Making Globalization Work for Your Company

Companies once held accountable only for the direct, contractually specified or regulated consequences of their actions now find themselves responsible for alleviating hunger, disease and more: issues as disparate as environmental sustainability, community economic development and child labor in sub-Sahara Africa. Thus it is easy to see that our increasingly interconnected world demands strong corporate leadership to strengthen governance, harness economic potential, alleviate global poverty and improve human conditions.

So what should be the role of business? As engines of growth and sustainable development, corporations have a responsibility to address poverty and underdevelopment, to help disadvantaged communities where they conduct their business, manufacture their products and employ workers. Here are some guidelines:

  • Innovate, create decent jobs and develop affordable products and services, especially those that meet basic needs such as water, energy, nutrition, healthcare, housing and education while leveraging your core business expertise and realizing commercial success.
  • Invest in improving society and addressing global challenges beyond traditional philanthropy. Too often philanthropy is used as a form of public relations: “writing the check” to promote a company’s image through high-profile sponsorships. To respond to competing pressure from investors, governments and activists, companies should approach their corporate giving strategically to improve the business climate and infrastructure where they operate.
  • Leverage other resources as well, devoting not only money, but management capabilities and relationships, to solving development problems such as in-kind donation of employee expertise for training; also utilize “cause marketing”: engaging customers in both awareness of and funding for some of these development needs.
  • Use your natural strengths to create products and markets that stimulate development in emerging economies where future business growth opportunities are the greatest. You can and should provide access to economic opportunity through jobs, property ownership and access to credit and access to new technologies and training.

Responsible conduct must increasingly become the guiding principle in for overall business strategy. For private enterprise, international development is increasingly regarded as the “quid pro quo” for globalization and market expansion. Companies that heed the call for alignment of their social and philanthropic missions with their core business strategies will succeed far into the future. Those that don’t won’t survive!

A Day of Reckoning for the Wine Industry: Part 2

Of all human activity, modern agriculture is the largest single contributor to global greenhouse gas (GHG) production, to deforestation and to water consumption. Protecting and improving the natural environment are fundamental, and issues like biodiversity, climate change, energy, soil degradation and water scarcity need to be addressed.

The global wine industry can and should do more to create a sustainable future for our planet ? environmentally, socially and economically.

Despite the warnings of a day of reckoning coming for the wine industry expressed in my previous column there is some good news. In response to these challenges organic?and biodynamic wines that focus on environmental protection have developed a notable presence on the global wine scene over the last few years.

More importantly, to my mind, vineyard managers and winery owners in some wine regions are going beyond organic practices and are adopting rigorous sustainability programs. These growers and winemakers alike are connecting to sustainability as an attitude that encompasses all of their work. Distinct from organic and biodynamic farming sustainable farming also?considers the social responsibility of the farm, as well as the profitability of the end product, and in a few cases includes a life cycle analysis of the wine?s impact on eco-systems from ?cradle to grave.?

For some, the goal is to continue to produce great wines while lessening their environmental footprint. For others, the goal is to preserve market share or gain a marketing advantage. And still, for others, the goal is simply to not get left behind. For the industry as a whole the goal should be to stay ahead of consumer and community concerns and avoid widespread pushback.

Adopting and incorporating sustainability into the work of wine growing and wine making is not trivial. These twin goals add substantial burdens to many who already work long hours, and additional costs sometimes where the margins are thin. In the beginning of this pursuit, there must be education, self-assessment and continuous improvement. Then, with official certification come increased paper work, third party independent inspection and on-site audits. But these steps are all critical to ensure credibility and a more sustainable future. Wineries in California, Chile, New Zealand, Oregon and South Africa are the leaders in this quest to be more sustainable and are helped by rigorous program promoted by their regional industry associations.

The term sustainability is often used quite loosely, and it is a term that has been abused by wineries and marketers alike. In the absence of a legal definition for sustainable wine, regional associations are establishing certification systems and prescribed codes of conduct for sustainable practice.

In general, sustainable viticulturists and winemakers work to minimize soil erosion, depletion of soil nutrients, and water pollution. While some of their practices and requirements are like the other responsible farming approaches, it is a much broader concept than either organic or biodynamic. For example, sustainable viticulture emphasizes the use of cover crops and careful canopy management (trellising and pruning) and employs composting. Chemical spraying is permitted, but chemical use is minimized, and spraying events are documented and recorded. Integrated pest management is also an important aspect of sustainable viticulture. Sustainable producers believe their approach is more realistic as the market demands both quality and volume; a vineyard is a business undertaking, which has to be commercially viable.

The wine industry?s complex sustainability issues extend beyond the natural environment in the vineyard. Firms must also address environmental stewardship throughout the production and distribution of the wine, as well as maintain social responsibility in their community to be considered as truly ?sustainable.? Sustainable wineries focus on the following areas of sustainability:

?Waste Management to prevent generation of unnecessary waste to begin with, and to reuse or recycle any waste that is generated.

?Strict Material Handling of potentially hazardous fertilizers and other chemicals used in the vineyard, to limit the impact on the environment, local community and employees.

