Written 2001, adapted 2002 and revised in 2008. Key metrics: -Production increased 1.5 fold in one year, from 3.6 million units in 1999 to 5.1 million units in 2000, moving from 60 percent to 84 percent capacity utilization (workforce is 1,250 and annual turnover is $10 million). - Average rework level decreased from 20.4 percent in 1998-99 to 8.3 percent in 2000-01 and average rejection level decreased from 10.6 percent to 4.8 percent. -Major improvements can be traced to both equipment/technology upgrading and new management practices, including the SA8000 management systems. -Average monthly overtime in 2000 was 46 hours, decreasing to 22 hours in the first half of 2001, representing a 52 percent decrease. -Absenteeism - percent of work days not worked - dropped from an average 20 percent in 2000, all workers combined (tailors, helpers, checkers, cutters, iron masters, finishers) to an average 9 percent in first six months of 2001. - Employee turnover was also reduced by close to half, from 8.5 percent to 4.7 percent.
To tie CSR credibly to the brand, reporting is required. CSR reports will vary based on the nature of the business that is reporting. Two significant recent trends are:
·greater coverage of previously unreported areas of corporate activity to meet the needs of stakeholders other than stockholders, and ·certification of information in the reports by top corporate officers, by second-party certifiers (contractors or consultants) or increasingly and by an accredited third-party certification body.
When a few shareholders own a company, it may be enough to generate some basic earning statements because the large shareholders will naturally take a personal interest in their investment.This is also the concept behind a bank-centered industry group as exemplified by the German Hausbank or the Japanese keiretsu bank.
When shareholding is more diversified, shareholders properly worry about the Principal-Agent problem, where their hired managers are less concerned about the owners than about themselves.Until 2002, the main system of outside review in the United States was one of outside review by large auditing firms reviewed the financial statements. Independent analysts on Wall Street then commented on these statements.
The Public Company Accounting Oversight Board (PCAOB) was interjected into this system in 2002 and serves as a kind of accreditation body for auditing firms.In this information age, businesses rely more on attracting and retaining a talented workforce than ever before. Intellectual capital does not come cheaply and the loss of a key employee can affect a company’s value. Key employees can go down the elevator and with them take important company information and clients.Recruitment and training are expensive. Productive, innovative employees who know and care for your company certainly provide value, and thus are an intangible asset.
Financial statements fail to tell investors much about what could be a company’s most important asset, namely its employees. If people matter most, as company CEOs like to say in annual reports, then their worth must be measured and a value put on them.
Balance sheets as presently constructed provide useful information, but leave out significant factors.Tangible assets such as machinery can be worthless in a few months if the product they make is superseded; they can only depreciate in value, whether they are used or not.Intangible assets can either increase or decrease in value.Because a reliable market price can not be determined, valuing intangibles is more art than science.And many intangibles, such as intellectual capital or brand loyalty, will not be found in a financial statement.
As investors peruse their annual reports for 2003, they are going to have on their mind major issuesof credibility and trust.These are at the heart of the value that shareholders place on the companies they invest in.
The UK government’s Department of Trade and Industry has asked the UK Accounting Standards Board to look at better guidance for disclosure of intangible assets.To help develop an alternative model, the Academy of Enterprise commissioned the Smith Institute to investigate the issue globally.Its report concludes:
Although the economy has changed, many of its institutions, like the accountancy profession, have failed to keep pace.In many respects, the current accountancy model, developed 500 years ago, attempts to measure the assets of the creative economy with the tools of the manufacturing-based economy.A profession which fails to acknowledge, let alone measure, the core people-based assets of many companies has become cumbersome in its ability to adapt to a changing environment.Today an entire industry -- accountancy -- is based on a fiction: that the valuation auditors produce reflects the real value of the companies they audit. They simply do not.- Smith Institute, Dynamic Reporting for a Dynamic Economy.
The report echoes Keynes’s dictum: “Better to be vaguely right than precisely wrong.”If corporate brands and reputations are their most enduring asset, it is worth a great deal to corporations to keep their brands and reputations untarnished.
Concept: Better Social Reports Are by Young or Repentant Firms
As mentioned in Chapter 1, the UK consultancy, SustainAbility,popularized the term "triple bottom line" to mean, in addition to the financial bottom line, an environmental and social bottom line.SustainAbility each year selects the top 50 social and environmental reports based on clarity of measuring and reporting, transparency, and management approach.The SustainAbility worldwide ranking of annual reports follows the model created by Tellus in Boston of ranking the top U.S. companies on their environmental reporting.
