Friday, April 26, 2019

Chatting with Judy Sandford: An Insiders’ View of Corporate Responsibility Reporting

It has been 15 years since I worked on my first corporate responsibility (CR) report. At the time, yes, we had smiling pictures on the cover and long narratives with very few targets. That was then and it was the beginning of a long journey. I am proud to see how far reporting has evolved, although many would say there is still a very long way to go. 

Judy Sandford
For an expert’s perspective, I recently spoke with Judy Sandford, Senior Strategist and Managing Director of CSR and Sustainability at Addison, a creative agency in New York. I got to know Judy and  her team while working on Merck’s corporate responsibility report– a report they continue to support today. 

Note: In this conversation, we use the terms “CR,” “Sustainability,” and “ESG” interchangeably. 

MK: What trends have you seen in CR reporting in the past few years?  

JS: One big trend is seeing companies starting to “integrate” their ESG information in different ways such as by adding sustainability information to their 10-K [financial] reports or providing downloadable fact sheets for analysts as a way to get the information in front of investors. This has been on the rise as more mainstream investors such as BlackRock, Vanguard and State Street ask corporate investor relations teams specific ESG questions on topics such as diversity of corporate boards and risks from climate change. 

Other companies are publishing “blended” reports by adding CR information to their financial reports. But, it’s not enough to have the information side-by-side in the report. To be truly integrated, companies must show how financial investments are increasing a company’s sustainability, and how sustainability is supporting the company’s long-term growth. To create an integrated report in the most robust way with the IIRC guidelines is challenging, and I don’t think we will see an increase in companies publishing truly integrated reports until there is regulation. Given that the current [U.S.] government is not focused on sustainability right now, I don’t think formal integrated reporting is likely to get much traction anytime soon [in the U.S.]. 

MK: What ESG challenges are companies struggling to report on?  

JS: A big issue now is transparency around diversity and pay parity. While many companies fear being put under microscope, others have embraced it and made it a strength such as Salesforce. They report openly about how they are getting better at catching pay disparity and adjusting for it. They have gained great reputational benefits by going through this exercise and addressing it head on. [For more information on how Salesforce reports on pay equity, click here.]

Another challenge is reporting on the business impacts of climate change and whether to set science-based targets. Overall, I see a lack of detail in reports on risk management and contingency and resiliency planning around climate change. There are lots of weather events starting to take a financial toll, and there isn’t a lot of detail on how companies are managing the costs of these impacts or how they are planning to ensure they will be ready to address them in the future. 

MK: Today, there is such a sea of ESG reporting standards and frameworks, from GRI and the UN Global Compact principles, to SASB (Sustainability Accounting Standards Board) and IIRC (The International Integrated Reporting Council). Which do you think are the most relevant and useful?

JS: GRI is a great place to understand how companies compare in general and to understand what issues are most important to you and your stakeholders. I also like SASB because it provides a shortcut for companies to identify what investors ae most interested in, although, of course, you must look at it through the eyes of your company, but it’s a helpful first-pass filter. CDP is also super important – making measures on water, forest and climate change very comparable. I like IIRC for its philosophy, but integration is more difficult for U.S. companies to implement. 

MK: Companies aim to reach multiple audiences with their reports. How can they satisfy such diverse information needs without making their report unwieldy?
 JS: We recommend that companies develop multiple tools customized by audience. We also suggest what we call the “reverse mullet” report -- all party in the front, all business in the back. In other words, all storytelling and narrative in the front, and all data in the back including your GRI index and technical data. This allows companies to share highlights and provide the details for people who want the data. 

We also see companies reporting in a hierarchical fashion. They create a short PDF summary report and then put the “encyclopedia” of information online for anyone who wants to go deep. A good example of a company that does this is Merck. The summary report is also useful as an employee tool and for use at conferences. 

MK: CR professionals are often stymied by their legal teams in disclosing key ESG data or information. Do you have advice for how to advocate for greater disclosure?

JS: My recommendation is to include the legal team as early as possible in reporting discussions so they can see what information you want to share and get their buy-in early in the process. They are often left out of sustainability reporting committees and of the decision-making process. Having them involved helps politically and practically. 

