Criticisms of business seeing value creation only in terms of achieving short-term, unsustainable results and how business schools prepare future leaders predate the financial meltdown. Warren Bennis and Jim O’Toole talked about the need to reform business education several years ago. The crisis simply made it more obvious that business as usual isn’t working, either in the classroom or boardroom.

The piece of management education reform that involves the role of ethics has added importance not only because trust in business has fallen so far, but also because it is tied to how leaders behave and the impact that has on a company culture as well as society.

When students return to campus in coming weeks, dialogue and debate on the purpose of management education and how ethics is handled will continue, impacted by initiatives that seek to help reinforce high ethical standards. Some examples are the MBA Oath project, and programs giving students experience practicing values and integrating ethics into other organizational risk considerations.

While well-regarded companies that have recently suffered reputation meltdown are real-world examples for the classroom, even more important is learning about other models for doing business, like Pepsico, a company that is intentionally setting high ethical standards for itself while still making significant profit.

For many companies ethics has a walk-on part—not much focus beyond the compliance function and website rhetoric about how a company describes its values. If integrating ethical considerations into strategic business decisions was the norm, we wouldn’t keep enduring debilitating crises where consequences of actions apparently aren’t clear to leaders until a regulator shows up or media headlines send stock prices lower.

Performance with Purpose

The reality is that crises at Toyota, Goldman Sachs and BP – to name a few -- involved ethical failures as potent as the business miscalculations and addiction to gaining ever-higher quarterly profits, where choices and shortcuts harmed stakeholders. Just as the ethical debacle of Enron was a wake up call met by additional regulation and beefed up ethics focus in companies, the corporate crises so far this year offer another kind of wake up call that companies and management education would do well to heed. How many more examples do we need of value creation only being about profit at the expense of society?

Indra Nooyi, Pepsico’s chairman and CEO, told students at Yale’s School of Management in May 2010 that “performance with purpose is how we run the company.”  She explained that “Performance with purpose is about how you can intimately link what a company can do with what the needs of society are and together deliver great performance.”

“Pepsico wants to be the model of the good company,’ she continued, “an example of how business should be done in the 21^st century.” This sets the bar very high at Pepsico. The business model requires integrating ethical considerations into the mix of business considerations, aligning decisions with purpose, and acting in a manner that inspires employees to do their best work. The result, if made a reality, establishes trust with stakeholders.

It is the inconsistencies that often trip a company up. Simon Webley, Research Director at the Institute of Business Ethics in London, makes a distinction between doing ethical things (like philanthropy and environmental activities) and doing things ethically. Doing the former is no substitute for doing things ethically, he says, mentioning a company in the U.K. known for the wonderful things it does for the community, but yet it doesn’t pay its suppliers on time. “It is easier to do CSR (corporate social reposnibility) than to integrate high ethical standards throughout the organization.”

Adhering to high ethical standards is at the heart of the Oath Project started at Harvard Business School last year as a grassroots movement of students and faculty. The voluntary pledge to “create value responsibly and ethically” seeks to create a community of MBAs (signers are from more than 250 schools) who share a high standard for ethical and professional behavior. Nitin Nohria, who became Dean of Harvard Business School this month, has been a strong supporter of the project.

Role of Values

Will signing a piece of paper change anything? It depends. We should consider how change occurs; it starts with a personal act of intention, followed by action, gaining reality through repetition and reinforcement until it becomes how things are done by an individual, and a collection of individuals. It is too soon to know the success of the movement or its influence on the companies graduates join. However, it is a start. The Oath Project is supported by many organizations, including Aspen Institute’s Business and Society Program (BSP).

Part of expressing high ethical standards is the ability to speak up in support of those values. Over 100 business schools globally are participating in an innovative, cross-disciplinary business curriculum called Giving Voice to Values (GVV) created by Mary Gentile. The program raises different kinds of questions than the case study approach: “Rather than asking ‘what is the right thing to do?’ she says, “we ask ‘how can I get the ‘right thing’ done?’” In GVV, students go on to answer other questions raised including: “What do I say to whom, what will they say back, and then what do I say? What data do I need? What allies do I need, etc.”

In GVV, Gentile says, “we ask students to create and practice literal scripts and action plans so that the program goes beyond awareness building and analysis to action.” The relatively new program was incubated at the Aspen’s BSP and also sponsored by Yale School of Management before moving to Babson College last year.

To help students practice integrating ethics into the decision-making mix, Loyola Marymount University (LMU) has developed an invitational intercollegiate business ethics case competition which attracts international participation. It is also sponsored by the Ethics and Compliance Officer Association, a professional group for corporate compliance officers, whose members serve as judges. MBA and undergraduate teams make presentations showing their understanding of the legal, ethical and financial dimensions of problems.

“Every decision you make in business generally occurs when you are under pressure, without all the information or time you’d like, and in the midst of competing factors – usually financial, legal or ethical issues,” says Thomas White, professor and director of the Center for Ethics and Business, who created the competition. “There needs to be more emphasis on ethics education in MBA programs (however it is done) because individuals need more technical ability in recognizing and resolving ethical issues, which are as sophisticated and complex as any financial problem, and getting more so.”

The success of business education reform has many champions, and is coming up again at a time when there is crisis fatigue as well as examples of successful companies with a value proposition that puts a priority on social good. Will current business leaders support training new leaders in skills and competencies that support new models of business or will we need to endure more business as usual?

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics, a weekly column at http://theweekinethics.wordpr

Jeffrey Hollender, Co-founder & CEO of Seventh Generation, tells Big Think:

It has been fascinating to watch over the last decade as more investors around the world actively embrace the importance of companies acting responsibly on environmental, social and governance (ESG) issues.  And equally, if not more important, we have seen companies globally step up and confirm the importance of being a responsible corporate citizen and its central importance for protecting and building shareholder value.

