Moving The Goalposts

While some still feel that the only business of business is to turn a profit while sticking to the rules of the game, the overwhelming drive is towards firms taking up some of the social slack left by Governments. Over the past decade the use of the term Corporate Social Responsibility (CSR) has snowballed. As the major trade bodies in aggregates, cement and concrete debate the structure of any combined superassociation in the drive towards sustainable construction, MQR takes a look at the concept of CSR and seeks to find what it currently means to the quarrying industry

Back in 1962 the Nobel winning economist Milton Friedman wrote that there was only one social responsibility of business: “...to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”

But the idea that free market economics alone can best serve the public good has been moving out of fashion for decades. Today, businesses of all sizes are having to re-evaluate the way they interact with wider societal issues. If business is a game then the goalposts have shifted.

This re-evaluation has led to the rise of the concept of corporate social responsibility (CSR). It is embedded into the majority of multi-national firms’ boardrooms and many have appointed directors to the cause to show they are serious – Aggregate Industries has recently followed suit in the guise of Miles Watkins.

However, if you try to pin down CSR with a definition it soon wriggles away. While many have an intuitive understanding of what it means – a form of voluntary action on the part of companies to augment social and environmental good beyond legal requirements – a single global definition to aid firms remains elusive.

The World Business Council for Sustainable Development sees it as firms behaving “ethically”, contributing to economic development and improving “...the quality of life of the workforce and their families as well as of the local community and society at large.”

The European Community, however, sees it as: “A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.

More locally, for the Confederation of British Industry (CBI), CSR needs to be “...voluntary, business-driven and often going well beyond what is required by legislation”. In fact, too much legislation and a business will be strangled, it says.

But CSR has its critics. Hang on, they say. The social and the environmental are the realms of government not business. All this talk of CSR is simply a stalking horse for the forces of the anti-capitalist lobby. It is simply a case of governments not doing their jobs properly. When effective laws are in place, the self-interest of the profit motive can lead to social good.

For example, arguably the biggest drive towards the use of recycled aggregates in the UK has been the Goverment implementing the Landfill Tax in 1996. If a developer chooses the cheaper option of an excavation firm recycling waste left by demolition on site to be used for groundwork material, this is less a sense of social responsibility towards lowering landfill levels and more good old fashioned self-interest in maximising profits.

In a new book on CSR, former US labour secretary under Bill Clinton and now University of California lecturer Robert Reich goes as far as to suggest that the current focus on CSR is actively diverting attention away from getting global Governments to do more in dealing with social issues.

Whichever side you come down on the issue, the fact is that CSR is here to stay. And in the UK quarry industry the big-five firms have been working on a definition that suits them for around a decade.

But even in the multi-nationals it is still early days. Business elements as diverse as HR, PR, waste management, sustainable development and external and internal communications can all fall under the CSR umbrella. Learning which ones suit the business is long and on-going. And as the CBI maintains: “Companies must be allowed to define CSR according to their own activities and context”.

There is an obvious split here in terms of UK quarrying. The big five either run cement works or are owned by global cement firms. The swampies and carbon emissions airport campaigners have yet to chain themselves to the clinker towers of the world in protest.

Even campaigning charities such as Friends of the Earth and Greenpeace have been uncharacteristically silent given the cement industry produces over 5% of global carbon dioxide emissions.

Carrying materials by transport such as waterway barges is being increasingly adopted by firms such as Cemex in order to lower carbon use and improve figures on environmental reporting.

However, this can quickly change. Pressure is growing. The 60% reduction in carbon emissions by 2050 mooted in the new Climate Change Bill came under attack almost as it was announced with opposition parties calling for an 80% figure.

A report from the UN in late November backed up these calls. Fighting climate change: human solidarity in a divided world says developed countries such as Britain need to reduce carbon emissions by 80% by 2050 if developing countries are not to find themselves the victims of our lack of action – even Gordon Brown has conceded the 60% figure is out-dated.