The companies most frequently cited for having good reports tend to fall into two categories:
·relatively younger(to be consistent with next point) companies (post-1970), often with an organic orientation, that have made social issues part of its brand;
·older companies that have made mistakes and are now making amends.
Some larger companies producing social reports have had to deal with a history or crisis that has at times threatened their existence as a company.For example:
Chiquita is given credit for producing the “gold standard” of CSR supply-chain reporting; as successor to the United Fruit Company, it has the burden of memories of “banana republics” to bear and in the 1990s was the subject of a major expose by the Cincinnati Enquirer on treatment of its workers in Central America.
What will it take for other companies to get ahead of the issue without a crisis in hand, or is it too much to expect?Could this lead to a collective crisis point for companies that generates some fundamental change in the years to come?
The CSR aspects of brand creation and maintenance are part of a broader trend.Brands can be introduced faster and more cost-effectively. With money and professional management of the process, it is easier to launch a brand today because of media penetration and the related power of advertising, public relations and marketing.Two reasons, among others:
·Young people are far more aware and concerned about brands;
·They are easily reached through television and the Internet.
The other side of this coin is that brands can also decline more rapidly. Media penetration works both ways.Bad news on the CSR side can destroy a brand even faster than use of CSR in advertising can help it.The people who are expert at creating a brand are not always so clever at controlling the devastation from negative publicity.Johnson & Johnson managed to do it with Tylenol.But Bridgestone/Firestone lost the faith of its customers in the quality of its brand.More broadly speaking, corporate mortality rates have risen.The average life expectancy of a Fortune 500 company in 1938 was 100 years.It is now 20 years.More threats to brands exist and therefore corporations have less time to realize value.
One way of summarizing all this is to say that the corporate “Brand Beta” has been tilting upward (the coefficient of β has been rising).The ladders to brand success are steeper, but so are the downward spirals.Just one exaggerated claim that is attacked in the press can be devastating for the company.
CSR issues are important not only to the maintenance of a brand built over several years but also to the building of a new brand.This is both easier and harder than it used to be, because public perception of many brands today is greatly affected by the social message conveyed by the brand.Some convey it as a conscious strategy called cause-related marketing, i.e., linking a commercial product to a cause.Various organizations have begun efforts to quantify the value of a company’s reputation (see the excerpt below on one organization’s findings) to help companies measure the effects of their social responsibility marketing efforts.
Alternatively, a company can suffer negative repercussions for not addressing socially responsible issues. When a company’s value depends on its employees and its reputation, the lines between social reporting and financial reporting become blurred.Failures in social reporting could adversely affect the company.
For instance, Nike suffered greatly from the negative publicity concerning the pay and abusive work conditions of workers in Asia who make its athletic shoes. As a result, Nike decided to invest in improving its reputation.Shell suffered from publicity linking the company to human rights abuses in Nigeria, and Exxon was vilified following the Valdez oil spill in Alaska.While it is difficult to pinpoint the economic effect, certainly Shell turned itself around and is now perceived as a world leader in social reporting.
…International reputation analysts at Echo Research tracked 426 businesses, national and on-line articles during 2000 and interviewed 30 leading opinion formers in the UK, USA, France, Germany, Japan and Australia to produce 'Echo's International CSR 2000 Report'.
Globally From 122 companies named as 'best practice' leaders
%share of all mentions
UK From 40 companies named as 'best practice' leaders
%share of all mentions
The Body Shop
The Body Shop
Robert Bosch Foundation
B & Q
…Echo's research shows that, while limited, global organizations attract the most recognition for best practice in the CSR arena, and see it as a license to operate in a competitive society. However, the report highlights distinct differences in the way individual countries approach CSR. The UK, and Europe in general, appear to be driven by avoiding regulation, while the research pointed to the long tradition of philanthropy in the US.
Echo's study showed that social welfare came through as much more developed in Europe than in the US. In the UK, the emphasis was not just on philanthropy, but rather on engaging in a two-way dialogue. In France, there were concerns expressed against seeing CSR as a substitute for social services. In Germany, the environmental aspects of sustainability were emphasized as much as social ones.
