CSR from the Inside

Recently I had the opportunity to interview Marcus Chung, director of corporate citizenship at McKesson (To learn more about Marcus, check out his blog and follow him on Twitter).

My purpose for sitting down with Marcus was twofold. First, I wanted to get his take on corporate social responsibility and sustainability efforts at McKesson, as well as ask some questions about the field in general. Second, given that he is a young CSR leader, I wanted to give Marcus a chance to share his own personal story.

Over the course of an hour or so, we talked about:

• Marcus' Professional Background,
• Corporate Citizenship at McKesson,
• Culture and CSR Success
• Reporting on Impact, and
• CSR Going Forward.

It’s a long post, but well worth it! Here's what he had to say:

Marcus' Professional Background

After graduating from Wesleyan University, Marcus worked as a senior research manager at The Corporate Executive Board. While he enjoyed working in the private sector, Marcus felt like he was missing something. It turns out that “something” was a discussion of the social and environmental impacts of business – a realization that led him to enroll in UC Berkeley’s Haas School of Business.

While at Haas, Marcus interned at Net Impact, an experience that was crucial in deepening his understanding of the field of CSR. Throughout his internship Marcus conducted numerous informational interviews with other CSR professionals, who confirmed for him that no two CSR jobs are the same (a key takeaway for anyone looking to find their own CSR job!).

After completing his MBA, Marcus accepted another internship at Gap, Inc. which later turned into a full-time job. His role there focused on strategic planning and communications for the company’s CSR department. In this position he was able to observe how the many different aspects of Gap's CSR program – from ethical sourcing to environmental affairs to the Foundation – all reinforced Gap's key business goals.

In July 2008, Marcus left Gap, Inc. to become director of corporate citizenship for the environment at McKesson. As we’ll hear throughout my conversation with Marcus, this new role challenges him to be entrepreneurial, think strategically, build empowered partnerships, and act as a constant champion for corporate social responsibility.

Corporate Citizenship at McKesson

Headquartered in San Francisco, McKesson is a 176 year-old company that employs 32,000 people and last year had revenues of $106B. As a business-to-business company, McKesson’s two main divisions – distribution services and health care IT solutions – serve business customers like Wal-Mart, Target, and 70% of the nation’s hospitals. While many consumers may not be familiar with the McKesson name, it’s safe to say that we’ve all used or been in contact with McKesson’s products and services at some point in time.

Recently McKesson has experienced very rapid growth, which has mainly been fueled by acquisition; in fact, the company is actually made up of 40+ independent business units, each with its own degree of autonomy. This has interesting implications for McKesson’s corporate citizenship program because, at the corporate level, Marcus and the rest of the team are trying to create company-wide CSR standards. Yet when each business unit operates independently, it can be tough to create a cohesive program.

McKesson's Corporate Citizenship Program takes many different forms. In his role, Marcus reports to the vice president of corporate citizenship, who is also the president of the McKesson Foundation. He splits his time in a few different ways:

• Managing the Environmental Councils: While Marcus directs enterprise-wide environmental strategy for McKesson, he also manages a system to empower different business units and facilities to get involved through the development of environmental councils. Right now there are 17 councils throughout the McKesson network, each staffed by employee volunteers (between 3 and 30 people) who look for location-specific projects to reduce the company’s impact.
• Producing the Corporate Citizenship Report: If you haven’t checked out McKesson’s CSR report, I highly recommend it. While Marcus is the first to admit that McKesson is still wrapping its arms around its environmental impact, I was very impressed by the report and its ability to tell the human side of McKesson’s story.
• Engaging with Internal and External Stakeholders: Whether it’s partnering with vendors, responding to inquiries from the socially responsible investment community, or working with internal groups to champion McKesson’s corporate citizenship program, Marcus spends a lot of time in stakeholder relations. Interestingly, one of the company’s biggest stakeholder communities is real estate – since 50% of McKesson’s greenhouse gas emissions comes from its physical buildings, Marcus sees a huge opportunity to work with McKesson’s real estate constituents to improve the company’s environmental performance.

Culture and CSR Success

One of the questions I often ask CSR professionals is “What is it about your company’s culture that makes your CSR program successful?” There’s clearly a unique recipe for CSR success at each company, and my sense is that culture has a lot to do with it.