Walden Asset Management recently conducted research on how companies see their roles in this evolution. The wide ranging quotes compiled below all connect to the premise that being a responsible company is good for the bottom line.  What’s significant about the quotes is that they all come from the companies themselves, drawn from several dozen corporate social responsibility reports (CSR) including a wide range of industries.

Please understand that including a quote from a company does not mean that I or Walden Asset Management automatically think this company is a “living model” for good CSR reporting or performance.  However, these quotes do illustrate the expanding belief that CSR has become vitally important for a company’s business, and that transparent reporting is, as one CEO said, one of “the prices of doing business today.”

Special thanks go to Carly Greenberg, a Summer Associate at Walden, who painstakingly reviewed dozens of CSR reports to gather this information.

Industry: IT

Intel

From the President and CEO statement, Paul S. Otellini

“Corporate responsibility is about doing the right things right.”

“Our approach has created value not only for our stakeholders and society, but also for Intel.  We have reduced costs through energy conservation investments, minimized risks by proactively working with our communities and supply chain, and enhanced our reputation as a leading corporate citizen by building trusted relationships around the world.” (pg. 2)

HP

“As one of HP’s seven corporate objectives, global citizenship has long been integral to the success of our business. We’re responding to pressing issues, such as mitigating climate change, using energy more efficiently, enriching education and improving healthcare, by providing solutions that are transforming how people live, work and connect.” (pg. 3)

Dell

From the Letter from CEO, Michael Dell

“Dell has a full-time commitment to being a responsible corporate citizen. It’s a commitment driven by the types of goals, strategies and accountabilities that characterizes every part of our business.” (pg. 4)

From the Text of the Report

“We live in an increasingly complex world. That reality, combined with the financial downturn of the global economy and the issues facing our planet and our communities, means business as usual is not enough. To make a meaningful difference, we must inspire and innovate….

"During times like these, we must continue to build trust with customers and stakeholders by demonstrating our positive impact on society and the planet and developing meaningful measures for reporting our progress. Corporate responsibility is a critical component of Dell’s overall business. We are committed to being a responsible corporate citizen.” (pg. 6)

Xerox

From the Letter from the CEO, Ursula M. Burns, and Chairman of the Board, Anne M. Mulcahy

“Despite the toll the recession has taken, we are pleased to report that it has not caused us to waiver from our belief in the need to behave responsibly as a good corporate citizen in the communities and countries in which we operate. There are two broad reasons for that – a belief that good citizenship is the right way to behave and an equally important belief that behaving the right way is a good thing for our business.” (pg. 2)

“The more we have integrated sustainability into our business operations, the more it has become a part of our DNA. We like to think of ourselves as a leader, still pushing the boundaries of what is possible.” (pg. 2)

“We were an early leader in the sustainability movement because we thought it was the right thing to do for the environment. But we discovered something else along the way. Every one of our innovations ended up either saving us money or creating new markets and new revenue. We found, in other words, that we don’t have to choose between the environment and profit. We can do both.” (pg. 3)

“Conducting our business with integrity and transparency builds credibility and attracts investors.” (pg. 4)

“Nurturing a greener world through sustainable innovation and development saves money, creates value and helps develop new markets.” (pg. 4)

Industry: Energy

Shell:

From the CEO introduction statement, Peter Voser

“Safety, environmental and social performances are now closer to the core of our business plans and decisions.” (pg. 1)

“I believe sustainable development works best when it is thoroughly integrated in our business decisions at the very earliest opportunity…That is exactly how it must be if we are to meet the complex challenges ahead in the most effective and responsible way.” (pg. 1)

From the interview with CEO Peter Voser, interviewed by Aron Cramer

“Sustainability is central to the way we do business, our business principles and our long-term strategy, so we take a very far-reaching view, not a short-term view.  It means to me that we help to meet the growing energy needs of the world in economically, environmentally, and socially responsible ways.  You can’t have one without the other two” (pg. 7) –Peter Voser

“We wanted to embed sustainable development as deeply into the business as possible” (pg. 7) –Peter Voser

Exxon Mobil:

“It is our view that successful companies are those that see business objectives and sustainability objectives as interlinked.” (pg. 2)

“For a number of years, our business lines have been incorporating sustainability considerations in their operations and sharing the outcomes with stakeholders.” (pg. 2)

“Our disciplined approach and long-standing commitment to corporate governance have contributed to our continued success during the global recession of 2009.” (pg. 15)

“We believe that an unwavering commitment to high ethical standards and business integrity is critical to our competitive advantage and shareholder value.” (pg. 16)

Industry: Utilities

Duke Energy

From the Letter from the Chairman and CEO, Jim Rogers

“In tough economic times, when every aspect of our business is under scrutiny, some might ask whether we can afford to focus on sustainability. To that I respond: Can we afford not to?” (pg. 4)

“Sustainability – operating our business in a way that is good for people, the planet and profits – is, in my opinion, no longer optional. It is the strategic and decision-making approach we are following at Duke Energy to create long-term value.” (pg. 4)

“At Duke Energy, sustainability describes the way we work; it is a competency that leads to improved risk management, efficiency and innovation for today’s complex, resource-constrained and connected world.” (pg. 4)

Industry: Telecommunications

AT&T

“At AT&T, when we talk about 'sustainability,' we’re not just talking about the environment. We’re talking about a broad array of initiatives that will make our business and communities stronger well into the future.” (pg. 13)

Verizon

From the Message from the Chairman and CEO, Ivan Seidenberg

“Our corporate responsibility process helps us assure that our practices keep pace with the evolving needs and expecta­tions of our customers.” (pg. 7)

“We have built a sustainable model for incorporating corporate responsibility into the way we manage our business.” (pg. 7)

Industry: Food & Beverage

The Coca-Cola Company

From the Chairman and CEO Letter, Muhtar Kent

“In the midst of the global financial downturn, the economic, environmental and social implications of business are more important than ever. There’s no question that the world is undergoing a massive resetting of priorities, values and expectations.”