"CSR's time has come, and it is not just a management fad. Our research shows that the key benefits of CSR for companies are in employee retention and helping organizations through dialogue and engagement with their key stakeholders. This enables companies to win better alignment with their markets and customers in the long run, and help stem the growing tide of confrontation." - Sandra Macleod, Chief Executive of Echo Research… Certain companies were described in Echo's qualitative research as having a notable record for and commitment to corporate social responsibility and were also covered positively in the media. The resulting integrated analysis shows, globally and in the UK, from left to right in the tables below 1. the leading companies 2. quality ratings in the media (from 0-100, with the neutral rating being 50) 3. frequency with which companies appeared in the media analysed 4. qualitative comments from the interviewees…
Assessment (where available)
Extremely positive stance; pursues sustainable energy
Socially integrative, especially of young people
Pioneers - shamed others into following suit
Have CSR managers
Good reputation overall
Because Riboud (CEO) is highly committed
Robert Bosch Foundation
Via its excellent foundation
…The report concludes that careful research and analysis of the benefits on both sides of the equation are essential to ensure that companies and society derive the most out of CSR programmes.
Sustainability has come into use as a word that covers both environmental reporting and workplace reporting.The issue is the sustainability of individual corporations, the existing capitalist system, and the world as a whole.
The UN Global Compact and the World Business Council for Sustainable Development (WBCSD) are working together in this area.They are sharing experience and learning in the area of the most effective performance models and tools to integrate the universal principles of the Global Compact into business strategy.The WBCSD has also launched a sustainability reporting portal that brings together different aspects of company reporting from across the world.The reporting portal, at www.wbcsd.org, provides visitors with an understanding of the issues and information companies are discussing in their sustainable development reports.Additionally, the Caux Roundtable has also sought to address global reporting and sustainability issues by starting from basic principles of human organization.
Today, the field is crowded with numerous rating and evaluation services.Because criteria and available data vary by country, GRI was convened by CERES in 1997 as a multi-stakeholder, international harmonization program with the goal of making sustainability reporting as rigorous and universal as financial reporting.It cut its formal ties with CERES in 2002 and is now an independent NGO that partners with the UN Environment Program (UNEP).
GRI described itself in April 2002 as follows: “The GRI was established to develop, promote, and disseminate a generally accepted framework for sustainability reporting - voluntary reporting on the economic, environmental, and social performance of corporations and other organizations. Its mandate as an international standards body is to make sustainability reporting as routine as financial reporting while achieving the highest standards of consistency and rigour."
The GRI is a potentially important undertaking.It has developed a set of measures that can be used for businesses throughout the world, allowing for variation among industry sectors.Dozens of global companies are piloting the draft GRI metrics.The GRI Sustainability Reporting Guidelines identify specific information needed to report on environmental, social and economic performance, incorporating eleven principles for companies and other entities:
- Accuracy:Reports should achieve the degree of exactness and low margin of error in reported information necessary for users to make decisions with a high degree of confidence. - Auditability: Reported data and information should be recorded, compiled, analyzed, and disclosed in a way that would enable internal auditors or external assurance providers to attest to its reliability. - Clarity:The reporting organization should be aware of the diverse needs and backgrounds of its stakeholder groups and should make information available in a manner that is responsive to the maximum number of users while still maintaining a suitable level of detail.
Comparability:The reporting organization should maintain consistency in the boundary and scope of its reports, disclose any changes, and re-state previously reported information.
Completeness:All information that is material to users for assessing the reporting organization's economic, environmental, and social performance should appear in the report in a manner consistent with the declared boundaries, scope, and time period.
Inclusiveness: The reporting organization should systematically engage its stakeholders to help focus and continually enhance the quality of its reports.
Neutrality: Reports should avoid bias in selection and presentation of information and should strive to provide a balanced account of the reporting organization’s performance.
Relevance: Reports should include information appropriately important to the particular aspect, indicator, or piece of information, and is above the threshold at which information becomes significant enough to be reported.
Sustainability Context:The reporting organization should seek to place its performance in the larger context of ecological, social, or other limits or constraints, where such context adds significant meaning to the reported information.
Timeliness:Reports should provide information on a regular schedule that meets user needs and comports with the nature of the information itself.
Transparency:Full disclosure of the processes, procedures, and assumptions in report preparation are essential to its credibility.
As with financial reporting, the centerpiece of GRI reporting is a CEO statement and some key environmental, social and economic indicators.In addition, GRI requires a profile of the reporting entity, descriptions of relevant policies and management systems, stakeholder relationships, management performance, operational performance, product performance and a sustainability overview.