Marcus says McKesson's corporate citizenship is a work in progress, and that the company is still trying to get a full picture of its impact. That said, he believes that the company’s culture and commitment to corporate citizenship enables his team to better visualize what the company’s success will look like down the road.

One of the main examples of McKesson’s culture is what is known as the ICARE Shared Principles. These principles are meant to set the tone for all employee behavior and decisions. Yet according to Marcus, they are not just some funny corporate mantra that no one cares really about; instead these principles are truly internalized by employees as a set of values that everyone should follow.

Take this and combine it with a CEO who believes in the importance of corporate citizenship and environmental sustainability, and you have a company that clearly values the right things.

Still, any CSR director knows that changing mindsets and behavior is a slow process. At McKesson, Marcus spends a lot of time educating employees that corporate citizenship goes beyond employee volunteerism and philanthropy.

“It’s an evolution,” Marcus said, “but at least there’s an appreciation for what we do.”

Reporting on Impact

Having just finished a post on The Basics of CSR Reporting, I was eager to get Marcus’ thoughts on how the Global Reporting Initiative’s guidelines factored into McKesson’s reporting strategy. Given that he had written reports at Gap, Inc. and is now doing the same for McKesson, Marcus had some interesting insights.

In general, he felt that using the GRI was a bit of a double-edged sword. On the one hand, the GRI clearly validates any company’s reporting efforts while also pushing it to improve its measurement process every year. Still, Marcus struggled with the idea of trying to fit McKesson’s data collection and reporting process into the rigid GRI categories, stressing that the company does not yet have a lot of the tools in place to measure what the GRI wants (not to mention the fact that some of what the GRI asks for isn't even relevant to McKesson's business).

Beyond the GRI, reporting at McKesson is still a challenge, Marcus said, because as a B2B company it’s not really used to disclosing this kind of information to various audiences (versus a company like Gap where today many end-consumers demand these details).

Not only is it difficult to collect data, then, but the company has to be comfortable with the story that the data tells – a concept that internal groups like marketing and legal might not always applaud. Thus, “reporting is an iterative process” at McKesson – and everywhere else I’m sure!

CSR Going Forward

Our interview concluded with a few final questions about the future of CSR at McKesson and in general. For Marcus, the key to McKesson's success is leveraging the enthusiasm and interest of its employees who clearly want to be involved in these initiatives. He wondered, “How do we connect them, get them educated and involved?”

He also said it’s time for the company to “start putting a stake in the ground” and set goals for measuring and reducing its environmental impacts. That is, rather than always looking backwards to tell stories and report results, Marcus wants the company’s focus to shift toward being pro-active about where McKesson will head in years to come.

As for the field overall, Marcus believes CSR is only going to grow in importance as more companies see the value of getting involved (and feel pressure from their stakeholders).

The big question, however, is how well – and how quickly – companies will realize that CSR goes beyond public relations and becomes instead about a deeper connection with, and impact in, communities worldwide.

Thanks, Marcus, for sharing your thoughts and opinions with The Changebase, and good luck at McKesson!

The Basics of CSR Reporting

As I mentioned in an earlier post on The Changebase, one of the projects I’ve been working on this semester is a CSR Reporting Directed Study for a Fortune 300 company.

This company (who will remain nameless since the project is still ongoing) contacted the Boston University School of Management and asked if the school would put together a team of MBA consultants to evaluate the company’s current CSR report and make recommendations for changes or improvements. Since CSR reporting is such an important and popular topic these days, I really wanted to be a part of this project. And, since the opportunity was presented as not just a consulting gig, but also as a class, I knew there’d be some good learning too.

Over the course of the last few months, I’ve spent the majority of my time with my team (there are five of us) learning about The Global Reporting Initiative (GRI).

As the area of CSR reporting moves forward and becomes more solidified, the GRI has emerged as the leading, best-in-class standard for how companies should address their environmental and social impacts. Much like LEED has become the “gold standard” in green building, the GRI has emerged as the reporting framework that most companies use. While this doesn’t mean that the GRI framework is perfect, it does mean that the GRI is the most popular guide for companies that want to report on these issues and don’t know where to start.

