BCLC Travel Journal: Tour of Europe's CSR Initiatives, July 2007

On July 3, BCLC Executive Director Stephen Jordan embarked on a two-and-a-half week tour of Europe to learn more about the prevalent CSR organizations, trends, and attitudes across the ocean. His online travel journal captures the highlights.

Jordan's first stop was the UN Global Compact Leaders Summit; he then traveled to Milan, Italy, for a conference on trust and corporate governance and Athens, Greece, for a "trans-Atlantic dialogue" on CSR.

Entry 1: UN Global Compact Leaders Summit, Geneva, Switzerland

Entry 2: More on the UN Global Compact Leaders Summit

Entry 3: Accountability Meeting on Partnership Governance, Geneva, Switzerland

Entry 4: Conference on Trust and Corporate Governance, American Chamber of Commerce in Milan, Italy

Entry 5: Further Reflections on Public-Private Partnerships

Entry 6: Corporate Citizenship and Corporate Social Responsibility, Part 1

Entry 7: Corporate Citizenship and Corporate Social Responsibility, Part 2

Entry 8: Last Impressions

UN Global Compact Leaders Summit, Geneva, Switzerland

Entry 1: July 4

The UN Global Compact Leaders Summit does not technically start until tomorrow, but the airport and the hotels in Geneva are full of old and new friends. The UN Global Compact was founded roughly six months before BCLC, and it seems to be evolving in interesting ways.

BCLC has been in talks with Compact leaders about trying to solve emerging market development problems, create information systems, and form partnerships, which obviously is a step toward bridge building and bringing people together. So I'm interested to learn more about its current agenda and what the delegates have to say.

From a business perspective, Sir Mark Moody-Stuart, the chairman of Anglo American; Neville Isdell, the chairman and CEO of Coca-Cola; and Carl-Henric Svanberg the CEO of Ericsson, are the headliners. Since this is the first UN Global Compact Summit that I have attended, I don't have any pre-conceived ideas about what will happen.

Some things I'm going to be studying include:

The tone and language that the participants use -- is it constructive or adversarial?
What are the benefits that different countries, companies, and organizations are looking for from the Compact?
How well does the Compact serve as an "honest broker" in terms of taking business issues and interests to heart?
Does it have pre-conceived ideas about what it wants and how it wants to achieve its goals?

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Entry 2: July 9

The top three take-aways from the Global Compact Leaders Summit, from my perspective, were:

Climate change is a topic of major importance for the Global Compact agenda.
The Compact is struggling to find its balance between advocacy and partnerships.
It may be helpful to some companies, but it will continue to mainly attract companies that find relevancy in the Compact's ideals and are directly engaged in human rights, labor rights and environmental issues in emerging markets.

Climate change was everywhere on the Global Compact agenda. There was not a single break-out session that I attended where it was not mentioned or at the top of the list -- and I attended the NON-environmental-specific break-outs. Delegates talked about their carbon footprints, their recycling programs, and their analyses of their energy consumption.

At first glance the chorus of complaints about the need to curb energy consumption seemed targeted at the U.S. However, as the McKinsey report on mega-trends that was presented at the conference pointed out, developing countries such as Brazil, Russia, India, and China are going to consume an increasingly large percentage of global energy. A few years from now, their consumption may pale in comparison to the energy consumption of other emerging markets as they start to come on line. As the conference proceeded, I began to get the impression that there may be significant tension in years to come between climate change activists and emerging-market development activists.

The tension between the Compact's advocacy agenda and its partnership aspirations was not hard to miss either. Its first request of its member businesses is to make the Compact and its 10 principles part of their business strategy and operations, and its second request is for them to engage in partnerships with "stakeholders."

Clearly, there are several challenges in engaging in this forum. For one thing, the jargon is a serious impediment. CSR may be about to be abandoned for "ESG" – the environmental, social, and governance issues. If you can work your way through the thicket of acronyms like WFP, UNOPS, UNDP, etc., then there is "responsible investing," "responsible lobbying," and "responsible management education" to learn about.

Some speakers were market-oriented and accepted the premise that a company has to be profitable in order to be able to deliver any benefits whatsoever. Others used more defensive language like "the UN brand is not for sale" and quoted Gandhi to the effect that the world should not be about the profit principle.