“The strength and sustainability of our brands are directly related to our social license to operate, which we must earn daily by keeping our promises to our customers, consumers, associates, investors, communities and partners. It is an honor, and a responsibility that we take very seriously.”

From the Text of the Report

“LIVE POSITIVELY^™ is our commitment to making a positive difference in the world. Through redesigning the way we work and live, we consider sustainability as part of everything we do. As we act with an eye toward future generations, we will focus on driving business growth and creating a more sustainable world.” (pg. 12)

Kraft

From the Message from the Chairman and CEO, Irene B. Rosenfeld

“To build and sustain brands people love and trust, one must focus—not only on today but also on tomorrow. It’s not easy…but balancing the short and long term is key to delivering sustainable, profitable growth—growth that is good for our shareholders but also good for our consumers, our employees, our business partners, the communities where we live and work, and the planet we inhabit.” (pg. 5)

Industry: Materials

Alcoa

From the Message from the Chairman and CEO, Klaus Kleinfeld

“During these tough economic times, we recommitted ourselves to integrating sustainability as a core value for Alcoa; protecting the health and well-being of our employees and our communities; conducting business with the highest code of ethics; preserving the environment and our natural resources; and earning our license to operate each and every day.”

The Dow Chemical Company

“In short, we are committed – through chemistry – to the betterment of global humanity. And it is this commitment that drives all of our strategies for growth and profitability.” (pg. 3)

From the Letter from Chairman and CEO, Andrew Liveris

““Setting the Standard for Sustainability” is our desire to have corporate citizenship inherent in everything we do as a global corporation, directly supporting our vision of being the largest, most profitable and most respected chemical company in the world.” (pg. 20)

From the Statement from CEO presenting overall vision, Andrew Liveris

“We see sustainable development as an opportunity to tap new markets that create value for our customers, consumers and the planet.” (pg. 23)

” By integrating sustainability elements into every facet of our business – from our product offerings to our energy use – we are creating a better future for our Company and the world.” (pg. 23)

Industry: Consumer Services and Products

Procter & Gamble

From the President and CEO Statement, Bob McDonald

“In fact, our growth strategy for the coming decade is linked tightly to our Purpose. We will grow P&G’s business by touching and improving more consumers’ lives in more parts of the world … more completely.

"To execute this strategy and fulfill the Company’s Purpose, we must grow responsibly and sustainably. As a result, Sustainability is at the heart of P&G’s business model. Keeping Sustainability at the core of our business fuels innovation and strengthens our results.” (pg. 4)

“We’re a company that focuses on growth now and for generations to come, and therefore Sustainability should and will be a focus area for me.” (pg. 4)

Nike

From the Letter from the CEO, Mark Parker

“We saw that doing the right thing was good for business today – and would be an engine for our growth in the near future. With each new discovery and partnership, we willingly gave up old ideas to shift our thinking toward a better, smarter, faster and ultimately more sustainable future – financially, environmentally and socially.” (pg. 4)

“All companies face a direct impact from decreasing natural resources, rising populations and disruption from climate change. And what may be a subtle effect now will only become more intense over the next five to ten years. Never has business had a more crucial call to innovate — not just for the health and growth opportunities for our companies, but for the good of the world.” (pg. 5)

“We see sustainability, both social and environmental, as a powerful path to innovation, and crucial to our growth strategies.” (pg. 5)

“And for all the athletic and cultural and financial successes of the company, believe our work in sustainable business and innovation has equal potential to shape our legacy.” (pg. 5)

“There is now only one path and it leads to greater sustainability, equity, growth and prosperity.” (pg. 5)

Wal-Mart

From the Letter from CEO, Mike Duke

“I meant we would make sustainability a priority throughout our entire company and we would act with a sense of urgency.” (pg. 3)

“It shows that even during the economic crisis, our company does not slow down on sustainability or even just stay the course; we redouble and strengthen our efforts.” (pg. 3)

“When we look at the world today and the trends that will shape the world in the future, we see that sustainability is no doubt one of Wal-Mart’s greatest opportunities to make a difference for our business, our communities, our customers and the planet.”  (pg. 5)

Kimberly-Clark Corporation

From  the “Choices for a Sustainable Future” section

“Put simply, sustainability is critical to our future success. It’s an enormous challenge. But we choose to do it, and to work with those who support positive change, because it’s the right thing to do. That’s one choice that will never change.” (pg. 3)

From the Message from the Chairman and CEO, Tom Falk

“Sustainable business practices are woven into the fabric of our Global Business Plan. We challenge ourselves every day to look for ways to sustain the resources we enjoy today for generations to come. That’s why Kimberly-Clark is focused on setting and achieving sustainability performance metrics for our brands and facilities. And through our resource stewardship, we are demonstrating to our stakeholders that sustainability isn’t just the right thing to do, it’s also good business.” (pg. 4)

Industry: Automotives

Ford

The letter from Executive Chairman and Chairman of the Board, William Clay Ford Jr.

“We continue to aggressively search for new ways, both big and small, to improve our economic and environmental sustainability. Often the actions we take accomplish both goals.”

“Creating a strong business and building a better world are not conflicting goals – they are both essential ingredients for long-term success.”

From the Letter from President and CEO, Alan Mulally

“We also know that the successful companies of the 21st century will be those that understand global sustainability issues and offer viable solutions. Through a decade of work and a disciplined reinvention of our Company, we have built sustainability into our business model.”