While there are some folks who don’t like the GRI, in general I believe its reporting framework provides a comprehensive, detailed outline of the targets and impacts every company should be measuring. Its framework consists of 79 indicators that are measured along 6 dimensions:

• Economic
• Environmental
• Labor Practices and Decent Work
• Human Rights
• Society, and
• Product Responsibility.

Under each category, the GRI lists very specific metrics that companies should use to quantify and qualify their impacts along each dimension. For example, under Human Rights, one of the indicators is “Operations identified as having significant risks for incidents of child labor, and measures taken to contribute to the elimination of child labor”. You can imagine how hard it is for a global business with operations worldwide to wrap its arms around this kind of question.

And yet, it is understandably crucial for any business to understand something like this.

In addition to the indicator questions, the GRI lays out principles for content and quality – which are essentially a roadmap for how to determine what should be in a report and how to tell the company’s sustainability story. These are:

Principles for Content:

• Materiality
• Stakeholder Inclusiveness
• Sustainability Context
• Completeness

Principles for Quality:

• Balance
• Comparability
• Accuracy
• Timeliness
• Clarity
• Reliability.

Without getting into too much detail, you can probably guess that some of these principles are easier to follow than others. Yet, the more I learn, the more I realize that absolutely every single one of them is crucially important.

The fun part of this consulting project has been poring over the company’s CSR report and looking at it through the lens of each content and quality principle. Over the last few weeks, we’ve been asking ourselves questions like:

• How well does the company present balanced (that is, positive and negative) information?
• What kind of stakeholder analysis has the company done? Does the report speak to the right audience?
• Is the report complete? If not, what’s missing?

It’s really been a lot of fun to take a real-life case study and evaluate it according to what we’ve learned.

And what I’m learning is that CSR reporting is a lot harder than you might think!

Another highlight of the project was having the chance to meet Andy Savitz, a very well-known sustainability consultant and author of The Triple Bottom Line. Andy is incredibly experienced when it comes to CSR reporting, and he was kind enough to sit down with me and my team to talk about best practices in this area. Since this post is about The Basics, I thought I’d share a few words of wisdom from Andy:

A CSR Report is a Living Document: My sense is that some companies want to look at their CSR report much like they do an annual report – it’s published once a year and that’s it. But in a field as new as CSR reporting, many CSR Directors are still getting a handle on what they should be measuring, let alone actually being able to report on it. And since companies are still solidifying what to report on, they’re finding that the data they collect isn’t always perfect.

According to Andy, that’s more than ok. A CSR report should not just be about reporting the good stuff, nor should it just be focused on the past. A good CSR report should focus on being aspirational and strategic, and it should present both the good and the not-so-good (also known as “Opportunities” or “Room for Improvement”).

This leads to a second important point: A Balanced CSR Report is a Trust-Builder. Interestingly, while companies might shy away from sharing negative information, the more transparent a company can be about the good, the bad and the ugly, the more trust it will earn from its stakeholders. Andy gave the example of a company that reported its overseas employees had been offered 13 bribes – and that they turned down 9 of them.

Sure, a CSR department might cringe at the thought of reporting this. But in actuality disclosing this information improved the company’s image and reputation because everything was framed as a work-in-progress. Most audiences, it turns out, aren’t looking for immediate perfection – they just want to know that you’re working on it.

So there you have it – The Basics of CSR Reporting. In truth, there is still so much more that I’m learning – in a month I’ll probably be able to come back and update this post! But I hope this helps lay the groundwork for you as you learn about this topic.

As for my consulting project, my team and I head to their corporate headquarters in late January to present our findings and recommendations. The goal is for their CSR department to take our feedback and incorporate it into their upcoming 2010 report. It’ll be interesting and exciting to see how their new report differs from their old one. I’ll keep you posted!

(By the way, if this post was helpful be sure to check out other posts I've written on "The Basics" - and let me know if there's anything you want to learn next!)

End of Semester Recap

Perhaps one of the best parts of being a second year MBA student is getting to pick my schedule. Unlike first year, where all of the core business classes were chosen for me, as a second year student I get to decide which electives I want to take. Not only has this been a relief (since most of the core classes were quantitative, and I am by no means a math whiz), it’s also been fun and rewarding to study topics that interest me through an MBA lens.

