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DIRECTIONS MONTHLY SUPPLEMENT DECEMBER 07
TRENDS AND ISSUES IN THE WORLD OF CORPORATE REPORTING
LEG
ISLA TION
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BOO FOR TS PR BUS A RE ESCRIP INE SPON TIO SS SIB N LE ne
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TA ILO RM AD E
MA PE RF OR
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C ATE
M CLI
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D AN BR
IN TE GR AT ED
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EGY RAT
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Rem emb er t o
25m g
COM OYEE EMPL
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Directions Monthly December 2007
Issue 18
Welcome to the December edition of Directions Monthly. In the past year we have seen private equity companies scrutinised over the takeovers of some of the most respected and trusted businesses. So this month we have invited Richard Ellis of Alliance Boots to provide his take on working with KKR, the challenges they faced and reasons why private equity firms are not really ‘barbarians’. He outlines his prescription for all businesses that are addressing the responsible business agenda and explains why it is so relevant to private equity-owned businesses.
Lucie Harrild
Pavan Athwal
Everyone watched anxiously as Boots was taken over by KKR – so how has Boots continued to maintain such a healthy responsible business strategy?
Richard Ellis Head of Corporate Social Responsibility, Alliance Boots
Following the merger between Alliance UniChem plc and Boots Group plc, Alliance Boots plc was formed on the 31 July 2006. At the time there was doubt, particularly among the broader CSR community, as to whether the new Company’s approach to CSR would match that of Boots. In June this year the uncertainty grew further following the high profile private equity acquisition of Alliance Boots plc by KKR and Stefano Pessina.
Boots’ CSR credentials were established by the founders of the Company, the Boot family, in the 1850s. In 1914 electrically powered vehicles were introduced, in 1915 a Combined Heat and Power Plant was first established and in the 1930s glass and cardboard were recycled. This agenda has not suddenly been discovered by Boots. It is part of the DNA of the Company; it’s not an add on, but something which is embedded into the way business is done.
The question on most commentators lips was – how would one of the UK’s most trusted companies be affected by this ownership change and what impact would it have on their CSR credentials? Some six months on I can report it’s, “Business as usual”.
The new owners could see that CSR was not a cost but a vital ingredient in the success of Boots. The CSR activities gave the brand its personality. It was the reason why customers “TRUST Boots”.
Very few, if any, private equity-owned businesses have successfully introduced CSR programmes. They have a reputation for being secretive; very few people outside the world of private equity really understand how these businesses operate. This lack of transparency was one of the key drivers for the Walker Review. Whilst some recommendations have been made available there is still further work to be done before final publication. How Alliance Boots deals with these issues could well impact the final version of this review. At the heart of these findings is the need for increased stakeholder dialogue. This has been fundamental to the success of the Boots programmes and is the central plank around which the new Company is building its CSR strategy. For the past five years Boots has ❝ maintained an on-going two-way communications process with all its stakeholders. They have helped shape the strategy and decide the priority areas; and exactly the same process continues today as a private equity-owned company.
❞
But KKR and Stefano Pessina needed more than just a compelling story – they needed a proper business case. They wanted to see that this activity delivered economic as well as environmental and social benefits. Central to this is the information gathering system, Credit 360. This provides the “numbers” which enable the CSR agenda to be managed and KPIs to be set. It provides the data in reports and various surveys such as the Business In The Community CR Index. Without it CSR would not have been taken seriously at Board level. CSR today is judged in exactly the same way as any business discipline. It is not given any special “favours” but must deliver value in the same way as any Business Unit does. Through this process it was possible to describe the real benefits of pursuing CSR initiatives. For example, a range of transport activities reduced the road kilometres driven on behalf of Boots by 8.5 million. This saved 5% in transport carbon dioxide emissions and £1.4 million in fuel costs. It was because we could articulate the business, as well as
Directions Monthly December 2007
Issue 18
❝
But KKR and Stefano Pessina needed more than just a compelling story they needed a proper business case. They wanted to see that this activity delivered economic as well as environmental and social benefits.