The GRI has not been an instant success.Critics charge that its search for broad consensus has resulted in a dilution of rigor.SustainAbility reports that CSR reports doubled in length in 2002 but have not provided more useful information.Others charge that the greatest shortcoming of the direction that the GRI has taken so far is that it hasn’t adequately recognized the enormous quality differential between reports with and without verification, and between verification with and without certified auditors against multi-stakeholder standards.GRI requirements lag far behind the reporting and verification described earlier in this chapter.Since GRI is in its infancy, it has the potential to take corrective actions.
Excerpt from “The GRI – Raising the Bar Too High?” by Mallen Baker (October 2002)
The GRI has released the latest version of its guidelines … against a backdrop of resistance to the framework from some companies who see it as setting the bar unrealistically high, whilst [it is] nevertheless seen as the only game in town by a broad range of stakeholders who are desperate for a global agreement on what constitutes social reporting.
Following its earlier draft, the GRI received quite a bit of feedback from both companies and other organizations.What shone through was the continuing will amongst the various stakeholders that the GRI should succeed.…
Nike commented: "The depth of the questions is overwhelming at times, however the flexibility allowed by the structure makes the GRI more digestible and tenable than most surveys. It can also serve as a useful catalyst in engaging internal leaders in substantive discussion around governance and triple bottom line accountabilities."
Deloitte Touche were more critical: "We do believe that the core indicators required by the 2002 Exposure Draft are too voluminous and will discourage too many organizations from even attempting to report under the GRI Guidelines.…We are concerned that the GRI is proceeding down a path of attempting to make a sustainability report be everything to everyone rather than focusing on how the reporting entity's sustainability performance can be measured overall.”
The GRI now has 50 core indicators.… of those 50, no less than 16 - nearly a third - ask merely for a policy and/or process to deal with an issue. How such an indicator translates into performance that can be tracked year on year is anybody's guess.Most external stakeholders wanting information about a company's performance on child labour will be more interested on whether the company has actually in reality employed children anywhere in its supply chain rather than whether it has a policy on the subject. …
The basic structure of the indicators promises a lot of useful information...Economic, environmental, social - covering a broad range of potential stakeholders. But then it is by no means clear what some of the resulting measures are actually for. …
Because of the deluge of corporate scandals, stakeholders have become more skeptical of company claims.They demand the same treatment that shareholders were presumed to be getting, transparency – i.e. credible evidence of performance, with third-party verification.
Social audits are designed to communicate a company’s social record.General Motors produced a social report as early as 1970, but without an outside review.Carl Jung once said it takes one generation, 30 years, for an idea to become part of the culture. Effective measurement and communication of a company’s commitment and performance has become a key component of successful social accountability, which led to some experiments with outside social audits.Social and environmental reports were designed to benchmark, track progress, address challenges, reflect consultations with stakeholders, and on occasion respond to allegations. The social auditor was asked to attest to the fairness of these reports.
The first example of independent verification of a major company CSR report by a large financial auditor was the Shell annual report for 2001.Social audits are designed to communicate and lend credibility to a company’s social record.They are also a response to independent external reports on companies.They present the company’s record in a way that the company has some control over.Effective measurement and communication of a company’s commitment and performance has become a key component of successful social accountability.Social and environmental reports are designed to benchmark, track progress, address challenges, reflect consultations with stakeholders, and on occasion respond to allegations.
Certification is the process whereby products or facilities undergo an impartial third party audit against a set of standards. In order to provide credibility with consumers, government, and the business, and to overcome the consumer confusion and suspicions that self proclamation engenders, it is essential that standards be subject to independent, impartial verification by properly accredited certification bodies (these can be NGOs) and that sufficient transparency be evident.For products, it means actual testing of samples; for facilities, it means a process that includes on-site inspection:
1.Product certification: These certifications often entail “cradle to grave” standard elements for the item or service itself; for the facility where it was produced; and for the raw materials and energy use involved in its production, use and disposal.
2.Facility certification: These certifications entail compliance with standards that typically include both management systems and performance elements for a facility.
If a facility or a product or service can demonstrate to a qualified impartial third party that it meets a standard, it will earn a certificate attesting to its compliant attributes, policies, management and/or operations. Generally, for facility certification, in contrast to product certification, the Mark or Seal signifying that it meets the standard can be displayed at facilities (a banner or framed certification or signs), on advertising, in general promotion, on packages and on hanging tags, but not on products themselves.
