Setting a CR strategy at Boots

The corporate responsibility agenda is growing by the day. In recent years it has changed and continues to evolve quickly. At Boots, the UK pharmaceutical chain, we believe that as a major retailer and trusted brand we can and should play a major role in advancing CR, not just by meeting our basic social responsibilities, but by actively promoting and embedding them throughout every corner of our business. It is not a question of addressing issues we had previously ignored, but tackling, communicating and of course measuring them in new ways. Because societal and environmental health is integral to the overall health of our business and all those we serve, we are embarked on a highly innovative and ambitious journey to champion the role of our business as a responsible contributor to society and steward of the environment.

If our Business in the Community rating on the latest “Companies that Count” index is anything to go by (up from 76th to fifth in the last three years), so far our approach seems to be paying off. We have also won Big Tick awards from BiTC for our supplier verification program and our approach to energy management. It has been an interesting journey.

 

Adapting to a changing business landscape
The growth in environmental awareness (and the urgency of tackling problems like climate change) means we have to scale up our approach to environmental stewardship. Changes in society mean adapting our working practices and being more flexible. Increased scrutiny of corporate governance means embedding sound principles and ethics at the top of the company and throughout its structure. And of course, modern communications mean that we can and should communicate our values in new ways to all our audiences; customers, employees, government, shareholders, investors and non-governmental organizations. The corporate agenda has changed dramatically in recent years. A whole raft of considerations now affect how businesses view their performance and measure their impact. These include:

• Growing legislative/mandatory requirements – for instance the Operating & Financial Review, which makes non-financial reporting mandatory.
• Rapid development of voluntary codes of conduct and operating standards – such as ISO and other quality assurance schemes.
• Rising stakeholder scrutiny of business practices – such as green campaigning NGOs demanding and often winning increased transparency on environmental behaviors.
• Ever more sophisticated internal target setting systems to meet commercial needs.
• Growing interest in socially responsible or ethical investment.
• An increasing number of benchmarking/rating systems that publicly rank companies on CR performance.

All these drivers are bringing fresh impetus to the argument that the best way to manage rising expectations is to strive for best practice in measuring the impact of CR programs.

 

The risks of measurement and reporting
The question is how and by what criteria to measure. Measurement enables better management of the CR agenda and provides the basis for much more productive dialogue with stakeholders. But it’s also something of a minefield. A great deal of non-financial information is inadequate, unreliable, of variable quality and inconsistent with information offered by peers. This is especially true when it is compared with financial information. So discovering what to measure and how to measure it is crucial.

At times, CR can appear to be something of a cliché – fine words and good spin, but not backed up by substance. Often this is the case because there is no robust measurement to back up the gloss. Some people pay lip service to CR because they essentially still subscribe to Milton Friedman’s view, expressed in 1970, that “the social responsibility of business is to increase its profits.” On that basis, the only rightful measure of CR is profits. Certainly, the higher the profits the easier it is for a business to commit to CR (or indeed to any activity). However, a growing number of businesses now believe the picture is more complex than Friedman suggested.

Despite the fact there are plenty of systems on offer, it is still very much left to individual businesses as to how they measure the effectiveness of their CR strategy. There are obviously “one size fits all” guidelines such as those offered by the Global Reporting Initiative, but it is hard to find systems which apply to all sectors. The issues in manufacturing are very different to those in the retail sector and technology companies are very different to banks.

There are a number of risks associated with CR reporting and measurement, which include:

• Reporting highlights weaknesses or risks which can be exploited by competitors and seized upon by other stakeholders such as NGOs (e.g., recording the number of products recalled).
• Reporting is generic and does not address the real impacts of the business in question. (e.g., drinks company has good transport policy in UK but is over exploiting water in developing world).
• Reporting is narrow and does not take into account knock-on effects throughout supply chains (e.g., UK based company is good on environment but has poor labor standards in Asia).
• Reporting facts and figures does not take account of stakeholder perceptions (e.g., the best performance in the world is not credible without stakeholder engagement/inclusion in the process).
• Reporting from one year to the next is inconsistent – areas of poor performance are “dropped” as categories from later reports and replaced with areas of good performance for which there was no information last time round (e.g., political parties measuring crime figures using different surveys from one election to the next).
• Reporting is irregular and therefore unreliable (e.g., not producing a CR report for three years after the first one).

So measurement is not easy. That is because there is no century-old rulebook to hand, unlike straight financial reporting. At Boots, we have worked hard to identify and embed measurement systems that we believe will measure our impacts most usefully, credibly and openly.

 

Identifying relevant issues
It’s tempting when embarking on a CR strategy to try to do everything perfectly. But the key to using CR effectively as part of management strategy is to identify and define the CR issues where the company can make its most effective contribution. For CR to become the “core DNA” of a large business like ours, you have to know which issues are most relevant to its activities and link strategic CR objectives with those of the company as a whole. Only in this way can CR strategy be intertwined in a genuine double helix with that of the overall business plan.

