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The department of good works

This chapter covers the evolution of the corporate responsibility function within companies, its organizational structure, and how these factors affect the practice.

Doing well is the result of doing good. That’s what capitalism is all about (Ralph Waldo Emerson).

I believe that most people would claim that they want to do good things for others. But, when it comes to their careers, that inner altruism is often forced into the back seat. At the risk of stating the obvious, “the business of business is business.” When you go to work for a company, whatever your role may be, you are expected to deliver a return on the company’s investment in your pay and benefits. For most roles within big companies, this means that saving the world may not fit into your job description – at least at first glance.

The reality of working in a big company is this: you are given a set of goals, your progress toward those goals is measured (usually in periodic performance reviews), and your performance is typically ranked against your peers (which is somewhat counterintuitive since most companies extol the value of teamwork). The environment is competitive, with money and advancement up the corporate ladder on the line. On top of the intrinsic competition, and lurking in the background at most companies, is the very real threat of layoffs that are increasingly a fact of life. All of these pressures drive you to keep your head down and remain focused on delivering on your goals, not taking time out to help make your company more sustainable.

Most of the books on sustainable business give you academic models, case studies, and high-level theories on how to embed sustainability into business or how companies can unlock hidden value by investing in corporate responsibility. As discussed in the introduction to this book, all but the most senior of corporate jobs don’t have the scope or authority needed to drive this type of change. This book focuses on practical, proven strategies to drive sustainability from a staff-level position.

To set the context, this chapter describes the genesis of corporate treehugger jobs. Corporations have had small groups of people in altruistic roles for many years. Recently, the number of these jobs has been increasing along with rising awareness and importance of corporate responsibility.¹⁰ This chapter lays out the evolution and raison d’être of business functions that contribute to society, from the traditional community affairs team, to a full-fledged corporate responsibility department.

The evolution of corporate responsibility

Steven Covey, in his timeless classic The Seven Habits of Highly Effective People, coined the phrase “seek first to understand” (Habit 5).¹¹ Following this rule, let’s first step back and reflect on how social responsibility became intertwined with business. Starting in the 1970s, as the fundamental environmental protection laws were put into place, companies were on one side and environmental groups were on the other side while the government played referee and set the rules and regulations. As these battles subsided, something happened: the environmental movement won the hearts and minds of the public. With public support for environmentalism polling overwhelmingly favorable, companies changed their tactics from fighting regulation toward voluntarily “greening” their operations.¹² Since that time, the traditional interest groups have been rearranged. Instead of lining up against environmental regulations, most of the Fortune 500 companies are now spending significant resources to demonstrate their sustainability credentials.

Like the end of the cold war, the victory of the environmental movement slowly filtered into our collective consciousness and a new world order emerged. In the new world, all things green are good. “Green” has become a verb. Cigarette packages carry environmental messages and even defense contractors publish sustainability reports. Being against “green” in the new world is like being against technology. Raising objections to sustainability will guarantee your status as a Luddite.¹³ The future, it seems, will be green (or, for the more cynical, at least be branded with green leaves printed on Forest Stewardship Council certified post-consumer paper with soy-based ink).

The point is that most companies are no longer actively (or openly) campaigning against environmental rules. On the contrary, most big companies are now tripping over each other to demonstrate their good works and many are finding value beyond enhancing their brand reputation. To do this work, companies need a department of good works – a group of people who are responsible for the care and feeding of the company’s reputation as a responsible corporate citizen … the tree-huggers in the corporate world.

The battle for the corporate soul

An example of the shift toward corporate “greening” was the near-mutiny at the U.S. Chamber of Commerce in 2009 when PNM Resources Inc., Exelon Corp., PG&E Corp., and Apple resigned from the Chamber over differences on climate policy (Nike also resigned from the Chamber’s board of directors but vowed to remain a member company). These companies took a visible and principled stand to oppose the Chamber’s regressive stance on pending U.S. legislation to protect the climate.

