As manufacturers begin to unravel the complexities of corporate social responsibility, they’re finding that it’s made up of much more than simply going green. Experts explain why it’s worth the effort.
This article first appeared in IMPO's August 2013 issue.
For many, the concept of corporate social responsibility (CSR) goes hand in hand with sustainability but, in reality, CSR is more than just including the environment in the overall equation — it wraps up a much larger concept which basically embodies a Hippocratic Oath for businesses; it's the idea that they do no harm to both the environment and its people.
The definition of social responsibility (from the ISO 26000 guideline) is “The responsibility of an organization for the impacts of its decisions and activities on society and the environment through transparent and ethical behavior that contributes to sustainable development, including health and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behavior; and is integrated throughout the organization and practiced in its relationships.” (International Standard ISO/DIS 26000: Guidance on Social Responsibility).
The concepts behind CSR– human rights, the environment – are heavy, and the overall challenge can likely feel overwhelming as manufacturers contend with a slew of regulatory agencies that they’re required by law to adhere to. So far, the ISO standard is just that — a standard. It provides framework and guidance, but doesn’t really have the regulatory authority to mandate the adoption of CSR.
Despite this, many manufacturers are taking CSR seriously because of the litany of influences they do face — not least of which is pressure from their big customer and business partners, who are increasingly viewing CSR programs as an expectation, not an option. And from a consumer standpoint, transparency and accountability has become a significant factor in improving brand loyalty, no matter the industry.
CSR: The Drivers
“The biggest companies across all industries have substantial CSR programs,” explains George Favaloro, Managing Director, Sustainable Business Solutions Group for PwC. “So if these companies are your partners or customers, they will be asking questions about your program.” Other motivations, adds Favaloro, are typically costs – cutting waste or water use can provide new avenues to cost savings, for example – and also a sense of responsibility. “You can’t feel good about your company if you know your factory is overwhelming your town’s landfill with production waste.”
One emerging motivation, Favaloro adds, is that many companies are taking a fresh look at their vulnerability to environmental risks. “Whether it is hurricane Sandy inundating a key production facility, or drought in the southwest affecting the price of agricultural commodities, more frequent and increasingly severe weather events are causing substantial business interruptions. We are working with companies to assess the risks in their operations, in their value chains, and in the surrounding landscape in order to anticipate vulnerabilities and respond with minimal disruption.”
In PwC’s experience, most companies begin to tackle CSR by looking at what is going on within their own four walls. “They focus on the inputs to, and impacts from, their own operations,” he explains. “Usually this means efficient use of energy, water, and material inputs, and programs to cut waste and emissions. These are the best starting points because they are under the firm’s direct control and because they usually offer the most substantial cost saving opportunities.”
Executing the CSR Plan
For a company like Danforth Pewter, the cost savings opportunities that come from reusing waste and scrap from its metal casting and spinning processes were a significant driver in its adoption of policies of social responsibility. According to CEO Bram Kleppner, this small, rural manufacturer and retailer of pewter jewelry, holiday ornaments, mugs, vases, key rings, and oil lamps has achieved almost zero metal waste in its shop by focusing on the following efforts:
When casting its products, anything that doesn’t cast perfectly either due to voids or to blemishes gets remelted and cast again.
Spinning creates three kinds of metal waste: trimmings, from cutting sheets of pewter to size; shavings, from smoothing the rims of vases and other products; and disks of pewter that get damaged or deformed either in the course of work or during the training of new spinners. Danforth collects all the pewter trimmings and shavings from the spinning process, and although they use different alloys for casting and spinning, with a little bit of alchemy, the spinning metal waste can be melted and reused for casting.
Most disks of metal that are damaged are likewise balanced, melted, and reused for casting.
Danforth has become adept at taking disks of metal that have been deformed for any reason and using them to create new products. For instance, they recently created a line of miniature vases (two inches tall) that its master craftsmen make from the parts of a sheet of spinning metal that is still usable, with the rest of the disk getting melted and reused.
While an incredible benefit, cost cutting was not the only driver of the company’s efforts. Danforth Pewter is also a founding member of Vermont Businesses for Social Responsibility (VBSR), which benefits the business by providing regular interaction with about 1,000 other businesses who serve as a source for new ideas and resources on “everything from green manufacturing to providing employees with flexible schedules to healthcare reform,” says Kleppner. There are also benefits from a supplier networking standpoint for those who “have a clear preference for doing business with companies that share their values” and for consumers who “prefer to buy from companies who are committed to their communities and the environment.”
The next step for Danforth Pewter is to convert its shop to solar power, which might just make them the first solar-powered pewter workshop in the world. VBSR played no small role in this effort, explains Kleppner. “VBSR helped ensure that new regulations for creating solar farms were not truly onerous. As a result, a Vermont business called AllEarth Renewables is able to install solar farms and provide the power to small Vermont businesses like Danforth,” he says. “This in turn will allow us to reduce our power bill by a great deal and reduce our carbon footprint significantly.” For Kleppner, this is less of an investment in energy efficiency technology and more of a win-win: “The community wins with cleaner air and our business wins with lower power bills and bragging rights to being the first solar-powered workshop in the world.”
A Culture Shift
When it comes to something as significant as an overhaul of your resource recovery strategy, it takes more than just identifying a set of rules for the facility to follow. There must be something for plant personnel to believe in, which is why, for many companies, the underpinnings of CSR are cultural – meaning, the individual teams within a manufacturing plant must understand the company’s efforts and truly believe in them in order to help facilitate these overall goals.
