SUSTAINABILITY: A Strategy of Choice

May 15 2000

SUSTAINABILITY: A Strategy of Choice

May 15 2000

IN 1995, Alcan Aluminum Ltd. announced that it wanted to build a new smelter in Alma, Que. It was not until 1998, however, that the Montreal-based corporation confirmed its decision to go ahead with the $2.3-billion mega project. “The announcement was actually the culmination of many steps including environmental hearings, agreements with unions and discussions with various levels of governments as well as with local businesses and community representatives,” says Dan Gagnier, Alcan’s vice-president of corporate affairs.

According to George Khoury, director of the Conference Board of Canada’s Canadian Centre for Business in the Community, Alcan’s inclusive and consultative strategy is indicative of the growing emphasis corporations around the world are placing on corporate social responsibility (CSR). “Twenty years ago, CSR was about paying your taxes and funding a charity or two,” says Khoury. “That’s changed radically. CSR today is about having a mindset and a corporate culture that sees value in being a responsible and accountable member of a larger community. It is about building and maintaining strong and positive relationships with all of an organization’s key stakeholders.”

According to Khoury, companies are discovering that the surest way to achieving sustainable success is to adopt a business strategy that stresses CSR. “A sustainability-driven company is one that achieves its business goals by integrating economic, environmental and social-growth opportunities into its day-to-day business strategies and practices,” he says.

There are good reasons why companies are showing interest in CSR. To begin with, sustainability makes sense from a risk management perspective. Just ask Alcan. In 1995, after the company had invested hundreds of millions of dollars in the Kemano Completion Project (a $ 1.3-billion program that would have seen the expansion of Alcan’s Kitimat facility), the B.C. government withdrew permission for the project to proceed. “In spite of the fact that we had scientists and engineers on side, we did not have the support of the people in communities involved,” says Gagnier. “If you don’t earn the trust of your community, there’s a very real possibility that your company will suffer.” Alcan did not repeat that mistake at Alma.

Companies are discovering that the surest way to achieving sustainable success is to adopt a business strategy that stresses CSR.

While mitigating risk, there is evidence that a sustainable approach promotes a better bottom line. Certainly that is the message of the Dow Jones Sustainability Group Index. Launched last fall, the DJSGI lists some 200 global companies that are top performers. Significantly, the index, which measures companies for innovative technology, corporate governance, shareholder relations, leadership and social well being, outperformed the Dow Jones World Index by 41 per cent last year.

It is a result that does not surprise Gord Forrester, director of public affairs at Dofasco Inc. in Hamilton, Ont According to Forrester, Dofasco, one of four Canadian companies that placed among the top 18 corporations on the DJSGI (the others are Enbridge Inc., Suncor Energy Inc. and TransAlta), has achieved remarkable success thanks to a decade-long strategy of sustainability. “The beginning of the 1990s were difficult times in the North American steel industry,” he recalls. “We decided that the only way we could survive and achieve long-term, sustainable prosperity was by providing added value to everything we do.”

In tangible terms that meant developing new products that would reap premium prices. It also meant that Dofasco put a renewed emphasis on partnering with its community. Currently, the company is involved in projects to clean up Hamilton Barbour and revitalize the city’s economy. Meanwhile, over the past five years, the company has reduced greenhouse gases by 27 per cent. According to Forrester, such efforts have reaped significant rewards. “We’ve had a year of record profits whereas most of our competitors are striking losses,” he says.

The push to sustainability has been accompanied by a growing interest in measuring socially responsible activity. “We have long had very sophisticated ways to measure financial performance,” says Khoury. “But, only now are we developing the methodologies to measure CSR accurately.”

To further the trend, the Conference Board led a group of Canadian business and government leaders to Britain last October. The purpose of the Executive Study Tour on Social Auditing and Reporting was to learn more about social auditing as practised by some of the UK’s leading companies including Shell International, British Petroleum and The Body Shop. More recently, the Conference Board announced that, in co-operation with the Canadian Centre for Philanthropy’s Imagine program, it is developing a CSR Index. The Index will be based on best-practice benchmarks that Canadian corporations can use to evaluate their own performance in areas ranging from human rights to community investment impact.