To borrow a phrase from Malcolm Gladwell, these high-profile defections from the Chamber signaled a “tipping point.”¹⁴ It seemed that the companies who left the Chamber had reached the point at which the risk to their brand image for being seen as opposing climate protection legislation was greater than their potential savings from avoiding climate regulation.

One of the themes of the film The Corporation is that companies will always act out of their own self-interest. If this is true, the defections from the Chamber might signal that the benefits of a responsible reputation are now far more valuable than avoiding the costs of climate change legislation. Perhaps these defectors were the vanguard of companies making rational, self-interested decisions in favor of the environment because to do so makes economic sense for them. By leaving the Chamber, they stood to benefit by protecting and enhancing their reputations as responsible environmental stewards. From this perspective, distancing themselves from the Chamber’s efforts to dilute or defeat the climate bill was a rational business decision.

But this change may have been even larger than it seemed. The Chamber represents its members on a wide variety of legislative issues. According to the New York Times, the Chamber’s 2010 budget was approximately $200 million.¹⁵ This is a formidable war chest of resources to influence a broad range of legislation beyond the climate bill. So, by exiting the Chamber, these companies were, in effect, saying that the value of their green reputation exceeds the overall value they would get from the Chamber’s substantial lobbying might on all issues.

This case is about the battle for the corporate soul on environmental issues and corporate responsibility. If the value of being green now exceeds the value of avoiding costly regulations, it represents a sea change in thinking by corporate leaders.

Where corporate responsibility lives

There is no standardized organizational structure for the corporate responsibility department. In many companies the function grew out of the environment, health, and safety department, but it can exist almost anywhere within the corporate structure. There are, however, a few departments and functions that are traditionally focused on corporate responsibility issues:

Public affairs and community relations

A traditional home for treehuggers in a big company is in the public affairs or community relations department. These are usually small groups of people whose role is to build relationships with the local community – such as citizen groups, elected officials, and other influencers. They donate corporate money to worthy charities, field complaints from neighbors, sit on local boards, and coordinate employee volunteers to work on community projects. In larger companies, these departments often manage corporate philanthropy by running the company foundation, which donates money to selected charities and often matches employee giving.

Many companies also combine their government affairs – or lobbying function – into this organization. In essence, the public affairs group is like a public relations firm for the company – working at the interface of the company and the public to boost the company’s reputation and influence policies that affect its interests.

Companies have invested in these groups over the years for a number of reasons, all of which can be summed up under the phrase “license to operate.” The public affairs team represents the company’s story about job creation, economic growth, and prosperity, invests in community programs, and builds the relationships that help the company operate smoothly. This work builds the reservoir of goodwill needed to obtain permits, reduce taxes, or gain favorable policies without picket lines, protests, or costly delays.

Intel vs. Sumitomo: The license to operate

A case study of the “license to operate” paradigm comes from my days at Intel Corporation. In the late 1990s, the company was building a huge computer chip factory in the suburbs of Phoenix. The facility would use loads of water and hazardous chemicals, take up acres of land, and increase noise and traffic in the area. The Intel public affairs team fanned out to woo influential civic leaders. They held stakeholder sessions, listened attentively to concerns and took actions – often expensive actions – to reduce the factory’s impacts on the community. They also worked with state officials to secure the most favorable tax and regulatory situation possible.

In the end, the permits were issued, the tax breaks were granted, and the factory was built in one of the more affluent areas of town. The community’s reaction was overwhelmingly positive and, even through massive expansions (Intel has since built two more factories on that site), the relationship with the community has remained amicable.

Standing in stunning contrast was another computer chip company, Sumitomo, which had planned to build a semiconductor factory in Phoenix at about the same time. This facility would use a similar process to make semiconductor wafers, only it was supposed to be smaller and would be located in a less affluent part of town which, theoretically, would make it easier to get the needed permits. But Sumitomo didn’t invest in the community or do much outreach with neighborhood activists. Instead, it focused its efforts on obtaining favorable incentives from the city. The public hearings over the permits for this facility erupted into a firestorm of public protest and outrage that nearly scuttled the entire facility, delayed construction, and damaged the company’s reputation in the community. While the total costs of this incident were not made public, they surely exceeded the amount Intel invested in community outreach for its new factory in the same city.

