Tell.... the truth

Transparency and Accountability are great concepts and are tremendously popular words nowadays, but, working in the area of Corporate Responsibility reporting, but with reference to general communications from companies and other organizations, it is clear to me that it does not matter how much you say, or what you say.

What matters, is that what you say is true; but even then, what about what you do not say? It is perfectly fine to say the truth, but not say certain things, and thus, in effect you are not telling the truth -but how do you say everything (of course, being truthful about everything)?

This is the challenge, and one complicated by the fact that revealing such information may well be commercially sensitive or create difficult situations for those involved. The easiest answer is to work out what you need to say that people want to know about, as much as possible -and for each of these topics have a group of people who can represent those who might want to know the information and can decide what information should be released or not to ensure the overall picture is fair.

You might also want a second group of people to then be able to actually know all that information: the bad, the good, the sensitive etc, and be able to judge that what was said is a fair reflection or not.

Now doing both will be very hard and time consuming, but might be necessary in some situations, where it is important to rebuild trust after having lost it. In reality, no-one will go to such extremes to prevent losing trust, but will after they lose trust and get desperate!

Each organization needs to tell the truth, and that requires telling the good, the bad and the ugly. If not, no-one will trust what you say, and that seems to be the problem with business now. Business has not tried hard enough to say the truth, and now wonders why no-one trusts business! Business has to get its act together, and find a solution.

Economic downturn great news for the Planet

With less money to buy things, people are going to buy less and use less. This is great; there will be less construction, less need for paper and packaging, less automobiles and less of many other things... Not the best way for society to consume less, but the most effective!

There will be a need to keep an eye out for shortcuts being taken to make products cheaper by using less sustainable production techniques or using less sustainable materials. Hopefully pressure from NGOs and the media, as well as the recent spurt in transparency through online campaigns, will restrict the success of companies that try such shortcuts.

In the meantime, it can be expected that with prices of carbon being factored in, prices of water and transport increasing, and new ideas to integrate the environmental costs of products; prices for many products will continue to increase, further reducing consumption. With otherwise downwards pressure on inflation, this will be a good thing, and something consumers might be able to weather (unlike last year when inflation was so high).

What worth is CSR Assurance?

Recently a report came out about assuring CSR reports (i.e. verifying that the information in the reports are true) which was funded by CSR Assurance companies (hmmm), saying that not enough companies are assuring their CSR reports (surprise, surprise).

I would like to proffer that CSR assurance is actually pretty pointless and useless (in of itself) because:
1) How much time or effort do any of the assurers put into looking at any of the data to see if it is true; is it even possible to verify half the data anyway?
2) Is there any legal liability for assurers, like there is for assuring regular financial reports?
3) Does the assurance mean anything to the reader at all, or add any value to a CSR report?

Question 3 is rather interesting, because the best CSR reports now include all kinds of other methods of assurance, though not technically 'assurance' which for me are much more interesting and useful. These include comments from concerned employees or customers, (unedited) comments from critical stakeholder councils and even comments from a CSR expert on whether the key Reporting principles have been followed or not (e.g. GRI has several principles including materiality). Others include reports from SRI experts or other relevant shareholders.

All of these comments mean more than a statement that the numbers are correct, which i truly doubt, since many of the most important numbers are hard to measure and the rest rely on self-reporting from the company anyway (rather than some auditor going across the world to check on what the exact waste is from any particular machine and whether that is what it has been claimed to be).

So, nothing wrong with assurance, but i do not think it adds much value to a CSR report for external readers, and probably does not (in of itself) help a company improve itself internally. At least, in the press release, they admit that the quality of assurance varies widely, and also point out that many of the assurers are also the ones who help prepare the report!

Transparency is...

...a swimming pool with clean water, where you can see the ends, see the floor, see who else is in it.

...not a muddy lake where you do not know how deep it is, what attackers lurk within in etc.

A great mental picture which has many lessons for the real world. think them through in more detail.