❞
the broader social and environmental benefits, that the new owners were willing to encourage the “Business as usual” approach. Talking about CSR in business language to Stefano Pessina was key. He could understand the strategic relevance of supporting breast cancer charities when 79% of the employees were women and 83% of our customers are women! It wasn’t just about doing good things for their own sake but embedding these principles into the fabric of the business. The importance of CSR to the new business was understood even before the acquisition. In the Prospectus document three very clear measurable CSR commitments were given and have been met… 1. That CSR reports written along Global Reporting Initiative guidelines would continue to be produced – the first CSR report for Alliance Boots was launched on the 9th October this year. 2. That a Board CSR Committee would be established to oversee CSR activities across the whole Company – the first meeting was in September 2007 and it comprises Ornella Barra, Marco Pagni and Steve Duncan who are all full Management Board Members. 3. That Alliance Boots would complete the BITC CR Index and allow its results to be published – Ornella Barra formally signed the submission in November 2007 and receipt has been acknowledged by BITC. There is clear leadership for this agenda. People at the very highest levels accept responsibility for the delivery of CSR objectives. They do this because they understand the real value it delivers for the business. Equally they recognise that they are members of society and that we all benefit from such activity. It is a passion that lives on in the new Alliance Boots. Looking forward, what are the challenges? Well, CSR is now firmly embedded on the management agenda but we must integrate it across the whole business. The former
Boots business understands the importance of CSR to its brand, but as the new business operates internationally some countries are only just starting their CSR journey. All parts of the business need to be helped to improve their performance and achieve their full potential. The first step on this journey for some of our international colleagues begins when they attend the CSR Training Course, which equips them to become the “champion” for CSR in their country. As all parts of Alliance Boots become familiar with this agenda it becomes possible to integrate Company-wide policies and introduce worldwide campaigns such as the eradication of counterfeit drugs. Communication of our achievements ❝ and aspirations will be key. I admire the way Marks & Spencer have communicated their “Plan A” CSR strategy; it is a great example of where a CSR programme has been aligned to business strategy successfully. This is not something Boots has done previously but the new owners are giving us the confidence to maximise the benefits of our CSR programmes.
❞
Stakeholders want to know more about CSR and in particular climate change issues. I think it’s fair to say the green consumer is on the march. But they personally don’t know what they can do to solve this problem and they don’t want to change their lifestyle too much. So they want to buy from brands that have done this for them. This means when they buy our products they can take them home and enjoy them – safe in the knowledge that we have done what can be done to tackle climate change. This was why we worked with the Carbon Trust to obtain “Carbon Labels” for our Botanics and Essentials shampoos. It shows consumers that we are serious about this agenda. Similarly we are encouraging our people to bring their personal behaviours to work. At home we are used to recycling and turning off lights. So why don’t we do similar things at work? We are encouraging such behaviours by taking away personal waste bins at Head Office. Now employees have to segregate their own waste and recycle
paper, cans and plastic. Such actions might not in themselves save the world, but they send a very clear message to our people that CSR is an important part of the business agenda. It’s the start of our journey to create 100,000 ambassadors for CSR across the Company. But businesses, even passionate ones, cannot tackle the responsible business agenda alone. The government could aid this process by offering more incentives to companies to follow sustainable practices. It needs to develop joined up thinking between central and local government on things like the building of wind turbines – National government wants more but the local government planning process often hinders this. Legislation can too often be a blunt instrument because it captures all companies irrespective of their type or past CSR record. For example: if laws were to be introduced requiring businesses to reduce their carbon footprint by a fixed percentage, what would the base point be? For a Company like Alliance Boots that has been doing lots of things across our property portfolio for five years, this would be much more difficult to do than for a company that had done nothing. My prescription for private equity-owned companies, which is equally applicable to all businesses, is to understand where CSR sits within the business agenda and who is responsible at Board level. Explain CSR in terms that the rest of the business understands; don’t get bogged down with some of the CSR jargon, particularly around carbon management. Make it relevant and measure and report on what you do. The new owners of Alliance Boots are, after all, business people who want their investments to succeed – they will listen and support strategies that deliver value and exceptional returns, as well social and environmental benefits.
