EPG SHRM Foundation’s Effective Practice Guidelines Series HRM’s Role in Corporate Social and Environmental Sustainability Produced in partnership with the World Federation of People Management Associations (WFPMA) and the North American Human Resource Management Association (NAHRMA) HRM’s Role in Corporate Social and Environmental Sustainability This publication is designed to provide accurate and authoritative information regarding the subject matter covered. Neither the publisher nor the author is engaged in rendering legal or other professional service. If legal advice or other expert assistance is required, the services of a competent, licensed professional should be sought. Any federal and state laws discussed in this book are subject to frequent revision and interpretation by amendments or judicial revisions that may significantly affect employer or employee rights and obligations. 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Online at www.shrmfoundation.org 12-0124 Table of Contents iii Foreword v Acknowledgments vii About the Author 1 HRM’s Role in Corporate Social and Environmental Sustainability 1 Introduction: The Business Case for Sustainability 3 Supporting Business Sustainability 5 The Role of HRM in Sustainability 6 Performing HRM Sustainably 6 Using the Tools of HRM to Embed Sustainability 8 Sustainable HRM and Its Impact on Sustainability Performance 10 The Roadmap to Sustainable HRM 10 Sustainable HRM, Leadership and Strategy 11 Organizational Readiness for Sustainability 14 Existing Sustainability Frameworks 15 The GRI Framework and HRM-Related Indicators 23 Community Involvement and Employee Volunteering Programs 24 Employer Branding 25 Green HRM 26 A Possible Sustainability Roadmap and Scorecard 31 The New HR Skills Required for Sustainable HRM 31 Sustainable HRM in Different Organizational Types 31 Conclusion 33 References 41 Sources and Suggested Readings HRM’s Role in Corporate Social and Environmental Sustainability Foreword Dear Colleague: Sustainability is often defined as the “ability to meet the needs of the present without compromising the ability of future generations to meet their needs.” Going beyond environmental sustainability, this concept now includes all types of social and environmental impacts. As sustainability becomes a key focus for more organizations, employers must develop a new way of doing business. In addition to focusing on financial profits, sustainable companies must also consider social and environmental impacts when making business decisions. The HR function has a critical role to play. This new SHRM Foundation report, HRM’s Role in Corporate Social and Environmental Sustainability, outlines the business case for sustainability and explains how HRM can take a leading role in both developing and implementing sustainability strategy. We created the Effective Practice Guidelines series in 2004 for busy HR professionals. By integrating research findings on what works with expert opinion on how to conduct effective HR practice, this series provides the tools needed to successfully implement evidence-based management. This report is the 15th in the series. Other recent reports include Promoting Employee WellBeing, Transforming HR Through Technology and Onboarding New Employees. To ensure the material is research-based, comprehensive and practical, each report is written by a subject-matter expert and then reviewed by both academics and practitioners. The reports also include a “Suggested Readings” section as a convenient reference tool. All reports are available online for complimentary download at www.SHRMFoundation.org. The SHRM Foundation provides unmatched knowledge for the benefit of professional workforce leaders. Our educational resources, such as the Effective Practice Guidelines series, are used in hundreds of college classrooms worldwide. We are also a major funder of relevant, high-impact, original research. We award more than $150,000 annually in education and certification scholarships to SHRM members. And all this good work is made possible by the generous support of donors like you. I encourage you to learn more. Please visit www.SHRMFoundation.org to find out how you can get involved with the SHRM Foundation. Mary A. Gowan, Ph.D. Chair, SHRM Foundation Research Evidence Committee Professor of Management Martha and Spencer Love School of Business Elon University iii HRM’s Role in Corporate Social and Environmental Sustainability Acknowledgments The SHRM Foundation is grateful for the assistance of the following individuals in producing this report and the companion executive briefing*: Content Editor Jennifer Schramm Manager, Workplace Trends and Forecasting Society for Human Resource Management Reviewers Ron Alexandrowich President/Owner World Class Human Resources Inc Patricia Bader-Johnston Representative Director and CEO Silverbirch Associates KK Kathleen K. Collins, SPHR Vice President of Human Resources MSPCA-Angell Kent Fairfield, Ph.D. Associate Professor of Management & Director for Sustainability Education Institute for Sustainable Enterprise, Fairleigh Dickinson University Carolyn Gould, SPHR, GPHR, CCP Principal, Global Compliance Services PricewaterhouseCoopers, LLC Joel Harmon, Ph.D. Professor of Management & Executive Director Institute for Sustainable Enterprise, Fairleigh Dickinson University Lynn McFarland, Ph.D. President Human Capital Solutions, Inc. Andrew W. Savitz Principal Sustainable Business Strategies Tiisetso Tsukudu President African Federation of Human Resource Management Associations Howard Wallack, GPHR Director, Global Member Programs Society for Human Resource Management Jeana Wirtenberg, Ph.D. Co-Founder, Institute