?Water Management to conserve water use, by sustainably obtaining, using, reusing and discharging water and employing practices that enhance the moisture levels and reduce the need for irrigation, such as mulching, composts, or planting cover crops.

?Energy Efficiency by using energy-efficient appliances and procedures and auditing energy use of wineries to reduce their carbon footprint. These include solar panels and other energy saving devices, housing tanks internally, and farm waste to generate energy.

?Packaging: some wineries measure CO2 emissions generated by glass production as well as the weight of glass in transport of wine to its market and opt for lighter-weight bottles, which also saves cost. Others have opted to bottle some of their wine brands in PET (plastic) bottles to further reduce carbon emissions associated with shipping glass.

Restaurants and bars are starting to serve wines from kegs, a sustainable alternative to offering wines by the glass. Kegs release much less CO2 both in manufacture and in transport than wine in bottles and result in little to no waste generation because most are repurposed or recycled and, at 26 bottles per keg, save substantial amount of trash from the landfill over its lifetime.

Community Outreach: In addition to tangible resource management, sustainable wineries also dedicate time to educating their community of consumers, producers, and vendors about their sustainable practices. These wine producers are also committed to social responsibility and giving back to their communities.

Social Equity: Increasingly, both wine producers, retailers and consumers are looking beyond environmental practices to the broader concept of sustainability — the ?triple bottom line? approach — and working to integrate three main goals: environmental health, economic profitability, and social equity. Social equity means taking care of people ? increasing safety and developmental training for employees, adding incentives such as housing and health insurance for seasonal workers, and focusing on community needs.

 

 

A Day of Reckoning for the Wine Industry

My work with sustainable agriculture began in the coffee industry, during a period of tremendous growth in high-quality coffee shops and retail categories around the world. As a senior executive at Starbucks Coffee Company, I led the company?s global responsibility efforts focused on rigorous approaches to sustainable agriculture for coffee, tea and cocoa, fair and responsible relationships with farmers and engaging consumers in this corporate social responsibility effort. Then as a board director of DE Master Blenders 1753 of the Netherlands — formerly Douwe Egbert, the second largest coffee roaster on Europe ? I was engaged in the company?s effort to integrate sustainability into its coffee procurement and roasting.

Now in the wine industry I instinctively grasped the similarities between both agricultural commodities. Coffee occupies a place in the market and in our cultural life analogous to wine, and the experience of it can teach us a great deal when it comes to understanding the elements of a sustainable wine industry.?? Neither is a nutritional necessity, but both are integral to our food habits, consumed for pleasure. And the aroma and flavors of both have the potential to connect those who imbibe with the lives and fates of people throughout the world, to their culture, their nation, their soil. What we enjoy is a direct result of their care of the plant, precision in processing, careful transportation and handling, and diligence in preparation. Consumer awareness of coffee cultivation, and its sometimes negative effect on people and the land, foreshadows current expanding developments in the wine industry.

The industries that produce and bring these two drinkable commodities to market also share important similarities. Vintners confess that wine is made in the vineyard, and the same holds true for coffee. Both are agricultural products from specific regions that are grown according to exacting standards. There are grades and flavor differences based upon where it was raised, how it was processed and flukes of nature that are recognized during evaluation, and priced accordingly. The soil, weather, orientation of the sun, altitude and rainfall ? in other words, terroir ? affect the flavor of coffee beans and grapes.

But the similarities between coffee and wine don?t end there. From the way we taste them to the words we use to describe them, it turns out that there?s much more to two of the world?s favorite drinks. Granted there are very clear differences: wine and coffee operate along two very different supply chain structures.

For wine, growers of the fruit and producers of the beverage have traditionally supplied their own region of consumers and the supply chain for wine is still largely immediate and fairly tight. If a winery does not literally own its own vineyard, for example, it is often within arm?s reach of one as well as the other links in the value chain.

Coffee on the other hand is produced quite far from its eventual market. The coffee tree is a tropical evergreen shrub that only grows in a defined area above and below the equator, often called the ?coffee belt? typically in poor regions of developing countries, also biodiversity ?hotspots.? The coffee supply chain is often complex and varies in different countries but typically includes many layers and the grower is often squeezed, receiving a small share of the value of production. The second most traded commodity in the world after oil, market swings in the price of coffee can have a profound effect on incomes of small coffee farmers who are sometimes forced to sell their beans for less than they cost to produce.

Meanwhile, the largest coffee corporations continue to reap enormous profits from the growth in trendy coffee shops and consumer demand for high quality Arabica based beverages. Some farmers cut down trees in rainforests to make room for planting more coffee trees, thereby destroying vital biodiversity and affecting green house gas emissions. This has resulted in a heightened level of activism by environmentalists, social justice campaigners and fair trade advocates, concerned with the negative impact of coffee growing on tropical rainforests and human inequity in the coffee supply chain.

The sustainability performance of the wine industry has yet to receive the kind of media scrutiny and activist interest that other industries like coffee have in recent years. But such issues have started to gain prominence, as consumers want to learn the cultural and environmental stories behind the wines they drink. And a day of reckoning for the wine industry is fast approaching judging by the increasing number of complaints over land use, objection to permits for new vineyards, water rights disputes, protests over pesticide spray drift and legal actions that producers face as a result of the health impacts of chemical use in vineyards. The industry should heed the lessons from the coffee experience.