Unfortunately, by the end of the semester, there’s little time for anything else – including blogging. I haven’t been able to write on The Changebase for a couple of weeks precisely because I’ve been too busy wrapping up all of the projects, presentations, and papers that these electives have assigned!

But it’s been a great semester of learning, and since I’m often asked to talk about how what I study relates to my interest in CSR and sustainability, I thought I’d share a little recap.

I started out my semester with a one-week intensive course called Global Sustainability, which basically looked at issues like food and water scarcity, energy constraints, and global migration and the impacts they have on our planet. If you haven’t checked out my previous summary on this class, I recommend reading it.

The rest of my four month semester consisted of five other classes:

Government, Society and the New Entrepreneur focused on the topics of “economic globalization, environmental sustainability, international entrepreneurship, and the interplay between growth and prosperity”. Through in-depth studies of various countries (Japan, China, India, South Africa, Saudi Arabia, Singapore, Russia and Brazil), my classmates and I gained a broad overview of how globalization impacts trade, economic growth, education, environmental conservation, and entrepreneurship around the world.

Big Takeaway: While our world is more connected than ever, each country’s national interests are more divergent than ever. To solve an issue as big as climate change, for instance, world leaders must balance their responsibility to their own people with a shared responsibility to care for our global resources. Tough job for sure.

On the other end of the spectrum, Consumer Behavior focused on the attitudes, behaviors, social norms, and decision-making processes that consumers use and reference when they make purchases. For this course I worked with a team to develop a hypothetical new product (along with target consumer and marketing recommendations) for green cleaning producer Seventh Generation. Lots of primary data collection, and lots of consumer behavior theory.

Big Takeaway: The more I spoke with potential target consumers, the clearer it became that people really are wary of the “green” label. They’ve heard it so many times – and yet they still don’t really understand what it means nor do they trust its value. A clear warning sign for marketers…

My Corporate Governance seminar centered on the interplay between governance, accountability and ethics in the corporate and nonprofit sectors. Through in-depth, “governance gone wrong” case studies, we developed a framework for understanding how factors like board oversight, compensation structures, and organizational culture affect the level and type of governance at a company. This class was especially timely one year after the global financial crisis.

Big Takeaway: Much like CSR, there are varied opinions relating to the value that good governance brings to an organization. Is governance just about compliance and risk management, or does it actually add value? Are investors willing to pay more for good governance? I think (and hope) they are.

Entrepreneurial Management focused on the challenges and hurdles faced by early-stage entrepreneurs, including the identification of and access to capital, scaling growth to reach beyond the early adapter market, and building a successful team. Perhaps the most fun part of the class was serving as a consultant to a social entrepreneur who’s facing these kinds of issues right now as he builds a line of ethically-sourced footwear. Like consumer behavior, this involved lots of primary data collection and marketing recommendations.

Big Takeaway: As a social enterprise footwear company, the client I worked with wanted to “do good and do well.” Yet, the potential consumers we spoke with reminded us that it’s not just intention that matters – cause marketing campaigns need to be genuine, transparent, easy to understand, and perhaps most importantly, have an immediate and tangible impact on a meaningful cause. Not always an easy task!

Finally, one project that I started this semester and will finish in early January is a CSR Reporting Directed Study. Back in October a Fortune 300 company contacted my school to inquire about putting a team of MBAs together to evaluate their current CSR reporting – and I jumped at the chance. In order to make recommendations, my team and I have spent the semester doing a deep-dive into the Global Reporting Initiative and the Carbon Disclosure Project. We’re now just starting the recommendation phase and I’ll be sure to keep you posted.

Big Takeaway: Sustainability reporting is more than just wrapping your arms around numbers (although it’s fair to say that getting a handle on a company’s data is hard enough!). In fact, two key themes that keep coming up are transparency in information sharing and stakeholder engagement – two crucial topics that are very hard to get right and very easy to get wrong.

So all in all it’s been an incredible four months, especially compared to my first year of business school when it was so hard to “see the forest” through all that data analysis!

In the end this really was a semester of putting all of the pieces together, which is a great feeling. And now on to winter break!