.S. manufacturing job losses to robotics and other productivity improvements, and only 13 percent due to trade.

The impacts are now moving to technical, analytical, and even managerial roles. According to a study done at Oxford University, over the next 10 to 20 years, 47 percent of all U.S. jobs are vulnerable to automation. Consider this observation by software developer Martin Ford, who was quoted in a December New Yorker review of his recent book: “A computer doesn’t need to replicate the entire spectrum of your intellectual capability in order to displace you from your job; it only needs to do the specific things you are paid to do.”

James Manyika, a senior partner at McKinsey and Company, agrees that almost half of the activities we pay people about $16 trillion in wages to do in the global economy have the potential to be automated using currently demonstrated technology. He believes that the most automatable activities involve data collection and manipulation as well as physical work in predictable environments including manufacturing, food services, transportation, warehousing, and retail. These sectors make up 51 percent of U.S. employment activities and $2.7 trillion in U.S. wages. And he adds that about 25 percent of what CEOs do, such as analyzing reports and data, could be replaced.

Manyika believes that in the short to medium term, more jobs will be changed than those fully automated away. And several other experts observe that even the eliminated jobs may be balanced by those created in enterprises yet to be determined. Consider, for example, that Google didn’t exist 20 years ago, and now its parent company Alphabet has a market cap of over $575 billion.

Elizabeth Kolbert comments in her New Yorker book review: “Picture the entire industrial revolution compressed into the life span of a beagle.” Is this a good thing? More specifically, to paraphrase Zuboff, will the AI revolution “infomate” or denigrate? That question will be the topic of the next blog in this series.

—Barton Alexander, Principal, Alexander & Associates LLC

Wednesday, March 15, 2017

S&P 500 Index Company Boards Need More Oversight of Sustainability Strategies and Execution, plus Disclosures

Results of research and analysis joint project by Ceres and Governance & Accountability Institute reveals: A closer look at the sustainability disclosure of S&P500(r) companies re-affirms the continuing need for greater oversight of sustainability efforts and disclosure of same by the boards of directors of the 500 companies.

Now that the clear majority of S&P 500 companies are publishing "sustainability" or "citizenship,"  "ESG" reports, the vast majority of companies still do not disclose more than the bare minimum on the role that their boards play on sustainability. (Research shows that while only 20 percent of the S&P 500 were publishing such reports in 2011, that number zoomed to 81 percent as of 2015.)

Despite the dramatic growth in corporate disclosure and reporting, the joint research project showed that the majority of companies do not (yet) provide enough insightful information for stakeholders—such as how environmental and social issues ("E" and "S") actually get on the board agenda, how strategy is set, how those decisions are made, and most important, how the senior managers rank and file then follow through on those decisions. What are the outcomes?

Given that boards of directors can play a critical role in driving the long-term performance of the companies which they oversee by carefully assessing both risks and opportunities related to their financial performance and overall strategic direction, disclosure about the role of the board is critical to helping investors and other stakeholders make thoughtful decisions on how well a company is organized and prepared for its long-term performance and viability.

About the S&P 500 Universe of Companies 

Each year since 2011, the G&A Institute team has examined all of the sustainability reports of those S&P 500 companies that are disclosing information about their sustainability performance. In this collaborative study with CERES, G&A further examined a select sub-group of companies using the Global Reporting Initiative (GRI’s) G4 Sustainability Reporting Standard that was published in the 2015 calendar year[1].

The Ceres - G&A Institute Analysis

G&A Institute worked with Ceres, a nonprofit sustainability advocacy organization, in conducting a deeper dive in the data and corporate narrative to determine the extent to which this important universe of U.S. companies were disclosing the role that their boards play in driving corporate sustainability performance.

This analysis could not have been more timely: Institutional and individual investors increasingly want to know more about what actions corporate boards are taking on material environmental and social issues ("E" and "S") that do or could pose risks and ultimately impact the performance of the companies that they invest in.

Shareholders now have more influence in board composition, and are becoming increasingly vocal in expressing concerns about the board members' sustainability expertise and experience, which shareowners deem to be necessary board qualifications today. Investors are increasingly focused on companies' ESG (environmental, social and corporate governance strategies and practices) for their portfolio management.

For example, last year large institutional investors such as California Public Employees Retirement System (CalPERS) were updating their investment criteria. CalPERS updated its Global Governance Principles and now requires their portfolio companies to identify and recruit of directors with expertise and experience in climate change risk management strategies.

Ceres’ analysis was based on practical recommendations from the  report View from the Top – How Corporate Boards can Engage on Sustainability Performance. This Ceres research effort highlighted evolving expectations on the systems and actions that companies and boards need to put in place for “effective” board sustainability oversight from the investor and stakeholder points of view.

