Thursday, May 30, 2019

My New Love Affair with Hamdi Ulukaya

Move over Bradley Cooper. I have a new crush. His name is Hamdi Ulukaya.  While he may not have your dreamy blue eyes, he does have a refreshing, intoxicating vision of what today’s CEO should be like that will leave you yearning for more.

If you are not familiar with Hamdi Ulukaya, he is the son of a dairy farmer from rural Turkey who came to the U.S. without speaking English and with a mere $3,000 in his pocket. In 2005, he saw a for-sale sign for an old yogurt factory in upstate New York that had just laid off its workers. When he ventured inside, something stirred in his soul and he took a risk. Today, that yogurt factory is one of two producing Chobani yogurt, the No. 1-selling strained yogurt brand in the U.S.

It’s not just that I really like yogurt, or that Hamdi  has really great hair, it’s that he is an example of how a company can succeed by believing in human dignity, and by putting employees and communities first.
The examples below speak for themselves.
In 2015, feeling a personal responsibility to help address the refugee crisis, he decided to hire local African and South-East Asian refugees living near the Chobani factory in upstate New York to “give them a chance to start a new life.”
During a recent TED Talk, he explained this decision as corporate responsibility. When people pointed out that the refugees didn’t speak English, he got translators. When they explained that they didn’t have transportation, he got buses. Today, 30 percent of his workforce in rural New York are immigrants and refugees.  “From the minute refugees get a job, they stop being refugees and start planning for their futures.”
He went further than his factory walls. At the 2015 World Economic Forum in Davos, he launched the Tent Partnership for Refugees along with three other corporate CEOs. Their goal: Mobilize the private sector to improve the lives and livelihoods of the more than 25 million men, women and children forcibly displaced from their home counties. Tent has grown from the original four companies to more than 100 and today supports refugees in 34 countries. And it’s not just philanthropic. Hamdi and  his partners believe passionately that the private sector, more so than government, is uniquely positioned to address the refugee crisis by mobilizing the networks, resources, innovation and entrepreneurial spirit of the business community. I couldn’t agree more.
Within his own company Hamdi has taken more bold steps. In 2016, he introduced Chobani Shares, an initiative to give every full-time member of the company the opportunity to share in the growth of Chobani over time. And in 2017, he implemented a new paid parental leave policy, offering 100 percent paid parental leave for six weeks for all full-time hourly and salaried employees – one of the most generous leave policies in the country.
When Chobani needed to build a second factory to meet growing demand, Hamdi didn’t turn to the state that offered the largest tax incentive. He turned to a struggling, rural community in Idaho. He was told he wouldn’t be able to find the skilled workers he needed so he partnered with the local community college to train them together. Today the community is thriving, and the plant is one of the largest yogurt plants in the world.
Earlier this year, when he heard that students with outstanding lunch fees at Warwick Public Schools in Rhode Island would be limited to eating “sun butter and jelly” sandwiches, Hamdi announced that Chobani would donate nearly $50,000 to pay off the debts.
For me, Hamdi cinched the role of leading man in a starring role in an April TED Talk where he  called for a new “anti-CEO playbook.” Here is an excerpt from that talk, which I am sure you will find, like I did, as tantalizing to listen to on YouTube as Bradley Cooper is to watch in A Star is Born.
“Corporate America [today] says it [business] is about profits…the current CEO playbook says it is about shareholders. It is time to admit that the playbook that guided business and CEOs for the last 40 years is broken….It tells you everything about business except how to be a noble leader. We need a new playbook that sees people again. That sees above and beyond profits.”
He went on to describe the four pillars of the new anti-CEO playbook:
1.       Gratitude. Instead of maximizing profit for shareholders, “business should take care of their employees first.”
2.       Community. Today, businesses ask, ‘What kind of tax incentives can you give me?’ “Business should go to the struggling communities and ask, ‘How can I help you?’”
3.       Responsibility. Business today believe they should stay out of politics, but “business, as citizens, must take a side on issues like immigration, climate change, gun violence, race, income inequality... Business, not government, is in best position to make a change in today’s world.”
4.       Accountability. Today, CEOs report to the corporate board, but “I think CEOs should report to the consumer… Consumers are in power; that is the reason that business exist.”