Participation

Levels of Participation is what possibly used to be 1 aspect separating businesses from NGOs from governments -but the recent trend has been for everyone to take-up participation in different ways which is now another example of the blurring of the line between the 3.

Governments all try different models of participation as democracies or even as autocracies too various degrees; with citizens able to vote on certain people or decisions as well as have access to information and the ability to input into ideas, processes etc through consultations.

NGOs have long had to use participation to find volunteers and raise funds and utilise some sort of research to start an idea and then to affect real change engage people in their activities as much as possible.

Businesses used to only use participation for market research and employee unions, but now involve employees much more, customers and their ideas much more and stakeholder engagement is the buzz word around to identify new opportunities and understand potential risks.

Though all kinds of participation are different within sectors and within organisations there still is a trend for all 3 sectors to increase their participation: for government it is a way to increase their legitimacy (which is getting lower), for businesses it is a way to increase trust and hopefully increase profits and for NGOs it helps increase their impact.

Participation for me is a great thing as it helps create mutual accountability between groups, increases communication, gains greater agreement, inspires confidence and generates ideas amongst other things. Of course there are limits to how much participation is useful -however I believe these limits should be decided by the 'participants' rather than those deciding. If it requires too much time for too little benefit, let the 'participants' say! If 'participants' are not qualified for certain discussions, let them realise so!

Power to the people, greater participation and greater involvement can unite this world slowly and surely to achieving better things for more people in better ways. After all, who will complain if an idea they contribute to fails? Though they might not take responsibility, they will still be happy about the process of decision making -and this is the key point for participation. The process is more important than the result and if 'successful' will often achieve better results in the wider sense.

Transparency

Transparency is important and becoming increasingly so. I am a big champion of transparency, but then I work for an NGO, so I would be!

I was wondering, in the context of the previous post about the 'invisible line', about how transparent a business could be. Nothing is simple. I looked before at why businesses are not responsible, since no-one seems to focus on this as much! Likewise, why is the 'publish what you pay' coalition (seemingly) such a failure? Why are companies not telling everyone how much taxes they are paying? Why in their Annual Report do they not geographically break down their payments? I think there are some unforeseen consequences. These could be positive but they could be (almost) revolutionary (sounds so dramatic). Let me introduce some scenarios:

-Shell says how much it pays the Nigerian government in taxes; the local people try to find out where it is getting spent and then civil unrest starts. This forces Shell to stop producing and to leave the country -for how long? Alternatively say Chevron pays less taxes and everyone tries to work out if this is justified or not (maybe from less income) -since tax regimes are so complicated that unfair comparisons are likely to be made and little achieved.

-If Wal-mart declared part of internal financial statements then competitors can work out their margins. Suppliers will realise the actually costs or sales of their products and renogotiate. Maybe this is stupid: but this is transaprency. Imagine that the current trend of supply-chain management develops so that customers demand more. Not just wanting to know if the company supports illegal forests, but wants to know if they use any of this or that chemical, they want to know how many products are bought locally (to support the local economy) and they want to know which ones. This could be fantastic: a concerted drive to source locally since customers might pay more for locally sourced goods it if keeps their neighbours in business, and so Walmart buys more locally... One way or another Wal-mart is forced, or voluntarily, reveals all this kind of information.

-If the terms of a contract were made public, how would this impact future competitiors wishing to bid for the contract? Granted if this was unusual, there would be (presumably) inequality in bargaining power, in knowledge disclosure and so on.

What I am really getting at, is that transaprency could work. But if it is to work, it needs a totally new paradigm: a new society with a new perspective on transparency with consequences that would (if transparency were the 'norm' -ie. legally enforced, and so everyone had the same access to the same knowledge) completely revolutionise how business is done. Would business be able to survive in this environment? I wonder if anyone has thought about any modelling of how it might, or how business could compete with total transaprency?