To qualify for facility certification, an applicant undergoes a three-step process.
1.Office visit involving review of policies and procedures and documentation, inspection of the central office, and interviews with staff;
2.Witness audits involving the observation by an accreditation audit team of the certification body conducting an audit; and
3.Periodic re-evaluation in the form of surveillance audits at levels 1 and 2 above.
Three Types of Audits
An audit is a systematic, independent and documented process for obtaining audit evidence and evaluating it objectively to determine the extent to which audit criteria are fulfilled. There are three types of assessments:
1.First party, or internal, when a company audits itself;
2.Second party, when a company contracts with a consultant to audit a supplier or when the company’s own staff conduct the audit of a supplier; and
3.Third party, an open system, when an accredited certification body conducts an independent verification audit to a consensus-based standard, under procedures established and overseen or licensed by an accreditation body.
Since the interest of auditors is not identical to that of the management of the facility, sophisticated interview techniques are required.This means interviewing management in ways that make it more difficult to avoid answering important questions relating to compliance with standards.It means interviewing workers under conditions in which they are not afraid to speak and protecting them from any possible retribution.
Preparation for an Audit
Each audit is a special challenge requiring an audit plan.Auditors must organize their visit to each facility to make the best possible use of time, coordinate the inspection activities and findings of each member of the audit team, enable confirmation of allegations of non conformances that might be garnered in interviews, to make it likely that all necessary aspects of the audit can be completed in the pre-arranged time frame, and to open and close the audit with clear and productive communications with management.
Generally, before undergoing a full environmental and/or social accountability certification audit, an applicant will first take a course in the operation of the standard and its management system (if any), study the Guidance Document for the standard, perhaps hire a consultant to assist in its implementation, implement the standard, then arrange for a pre-assessment to determine if it is “certification ready”.A Guidance Document is an updated interpretation of each element of a standard, with special attention to its application to particular locations and sectors.For example, in a fair workplace standard: How does one determine if minimum wage requirements are met where workers are paid on a piece basis? How does one interpret freedom of association in China?What is a living wage and how is it to be determined for a particular location?
Should any interested party (e.g. a competitor, neighbor, worker, trade union or NGO) observe a non-compliance at a certified facility (that escaped the notice of the certification body), a complaint should be lodged with the certified facility itself. Failing satisfactory resolution of the complaint, another complaint or appeal of the certification can be lodged with the certification body that issues the certificate. Certification bodies are required to operate a complaints and appeals system that calls for timely, impartial investigation and resolution of all documented complaints and appeals. Should the allegations be substantiated, a Corrective Action process must be initiated and implementation of Corrective Actions confirmed for the certification to remain in effect. Failing satisfactory resolution, the complainant can further complain or appeal against the certification body to its Accreditation Agency.
An effective, open and transparent complaints and appeals system increases reliability and credibility or a certification program. Auditors are nor infallible. For facility certification, workers are in a facility every day, whereas auditors come in on a regular but far less frequent basis; for product certification, auditors check a sample, not every item. A facility might be incompliance one day but not thirty days later.
Non conformities identified in the process of an audit fall into three categories: Major (systemic violation), Minor (oversight or non-systemic problem), and Observation (non mandatory).
Majors and minors are written up and presented at the closing meeting with management in the form of Corrective Action Requests. These are designed to elicit plans for Corrective and Preventive Action. Ideally, at the closing meeting, the CSR manager and other key members of management are joined by the elected worker representative, and the team develops corrective and preventive actions together. Under no circumstances can a third party auditor design the Corrective Action, as this would pose a conflict of interest.
In the case of a major, the audit team does not recommend certification. Instead, if the Corrective Action plan is approved by the auditors, a date is set for a return audit visit to ascertain whether or not the Corrective Action is emplaced and effective. Once all majors have been cleared, the audit team will recommend certification.
In the case of minors, the audit team may decide to recommend certification. Management will be expected to notify the auditors when the Corrective Actions are in place.If certification takes place, confirmation will occur at the next scheduled surveillance, in six months. The emphasis should be on continuous improvement, so Observations are also important, even though no action in response is required. Observations are among the value added contributions an audit team can provide without posing a conflict of interest.