Results: So what did the joint G&A Institute and Ceres analysis reveal?
  • While companies acknowledge the role of their board for sustainability, not all of them formalize sustainability in the charter of the board committees. Establishing formal systems, such as board duties in charter incorporation allows sustainability to be raised in board meetings in a systematic and in-depth manner, rather than in an ad hoc way. While 97% of the companies surveyed broadly note that their boards oversee sustainability, only 58% specifically included ESG issues in a board committee charter and area of responsibility.
  • Very few companies formally require expertise in sustainability issues as a board qualification for nominees for election to the board of directors. Ceres’ report underlined the importance of having board members qualified in material sustainability issues would empower directors to engage with management in a thoughtful and robust manner. Yet, only ten percent of companies surveyed included this criterion in their board nomination process.
  • A limited universe of companies do integrate sustainability matters into their board evaluation processes. Ceres’ report noted that continuous evaluation of board performance—including on ESG issues of material importance—is necessary for boards to remain effective in their oversight duties. However, only 15 percent of companies surveyed included environmental and social issues in their board evaluations. If these issues were included in their board performance evaluations, the Ceres staff noted, directors would certainly be more diligent in their oversight duties.
  • Companies do disclose the role of the board in overseeing sustainability risk, yet there is limited disclosure of board decision-making. The Ceres report called on companies to provide more public disclosure, detailing both the role of the corporate board in overseeing sustainability risks, as well as issues that the board prioritized and key decision taken. Only 33 percent of companies surveyed identified that their boards have a critical role to play in overseeing sustainability risk—and yet even for these companies there was limited additional detail provided on the specific issues that the board had prioritized or key decisions made.

Key Conclusions

Overall, the joint G&A Institute and Ceres analysis underlines the thesis that while a growing number of companies are starting to publicly acknowledge that their boards play a role in sustainability, the disclosure largely exists at the high level, and the "30,000-foot high view" approach does not provide the needed details on prioritization and decision making that stakeholders are expecting.

This shortcoming in corporate disclosure and reporting means that stockholders and key stakeholders are not able to see if this apparent corporate focus has been effective—or if the board of directors' oversight has led to improved sustainability related performance impacts (tangible results that can be clearly articulated).

This shortcoming does not necessarily mean that the processes in question do not exist—just that stakeholders don’t yet have enough information to make the decisions on which companies are doing well on this issue, and reward companies with leading practice.

Going forward, Ceres and G&A Institute encourage company boards and managements to offer a clearer line of sight on both the systems in place for board sustainability oversight, and also the actions they are taking related to integrate material sustainability issues into overall company performance evaluation, risk management and the creation of long-term value for shareholders.

[1] These companies have now reached 108 companies (“companies surveyed”) within the index. 



—Louis D. Coppola, co-founder and executive vice president of Governance & Accountability Institute, Inc. (lcoppola@ga-institute.com); and Veena Ramani, program director, capital market systems, Ceres (ramani@ceres.org)

Monday, March 13, 2017

The Growing Importance of Industry Self-regulation

Every business today faces tremendous ethical challenges, and increased transparency brings these challenges to the forefront. I believe that vigorous self-regulation will be one critical element to assure a future grounded in integrity. Here’s why.

The call for ethics in interpersonal and organizational relationships is ageless—and increasingly important in our interconnected, global world. Businesses are challenged to grow trust, not only for their shareholders, but with their employees, customers, supply chains, communities, and on behalf of the wider, natural world. Simultaneously, governments strive to develop, implement, and manage a functioning legal and regulatory system that rewards fairness and curbs abuses. Businesses, in turn, resist what they term “overregulation,” that—they argue—muddles markets and curtails competitiveness.

These trends are particularly important when we consider the increasing rate of economic, political, and technological changes affecting us all.

We now exist in a global society, economy, and ecosphere, where many companies and institutions operate across borders. Money, ideas, people, and jobs are increasingly fluid. In this context, national decisions have both limitations and tremendous worldwide implications including: Are we at war or peace? Do we promote free trade or protectionism? Should we enjoy growth or retrenchment? How do we value equity versus efficiency? We see the negative impacts of these some of these decisions in mass migrations, growing inequality and threats to the sustainability of our climate.

We live and work with complex systems that are well beyond the grasp of common understanding, yet the implications of these systems are increasingly visible to us. As transparency increases, businesses become exposed to wide knowledge and judgement of the outcomes of their operations on people, communities and the planet. Their “shields” that may have worked in the past—such as legal privilege, “protective” philanthropy, and in some markets, outright bribes—now just compound the problems when they are exposed by social and other media.

We now have products and services developed and delivered in ways beyond the capacity of governments to “keep up.” This challenge is evident in the developing world, where even functioning states cannot provide basic services and oversight, not to mention the increasing failures of some states and the emerging power and influence of non-state actors. The challenge is also impacting developed economies, where the rate of change exceeds the capacity of government to understand, let alone react.

I recently retired from the beer industry where I had the privilege to struggle with these issues with my colleagues in beverage companies around the world. I became increasingly aware that many decisions previously attributed to governments now are made in the private sector. Stakeholders are demanding that companies address issues of equity, fairness, sustainability, human rights, access to health care and education in ways that are new—and for man—unfamiliar. It is a business world far more complex than one based solely on increasing shareholder returns. The Carnegie Endowment and Virginia Haufler titled this trend “the public role of the private sector.”

