The meaning of CSR within BT
BT views CSR as its voluntary contribution to the wider societal goal of sustainable development. Elements of the CSR programme include business practice governed by legislation, but most of our activity is beyond compliance and takes a wider perspective on the overall responsibility of business in society and the benefits that can be derived from this approach.
Early definitions of sustainable development placed heavy emphasis on environmental protection and resource conservation, given the finite resources of the natural world. But as the concept of sustainable development matures, it is coming to represent a vision in which economic growth not only preserves the natural environment and the world’s nonrenewable resources for future generations but delivers a more just and inclusive society too.
At the World Summit on Sustainable Development in Johannesburg in September 2002, delegates found themselves confronting a special ‘state of the world’ report which set out some huge challenges:
Clearly challenges on this scale require commitment and co-operation both internationally and across all sectors. Governments, NGOs, individual citizens and professional bodies all have an important role to play. The role of the business community, as the main generator of wealth in society, is especially crucial. And the responsibility of business is to generate and distribute that wealth in a responsible way, taking account of the needs and expectations of all its stakeholders.
In our 2003 occasional paper ‘Just Values’ we discussed the importance of corporate values, not only in relation to the business community’s involvement in sustainable development, but also acknowledging the central role that values play in all business decisions. We stated: “All decisions are value laden, whether the driving value is respect for the natural world, creating delighted customers, providing a service to society, caring for employees or making a profit. Values are embodied in corporate structures and cultures, in the relationships with other companies and stakeholders and in the business models the company employs.” A central motivator behind BT’s CSR programme therefore is our belief in our wider societal responsibilities and our desire to make a positive contribution to the communities within which we operate.
With such a broad definition, our CSR programme needs to cover many elements of non-financial performance in the business – issues as wide-ranging as supplier management, customer satisfaction and engagement, human resources policies, community involvement, charitable activities, human rights, digital inclusion and our approach to the environment and business ethics are included.
So for BT, this means:
Identifying and understanding our business’ environmental and social impacts, and taking action to improve them is an important part of how we do business.
In BT, this three-pronged approach to our impacts – identification, understanding and taking action – is part of the way that we take responsibility for addressing wider sustainable development challenges.
Issue identification and the subsequent development of an understanding of those issues and what they mean for BT is an integral part of our stakeholder engagement. Listening to campaign groups, learning from our customers and appreciating the issues being raised in the media all play a part in our overall assessment and analysis of the issues facing the business. Prioritisation of those issues then determines the actions needed to manage those issues.
On the environmental side we have a team specifically focused on our environmental policy and practice, plus an implementation committee drawn from across the business which monitors and assesses our environmental performance. Since 1999 we have had certification to ISO 14001 for our UK operations. Whilst the ICT sector has traditionally been seen as a relatively clean industry, the sheer size of our operations means that we have a large environmental footprint. For example, BT is one of the largest business consumers of electricity in the UK. As part of our commitment to managing our impacts we were proud to announce in October 2004 that we had become the world’s largest purchaser of green energy, having negotiated a contract which will provide our 6,500 telephone exchanges, satellite earth stations, offices and depots with environmentally friendly power – half from sustainable resources such as wind generation, solar, wave and hydroelectric schemes and half from CHP, a technology that generates electricity and heat together and typically achieves a 35-40 per cent reduction in primary energy usage.
Managing our social impacts is becoming increasingly complex as we orientate our business towards the Information Communications Technology (ICT) sector. The changing nature of our business is giving rise to new issues that need to be addressed from a CSR perspective. Areas include the accessing of child pornography through the internet (in 2004 we launched an initiative which blocks all outbound traffic from the UK to addresses on the Internet Watch Foundation’s blacklist); working conditions in our supply chain, which is covered in more detail below; and the development of Radio Frequency Identification Devices (RFID) and possible implications for BT of being involved in commercialising this technology. These new issues are in addition to those we have managed for many years, such as access to telecommunications services for the disabled, elderly and poor.
We take a proactive approach to managing relationships with all our stakeholders (investors; customers; suppliers; the community; and our employees).
Our stakeholder dialogue is a well-established, regular part of how we do business and make decisions in BT. We have specific types of dialogue for the different stakeholder groups: for example our consumer liaison panels, which have been running since 1984, focus on general policy issues for consumers as well as specific consumer issues in the telecommunications market and BT. With our suppliers we carry out an annual satisfaction survey and undertake regular ethical trading forums. The most important of our staff surveys is the annual Communication and Attitude Research for employees, which gives all our people an opportunity to express their views on a wide range of issues. Managers are encouraged to work with their teams to develop and carry through action plans based on the results. We recognise two trade unions, the Communication Workers Union and Connect, and have a European Consultative Council that meets twice a year.
Examples of issues we have engaged our stakeholders in include the identification of key performance indicators (KPIs) for CSR work; choosing education and better communications as the priorities for our social investment programme; and the development of our Next Generation Contact Centre strategy for our call centres. We also have a specific consultation process involving local communities when we are considering the removal of a public payphone in a particular area.
