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CSR and the money-back guarantee

25 February 2013 |

HR Director article
Expectation that today’s businesses make a statement of intent on Corporate Social Responsibility (CSR) can seem at odds with today’s economic environment. Rebecca Fay, Marketing Director at The CarbonNeutral Company asks: can we justify the commercial impact of a CSR programme?

In this challenging economic climate, some businesses have reduced spending on CSR initiatives, as beleaguered executives cut philanthropic ‘nice to haves’ that can’t meet the pressing need to demonstrate ROI. Yet others see CSR as being central to the company’s future. The wide range of approaches and stages of evolution signal the differing interpretations of CSR in the business world. Traditional interpretations centre on social and philanthropic activities, often directly within the communities where the company’s operations are based. This clearly has a vital place in fostering employee and stakeholder engagement, but does not necessarily satisfy the ever-pressing need for businesses to justify a ROI. The question remains as to whether activities that relied on a regular donation of money delivering sustainable support to communities, are sustainable for businesses and fully justifiable to shareholders.

But CSR has grown up. Some companies have broadened the definition and role of CSR to include a wider range of sustainable business practices, such as ensuring their supply chain is ethical and a greater focus on environmental sustainability. These companies have moved beyond individual activities, often within the remit of HR or marketing teams, to a strategic initiative with board level backing. CEOs like Marc Bolland of Marks & Spencer and Jochen Zeitz of Puma see it as being central to their company’s future, recognising its potential to influence core business functions like product development and marketing, engage global stakeholders and deliver real business value.

The drivers for this broader approach go beyond doing good. They may include risk management considerations such as concern about future energy costs and security, the ethical sourcing of raw materials, or increasing shareholder and regulatory pressure to show sustainable governance. Added to that are growing demands from increasingly sophisticated stakeholders: investors now have a much wider range of information on a company’s CSR, and particularly environmental, performance through initiatives such as the FTSE4Good and the Global Reporting Initiative. Aviva has convened the Corporate Reporting Sustainability Coalition, which represents organisations with assets of $2trillion and calls for global governments to introduce national regulations for reporting sustainability. The UK government has also begun that process, requiring all FTSE companies to report their carbon emissions from 2013.

These signals suggest that external regard for CSR has increased despite the challenging economy. CSR (or Environmental, Societal and Governance – ESG - as it is often referred to today) has become about future proofing the business by future proofing communities and the planet. Increased access to CSR information means that current and future employees ask more demanding questions around the effectiveness of CSR programmes too. Research conducted by Cone Millennial Cause group found that 80 percent of a sample of 1,800 13-25 year olds wanted to work for a company that cares about how it impacts society and would refuse to work for an employer that didn’t. By the year 2020, Millennials are expected to be 50 percent of the workforce.

Companies need to work harder than ever at CSR to make an impact with stakeholders. The 2012 Sustainability Leadership Report analysed 100 leading companies and found that, although more CSR actions were underway, the perception of CSR activities among recent graduates and investors had dropped. The addition of environmental leadership, management and sustainability to the traditional philanthropic activities of CSR delivers vital business value. While environmental stewardship is just one pillar of a successful CSR programme, it can be a powerful statement of intent that enhances reputation, improves stakeholder engagement and unlocks new revenue opportunities.

Carbon management is often a key component of an environmental programme. Companies are increasingly familiar with measuring carbon and articulating the business benefits of managing emissions, from cost savings to employee engagement on energy efficiency. Many UK listed companies have acted ahead of regulation: 90 percent of FTSE 100 companies now report to the Carbon Disclosure Project, and the inclusion of this score on a company’s Google Finance listing indicates the shifting level of investor importance. Corporate literacy in carbon abatement is now being applied to environmental issues such as water, as companies like Coca-Cola and Levis measure the use in their production and look at where they can reduce impacts.

Sky’s Bigger Picture initiative promotes sustainable business to all of its stakeholder groups including staff, customers and supply chain. The media company found that environmental initiatives had particular resonance. These included redesigning their set top boxes to use less power, to inviting customers to participate in planting a billion trees in the Amazon. Sky also reduced its own organisational footprint, working with The CarbonNeutral Company to become the first FTSE 100 media company to be certified CarbonNeutral® in 2006. Its environmental ethos continued in to its carbon neutral new headquarters, which includes rain-water flush toilets and onsite renewable energy. Around a third of a building’s running costs are energy bills, so this is sound business as well as environmental sense.