In Sonoma County, California for example more wineries face growing objections to the industry?s expansion. Between 2000 and 2016, 300 new wineries and tasting rooms were approved ? a nearly 360 percent increase over the previous three decades ? and many of those wineries have decided to boost business by offering an array of events, from wine-tasting dinners to weddings and harvest parties.

The industry?s growth has sparked strong blowback from many rural residents, who say unruly crowds, loud noise and traffic on narrow, winding roads is detracting from the peace and quiet of their neighborhoods. Critics say the industry?s expansion has gone overboard, impacting daily life for winery neighbors while clogging area roads, attracting thousands of visitors to the most popular annual events. They object to the commercialization of agricultural lands and diminishing the rural character of the county.

In France pesticides awareness groups have sprang up in most viticulture regions and anti-pesticide protests have been rife in 2016 with the Gironde administrative region, with Bordeaux at its epicenter, as the country?s largest user of pesticides. Pressure groups in Burgundy and in the M?connais area have demanded that grape growers cut pesticide use. Alongside the protests, a former Bergerac vineyard worker successfully sued her ex-employer over pesticide-related illness — believed to be a first in France.

The industry is being shaped by rigorous, compulsory environmental regulations, voluntary assessment and certification, local activists, as well as by more environmentally conscious consumers who want to be sure they are purchasing products that respect the environment.

The wine production process affects the natural environment that surrounds the vineyards and can negatively impact the quality of water, soil and air. Pesticides and other chemical fertilizers used in grape growing can remain in the soil, the clay, and the organic matter within the soil for years, causing a loss of fertility, exhausting nutrients and allowing erosion. Furthermore, if the soil is polluted, rainfall will cause the subterranean waters to be contaminated as well.

Sustainability issues extend beyond the natural environment in the vineyard. Producers and winemakers must also address environmental stewardship throughout the production and distribution of the wine (with regard to packaging and fossil fuel use, as well as maintain social responsibility in their community to be considered truly ?sustainable.?

But it isn?t all bad news. My next column will describe how some regions and wineries are implementing responsible practices.

Social Responsibility in the Global Wine Industry Part II: Workers and Community

Environmental stewardship has received much attention in the wine industry, but firms must also address social sustainability to be considered ?sustainable? enterprises. This means growing wine grapes and making wine in ways that are environmentally sound, socially equitable, and economically viable. On the production side it is (or should be) about commitment to communities and commitment to workers ? taking care to provide workers a healthy environment in which to work in the vineyard and in the winery. Employee-related issues include workplace opportunity, human resource policies, quality of life, governance, democratic processes, worker development, gender diversity, bonus-pay systems, seasonal worker housing and health insurance.

Additional societal concerns include local purchases, local hiring, supporting local community events, product impacts on society, treatment of the under-privileged, and being a good citizen in the community.

Following are best practices by wineries, prominent charities and good works in various regions.

Talley Vineyard?s Fund for Vineyard and Farm Workers, California

California?s Talley Vineyards established an endowment in 2004, the Fund for Vineyard and Farm Workers, with the goal of amassing a $1M fund, the interest of which will fund (in perpetuity) grants to nonprofit organizations that assist San Luis Obispo County agricultural workers and their families. Their Mano Tinta series is specially designated for the fund, and local grape growers and winemakers are invited to produce their own specially designated wine as cause marketing for the endowment?s sake. Mano Tinta, ?Red Hand?, is a wine dedicated to the pride and commitment of farm workers to their craft. All of the grapes, materials and services used to make this wine are donated and all profits from the sales of Mano Tinta benefit the Fund.

The recipients of these funds are nonprofits dedicated to local charity work including education, reading programs, literacy, after school programs and housing for migrant and seasonal labor. https://www.talleyvineyards.com/

IMAGE 6. FIELD WORKER CREDIT Wine InstituteRdV Vineyards, Virginia

RdV Vineyards in Delaplane, Virginia, has ?put the state of Virginia on the global wine map,? according to wine critic Jancis Robinson. Founder and General Manager Rutger de Vink is a former US Marine who has produced a high quality Bordeaux style blend. Rutger?s philosophy guides RdV?s labor and community practices. From the beginning he was very adamant about having no seasonal workers/labor. RdV has a full-time vineyard team that works year round. Another aspect of RdV?s social responsibility is being a part of the community and the winery?s charitable commitments to Hope for the Warriors and Navy Seals. As a result, a lot of individuals coming back from combat spend a lot of time at the winery, including helping out with harvest. RdV did a special bottling in 2010 called Exurgo and all of the proceeds from this wine went to Hope for the Warriors. http://www.rdvvineyards.com/

Domaine Chandon, Argentina

Domaine Chandon in Argentina has collaborated with its neighbors on a program for children of harvest workers called ?Education in Harvest.? The harvest workers had been accustomed to taking their children to the vineyard at harvest time, which exposed them to a variety of risks and accidents. Since 2006, Bodegas Chandon has been going beyond the legal framework related to child labor and has implemented a recreational education program for children of pickers at harvest time. This happens during the month of February, when the children are not attending school. Up to 100 children between the ages of 1 and 15 are moved from their rural homes to the nursery garden and sports center of Tupungato, where they participate in sports and recreational activities. They also receive breakfast, lunch and medical checks.

