How Can You Help Orgs Change to Meet CR Agenda


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Corporate Social Responsibility and Environmental Management Corp. Soc. Responsib. Environ. Mgmt. 11, 133–139 (2004) Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/csr.060

HOW CAN YOU HELP ORGANIZATIONS CHANGE TO MEET THE CORPORATE RESPONSIBILITY AGENDA? David Lyon* Arthur D. Little Ltd, Cambridge, UK As corporate responsibility (CR) has developed over the past decade, companies have developed and communicated their formal values relating to environment, employees, stakeholders and governance through public statements. Many of these companies have produced formal reports covering their performance on environmental and social issues. Continued improvement and delivery of commitments depends on buy-in not just from senior management (and the CR manager), but from managers and staff across the organization. This is only possible if there is a culture that is supportive of corporate responsibility. One key aspect of making this change is understanding how the company’s culture affects corporate responsibility performance. This paper discusses some areas of organizational culture that affect CR performance including rewards and recognition, learning and managing * Correspondence to: David Lyon, Arthur D. Little Ltd, Science Park, Milton Road, Cambridge CB4 0XL, UK. E-mail: [email protected]

Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment.

change, awareness and involvement, questioning culture and flexibility underpinned by mutual respect. It also provides an overview of our approach for assessing and fostering a supportive culture. This is based on working with clients to manage their licence to operate in addition to extensive experience in innovation culture and safety culture. Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment. Received 30 June 2003 Revised 14 July 2003 Accepted 9 September 2003

INTRODUCTION decade ago most companies started from a position of managing sustainability issues in an ad hoc manner. Mature issues (mainly related to health and safety) were controlled through established management systems, and in some cases supported by a company culture that promoted certain behaviours and discouraged others. Over the years, we have observed a growing trend of companies addressing sustainability through a more defined and organized process, often including

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D. LYON • identifying the business case or the rationale to address environmental, social and economic issues • developing a vision supported by a strategy to manage these issues • beginning to measure performance through KPIs, impact assessments, stakeholder feedback etc. • producing environmental, social, economic and more recently sustainability/CR reports. The growth of this pattern can be seen from a recent study that illustrates the trend of increased reporting (Figure 1). However, this increasing level of reporting does not necessarily mean there is support for improving environmental and social performance from within the company. Indeed the ‘power of inertia is immensely strong especially in the functioning engine room of . . . the middle ranks’ (Tickell, 2003). To deliver sustained improvement in social and environmental performance, a change in the way a company sees its business and the way decisions are made is often required. This involves moving from being wholly reliant on the formal systems and processes and at the same time developing a proactive approach to

Figure 2. Evolution of systems to manage CR. Source: Arthur. D. Little.

CR (Figure 2). This is only possible if the organization has a supportive culture. This presentation explores this theme and discusses an approach for assessing and fostering CR culture. This is based on working with clients to manage their licence to operate (ADL, 2001) in addition to our extensive experience in innovation culture (ADL, 1998) and safety culture. (ADL, 2000).

WHAT IS CULTURE? There is no definitive definition of culture, and little discussion of what elements of culture support corporate responsibility objectives. In our work, we have adapted a commonly used definition of safety culture a useful definition to be applicable to CR: the CR culture of an organization is the product of the individual and group values, attitudes, perceptions, competencies and patterns of behaviors that drive the commitment to and style and proficiency of an organization’s corporate responsibility management (adapted from the Health and Safety Commission definition of safety culture).

Figure 1. Number of environmental and social reports produced between 1990 and 2002. Source: www. CorporateRegister.com based on 3411 reports from January 1990 to September 2002. Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment

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Each of these aspects of culture is presented in further detail in Table 1 and can be interpreted in terms of factors that contribute to improved corporate responsibility performance. These are discussed in more detail in the next section. Corp. Soc. Responsib. Environ. Mgmt. 11, 133–139 (2004)

ORGANIZATIONAL CHANGE TO MEET THE CR AGENDA Table 1. Aspects of organizational culture Term Values

Attitudes

Definition

Example

The key aspects of an individual or group belief system that are acknowledged as being important Positions adopted by individuals in relation to external events

Perceptions

An individual’s interpretation of reality

Competence

Ability to perform a task, requiring a combination of knowledge, experience and skill/capability What people do and the way in which they do it

Behaviour

• • • • • • • • • • • • • •

Integrity Professionalism No blame Pride in work Social awareness Readiness to bend the rules ‘Management are only interested in profits’ ‘We are excellent at stakeholder engagement’ Competence to drive a train Competence to manage safety Ignoring a warning Following a system Telling off a subordinate Demanding high performance from each other

Source: Adapted from Arthur D. Little (1999).

