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GreenMoney Journal - publishing since 1992
Winter 2009/10 issue
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Corporate Responsibility: A fad or a way of life?
Gareth Llewellyn
Over the past decade, globalisation has had its fair share of its critics. Large corporate failures
have added to the concern about the ability of businesses to operate responsibly. Nevertheless, in
responding to the recent appalling disaster in the Indian Ocean, the corporate world, particularly
those businesses with a global reach have shown they can be a force for good. There have been
numerous examples of companies donating millions of vaccines, providing logistical support, or
financial aid. But is this responsible face of business a fad, or is it likely to have some
longevity?
National Grid Transco is one of the world's largest utilities focused on
delivering energy safely, reliably and efficiently. We do not generate electricity, nor are we in
the business of gas extraction. We manage infrastructure in a way that provides secure energy
supplies essential to economic prosperity; the cornerstone of sustainable development.
In
the northeastern US, we deliver electricity to 3.3 million customers, and gas in upstate New York
to around 560,000 customers. In the UK, our local gas distribution network delivers gas to some 21
million homes, offices and factories, and we own and operate both the high voltage electricity
system and the high-pressure gas transmission system.
Corporate responsibility is best
characterised as being the contribution that a company can make to helping society as a whole
become sustainable, and extends to both social and environmental responsibility as well as being
financially viable. Against this background, we have been working to integrate responsible business
practices into the fabric of our day-to-day operations.
Our approach to corporate
responsibility
In 2001, we asked our 14000 employees across the world for their views
on a wide range of issues including respect for human rights, climate change, safety,
profitability, service delivery, corruption and bribery and corporate philanthropy. In a parallel
initiative, we also asked 2000 external stakeholders including Government ministers, NGOs, media,
customers, and shareholders for their views on the same issues.
As a result of this
process, we published our Framework for Responsible Business in 2002. Since its publication, we
have used the framework to drive the way in which we do business across the world. Having
established our business values, we have also sought to set out in more detail how the company will
approach issues of importance such as human rights, safety or climate change.
Human Rights - a cost or a benefit
In 2001, National Grid Transco together
with five other companies set up the Business Leaders Initiative on Human Rights -
http://www.blihr.org
under the chair of Mary Robinson, former UN High Commissioner for Human
Rights, with the aim of developing a toolkit that would enable businesses to integrate their human
rights obligations within their day-to-day operations. In 2004, we were pleased to welcome Hewlett
Packard and the Gap into BLIHR.
The members of BLIHR have since developed numerous
examples of how human rights can be integrated into business decisions. This sends a powerful
message to the wider business world that the effective management of human rights is not onerous.
For example, in Australia, we are constructing the world's longest undersea power cable
which, when complete, will enable the mainland Australian energy market to access the extensive
renewable energy on Tasmania. During the construction of the project, our subsidiary Basslink has
employed representatives of the local aboriginal communities on both the mainland and in Tasmania
to help supervise activities. All artefacts of cultural significance for the aboriginal communities
discovered during the project have been protected and have provided valuable information on trade
routes and migration patterns. As a result we have ensured that the project continues on schedule
at the same time as providing employment for the indigenous population and setting the basis for
long-term stakeholder relations.
In reality, an intelligent approach to human rights can
be a benefit to both the business and the communities it touches.
Meeting the
challenge of climate change
Climate change is a natural phenomenon, witnessed by
previous periods of glaciation. However, there is no doubt that the current rate of change has
been affected by mankind, and the ability of the environment to rebalance itself without our active
intervention is questionable. Against this background we have made our position on climate change
very clear, and have a programme of initiatives which will make our contribution to protecting the
environment for future generations.
The demand-side management programmes of our US
operations save over 1 million tonnes of CO2 annually. We also offer a renewable energy tariff to
all electricity customers, and are currently trialling hybrid vehicles for our fleet. In the UK we
are replacing old cast-iron gas mains with plastic pipes which will reduce methane leakages, and
our gas transmission network is enabling power generators to move away from oil and coal as sources
of fuel.
One of the challenges head is to convince the more sceptical elements in the
equity market that this proactive approach holds short-term as well as long-term value for the
company.
The welfare of our employees
Safety is critical in our
business. We have a moral duty to look after our employees and every one that works with us. Our
aim is therefore to operate with zero injuries every day; accidents do not happen, everything is
preventable.
In 1998, there were more than 500 work-related injuries in Transco, our UK
gas business. It was calculated that each injury cost the company around $10,000. In response to
this, we put in place the Safety Charity Challenge. Employees were set the challenge of identifying
and removing workplace hazards. When the hazard was removed, employees were given a check to donate
to charity. Since 1999, we have donated over $5 million to national mental health charities as well
as smaller local charities. In the same period there has been an 80% reduction in injuries, and the
challenge has been entirely self-financing.
So sound business practices can pay dividends
for both the company and for those less fortunate in society.
Where are the benefits of
responsible business practices?
There is a natural tendency for companies to look to the bottom
line for an immediate indication of the benefits of corporate responsibility. The fact that the
benefits will also appear in intangibles should not be overlooked.
In the summer of 2004,
we undertook another world-wide employee survey. Of those responding, 85% of employees felt the
company was committed to environmental issues, with only 5% feeling the company had more to do. In
addition 89% of employees felt the company was responsible in its business dealings with others.
The impact of responsible business practices on the culture of a company and the engagement of
employees should not be overlooked.
The other benefit is in reputation. National Grid
Transco's Board uses a number of corporate responsibility indices as a way of measuring the
reputation of the company, a key part of the intangible valuation of any business. In 2004, we were
ranked #1 in the UK's Corporate Responsibility Index, in the premier league of the UK's
Environmental index, 4th in the Dow Jones Sustainability World Index, and retained our position in
the FTSE4Good index. Our progress in all of these indices has confirmed there is indeed
reputational benefit in having a transparent approach to corporate responsibility.
There
remain or course those who are sceptical about the "traditional" benefits arising from a more
responsible approach to business. However, the significant increase in SRI funds and their
willingness to stick with responsible companies is an important foil to the short-term approach of
hedge funds. By retaining stock in responsible companies, SRI funds offer one benefit which even
the most sceptical of CEOs or CFOs crave - reduced volatility in stock price.
Our stock is
currently held by, or is eligible, for over 40 SRI funds across Europe, and we have been chosen as
"best in class" by companies like Storebrand for its environmental and social performance. While
our primary listing is on the London Stock Exchange, we have a secondary listing on Wall Street,
and are therefore also suitable for US-based SRI funds.
So where from
here?
Companies with a visible approach to corporate responsibility are clearly more
able to manage non-financial risks to shareholder return than those without a well-thought through
strategy. With a clear distinction between companies with a commitment to responsible business
practice and those less convinced, the ball is now firmly in the court of the fund manager. By
selecting and retaining stock in responsible companies, the equity market will send a very strong
signal that corporate responsibility should become a way of life for companies and not a passing
fad.
Article by Gareth Llewellyn is Group Corporate Responsibility Director for
National Grid Transco. Further information on National Grid Transco's "Framework for Responsible
Business" can be found at http://www.ngtgroup.com/responsibility
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