He ended his talk remembering the treasure he found in the factory in upstate New York and what he learned from the people who had been laid off about the dignity of work and of the human spirit. “We need to unleash that [spirit] all across the world…There are people and places all around the world left out and left behind, but their spirit is still strong…they just want another chance. This is the difference between return on investment and return on kindness…this is the difference between profit and true wealth.”
If I could have just one wish, it would not be to walk down the red carpet with Bradley Cooper (but, in case he’s reading, that would be nice). My wish would be for all CEOs to take a page or two out of Hamdi’s “anti-CEO playbook” and to see what is possible when they bring the best of humanity into the boardroom.

Thursday, May 23, 2019

Investing in Women’s Empowerment: Private Sector Helps Lift Women

I just finished reading Melinda Gates’ new book, The Moment of Lift: How Empowering Women Changes the World. It’s a really amazing read that takes you inside the lives of women around the world who struggle to make ends meet, to feed their children, to succeed in male-dominated societies. But it also offers hope, inspiration and wisdom of how women's lives can be uplifted. 

This week more than ever I needed to read an intelligent book by and about women. I’ll share one excerpt that I found especially poignant: 

“From high rates of education, employment and economic growth to low rates of teen births, domestic violence, and crime – the inclusion and elevation of women correlate with the signs of a healthy society. Women’s rights and society’s health and wealth rise together.”

She goes on to write, “If you want to lift up humanity, empower women. It is the most comprehensive, pervasive, high-leverage investment you can make in human beings.”

This got me thinking about corporate investments in women. For years, diversity has been a core pillar of companies’ corporate responsibility strategies. This has meant stronger policies protecting women from sexual harassment in the workplace and creating family-friendly work cultures. These, of course, are good things.

But, lately, I am seeing examples of companies investing in programs and policies that go further, that truly empower and aim to lift women up. Here are three examples I particularly like.

In 2018, the women’s retail designers Ann Taylor, LOFT and Lou & Grey (all owned by Ascena Retail) fulfilled its goal of empowering 100,000 women in its global supply chain by providing health and financial literacy training.

The retail giant explains on its website: “We learned a lot from working with these inspiring women. …women can drive enormous positive change by sharing their knowledge and skills with others. When women do this, their colleagues, families, and communities all become better equipped to manage their health and/or finances, creating a ripple effect of positive change.”
For Ascena, empowering female supply chain workers to be financially literate and better stewards of their health wasn’t just to boost its corporate reputation. It was about better performance. After the trainings, the company’s suppliers reported reduced turnover and absenteeism. The trainings also led to strengthened relationships between workers in the factory and supplier management.
Unilever, makers of Ben & Jerry’s ice cream, Dove beauty products and Lipton tea, states, “We believe that women’s empowerment is the single greatest enabler of human development and economic growth.”
It’s not surprising why; women make up more than 70 percent of Unilever’s consumer base, 50 percent of the talent pool from which it recruits, and play a central role in its supply chain.
So serious is its belief in the power of women that the company has committed that, by 2020, it will empower 5 million women by advancing opportunities for them in its operations, promoting safety, developing skills and expanding opportunities in its retail value chain. Already the company has seen results: In 2018, 49 percent of Unilever managers were women.
The company is also taking its message on the road, advocating to other businesses that they also embrace women’s empowerment by being:
  1. Gender aware by having the right information and data in place to inform policies.
  2. Gender active by having the right policies and practices in place that respect women’s rights and empower professional and personal development.
  3. The new norm by ensuring that harmful norms are not perpetuated through outdated business practices, while actively promoting more positive portrayals of women along the value chain to challenge stereotypes.
Moving from ice cream to the tech industry, not exactly the sector that comes to mind for women’s empowerment. But here, too, there are some good examples, such as Intel.