You can also help gain their support for disclosure by sharing benchmarking of reporting from others in your sector. If the majority of companies are disclosing X, you can ask “Why not us?” You can also engage in a discussion on the risk of not sharing the information versus the benefit. Yet, another point of leverage might be that disclosure can help you do better on your MSCI score, which can result in investors being more favorable to your company. This could even translate into a financial benefit. 
Finally, to help bring corporate counsel along on the sustainability journey it is important to explain the difference between financial materiality and corporate responsibility materiality.
MK: As you’ve mentioned, investors are increasingly important readers of CR reports. How do you advise your clients to best determine what information to include in their reports to meet investor information needs? 
JS: Investors are much more about the facts, not the story telling. For example, they want to see diversity and balance in the board. I would suggest consulting the SASB criteria for your sector and to also look at the information requested by major rankings and ratings, as well as major institutional investors criteria. Based on this, do a gap analysis of what you are reporting versus what is being requested of you. 

MK: Are companies doing a good job integrating the UN’s Sustainable Development Goals into their reporting? 

JS: Many companies just show alignment with the SDGs, but do not talk about how they are making progress. I am impressed with how Heineken [not an Addison client] represents the linkage in their reporting. They have a helpful value chain diagram that shows their impact along the way and there is a discussion of the relevant goals and what metrics they are trying to hit. GRI and the UN Global Compact issued a useful resource last year to help companies measure and report on their impact on the SDGs. [Note: You can download the new publication here: Integrating the SDGs into Corporate Reporting: A Practical Guide.]

MK: What is your perspective of assurance of reports? 

JS: There, of course, are different levels of assurance. For early stage reporters, I recommend an external review of content and methodology to confirm that the right topics are covered. This will help provide objective feedback. For more experienced reporters, there are the big accounting firms that provide formal auditing of data and verify claims. This can be expensive and time consuming. Some of our clients focus assurance efforts only on those elements that are most measurable, which tend to be environmental data. This makes sense for some companies. There may also be safety data worth having an outside view, as well as pay parity. Assurance provides more credibility to readers and, of course, it should be a different third party than that does your financial reporting audit to avoid a conflict of interest. 

MK: Companies often struggle with ESG data collection due to unconnected systems, mis-matched data requirements, etc. Are there practices or tools that you’ve seen help? 

JS: I have to say that a majority of clients are still using Excel spreadsheets to collect data. Some have embraced Workiva, while another client uses Enablon. UL EHS Sustainability (formerly Credit360) has also been around for a long time. Often companies’ IT departments don’t want to invest in new systems because of security concerns or lack of resources to manage them. On the other hand, such systems can really help with version control and documentation. 

MK: What advice would you give to a company embarking on its first CR report? 

JS:

1.      Do benchmarking of reports in your sector.

2.      Get your CEO/chairman behind the idea of reporting to help rally people and ensure they will give their time.

3.      Establish an internal committee where people are responsible to gather information from each group. The committee members should also talk to each other and share ideas. After all, reporting isn’t just about producing a report, it’s also people talking to each other, learning, identifying risks and opportunities, and continuously improving the company.

4.      Don’t try to report on everything – focus on the most material (important) topics. And keep to a manageable number of goals--20 or fewer. 

Judy’s Last Word on CR Reporting 
·       A company whose reporting you admire: For a large company, I think Nike provides several levels of reporting for different audiences, high transparency and demonstration of innovation. For a smaller company, United Rentals – they have a clear, concise report that shows the value to their business of their sustainability efforts.
·       A CR report should always: Be focused on what’s most important to the company and stakeholders. 
·       A CR report should never: Provide unsubstantiated information. 
·       In 15 years, CR reports will: Be mostly online and integrated with other corporate information. 
·       I wish that all CR professionals would: Be part of the overall strategy team and have access to the CEO.
·       I wish that all CEOs would: Embrace the benefits of sustainability reporting.  
·       I wish that all corporate lawyers would: Ask more questions about the importance of transparency. 
·       My favorite thing about working in this field is: Being able to help companies be more profitable and successful, and also the variety of sectors I get to work in. 