The term “management system” is used most commonly in industry today in association with a quality, environmental, safety or social system, which is being maintained by the company. The management system refers specifically to the system of control exercised by the company to assure the following: 1.That procedures (including work instructions depending upon the size and nature of the industry) are in place to assure that there is a degree of process capability (the ability to consistently replicate a function in the same manner with the same results) 2.That a key representative is appointed to direct the system and coordinate all aspects of system control, this person reporting directly to senior management. 3.That specific responsibilities have been identified for critical elements of the system to assure accountability for implementation 4.That senior management oversight is exercised in a periodic and consistent fashion to assure that the system integrity is maintained 5.That a formal system of corrective and preventive action is in place to assure that problems are either prevented through proactive initiatives or corrected in a timely and effective fashion. 6.That a system of internal audits is in place to monitor the effectiveness of the system The purpose behind the management system is to control the procedures within an organization and to provide a clear method of enforcement. A management system is designed to assure that compliant conditions can be attained and maintained in a consistent and reliable manner. With an effective management system, verification can be reliable, because the reporting and procedures enable auditors to inspect evidence, to confirm (or not) statements made in interviews. A management system provides a basis for assurance that compliant conditions found during an inspection will likely also be present the following week. Central to the management systems approach is its plan-do-check-act continuum.
1.Plan. Select, define and analyze the problem, identifying root causes, setting measurable goals, listing steps, mapping the process, collecting and analyzing data. 2.Do. Develop and implement solutions, establishing criteria, conceiving and selecting solutions, gaining support and approval, and testing them. 3.Check. Evaluate the results, gathering and analyzing data, and determine if the desired goal has been met. 4.Act. If the desired goal was met, standardize the solution, identifying systemic changes and training needs to roll out; adopt the solution, monitoring it regularly. If not, return to step one, developing a new plan or selecting one not chosen earlier.
A corporate social accountability management system is designed to provide tools useful for both those enterprises with superior social responsibility records and also for those struggling with numerous violations and at risk of a public exposé.
Frequency of Audits
Certification audits are conducted at regular intervals, frequently on a three year schedule with surveillance audits annually or more often. At both levels, a Corrective Action process is utilized. To qualify for certification or accreditation, no major Corrective Actions can be outstanding. A system of checks and balances provides for approval at several levels, generally both a positive auditor recommendation accompanied by an audit report with no outstanding major non-conformities and review and approval by an Accreditation Review Panel.
A company operating a group of facilities that share a management system and operate in rigorously similar manner can apply for group certification. In such cases, the certification body utilizes a sampling process to select individual facilities for auditing.
Companies seeking certification or relying on certification in business-to-business relations, look to certification bodies for assurance. Business prefers to rely on certification bodies that are accredited. Two global associations of accreditation bodies seek to assure high quality and consistency in standard setting, the interpretation of standards, and accreditation.
International Accreditation Forum (IAF)
The older and more dominant is the International Accreditation Forum (IAF), which brings together national conformity assessment accreditation bodies for mutual recognition, harmonization, and high professional quality. Accreditation bodies which are members of IAF agree to operate in compliance with ISO standards for accreditation agencies and to require the bodies they accredit to comply with appropriate international standards. IAF is designed to establish Mutual Recognition Arrangements (MLA) to move from their national systems to a single global one, thus removing the need for duplicative recognition in each country where certification bodies operate.IAF seeks to accomplish this integrative goal through Mutual Recognition Arrangements attained via peer audits among its members. IAF also develops guidance for and seeks to harmonize accreditation procedures and contributes to the work of ISO. IAF members include virtually all national accreditation agencies, but it has been hostile to global accreditation agencies, which it seems to view as posing a competitive threat to the nationals.
International Social and Environmental Alliance for Labeling (ISEAL)
In a global world, the national accreditation agency system has been viewed as obsolete for global trade and business, just as is the system of the separate development of standards for each nation that apply to business products, services and processes that operate and trade globally.A number of multinationals are on record as preferring not only global standard setting processes, but also global accreditation and certification systems, to avoid the higher cost and complexity of complying with multiple standards and multiple systems for their verification.
Therefore, eight global accreditation agencies formed ISEAL (the International Social and Environmental Alliance for Labeling), to provide a home for the new wave of global standard setting and accreditation bodies established to develop and oversee the standards designed to assure ecological sustainability and social justice and verification of compliance with them.ISEAL seeks to raise professional standards among accreditation and certification agencies and to seek harmonization among the standards.Today most of the voluntary international standards and accreditation programs focused on social and environmental issues belong to ISEAL. Its mission is to support its member programs to attain a high level of quality, public credibility, political recognition, and market success.