Earlier this year, Intel was one of the first U.S. companies to announce that it had achieved gender pay equity globally. It also reached its $100 million commitment for spending on women-owned businesses more than a year early, and announced a new goal of $200 million for 2020.
Intel is also investing in programs to empower girls and young women to continue school. It is a founding member of the Reboot Representation Tech Coalition, through which 12 companies have pledged more than $12 million to double the number of women of color graduating with computing degrees in the U.S. by 2025.  In addition, Intel has invested in the Center for Advancing Women in Technology’s Technology Pathways Initiative, which seeks to enrich the U.S. workforce with a diverse pool of college graduates equipped to be innovators in the digital economy.
Ascena. Unilever. Intel. Not only do these example lift up women and humanity, they create long-term value for business. And that’s a good thing for everyone.

Thursday, May 16, 2019

The Promise and Risks of AI in Health Care: How to Ensure the Good Guys Win

I have to be honest. A year ago, my understanding of AI (aka, artificial intelligence or related technologies such as machine learning and deep learning) sat somewhere between the 2001 Stephen Spielberg movie of the same name and The Matrix. I increasingly found myself in circles with AI being discussed as “the game changer of the century” and realized that my Hollywood knowledge was not going to suffice.
Fortunately, just like in the movies, I was in luck, finding myself a few weeks ago at a keynote discussion as part of the 8th annual Biopharma Sustainability Roundtable listening to Dr. Helen Routh. And, much to my surprise, I learned there is a huge role for corporate responsibility (CR) professionals in ensuring their organizations practice “responsible AI.”
Helen Routh
But let’s start with our leading lady. Helen is as much a super hero as any you’ll find on the silver screen. She spent 25 years at Philips, in innovation, business and strategy roles including four years as Senior Vice President of Strategy & Innovation. A common thread throughout her career has been the use of data to drive significant outcome improvements in health care, leading to what would be depicted today as “AI.”  Today, she is a board member and advisor in both public and private sectors and currently chairs Ultromics, an outcomes-based AI company spun out of the University of Oxford. It develops ultrasound-based diagnostic support tools for cardiovascular disease by combining deep clinical insights with machine learning and some of the largest cardiac ultrasound datasets in the world.
While Helen’s keynote didn’t involve any car chases or love triangles, it didn’t disappoint in painting a picture of immense hope for the future of health care through the power of AI. And, like an Oscar-winning director, Helen infused her story with dramatic risks, driving home that the only way the world can  reap the vast fruits of this innovation is by gaining a real understanding of the potential unintended negative effects and how to avoid them.
Let’s start with the positive. If used well, data and analytics, whether strictly AI, machine learning or deep learning, has the power to dramatically improve health outcomes, enhance the quality of care, reduce health care costs, and expand access globally. 
Starting in the developed world, Helen shared several real-world examples:
·       N of One: Recently acquired by Qiagen, it has developed proprietary technology and a knowledgebase called MarkerMineTM, which provides high-quality and actionable clinical interpretation of molecular tests for oncology patients.  The clinical decision support technology links patients’ tumor profiles with potential therapeutic strategies, including those still in clinical trials, greatly improving the chance for effective treatment.
·       HeartFlow: Developer of cloud-based software that aids cardiologists in coronary artery disease diagnosis. HeartFlow creates a 3-D model of a patient’s coronary arteries and applies algorithms to locate blockages to blood flow and helps determine a more precise treatment plan. It has been in beta testing for the past three years in 80  health care centers in the United States and abroad. The technology helps reduce unnecessary angiograms and other invasive procedures and shortens turnaround time to diagnosis.
·       CareSageTM: Developed by Philips, this predictive analytics engine integrates data from patients’ records with Lifeline (medical alert company) enrollment and medical alert service activity. The information is merged into models to score a patient’s risk of admission to the hospital or nursing center in the next 30 days. In a retrospective analysis of 2,000 Lifeline subscribers, the software accurately predicted a 40 percent reduction in admissions. 
And here’s one more that I learned about since Helen’s talk that illustrates how robotics can be combined with AI in health care delivery. Mazor Robotics uses AI to aid minimally invasive surgical operations as well as operations with complex anatomy. Before an operation, a patient’s CT scan is loaded into a 3-D computerized planning system to indicate where a surgeon should place implants—all before the patient even arrives. Mazor’s spinal surgery robot arm guides the orthopedic surgeon’s instruments, allowing for an extremely high degree of precision.