This case demonstrates the value of community outreach to a company and why most medium-to-large companies employ several people in a public affairs function. In many companies, the public affairs department either grew into or became the organizational host for the modern corporate responsibility function.

Environment, health, and safety

Another traditional hub for treehuggers in the corporate world is the environment, health, and safety (or EHS) department (these groups are referred to as EHS, HSE, or SHE; this book will use EHS). The treehuggers tend to hang out in the “E” part of the EHS team – the environmental group.

The environmental department is where I cut my teeth as a corporate treehugger. My position as global environmental manager at Intel had responsibility for environmental compliance for 17 manufacturing sites (and numerous other facilities) scattered across the planet as well as company-wide environmental sustainability and product environmental standards. My time and attention were consumed by tactical management considerations such as knowing which regulations applied to which facilities, monitoring emissions and resources, and dealing with permits for new facilities. When I started in this role, the term “sustainable development”¹⁶ was still fairly obscure and, like most companies, the primary focus was on compliance obligations.

In these early days, the environmental compliance function had the attention of senior management, and for good reason: noncompliance can cost a company a lot of money. Intel got a wake-up call from some Superfund sites (toxic waste that had filtered into underground water sources) that the company was responsible for cleaning up. The company has grown so large since then that it is hard to imagine this today, but the cleanup was so costly that it had a material impact on the quarterly earnings reports. Then came the Clean Air Act of 1990. Intel viewed the rigorous and restrictive permitting requirements of this new law as a potential deathblow to its ability to build the factories and invent the manufacturing processes at the pace it needed to stay on top in the hyper-competitive semiconductor business.

With stakes this high, the EHS department had plenty of attention from the executive suite. Environmental operations were reviewed every quarter with then CEO and company founder Gordon Moore (author of Moore’s law¹⁷) sitting in to oversee the group’s performance. Every permit, cleanup site, and regulation was scrutinized in those meetings.

As the compliance and cleanup issues waned and public awareness of sustainability grew, responsibility fell to the environmental department to develop Intel’s sustainability program. The program officially started when Intel issued its first public report in 1995, which was called the “environmental report.” This report focused on the environmental improvements that the company accomplished over and above what the regulations required. The company had invested millions of dollars in pollution controls, process changes, and product changes to reduce its pollution and consumption of natural resources. Many of these investments were over and above what was required by the applicable regulations.

There were many internal meetings where Intel struggled over the return on these investments. Typically, my team was able to calculate the costs with precision, but the benefits were harder to quantify. During decision meetings the Intel staff often talked about values – such as “community goodwill” – which are vague and hard to monetize. The Intel management during this time deserves credit for making these investments in the face of unfavorable or unknowable return on investment (ROI). Most of these meetings ended when the decision-maker would ask, “Guys, is this the right thing to do?” We would go around the table and nod in the affirmative, at which point we agreed to move forward.¹⁸

In many companies, similar to the Intel case, the environmental team was the birthplace of the sustainability program. While the environmental function continues to be a central component of a sustainability program (especially for manufacturing businesses), the expanded scope of issues and expectations from stakeholders has outgrown the capabilities of the environmental department.

The growing gap between EHS and sustainability

A few years ago, I gave a talk to a group of EHS professionals illustrating the growing gulf between environmental compliance and sustainability. Titled “Sustainability 101,” I started the session asking for a show of hands on “who can define sustainability?” No hands went up and all I heard was the sound of crickets chirping. This audience was far more focused on the nuts-and-bolts of environmental management than the esoteric definition of sustainable development – the perfect group for my Sustainability 101 lecture! The widely used Brundtland Commission definition of sustainable development is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” This sounded like so much hot air to this group of compliance engineers.