Regular Members of ISEAL are committed to operate in accordance with international normative documents for standard setting and accreditation and to meet the requirements for Peer Review (in effect within two years ofjoining). ISEAL is establishing a Multilateral Recognition Agreement (MLA) based on this Peer Review system.
ISEAL also operates programs in monitoring and analysis of policy and seeks to build capacity and promote best practice. Its first collaborative project is SASA (Social Accountability in Sustainable Agriculture). SASA seeks to improve social auditing processes in agriculture and to foster closer cooperation and shared learning among initiatives trough a series of pilot exercises. Optimal outcomes include the identification and adoption of best practice, harmonization of standards, development of procedures for integrated audits, and perhaps even laying the groundwork for joint public education and promotion among the project partners.
1.What type of audit do you think multinational companies should demand from their suppliers in developing countries? 2.Do you think that multinationals should be responsible for the cost of the audits? 3.Do you think that certification will provide suppliers with a competitive advantage or will it put them at a disadvantage?
As social and environmental reports have grown in number and in specificity, the need has also grown to reduce duplication of efforts and lack of consistency among reporting systems.
One way of reducing the burden is through harmonization of standards, i.e., sharing definitions and operational concepts so that complying with one set of standards leads to compliance with another.Another step toward reducing the burden of certification and compliance is through mutual recognition, i.e., acceptance by one standard-setting body of compliance with another set of standards as leading to partial or full compliance with another.Finally, a third approach is that of integrated audits, i.e., sharing of the certification tasks by certification bodies for two or more different standards.
The shared goal of these efforts is to increase the diffusion and reduce the cost of adhering to common standards of reporting to improve the accuracy and reliability of corporate reports to stakeholders and in the process ensure decent and sustainable workplaces.
Convergence is already occurring with the integration in many companies of their ISO9000 and ISO14000 management systems audits (for operations and the environment) with SA8000 audits.Quite a few companies are certified against all three of these standards.Several ISEAL certification programs are working in alliance toward these goals.
The SASA project (Social Accountability in Sustainable Agriculture) is a prime example.SASA’s objectives include harmonization, developing methods for integrated audits (for example, pesticide use is an issue for both occupational health and safety of workers and protection of the environment, so it is an auditable item for both fair workplace and environmental standards), and adoption of best practice.It also seeks better mutual understanding and a practical common strategy to address the special needs of small enterprises in poor countries.Lastly, it seeks to enable and encourage the four organizations to work together to inform and attract consumers.
Cooperation among the labor initiatives has, to date, proven elusive, and far easier to envision than to realize.The Multi-Stakeholder Codes Initiative (MI6) seeks to unite leading labor code of conduct organizations in a program of collaborative work.The Initiative brings together six American and European organizations: Social Accountability International (SAI), the Clean Clothes Campaign (CCC), the Fair Labor Association (FLA), the Ethical Trading Initiative (ETI), the Fair Wear Foundation (FWF) and the Worker Rights Consortium (WRC).The Initiative aims to improve the quality and increase the effectiveness of code of conduct monitoring as a means of promoting greater respect for internationally recognized worker rights.
The initiative will establish, for the first time, a broadly agreed set of “best practices,” or standards, for how monitoring and remediation should be done.This will improve the work of the participating organizations, raise standards throughout the monitoring field, and provide a basis for interested parties to assess the quality and reliability of the numerous monitoring organizations and code systems that comprise an ever-expanding field.
It is hoped that this project will lay the groundwork for the upward harmonization of monitoring systems and the potential creation of formal structures that will facilitate long-term cooperation among monitoring groups, global brands, and local actors.The project will involve joint monitoring and remediation work at a series of apparel factories in Turkey.These joint projects will incorporate a variety of code enforcement methods and strategies and through this work, and analysis of the outcomes, the participating groups will identify “best practices” and develop viable models for ongoing cooperation.The results will be broadly shared with the intent to help reduce duplication of effort, inefficient use of resources and the “audit fatigue” suffered by suppliers, which limit the impact of code enforcement.
AccountAbility in collaboration with CSR Europe, “The Impacts of Reporting: the Role of Social and Sustainability Reporting in Organisational Transformation.”Check www.csreurope.org.