Pretty cool stuff. And AI also has potential to drive game-changing improvements in health in the developing world. A new report, Artificial Intelligence in Global Health: Defining a Collective Path Forward, recently published by USAID, the Rockefeller Foundation, and the Bill & Melinda Gates Foundation, sees AI as a tool to enable community health workers to better serve patients in remote areas, help governments prevent deadly disease outbreaks, and greatly improve health care delivery to vulnerable communities.
The report includes dozens of scenarios of AI’s potential use for good. One tells the story of Anita, a woman living a rural village in Western Kenya, six hours from Nairobi and two hours on dirt roads from the closest hospital. Anita has recently became a community health worker and now goes door to door in her community providing local patients with health advice and selling basic health products to address their needs.
Anita has a smartphone with various apps that she uses in her work; she enters simple information on her patients’ health condition, including symptoms they are currently experiencing. Her AI-enabled apps then provide health recommendations, diagnoses, treatment advice, and self-care recommendations that allow her to provide the best possible care to her patients and allows them to avoid travel to a health facility hours away.
Enter Dramatic Music
But now comes the moment in the story for drama when the good guys do their thing (which surely involves some karate kicks and jumps off tall buildings) to ensure risk is avoided so that the world can benefit from this life-altering technology. 
In the case of the developing world, the USAID/Rockefeller/Gates report calls out the challenge of taking AI solutions from high-income countries and deploying and scaling them to address the unique needs of populations in low-income environments. Fortunately, the report’s authors serve up recommendations to guide the appropriate use of AI in low- and middle-income contexts.
Back at the keynote, Helen revealed several of the critical factors that must be addressed to deliver the potential of data, analytics and AI to both developed and developing countries:
·       Data security and privacy should already be top of mind for all companies and particularly those in health care. “Any business or organization not already thinking about how to mitigate the risk of data breaches or other cyber-security-related threats is at risk.”
·       Data quality is critical to deliver meaningful results. Helen draws on the principle of “garbage in, garbage out,” noting that it is key to understand the quality of data used in building an application and how it applies to the specific clinical problem at hand.
·       Bias can be embedded (even unintentionally) in historical data sets, results and interpretations – whether this arises from using data for a different application, not understanding the impact of how data was collected, or population differences.
·       Public understanding and trust are critical to allow AI to thrive. Organizations must clearly communicate how a patient or citizen’s data will be used, how value is returned to the patients or citizens and be able to explain at a high level what a particular application does.  It’s hard to build trust when AI is perceived as a “black box” where something magic happens to your data.
While not part of Helen’s remarks, in my own research I came across a tool from Accenture’s new Applied Intelligence practice called the “AI Fairness ToolTM,” which helps identify and fix unintended biases in AI solutions. The tool examines “data influence” of sensitive variables (age, gender, race, etc.) on other variables in a model, measuring how much of a correlation the variables have with each other to see whether they are skewing the model and its outcomes. 
Another group working to maximize the public good of AI and related technologies is the Partnership on AI to Benefit People and Society. With more than 80 partners (including UNICEF) spanning 13 countries, the Partnership studies and formulates best practices for AI technologies, works to advance the public’s understanding and trust in AI, and serves as an open platform for discussion about the influences of AI on people and society.
“Where AI tools are used to supplement or replace human decision making, we must be sure that they are safe, trustworthy and aligned with the ethics and preferences of people who are influenced by them,” reads the Partnership’s website.
In health care, building trust and understanding of AI among the public will also require engagement with patient advocates and patient/disease-focused societies, and, as Helen notes, communicating the clinical not the business benefits of the technology. 
And this is precisely where the role of CR professionals comes in: We can help identify potential unintended risks; put in place responsible policies; bring in the voice of diverse stakeholders who may be affected by the AI-enabled technologies; and ensure transparency around the organization’s use of AI (thus, helping to build public trust). In summary, CR professionals must help ensure their organizations practice “responsible AI.”
Helen’s address taught me that AI is not science fiction; it is here, all around us already. It has the potential for much good, but society –business, government, academia and research institutions – must come together to define and practice responsible AI in order to reap the potential benefits and ensure a happy ending that would make Hollywood proud. 