After the event, it was illuminating to talk with some of the participants to understand the chasm that has grown between the practice of environmental management and the concept of sustainability. Sustainability is based on the “triple bottom line” measuring economic, environmental, and social performance. This broad scope includes issues, such as fair labor standards, diversity, and ethics that are beyond the scope of the environmental compliance function.

But there remain strong connections between the environmental management discipline and sustainability. I challenged this group to leverage their technical skills in the environmental field to be successful in the emerging practice of corporate responsibility/sustainability. Using my own career and stories from colleagues’ careers as examples, I focused on the essential skills and capabilities needed to transition from a career in EHS to a career in corporate responsibility (discussed in Chapter 2). The take-home lesson for this audience was that it is easier to start with a technical background and acquire the other skills needed for a career in corporate responsibility than it is for non-technical people to learn what this crowd already knew.

The corporate responsibility department

The corporate responsibility department is an aggregation and integration of environmental, social, ethics, communications, and other disciplines. As discussed in the introduction to this book, companies use several names to describe this function, the most common being: corporate social responsibility, corporate responsibility, corporate citizenship, and sustainability. The term “corporate responsibility” seems to be gaining in popularity because it is the most inclusive.¹⁹ While the roots of this function are often in the EHS or the public affairs department, the practice of corporate responsibility both integrates and expands beyond the traditional boundaries of both of these groups.

The best way to define the scope of the issues covered by the corporate responsibility department is the Global Reporting Initiative (GRI) guidelines.²⁰ The GRI guidelines have become the de facto international standard for disclosures on corporate responsibility matters. They are a collection of more than 100 performance indicators covering everything from corporate strategy, governance, economic performance, executive compensation, environmental performance, labor issues, human rights, impacts on society, diversity, and product responsibility, among others.

One of the primary responsibilities of the corporate responsibility department is to assemble and report on all of the information called for by the GRI guidelines in a corporate responsibility report. The number of companies issuing corporate responsibility reports (these reports can also have many names such as corporate citizenship, sustainability or corporate social responsibility reports) has grown exponentially over the last decade. The CorporateRegister.com tracks more than 38,000 corporate responsibility reports from 8,703 different companies across 159 countries. According to its website, the number of corporate responsibility reports has grown by 672% between 2000 and 2010.²¹

The role of the corporate responsibility department does not end with the annual CR report. This group must also coordinate, cajole, and motivate the corporate functions that produce the data included in the report. For example, because diversity is an important component of overall corporate responsibility performance, CR managers must work closely with human resources (HR) managers to understand and influence their diversity policies. The same scenario is repeated for just about all of the corporate departments. The role of the corporate responsibility manager is to align, influence, and communicate the performance of a very broad swath of issues that span the corporate structure. As discussed in Chapter 2, it takes a special set of skills to lead a function where you have broad responsibility for issues that you have almost no authority to control.

For the most part, corporate responsibility program managers must “lead through influence” in programs they do not directly control. In some cases, however, corporate responsibility departments “own” certain programs (i.e., they have direct authority). These can be “orphan programs,” meaning that no other department is managing the program but, because it is critical to corporate responsibility performance, the CR team takes leadership. For example, if the procurement team does not have the resources, expertise, or inclination to manage “supplier responsibility,” the CR team might step in to set up a code of conduct and a compliance program (see Chapters 6 and 7). In other cases, the corporate responsibility team might own programs that are remnants of their historical beginnings. For example, CR teams that grew out of the environmental department might continue to own the management of the company’s carbon footprint.

Ultimately, the corporate responsibility job is an eclectic mix of leading through influence, leading through authority, and communicating to the public about a very broad range of issues. To do this job well you have to have an understanding of a wide range of corporate functions, be able to influence them, and be able to communicate about them to diverse audiences. The essential skills required to do this job are covered in Chapter 2. Establishing and running a successful program are the focus of Chapters 3 and 4. Chapters 5 through 13 cover the knowledge about all the various programs under the rubric of corporate responsibility. Because communication skill is such a vital aspect of this career path, Chapters 8 and 9 (spoken and written communication, respectively) are focused on this topic.