Industry: Pharmaceuticals

Pfizer

From the Letter from the Chairman of the Board and CEO, Jeff Kindler

“In times like these, some companies might choose to focus simply on running their businesses and think of their corporate responsibility work as a luxury that can wait for better times. Not Pfizer. We believe successful companies can’t do one without the other.” (pg. 5)

Industry: Capitol Goods

Caterpillar

From the CEO and Chairman’s Message, Jim Owens

“We’re making sustainable development part of how we do business. In 2007, in the midst of our growth period, we set bold aspirational goals for 2020, and abandoning those goals, in the face of dramatic economic challenges, was simply not an option. This isn’t a passing fad that we only care about during prosperous times. It’s a serious commitment. And it’s a real business opportunity, now and in the future.”  (pg. 2)

“Good things happen when we integrate sustainability into our products, services and solutions. We improve our competitiveness and create and capture customer value. We save money, reduce our environmental impact and improve employee satisfaction. And by partnering with others, we can help ensure sound policies that promote sustainable development and innovation.” (pg. 2)

“In the next decade, the most successful companies will be those that integrate sustainability into their core businesses. That’s what we’re doing at Caterpillar, and we are also helping our customers do the same.” (pg. 3)

“Some of Caterpillar’s fastest-growing businesses are those focused on the sustainability of materials and resources.” (pg. 3)

“In fact, the economic downturn has helped secure sustainability’s place at the core of our strategy. It’s not something extra that we do during good times. It’s something that creates and captures value for the company, our customers, investors, employees, suppliers – and really, the world.”  (pg. 4)

Industry: Industrials

General Electric Company

From the Letter from the Chairman of the Board and CEO, Jeff Immelt

“Successful companies can only create solutions to some of the world’s toughest problems by working collaboratively. Business must engage — with communities, governments, customers and each other — because the status quo is not an option. It is not only possible for a global business leader to be a good citizen, but a requirement.” (pg. 4)

“Based on a commitment to integrity, a commitment to performance and a commitment to learn and grow stronger, GE is creating a better company coming out of this reset — a renewed focus that is better for GE, and also better for our world.” (pg. 4)

Trade Associations and Consultants

BSR Report 2009: Innovating for Sustainability

From the Letter from the President and CEO, Aron Cramer

“2009 presented numerous challenges for the entire world, not least for all of us dedicated to sustainable business. At the start of the year, many observers thought companies would consider corporate responsibility to be an expendable luxury that could be cut along with other discretionary budgets. 'Sustainability,' they predicted, would be redefined as 'basic economic survival.'  Fortunately, these predictions did not play out. Rather, 2009 showed us that sustainability can—as we had argued—help pull business out of the recession.” (pg. 1)

“Despite the difficulties presented by the economic conditions, it is clear that sustainability remains as important to business—and to the world—as ever before.” (pg. 1)

From the Text of the Report

“What’s more, revived economic growth is again exacerbating existing challenges related to climate, water, and biodiversity.  Long after the recession passes into history, these trends will be shaping economic conditions. They are the reference points that business should consider in shaping their strategies.

More and more companies recognize this. As a result, they are making sustainability not just a program, but, in fact, the defining feature of success in a fast-changing world.” (pg. 5-6)

“While calmer economic conditions have returned, the road to tomorrow’s prosperity is not the same as what came before. The businesses that assert leadership, take a comprehensive approach, use sustainability as a driver for innovation, and champion sustainable consumption will not only become the sustainability champions, but also the most successful companies in the years ahead.” (pg. 11)

Accenture Report: “A New Era of Sustainability”

This report summarizes findings from a survey of CEO’s globally

From the Forward by Georg Kell, Executive Director UN Global Compact, and  Bruno Berthon, Managing Director Accenture Sustainability Services

“It is a decade that, CEOs believe, could usher in a new era where sustainability issues are fully integrated into all elements of business and market forces are truly aligned with sustainability outcomes.” (pg. 2)

“Today’s CEOs are more convinced than ever of the need to embed environmental, social and corporate governance issues within core business. But they are also convinced that good performance on sustainability amounts to good business overall: The imperative to act has shifted from a moral to a business case.” (pg. 2)

From the Text of the Report

“93 percent of CEOs see sustainability as important to their company’s future success.” (pg. 10)

“Demonstrating a visible and authentic commitment to sustainability is especially important to CEOs because it is part of an urgent need to regain and build trust from the public and other key stakeholders, such as consumers and governments—trust that was shaken by the recent global financial crisis. Strengthening brand, trust and reputation is the strongest motivator for taking action on sustainability issues.” (pg. 10)

“Our survey found widespread agreement among CEOs about what the next era of sustainability will look like: It is one where sustainability is not only a separate strategic initiative, but something fully integrated into the strategy and operations of a company.” (pg. 11)

“96% of CEOs believe that sustainability issues should be fully integrated into the strategy and operations of a company (up from 72% in 2007).” (pg. 14)

“80 percent of CEOs believe that the economic downturn has raised the importance of sustainability as an issue for top management.” (pg. 16)

“74 percent say that the downturn has led their company to align sustainability more closely with core business.” (pg. 16)

“Also bolstering the continued commitment to sustainability during the economic downturn has been demand for sustainable products and services.” (pg. 18)

From “Industry perspectives: Belief in the importance of sustainability varies considerably by industry”

“Fully 100 percent of automotive CEOs identify sustainability issues as important or very important to their future success. This finding reflects how environmental concerns present both a challenge to the industry and an opportunity to serve a new market with low carbon alternatives such as e-vehicles.” (pg. 19)

“CEOs from the energy and utilities sectors also see sustainability issues as critical to their future success.” (pg. 19)

“Wolfgang J. Ruttenstorfer, CEO and Chairman of European oil and gas company OMV, said, ‘I regard these issues as bringing competitive advantage in the long term; a transparent approach clearly oriented toward values, human rights and environmental objectives is the only right approach that will be  appreciated in the long term.’” (pg. 19)

“Support is especially high in the banking industry, for example: 68 percent of CEOs note that sustainability is “very important” to their success…a commitment to environmental and social issues may be a prominent part of restoring brand value as the financial industry struggles to regain the trust of consumers.” (pg. 19)

“CEOs in the communications and electronics & high-tech sectors are the least likely to identify sustainability issues as critical to their future success— just 22 percent and 31 percent of those industries’ CEOs, respectively, cite sustainability as very important to their future success…leading companies in these sectors are beginning to think beyond the direct physical impacts of their business on sustainability issues, and are looking to shape a vision of the role that they can play in society by driving sustainable development…providing companies around the world with new technologies and ways of working that will help them achieve their own environmental objectives.” (pg. 19)

KPMG

This report published every 3 years; following statements are from the 2008 report.