For another, the focus seems to continue to be about what companies can do for the UN. This emphasis continues to raise questions about whether the multilateral advocates really care about the businesses they seek to work with or whether they are just trying to use them.

One recommendation I would have, is that it would be helpful for the UN Global Compact or its sister agencies interested in working with the private sector, if they could articulate how they see engagement being mutually beneficial, instead of a one-sided proposition.

It's not that the UN agencies aren't trying to open up, it's just that they have years of statism and "government-itis" to overcome, and many sovereign members of the UN are still less free-market oriented than we are in the U.S. The Global Compact represents something new for the UN "family", and they are still in the process of finding their way.

For me, the configuration of the UN meeting space was the perfect metaphor for what they are trying to do. Built in an earlier era, the classic UN room configuration features rows of desks for principals to sit, with chairs behind them for their deputies and assistants to brief them facing a raised dais where a speaker can talk down and at them. The tables don't move. But what the conference organizers tried to do was put chairs on both sides of them so that participants could talk with each other.

It was a little awkward, very stiff, and definitely not natural, but you could tell that they were trying very hard to adapt and move away from their hierarchical, protocol-laden nature.

While the Global Compact is certainly not for every company that we work with, it could be useful in some contexts, particularly if it continues to strengthen its abilities to facilitate partnerships and other connections. If your company is investing in emerging markets, the Compact could certainly be helpful to build relationships with other Compact signees.

The Compact might also be helpful if you are working with sovereign nations, engaged in other business with government agencies and entities, or looking for a "Good Housekeeping"-style seal of approval from the international community.

Could the recent flaps over safety and counterfeit goods or preparations for the 2008 Olympics have spurred China to send the biggest delegation (almost 10% of all participants) to the conference? These reasons may also explain why so many companies in traditionally statist countries like France, Spain, and Argentina have signed up as well.

But in this cynical era, idealism should not be completely discounted. I talked to one Global Fortune 50 executive about why his company was a signatory, and he said, "Because we believe in the ideals of the UN."

While the Global Compact may be most relevant to just a select number of companies, I certainly witnessed how some companies like Coca-Cola, McKinsey, and Goldman Sachs have embraced it wholeheartedly.

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Accountability Meeting on Partnership Governance, Geneva, Switzerland

Entry 3: July 10

Accountability is a very interesting British consultancy, led by Steve Rochlin in North America and by Simon Zadek internationally. On Monday and Tuesday they held a working meeting on partnership governance and accountability with a select group of practitioners and experts in Gland, Switzerland, which they graciously invited me to sit in on.

Over the next few months they are going to be publishing their findings, so I don't want to get into too much of the discussion at which "Chatham House rules" applied, but there are a couple of points that I don't think they will mind if I mention.

First of all, the field of public-private partnerships is rapidly expanding, and there is an increasing need to categorize and understand the different types of partnerships. There are partnerships for a specific purpose, e.g., to restore a historic landmark or undertake a particular development project like the construction of a school or health care clinic.

There are open-ended partnerships like the Global Business Coalition on HIV/AIDS, TB and Malaria.

There are partnerships that set up their own stand-alone secretariats like the Global Reporting Initiative, and others where the respective organizations use their own resources.

There are partnerships between nonprofits and governments or businesses and nonprofits; alliances including one or more governments, several nonprofits, and multiple companies; and so on.

Clearly, there is a great deal of complexity in this field, and many issues which need to be sorted out.

While many of these partnerships have grown organically, the day may not be too far off when principles and "rules of the road" may be helpful to assure good governance and strengthen the accountability of the partnerships and the partners who comprise them.

Accountability is thoughtfully and methodically working through these issues, and their research will have relevance, not only for partnerships, but for other initiatives that seek to attempt to calculate social value, social impact, social return on investment, etc.

While this will not happen overnight, it is encouraging to see progress being made in terms of listening to what partnership practitioners have to say about their experiences, and learning more about what makes them effective.

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Conference on Trust and Corporate Governance, American Chamber of Commerce in Milan, Italy

Entry 4: July 11

Paolo Catalfamo, the managing director of the American Chamber of Commerce in Italy, invited me to share BCLC's findings from our January report on corporate culture and trust, "Values Matter." (PDF)

I was happy to oblige, but I was equally fascinated by the other presentations: one by Michael Hershman and Thomas Kaiser about how Siemens is managing the response to the disclosure of bribery payments that rocked the company last November, and another by Maurizia Iachino Leto di Priolo about the evolution of governance in Italy over the last few years.