ABOUT US SALTERBAXTER ADVISE COMPANIES ON STRATEGY, BRANDING, CORPORATE COMMUNICATIONS AND DESIGN. Our clients are extremely varied and include FTSE 100 companies; some of the world’s most exclusive brands; independent, entrepreneurial businesses; world-leading educational establishments; law firms; private equity firms and media companies. We name companies, re-invent companies and re-position companies. We help companies communicate with shareholders and advise them on how to address corporate responsibility. We launch, brand and re-brand. A key area of our expertise is corporate reporting and we advise leading UK and European organisations on strategy and design for their financial and CR communications programmes. We currently work with 11 of the UK FTSE 100. Contact: Lucie Harrild [email protected] Tel: +44 (0)20 7229 5720
Pavan Athwal [email protected] Tel: +44 (0)20 7229 5720
Directions Monthly supplements our main Directions report. This report is published each year and is now regarded as the UK’s most comprehensive analysis of the trends and issues in CR communications. If you want a copy of the full Directions Annual Survey and Report, call us on the number below or email [email protected]
202 Kensington Church Street London W8 4DP Tel +44 (0)20 7229 5720 Fax +44 (0)20 7229 5721 www.salterbaxter.com
This supplement is printed on Think Bright and is supplied by Howard Smith. It is an FSC (Forest Stewardship Council) certified material and is 100% recyclable. www.hspg.com Printed by CTD, an ISO 14001 certified and FSC accredited company. TT-COC-2142 ©1996 Forest Stewardship Council A.C www.ctdprinters.com
TRENDS AND ISSUES IN THE WORLD OF CORPORATE REPORTING
LEG
ISLA TION
ho
BOO FOR TS PR BUS A RE ESCRIP INE SPON TIO SS SIB N LE ne
st
y
sty
ne
ho
NC
E
TA ILO RM AD E
MA PE RF OR
HAN
C ATE
M CLI
T US TR
GE
CR
D AN BR
IN TE GR AT ED
MS
esty
EGY RAT
L ST
BA GLO
com plet e th e co urse
hon
Rem emb er t o
25m g
COM OYEE EMPL
ES LU VA
Directions Monthly December 2007
Issue 18
Welcome to the December edition of Directions Monthly. In the past year we have seen private equity companies scrutinised over the takeovers of some of the most respected and trusted businesses. So this month we have invited Richard Ellis of Alliance Boots to provide his take on working with KKR, the challenges they faced and reasons why private equity firms are not really ‘barbarians’. He outlines his prescription for all businesses that are addressing the responsible business agenda and explains why it is so relevant to private equity-owned businesses.
Lucie Harrild
Pavan Athwal
Everyone watched anxiously as Boots was taken over by KKR – so how has Boots continued to maintain such a healthy responsible business strategy?
Richard Ellis Head of Corporate Social Responsibility, Alliance Boots
Following the merger between Alliance UniChem plc and Boots Group plc, Alliance Boots plc was formed on the 31 July 2006. At the time there was doubt, particularly among the broader CSR community, as to whether the new Company’s approach to CSR would match that of Boots. In June this year the uncertainty grew further following the high profile private equity acquisition of Alliance Boots plc by KKR and Stefano Pessina.
Boots’ CSR credentials were established by the founders of the Company, the Boot family, in the 1850s. In 1914 electrically powered vehicles were introduced, in 1915 a Combined Heat and Power Plant was first established and in the 1930s glass and cardboard were recycled. This agenda has not suddenly been discovered by Boots. It is part of the DNA of the Company; it’s not an add on, but something which is embedded into the way business is done.
