Companies have made good progress in implementing sustainability practices since the United Nations Global Compact (UNGC), the UN’s corporate sustainability initiative, was established 15 years ago to provide companies with guidelines on how to operate responsibly and ethically.
But the biggest obstacle preventing businesses from adopting these strategies are the lack of metrics to measure and evaluate the impact of such sustainability-driven initaitives, said Ursula A. Wynhoven, general counsel and chief of governance and social sustainability for the UNGC .
Speaking to Eco-Business on the sidelines of the 2015 International CSR Summit in Singapore, Wynhoven said this is slowly changing, however, and there are encouraging signs that progress is being made to quantify the impact of issues such as human and labour rights.
Organised by the Global Compact Network Singapore, the annual summit gathers business leaders, government officials, CSR practitioners, and civil society leaders over two days to exchange ideas and discuss the latest developments in CSR.
Currently, more than 8,300 companies across 156 countries are part of the UNGC and they include some of the world’s largest companies such as Danish shipping firm Maersk, Chinese oil producer Sinopec, Swiss food company Nestle and British-Dutch consumer goods giant Unilever.
Companies that sign on to the Compact agree to operate within United Nations’ principles on human rights, labour, environment and anti-corruption, among others. They also have to support their local communities and report transparently on their efforts to comply with the principles each year.
Over the past decade or so, corporate social responsibility has progressively evolved from philanthropy to risk management, and now to an emerging focus on sustainability as “a mainstream strategic corporate practice,” noted the New York-based Wynhoven.
More companies are realising that there is a business case to good sustainability practices, and that they create shareholder value when they respect basic principles in areas such as human rights, labour, environment and anti-corruption.
But they find it a challenge to measure and quantify the positive impact particularly when it comes to these social dimensions, Wynhoven added.
“Among the challenges is that the metrics to assess companies on sustainability performance and impact on the company’s business are not fully there,” she said.
“Companies are economic animals and they are operating in a system of cost and benefits, so if we can make progress on that - and we are seeing the will to do this - then I think it will really help us make a quantum leap,” she added.
She cited a 2008 study by McKinsey, in which chief financial officers, investment professionals, institutional investors, and corporate social responsibility professionals from around the world were asked to identify whether and how environmental, social, and governance programmes create value.
The respondents agreed that environmental, social, and governance (ESG) programmes do create shareholder value but most of the them do not fully consider the financial value of these initiatives when assessing the attractiveness of business projects or companies.
Some think the value is too long-term or indirect to measure, and others just are not satisfied with the metrics available. Respondents did say however that they expected that these ESG programmes would deliver more value over the next few years.
In a separate 2013 report, the UNGC-Accenture CEO Study on Sustainability – which involved 1,000 global CEOs from 27 industries across 103 countries – found that about 76 per cent of respondents believed that embedding sustainability into their core business will drive revenue growth and new opportunities.
But just over a third of them reported that the lack of a clear link to business value stopped them from taking faster action on sustainability.
Collaboration is key to measuring impact
Wynhoven said one way to address the issue is to come up with clearer ways to quantify the impact – both negative and positive – of sustainability. And companies and the financial sector need to collaborate more closely to come up with more sophisticated metrics, she added.
“We have advanced a lot in the environmental area which is why I think we have seen a lot of more progress in some of these environmental domains,” she explained. “The social area is where we still find some challenges in the metrics.”
For example, if a company prevented a social issue from arising, it can be very difficult to calculate and show the value of that action, she said.
“We have advanced a lot in the environmental area which is why I think we have seen a lot of more progress in some of these environmental domains. The social area is where we still find some challenges in the metrics.”
Ursula A. Wynhoven, general counsel and chief, governance and social sustainability, United Nations Global Compact
“What’s the value add of something not happening? It can be quite difficult to quantify that. So I think we need to get better at that.”
Over the past 14 years since she joined the UNGC, she has seen some progress made towards collaboration such as multi-stakeholder partnerships to help businesses understand and meet their corporate responsibilities.
More companies are now more willing to collaborate and tackle issues such anti-corruption, poverty, which is the root cause of child labour, and rule of law, she said.
“A company alone cannot solve these issues,” she said. “That’s why there’s a premium on collaboration between companies and other actors, and between companies and other companies.”
Singapore’s CSR efforts
One way of enabling this collaboration is to have local networks such as the Global Compact Network in Singapore which helps companies in the country map out their individual sustainability efforts and provides a platform for them to exchange ideas and best practices.
Singapore’s corporate sustainability efforts is very much in line with the country’s Sustainable Singapore Blueprint, announced by Prime Minister Lee Hsien Loong in November last year. The blueprint mapped out the government’s vision to commit S$1.5 billion over five years to create a more liveable and sustainable future.
Grace Fu, second minister for the environment and water resources, said at the event, held at the Suntec Singapore Convention and Exhibition Centre, that Singaporean firms are now strong enough to play a key role in realising this Blueprint.
“We are seeing big, stable, strong Singapore companies evolving in the last few decades,” Fu said. “And I think it’s very timely for the [Global Compact Network Singapore] to now play a greater role in galvanising the resources and engagement of Singapore companies in the sustainable development of Singapore.”
Indeed, some companies in the country have already integrated sustainability into their businesses since the network was set up 10 years as the Singapore Compact, said Kwek Leng Joo, president of Global Compact Network Singapore and deputy chairman of property developer City Developments (CDL).
But there is room for improvement, so that sustainability becomes “a norm, not the exception”.
Part of this work involves engaging young people and educating them about sustainability, because they will be the next generation of business leaders, Kwek added.
At the event, winners of the CDL-Compact Singapore Young CSR Leaders Award were announced. In its fifth year, the award provides students with real-life business cases for which they need to come up with CSR strategies.
The team from Singapore Management University won the first prize for formulating three employee-engagement strategies for telecommunications company StarHub. The second prize went to students from Singapore University of Technology and Design who proposed an online portal to match workers of Juhler Group Asia, a recruitment company, to needs of charity organisations.
The two third-prize joint winners were Nanyang Technological University (NTU) and Hwa Chong Institution. The NTU team proposed that Swire Pacific Offshore, a service provider to the offshore oil and gas industry, start a programme that educates stakeholders about the company’s commercial activities, environmental impact and CSR initiatives.
The Hwa Chong students proposed a program to enhance telecommunications group Singtel’s existing cyber wellness programme notAnoobie, increase publicity of its e-waste recycling programme and extend Singtel’s outreach to the wider community via enABLE the disABLED, an employment programme for people with disabilities.
“We may not be able to solve many of the world’s crises in our lifetime, so the next best thing we can do is to equip the future generations with the necessary skillsets to do so,” he said. “This ensures continuity in the efforts as well.”