A select number of prominent Canadian organizations and corporations are also opting to develop sustainability measurement tools. A case in point is Natural Resources Canada. NRCan adopted a Sustainable Development Strategy in 1997 and last year released a Sustainable Development Progress Report. The public report detailed how the federal government department was faring on reaching specific targets ranging from reducing overall energy usage to scaling down the size of its vehicle fleet.

Ralph Goodale, natural resources minister, believes that it is extremely important to track such information. “By measuring, we demonstrate progress,” he says. “We also obtain a benchmark that’s important for future policyand decision-making.”

Goodale adds that while social auditing is today the exception, it will fast become the rule. “I think we will see a growing interest in measuring sustainability,” he says. “Sustainable development is not just a theory. It’s an effective strategy that promotes optimum performance - socially, environmentally and financially.”

A Changing Climate

The debate over global climate change continues. Skeptics, while they do not dispute the fact that the earth has warmed appreciably over the past century, believe that the increase may be attributable to natural causes. The dominant view, however, is that the earth is getting hotter because the atmospheric concentrations of greenhouse gases (GHG), like carbon dioxide, are rising.

The increase of GHG, by and large the result of burning fossil fuels like coal, oil and natural gas, has led many mainstream scientists to issue dire forecasts. A United Nations scientific panel has predicted that unless GHG emissions are reduced, the earth’s average surface temperature could climb as much as three degrees Celsius over the next century. The result would be widespread climate change, more severe weather and extensive flooding.

In 1997, the specter of such consequences led Canada, along with 158 other nations, to agree to the Kyoto Protocol. The accord calls upon Canada to reduce GHG emissions to six per cent below 1990 levels between the years 2008 and 2012.

To help meet the obligation, Canada’s federal and provincial environment ministers established a National Climate Change Secretariat in 1998. NCCS is expected to announce a national strategy on climate change later this year. At the same time, the Conference Board, in partnership with the Canadian Energy Research Institute, launched the Climate Change Economic Analysis Forum. The forum’s mandate is to provide a neutral ground for decision makers from across the country to participate in the climate change debate and discuss the socio-economic implications of GHG mitigation options.

The Conference Board is also serving as a think tank for leading Canadian corporations that are choosing to voluntarily address the issue of climate change in advance of any regulatory requirements. “The participating companies believe that by acting now, they have the best chance to develop effective emission reduction programs,” says Ron Yachnin, senior research associate at the Conference Board. “They also believe that by acting sooner rather than later, they can minimize risk and protect their reputation as socially responsible companies.”

According to Ottawa-based Voluntary Challenge and Registry Inc. (VCR), an organizations dedicated to encouraging private and public sector organizations to voluntarily limit GHG emissions, there are indeed many Canadian companies that are opting to move forward on the climate front. Manitoba Hydro, for instance, has adopted a significant environmental management program. To date, the utility has reduced greenhouse gas emissions to six per cent below 1990 levels which has helped it to win the VCR award.

In Montreal, meanwhile, CNR has been aggressively working to curtail energy consumption. As well as buying new and more energy-efficient locomotives, the railroad has outfitted older trains with Smart Start, a technological innovation that keeps engines warm when not in operation and so eliminates the need to keep engines idling for long periods. Says Normand Pellerin, CNR’s assistant vice-president for environment, “By being energy efficient, we reduce costs. That makes us more competitive.”

In Calgary, Suncor Energy Inc. is another company that believes that sound environmental policies make sound business sense. Recently, Suncor announced its intention to invest $100 million over the next five years in alternate and renewable energy projects. The company has also signed an innovative pioneering trade deal to purchase excess C02 reduction credits from Niagara Mohawk Power Commission in New York State. “It’s all part of our plan to be a sustainable energy company,” says Rick George, Suncor president and CEO. “That means our job is to create long term value on an economically, socially and environmentally sustainable basis.”

A Call to Action

Last November, business leaders from across Canada gathered at the Conference Board’s CEO Forum on Aboriginal Issues in Ottawa to share their thoughts and ideas on the role corporations could play in helping Canada’s Native Peoples overcome some tough challenges. “It was an extremely timely meeting,” says Stelios Loizides, senior research associate at the Conference Board. “In terms of our Aboriginal peoples, we are facing a growing crisis.”