Thursday, May 9, 2019

Remembering My Catholic School Days through Shareholder Engagement

I can still feel the eyes of Sister Kathleen, principal of St. Monica’s Elementary School in Kalamazoo, Michigan, as I walked down the hall to my 4th grade classroom in 1982. She inspired just the right amount of fear to keep the student body in check.

When I graduated from 8th grade four years later I thought I bid adieux to Catholic school, green plaid uniforms, and the likes of Sister Kathleen. Never in my wildest dreams did I imagine that 20 years later I would be preparing for a meeting with “the Nuns” to discuss access to medicines and the HIV/AIDS epidemic. But that is just what I was doing on a cold January morning, trudging through the slush in upper Manhattan looking for the offices of the Interfaith Center on Corporate Responsibility(ICCR). Fortunately, I was not donning a green plaid jumper or navy-blue knee-high socks. That would have been ridiculous.

I was working for Merck at the time in the company’s Office of Corporate Responsibility and it was our annual meeting with ICCR, which we affectionately coined “our meeting with the nuns.” It’s really a misnomer because, while there are nuns and other members of the Catholic diocese in ICCR, the coalition is a diverse group of nearly 300 faith and values-driven organizations who “view the management of their investments as a powerful catalyst for social change.” In addition to faith-based institutions, ICCR members include socially responsible asset management companies, unions, pension funds and colleges and universities. Collectively, they represent over $400 billion in invested capital.

The coalition explains on its website: "While ICCR members never shy away from making the moral case for action, our fundamental proposition as investors is that responsible and sustainable business practices -- and a strong corporate culture of ethics -- are in the long-term interest of both companies and investors."

ICCR had first reached out to Merck a few years prior, submitting a shareholder resolution pressing the company to report publicly on its efforts to expand access to its HIV/AIDS medicines in sub-Saharan Africa. This began not only the publication of an annual report on the company’s access efforts (a report that eventually morphed into a formal corporate responsibility report) but a series of annual meetings, led by Sister Judy Byron, which continue with Merck today.

Over the years, the topics vacillated between access to medicines in developing countries, to access in the U.S. They pushed us to disclose where we registered products in the developing world, and where the company filed patents. Pharmaceuticals in the environment were usually on the agenda. If there was an issue in the news, such as the litigation surrounding VIOXX®, that was brought up too, with questions on what policies Merck management had put in place to avoid a repeat of the situation.
Just like Sister Kathleen, the nuns and other ICCR members were always direct and unapologetic with their questions. But they were also kind and willing to listen when we peeled back the curtain and let them see inside the company. Sometimes they weren’t satisfied that management was doing enough on an issue and they would move forward with a shareholder resolution, but often our dialogues showed them we were taking steps to address an issue and they would withdraw their resolution. Such was the case on a resolution filed by the late Rev. Michael H. Crosby asking for clarity on Merck’s strategy on pricing in the U.S. Rev. Crosby was tough and wanted action, not talk. He agreed to withdraw the resolution if Merck would host a roundtable in Washington on topic, which we did.

When I moved on from my position in Merck’s CR team, I truly missed my engagement with ICCR (I can’t say the same for my days at St. Monica’s back in Kalamazoo.)
A look at their website reveals that they have kept at it with some 40 shareholder resolutions filed in the 2019 season. Resolutions called for action on a number of issues, including:

·       Pharma companies to report annually to shareholders on the extent to which risks related to public concern over drug pricing strategies are integrated into companies’ incentive compensation policies, plans and programs for senior executives
·       Energy companies to report on how they can reduce their carbon footprint in alignment with greenhouse gas reductions necessary to achieve the Paris Agreement's goal of maintaining global warming well below 2 degrees Celsius
·       Multiple companies to provide a report, updated semiannually, disclosing policies and procedures for all lobbying expenses
Several resolutions were withdrawn due to productive dialogue.
Feeling a bit nostalgic, I reached out to Pat Zerega, Director of Shareholder Advocacy at Mercy Investment Services, the socially responsible asset management program for the Sisters of Mercy and its ministries. A 20-year-plus veteran of ICCR, Pat participated in many of the dialogues with Merck over the  years.
Pat Zerega
MK: How has faith-based investing and engagement with companies changed?