In 2003, we spent nearly a year developing our understanding of the areas where we believed our CR efforts could be most effective. These are grouped under four main headings, or “drivers.” Under each main heading we defined a handful of key issues most important to our CR strategic objectives, making a total of 21 key issues:

Community (to be a responsible neighbour)
Charitable giving
Community healthcare
Education
Employee fundraising
Employee volunteering

Environment (to protect it for future generations)
Biodiversity
Chemicals
Energy
Sustainable products
Transport
Waste and recycling

Marketplace (to do business fairly and with integrity)
Cause-related marketing
Corporate governance
Customer safety/access
Ethical investment
Supplier verification

Workplace (to treat people with dignity and respect)
Cultural diversity
Employee forums
Health and safety
Training and development
Women in the workplace

The Boots Board has established a Social Responsibilities Committee, which oversees and is ultimately accountable for our CR performance. In each of the defined CR areas, we have set ourselves specific goals. These have been determined by a new CR Action Group, reporting regularly to the board and responsible for coordination of all activities. Program management teams, action plans and budgets are all in place. To maximize accountability, individual “issue owners” have specific CR goals written into their personal objectives. In other words, their contribution to our CR plans is part of their job description and therefore their appraisal. It is only by embedding personal accountability in this way that we will achieve our strategic goals and specific objectives.

The Action Group is also working to ensure that best practice is shared throughout Boots. This year we are launching an internal awareness campaign, designed to generate interest and involvement in our CR programs, as well as raising specific issues where we need to work harder.

Figure 1: The Boots CR scorecard

 

Measuring our impact
Measuring our impact is critical as we move forward. At the core of our internal measurement is our “CR Scorecard” (see Figure 1, above). This highlights the key elements of Boots CR agenda. For each of the 21 areas there is a five-year program with measurable outputs. These are broken down into annual actions with key performance indicators. These are reviewed quarterly by the Board Social Responsibilities Committee; using a traffic light system to highlight where action needs to be taken. This process ensures senior management focus and demonstrates to both internal and external audiences the importance of this whole subject to the company. Measurement enables these very different activities to be managed in the same consistent way and ensures all elements are regularly considered; nothing is overlooked or forgotten.

At the end of our next financial year in March 2006, Boots will have to prepare an Operating & Financial Review as required by the new Department of Trade and Industry legislation. Boots has developed, with the consultancy FLAG, a database system as part of the measurement work that will form the basis of its OFR submission. While the directors of the company have yet to decide what is material and therefore what should be reported, information is now being recorded which will make this process much easier to manage as we move forward. Even if some items are excluded from the actual OFR itself the numbers captured will provide a better understanding of what is happening across the CR agenda and help us to manage this more effectively.

We have also done extensive work with stakeholders on their expectations of our new CR website, in order than once it is up and running we can measure our success. Key groups, such as the media, academics, SRI analysts and NGOs, were asked in a series of one-to-one interviews what they wanted to be included. We also reviewed those businesses that had won awards for the excellence and clarity of their sites to see what we could learn. Talking to our stakeholders has been key as our CR plans have been developed and implemented; this enables us to measure if we are meeting the needs and expectations of all our customers.

We are currently working on the production of our first CR Report to be written along Global Reporting Initiative guidelines. This approach requires Boots to describe all its CR activities not just those it is proud of. It will, almost certainly, highlight areas where we are not performing as well, but we believe this approach will provide much greater credibility for our overall program.

 

Looking to the future
It has taken two years of intense activity to get to this point. During the next year, we will increasingly share news about our CR program with the outside world. Our customers will of course be a key target audience, as will the wider public. We believe that we now have the right systems, processes and targets in place to be able to communicate meaningfully and with confidence about the responsible approach we are taking. Our customers have a right to expect that we mean what we say. Our website already provides detailed information on all Boots’ CR policies and activities. And as we start to produce comprehensive and regular measurement of our performance through our reports, we can continually be held to account and make further improvements across all the priority areas and issues we have identified.

We have traveled a fair distance, but there are ongoing challenges and new paths to be negotiated. We have set ourselves very high standards and meeting them will not always be simple. We can always improve our performance and as the CR agenda continues to grow we will need to make sure we continue to adapt to reflect its priorities as they impact on our business. It’s essential we maintain the vision and drive to ensure we have the will and the systems in place to do so.

By measuring our success, as we would for any other corporate activity, we believe we can demonstrate the value of being a socially responsible business and continue to lead this agenda. This will not only benefit the communities we serve, the environment we all share, our customers and our people, but also the commercial performance of our own business.