for Sustainable Enterprise President & CEO, Transitioning to Green LLC Project Manager Beth M. McFarland, CAE Manager, Special Projects SHRM Foundation *Executive briefing HR’s Role in Corporate Social Responsibility and Sustainability is available online at www.shrmfoundation.org. Major funding for the Effective Practice Guidelines series is provided by the HR Certification Institute and the Society for Human Resource Management. v HRM’s Role in Corporate Social and Environmental Sustainability ABOUT THE AUTHORS ELAINE COHEN Elaine Cohen is CSR Consultant and Sustainability Reporter and a former country Human Resources VP with Unilever. Elaine is the author of CSR for HR: A Necessary Partnership for Advancing Responsible Business Practices (Greenleaf, 2010). Elaine can be contacted at elainec@b-yond.biz. SULLY TAYLOR Sully Taylor is Professor of International Management and former Associate Dean for Graduate Programs at the School of Business Administration, Portland State University. She has published extensively in international HRM, global mindset, leadership and corporate cultures, and also teaches sustainability HRM and leadership. She is currently a guest editor of HRM Journal for a special issue on sustainable HRM. Sully can be contacted at sullyt@sba.pdx.edu. MICHAEL MULLER-CAMEN Michael Muller-Camen has a Chair in HRM at WU Vienna University of Economics and Business and is Associate Professor of International HRM at Middlesex University Business School in London. He has published extensively in international HRM, green HRM and age management and is the co-editor of a special issue of Zeitschrift für Personalforschung (German Journal for Research in Human Resource Management) on green HRM. Michael can be contacted at Michael.Muller-Camen@wu.ac.at. vii Alongside economic considerations of growth and profit, organizations should be held accountable for their impacts on society and the environmental risks and opportunities when making all business decisions. HRM’s Role in Corporate Social and Environmental Sustainability INTRODUCTION Sustainability has become a key focus for many organizations as climate change, regulatory pressures and societal demands for greater environmental and social responsibility have increased. For employers, this focus means a different way of doing business. Alongside economic considerations of growth and profit, organizations should be held accountable for their impacts on society and the environment. In addition, they should assess social and environmental risks and opportunities when making all business decisions. This approach is often referred to as “the triple bottom line,”1 the simultaneous delivery of positive results for people, planet and profit. Indeed, aspects of sustainability, such as environmental stewardship, workplace responsibility, human rights protection and good corporate citizenship, are increasingly part of an organization’s social legitimacy. The HR function is critical to achieving success in a sustainabilitydriven organization. Sustainability practice pervades every aspect of doing business and needs to be embedded across an organization at all levels, becoming an ongoing change process. Since the prime focus and skills of HR professionals include organizational process, change management and culture stewardship, they should take a leading role in developing and implementing sustainability strategy. This report aids human resource management (HRM) practitioners in understanding sustainability in an organizational context. It can be used as a guide for the HR function to support sustainable business and perform HRM sustainably. Divided into two main sections, this report begins by examining the critical role HRM plays in sustainability and the HRM tools available to embed sustainability strategy in the organization. The second section introduces a roadmap to sustainable HRM. It outlines global business approaches to sustainability, labor standards and specific aspects of sustainable practice such as employee volunteering, employer branding and green HRM. Finally, the report explores the new HR skills required for practicing sustainable HRM and the applicability of sustainable HRM in different types of organizations. 1 HRM’s Role in Corporate Social and Environmental Sustainability The Business Case for Sustainability Sustainability is more than simply meeting responsibilities to society—it can create significant competitive advantage. Therefore, organizations increasingly regard sustainability as a business strategy that enhances shared value 2 —for both business and society—by delivering greater shareholder value and access to capital as well as stronger performance over time. 3 In fact, research suggests that social and environmental responsibility is likely to pay off in a number of tangible ways. 4 Firms can gain “improvements in reputation, productivity, talent acquisition, employee retention and engagement, cost effectiveness, risk avoidance/mitigation, innovation and market expansion, and access to capital.”5 However, the relationship between sustainability investments and organizational performance is complex, and other factors such as industry positioning and market structure also affect the strength of the relationship. 6 Porter and Kramer7 argue that in order to unleash the next wave of innovation and growth, corporations must help redefine capitalism through addressing the social and environmental challenges of society, in a “shared value” model of business activity. Practically speaking, sustainability significantly affects an organization’s business model, structure and processes. First, organizations consider a wider set of stakeholders when setting strategy. Sustainable business strategy requires responsiveness to stakeholders, defined as those individuals or groups that influence an organization’s activities and are influenced by them, going beyond the traditional dominance of financial shareholders. 