The program?s positive impact led other companies to join, including Bodega Catena Zapata, Canale Group (Alco) Shirley Hinojosa, and Don Antonio Vineyards. This program strengthens the employment relationship and the parents can work in a concentrated way, knowing that their children are cared for and safe; and so the workers return to Chandon each year. http://www.chandon.com/

Backsberg Estate, South Africa

In 1998 South Africa?s Backsberg Estate Cellars introduced a special wine series titled Freedom Road. A cause-marketing initiative, Freedom Road aimed to raise funds for housing construction projects so that laborers of Backsberg would own their own property without being encumbered by significant debt and lessening reliance on employer housing that is common in South Africa. The South African government was a key player in this effort, providing housing subsidies for first-time homeowners. The workers themselves were responsible for maintaining their 14 hectares of land and the buildings. Backsberg created and marketed Freedom Road, financing the initiative for its laborers. The collaborative nature of the effort is evident, but the winery itself was the facilitator of the process, making it all possible. http://backsberg.co.za/

Murphy Goode, Alexander Valley, California

Through the sales of their Operation Homefront Red, Murphy Goode Winery, a Sonoma County Winery, supports Operation Homefront, an organization that provides emergency and financial assistance to the families of service members and wounded warriors. http://murphygoodewinery.com/wine/homefront-red

Ehler?s Estate, Napa Valley, California

In 1985, French entrepreneur and philanthropist Jean Leducq began acquiring small parcels of vineyard land in Napa Valley?s acclaimed St. Helena appellation ? parcels that would eventually become Ehler?s Estate. In 2002, Jean Leducq passed away from heart disease, leaving the winery in trust to the nonprofit Leducq Foundation that he and his wife had founded in 1996. One hundred percent of the profits from the sale of Ehler?s Estate wines are returned to the Leducq Foundation, which awards over $30 million annually to directly support international cardiovascular research. Additionally, they produce a Cabernet Sauvignon with the name ?One Twenty Over Eighty? ? a nod to the ideal blood pressure (120/80) and to the heritage and main philanthropic cause of the estate.?? http://www.ehlersestate.com/

Staglin Family Vineyards, Napa Valley, California

Staglin Family Vineyards in the Rutherford area of Napa Valley created the Salus wine label to support the International Mental Health Research Organization (IMHRO). IMHRO funds research to find better treatments and cures for schizophrenia, bipolar disorder and depression. “Great wines for great causes” has been the winery?s motto. The Staglin Family has donated and raised more than $800 million to support charities, including their main cause, the Music Festival for Brain?Health, which brings together generous chefs, wineries, top-billed musicians and scientists to raise significant funds and awareness for the cause of brain health. http://www.staglinfamily.com

Ken Wright Cellars, Oregon

?Salud!, a program sponsored by winemaker Ken Wright, is a joint venture between the Oregon wine industry and Tuality Hospital, and provides healthcare for the seasonal workers and their families who are so integral to the industry. An annual event in November benefitting ?Salud! showcases the Valley?s top 42 Pinot Noir producers who auction just five cases of wine from the best barrel in their cellar. With over $6 million raised to date, ?Salud! has had a profoundly positive health impact on thousands of seasonal workers and their families. http://www.kenwrightcellars.com/history.shtml

Regional Partnerships

At the regional level, organizations are engaging with social responsibility in a number of exciting ways. Bonded by their geography, participating vineyards and wineries are joining together for greater social involvement, too.

Napa Valley Farmworker Foundation

The mission of the Napa Valley Farmworker Foundation is to support and promote Napa Valley?s vineyard workers through education and professional development (ranging from safety in the vineyard to English language) totaling over 215 hours to more than 2,800 farmworkers in 2014.

The foundation offers other valuable community resources. Napa growers assess themselves in order to fund farmworker-housing centers, where individuals benefit from lodging, meals, laundry, and recreational amenities.

In terms of pay and benefits, entry-level Napa Valley farmworkers are usually hired for a minimum wage of $12/hour, substantially more than the national average ? not just for agriculture, but the entire private sector. Experienced Napa Valley farmworkers and those with certificates and additional training can be paid as much as $40/hour. Year-round employment is a regular occurrence, as vineyards often need upkeep year round. The 2011 Napa Valley Wages & Benefits Survey shows that 91% of supervisors and 69% of vineyard workers are offered medical insurance plans (compared to 52% nationwide in the private sector) and 55% are offered 401k plans in Napa.?https://www.napagrowers.org/in-the-vineyard/farmworker-education-fund/fund-overview/

Napa Auction

Since its first year in 1981, the annual Napa Auction has raised and donated $120M on behalf of philanthropic causes in its local community. Organized by Napa Valley Vintners, the auction in 2013 alone generated $18.7M with 49 lots donated by Napa?s wineries. These donations go to a variety of local charities and initiatives with a wide array of purposes: to healthcare providers and access; education; mental and emotional health and wellness; family services and geriatric care.? http://auctionnapavalley.org/

Sonoma County Grape Growers Foundation

Sonoma County grape growers have stepped up their commitment to improve the social plight of their workforce by contributing nearly $100,000 towards construction of a farmworker-housing complex. The Foundation raised the money from donations from companies such as Balleto Vineyards and Winery, Rodney Strong Wine Estates, the Rubin Family of Wines, Sangiacomo Vineyards, Vino Farms and Jackson Family Wines.