The question on most commentators lips was – how would one of the UK’s most trusted companies be affected by this ownership change and what impact would it have on their CSR credentials? Some six months on I can report it’s, “Business as usual”.
The new owners could see that CSR was not a cost but a vital ingredient in the success of Boots. The CSR activities gave the brand its personality. It was the reason why customers “TRUST Boots”.
Very few, if any, private equity-owned businesses have successfully introduced CSR programmes. They have a reputation for being secretive; very few people outside the world of private equity really understand how these businesses operate. This lack of transparency was one of the key drivers for the Walker Review. Whilst some recommendations have been made available there is still further work to be done before final publication. How Alliance Boots deals with these issues could well impact the final version of this review. At the heart of these findings is the need for increased stakeholder dialogue. This has been fundamental to the success of the Boots programmes and is the central plank around which the new Company is building its CSR strategy. For the past five years Boots has ❝ maintained an on-going two-way communications process with all its stakeholders. They have helped shape the strategy and decide the priority areas; and exactly the same process continues today as a private equity-owned company.
❞
But KKR and Stefano Pessina needed more than just a compelling story – they needed a proper business case. They wanted to see that this activity delivered economic as well as environmental and social benefits. Central to this is the information gathering system, Credit 360. This provides the “numbers” which enable the CSR agenda to be managed and KPIs to be set. It provides the data in reports and various surveys such as the Business In The Community CR Index. Without it CSR would not have been taken seriously at Board level. CSR today is judged in exactly the same way as any business discipline. It is not given any special “favours” but must deliver value in the same way as any Business Unit does. Through this process it was possible to describe the real benefits of pursuing CSR initiatives. For example, a range of transport activities reduced the road kilometres driven on behalf of Boots by 8.5 million. This saved 5% in transport carbon dioxide emissions and £1.4 million in fuel costs. It was because we could articulate the business, as well as
Directions Monthly December 2007
Issue 18
❝
But KKR and Stefano Pessina needed more than just a compelling story they needed a proper business case. They wanted to see that this activity delivered economic as well as environmental and social benefits.
❞
the broader social and environmental benefits, that the new owners were willing to encourage the “Business as usual” approach. Talking about CSR in business language to Stefano Pessina was key. He could understand the strategic relevance of supporting breast cancer charities when 79% of the employees were women and 83% of our customers are women! It wasn’t just about doing good things for their own sake but embedding these principles into the fabric of the business. The importance of CSR to the new business was understood even before the acquisition. In the Prospectus document three very clear measurable CSR commitments were given and have been met… 1. That CSR reports written along Global Reporting Initiative guidelines would continue to be produced – the first CSR report for Alliance Boots was launched on the 9th October this year. 2. That a Board CSR Committee would be established to oversee CSR activities across the whole Company – the first meeting was in September 2007 and it comprises Ornella Barra, Marco Pagni and Steve Duncan who are all full Management Board Members. 3. That Alliance Boots would complete the BITC CR Index and allow its results to be published – Ornella Barra formally signed the submission in November 2007 and receipt has been acknowledged by BITC. There is clear leadership for this agenda. People at the very highest levels accept responsibility for the delivery of CSR objectives. They do this because they understand the real value it delivers for the business. Equally they recognise that they are members of society and that we all benefit from such activity. It is a passion that lives on in the new Alliance Boots. Looking forward, what are the challenges? Well, CSR is now firmly embedded on the management agenda but we must integrate it across the whole business. The former
Boots business understands the importance of CSR to its brand, but as the new business operates internationally some countries are only just starting their CSR journey. All parts of the business need to be helped to improve their performance and achieve their full potential. The first step on this journey for some of our international colleagues begins when they attend the CSR Training Course, which equips them to become the “champion” for CSR in their country. As all parts of Alliance Boots become familiar with this agenda it becomes possible to integrate Company-wide policies and introduce worldwide campaigns such as the eradication of counterfeit drugs. Communication of our achievements ❝ and aspirations will be key. I admire the way Marks & Spencer have communicated their “Plan A” CSR strategy; it is a great example of where a CSR programme has been aligned to business strategy successfully. This is not something Boots has done previously but the new owners are giving us the confidence to maximise the benefits of our CSR programmes.