Thursday, April 11, 2019

Why and How to Measure Social Impact and Outcomes: A Discussion with Jeffrey L. Sturchio

Jane was given $250 million to launch a national multi-media marketing campaign for her company’s newest household detergent. At the mid-point of the campaign she looked at the numbers and saw sales were doing great in the Southwest but poorly in the Northeast. She investigated further, made some changes and course-corrected. At the end of the campaign, Jane could report a positive ROI and specific impact on sales to the CEO, enabling her to obtain another round of funding. 



Sounds logical right? Then why do so few companies measure the ROI and impact of their corporate social responsibility (CSR) initiatives with the same level of rigor? That is the question on the mind of Dr. Jeffrey L. Sturchio, CEO of Rabin Martin, a global health strategy consulting firm that helps a wide range of clients in the biopharmaceutical industry with initiatives in global health and CSR. I sat down with Jeff recently to chat about the importance of measurement in CSR and who is leading the way. 


MK: Why is it so critical to measure the outcomes of corporate social responsibility (CSR) initiatives? Aren’t they “doing good” by their very nature?
JS: Whether you are working on the CSR or commercial side of business, you must think carefully before you start (a project) about what you’re trying to accomplish. No self-respecting business would think of operating without having financial metrics in place to be able to tell if their sales and marketing efforts are achieving targets or if their people are meeting their objectives. It should be the same in CSR: Are your CSR programs helping you to accomplish what you are trying to do? Are social business initiatives delivering on intent?
It should be accepted practice in CSR to design a monitoring and evaluation (M&E) framework for every project. This shows that you have the same discipline and rigor that the other parts of the business do. It demonstrates you are serious about the work. And it allows you to speak the same language as the other decision makers in the company in terms of ROI and impact. If you can monetize the work you are doing, you can go to leadership with a persuasive case for additional resources to invest. 
Another reason effective measurement is so important is that it’s the only way you will know if a program is well-designed and to allow for mid-course corrections when needed. What you expect to happen when you design a project will rarely be what actually happens when implemented. But if you have an M&E framework, you can see if you are on track or not and the information allows you to adjust. One company that is doing this well is Novartis (see sidebar below). 
Another is Merck with Merck for Mothers (MfM), an initiative launched in 2011 to help eliminate preventable maternal mortality worldwide.  (Rabin Martin has worked closely with MfM since the outset.)  Last year, Merck for Mothers published its first Research Compendium with links to more than 100 publications it has supported over the past six years. The questions these publications explore and the answers they uncover have been invaluable in informing the initiative’s work. It only resulted because there was a strong M&E framework at the project level from the beginning. 
Measuring Impact: Novartis Access Program: One company that has put a rigorous M&E framework in place to measure the outcomes of its CSR efforts is the Swiss pharmaceutical giant Novartis. It is working with Boston University to evaluate the impact of Novartis Access, which offers a portfolio of non-communicable disease (NCDs) medicines at a price of US$1 per treatment per month to public and NGO customers in low-income and middle-income countries. Starting in 2016, study investigators conducted a cluster-randomized controlled trial in eight counties in Kenya. As presented in the Lancet Global Health earlier this year, results from the initial baseline showed that “after 15 months, [Novartis Access] had a positive effect on availability of amlodipine and metformin at facilities, but had no effect on availability of the other medicines in the Novartis Access portfolio. It noted, however, that “access programs operate within complex health systems and that reducing the wholesale price of medicines might not always or immediately translate to improved patient access. The evidence generated by this study will inform Novartis's efforts to improve their program going forward. The study also contributes to the public evidence base on strategies for improving access to medicines globally.”
MK: How do you see most companies measuring their CSR programs today?
JS: Too many companies spend millions of dollars on programs and hardly anything on measuring impact. That can result in throwing good money after bad if you expand a program that isn’t actually working. Instead, people talk vaguely about how important a project is and that it will ultimately be good for the company’s reputation. But they can’t be exact about the extent to which the program is helping its intended beneficiaries or talk about the timeline for a reasonable return on investment. This lack of precision about ROI puts CSR executives at a disadvantage to their business colleagues when senior management has to make decisions about resource allocation.
MK: But companies are reporting to some degree on their CSR programs, aren’t they?
JS: Yes, but most CSR metrics focus on inputs – e.g., how much money did we invest? Some companies go further to look at outputs – e.g., how many products did we distribute, how many health care workers did we train? This shows what you got for your investment. But few companies think about the outcomes and impact their investments actually had – if, for example, they have improved the health and wellbeing of the people they were supposed to reach. 
A good example of this is a pharmaceutical company we worked with that was trying to address hypertension in sub-Saharan Africa. They spent a lot of time looking at how many people they screened for high blood pressure, how many people were diagnosed, and how many were put on treatment. But they didn’t place a similar effort into capturing the ultimate impact of their program – were they and their implementing partners reducing the number of strokes from hypertension? Were the people using their anti-hypertension medicines (or others) able to go back to work and be more productive? 
MK: Many CSR initiatives that tackle tough social issues are conducted in complex environments with many intertwined factors. In such environments, how can measurement show causality of a program’s intervention? How can  you  build an evaluation process that allows you to claim appropriate attribution for your program or intervention?
JS: Skeptics will  often say that your intervention won’t solve the problem because there are all these other contributing issues.  But, if you are thoughtful – by examining and understanding the health care ecosystem in the country you are in and what’s connected to what – it is possible to understand and measure the contribution of your intervention. It’s simply nihilistic to say at the outset that you can’t possibly  measure the impact. In fact, you have an obligation to try to measure your contribution for at least three reasons:
  1. To illustrate to other stakeholders that you’re making a positive contribution, 
  2. To persuade your internal colleagues that this is a good way to use resources, and 
  3. To know what you’re doing right and what you’re doing wrong. 
If you  have a robust M&E  framework – even if you can’t be 100 percent specific about what impact your program is having  – it still adds to the knowledge base. You will undoubtably find other problems going on in the health care environment that need to be fixed and this will help reach the overall goal you and others are trying to attain. That is the unintended consequence of M&E programs – they uncover other information on how health systems operate and over the long run this leads to improvements in population health overall. 