The pressure this mounts on the cement industry is obvious. And it is a key driver behind its urgency in creating a single lobbying group comprising the QPA, British Cement Association (BCA), British Precast and others. As Mike Gilbert, head of the BCA, told MQR: “We need to start making the link between hospitals and cement. The new Climate Change Bill will effect us all.”

Of course, there are many in quarrying who have nothing to do with cement, leaving the QPA to tread a difficult path between the global cement firms and the independent quarriers.

It appears to have decided that the best route is to formulate a carbon reduction statement of intent while defining the entire package of CSR in the areas it sees as relevant as sustainable development. It is an approach to CSR that QPA director-general Simon van der Byl believes is being adopt by the wider industry.

“Our members adopted this approach to report annually on what we see as the key CSR issues. I believe this is the way the whole industry is moving. It is certainly the way in which I see the big-five moving,” he told MQR.

The QPA’s annual sustainable development report breaks down into four pillars: social progress, environmental protection, natural resources and economic prosperity. These each support reporting on a range of other CSR related issues.

Social progress covers areas such as health and safety and community relations while environmental protection deals with issues such as aggregates transport and restoration. Conservation of resources is the subject of natural resources while economic prosperity covers topics such as employment and aggregate production.

The marine aggregates arm of the QPA – the British Marine Aggregates Producers Association (PMAPA) – has also followed suit releasing its first sustainability report in November this year. So, is the industry defining CSR as sustainable development? Head of sustainable development and public affairs at Lafarge Aggregates, Mark North, believes it is.

North’s role was only created in March this year. He is a geologist by background and finds himself in the unfamiliar environs of CSR. His job function contains some of the strategic elements of HR, internal and external communications and waste management. But the overarching emphasis is on sustainability in line with van der Byl’s point on the industry’s definition of CSR.

“At the moment sustainability covers the key issues in the industry and we support the QPA process. And as a geologist I have always been concerned with wasting resources,” he told MQR.

Every January Lafarge Aggregates gets its workforce together to review the 12months gone and identify challenges for the coming year. The main areas of focus for the previous few years have been health and safety and customer service. This year there is a new module: sustainability.

North: “We are going to launch our energy campaign. It is a bid to link home and work to the wider issues of sustainability. Many people hear about climate change from the media and feel like a rabbit caught in headlights unable to move.

“Saving resources is something everyone can relate to and understand. They can use it in their own homes and allows them to answer customer questions before they are asked,” he says.

But is this CSR or simply good business practice in terms of win-win all round? For North any sustainable approach needs to be both if it is to be successful. It is an opinion shared by his former boss and now consultant and member of the CBI Minerals Forum Nigel Jackson: “CSR is about the social, environmental and the economic. You cannot isolate one from the other.

“It is a matter of truth, transparency and trust in the way a business operates,” he told MQR.

The big-five as listed companies have to be seen to be doing something, he says, and so have built up a range of tools to show they are. As they are very much self-contained, the focus for the industry now needs to be on making these tools relevant and useful to small and medium sized enterprises (SMEs), he says.

“We need to find ways of spreading the approach of the big players to smaller firms without regulation. We need to keep it simple and translate the global systems into methods that can be used by UK SMEs.”

The best way of doing this is through the sustainable development agenda, he says. An example is gaining the ISO14001 environmental management standard: “If we could bring all companies up to this standard, for example, then we could take CSR further. We need to build a layer at a time and ensure it is embedded before moving on. It can’t be about complex aspirational attainment,” he says.

The QPA is currently working on a CSR reporting scheme for SMEs. Using the structures of the global players it will offer SME members a practical methodology for reporting.

There is no release date yet, according to Jackson, but will probably gain more development time following the QPA’s response to its carbon statement of intent, which it is seeking to report on at the 2008 sustainability awards in London.

And while the framework will be intended to be for QPA members only, it will be publicly available allowing non-members to learn from its structure.

And CSR is certainly on the mind of smaller firms. Ennstone chairman Vaughan McLeod: “You have to take the view that without CSR there would be no quarries. General environment, planning, truck movements, noise, dust, respect for staff, diversity health and safety, local community all come under CSR – we have isolated 14 different aspects and hope to eventually report on them all,” he told MQR.