Association of Chartered Certified Accountants, www.acca.org.uk
Citizen Works in March 2003 launched a new public interest accounting group, the Association for Integrity in Accounting (AIA), which provides a public interest voice for integrity and responsibility in the profession.Visit http://www.citizenworks.org.
CSR Europe, "Exploring Business Dynamics – mainstreaming corporate social responsibility in a company's strategy, management and systems."It finds that the greatest challenge facing companies undertaking CSR and sustainability-related initiatives is to integrate these initiatives fully into the way they do business. This study builds on the experience of pioneering companies to identify success factors and challenges in the effort to mainstream CSR within a company. Check www.csreurope.org (Executive Summary is available).
Global Reporting Initiative (GRI), www.globalreporting.org.
Grayson, David, and Adrian Hodges, Everybody’s Business (London and New York: DK Publishing, 2002).“The Seven-Step Process,” pp. 210-211, 302-303.“Making a Business Case,” pp. 218-228.“Engaging Stakeholders,” pp. 260-286.Marlin, Randal, Propaganda and the Ethics of Persuasion (Peterborough, Ont., Canada: Broadview Press, 2002).Chapter 5, “Advertising and Public Relations Ethics.”
McIntosh, Leipziger, Jones and Coleman, Corporate Citizenship. “How to Make a Case to a Board or Management Committee,” “Protecting Reputation” and “Managing Risk,” “Business as if There’s a Future.”“Social Audits,” “Global Reporting Initiative,” 227-246.
Prince of Wales Business Leadership Forum
SustainAbility, www.sustainability.com – read about its UK and European Reporting Awards
World Business Council for Sustainable Development (WBCSD), “Striking the Balance.
Association of Chartered Certified Accountants, www.acca.org.uk
Global Reporting Initiative (GRI), www.globalreporting.org.
CSR Europe, www.csreurope.org, has released "Exploring Business Dynamics – mainstreaming corporate social responsibility in a company's strategy, management and systems."It finds that the greatest challenge facing companies undertaking CSR and sustainability-related initiatives is to integrate these initiatives fully into the way they do business.
Two studies have recently been released on the effectiveness of social reporting: “Striking the Balance”, from the World Business Council for Sustainable Development (WBCSD), is available “The Impacts of Reporting: the Role of Social and Sustainability Reporting in Organisational Transformation”, from AccountAbility in collaboration with CSR Europe.
 As Prof. Baruch Lev of NYU’s Stern School has said: “To claim that tangible assets should be measured and valued, while intangibles should not, or could not, is like stating that things are valuable while ideas are not.”'
 This section relies in part on an argument raised by Alec Reed, “Pounds of Flesh,” Financial Management, a journal of CIMA, London.
 John Elkington, Cannibals with Forks (London: Capstone, 1997).
 Examples: Ben & Jerry’s, Stoneyfield Yogurt, Tom’s of Maine, Body Shop.
 PricewaterhouseCoopers, “Uncertain Times, Abundant Opportunities: 5th Annual Global CEO Survey,” in conjunction with the World Economic Forum, 2002, p. 17.
 In 1954, United Fruit was involved in the CIA-assisted overthrow of the Guatemalan government.
 As The Body Shop can attest from the public backlash it received.The company claimed that they had sourced its supply of babassu oil from the rainforest, when in fact it was produced commercially.This was in direct conflict with their “Trade Not Aid” program.
 This fact is demonstrated regularly by surveys by Environics (www.environics.com).
“The Echo Group brings together market research, media analysis and communication planning to enable clients to monitor their reputation, brands, messages and image more perceptively, accurately and actively than ever before.” www.echoresearch.com
Deloitte and Touche has suggested an additional principle, namely a clear view of quality indicators covering performance areas wholly within the reporting organization’s own control.
 SustainAbility has made this point.The Chiquita annual report was long and useful, but its most useful information was in the form of a few tables showing progress in achieving compliance with certain standards.
 The Abt Annual Report and Boston Gas report in the early 1970s was primarily an environmental report. The Ben & Jerry’s report in 1989 (reporting on 1988) was the first stakeholder report; it was certified by a second-party contractor. None had a major auditing firm certify or “verify” the reports.
 These external reports started in 1969 with the Council on Economic Priorities (CEP), but the media had already covered the GM story on Nader.Milton Moskowitz was writing about the best companies to work for.EIRIS in the UK wrote reports similar to those of CEP.ICCR started up in 1972.