❞
Stakeholders want to know more about CSR and in particular climate change issues. I think it’s fair to say the green consumer is on the march. But they personally don’t know what they can do to solve this problem and they don’t want to change their lifestyle too much. So they want to buy from brands that have done this for them. This means when they buy our products they can take them home and enjoy them – safe in the knowledge that we have done what can be done to tackle climate change. This was why we worked with the Carbon Trust to obtain “Carbon Labels” for our Botanics and Essentials shampoos. It shows consumers that we are serious about this agenda. Similarly we are encouraging our people to bring their personal behaviours to work. At home we are used to recycling and turning off lights. So why don’t we do similar things at work? We are encouraging such behaviours by taking away personal waste bins at Head Office. Now employees have to segregate their own waste and recycle
paper, cans and plastic. Such actions might not in themselves save the world, but they send a very clear message to our people that CSR is an important part of the business agenda. It’s the start of our journey to create 100,000 ambassadors for CSR across the Company. But businesses, even passionate ones, cannot tackle the responsible business agenda alone. The government could aid this process by offering more incentives to companies to follow sustainable practices. It needs to develop joined up thinking between central and local government on things like the building of wind turbines – National government wants more but the local government planning process often hinders this. Legislation can too often be a blunt instrument because it captures all companies irrespective of their type or past CSR record. For example: if laws were to be introduced requiring businesses to reduce their carbon footprint by a fixed percentage, what would the base point be? For a Company like Alliance Boots that has been doing lots of things across our property portfolio for five years, this would be much more difficult to do than for a company that had done nothing. My prescription for private equity-owned companies, which is equally applicable to all businesses, is to understand where CSR sits within the business agenda and who is responsible at Board level. Explain CSR in terms that the rest of the business understands; don’t get bogged down with some of the CSR jargon, particularly around carbon management. Make it relevant and measure and report on what you do. The new owners of Alliance Boots are, after all, business people who want their investments to succeed – they will listen and support strategies that deliver value and exceptional returns, as well social and environmental benefits.
ABOUT US SALTERBAXTER ADVISE COMPANIES ON STRATEGY, BRANDING, CORPORATE COMMUNICATIONS AND DESIGN. Our clients are extremely varied and include FTSE 100 companies; some of the world’s most exclusive brands; independent, entrepreneurial businesses; world-leading educational establishments; law firms; private equity firms and media companies. We name companies, re-invent companies and re-position companies. We help companies communicate with shareholders and advise them on how to address corporate responsibility. We launch, brand and re-brand. A key area of our expertise is corporate reporting and we advise leading UK and European organisations on strategy and design for their financial and CR communications programmes. We currently work with 11 of the UK FTSE 100. Contact: Lucie Harrild [email protected] Tel: +44 (0)20 7229 5720
Pavan Athwal [email protected] Tel: +44 (0)20 7229 5720
Directions Monthly supplements our main Directions report. This report is published each year and is now regarded as the UK’s most comprehensive analysis of the trends and issues in CR communications. If you want a copy of the full Directions Annual Survey and Report, call us on the number below or email [email protected]
202 Kensington Church Street London W8 4DP Tel +44 (0)20 7229 5720 Fax +44 (0)20 7229 5721 www.salterbaxter.com
This supplement is printed on Think Bright and is supplied by Howard Smith. It is an FSC (Forest Stewardship Council) certified material and is 100% recyclable. www.hspg.com Printed by CTD, an ISO 14001 certified and FSC accredited company. TT-COC-2142 ©1996 Forest Stewardship Council A.C www.ctdprinters.com
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