Retailer M&S was one of the first companies to quantify the benefits of its CSR programme, claiming in its 2012 How We Do Business Report that it has saved the company £185m over five years. The broad-based programme includes becoming carbon neutral in 2012, buying 100 percent of its energy from a ‘green’ tariff and recruiting Joanna Lumley for its Schwopping campaign, which donates customer donated clothes to Oxfam. Smaller businesses also report the value of taking a more strategic approach to CSR. Office supplies company Commercial Group says that its broad reaching CSR programme, founded six years ago when it made the decision to certify its operations and products CarbonNeutral®, generated £2m of new business in its first six months and delivers an annual saving of £100m. All of these programmes are led from the boardroom and require the skillset of each business function. If leveraged right, environmental sustainability can act as the glue that brings together functions from the CFO to the CMO and CIO, and in turn serve to change the role of HR as a strategic driver within the business. The broader remit of today’s CSR programmes requires the involvement of every business function if they are to generate significant value to businesses through revenue opportunities, customer and investor demand, employee engagement and improved reputation. Understanding the value of CSR to recruitment and retention strategy can help ensure HR is on the boardroom agenda. An involvement in the environmental aspect of CSR may seem less obvious to HR leaders, but the holistic nature of the successful CSR programme suggests this is not the case.

The CarbonNeutral Company works with over 400 clients who take a strategic approach to carbon management, using carbon finance to meet stretching emission reduction targets, engage staff, investors and other stakeholders and deliver essential finance to renewable energy and resource conservation projects that support their supply chains all over the world. Increasingly they see the HR team leading action to deliver committed environmental programmes. IT services company Steria is one example. HR leads its CSR programme, which involves staff from every function and location, and in turn has used learnings from CSR to inform HR strategy. A client of The CarbonNeutral Company, Steria has an A rating on the Carbon Disclosure Project Performance Index, has won awards with its environmental management programme, and achieved differentiation in markets from Norway to India through putting environmental sustainability at the heart of its activities.

Today’s CSR programmes concern more than philanthropic activities, and they are the concern of the whole business. Despite continuing fears about the economy, there are other external business drivers that require a thoughtful, holistic approach to CSR, of which HR needs to be part, ensuring further value is delivered back to the business, today and in the future. By increasing their understanding of the environmental pillar of a CSR strategy, HR Directors can ensure they are closer to the concerns of investors and employees, helping to reinforce a company’s reputation by investing in sustainable initiatives. In 2011 IT services company Steria introduced carbon neutrality in to its wide reaching sustainability programme, working with The CarbonNeutral Company to reduce the emissions from all of its business travel. Solfrid Skilbrigt, Programme Director for Corporate Responsibility across Steria Group and HR Director Steria Scandinavia, explains how Steria’s CR programme delivers value for the business. “Steria has 20,000 employees in 16 countries so there’s a lot of travelling. We wanted to neutralise that and contribute to a greener world. It’s an area where we can really measure what we do, and we are taking action to reduce the amount of travel by working in different ways.”

This quantifiable measure is a starting point for further reductions, explains Skilbrigt, as it can have an immediate impact while programmes such as greener buildings need longer timescales and are more capital intensive. The company’s ambitions include virtualising energy hungry datacentres and making more of its buildings energy neutral, like its Stockholm headquarters which uses the heat generated from the train station below. Environment is one of the four pillars of Steria’s CR programme, alongside Workplace, Marketplace (business ethics, supply chain and customers), and Community. Not all areas of the programme have easily quantifiable metrics, says Skilbrigt, but she points to employee and investor confidence as a measure of success. The Ga&iuml;a sustainability index ranks Steria as the best performing company for CSR , and it has received accolades from the Bombay Stock Exchange. “Corporate Responsibility is very important in developing markets like India,” says Skilbrigt. Steria’s scholarship programme currently has over 100 Indian students at university or graduates of degrees, all of whom would not have been able to stay in education without support. With 30 percent of Steria’s workforce in India and those figures growing, Skilbrigt says it is an investment in the company’s future and the programme received awards because it is a sustainable, long term commitment.

HR Director, 22/02/13