If we presume, that this would not be possible, then we have to work out where the line is between no transparency to total transaprency. Then we need to establish the motivations behind increasing transparency: legal or just self-interest? Transparency will increase when organisations think it is in their own benefit. Otherwise it would not be sustainable. No wonder 'publish what you pay' is destined to fail. NGOs might wield power of a sort, but its influence is limited when its demands unreasonable and when the impact of its activities (even if successful) may be limited: the unintended consequences could be graver. I'm a believer that someone will do something if they think its right. Telling them its right is not as effective as showing them.

Back onto the topic, what if transparency was not total: but more complicated (even those complexity usually makes things worse, in my opinion). What if different disclosures were made to different groups at different times (or when asked) and what those groups did with information did not affect the company's competitiveness or comparative advantage? Well, lets see if this will work. It seems this is the way the World is going... I can imagine in the near future that Transparency International will get certain information, create a report and say 'trust me' without revealing all the details. But what makes this interesting, is that companies are now refusing to trust governments with their details (ID cards in UK, google in the US), so why should we trust NGOs, or any other organisation for that matter?

I'm looking forward to how the current experiment in transparency works out and would be much more interested to look further into a concept of a world with total transparency: what would the ramifications be for salaries, costs, negotiations....?Why, we might end up in a world totally different -would it be a world that works better than the current one? Maybe, but will it be better for those who control the world now -no. So how likely is it to happen? So, going backwards somewhat (to reality), how likely is transparency as a concept to develop anyway? It is a concept that SEEMS to only have negative effects to those benefitting from an untransparent World. What is the future of transparency?

The invisible line

Assumption:
-Partnership between sectors and organisations are good. eg. government and business collaborating on new laws that businesses could abide by and benefit from or companies in the same sector creating a voluntary code that they will agree to (such as not advertising chocolate to shildren)
-Corruption is bad. eg. business paying government to make, or not make, a certain law or businesses working together as cartels to create artificial price fixes

You'll see what I am leading to... where is the line between partnership and corruption? That the line can be greay and not black/white means it is harder to define the boundary, but more importantly, it is harder to interpret. So a company may quite happily have 2 principles: 1 of partnering to achieve more and 1 of refusing to be involved in corruption. It may strive to work closely with its suppliers and customers so it can better service them, it may give preferential treatment to preferred suppliers. But when does this preferential treatment become bribery?

Consider the case of treating a customer to dinner, or the case of a business partner also being a friend. When does the dinner become a bibe and when does a social conversation about their sector end up as a tacit agreement to collude or lead to sepcial favours? When recruiting someone, it is sensible to take into account personal experience or recommendations, but how valid is this, and does this not lead to discrimination against those who you did not know before?

Thinking about this more and more show that there are so many more examples -how do you draw the line? Presuming you do not intend to break the law then the line is very subjective. It is defined in reference to the 'norm' (ie. the normal circumstances that you think everyone does all of the time as part and parcel of the job). This creates a problem if there is no established 'norm' or if you do not know what the 'norm' is. In the case of China, where everything changes so fast (including the legal framework) and where most foreigners enter the market without understanding the culture or even being able to communicate effectively these issues might become especially valid.

On a slight tangent, this question leads me to think of the separate role of government and business. Is there a separate role? In every country the role is different. In some cases governments provide training, healthcare, utilities, salaries (pensions, unemployment benefit) etc etc. In others it is different. On a micro level in China you will find the British Embassy offering some free advice to British companies wishing to set up here, since the government wants to encourage business success, yet the company could also pay a special consultant for more in-depth advice. In fact often the government might subsidise this kind of advice directly.


What do companies do? Provide services in return for money? well governments do the same: you pay in your taxes and receive benefits. Governments tend to then themselves pay another company to do some of those services (outsourcing) and then it can all get complicated and confusing. I think the concept of CSR is struggling somewhat since it is trying to establish the rold of business in society: in reducing poverty, in creating a successful, sustainable society and so on. But this is also the role of national, local or international governments. Then there are NGOs: many bigger and with more influence than business or governments. Many performing services that are effectively government services outsourced.. but to an NGO not to a company. No difference, except in name.