From the Forward

Message from Global Head of Citizenship and Diversity, KPMG International, Lord Michael Hastings of Scarisbrick CBE

“As you will see in the results, there has been an important shift in this direction with CSR reporting becoming the norm instead of the exception within the world’s largest companies. Three years ago only 50 percent of companies surveyed included CSR in their reporting, in this survey the number jumped to 80 percent. More companies report the information as it relates to specific objectives and more companies include this information in their annual reports.” (pg. 5)

Message from Global Head, KPMG Sustainability Services Partner, KPMG in the Netherlands, Wim Bartels

“But would these reports pass the “greenwash” test? For the first time in the 15 years we have been doing this survey, we think they just might. Nearly all of the Global 250 companies that report also publish a corporate responsibility strategy with defined objectives.” (pg. 5)

From Text of the Report

“One of the most significant findings of the 2008 survey is that corporate responsibility reporting has gone mainstream - nearly 80 percent of the largest 250 companies worldwide issued reports, up from about 50 percent in 2005.

National trends - National level companies trail the G250 with only 45 percent of the total sample issuing reports, but numbers vary from less than 20 percent in Mexico to more than 90 percent in Japan.” (pg. 7)

“Now that some of the world’s largest companies have been able to quantify the business case for corporate responsibility and reporting, it is likely that the practice will spread through countries and sectors to the smaller players.” (pg. 7)

“Reporting is necessity if companies are to know and understand their social and environmental impacts, and how to minimize the dangers and maximize the opportunities associated with new and emerging challenges.” (pg. 10)

““In these challenging times it is now perhaps more crucial than ever for companies to show their commitment to transparency through sustainability reporting. Effective public disclosure of economic, environmental, and social performance can enable a company to rise above the rest and take advantage of the opportunity to position itself as a forward-thinking leader among an increasingly sophisticated constituency of stakeholders. No longer is publishing a sustainability report merely a matter of mitigating risk to reputation and costs. More than ever, employees, investors, and consumers are looking to the companies from which they buy, invest in, and work for to join them in addressing the critical sustainability issues of the day in innovative ways.” (pg. 17)--Judy Henderson Board of Directors, Global Reporting Initiative

There’s an easy tendency to read corporate responsibility reports with skepticism, discounting high-sounding language about policies and principles as “greenwashing” that largely serves a company’s public relations goals.

GE CEO Jeffrey R. Immelt

When the report is issued by GE, however, I think it pays to read the language carefully and take notes.  With operations in 100 countries and about 300,000 employees, GE generates annual revenue of $156 billion.  The company’s stock is the most widely-held in the world, with more than 5 million shareholders.

While GE’s corporate behavior doesn’t always please everyone (and, in fact, often infuriates many), the company’s rigorous attention to management and best practices for over a century has regularly placed it at the head of the corporate pack.   As Fortune magazine put it: “Through good years and bad, GE consistently does things the rest only wish they could.”

And so it is with GE’s 2009 Citizenship Report – Renewing Responsibilities – a 40-page document, supported with additional materials on the GE web site, in which the company sets forth a vision of addressing global concerns with confidence, integrating  sustainability into its core business strategy.

“Our goals," GE says, "are to make money, make it ethically and make a difference."

In fact, the company views two of the world's most pressing societal issues - the environment and health care - as huge commercial opportunities, central to its future.  GE's "ecoimagination" product line, launched in 2005, last year generated $18 billion in revenue, or 28% of the corporate total.

Not an Accounting Exercise

Assume that GE’s corporate citizenship team has spent considerable time and attention formulating the message it wants to convey in this report.   Assume the message has been crafted by well-paid writers and – maybe even more importantly – vetted by high-priced lawyers.   And then assume that the highest-levels of management are comfortable not only with the facts and figures in the report, but with the overall tone of the message from the top.

Then pay attention to the language.

“In light of what many have called the Great Recession,” says CEO Jeffrey R. Immelt, “the world is reset.  Now we must lead an aggressive renewal to win the future.”

“Citizenship is not a spectator sport," writes Sam Nunn, chair of the GE board of directors’ Public Responsibilities Committee. "Companies with global reach and impact like GE must set commercial priorities to increase shareholder value while recognizing that our business foundation rests on forward progress on public policy imperatives. GE is making a dedicated effort to develop its business strategy so that its products and services have a positive human impact and produce long-term business success.”

The report goes to considerable lengths to address the big picture: “Economies are rebuilding after the financial crisis, and with that comes the opportunity to reshape systems toward a pathway of sustainability — one that enables positive human impact. The challenge of meeting the needs of today’s nearly seven billion people, and tomorrow’s nine billion, is immense. The limits of the planet’s natural resources — clean water, air, energy and land — are already stretched. Closing the global gap between where we are and where we need to get to cannot be achieved by a return to business as usual.”

And this: “In the end, the return on investment for corporate citizenship is a world fit to live in, do business in, and hand down to our children — and this requires long-term commitment. The impact of successful corporate citizenship comes from driving the conversations (with employees, customers, regulators, competitors and markets) needed to catalyze systemic change.  Turning corporate citizenship at this level into an accounting exercise linked to profit and loss calculations is wrong, a waste of time and a concept mistaken from the very beginning.” (Emphasis added.)

OK, it’s just language.  But language can matter greatly.  One of the tactical truisms of corporate responsibility reporting is that once a company has taken the plunge (and in this case, GE seems to be diving into some pretty deep water), retreat from the commitment is far more difficult.  The language doesn't guarantee that GE or one of its businesses won't be in the news in a negative context sometime soon.  It does mean, however, that the company is in the game and on record with some long-term thinking regarding corporate priorities.