That is not hyperbole. As a result of poor education, lack of role models and mismatch between geographic location and jobs, Aboriginal peoples have a low rate of participation in the Canadian workforce. There is worse to come. Between 1991 and 2016, the country’s Aboriginal population is expected to grow by 52 per cent. As a result there will be increased demand for education and job opportunities as well as infrastructure and economic development opportunities.

To address these challenges, the participants at the CEO Round-table made a number of recommendations for action. Prominent among them was a call for corporations to work with Aboriginal leadership to build capacity within Aboriginal communities.

Some leading Canadian corporations are already doing exactly that. In Fort McMurray, Alta., Beverley Davies, manager for regulatory and stakeholder relations at Syncrude Canada Ltd., notes that the giant oil company has made a commitment to support Aboriginal communities “a part of its everyday business strategy.” Currently, over 10 per cent of Syncrude’s direct workforce is made up of Aboriginal Canadians. Meanwhile, the company is also a strong promoter of local Aboriginal businesses. A case in point is Fort McKay First Nations Group of Businesses, an enterprise that owns a number of operations ranging from bussing to environmental management. “Over the years, Syncrude has provided significant financial help to our company,” says Jim Carbery, McKay Group’s general manager. “It has also led the way in terms of mindset. Syncrude shows by example that corporations have a responsibility to the communities in which they operate.”

“Other companies such as BP Amoco and Xerox are also working with the Canadian Council for Aboriginal Business, which is developing a program called Progressive Aboriginal Relations. The program will help corporations to benchmark their performance in promoting the full participation of Aboriginal people in the Canadian economy.

In Saskatchewan, SaskTel is also committed to building stronger Aboriginal communities. Among the many recent initiatives the telecommunications company has launched is a partnership program with Saskatchewan Indian Institute of Technology to train diploma-level technologists. As well as classroom training, the program enables students to gain valuable work experience through a five-month stint at SaskTel.

Says Andrew Arcand, a 29-year-old member of the Beardy’s tribe who will graduate from the electronics course later this year, “The program is a wonderful opportunity. It’s my hope that it will lead to a good job and put me in a position to be a mentor to other young people in my community.”

In Ottawa, the Conference Board’s Loizides is encouraged by such initiatives: “It’s my hope that these examples w ill prompt other Canadian companies to play an active role in building Aboriginal capacity for economic and social development.”

A Winning Partnership

“By 1996, we were facing serious problems,” recalls John Sullivan, superintendent of Strait Regional School Board, which serves rural communities in Cape Breton Island as well as the northeastern Nova Scotia mainland. “We were losing our traditional resource-based economy. As well, our young people were leaving the region at an unprecedented rate.”

To turn the tide, the school board, in partnership with three regional development agencies and 53 communities , as well as a number of business and government partners including Knowledge House Inc., MTT, IBM Canada and Industry Canada, launched The Strait East Nova Community Enterprise Network (SENCEN). Says Sullivan, “Our goal was to embrace new technology and ideas as a way of preparing our students for the knowledge age and encouraging community development”

It is an ambition that has already achieved results. For instance, as a residt of the development of a distance learning program, high school students in the Strait region are now able to take advanced mathematics courses. “Three years ago, none of our students were taking calculus because of a lack of qualified teachers,” recalls Sullivan. “Now we have 250 senior students taking the course.” Meanwhile, international interest in SENCEN’s distance education program is currently leading to the development of a commercial education software enterprise with global potential.

In recognition of its efforts to build a strong community through information technology, SENCEN received an Industry Canada CanConnect Award at the Conference Board’s Business and Education Awards in Halifax recently.

According to Mary Ann McLaughlin, director of the Conference Board’s National Business and Education Center, SENCEN shared an important trait with the 40 other award winners. “What all the recipients have in common is breadth. In the beginning, partnerships tended to involve one business and one educational institution. Today, the collaborations are much broader. This year, the winners comprise some 15,000 partners. That’s encouraging. It’s a broad approach that will foster sustainable communities.”