WHAT IS A ‘CORPORATE RESPONSIBILITY’ CULTURE? The aspects of culture presented are not specific to corporate responsibility and apply to other aspects of a company. However, through our work in a range of sectors it clear that companies that effectively manage their corporate responsibility appear to have a range of traits in common. This section explores some of these traits. Focus on rewards and recognition Corporate responsibility can be managed through compliance alone, although companies achieve much greater success if they foster a strong commitment from staff. Commitment can be effectively encouraged by systems to reward, publicize and welcome initiatives where innovative solutions to CR issues are identified, managed and followed through. In a recent ADL assessment of 15 global chemicals companies and societal licence to operate, we found that within the most effective companies there were common themes in managing rewards and recognition: Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment

• consistent implementation • bonus related, therefore people understand that this issue is important • open reporting • cumulative (progressive) disciplinary system, i.e. the same incident is required to occur two years in succession in order for a disciplinary action to take effect • root cause investigation is conducted to identify and make distinction between system failures, individual failures and supervisory failure. Appropriate rewards and recognition provide the motivation for people to systematically integrate CR into everyday decision-making. In developing a programme of awards for CR, it is advisable that they are closely and visibly linked into rewards for general business performance as staff will begin to see the two closely linked.

Learning and managing change Across each sector issues are emerging all the time. In a recent survey into food and drink companies, issues affecting companies were classified into three categories: mature (issues Corp. Soc. Responsib. Environ. Mgmt. 11, 133–139 (2004)

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D. LYON older than 3 years, declining in business impact), emerging (less than 3 years with potentially significant impact) and latent (greater than 3 years with unknown impact) (Ceppi et al., 2002). Of all issues mentioned in published media and in interviews with NGOs and company representatives, 17 issues were mature, 72 were emerging and 115 were latent. This suggests that there is a rapidly changing set of issues that companies have to understand and adapt to. To an extent this can be addressed through issue tracking and managing systems. However, this has to be supported by a culture that includes a commitment to learn, tolerance of failure, understanding and accepting risk, openness to external ideas, learning from experience, and continuous improvement. Such cultures can be encouraged by for example • • • •

role flexibility external partnerships training beyond core skills flat non-hierarchical structure.

organizational

Awareness and involvement Companies that manage CR effectively have staff who are aware of who their stakeholders are and what their concerns are. This can be supported by processes and systems such as guidelines providing support on systems for stakeholder engagement and best practice (see, e.g., IFC, 1999). However, to be effective, these systems need to be supported by a culture of wanting to understand the perspectives of others and their concerns. This is sometimes difficult particularly for operational or technical staff, who may consider that their role is purely inward facing. However, at the same time as being aware of the myriad of issues that affect companies, it is important to encourage a culture of appreciating that only some issues may be material to the company. This ability to focus also requires enabling staff to communicate to external Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment

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stakeholders why a given issue is considered important or not. Awareness needs to go beyond this to ensure that the business can evolve with society. Here awareness of CR issues is key to identify solutions that can develop future business. A recent example of this is the development of the Hewlett Packard i-community programme, which through understanding the needs and concerns of communities in India and Africa (among other regions) is able to identify possible new markets. (Hewlett Packard, 2002). Another example is that of Novozymes (http://www.novozymes.com), who have used NGOs to help identify emerging biotechnology issues. For this to work, there has to be trust between the two parties. Staff should also be involved internally. This may involve close engagement of staff in the design of standards to ensure commitment and efficient dissemination throughout the organization. This view is endorsed by an international food and drink company who in a recent assessment stated ‘the implementation of corporate programmes often fails because the generic frameworks that are used lack relevance to the local conditions faced by business unit managers’ (Ceppi et al., 2002). The best way for employees to be involved in managing CR issues is to have firm commitment from senior management. This involves visible decision-making supporting CR at board level. It also involves making a transition from a target-driven culture to a value-driven culture. Questioning culture and problem identification/solving Companies need to have an explicit approach for managing problems. Often there can be situations where problems are not considered in a comprehensive fashion. Companies that only look at issues selectively often find themselves unable to address emerging issues. From a recent ADL study of food and drink companies, we concluded that many of the Corp. Soc. Responsib. Environ. Mgmt. 11, 133–139 (2004)

ORGANIZATIONAL CHANGE TO MEET THE CR AGENDA tangible issues such as employee safety and waste from operations could be addressed by scientific approaches. This, however, does not always assist in understanding and managing less tangible impacts such as child labour, food poverty or ethical trading. These are driven by a complex set of factors influencing people’s livelihoods (many of which are outside the direct control of any company) and require a different approach. When addressing these problems, successful companies are those where their employees are supported in thinking outside their immediate zone of control and looking at the external drivers that may affect the business from a systems perspective (see Checkland and Scholes, 1999). Companies that discourage staff from questioning corporate objectives, standards and practices are unlikely to be effective in this respect. Shared but flexible culture based on respect Your staff forms an important stakeholder group and need to be managed within a CR policy. There is considerable literature on this subject. This paper will not repeat these debates of how the needs, concerns and perspectives of employees can be understood and respected, especially understanding the implications of different ethnicities, ages, genders etc. Respect for staff should promote tolerance for new ideas within the culture, increase the credibility of communications and encourage people to be proud of individual, and organizational, achievements.