There are no startling statistics in the GE report.  Compliance, which many companies place in a silo separate from corporate responsibility, gets featured up front.  GE uses about 700 designated ombudspersons throughout he company who act as independent resources for reporting integrity or compliance concerns; the company says anyone reporting a problem is "fiercely protected from any retribution."   Last year, there were 1,641 "integrity concerns" reported through the process, with a resulting 420 disciplinary actions, including 118 firings.  (Not bad, when placed in the context of almost 300,000 employees.)

On a broader scale, GE’s citizenship strategy is focused on three areas: energy and climate change, sustainable healthcare, and community building - all “underpinned by our commitment to operational excellence.”  Greenhouse gas emission and intensity are improving relative to established benchmarks; new technologies are driving healthcare breakthroughs; and the company seems mindful of how delicately an enterprise of its size must tread in dealing with governments around the world.

“We recognize that any business that is promoting a view on how best to achieve public policy goals while also advocating for its own commercial priorities runs the risk of running into conflicts of interests, both real and perceived,” the report says. “There are legitimate concerns that businesses may influence public processes unduly to achieve private ends, or conversely may lose commercial focus by aligning too closely with governments’ goals.”

Heavily influencing GE’s corporate citizenship strategy is an economic reality: more than half the company’s revenue now comes from outside the United States, “increasingly from emerging markets such as China and Brazil,” reports CEO Immelt.  The result is a focus on localized research and development in countries around the globe and “a plan to sell these products in every corner of the world.”

Asbestos has long been known to cause debilitating and often fatal diseases such as lung cancer, mesothelioma and asbestosis. It is banned or restricted in 52 countries, and its use has plummeted in the United States since its peak in the early 1970s.

But since the mid-1980s, a global network of lobbyists has spent nearly $100 million to maintain a market for asbestos, according to an investigation by the Center for Public Integrity. Borrowing a page from the tobacco industry, these trade associations have funded scientists whose studies raised doubts about the health risks of asbestos and have preserved significant sales by focusing on the developing world.

Today's remarkable investigation describes the asbestos trade in the countries where it is still flourishing: India, where asbestos use is booming among the rural poor; Brazil, where one federal inspector has battled the industry for a quarter-century; Russia, which produces nearly 1 million tons of asbestos each year; and China, the world's biggest asbestos consumer.

A leading industry group, the Asbestos Cement Products Manufacturers' Association, said in the report that the only type of asbestos that is currently used -- chrysotile, or white asbestos -- is much safer than brown or blue asbestos, which were commonly used in the past.

The investigation cites statements by several health organizations warning that all forms of asbestos are dangerous and carcinogenic. You can read the whole report here.

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

One of the most persistent and challenging corporate responsibility issues for many global brands is how to manufacture products in contract factories in less developed countries while paying fair wages and maintaining acceptable working conditions for workers.

We recently wrote, for example, about the global giant Nike, whose three main product lines — footwear, apparel and equipment — are made in approximately 600 contract factories that employ more than 800,000 workers in 46 countries around the world.  In a corporate responsibility report published in January, Nike acknowledged that wage and working conditions issues remain problematic.

“While we can point to many examples of improvements, challenging issues remain for our company and our industry in systemically identifying and tackling how to affect long-term system-wide change,” the company said.

Now The New York Times reports in a lengthy feature story of a “high-minded experiment” at a factory in Villa Altagracia, Dominican Republic, that is a “response to appeals from myriad university officials and student activists that the garment industry stop using poverty-wage sweatshops.”

With 120 workers, the factory is owned by Knights Apparel, a privately held company based in Spartanburg, S.C., that is reportedly the leading supplier of college-logo apparel to American universities.  “Industry experts say it is a pioneer in the developing world because it pays a ‘living wage’ — in this case, three times the average pay of the country’s apparel workers — and allows workers to join a union without a fight,” according to the Times.

While that “living wage” is only $500 a month, the Times story reports on worker Santa Castillo, who says: “We never had the opportunity to make wages like this before…I feel blessed.”  Comparing this factory with others, union leader Maritza Vargas says, “the difference is heaven and earth.”

The experiment has been driven by Knights Apparel CEO Joseph Bozich, who, after being diagnosed with multiple sclerosis, decided that “I wanted to find a way to use my business to impact people that it touched on a daily basis,” according to the Times.

Another powerful factor has been Knights Apparel’s strong brand presence among college and universities, and a bet by the company that students will be willing to pay a premium for products made by workers that are treated well.

The economics of the business are illuminating.   Paying the 120 workers the “living wage” – or $500 a month – means the factory’s cost will be $4.80 a T-shirt, 80 cents or 20 percent more than if it paid minimum wage. Knights will absorb a lower-than-usual profit margin, selling the shirts for $8 wholesale, with most retailers marking them up to $18, according to the Times.

Knights Apparel developed its plan working closely with the  Worker Rights Consortium (WRC), an independent labor rights monitoring organization that works “to combat sweatshops and protect the rights of workers who sew apparel and make other products sold in the United States.”  The WRC has over 175 college and university affiliates.

Apparel makers Nike and Addias are board members of the Fair Labor Association, a collaborative effort that provides affiliated colleges and universities with information on the labor compliance programs of companies involved in the production of collegiate merchandise. The FLA says it has over 200 colleges and universities in the U.S. and Canada.

A Nike spokesman said his company would “watch with interest” the Knights initiative, according to the Times.

by Deanna Zandt

Reviewed by Michael Connor

On Tuesday of last week, U.S. basketball superstar LeBron James opened a Twitter account in anticipation of his wildly-hyped announcement regarding which NBA team he’d be playing for in coming years.  By noon Wednesday, James reportedly had 235,000 followers on Twitter.

James did well, but he’s still a far cry from basketball’s Shaquille O’Neal, who is nearing the 3-million mark in terms of Twitter followers.  And both ballplayers trail entertainers Britney Spears (with 5.28 million Twitter followers), Ashton Kutcher (5.21 million), Ellen DeGeneres (4.28 million) and Lady Gaga (4.81 million).