Rents in the apartment complex will be capped at 30 percent of families? incomes. Farmworkers normally spend about half of their estimated $18,000 to $22,000 annual income on housing.?http://www.sonomawinegrape.org/

Must! Charities

Must! Charities in San Luis Obispo?s North County of California work to empower local health, education, and social service organizations to make significant changes in the lives of children in the area. Given the proximity to the Paso Robles and Santa Lucia Highlands AVAs, many of those in need are children of seasonal workers. Must! works with organizations like The Boys and Girls Club to ensure that these children have a safe place to go after school and have mentors in the community to lean on, and with The Food Bank Coalition?s Children?s Program to take meals to every eligible child in the north county. http://www.mustcharities.org/

(Photo credit: Wine Insitute)

Social Responsibility in the Global Wine Industry: Part 1

Many people who aren?t familiar with corporate social responsibility assume that it only involves making companies right the social wrongs that they practice. However, the most successful companies take a more proactive approach, contributing to causes that improve their local, national or global community, especially in ways that also benefit the company. Companies in the world of wine are no exception, and there are many who take steps to engage in greater social responsibility. I consider there to be four levels of engagement: government, industry, regional partnerships, and individual wineries. In this article, we?ll cover the government and industry-related levels of engagement.

Government-Sponsored Initiatives

Governments are uniquely empowered to facilitate social responsibility through economic and labor policies. Tax breaks for philanthropic business giving and setting fair labor standards are steps to a more sustainable economy. One such program in New Zealand addresses a labor problem for the wine industry. Wine production requires seasonal labor, a call that is usually answered by migrant laborers. New Zealand faces a unique challenge in its labor market in that it has 100% employment. The island nation simply does not have enough workers to support a robust viticulture industry that demands unskilled, seasonal labor.

social responsibility wineDespite being given lemons, New Zealanders have made lemonade (or should we say wine?) through developing the Recognised Seasonal Employer (RSE) program. RSE recruits workers from countries participating in the Pacific Island Forum (with the exception of Fiji) to work in New Zealand?s horticultural and viticultural industries. The employer is responsible for paying for the flight to New Zealand, paying a market wage to the worker, providing basic pastoral care and covering any costs associated with the process should an employee not return to their home country.

Workers themselves benefit from the program, citing improved English skills, greater wages and increased abilities to support their families. Despite purchasing their own return plane ticket and paying registration costs, participating in the program yields considerably higher wages for the workers than those they would collect working in their home communities. In addition, workers from a specific community select a social project to undertake back home ? such as a school library, water pumping or village electrification — and they also use part of their wages to purchase equipment and supplies to complete the project when they return. Nearly every OECD country has a migrant laborer policy, but New Zealand?s serves as a model to replicate where possible.

Industry Codification

Wine industry organizations that set sustainability certification guidelines can also foster social responsibility. Groups like the California Sustainable Winegrowing Alliance and Bodegas de Argentina can inform and incentivize participating vineyards and wineries to adopt socially responsible initiatives.

For example, Section 15 of the California Sustainable Winegrowing Alliance Sustainable Winegrowing Protocol titled ?Neighbors and Community? contains practices at the community level and beyond. Awareness of the business?s impact on the community is essential. Vineyards and wineries recognize that noise, light, and traffic as well as potential pollution and chemical use are common concerns for their neighbors. Engaging these stakeholders and responding to their worries with action or clarification creates a more positive environment in which to live and conduct business.

More than taking ownership of the potential problems that could arise as a result of on-site practices, CSWA encourages its participants to donate time to their communities, whether by volunteering or by presenting to schools, fire departments, police departments or other community organizations. Additionally, CSWA organizations can host or sponsor arts and cultural events as another way of engaging communities.

The Fair Trade certification also provides an opportunity for wine companies to engage with corporate responsibility while also bettering their business interests. For example, many of the families who work on smaller farms in Argentina live on the land as well. Difficult labor conditions, including frequently fluctuating market prices, can threaten these workers? livelihoods, causing disruptions in a vineyard?s workforce. However, companies like Soluna Wines in Argentina have begun having wineries pay a small premium on each bottle of wine, which is then put in a fund for the workers at the vineyard. This money is used at the workers? discretion to better their lifestyle, aiding the workers community meet basic needs, generate larger income, stay in their jobs longer, and become more connected to their work. Many of these wines have received the Fair Trade label, as have other wineries that make a conscious effort to avoid child labor and unsatisfactory work conditions.

In my next article, I?ll cover the roles that regional partnerships and individual wineries play in bettering their local and international communities.