As a result, leading companies engage with diverse interests and seek to create new products and services that build value for all stakeholders including but certainly not limited to shareholders. Governments, recognizing that they cannot keep up with the rate of change, may seek to simplify regulation to impact the most critical questions of equity and fairness.

Of course, this leaves a great gap that is beginning to be filled with effective and transparent systems of self-regulation. For example, food manufacturers are agreeing to reduce sugar and salt and artificial ingredients. Standards of environmental and quality being driven by ISO standards that exceed regulatory requirements. Global codes and commitments on human rights and sustainability are being led via business engagement with the UN Global Compact.

In my experience in the alcohol beverage field, companies began with standards of self-regulation in major markets, then extended those standards to emerging markets with limited governmental capacity. Alcohol beverage producers, through the International Alliance for Responsible Drinking, then agreed upon principles, standards and models for self-regulation, and producers committed to visible and measurable actions to reduce harmful drinking around the world.

Even in the emerging field of artificial intelligence, self-regulation will likely play a pivotal role. As tech companies become worried about regulators creating unworkable and outdated rules around their work, they are turning to self-regulation. In my next blog, I will look at the ethical and societal challenges coming with artificial intelligence, and in the third and final blog of this series, I will take a look at work begun by tech giants to craft a self-regulatory response.

Note: This post is adapted from remarks made at Integrity 2017, sponsored by the Center for Enterprise Ethics, Daniels School of Business, University of Denver.

—Barton Alexander, Principal, Alexander & Associates LLC


Monday, March 6, 2017

The Growing Supply Chain Landscape: CSR Takes the Lead

From medium-sized businesses to members of the Fortune 500, organizations are investing heavily to ensure sustainability and corporate social responsibility (CSR) are ingrained across their supply chains – and they are already seeing major returns.

Consider the results of the 2017 Sustainable Procurement Barometer, recently released by EcoVadis and HEC Paris. The data, gathered from supply chain professionals around the world, shows multiple business drivers behind a global maturation of the supply chain sustainability market. The research found three primary drivers of sustainability:
  • Brand reputation – identified as a critical factor by 63 percent of organizations;
  • Risk mitigation – identified as a critical factor by 61 percent of organizations; and
  • Compliance – identified as a critical factor by 57 percent of organization.
For the most mature organizations, the benefits are even more tangible. Sustainable procurement is directly impacting the bottom line. In fact, 50 percent of sustainable procurement leaders experienced increased revenue from sustainability initiatives in 2016, which represents 33 percent increase over non-leaders.

For organizations looking to expand their sustainable footprint, supply chain transparency plays a critical role. However, only 15 percent of organizations have complete supply chain visibility into the CSR and sustainability performance of both tier one and two suppliers. Beyond that, only six percent of organizations report having full visibility into tier three suppliers and beyond, according to the research.

While supply chain visibility continues to be a top challenge for procurement organizations today, nearly every organization surveyed (97 percent) places a high level of importance on sustainability. This consensus among supply chain leaders illustrates just how established the sustainable procurement field has become — a major development in less than 10 years’ time.

Interestingly, the report found that over the past three years, the sustainable procurement landscape has shifted its emphasis away from environmental issues and toward social, labor and business ethics. Consider the following findings:
  • Only 18 percent of organizations are placing significantly more importance on the environment today than they were three years ago;
  • 33 percent of organizations are placing significantly more emphasis on social and labor issues than three years ago; and
  • 33 percent are placing significantly more emphasis on business ethic.
What is driving one-third of respondents toward a more socially and ethically responsible supply chain? Perhaps the answer lies in the fact that while social issues continue to grow, environmental efforts may have peaked—these efforts have been maturing for a much longer time, and feasibly came to a head in 2015 with COP21. Meanwhile, the rise of due diligence laws—California Transparency, UK Modern Slavery Act, EU Conflict Minerals and the Devoir de Vigilance bill—are shining a spotlight on social and labor issues in the supply chain.

Consumers are also making their preferences felt when it comes to responsible sourcing. Unilever recently surveyed more than 20,000 people across five countries to gauge sentiment around brands using socially and environmentally responsible practices. The study found that one third of consumers intentionally buy from brands that are doing social or environmental good, an opportunity that represents more than one trillion dollars for brands that make their sustainability credentials clear.

While the sustainable procurement landscape is still in its infancy, it’s rapidly growing and maturing across the globe. The increase in consumer pressure, and the competitive benefits of operating in a sustainable fashion, will continue to push companies to become more socially responsible and scale their sustainability efforts. This evolution will set the stage for a new phase of sustainable procurement maturity in 2017 and beyond—one where the leaders continue to generate tangible business value and scale programs further, and the laggards either get in the game, or risk falling dreadfully behind.

—Pierre-Francois Thaler, co-founder and co-CEO of EcoVadis. 

EcoVadis is a supplier sustainability ratings company that helps organizations institute corporate social responsibility and various sustainability programs. EcoVadis Twitter: @ecovadis