To Deanna Zandt, a media technologist and consultant to progressive media organizations, while huge numbers like that may constitute success for mass media icons and idols, they mask the real potential of social media networks like Twitter and Facebook to change the world.

“So-called popularity does not make these folks automatically interesting or relevant,” she writes in her new book, Share This! How You Will Change the World with Social Networking. “Bigger used to be better, but now effective is better.”

Whether it be parents of students in Palm Beach County, Florida, successfully organizing a Facebook page to protest new academic programs, or the 2008 Obama campaign’s masterful use of social media to organize and fundraise, Zandt says the point is the same: “How we share information, find community, and both connect and disconnect will give us unprecedented influence over our place in the world.”

Facebook now claims more than 400 million active users, with more than 50 percent of those users logging in on any given day.  Earlier this year Twitter was estimated to have 75 million accounts, though reports indicated a slowing in growth of new accounts.

By connecting disparate individuals across great distances, social media networks represent a dramatic change for institutional authority.  “It’s turning a whole lot of institutions – businesses, legislative bodies, traditional media – upside down,” Zandt  says.

And while she acknowledges an important ongoing role for old-fashioned newsgathering, Zandt argues that social networkers have a hard time “tolerating the old demands of one-to-many messaging – ‘This is what’s good for you, and you’ll just have to trust us.’”

But the social media revolution hasn’t yet arrived for millions of Americans, Zandt notes, largely because high-speed Internet is not available to them.   While 63 percent of all Americans now have broadband Internet service, for example, only 46 percent of African-American homes do.

And that disparity highlights a critical danger for social media. “Diversity in the social network sphere is critical for generating fresh perspectives on old problems, to help us avoid replicating on the Internet what we’ve done for hundreds of years – marginalizing or otherwise ignoring voices that can share ideas for systemic change,” Zandt writes.

If you’re a skeptic who wonders why there’s so much noise these days about Facebook and Twitter, this book will challenge your thinking. While Zandt explains upfront that she does not mean it to be “the End-All-Be-All Activist’s Guide to Fixing Everything with Social Networking,” she does a good job of explaining enough of the nuts-and-bolts to make you appreciate the current reality as well as the potential of social media networks for achieving social justice (as well as spreading the news that LeBron James is headed to the Miami Heat).

“The commitment to sharing our experiences with one another supports and strengthens our bonds,” Zandt says, “and we are our own best hope for changing the world.”

Investors filed a record 101 climate and energy-related resolutions with 88 U.S. and Canadian companies in 2010, a 50% increase from the year-earlier, according to activist shareholder organizations.

A record 51 resolutions were withdrawn after the companies agreed to climate change and energy-related commitments.

Sixteen of the 42 resolutions that went to a vote achieved 30 percent or greater support, nearly three times the number that achieved that level of support in 2009.   The average vote for the 42 resolutions voted on so far this year was 24.6 percent, up from 21.7 percent last year.

The statistics were compiled by Ceres, a coalition of investors and environmental groups, and the Interfaith Center on Corporate Responsibility (ICCR), a coalition of nearly 300 faith-based institutional investors.

”The BP spill is only the latest reminder of why investors are ratcheting up their attention to climate and other environmental risks across their portfolios,” said Mindy Lubber, president of Ceres. “This year’s record results send a powerful message that companies should boost their attention to these issues.”

“If our portfolio companies are to provide long-term shareowner value, they need to be proactive, not reactive, in addressing climate change and other ESG matters,” said Jack Ehnes, CEO of CalSTRS, the second largest pension fund in the U.S.   Mr. Ehenes said the record results for shareholder filings in 2010 are “an encouraging sign that investors and companies are paying increasing attention to long-term drivers of value.”

Among the resolutions, requests for companies to provide a corporate responsibility or sustainability report have “increasingly resonated with investors,” according to Tim Smith, Senior Vice President for Walden Asset Management.  He  pointed to a  record 60 percent vote at Layne Christensen and votes at Gentex and St. Jude in the low 30s and low 40s, respectively. “We believe this signals a tipping point for the case for transparency on CSR,” he said.

Correction 7/26: An earlier version of this story incorrectly reported the comments of Walden Asset Management’s Tim Smith in discussing vote results at Gentex.

The issues with key high votes and share value of votes in favor, according to Ceres and ICCR, were:

Adopt greenhouse gas (GHG) reduction goals:
CMS Energy, 35.1%  ($729 million)
ExxonMobil, 27.2%   ($39.7 billion)
Massey Energy, 53.1% ($852 million)
Ryland, 37.4%  ($234 million)

Issue a sustainability report including GHG reduction strategies:
Boston Properties, 44.1%  ($3.2 billion)
Chesapeake Energy, 31.5%  ($2.4 billion)
EQT Corporation, 37.4%  ($1.4 billion)
Federal Realty Investment Trust, 44.6%  ($1.4 billion)
Layne Christensen, 60.3%  ($234 million)
St. Jude Medical, 42.8%  ($3.1 billion)

Report on the environmental and health risks associated with coal ash:
CMS Energy, 43.1%  ($875 billion)
MDU Resources Group, 40.5%    ($962 million)
The Southern Company, 21.0%  ($2.6 billion)

Report on risks posed by the environmental, social and economic challenges associated with oil sands operations:
ConocoPhillips, 27.1%  ($13.8 billion)
ExxonMobil, 26.4% ($38.3 billion)

Poorly managed corporate risk all too often becomes risk that stakeholders unwittingly end up assuming. The consequences can be dire: Think deaths and accidents from unintended acceleration in now-recalled Toyota vehicles, the shocking demise of Lehman Bros. that fueled the global economic meltdown, or the deaths of oil platform workers in the explosion that started BP’s environmental catastrophe in the Gulf of Mexico.

Scandal affecting public figures also continually demonstrates the high costs of poorly managed risk. Estimates are, for example, that Tiger Woods lost between $23 to $30 million in endorsement deals last year, even though according to Forbes, he still topped other sports icons’ endorsements.  Finance professors at University of California at Davis estimated that shareholders of companies sponsoring Woods lost between $5 billion to $12 billion  in market value from November 17, 2009, when the scandals around his private life broke, to December 17, 2009.