It is an opinion shared by Barbara McNally, vice-president of the Ottawa Center for Research and Innovation (OCRI), one of five 1999-2000 winners of the Global Best Award. OCRI, an organization that boasts 472 members from local schools, businesses and government, promotes initiatives ranging from school breakfast programs to high-tech training for teachers. “Our mandate is to strengthen and improve the quality of life in our community,” says McNally. “We could not do that without the involvement of so many.”

Moving Forward Together

“A huge opportunity” is how Lynda Lysne, executive director of the Canadian Palliative Care Association (CPCA), describes her organization’s involvement with Glaxo Wellcome Inc. Currently, CPCA and the Mississauga-headquartered pharmaceutical manufacturer are developing an ambitious national program, Living Lessons, to educate patients, caregivers, medical professionals and policy makers about the benefits of palliative care. “We are a small and relatively new organization,” says Lysne. “There is no way we could do anything of this magnitude without Glaxo’s incredible leadership and commitment.”

According to Tara Addis, manager of external relations at Glaxo, it was about three years ago, after an intense period of research and dialogue with employees and various non-profit organizations, that Glaxo made the decision to partner with CPCA. “What we were looking for was a relationship with a charity that would allow us to go beyond chequebook philanthropy and pursue a focused, strategic approach to community investment,” she says. “Living Lessons allows us to do that. It’s an initiative that touches the lives of all Canadians. It also fits with our business mission which is committed to providing high quality care for all Canadians. At the same time, the program provides Glaxo employees with the opportunity to volunteer their time and expertise.”

That corporations are looking at community investment in more sophisticated ways comes as no surprise to Jan Belanger of Great-West Life and London Life in Winnipeg. Belanger is chair of the national chapter of the Conference Board’s Corporate Community Investment Council, an executive network that brings together representatives from leading corporations and the non-profit and public sectors on a regular basis to promote dialogue, share ideas and explore opportunities for mutual benefit. “Companies want to be at the table - be part of the process - rather than simply providing the funding.”

According to Belanger, taking community investment to “the next level” means that many leading corporations are looking to be partners in meaningful, accountable and broadly-based programs that provide opportunities to engage a company’s expertise as well as its employees and customers.

Certainly, that was Petro-Canada’s intent when it recently chose to celebrate its 25th anniversary by partnering with the Canadian Cancer Society (CCS). This spring, the oil company donated $500 thousand to the Society’s Cancer Information Service, a toll-free, national service that provides callers with information on topics ranging from cancer prevention to treatment options. Petro-Canada customers and employees can also participate in the initiative by arranging to donate their PetroPoints to the CCS. Says Hazel Gillespie, Petro-Canada’s national community investment manager in Calgary, “The Cancer Information Service is a good fit for us. It’s accessible to people whether they live in rural Canada or big cities and it allows us to engage our employees and customers in a very meaningful way. It’s also a program that can be of great benefit to the communities in which we do business.”

The Royal Bank Financial Group (RBFG) is another player that is using a pro-active, collaborative approach to community investment. Concerned about the education and well-being of Canada's youth, the bank has launched an AfterSchool Grants Program designed to encourage kids to stay in school. As it is still undetermined which type of after-school program works best, the Bank has adopted a 'Request for Proposal' approach rather than to partner with a single charitable organization. Says Jackie Tuffin, RBFG’s vice-president corporate contributions, "Since the audiences and communities differ, certain programs may be more successful in some locations than others." As a result, 1999 saw fifteen new or existing community-based programs for kindergarten to grade 12 students receive funding from RBFG.

The After-School Grants Program is just one of many CSR initiatives featured in the RBFG's first community report, Beyond the Bottom Line. The publication of this report places RBFG among a growing number of forward-looking companies that believe it is important to share information on how they have implemented the concepts of CSR to make a difference in society that goes beyond the bottom line. Indeed, RBFG's efforts have paid off, as the bank has been named the top corporation in Canada in Report on Business Magazines social responsibility category for the fifth straight year. ■


Corporate Community Investment Councils

The National and Western Corporate Community Investment Councils provide community investment officers at corporations across Canada with a forum for learning and professional development. More information about the councils as well as current members can be obtained at the following Web site: www.conferenceboard.ca/ccbc/Networks/ccico.htm