How to Make Corporate Responsibility Work for Multinational Corporations

In my last post, I discussed how multinational corporations are often blamed for the negative impacts of globalization. The reality of today?s world is that companies need to invest in improving society and addressing global challenges beyond traditional philanthropy. Too often philanthropy is used as a form of public relations, ?writing the check? to promote a company’s image through high-profile sponsorships. To respond to competing pressure from investors, governments, and activists, companies should instead approach their corporate giving strategically to improve the business climate and infrastructure in the places where they operate. This concept is called ?creating shared value,? and I?ll discuss several examples.

Corporations must move toward integrated and strategically focused approaches that align their corporate citizenship, corporate responsibility and philanthropic activities more closely to business strategies and core corporate competencies and assets. They should use their natural strengths?creating products and markets?to stimulate development in emerging economies where future business growth opportunities are the greatest.

For example, Coca-Cola understands that fresh water availability and access is an acute need of many developing communities and is critical to the company?s long-term business success. They have:

  • set goals to improve factory performance in water efficiency,
  • launched community programs to help enable equitable access to clean drinking water in underserved communities where they operate,
  • worked toward the protection of watersheds in water-stressed regions, and
  • helped mobilize the international community around the issue of water shortages and clean water.

Coke is ?Creating shared value? by not simply improving water quality and access for its own sake. They are protecting a vital resource for their product and creating better relationships with potential customers and markets in developing countries by doing so.

Other notable examples of international development projects based on business objectives:

  • Healthcare companies supporting improved access to essential medicines and improved local capacity to meet health needs
  • IT companies improving access to technology
  • Energy companies supporting affordable energy access
  • Water companies partnering with others to improve water and sanitation
  • Finance companies sourcing locally to increase access to credit and business skills
  • Professional services firms sharing their management expertise with local NGO, government and business partners
  • Food and agricultural companies improving access to nutritional foods and/or supporting local farmers? livelihoods through improved crop quality and ensuring higher prices for commodities in the international marketplace.

Many corporations and NGOs have thus begun to work together to tackle specific development concerns. NGOs provide corporations with sophisticated knowledge and expertise about specific social, economic and environmental issues. They furnish indispensable access to and information about ?the actual situation on the ground? in local communities where corporations have established markets. Corporations provide NGOs with the influence, flexibility and financial resources to get things done. The smartest business strategists do not see these partnerships as necessary simply from a public relations standpoint. They see it as an opportunity to grow and protect the company?s market while simultaneously doing humanitarian or environmental good.

This new approach toward strategic engagement in communities will be good for the bottom line and will bring those millions who had not benefited from globalization into the fold and out of poverty. Companies that heed the call for alignment of their social and philanthropic missions with their core business strategies will succeed far into the future. Those that don?t won?t survive.

Making Globalization Work for Your Company

Today’s CR as a business strategy includes integrated development, philanthropy abroad

Globalization ? the growing integration of economies and societies around the world ? has been one of the most hotly debated topics in international economics over the past decade. Rapid economic growth and poverty reduction in China, India and other countries that were poor just 20 years ago has been a positive aspect of globalization. Many of these emerging countries?such as China, India, Hungary and Mexico?have adopted domestic policies and institutions that enable their people to take advantage of global markets, which have sharply increased the share of trade in their GDP.

But not all countries have integrated successfully into the global economy. Some two billion people ? particularly in sub-Saharan Africa, the Middle East and the former Soviet Union ? are being left behind. These countries have been unable to knit into the world economy; generally, these economies have contracted, poverty has expanded and education levels have risen less rapidly than in the more globalized countries. So while globalization often has been a very powerful force for poverty reduction, too many countries and their people have been left out.

The assumption that often arises as a result is that globalization?which is often blamed on multinational corporations particularly in the U.S.?has increased inequality and environmental degradation in many of the poorest areas of the world. Now, companies once held accountable only for the direct, contractually specified or regulated consequences of their actions now find themselves responsible for alleviating hunger, disease and more: issues as disparate as environmental sustainability, the spread of disease and treatable illnesses, and child labor in sub-Sahara Africa. Thus it is easy to see that our increasingly interconnected world demands strong corporate leadership to strengthen governance, harness economic potential, alleviate global poverty and improve human conditions.

While some companies have made major strides in addressing important globalization and development challenges, overall, these achievements do not stack up against the scale of change needed for real progress. What should be the role of business? What is the responsibility of corporations to address poverty and underdevelopment, to help disadvantaged communities where they conduct their business, manufacture their products, and employ workers?

Businesses are engines of growth and sustainable development with the potential to impact developing countries enormously. They can help improve people?s lives through innovation, investment and creation of decent jobs and development of affordable products and services?especially those that meet basic needs such as water, energy, nutrition, healthcare, housing and education?while leveraging their core business expertise and realizing commercial success.

Many business leaders lack the knowledge and information to do more than simple grant making and traditional philanthropy. However, companies that want to continue to be in business must grasp increasingly competing societal realities and realign their strategies to include the needs and desires of populations in developing countries and under-served segments of all societies, including in their home markets, helping those populations become able customers. I?ll talk about how several multinational corporations are doing just that?working towards good for people around the world while also making advantageous business decisions?in my next post.