PZ: In the early days, faith-based investors were the main ones practicing socially responsible investing [SRI]. But, today, the SRI field has a lot more people and investment companies. The faith-based investment community continues to have the loudest voice, however: We have about 4 percent of assets under management of social investors but submit nearly 40 percent of resolutions.
Another change – the faith community is shrinking and we’re trying to figure out how we can deal with every issue of concern or, at least, address those that are most important when we have less resources including people to do the work.

In terms of change with corporations, there has definitely been change. I see this especially on the climate issue; companies’ actions are totally different than in 2000 when we were pushing companies  to simply report on their water use and GHG emissions. Companies were asking us “How?”. Today, environmental reporting is commonplace. Measurement was an easy way to start – as the saying goes, what gets measured, gets managed. This was true for climate, but it isn’t the same for all issues such as human rights, where measurement is not as straight-forward.
MK: Have the issues changed?
PZ: Some have. Tobacco issues have moved to a new place; instead of focusing on the tobacco companies, we are spending time asking health and wellness companies such as Walgreens and Rite Aid why they sell tobacco. They are supposed to be healthcare companies!

The nuclear issue is not as prevalent as it was in the ‘90s.  Pharma is still there, but changing; the opioid crisis has just blossomed in the past year. More broadly across industries, there is more focus than there was previously on the connection between governance and social issues. For example, we are seeing more resolutions on how management incentives tie to an issue.

MK: What issues have seen the greatest progress?

PZ: HIV drugs and access has really changed.
MK: Are there new issues?

PZ: In the past five years, there has been an increased focus on human rights. It started with the Ruggie principles. [The UN Guiding Principles onBusiness and Human Rights  are a set of guidelines for States and companies to prevent, address and remedy human rights abuses committed in business operations. They were proposed by UN Special Representative on business & human rights John Ruggie, and endorsed by the UN Human Rights Council in June 2011.] We are grappling with what is the corporation’s responsibility versus that of the state.
ICCR has a new group called the Investor Alliance for Human Rights that is looking at the issue. It’s not what we saw in the  late ‘90s with protesters in parking lots of Coca-Cola facilities being killed. Now, some companies are acting to defend human rights protesters. But there is always the tension between the role of business and the state. In Uzbekistan, we see cotton farmers thrown in jail if they start to protest. What is the responsibility of business to its supply chain or workers in such an environment?
Another important human rights issue that has risen recently is the role of for-profit private prisons, which ICCR sees as at risk for potential human rights impacts. [Note: In December 2018, investor members of ICCR launched a corporate campaign focused on a group of six companies across the private prison, e-commerce, banking and defense sectors deemed at risk for human rights violations as a result of government contracts that support President Trump’s “zero-tolerance” immigration policies.]

MK: As you fight for social change through corporate engagement, what keeps you hopeful?

PZ: The unexpected; when you ask a company to do something and they, unexpectedly, say “Yes, of course, we’ll do it.” This happened for example with a big oil and gas company. We were meeting with their CEO and asked him to train their drivers on the issue of human trafficking. I was shocked when he immediately agreed and, in six weeks, all his drivers were trained. Through dialogues like this we have seen change – today, there is a partnership that includes the oil and gas industry called Truckers Against Trafficking, which works to educate, equip, empower and mobilize members of the trucking and busing industries to combat human trafficking.

MK: What recommendations do you offer companies to ensure a successful dialogue?

PZ: If you don’t think we know enough about an issue, educate us. As fracking began and investors approached companies, one company set up seminars for shareholders so we could ask informed questions on their fracking practices.
Also, don’t send gatekeepers to the meetings; bring subject matter experts. We want someone who knows the topic, not just a representative from IR or the general counsel’s office. Ideally, we’d like someone from the Sustainability team to lead the discussion, bringing in colleagues who can speak on specific topics as needed.
Once you’ve  developed trust through a series of engagement, consider inviting a board member or senior business leader to the discussion.