We aim to lead by example, publicly working to raise awareness of Corporate Social Responsibility and participating in activities which help to move the agenda forward.
Alongside our active CSR programme we work with external bodies and organisations that contribute to the development of industry standards and guidelines in the CSR field. For example we have:
We believe in being transparent and accountable.
To quote Ben Verwaayen, our CEO: “Transparency in dealing with controversial issues is paramount. We will never satisfy everyone, so openness is key.”
Each year we produce an online social and environmental report, alongside our annual report and accounts, which details our social, environmental and economic impacts. This report is independently verified and assured against the AA1000 assurance standard and produced in accordance with the Global Reporting Initiative guidelines. We have identified a number of key performance indicators that are especially important to our stakeholders and our report includes progress against these and their associated targets.
Inevitably there are times when as a business we make decisions that are seen as controversial. In response to these we commission independent commentary in the form of a Hot Topic, which allows for a greater, in-depth assessment of our performance than would be possible in the other parts of our report. An example of this is our ‘Good Migrations’ paper, commissioned when we took the decision to open a number of call centres in India. Written by Sustainability, a campaigning business consultancy focused on sustainable development, it investigates potential conflicts between CSR and offshoring, including a review of how well BT discharged its responsibilities to its stakeholders when establishing the call centres in India in 2003. The report also outlines a series of steps organisations can take to manage the CSR implications of offshoring in both the home and recipient country.
Our annual social and environmental report is the principal way in which we demonstrate our accountability, but not the only one. In addition to the Hot Topics, we publish studies, reports and occasional papers designed to stimulate debate on CSR issues relevant to our sector and current strategy. A recent example is our publication of a paper, written by Forum for the Future, looking at the Sustainability Impacts of Broadband Britain.
The evolution of CSR within BT
Individual examples of CSR activity within BT can be found stretching back many years. For example, we developed our first telephone for the partially deaf in 1929, our Consumer Liaison Panels were introduced 21 years ago in 1984, we established the Malicious Calls Bureau in 1992 and introduced our ethical supply chain policy, Sourcing With Human Dignity, in 2001. But up until the end of the 1990s, whilst there was considerable activity across the business, it was very strongly compartmentalised into its own part of the business and lacked an overall co-ordinated approach. Since then, a much more joined-up approach to CSR across the company has developed, with the introduction of an overall CSR strategy, much stronger co-ordination of all CSR activity across the group and the development of a detailed risk identification process for potential CSR risks facing the business. This more coordinated internal approach has been reflected in our external CSR reporting, with our first sustainability report produced in 2001, combining our existing separate environment and social reports, which had been produced for nine and two years respectively.
CSR governance, leadership and policy-making within BT
The majority of BT’s employees, and its revenues, are UK-based. CSR policy and practice in our overseas business has reflected the diversity of the business models operating in the countries where we have interests – but the group-wide governance process that has been in place since 2002 is helping to facilitate a much greater degree of integration across the group.
There are two committees with representatives from across the business, one focused on the strategic direction and policy development of CSR, and the other on the practical issues around implementation. They meet quarterly to examine progress against targets, identify new potential areas of focus or policy for the business and share perspectives. The chair of the strategy and policy committee is a senior operational manager within the business, which helps with the integration of CSR into the way the business is run.
Important annual activities the committees undertake include the identification of CSR risks the business may be facing, covered in more detail below, and the review of our Key Performance Indicators (KPIs) of our most important impacts. Externally, they give a quick overview of our social and environmental performance and internally they have been used to establish strategic social and environmental targets, which are used to drive performance improvement across the business.
In addition to these two internal committees, an independent Leadership Panel of external CSR specialists, from a variety of fields including the investment community, NGOs and business, gives a broader perspective and offers expert advice, with a specific remit to challenge BT to move the agenda forward. Whilst not a formal part of the decision-making process for CSR within BT, this panel plays a vital role in encouraging innovation in sustainable development at BT. The Leadership Panel also offers an independent statement on our social and environmental report each year. Overall coordination is provided by a small team of CSR specialists that oversee the development and direction of the CSR programme across the group.
There are three ways in which the integrated CSR programme fits into the overall governance process for BT group:
In addition, there are various different committees that address separately, and in more detail, some issues that appear in the overall CSR programme. This includes the Community Support Committee, a board-level committee that meets three or four times a year and is charged with specific responsibility for BT’s worldwide policy to support the communities in which we operate, and approval and allocation of funding for community programmes.
The identification and mitigation of risk within BT
The main plc board is responsible for BT group’s systems of internal control and risk management which take account of significant social, environmental and ethical issues that relate to BT’s business. Whilst we have identified no social, environmental or ethical risks that would have a material impact on BT’s business, in the section of the annual report and accounts on Our Commitment to Society, we have for several years addressed the potential risk to reputation of supply-chain working conditions.