A good example of the work being done in this area is  by Boston University and leading global pharmaceutical companies through the Access Accelerated project. (See side bar below).

MK: How should an organization get started measuring impact? 
JS: You must design the M&E framework before you start the project. You can’t start it mid-course. Companies should start by thinking about what it is they are trying to affect and work back from there using a logic model that specifies inputs, outputs, outcomes and impacts.  You need metrics along the project’s entire trajectory. And, you must have a system to collect the data in a reliable and sustainable way, so you’ll be able to analyze it. 
Access Accelerated: Through the Access Accelerated initiative, 26 biopharmaceutical companies are tackling the growing burden of non-communicable diseases in low and middle-income countries by co-creating scalable and sustainable solutions to improve people’s health. A team from Boston University is working with the companies to integrate a robust measurement framework into the project to serve as a common language for categorizing, understanding and comparing access programs. The framework includes three main components: 1) A taxonomy of 11 strategies that describes common approaches used by access programs; 2) A series of logic models—one for each strategy—detailing the pathways by which programs may achieve impact; and 3) A set of clearly defined indicators for reporting program activities and achievements. The team has developed the Access Observatory, an online public repository of information on access programs, structured according to the measurement framework. To date, the Observatory has compiled reports on 63 programs in 103 countries.  For more information, see their 2018 report.  

MK: What types of skills does Rabin Martin have to help clients develop  M&E frameworks?
JS: We bring a unique mix of skills to bridge research, evaluation, programming and policy, with an unwavering commitment to measurable results.  We have experts in public health program design and implementation, often with hard-won experience on the front lines establishing and operating programs. They understand what you need to do to collect data and analyze it. We also have people who understand the art of program evaluation and the nuts and bolts of managing an M&E framework. It helps to have done this kind of work when counseling clients on the best approaches for building M&E into their program designs at the outset – and to do so in a nuanced way.
MK: How do you ensure that impact measurement becomes a means to an end rather than an end in itself?
JS: M&E must be part of the discipline of how you manage your entire portfolio, with an emphasis on becoming a learning organization. It is a mindset of looking quantitively at data to inform decision-making. Everything you do is a question of allocating scarce resources to accomplish what you are responsible for – in that context, without the right data, it’s not possible to tell which investments are yielding the most health for the money. There is truth in the old cliché that you can’t manage what you don’t measure. 