I have a few other tips that I can’t claim as my own but were passed on to me from a colleague, which also make good sense.
·    Plain English please; talk as if you were speaking to a ten-year-old. We come from different places.
·    No acronyms without spelling them out.
·    No marketing.

MK: Any advice to publishers of CR reports?
PZ: Reports with no metrics are not useful. I want to see numbers that demonstrate change over time. I hear from companies that they don’t want to talk about bad news. I’d rather read about how companies are making progress on a difficult issue than silence. I want to know how companies are approaching issues, especially those that pose risk, such as human rights. Are they conducting their own risk assessment? Make information easy to find; the easier a company makes it, the more we are going to look at their information.
MK: What other sources do you use in your corporate research?

PZ: We do use information from research firms such as ISS [Institutional Shareholder Services], Sustainalytics, and Glass Lewis. Issue-specific indexes and ratings – such as the Access to Medicines Index, Access to Nutrition Index and Know the Chain – are also useful because they take only publicly disclosed information. I am never horrified if, in the first year, a company is at the bottom. That would make sense – they never looked at the evaluation before. But, in the second or third year, I want to see they are making progress.

Pat’s Last Word on Faith-based Investing
In 10 years, I hope: Companies are comfortable talking with shareholders and release more information than they have in the past.
I wish that all companies would: Not see us as the enemy but as a voice that may not be in the room.

I wish that all CEOs would: Meet every once in a while with their CR shareholders – not just with Blackrock – to hear other voices.

If I had a magic wand and could change one thing in the world it would be: That there was a pipeline of people coming into the investing field with a social justice/faith commitment. The faith community is shrinking, and we need some way to carry on the moral voice. We need the next gen of the moral voice.

The best part of my job is: Supporting people within corporations who are trying to do the right thing and figuring out how to make change  happen.

Thursday, May 2, 2019

Integrating Corporate Responsibility into Business: Nestlé Shows How It Is Done

When I talk with senior corporate responsibility (CR) and sustainability leaders one of the most frequent challenges they talk about is driving CR and sustainability out of their stand-alone CR departments and into the day-to-day commercial operations of their business. This is the nirvana, the holy grail, the goal post, the bull’s eye – you get the picture – for CR professionals, but often, in the privacy of their offices, they are beating their heads on the wall when faced with commercial colleagues who just don’t seem to understand the business value of CR.

But there are some companies whose commercial leaders have gotten it. One company is Nestle.

With the world’s population facing unprecedented levels of under-nutrition and obesity, the issue has taken on global urgency. Nestlé’s senior management has acted by creating a global Nutrition, Health & Wellness (NH&W) strategy. As part of its strategy, it has made the public commitment, aligned with UN Sustainability Development Goal #2 (No Hunger) and #3 (Good Health and Well-Being), to transform its product line by offering healthier choices. Specifically, it has pledged to: 
·       Launch more foods and beverages that are nutritious, especially for mothers-to-be, new mothers,  and infants and children
·       Further decrease sugars, sodium and saturated fat
·       Increase vegetables, fiber-rich grains, pulses, nuts and seeds in its foods and beverages
·       Simplify its ingredient lists and remove artificial colors, and
·       Address under-nutrition through micronutrient fortification
Their strategy has won them the coveted #1 spot on the 2018 Global Access to Nutrition Index, which assesses the world’s largest food and beverage manufacturers on their nutrition-related commitments, practices and performance globally. (Read more about the Index in my previous blog.)

It’s also won them financial returns. Earlier this year Nestlé announced that its 2018 net profit rose to 10.1 billion Swiss francs ($10.03 billion), with sales rising 2.1 percent.

As the company states in its most recent Annual Review, “Winning with consumers is the source of our sustainable financial performance and our way to earning trust and maintain our market leadership. Based on a compelling Nutrition, Health and Wellness strategy, our company delivers sustainable value over the short term and the long term."

To find out how Nestlé is integrating its NH&W strategy into its business, I spoke with Wendy
Wendy Johnson
Johnson, Director, Public Policy and Public Affairs. She is part of the Nestlé team that works closely on the company’s NH&W strategy in the United States. 

MK: Congratulations for being named #1 on the 2018 global Access to Nutrition Index. What does this mean for Nestlé?