As Michael Hershman, president and CEO of the Fairfax Group, explained, in November of last year, it was publicly disclosed that bribes were paid out by some Siemens executives to win contracts overseas.

Siemens executive leadership brought in the Fairfax Group to serve as an independent audit advisor, and implemented a dramatic response to the scandal -- announcing their full cooperation with the authorities, establishing a 24/7 ethics hotline and helpdesk capable of answering questions in close to 40 different languages, implementing "Integrity Pact" standards for their government bids, and centralizing financial controls.

The company also instituted a number of other measures, which as Thomas Kaiser, head of CSR for the company, explained, were part of Siemens methodology of establishing goals, identifying benchmarks, developing systems and priorities, and re-testing through consultations with important stakeholder groups.

Despite the scandal, Siemens stock price has increased by 20% since November, indicating investor confidence that the company will weather the scandal and that it does not reflect the company's core values or the integrity of its fundamental operating systems.

Maurizia put the importance of trust in the Italian context bluntly: "The trust of markets, investors, and various stakeholders is not to be taken for granted. In Italy in recent years, various financial scandals have led to the emergence of a requirement for better corporate governance."

She noted that traditionally, Italians placed their loyalty in people, as opposed to principles, but that occurrences like the Parmalat scandal of 2003 and the Antonveneta-BNL-Antonio Fazio scandal of 2005 had increased awareness in the country of creating new governance measures for institutions. She argued that while some progress had been made, more needed to be done in terms of board independence and accountability, internal controls, transparency and the communication of reliable information, and the prevention of conflicts of interest.

As these two presentations indicate, the increasing recognition of the importance of public confidence isn't just a U.S. phenomenon or a Chinese phenomenon, but a global trend. Good ethics and the importance of social capital -- the build up of trust and the willingness of stakeholders to emotionally support the enterprise -- are being increasingly recognized as vital, not just in terms of mitigating scandals, but in terms of attracting financial capital and creating a sustainable and competitive business.

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Further Reflections on Public-Private Partnerships

Entry 5: July 13

The more that I have thought about the Global Compact meeting and the AccountAbility meeting afterward, the more I've been thinking that there might be some kind of a synthesis – "7 Principles for Partnerships" where companies, non-profit organizations, and government agencies might want to work together. I'd be interested in what different companies have to say about this, but my impression is that there could definitely be common ground in the following areas:

Partnerships for Education and Workforce Development – over and over again, companies are telling us this is a critical ingredient of their social engagement. You need skills-based workers not just to take advantage of the knowledge economy, but for any kind of technical or complex activity. This is why IBM for example, just launched a new education benefit for their employees…globally.
Partnerships for Trust-Building and Good Governance – there is an increasing recognition that potential investors, employees, customers, and other stakeholders have an increasing array of choices about where to invest their dollars, time, and interest, and the most trust-worthy, safe, and lowest risk countries, governments, companies, and communities win.
Partnerships for Sustainability – this isn't just about the environment, it's about how companies and communities and the people they support endure and thrive.
Partnerships for Wellness – health care is the single biggest philanthropic, humanitarian, and self-interested investment made by the business community on a global basis. Pharmaceutical companies like Pfizer, Merck, GlaxoSmithKline, Novartis, and Abbott donate hundreds of millions of dollars of product particularly in sub-Saharan Africa and Asia, by far the single largest donations by any companies any where. But wellness is not just about drugs, it is about nutrition, fitness, and basic access to food and water.
Partnerships for Quality of Life – in the knowledge economy, workers are increasingly mobile, both companies and communities have common cause to make their particular circumstances as attractive as possible. Companies are increasingly aware of the importance of the amenities of life – cooking, music, the arts, parks, good schools, and so on. Whether it's Google investing in chefs and cooking schools or Boeing investing in symphonies in Europe, companies increasingly recognize that la dolce vita also contributes to la bella economia.
Partnerships for Infrastructure Development – highways, railroads, ports, airports, computing and communications are the lifeblood of commerce and the foundation of economic and social mobility.
Partnerships for Community and Cultural Distinctiveness – increasingly companies are recognizing that differences and distinctiveness are qualities to be admired, preserved, and promoted, and that different cultures and civilizations contain unique assets that should be respected and leveraged.