Ennstone has reported on CSR in its last three accounts, Ennstone SHE director Roger Baines told MQR. However, these are very early days for CSR in the smaller independent firms – so, much of it has been a wishlist of things to do, he says, rather than a record of concrete actions.

Restoration of land such as this former Hanson sand and gravel workings at Middleton Lakes is another sign of the industry’s commitment to the principles of corporate social responsibility, quarry firms say.

One of the reasons for this, explains Baines, is cost. For example, Ennstone is setting up a new metering system for energy use to help ensure lower carbon emissions but it all takes time and money. Cost also dictates how far the firm can react to the CBI’s call for companies to go beyond legislation.

“We want to report on waste, energy, water use and emissions – as we run our own fleet – but it is going to take time. My target is to be reporting on wider CSR issues from 2009 for the 2008 period,” Baines told MQR.

International standards such as the ISO14001 enviromental management standard are an important badge of CSR to many firms. There are 6,070 organisations certified to ISO14001 in the UK including all the major quarry firms and many smaller ones – Aggregate Industries for one keenly advertises that over 90% of its sites are ISO14001 compliant. And as Jackson noted earlier, it is a good base standard from which the industry as a whole can start to embrace a wider CSR concept.

However, by 2010 the International Standards Organisation (ISO) is to release a new ISO26000 standard in corporate responsibility – November saw the fifth plenary meeting of the ISO Working Group on Social Responsibility held in Vienna, Austria.

ISO 26000 is intended for use by organisations of all types, in both public and private sectors, in developed and developing countries. And in keeping with the industry’s defining of CSR it also chants the mantra of sustainable development: “There is a need for instruments that assist the practitioner to affirm and operationalize the goal of sustainability,” states the working group literature. “There is a need for ISO 26000”.

Core issues for the standard will include fair operating practices, labour practices, human rights, environment, organizational governance, consumer issues, and social development.

But while there is a general agreement that an instrument guiding firms on corporate responsibility is needed, given the difference in opinion over definitions there is some question whether ISO26000 is the one to do it, at least in the quarrying and cement related industries.

One problem is that it is not a management system like ISO14001 and will not be for use as a certification standard. It will contain guidance, not requirements.

Mallen Baker is development director of Business in the Community (BITC) – which produces its own annual corporate responsiblity index awarding platinum, gold, silver and bronze ratings to firms. He believes that the new standard will be of limited use for quarrying and cement firms.

“These firms need a more ambitious approach, something more dramatic than a standard can resolve, especially for cement companies. It is a sector wide issue.

“ISO26000 will be influential but it will be a source book rather than a de facto standard. It isn’t something we would factor in to our own index assessment,” he told MQR.

BITC’s own CR index started off as an environmental index back in 1996. It was based on ISO style reporting to help companies benchmark their environmental management.

In 2002 this was expanded to include the community, marketplace and workplace through member company operations, products or services, and interaction with key stakeholders – 120 companies used it as a benchmark in 2006.

The index provides average scores in each section. The average score across all participating companies last year was 86%. It was 61% five years ago so a lot of progress is being made.

Lafarge Cement, Anglo American and Aggregate Industries featured with the first two gaining gold and Aggregate Industries securing silver. This places all of them above average with AI experiencing a rise in score of 5-10% compared with the previous year.

Baker believes that one of the reasons cement firms have been left alone by pressure groups is because they are showing they accept, and are acting on, the key issues in terms of carbon reduction and sustainability: “It should stay like this if they collaberate and continue as they have started.”

However, using a football analogy, he points out that the team is only just running onto the pitch: “The last thing they need is to deliver a performance like the England football team.”

With these he also places quarrying companies. And here perhaps this is something the independents need to be wary of. The drive towards a single superassociation risks mixing cement and quarrying in the eyes of the public. And while the cement industry is being mostly ignored by protestors this is a positive thing.

Should the wind change, however, then any work aggregates firms have done to improve their branding with the public could falter. This is where a comprehensive CSR policy could prove very useful!