All types of organisations have the ability to accrue debt or make profit. It could be possible to argue that governments are elected, other organisations are not: but this has nothing related to role of the organisation itself: maybe in the future, since stakeholders are becoming so important in business, that business will not just hold itself accountable to its stakeholders, but will go even further and hold itself electable to stakeholders. It will certainly gain legitimacy and trust! Though this may seem pointless since many countries struggle to have high turn-out in their governmental elections anyway!

So, the invisible line: macro and micro level discussions. Impact on individual level? How the individual defines their own lines, in the context of how the individual believes others see the line, and how the individual thinks others expect the individual to draw the line. Its all to subjective... no wonder corruption is a problem!

Management problems

When writing my ideas for submitting an essay to the China CSR Map's essay competition I started thinking about CSR in China from an objective, long-term perspective: trying to think about why CSR is growing, is it growing and where is it going...

One of the issues I draw upon is related to the State Owned Enterprises (SOEs) in China. The largest national ones have all been put under the control of SASAC (State-owned Assets Supervision and Administration Commission of the State Council) in order to reform and restructure the SOEs. The question I posed was oringnally just about CSR: If the government wants to encourage CSR then it should tell the SOEs and they will do it, or not?

Now ignoring the issue of CSR and just looking at the issue of owners telling the managers to do something, you come to several problems. Key, for me (especially in a CSR context) is that it is likely that some of the instructions will be beneficial to the SOE, but not to the manager. If we presume that implementing CSR has negative short-term implications (financial and human investment required) but positive long-term implications, then the Manager might not care about the long-term. In addition, they might not want to accept more responsibilities or more targets, or anything that makes their life harder, more complicated or more difficult. How much power does the owner wield? For non SOEs, the bigger issue is that short-term investments often lead to lower profits and lower stock (share) prices; both of which managers are measured against to judge their success.

Presuming that current governance models, therefore (either government owned or publicly owned) have these inherent problems (and many more, that I will not delve into right now), what can be done?

There are 2 focus areas. The first is to try to create an organisation that acts responsibly, which can mostly be done through creating such an organsiational culture (as mentioned many times before on this blog), but this is not easy -especially if you have to change the current culture of a large organisation. It would be easier to try to create the necessary processes that create a responsible organisation. This could be creating a reward system that rewards the kind of beahviours or results that you want, or it could be from the 'stick' approach: through governance and reporting systems.

The second is to create individuals who act responsibly which is also tough. Responsible leadership is important: since setting an example and acting as a role model can really make a difference. You need to create people who see what is best for the company, and do that -even if it is not best for them. Create the culture of 'what is best for the company is best for me'. This is not easy though... so there are some little tricks that can be employed.. For example, try creating buy-in from the individual by tapping into their loyalty to the organisations or by instilling a little fear.

At the end of the day, this problem is one that is inherent and wide-spread, with no simple solution. The solution is tough and demanding: the solution is to recruit and employ individuals with an ethical stance, with the sense of responsible leadership. Create the framework and the system for this attitude to thrive and this should mitigate the ownership-manager conundrum.

choose your words carefully

Transparency is an important (well, crucial) part of responsible leadership, so is trust. In the center of both is communication. Although not a post about communication per se, one important issue came to my mind when reading this about framing.

The concept is that what you say affects what someone hears (obviously); but its not that simple. Of course, what you don't say also affects what someone hears, what order you say things affect how the brain interprets what is says, how you stress certain words affects the emphasis that is placed on words and so on... In fact, spare a thought for the fact that non-native speakers of a language may not pick up most of the aspects of the communication (emphasis, slight difference in meaning between say 'large' or 'massive' etc) and will thus misunderstand you. In fact, this also applies to people with different accents -so communication affects everyone and everything you do.