In anticipation of proposals in the UK to introduce an Operating Financial Review requiring information about environmental matters and social and community issues, during the 2004 financial year we injected additional rigour into our risk identification process for CSR. We developed a CSR risk register using the standard BT methodology for risk identification. Anticipated impact on cash flow, plus likelihood of the risk occurring within a time horizon of three years, are the significant determinants of risk. Of the 17 risks identified as a result, the most significant six (not in any specific order) were climate change, breach of integrity, working conditions in the supply chain, diversity, offshoring and health and safety. All 17 have an identified owner and mitigation strategy and the risk assessment process will be repeated annually. Over time, this will give us the opportunity to better understand trends in the CSR risks in our business and respond to them.
The business case for CSR
Reducing the company’s exposure to CSR risk is one of a number of key elements in the business case for CSR. Understanding from the risk analysis the size of potential savings as a result of actions the company is taking to mitigate the risk is a benefit to the business for as long as the risk doesn’t materialise. But the business case extends well beyond the boundaries of the management of risk. In the late 1970s, reduction of the resource intensity of a company’s operations first emerged as a financially prudent way of cutting costs; the World Business Council for Sustainable Development later called this ‘eco-efficiency’. BT has deployed this to good effect, saving over £600 million through its environmental management programmes over a ten-year period. Ongoing research since then continues to strengthen understanding of the business case, for example Sustainability Pays, a 2002 publication by Forum for the Future, a leading sustainable development charity in the UK, identified four areas where adopting sustainable development policies has brought companies financial benefits:
These propositions hold true in a number of respects for BT. They are clearly important for protecting BT’s brand and reputation – not least because of the value of the BT brand. In 2001 we undertook an analysis of over 80 months’ worth of customer satisfaction data to help us understand the drivers of customer satisfaction and the role that our CSR activities played. Of the four key drivers identified, one of these, image and reputation, was found on further analysis to have a significant CSR component. Taking the model to the reasonable bounds of extrapolation implies that if BT were to cease all CSR activities (eg. stop treating employees with respect; ignore environmental issues and cancel all community activities, etc) then our customer satisfaction rating would drop by 10 per cent with a knock-on effect on company profits and customer loyalty.
Increasingly we are finding not only that our CSR activity contributes to the management of risk in the business, but also that long-term sustainability trends are leading to the creation of new market opportunities through the application of our Information Communications Technology (ICT) products and services. And finally, being able to demonstrate competence in CSR activity is increasingly becoming a level of entry for large, particularly public sector, contracts. In the 2005 financial year we are seeing more than a 100 per cent increase in the value of bids requesting CSR support.
Human rights and working conditions in BT’s supply chain
Having outlined the way that CSR policy is formulated and managed by BT, the remainder of this chapter will focus on one specific area, that of human rights. We will give a practical illustration of how we have approached this complex issue with reference to working conditions in the supply chain.
Our impact on human rights has three aspects: firstly, the supply chain, and the working conditions under which products and services purchased by BT are produced; secondly, the use chain, ie the effect of the use of our products and services once they have been sold; and finally, through our employees who work directly for us. In tackling issues in the supply chain, we base our approach on our aspiration that working conditions meet the standards of the Universal Declaration of Human Rights and the International Labour Organisation (ILO) conventions. Because of the particular issues faced in the supply chain, the focus for the remaining part of the chapter will be specifically on the supply chain impact on human rights.
Seeing the way in which working conditions in the supply chain in the apparel industry came to prominence in the 1990s, and knowing that in many ways the working conditions in the ICT sector are similar, led BT to identify this as a risk to its business. And for several years we have made specific reference to this potential risk in our annual report and accounts. The years 2003 and 2004 seem to have borne out our concerns, with the publication of a number of reports exposing poor working conditions in the ICT sector, by organisations as diverse as the Catholic Agency for Overseas Development (CAFOD) and ISIS Asset Management.
Our aim is for working conditions in our supply chain to meet both the standards of the Universal Declaration of Human Rights and the International Labour Organisation Conventions and the remaining part of this chapter outlines the way in which we work towards this.
In 2001, following consultation with stakeholders, we launched our Sourcing with Human Dignity Initiative, which sets out the minimum standards we expect from our suppliers in the following areas:
In the 2004 financial year we spent over £8 billion on procurement activities, and have several thousand different suppliers worldwide, so the application of this initiative across our supply chain requires a measured and realistic approach. The principles on which the Sourcing with Human Dignity initiative is being implemented are as follows:
BT strongly supports the principles of continuous improvement and a collaborative approach to working with suppliers where shortfalls are identified. However, persistent shortfalls will not be tolerated and in one case since the introduction of the policy in 2001, the decision to stop placing orders with one subcontractor was taken because of noncompliance with the Sourcing With Human Dignity standard.
Conclusion
We have sought to show how BT views CSR, the evolution of it in our organisation and the practical means by which it contributes to our business. The fundamental importance of the intention behind why we take it seriously, is however without doubt the most crucial message. This goes straight back to the way in which CSR contributes to the sustainable development challenges faced at a global level, as outlined at the World Summit on Sustainable Development in 2002. Tackling these challenges is clearly not the preserve of business alone, but business has a key part to play. But that part must be consistent with the commercial strategy of the business and that’s where the CSR business case comes in. When one succeeds at both levels then we believe CSR really builds stakeholder trust and respect.
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