CSR: Living in a Material World

Materiality is an accounting concept relating to the importance of an amount, transaction or discrepancy. Information can be considered material, according to international accounting standards, if its omission or misstatement could influence the economic decision of users?investors, regulators and suppliers. Thus, materiality provides a threshold or cut-off point to guide companies in making decisions about what information to disclose. Despite many years of financial accounting practice, opinions can still vary radically on what is or is not influential.

What does this mean in the context of corporate social responsibility (CSR)? The main driver for discussing materiality in the CSR context is the increasing importance of sustainability reports.?The growing numbers of issues companies are asked to include in their annual CSR reports cause them to question which ones should be the main focus and which ones are less seminal. Companies must be able to prioritize issues they will manage, and materiality is a foundation for making those decisions.

Most businesses understand they must keep track of the changing economic and consumer trends that affect their industries, as these can greatly impact their financial success. Yet they are less adept when it comes to identifying emerging social and environmental issues. This is where external stakeholders can help.

To assist in determining materiality, some companies recruit external advisors who share a commitment to transparency and multi-stakeholder engagement to form a CSR report review committee. They typically have expertise in labor, human rights, environmental, social, economic and diversity issues. Others utilize internal managers to assess what information is material and should be included in the CSR report. In this process, the managers consult a variety of sources?both internal and external?as part of the materiality assessment to determine economic, environmental and social issues that influence the decisions of stakeholders. These sources include:

  • company objectives, strategies, policies, programs and risk factors
  • employee surveys and input gathered through various other feedback mechanisms
  • customer-contact feedback
  • input gathered from stakeholders and suppliers
  • media coverage of company issues

The most material issues are prioritized for inclusion in the report, based on the importance of the issue to (and potential impact on) the company?s business and stakeholders, as well as the amount of reasonable control the company has over that issue.

Of course, reporting is not an end in itself. A materiality assessment is an essential first step in CSR strategic planning, to identify the material issues that senior management must consider in order to minimize environmental risks and maximize opportunities for corporate shared value. A first-rate CSR strategy provides a structure for managing all sustainability challenges and impacts, and puts responsible practices at the core of a company?s business planning. This includes supply chain accountability, environmental impact assessment, governance, policy, stakeholder engagement, social community commitments and transparency.

Additionally, studies indicate that publicly reporting social and environmental performance issues keeps a business on its toes. Facing the annual deadline for submitting metrics and numbers for the CSR report, the business manager focuses on the commitments made the year before and the pending public disclosure of how things have improved?or not.

In the end, businesses need to understand the impact that their operations and sourcing decisions have on local communities, workers and the environment and to then take action to ensure this impact is positive. Ultimately, transparency is enhanced when companies use reliable indicators of CSR progress and then communicate honestly with various stakeholders about CSR policies and practices.

To learn more about the Global Reporting Initiative, click here. To learn more about the Shared Value Initiative, click here.

An unabridged version of this article originally appeared in CR Magazine.

New Zealand Pillars of Sustainability: Part II

A cover crop of flowers naturally helps prevent soil erosion and maintain soil fertility.

A cover crop of flowers naturally helps prevent soil erosion and maintain soil fertility.

In my last blog post, I discussed the first three of seven Pillars of Sustainability outlined by Sustainable Winegrowing New Zealand. The wine industry?s?dynamic and proven methods for achieving the triple bottom line of social responsibility, economic viability and environmental stewardship are models for other regions. In order to fully understand how SWNZ undertakes this mission of kaitiakitanga (the M?ori word meaning ?environmental guardianship?), let?s now explore the remaining four pillars: chemicals; byproducts; people; and business practices.

Chemicals

Managing pests is a crucial part of operating a successful vineyard; doing so in a sustainable way ensures success for years to come. Chemicals are not by any means the only way to protect crops, but they are among the least sustainable. Chemical use exposes the land to risks of pollution, spills and contamination and can be unhealthy for the workers handling the chemical product. When you consider that chemical pest management is often more expensive than other techniques, there is little justification to use them. Pest management is not a difficult task for most organic and sustainable winegrowers, and very effective strategies are available.

What can be done instead of using chemicals with damaging side effects? In addition to organic pesticides, growers must employ a system, where a combination of efforts in the vineyard help ward off problems. Everything they do helps to balance the vines, so that susceptibility to insect and disease attack is minimized. Growers can create a habitat for beneficial insects to live in and nectar as an alternative food source for parasites. Biological controls like planting nectar plants in the vineyard serve as a foil for insects, smelling even sweeter than the precious grapes. Diligent pruning of crops to rid the plants of diseased branches reduces the spread of disease. Sheep can easily manage weeds and grass, and are particularly popular in New Zealand. (In 2011, there were 31 million sheep, outnumbering the Kiwi population 7:1!)

All of these efforts combine to produce a more pure and sustainable product.