As a person communicating to another, you must try to accurately convey your message and take into account these externalities. Any good public speaker or someone used to speaking to foreign audiences will have experience in this. In a leadership role, how you communicate is even more important, since the message may have large implications. And you may be communicating by sound, by letter, by action, by video...

Have a thought about how you can communicate your message effectively, and always bear in mind how people will interpret it: how can you convey your message most effectively: what media should you use?, how long should the message be?, what words/sounds/images should you use? do you need to repeat yourself or speak slower? what choice of words should you use?

Remember how many times ineffective communication has made a difference when you were on the receiving end. Its your responsibility to make sure when you want to be an effective leader, you communicate well.

Accountability

So Tony Blair got elected again, despite some sources maintaining that the opposition party (Conservatives) actually got more votes. Well, he didn't cheat, but he running a system whereby those who he is directly accountable to -the people, do not seem to have much of a say in his performance.

Now, I am not saying that it is easy to create a democratic system; since every country has a different one, there is obviously no right method. However I do believe that there should be pressure for reform if the system is functioning so badly.

Accountability is crucial. How can he claim to represent the majority of the British people if he does not? Therefore he should govern the country on the principle that he represents only 20% of the population. Thus the rest of the population should have a way of expressing their opinion in order to represent themselves, and this could be through a demonstration, like the 1 million people (of a total population of 60 million) who protested about Iraq. That is a sizable number, should they be taken more seriously if they march again, since now the government would have to listen to them more (before Tony Blai actually did have a bigger proportion of the public who supported him).

Every organisation needs to be accountable. To who, is an interesting question, and one that brings up the topic of stakeholders. Who are stakeholders, who are the most important, how can you represent them or engage with them, how can you be transparent with them and how can you ensure you do not operate as to create a conflict between stakeholders?

Responsible leaders need to pay close attention to these issues -they need to think about their accountability, and choose an option that is suitable. Unfortunately its harder to me more precise than that, since different types of organisations, and they are distinguished based on their accountability. Needless to say all organisations should ensure that the accountability method they have selected is working as intended. If not, maybe its time to reconsider. Who are you responsible for? How can you be responsible to them?

The role of a Director

So it seems that there will be no saving Rover, a UK owned and based medium scale car manufacturer; despite the UK government's attempts to sell the company off to SAIC off China or to prop it up with 'loans' before the upcoming election. It is not surprising, since BMW gave up on it and it became British again. It only makes a few models and only sells a few cars. It does not sell Internationally, nor manufacture internationally, and can certainly not compete with the Fords, GMs etc (themselves struggling and only making profits on their financial operations).

Recently the Directors have been forced to put more of their own money into the company to keep it going -in fact they have made about £40million in 5 years of ownership. Many were surprised at the sudden deterioration of the company and it only came to light after 2 separate auditors' reports, that the company was losing £20million a month.

One may wonder how a company on which 20,000 direct and indirect jobs depend, can go bankrupt so quickly, having lasted 5 years without much initial investment (although BMW paid off its existing debt). One aspect seems important to me; that the company was taken private, owned by the 'Phoenix Four' originally.

Its not just that I am suspicious that the Directors made £40 million from their 5 years of work, but I am, especially as they got the company for a token £5. I wonder about the transparency of many private companies. Since the high profile corruption cases in US, Italy and elsewhere, the trend for increasing public companies' transparency and reporting requirements has quickened. A result has been for more companies to go private, arguing that some requirements are too restrictive on their organisations.

Many of the World's most successful businesses have had their turn being privately owned, and many are still privately owned. Yet, not many people know much about these businesses -they are much lower profile, they have less stringent public reporting standards (yet the same legal standards), however many of their owners are significantly richer than the Directors in listed companies or the shareholders (based on profit from their shares).

I'm not going into a full discussion on this, but the point I want to highlight is how ethical is a private business? -not because it is private, but because it has less legal reasons to be transparent, and transparency is a key part of governance, ethics and responsible leadership. Some private companies may be more responsible than listed ones; but one thing stands out. From a UK perspective, there are many different forces involved in monitoring businesses. The more, the better, I think. Private companies have less, and thus the temptation is greater to behave less responsibly.