I appreciate that this is a different conversation than some of the more adversarial CSR dialogues that have been taking place. For one thing, it assumes that companies can and do have a positive role to play in development. It's also geared toward problem-solving around specific, concrete issues affecting local development, and third, it's not built around rules or "thou shalt nots," but around relationships and what organizations can do together.

I'm looking forward to seeing if we can spark a conversation about what our respective companies and organizations do well, and how we can work together constructively to achieve some positive changes. I'd welcome comments on this.

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Corporate Citizenship and Corporate Social Responsibility, Part 1

Entry 6: July 16

At the AmCham Italy forum on July 12, as Thomas Kaiser laid out Siemens' approach to CSR he also laid out a chart which also included "corporate citizenship" as a function of their CSR program.

I asked him what corporate citizenship meant to him, and he said that it had the connotation of philanthropy and corporate giving. I asked him what he thought of corporate social responsibility, and he associated it with the overall strategy of the company's engagement with society.

Today, AmCham Greece hosted a working meeting on how the American chambers in the region could work together to develop a better trans-Atlantic understanding of business and society issues, and again this issue came up – what do we mean when we talk about corporate citizenship and CSR?

I explained that when we first began to develop the BCLC program back in the late 1990s, we received an almost universally negative reaction when we talked about corporate social responsibility. For many American companies, CSR carries the connotation of obligation, expectation, and liability. CSR is what non-businesses want companies to do.

In this regard, CSR is not viewed in a positive light – CSR is about somebody else's agenda, not the company's, so by definition, it is not strategic, but rather seen as a cost of doing business.

Corporate citizenship on the other hand, was seen as the expression of the company's traditions and values. Henry Ford paying his workers middle class wages was an expression of his corporate citizenship. Personal computing, freedom to fly around the country, every day low prices were all seen as expressions of corporate citizenship.

From what I understand from the conversation however, for Europeans, the words have very different senses. Corporate social responsibility has the connotation of solidarity – that companies are "with" the people. CSR is their way of showing that they share common values and that they are committed to the public welfare.

Corporate citizenship does not really translate because citizenship is actually being discouraged as a concept as the French, Germans, and the other countries struggle to transfer more of their sovereignty to the European Union. In a way, corporate citizenship would have the connotation of a nationalist, particularist agenda. For example if a Spanish company were to talk about its corporate citizenship, it would be referring to what it did in Spain.

I asked if it was understood what we meant when we talked about corporate citizenship, and the answer was "yes – in the American context."

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Corporate Citizenship and Corporate Social Responsibility, Part 2

Entry 7: July 16

So what seem to be the main differences between U.S. corporate citizenship and EU CSR? At the risk of committing very gross generalizations, I would like to submit a few observations for discussion.

First, the historical roots of business are different. In Europe, the first companies were created as concessions granted by the monarchy, Queen Elizabeth I chartering the East Indian Company or the Dutch doing the same for their companies for example. The companies received the right to trade and operate as a legal entity as a privilege granted by the state.

In the U.S., on the other hand, businesses began because people saw ways to build better mouse traps, cotton gins, or railroads. The ability to do business wasn't something granted by a government official, it was based on whether or not the individual had something to offer. So the first major difference is rooted in who is perceived as doing the favor – the society or government or the people building the business.

Second, particularly on the European continent, there seems to be a much deeper sense of collective responsibility, as opposed to individualism. Collective responsibility means that people don't necessarily see themselves as personally responsible for their actions so much as institutions like the government, the health care system, or companies.

I can't tell you how many times people referred to Anglo-American business principles and the "Anglo-Saxon" model. You see it in such mundane ways as how communities are structured. American cities tend to be designed for convenience, on grid patterns with easy access. Theirs – particularly their older cities – tend to be designed for socializing – plazas, narrow streets, extensive train, and bus systems.

Community design may also affect environmental perceptions. The narrow streets of old city centers built hundreds of years ago mean that pollution isn't diluted as much as it is in the U.S. with our open spaces, so it stays trapped on cathedral walls and ancient monuments in a much more visible way.