2 Stakeholders typically include employees, customers, suppliers, regulators, local communities and the natural environment. Sustainable organizations seek out stakeholders to understand their expectations, concerns and risks relating to operations before developing sustainability strategy. Also, stakeholders help with sustainability strategy implementation. Increasingly, employers realize the benefits of partnerships with external stakeholder organizations, such as community organizations, nongovernmental organizations (NGOs) or industry alliances. These alliances help advance sustainable development, as the demands of global corporate sustainability often go beyond the capability of one organization to respond. Finally, a sustainability approach affects corporate practices, requires greater involvement and accountability of boards, and demands business transparency, as is manifested in the growing number of organizations issuing annual sustainability reports. As organizations have increasingly pursued sustainability strategies, an emerging vocabulary has developed in this area. Researchers already established the link between sustainability and business functions such as marketing, accounting and operations management, but now they are also studying sustainable HRM. 8 This recent literature portrays HRM as a traditionally introspective function, focusing on the effective and efficient use of people to achieve short-term financial results. Instead, a more sustainable approach to HRM would develop managers who can deal with both present and future sustainability challenges facing organizations; consider employees as stakeholders, How Sustainability Affects the Business Model 1. Stakeholders are defined more broadly as shareholders, employees, customers, suppliers, regulators, local communities and the natural environment, that is, individuals and organizations that have influence on a business and those affected by it. Sustainability leads to greater interaction with stakeholders, which influences business strategy. 2. A  ll stakeholders play a role in implementing sustainability strategy. 3. S  uch a model offers both greater involvement and accountability of corporate boards and greater business transparency, all of which leads to greater trust and improved reputation. including those in the extended supply chain in vendor operations; place more emphasis on the longterm impacts of HRM activities on all stakeholders; and, generally, adopt a more holistic and integrated view of people management. 9 The HRM function has the potential to contribute important skills, as noted above, to support the transformation of business and the HRM function itself for greater sustainability. These skills in organizational process, change management and culture stewardship enable HRM to take a leading partnership role in developing and implementing sustainable business strategy. HRMunique skills and knowledge are sources of competitive advantage that can be leveraged, for example, to create sustainability-linked performance targets, compensation and benefits, training and education, HRM’s Role in Corporate Social and Environmental Sustainability Glossary of Terms Sustainability is often defined as the “ability to meet the needs of the present without compromising the ability of future generations to meet their needs.”10 Sustainability initially meant environmental sustainability, but today the term is used to refer to all aspects of social and environmental impacts. Sustainable development is “a process of achieving human development . . . in an inclusive, connected, equitable, prudent, and secure manner.”11 Triple bottom line is the performance measurement of an organization pursuing a sustainable strategy. “A sustainable enterprise, therefore, is one that contributes to sustainable development by delivering simultaneously economic, social, and environmental benefits—the so-called triple bottom line.”12 CSR (corporate social responsibility) is “the sum of the voluntary actions taken by a company to address the economic, social and environmental impacts of its business operations and the concerns of its principal stakeholders.”13 In October 2011, the European Commission published a new definition of CSR: “The responsibility of enterprises for their impacts on society.”14 Difference between sustainability and CSR: Sustainability at the corporate level is the focus on creating a business model that is sustainable from an ecological, financial and social point of view and that identifies “strategies and practices that contribute to a more sustainable world and, simultaneously, drive shareholder value; this we define as the creation of sustainable value for the firm.”15 Addressing sustainability issues thus becomes deeply embedded in the organization’s basic business operations and integral to its business strategy. CSR, however, is concerned with decreasing the negative impacts of corporate actions in pursuit of a business strategy and is thus considered largely voluntary and is often practiced at a tactical level without affecting core business processes. Sustainable HRM is the utilization of HR tools to help embed a sustainability strategy in the organization and the creation of an HRM system that contributes to the sustainable performance of the firm. Sustainable HRM creates the skills, motivation, values and trust to achieve a triple bottom line and at the same time