WJ: It is a point of pride because it confirms that we are headed in the right direction. It’s always sweet when a third-party recognizes your success, especially given that industry is so often demonized. To get credit from the Access to Nutrition Foundation,  a respected third party, was sobering and confirmatory because it is external validation that our efforts are valued.
MK: Nestlé clearly sees this issue as a core part of its business strategy – not just an area to be addressed in the philanthropic space. How is Nestlé able to integrate the issue of nutrition and align the UN Sustainable Development Goals into its day-to-day commercial business?

WJ: The discussion starts at the top with our global CEO, Mark Schneider. We know that as a food business we can’t ignore the statistics on obesity and under-nutrition. We knew early on that we had to make changes where we could that could help mitigate  the obesity crisis and help address the challenges of under-nutrition where it is a concern. This has been and continues to be part and parcel of our senior leadership’s strategic thinking.  No one wants the prospect of a generation that will not live as long of their parents because of their diets. This is not good for society and it is not good for business.

One important way we have integrated this into our business is by embedding the development and governance of this strategy within our Executive Board. Each public commitment within our “Creating Shared Value” platform is ultimately championed and led by a member of our Executive Board, which drives fulfilment of our commitments across the commercial businesses. Specifically, the Board works to: 

·       Ensure all activities and work streams align with Nestlé’s positioning in society
·       Assess and draw appropriate conclusions from societal developments affecting Nestlé, and
·       Further strengthen our credentials in corporate Shared Value, environmental sustainability and compliance.

As part of Nestlé’s nutrition strategy, the Board approved a comprehensive set of nutrition-related targets directly linked to the SDGs. These targets are measured at a country level and are reported up to global leadership, which includes the Executive Board.

MK: How are the U.S. operations of Nestlé doing on these targets?

WJ: The global targets are cascaded to countries, which are then expected to incorporate those most applicable to their local area.  In the U.S., we have made quite a bit of headway especially in the reduction of sodium and sugar in our foods. This requires working closely with the business on reformulation, consumer testing, and then working with our retail partners to get the products in the hands of our consumers.

We have been very forthcoming with our support of the FDA’s voluntary sodium restrictions and continue to push this agenda forward because we understand that heart disease is still the #1 killer in the U.S. of both men and women.  What’s holding us back from pushing further, faster with some of our targets is the lack of technology and the lack of consumer acceptance. For example, sodium in foods does many other things than just season; it has other functional capabilities and you can’t just take it out without having a detrimental effect on the product. From a food science perspective, we must ensure that whatever substitute we introduce has the same capabilities.  While all our efforts are important, none of it will have an impact if consumers do not accept the product. 
MK: You launched Nestlé for Healthier Kids last year.  How is it doing?
WJ: Globally, we launched Nestlé for Healthier Kids as one of our Creating Shared Value programs to help 50 million children lead healthier lives by 2030.

In the U.S., our focus has been on educating parents on the importance of nutrition early in childhood (birth to 4 years). We took learnings from leading nutrition experts as well as learnings from our Feeding Infants and Toddlers Study, a Nestlé study of what young children eat, and developed a peer-reviewed, unbranded curriculum that we are piloting in six New Jersey locations. We are partnering in several communities with the YWCA to offer a series of classes to parents on topics such as the importance of breakfast, the introduction of solid foods, how to handle picky eating, increasing fruit and veggies, and transitioning to table food. We are working with Rutgers University to conduct pre- and post-testing to see how much parents have learned and are also identifying parents who have gone through the classes who can become peer educators and deliver the program further into their communities.

We will look at the results from these pilots and decide how to scale up the program, including looking at options to reach a broader audience through digital platforms.

MK: Why is the obesity crisis important to Nestlé?

WJ: Nestlé has been in business for more than 150 years and looks forward to being in business for 150 years more. Our company’s purpose is enhancing quality of life and contributing to a healthier future. That is among the reasons why we are so keenly focused on helping address challenges around nutrition and wellness, including obesity, faced by our consumers and employees. For our business to succeed, we need to ensure the future health of our employees and consumers. We need to see longevity in our communities to ensure the longevity of our business.