Third, the lack of a customer service culture in some parts of Europe is really off-putting. You see it in restaurants where waiters get to you when they get to you, surly ticket office reps, store hour closings, clerk processing, and so on. I wouldn't be favorably predisposed to business, either, if I constantly experienced that kind of casual rudeness every day.

Fourth, there is a class-based sensitivity that goes back for centuries when privilege was deeply ensconced in many countries. In this regard, wealth is seen as somehow elitist and undemocratic. If you make money, there is a suspicion that you must have exploited someone else to do so, as though wealth creation were somehow a zero-sum game.

I could go on and on – most European countries are much more unionized than we are which means that labor and management have more adversarial relations. More Europeans tend to expect government agencies to provide all kinds of services we leave to the private sector, and so on.

There are also important reservoirs of guilt in various European national psyches. World War II was brought up by the Poles in a way that almost derailed the recent G-8 talks. The French and the British perceptions still are colored by their feelings about their imperialist past, and their relationships with their former colonies.

The cumulative effect of all of these differences is that whereas U.S. corporate citizenship grew up as a pro-active expression of business intent, I get the impression that European CSR almost becomes a defensive mechanism to reassure external stakeholders that companies are made up of human beings too.

This may help to explain why so many Europeans have expressed skepticism to me about U.S. corporate philanthropy, and why they are quick to throw around words like "greenmail" and "corporate values" as pejoratives.

What was refreshing about today's discussion, is the recognition that there is a need for a new CSR agenda oriented around sustainability, quality of life, and relationship-building.

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Last Impressions

Entry 8: July 18

So you can't help being in Europe for any amount of time without remarking on the differences, and I'm well aware that I'm not the first or the last 7-day expert to weigh in on these issues.

The stories that dominated the news cycle were the continuing whirlwind of activity around Nicolas Sarkozy and his maneuverings vis-à-vis the G-8, his first meeting with new UK Prime Minister Gordon Brown and his relationship with Angela Merkel, and the negotiations at EADS (Airbus) to move away from the cumbersome bi-national management structure.

Intel's decision to get involved with the One Laptop Per Child campaign launched by Nicholas Negroponte at MIT received a surprising amount of play. The Live Earth concert came and went. Putin's withdrawal from a key arms control treaty ruffled feathers, while the war in Iraq dominated European coverage of U.S. news.

It was interesting to see familiar topics presented in a different format and context. Even CNN International presents a different composition and slant to the news than they do in the U.S. I came away with a much greater appreciation for the differences in European approaches to CSR and the importance of staying in contact and building relations and understandings with key players on the continent.

I still think it is a big mistake to treat the EU as the equivalent of the U.S., however. There are important national differences in attitudes, culture, and perceptions. Greece has a very different history, culture, and language than Italy (as an aside, I have new and increased appreciation for the phrase "it's all Greek to me"); Italy from Switzerland; and even crossing the border from Francophone Switzerland to France brings noticeable differences in to play.

I greatly appreciated the hospitality of AmCham Italy executive director Paolo Catalfamo and AmCham Greece executive director Alex Lamnidis, and the insights of a variety of experts from the business, government, and non-profit fields with whom I had a chance to visit.

There are clearly common areas where the US and EU business communities see eye to eye on CSR issues, particularly around the importance of education and workforce development, emerging market development, trust, good governance and public confidence.

Companies like Daimler, DHL, Unilever, Vodaphone, Nestle, Novartis, Shell, Titan, and organizations like the World Food Program, the Forest Stewardship Council, the World Conservation Union, and others are grappling with complex issues, and starting to form new attitudes about the role of business in society and to develop relationships to address them. American companies such as Coke, P&G, Accenture, UPS, and many others, have found not only found business success in Europe but also ways to tailor their corporate values and corporate citizenship to make a meaningful in local communities there.

There have been some articles and comments in recent months bemoaning the direction of the field of CSR and where it is headed. My take is that this is a time of transition. Old habits and attitudes, suspicions and animosities, stereotypes and prejudices die hard, but President Sarkozy isn't the only fresh face in Europe, and there seem to be some significant opportunities for dialogue and constructive engagement.

I'm looking forward to seeing what we can do at BCLC to help this process along.

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