Tuesday, April 2, 2019

Tackling the Global Nutrition Crisis through the Food & Beverage Industry

Gone are the days when corporate responsibility can be defined simply as a company doing no harm.

Today, companies must, as Paul Polman preached at Unilever, provide solutions to the world’s greatest challenges not through a separate philanthropic arm but through core business strategy. When they do, they will drive long-term corporate growth and sustainability. Even mainstream investors are starting to agree. BlackRock Investors CEO Larry Fink recently wrote in a letter to CEOs that “Society is increasingly looking to companies, both public and private, to address pressing social and economic issues.”



Nowhere has this shift been more apparent, perhaps, than in the food and beverage industry, where in the past companies focused on reducing their environmental footprint and ensuring the protection of its workers. Today, they are being called to go much further to help solve the world’s global nutrition crisis, which sees one-in-three people either overweight or undernourished. 
Helping to push the industry toward greater action is the Access to Nutrition Foundation (ATNF), which publishes the bi-annual Access to Nutrition Index (ATNI) as well as country-specific Spotlight Indexes. First launched in 2013, the Index measures the efforts of the world’s largest food and beverage manufacturers to facilitate improved diets and reduce serious global problems of both obesity and undernutrition. 
By assessing and ranking the world’s largest manufacturers on their nutrition-related commitments, practices and performance globally, ATNI aims to encourage companies to increase consumer access to nutritious and affordable foods and beverages through better product formulation, pricing and distribution; and to responsibly exercise their influence on consumer choice and behavior through marketing, labeling and promoting healthy diets and active lifestyles.
To put the Index in context: The 2018 ranking examined 22 companies that generate an estimated $500 billion in annual sales in more than 200 countries, with their products playing a significant role in the diets of millions of us from New York to Nairobi. 
ATNF also collaborates with  investors. To date, more than 60 with US $7 trillion in assets under management have signed the Access to Nutrition Index Investor Statement.

Inge Kauer, Executive Director, ATNI

I spoke with Inge Kauer, Executive Director of the Netherlands-based ATNI, about where she sees progress and why she believes companies that do well on the Index will do well in the marketplace. 
MK: Taking the line from Larry Fink’s letter, how are food and beverage companies doing in addressing social and economic issues? 
IK: More and more companies are making commitments and pledges to address nutrition and we’re seeing this starting at the Board level. So that is a good thing. The private sector can play a major role in tackling the SDGs [Sustainable Development Goals]. But to tackle the world’s major challenges all the SDGs we need the private sector to really accelerate their efforts. It’s good BlackRock is recommending they get involved; investors have an important influence on companies’ management and if they make it a topic of their engagement and  incorporate these issues into their investment decisions, it will accelerate the progress. That said, BlackRock is not yet a signatory…so hopefully they will be soon!
MK: The Foundation has published three global ATN indexes to date. Has there been visible progress?
IK: There has been improvement when you look at the increase in the average scores of companies from 2.5 in 2013 to 3.3 [out of 10] in 2018, but scores are  still relatively low. On an individual company level, we see more improvement. For example, in 2018, nine companies [out of 22] scored 5 or more on the Index, whereas in 2016 there were only 2. FrieslandCampina, a Dutch dairy cooperative, is an example of the type of progress that can be accomplished in a two-year index cycle. They rose four places in the ranking largely thanks to a new strategy, new initiatives to tackle undernutrition, and more responsible marketing commitments. We also see increased efforts by other companies to address undernutrition including by fortifying foods and supporting education programs. And there has been progress on food labeling, with clearer labels and more information on health and nutrition claims.
MK: Are you satisfied with the speed of progress?
IK: No. When you see the nutrition crisis that is happening today, there clearly needs to be a greater sense of urgency. We need a lot more action and acceleration. At the same time, we understand that companies need to do this step by step and can’t change overnight. We hope our Index and scorecards serve as a roadmap for change and helps them take action. 
MK: Are companies changing because of the Index or due to business pressures?
IK: Companies understand the need for more diversification and innovation in their product portfolios. They realize the risk of not tackling this challenge because they are confronted with obesity daily and see the impact on consumers and their own employees. They also see growing demand for healthier products as a commercial opportunity.  We see strong examples of this such as with PepsiCo, which has invested in new healthy beverages with lower sugar levels.  
MK: Where is there the greatest need for progress? 