CONCLUSIONS: UNDERSTANDING CR CULTURE The cultural aspects of CR are critical to achieving desired social, economic and environmental performance. Many companies have addressed these through written rules, often in the form of systems and processes. Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment

It is clear that all organizations, without exception, are actually driven by a set of Unwritten Rules of the GameTM (Scott-Morgan, 1994): ‘What really goes on around here’, best thought of as being the advice you would give a friend about how to survive and prosper in your organization. These are often rules such as ‘Protect your own turf’ or ‘Don’t stick your head out above the parapet’. The unwritten rules are sometimes tacitly recognized, but ignored when it comes to driving through a change. In some cases, they are not even recognized. Yet misalignment of these unwritten rules with the written rules will not result in the delivery of the desired improvements in sustainability performance. Through our work we know that unwritten rules are actually always logical rather than irrational or random. This means that it is possible to use a systematic approach to uncover the drivers that lead to them, and these drivers provide a key to identifying actions needed to realign them. Our methodology uses both climate index questionnaires (specially developed questionnaires that explore how the individual sees the ideal culture and the actual one experienced day to day) and interview techniques (either singly or in focus groups) to characterize the drivers and the chains of logic to which they belong. We might group these into three categories: (i) what is important to people (motivators); (ii) who is important to them (enablers) and (iii) how do they achieve their motivation (enablers)? These are illustrated in Figure 3. To exemplify the interactions in Figure 3, the following very simplistic example can be used. Individuals in a particular organization might be motivated by the prospect of a cash bonus (the motivator). The bonus might be achieved by pleasing their manager (the enabler) who wants to see a certain level of productivity per annum (the trigger). If the manager does not reward staff for environmental or social performance (another trigger), an unwritten rule may develop that says it is not worth spending time on corporate responsibility, just in proCorp. Soc. Responsib. Environ. Mgmt. 11, 133–139 (2004)

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D. LYON

Figure 3. Understanding Unwritten Rules of the GameTM. Source: Arthur D. Little Ltd (1999) Managing Safety Through Culture.

ducing more. The resultant side-effect will be that the organization is productive but may not manage business risks or identify opportunities through CR. This is a rather crude example for the purpose of illustration; in reality, the motivators, enablers and triggers are often more subtle and difficult to uncover. This type of analysis has some clear advantages (ADL, 1999). • First and foremost, it points clearly to practical measures to address problems – for example, it is easier to change a trigger or an enabler than it is a motivator. Knowing what to leave alone is as important as knowing what to change. • The method is conceptually easy to understand and communicate. • The methodology involves gathering of significant ‘evidence’ for each of the assertions in the form of unattributable quotes. • Finally, the diagnostic process is relatively fast and limited in scale. The outputs from the climate index tool assessment provide a good indication of the climate of the company, both in terms of its current Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment

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position and where the team would like it to be. The outputs often indicate areas that need further exploration or understanding, which can take place in subsequent interviews or focus groups. These develop lines of questioning that may help uncover many of the Unwritten Rules of the GameTM for the organization in question. Once there is a clear idea of what culture (and behaviours, in particular) support corporate responsibility, and what are existing behaviours, it is important to align culture with the strategic intent. There are several levers that can be used to achieve this goal including practices, procedures, policy and philosophy. The use of these depends on the organization and how it needs to be influenced.

REFERENCES Arthur D. Little (ADL). 1998. The Innovative Company, prepared for members of the OECD Focus Group on the Innovative Firm. ADL: Cambridge. Arthur D. Little (ADL). 1999. Managing Safety through Culture. ADL: Cambridge. Corp. Soc. Responsib. Environ. Mgmt. 11, 133–139 (2004)

ORGANIZATIONAL CHANGE TO MEET THE CR AGENDA Arthur D. Little (ADL). 2000. Achieving a Safe Culture. Facing the Leadership Challenge. ADL: Cambridge. Arthur D. Little (ADL). 2001. Licence to Operate Balancing Conflicting Needs, a workshop for key practitioners in the transport and utilities industries, Cambridge. Ceppi P, Chen P, Elias R, Xin Y. 2002. License to Operate in the Food and Drink Sector, report to Arthur D. Little and Judge Institute of Management. Checkland P, Scholes J. 1999. Soft Systems Methodology in Action. Wiley: New York. Hewlett Packard. 2002. Kuppam i-community, Andhra Pradesh, India, Accelerating Economic Growth and Access to New Markets. Hewlett Packard: Kuppam, India. IFC. 1999. Doing Better Business Through Effective Public Consultation and Disclosure. IFC: Washington, DC.

Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment

Scott-Morgan P. 1994. The Unwritten Rules of the GameTM. McGraw-Hill: New York. Tickell C. 2003. Johannesburg and its aftermath. The Tomorrow Bulletin 5: 3.

BIOGRAPHY David Lyon works at Arthur D. Little Ltd, Science Park, Milton Road, Cambridge CB4 0XL, UK. Tel.: + 44 (0)1223 392421 Fax: + 44 (0)1223 420021 Email address: [email protected]

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