While there is little consistency in organizational structure or capabilities of corporate responsibility departments today, as the field grows and matures there are efforts to articulate standards for the practice of corporate responsibility.²² Over time, there will likely be more consistency in the roles, responsibilities, and placement of the corporate responsibility function within the corporate structure.

Choosing the right company

After working in corporate responsibility roles at Intel, Apple, and AMD, I came to this observation: there are two ways that most companies decide to initiate a corporate responsibility function: the “epiphany” or the “2x4.”

Based on my own experience, corporate responsibility usually starts with a whack – the metaphorical 2x4 – upside the head. In these cases, the company is suddenly faced with a significant business risk that must be addressed through corporate responsibility measures. In Intel’s case, the 2x4 moment was the threat to its business from increased environmental regulation (Superfund cleanup and Clean Air Act permits). In Apple’s case, it was allegations of sweatshop conditions in the factories making its iconic iPod. There are many other examples of the 2x4 effect, such as the highly public revelations of sweatshop conditions in factories supplying Nike and Gap. In my experience, this is the most common way that companies decide to invest in this function. Once one company experiences the 2x4 effect, it serves as a wake-up call to other companies in the same sector. Often, one whack is enough to move a large percentage of the industry out of fear that they will get whacked with the same piece of lumber.

The epiphany scenario is when the founder or CEO of the company declares that his or her company will be a leader in responsibility. Great examples of this scenario are Ray Anderson (the late CEO, Interface Carpets), Gary Hirshberg (former CEO, Stonyfield Farm), Dame Anita Roddick (the late founder of The Body Shop), Jeff Swartz (former CEO, Timberland), Ben Cohen and Jerry Greenfield (the founders of Ben & Jerry’s), or Jeffrey Hollender (former CEO, Seventh Generation). Each of these business leaders deliberately set out to integrate corporate responsibility into their business strategies. This is very different paradigm than the 2x4 model because these programs are not born out of crisis management or problem-solving mode. These companies are dedicated to making a profit while simultaneously helping people and the planet. Epiphany companies often use their stance on sustainability and social justice as a differentiator in their market. Because the responsibility message is coming from the top, it becomes ingrained into the DNA of these companies, and thus is manifest in just about every corporate function and job.

This is an extremely important distinction for the treehugger looking for work in the corporate world. In epiphany companies, you are likely to find opportunities to work on responsibility issues in any job. In 2x4 companies, the jobs that impact sustainability issues are more limited and changing the company’s behavior is more challenging.

Based on this paradigm, you probably want to work for an epiphany company. The problem is that there are far fewer of them and the competition for jobs is stiff since so many new graduates want to work for a values-based company.²³ Don’t despair: there are still plenty of opportunities to contribute to social and environmental improvement in 2x4 companies, and since that is where the vast majority of treehugger jobs exist, this book will focus there. While there is little consistency in the structure of corporate responsibility departments in these companies, there is a common set of skills and duties that apply.

Group gravity

The old axiom of “where you stand depends on where you sit” comes into play depending on where your CR department is located within the corporate structure. The gravity of the function and culture of your organization will affect the make-up and focus of the corporate responsibility department. For example, if your CR team sits within the marketing department, you will likely have access to the marketing decision-makers and budget. Naturally, your efforts will lean toward weaving responsibility into brand or product messages. At Apple, I worked in the procurement or “operations” group and, predictably, my team was focused on how we could drive responsibility through supplier relationships. At Intel, my team was in the EHS department, which drove our focus into facilities and compliance issues.

Regardless of the tilt that comes with the organizational structure, the scope of issues that the corporate responsibility group must understand, influence, and communicate extends beyond the boundaries of traditional corporate roles. While this can be frustrating, it can also be exciting and satisfying. Very few jobs, outside of the executive suite, have access to more of the company’s functions, and fewer still have the opportunity to influence these functions to improve social and environmental outcomes.