IK: We need to see more change in product portfolios – increases in the number of healthy products. In 2018, we included for the first time a product profile exercise assessing nutrition quality of products. Only  one-third of products [of Index companies] were classified as healthy. Urgent action is needed to lower salt, sugar, and saturated fat levels and improve the amounts of fruit, vegetables and fiber. 

Another important area is to make healthy food more affordable and accessible to vulnerable populations – people who live in food deserts in the U.S. and in rural areas in India. Companies are still struggling to find sustainable solutions. At ATNF, we are researching and working with experts to identify best practices – and failures we can learn from and share with companies. 
MK: Are boards taking a more active role in companies’ response to delivering better nutrition as part of core business strategy? 
IK: We see this in some companies. When you look at the Index results, companies that score high marks for governance and oversight practices score high in other areas as well. We see at leading companies that their nutrition strategies are reviewed at the senior board level and are included in management incentive structures. These companies are talking about the Index results at the Board level. But that is not everywhere the case. It is one of the key recommendations we give to companies. 
MK: How would you characterize engagement with companies on the Index?  
IK: In the beginning, we were fortunate that there was a high level of engagement. We probably benefited due to the existence of previous indexes like the Access to Medicines Index and the Dow Jones Sustainability Index, which leading companies were familiar with already.  We were also well positioned due to our partners, nutrition experts and our funders. This led to a relatively high level of engagement. Over time, companies that were at first not engaging are now reaching out, and we see the level of detail that the major companies provide in their data collection is also increasing. It is impressive how many [companies] are investing in the process and trying to learn from it. 
MK: Why create country-specific spotlight indexes in addition to the global Index? 
IK: The country-specific spotlights allow us to tailor the Index to local markets and specific country issues. The situation in each country where we have piloted or published local indexes [South Africa, India, Mexico and the United States] is different. They have been very well received by local stakeholders who use them to engage in dialogue on a national level. 
MK: Do you see geographic differences in the commitment of companies and the progress they are making?  
IK: Not all companies are applying their strategies and programs outside of their own market, they are not being applied globally. We found, for example, in our first U.S. Index that although the U.S. is the largest single market for all the companies we assessed, there was not a lot of disclosure of what companies were doing to improve nutrition for the U.S. customer compared to globally. Our recommendation is to approach consumers globally in a consistent way. 

MK: What do you hope the Index helps to achieve by 2030?
IK: I hope that everyone will see the private sector as a key partner. I hope the Index will help speed up progress and that it helps increase dialogue and debate between companies and investors, policy makers and civil society.  I hope, at a certain point, the Index is not needed any more, but is in the heart of the organizations….that preventing malnutrition becomes part of business strategy.  
MK: What is one thing you believe the Index could do better? 
IK. Contribute to the discussion in more countries, especially where there is high burden of malnutrition. 
MK: What is next for the Foundation/Index? 
IK: There is a lot going on! We’re going to publish the 2nd India Spotlight later this year, and it will include a few new companies. We’re also developing a self-assessment tool for small and medium-sized enterprises to help them see what they can contribute and measure their own progress. We are in the final stages and will pilot the tool in Nigeria and are looking for a second pilot country as well. Finally, there is interest in regional indexes in Europe and in Africa. We’re currently talking with local partners – NGOs, policy makers and companies to shape a methodology. So, stay tuned! 
MK: What is most rewarding about your work on the Index? 
IK: I am passionate about tackling malnutrition. In my life, I have always worked and advised companies on what they can do to solve social problems. I see an enormous potential for the private sector to do more in this area. To see it more and more on the agenda of companies and that there is more focus on  the potential role of the private sector in tackling malnutrition-- that is driving me to do this job. 
Stay tuned for a discussion in a future blog with a leader on the ATNI and their efforts to address the global nutrition crisis.