UK-based corporate sustainability veteran David Logan, who is now working with the firm, will tell you that the move from beleaguered company with a less-than-stellar reputation to that of a leading sustainability leader is one that is fraught with challenges - but worth attempting nonetheless.
This is because expectations from an increasingly environment-conscious consumer base have changed.
“Companies are getting pressure from consumers that they want these companies to solve these [sustainability] problems for them. They want to be able to consume without irrevocably damaging the planet, and companies are picking up the challenge,” said Mr Logan, who is the founder and co-chair of Corporate Citizenship, a UK company that works with corporate clients on long-term sustainability issues.
In a recent interview with Eco-Business, Mr Logan revealed that he is now working with Golden Agri-Resources (Golden Agri) on the firm’s first sustainability report.
Golden Agri - which enjoys annual revenues of more than US$2 billion - has in recent years been in the glare of the public eye, with environmental groups such as Greenpeace campaigning against the firm over allegations of illegal forest clearing.
Last month, the firm announced that under its new forest conservation plan, Golden Agri and its subsidiaries, including Indonesian-based PT SMART, will work with Geneva-based non-profit organisation The Forest Trust to prevent the development of areas such as peat lands and high conservation value forests for plantation use.
The partnership comes after the allegations prompted major palm oil buyers such as Nestle, Unilever and Burger King to stop making purchases from the group. Golden Agri commissioned an independent audit by Control Union Certification and BSI Group to investigate the allegations, but after the results were released both parties clashed on how the report should be interpreted.
Mr Logan, who has a long history in corporate social responsibility (CSR) having started in the field for Levi Strauss and Co in 1980, said: “It’s not easy when you’re under intense attack by Greenpeace. They’re pretty ferocious. It’s not easy to keep your nerve and respond.”
Golden Agri appointed strategic communications consultancy Pelham Bell Pottinger Asia, along with its sustainability specialist arm Corporate Citizenship, to help them deal with the situation. Mr Logan was involved in examining some of the challenges presented by the Greenpeace campaign, including the validity of the allegations and possible courses of action.
In his view, Golden Agri responded quite well. “They responded by having an independent survey done, which was interesting because it revealed certain strengths and weaknesses in the company’s approach. And they’ve gone the next stage further and said we’re prepared to partner with an NGO.”
The list of clients that Golden Agri joined includes companies such as Unilever and Cadburys with strong corporate responsibility records. In Mr Logan’s words they are “leading British companies that are thinking outside of the box.”
Setting the bar for CSR
The use of the term ‘leading company’ is more than descriptive in Unilever’s case. The company is one of the 54 founding members of the Global Compact LEAD - a platform launched by the UN Global Compact at the World Economic Forum in Davos in January. Unilever has implemented a ‘Sustainable Living Plan’ aimed in part at doubling its business while at the same time halving its environmental impact. It is one of the global companies setting the bar for today’s multi-nationals.
Today’s corporate sustainability leaders are moving beyond the direct environmental impacts of their operations to map the environmental footprints of their suppliers and customers. What they are finding is that their in-house operations are only a small fraction of the impact of their products.
To give an example, Unilever’s manufacturing processes account for only three per cent of their products’ greenhouse gas emissions, while product transport accounts for an additional two per cent. The vast majority of emissions occur before the company receives raw materials or after the products enter the market.
“What’s happened in the past five years is that companies have started to do this kind of systematic footprinting along the total value chain, not just the owned and operated business,” said Mr Logan. Companies are asking themselves, ‘how can we work on these other aspects of our footprint,’ he said.
“[The public] wants us carbon neutral, not just efficient. People buy that now, and they buy it not just for the owned and operated business, but for the whole value chain,” he said.
For multi-nationals, that means extending sustainability measures to partners in Asia as well. The result, Mr Logan explained, is that companies such as Unilever want to think about how to reduce the carbon footprint in Asia.
“You have to have an active role in thinking as a business about how can we reduce the carbon footprint of our suppliers and our consumers as well…There’s not a sharp disconnect between Asia and Britain. We’re all on the same platform,” he said.