Jeff Fielkow is the EVP of revenue and growth for ReCommunity, the nation’s largest pure-play recycler. Recycling has bled significantly into consumer mindsets, however the business case for resource recovering in a manufacturing environment can be immense. Fielkow designed and executed the U.S. recycling strategy for the $14 billion global packaging company Tetra Pak, and has generated hundreds of millions in shareholder ROI for multiple companies.
For Fielkow, one can’t separate the state of recycling in today’s manufacturing facilities with the legacy of industrialization that’s come before. The modernization of the industrial space, says Fielkow, has helped many thrive with groundbreaking technological advances, but the byproduct of that model has been a cumbersome, rapidly expanding waste stream. “The first step in manufacturers’ changing this trajectory is changing perspective.” But the disposition of end-of-life products into landfills “simply no longer makes economic or ecological sense, which is why resource recovery and sustainability, where the very valuable resources contained in end-of-life products are once again transformed into useful products, makes perfect sense for forward-thinking manufacturers.”
Fielkow suggests manufacturers start by developing a manufacturing culture that is relentlessly committed to innovatively designing and producing products in a way where end-of-life resources are easily converted into revenue — much in the same way safety culture has advanced prolifically where many facilities tout zero tolerance for accidents. “Without question, zero waste must be engineered into the manufacturing culture, from the design of the manufacturing line to those working the line,” he says. “Ongoing education is crucial to ensuring everyone understands that everything coming off the line has a better and higher use than a landfill.”
Jennifer Woofter, president of the environmental consulting firm Strategic Sustainability Consulting, concurs that education is a key component in adoption of these sustainability practices. “Perhaps the best piece of advice I can give is to emphasize sustainability training for middle managers — they are the lifeblood of the organization and a critical link between the corporate sustainability agenda and the average employee,” she says.
And it's evident when this culture shift goes from top-down to bottom-up. For some manufacturers, this shift manifests itself in company-wide pride over resulting efficiency improvements and waste reduction. Says PwC’s Favaloro, “The companies that embrace sustainability proactively usually find it’s one of their top rallying points. I’m always impressed to see what a large role company pride plays.”
Track Your Progress
While any efforts towards CSR, however minor, ought to have some impact on the world and its inhabitants, it's also important that manufacturers develop strategies for sharing this crusade. For many businesses, finding a way for the goodwill of CSR to rub off on their brand is another key benefit to embarking on these programs to begin with.
According to Woofter, a sustainability report can be instrumental in helping businesses document progress and relay their efforts to suppliers and customers. “A sustainability report tells readers which issues matter the most to your organization. It lays out your expectations and practices for sustainable operations, supply chain management, and product development. It tells your environmental and social stories, and proves your commitment with relevant data,” explains Woofter. In addition, this kind of a document can serve as a good jumping off point for discussions around risk management, community engagement, capital investment strategy, and research and development priorities, says Woofter.
This kind of organization on the back end cannot be undervalued, as channel partners increasingly look for verifiable data supporting the “greening” of their own supply chains. According to Favaloro, “CO2 emissions are a particularly important area as many large companies seek to encourage their suppliers to cut greenhouse gas emissions and track and report their progress.” Other key areas PwC’s clients are focusing on include packaging and the environmental performance of the product once it leaves the factory and is in use by the customer. “If you have the most energy efficient product to operate, or the product that is easiest to recycle at the end of life, these can be differentiating features or benefits that help build your brand and help you sell.”
Along that line of thinking, any company can benefit by the improved reputation that comes along with a CSR program, however Woofter cautions businesses to be certain they understand the FTC guidelines on green marketing. “While the FTC rules on green marketing can seem overwhelming, the message to manufacturers is simple: don’t make vague claims that you can’t back up,” explains Woofter. She recommends manufacturers avoid terms like “eco-friendly,” “natural,” and “green,” which have no clear definition in the marketplace and can come across as misleading. Instead, “focus on the stories that you can back up with facts and evidence. And remember, sustainability marketing is different than other kinds of marketing in that you need to present both sides of the story. People don’t want to hear about how perfect you are — and in fact, they will doubt your credibility if you present only the positive stories. Instead, take the opportunity to wrestle with the tough issues.”
In fact, in Woofter’s experience, most suppliers and customers simply want manufacturers to take some steps forward in reducing the way their businesses infringe upon the environment or the rights of others. “People don’t want, or expect, perfection,” she says. “What they want is to believe that you are doing your part to solve the problem.”
Beyond the Environment: Ethical Sourcing
The apparel industry is under close scrutiny after a Bangladesh factory collapse in April killed 1,132 garment workers and sparked debate over labor safety and rights.
Phil Rooke, CEO of the customizable T-shirt company Spreadshirt (www.spreadshirt.com) is at the forefront of providing ethically sourced and affordable options to consumers with the March launch of the European Quality at Heart line, and the upcoming U.S. launch in August of 2013.
“The T-shirt phase in American Business jargon is outdated and is no longer relevant as a poster for bad practice,” says Rooke, referring to the stage where a developing country transitions from an economy dominated by subsistence agriculture to one that uses its cheap labor advantage to undercut exports by more developed countries.
“Spreadshirt launched Bangladesh sourced products because they offer a very good quality product in a quality factory and at a good price. They are Fair Wear, Respect-code.org-certified, and fully retraceable to demonstrate our ethically sourced and produced products,” he explains. “Spreadshirt will stand by our Bangladeshi manufacturers and be proud of the team and workers who make a great product. The DNA codes in every product show consumers exactly what a powerful symbol an ethically sourced T-shirt can be and wear it proudly. At Spreadshirt, we take ethics very seriously and trust is really important to our idea generators and team. This value is at the core of everything we do and the T-shirt should be a proud symbol of evolved business practice.”