Some of the forces include investors analysing their investments, the media raising awareness of issues and of employees having access to information about their company. The purpose of this post is not to criticise necessarily the private businesses, or those running them (or taking public businesses private), but just to stress the importance of these issues in responsible leadership.

Leaders have a responsibility to their stakeholders to be ethical and as transparent as is commercially viable. The huge amounts of pressure on companies in recent years from various sources (including NGOs) has, I believe, made many businesses more responsible -they are more aware of their responsibilities, and those they impact are able to have more of a say.

From a Chinese context it will be interesting to see how the financial markets develop here -what rules will be developed etc as well as what role the media, NGOs etc will play. Noting the continuing frequency of corruption at some of the highest levels of businesses here (and it is a fantastic thing that this is being publicised, and that those responsible are being punished), one
hopes that as these forces develop, Chinese businesses will also be more responsible.

Zimbabwe...

This post could be a long one....Zimbabwe is the country led by Robert Mugabe. Who undoubtedly is the World's worst, most irresponsible leader, currently alive.

Although Mugabe has 'only' been responsible for around 50,00 deaths (there are surely individuals alive and free who have killed more); personally, I cannot think of a subject that frustrates me more than Mugabe. 1 man, who for 16 years ruled a country that seemed to do all right. It produced a surplus of food and has wonderful natural touristic resources, such as the Victoria Falls (on the border with Zambia). Ever known a tourist go to Zimbabwe in the last 4 years? This is when he forced the White farmers to give the farms to the State. Now they are run by inexperienced black farmers, who got the farm based on their relationship to Mugabe. It seems that the farms could still produce food, but those running them do not know how to, and do not want to.

They have no incentive when they are handed as much as they want from Mugabe; a corrupt dictator who steals money, food and anything else given in aid, investment or handouts. In fact inflation is in the hundreds of % and unemployment is around 80%. It is a tribute to the people that they are still alive (although apparently, within 12 months, the situation will turn from dire to deadly).

How can 1 man let his country become the worst place in the World to do business? How can they justify 'free' elections when voters names are made up, food not given to those who vote against him and opposition candidates openly murdered (this seems rare, as most are already in prison)....the list could go on. Journalists rarely are allowed in officially, and unofficial ones face 2 years in prison. So how can any leader justify this to himself, or to others?

How can he be personally happy with what the direct consequences are of his actions? Unless he has not left his palace in 4 years, and therefore genuinely unaware of the situation, I cannot believe such a person exists. Its not that he has a misguided vision (for example, Hitler), its that he is deliberately locking up his own countrymen, starving his own people. It is not that he is just killing the 'white farmers' (like man of the ethnic or racist wars globally), its that he personally profits from the unhappiness of 90% of his country (the other 10% are those he pays to deprive the 90%!).

I would like to presume that every person is a genuinely 'good' person inside, and only does bad things due to misguided teachings, influences, psychiatric state or beliefs. I don't know Mugabe personally. I wonder if any of these categories fit him, or if he is genuinely a bad person? A misguided person might believe in reclaiming land from colonialists; but would be aware (after 4 years) that the policy needs altering when output falls so dramatically.

So responsible leaders need to be aware of their actions. They need to engage with others in order to determine the consequences of their actions (then they could make informed decisions). Responsible leaders need to have a moral conscience; they should act on it. They should allow others the freedom to be themselves -allow them the freedom to life, to choice, to speech, to work. They should not deceive others, they should not deliberately (or accidentally) harm others (in this case, needlessly).

Lastly, I believe this is the 1 country where so little from the rest of the World, could so easily make such a big difference. Where are the responsible leaders in this World who are willing to make a moral stand for what they believe is right. In some cases, personal morals are not global -people disagree. In this situation, I would like to find someone who thinks that Mugabe should stay in power and is a positive force for the World. Anyone out there believe that?