So what is the best way forward for companies such as Golden Agri, who want to become a sustainability leader?
Mr Logan argues that the tendency for Asia’s businesses to view themselves as part of their countries’ national-building efforts works in their favour. He pointed to the Tata family in India, who saw their business success as integral to the success of an independent India.
“There are some Asian companies that have always been highly responsible like JN Tata and Sons in India. There’s been a tradition of corporate responsibility in India that is world class within its own context. It’s just rather different to the American and the European model.“
Whether Asian or western, sustainable companies see themselves as long-term members of their communities. “The fundamental question that it’s taken a while to get settled is that corporates are in a sense citizens. They are players in society. They have rights and responsibilities. This is what we argue and what we try to do is encourage them to step up to the plate on their responsibilities.”
Mr Logan admitted there are areas of Golden Agri’s operations that can be improved, and points to the company’s new partnership with The Forest Trust, UK (TFT) as one way forward. TFT is a global non-profit founded to help companies source forestry and other products sustainably.
“I think the best NGO’s…bring to the table independence and a sort of commitment to the public good. So, they’re now sitting alongside Golden Agri. They’re going to be looking at their forestry business practises to see where they can be improved.
“There needs to be improvement there, but there are other things that Golden Agri were doing, particularly on the labour side, which were very, very good. Their owned and operated business in terms of social economic profile was well-run.
“The whole question was access to land, and the quality and integrity of that land. Clearly RSPO was perceived by many as moving too slowly. So TFT is going to move Golden Agri on with their partnership. I’m sure there’ll be struggles,” he added.
Clearly defining the government’s policy and mapping the relevant forested areas are some of the struggles he predicts: “The Indonesian government needs help and support to manage its assets better… When I’ve spoken to people in the field, they’re still working from Dutch colonial maps. There’s a knowledge gap, and then there’s a gap in terms of government capacity to enforce the national policy.”
The boundaries between local and national policies, as well as the physical boundaries of forests to be protected are anything but clear. Some of the land protected as virgin forest has already been destroyed, and some of the land earmarked for agricultural development has pockets of high conservation value forest or peat land.
Mr Logan said that Golden Agri has committed to only planting on land designated by the government for agriculture development. He believes the bigger companies like Golden Agri have a strong vested interest in staying clearly inside the national policy.
Vested interest in transparency
Also in Asian businesses’ best interests are transparency and sustainability reporting, according to Mr Logan.
“Transparency is an issue in Asia. It’s been a battle to get high levels of transparency in Europe and North America (over the years). You don’t have these traditions of transparency here, particularly within business. The vast majority of businesses in Asia are still family businesses. It’s publicly listed companies that have the highest levels of disclosure because that’s required for investment purposes.”
Mr Logan said that because sustainability issues are so central to the success of companies that are heavily reliant on natural resources, “it becomes absolutely logical to add to your basic financial report a sustainability report, because it gives your investors confidence that you’re thinking about and managing these issues. It’s risk management. A large part of CSR is based around risk management for the investor community.”
One of the main advantages of doing sustainability reporting, he said, was that the reporting process pushes the company to get its act together: “if good companies want to be around for fifty or a hundred years, and want to have an optimal rate of return on their investment, then they have to manage these dimensions to business.”
Additionally, he added, companies like Golden Agri want to get credit for the good works they are doing: “they realise that the good works they are doing, because it’s not all a bad story, are not being heard at all, so nobody’s cutting them any slack.”
The key to a good sustainability report, and where Unilever excels, according to Mr Logan, is to be open about the dilemmas you’re facing:
“Companies are under a lot of pressure to put a good face to the world. They find it difficult to discuss dilemmas openly because if they admit to a dilemma they’re likely to get attacked. They often need time to figure out what the appropriate response is…one that they can live with, and what their plan is.
“Unilever is very good. They say ‘we don’t quite know how we’re going to do it, but we know what we have to do. If we’re going to grow, if we’re going to double our size – we have to halve our environmental footprint.’”
Now, all eyes are on Golden Agri to see if they have what it takes to turn it around.