Especially troubling here is that no matter how many examples establish irrevocably the very high human and financial consequences of reputation damage, and no matter how often leaders talk about the importance of having or regaining trust and reputation, the examples keep happening in different companies, with different leaders, with harm inflicted in different ways. It is almost a perverse corporate version of the movie “Groundhog Day” in which a calamitous day keeps repeating itself until the hero figures out what he has to do differently to find a way out.

Risk Management and Ethics

When will it be the right time for corporate leaders to do things differently? Mediator extraordinaire Kenneth Feinberg can’t be everywhere. His newest assignment is administering BP’s $20 billion oil damages fund; his intervention deemed necessary because there was little trust in BP’s handling of the claims.

A recent supplemental research report by the Ethics Resource Center observes that companies are put at risk when leaders fail to see that ethical leadership  is a vital component of effective and responsible management.

Companies that put themselves at risk and whose behavior is also considered to have contributed to the financial meltdown have been required to appear at so many hearings, they’ve worn a virtual path to Washington DC. On June 30 and July 1, 2010, Goldman Sachs and AIG face questions from the Financial Crisis Inquiry Commission on The Role of Derivatives in the Financial Crisis.  In that venue, companies are seen as the problem, not part of the solution; so the public relations hits to reputation are high.

The jury is out on what it will take to convince corporate leaders to build into their risk management strategies the capacity to ask crucial questions about ethical liability, as is done with legal liability. Such a step, hardly radical, would have the objective of putting ethical conduct on the table as a deliberate outcome; evaluating business strategies and actions to assess the potential for unintended consequences that could harm credibility, trust, reputation, and their stakeholders.

Getting on the Bandwagon

An easier way to court public favor seems to be on the sustainability bandwagon. A recently-released UN Global Compact/Accenture Survey (PDF) states, “Demonstrating a visible and authentic commitment to sustainability is especially important to CEOs because it is part of an urgent need to regain and rebuild trust from the public and key stakeholders...trust that was shaken by the recent global financial crisis.” Of the 766 global CEOs surveyed, 72 percent say “strengthening brand, trust and reputation is the strongest motivator for taking action on sustainability issues.”

One of the disconnects pointed out in the survey is that CEOs often assume their own company is more respected and trusted than their industry. This can fuel arrogance and lead to miscalculations. However, even having more trust and respect than accorded others in your industry can evaporate fast as we saw when Toyota’s gold standard of quality fell like a house of cards. Another disconnect is that while 92 percent of CEOs say sustainability should be embedded throughout the organization, only 59 percent are actually doing that. So, how much weight do we give here for intentions?

While 54 percent of CEOs say sustainability will be fully integrated in core business in another 10 years, the qualifiers are based on a number of factors coming into play, including creating a viable market for sustainable products and services. So bets are hedged. Also problematic is the 72 percent of CEOs who say brand, trust and reputation (essentially intangibles) are their biggest motivators for sustainability; standard drivers for business decisions like revenue growth, cost reduction, personal motivation and customer demand are motivators for less than half the CEOs.

This begs the question: Will CEO commitment for sustainability have the enduring motivation to do the hard work of building ethical and responsible corporate policies and practices? Or is it a public relations placeholder until something else comes along?  Commitment to making sustainability real would be a big step forward in ethical leadership. So too would consciously looking at potential ethical liabilities, before taking a course of action. Continuing with business as usual and expecting different outcomes is my definition of insanity. The lessons of the past several months offer ample reason to ensure that ethical considerations are paramount in corporate risk assessment.

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics, a weekly column at http://theweekinethics.wordpress.com

GlaxoSmithKline, Merck & Co. and Novartis are the top-ranked pharmaceutical companies in the second, and latest, Access to Medicine Foundation report.

The group's Index seeks to rank pharmaceutical companies based on their efforts "to enhance global access to medicines."

The Access to Medicine Index ranks 20 of the world's largest drug companies; the report said Gilead Sciences and Pfizer of the U.S. were "most improved" in the ranking while Bayer (Germany), Bristol-Myers Squibb (U.S.), Merck KGaA (Germany) and Novo Nordisk (Denmark) fell.

A separate ranking for seven generic drug makers was topped by Ranbaxy Laboratories and Cipla of India.  However, the generic analysis was hampered by "the general low level of disclosure and responsiveness to data requests," the report said.

The report is available here.

Wim Leereveld, chairman and founder of the foundation, said pharmaceutical companies since the earlier 2008 report "have shown far greater willingness to open up." And the greater openness "has brought to light increased implementation efforts."

The Index tracks 106 strategic indicators and seven technical areas. And it covers 33 diseases, up from 24 two years ago.

The rankings access performance in seven technical areas:
--general access to medicine management
--public policy and market influence
--research and development for index diseases
--equitable pricing, manufacturing and distribution
--patents and licensing
--capability advancement in product development and distribution
--product donations and philanthropic activities

Each technical area is then examined for commitments, transparency, performance and innovation.

The Index addresses the top 14 "Neglected Tropical Diseases," top 10 communicable diseases, and top 10 non-communicable diseases in the 88 countries classified as "Low and Medium Human Development Countries" at the United Nations.

The report cited particular problematic medical areas including:
--need for new pharmaceutical products to address neglected tropical diseases
--lack of viable markets for pediatric HIV/AIDS drugs
--need for more affordability of existing medicines
--need for more accessibility of existing treatments
--increasing health burden of non-communicable diseases including cardiovascular ailments, cancer and diabetes.

Here's a graph of the companies in the Index:

Access to Medicine Index 2010

Photo courtesy of the Bill & Melinda Gates Foundation / Brent Stirton

James Hyatt, a retired reporter and editor for The Wall Street Journal, has been writing about business ethics and social responsibility issues since 2005.