Byproducts

The three ?R?s? inform SWNZ?s approach to byproducts: reduce, reuse and recycle. In addition to reducing the amount of material and associated costs in operations wherever possible, reusing and recycling on-site conserves raw materials and saves energy. Most people don?t always think of waste as a good thing, but often agricultural byproducts can be useful resources in winemaking! A rich compost can help improve and maintain soil quality and biodiversity. New?Zealand?viticulturists?are absolutely obsessed with making good compost!?Several, on my recent trip,?couldn?t?wait to show me?their?compost?site and?tell me?about everything?that went into it,?including?ground?mussels?shells, seaweed?and?of course manure. A rich compost can be made from vine prunings, marc and grape stalks. As mulch, this material then helps improve and maintain soil quality and biodiversity.

Sheep help pluck leaves off the vines.

Sheep help pluck leaves off the vines.

People

We all love to share a good wine with friends; that special relationship makes the occasion and product that much more special. On the supply-side, relationships are important too, and embracing this makes winemaking a more socially equitable practice. Training staff, holding collaborative meetings, seeking feedback and encouraging teamwork to achieve goals, sustainable and otherwise, fosters a positive company culture and holistically produces a better product.

Business Practices

Aside from the obvious environmental goals, two goals of sustainability in the New Zealand wine industry are profitability and legacy. Sustainable practices allow many winemakers, vendors, and other participants in the supply chain to add value to their products and services. To ensure that?everyone involved in the sustainable wine making industry is compliant with?the various laws and regulations governing sustainable wine production,?the SWNZ provides guidance and templates for business development and staff training. This saves time, money and energy for all involved – no wasted paperwork or frustration over the process.

 

The efforts of Sustainable Winegrowing New Zealand?s initiatives has put New Zealand at the front of the pack and makes them a global example for advancing sustainability. To that we can all raise a glass!

New Zealand Pillars of Sustainability: Part I

New Zealand Winery

Martinborough, NZ

Sustainable Winegrowing New Zealand demonstrates the country?s outstanding commitment to securing a socially responsible, economically viable and environmentally sound future. I enjoyed and appreciated the opportunity to travel to New Zealand this past month, visiting each of the country?s wine regions, meeting wine producers and learning more about their comprehensive sustainability efforts and successes. They have come very close to their goal of 100% sustainability throughout the industry, including vineyards and wineries.

The M?ori, the land?s original settlers, have a word for these ?eternally sustainable? practices: Toit?. With just five letters, the M?ori define an entire philosophy for not just farming, but also for living.

The world of wine, as we know and enjoy it, is similarly much more than just farming, and it demands a multi-faceted approach in order to be sustainable, too. This is a formidable task! However, SWNZ makes this challenge feasible in outlining their Seven Pillars of Sustainability: biodiversity; soil, water and air; energy; chemicals; byproducts; people; and business practices.

In this post, we will explore the first three pillars: biodiversity; soil, water and air; and energy.

Biodiversity

Due to millennia of geographic isolation, New Zealand is one of the world?s most unique natural settings and home for troves of endemic plant, animal and insect species. Protecting this biodiversity while using the land for winegrowing and production is a central tenant of SWNZ?s efforts and the first of seven pillars.

There are many ways to promote biodiversity; wineries all throughout New Zealand are creating wildlife

Mussel shells used to make compost for the vineyards.

Mussel shells used to make compost for the vineyards.

corridors and restoring native habitats. Brancott Estate developed a special line of wine, a portion of the sales of which go to the Marlborough Falcon Conservation Trust, an organization committed to the regeneration of the majestic and prized natives species. Mount Difficulty Winery in Central Otago exemplifies efforts undertaken by many wineries in New Zealand, who plant seedlings of native trees and flaxes to increase indigenous wildlife population and to regenerate diverse flora and fauna in areas where these native species once thrived.

Enhancing biodiversity, beyond the good in itself, reduces costs of production by controlling pests, diseases, weeds and improving soil quality; it?s a win-win-win!

Soil, Water and Air

The notion of terroir educates us on the importance of soil to winegrowing as a process and to wine as a product. This special relationship makes soil management and conservation crucial to sustainable winemaking. Specific protective actions include mulching to increase organic matters and using sheep to mow grasses and control weeds.

New Zealand is graced with many natural freshwater supplies, but there are arid regions and seasonal rainfall, thus reducing water use minimizes environmental impact, saves energy and improves economic efficiency. Responsible disposal of waste protects this essential resource?s purity and is also an essential component of SWNZ.

Keeping New Zealand?s air clean requires more than reducing GHG emissions from vehicles and industrial processes, but also monitoring spray drift when applying chemicals and understanding the complex ways in which chemical processes interact on-site at wineries.

Energy

Being efficient in energy use is the third pillar of SWNZ. Energy-savvy building design, including maximizing natural light and ensuring proper insulation, installation of low-power and energy-efficient appliances and maximizing heat transfer and cooling during fermentation all contribute to this success. For example Yealands Family Wine Estate in Marlborough has installed energy efficient equipment, heat recovery technology, advanced refrigeration technology, temperature and energy monitors. The winery currently utilizes solar and wind power and baling of vine prunings as energy source for the winery.

In my next post, we will investigate how the remaining four pillars (chemicals, byproducts, people and business practices) are critical to Sustainable Winegrowing New Zealand?s mission and support the philosophy of Toit?.