ensures the long-term health and sustainability of both the organization’s internal and external stakeholders, with policies that reflect equity, development and well-being and help support environmentally friendly practices. and values-based recruitment using sustainability-informed employer branding. The tangible outcomes of strong sustainable HRM performance include not only support for the achievement of broad sustainability business objectives, but also measurable contributions to HRM performance, including lower employee turnover, lower absenteeism, improved employee well-being, and an overall increase in employee engagement, motivation and productivity. In order for HRM to redirect itself and the organization toward sustainability, corporate sustainability leadership must regard HRM as a critical contributor. Organizational leaders should involve HR managers through collaboration and consultation as well as demand HRM accountability for sustainable HRM practices. At the same time, HR professionals must update their approach from transactional or transformational HRM to sustainable HRM. HRM has two main roles in the implementation of sustainability strategy in any organization, each of which will be discussed in greater detail in the remainder of this section: ■■ Supporting business sustainability: Using the processbased tools of HRM to embed sustainability strategy in an organization’s culture and practices. ■■ Performing HRM sustainably: Creating and delivering HRM core processes, which are themselves founded on principles of sustainability. supporting BUSINESS SUSTAINABILITY In the first role—supporting business sustainability—a variety of tools are available to the HRM function. Before examining these tools, the HRM function will need to assess the organization’s stage in advancing sustainability to make the most relevant choices. Organizations may come to realize the need for sustainability via different routes: 3 HRM’s Role in Corporate Social and Environmental Sustainability Value-Based Routes to Sustainability Anita Roddick and the Body Shop16 Anita Roddick founded The Body Shop in the U.K. in 1976 and quickly turned it into a business expressing her own values and social and environmental activism, with a mission to “dedicate our business to the pursuit of social and environmental change.” Despite a buy-out by the global cosmetics firm L’Oreal in 2006, The Body Shop has retained its distinct identity and core values: Against Animal Testing, Support Community Trade, Activate Self-Esteem, Defend Human Rights, Protect our Planet.17 Jeffrey Hollender and Seventh Generation Jeffrey Hollender founded Seventh Generation Inc. in 1988. The name Seventh Generation comes from an Iroquois proverb, “In our every deliberation, we must consider the impact of our decisions on the next seven generations.” The company has pioneered development of nontoxic, ecologically preferable household cleaning materials. Although Jeffrey Hollender is no longer with Seventh Generation, the business continues to believe in its responsibility to “set a course for a more mindful way of doing business.”18 Ben Cohen and Jerry Greenfield and Ben and Jerry’s Ben and Jerry’s was founded in 1978 in Burlington, Vermont. The company advanced community values and was one of the first to produce a social and environmental report in 1999.19 Ben and Jerry’s was sold to the global food and personal care business Unilever in 2000, but it retains its identity and values and continues to lead new advances in CSR such as the adoption of fair trade-certified ingredients. Stephan Schmidheiny and Amanco20 Amanco, a large Latin American producer of plastic pipes and fittings for transporting fluid, was founded by Stephan Schmidheiny, who in the early 1990s helped organize the World Business Council for Sustainable Development, which popularized the term “eco-efficiency.” Amanco’s purpose, Stephan Schmidheiny believed, was not just to make a profit, but to contribute equally to the social and environmental contexts in which the company operates. Amanco, one of the first companies to create and implement a sustainability balanced scorecard in all its operations, saw early on that engaging key stakeholders, from small retail store owners to local governments to even their competitors, in creating efficient and environmentally safe water delivery systems was essential to living the values of the company. Amanco’s measures of success reflect these values. CEO Roberto Salas noted in 2006, “We don’t want just to sell pipes and products. We want to offer solutions that give our customers access to water and sanitation. We now measure water savings or increases in families’ income due to use of our products.” ■■ 4 A values-based route: Typically, this approach can be found in smaller, privately owned businesses in which the founders’ values dictate the business culture. Often-quoted examples are Anita Roddick’s Body Shop, Jeffrey Hollender’s Seventh Generation, Ben Cohen and Jerry Greenfield’s Ben and Jerry’s, and Stephan Schmidheiny of Amanco in Latin America. Even though these companies may have grown to become large corporations, their core culture was a reflection of the personal principles and passions of their founder-owners. ■■ A strategic route: Typically, this approach has been adopted by organizations well positioned to redesign their business model to deliver products and services offering sustainability benefits. The most-quoted example in this regard is General Electric and its “ecomagination” line of products, designed to create a market for green appliances, which it has done very successfully. ■■ A defensive route: This approach developed in the late 1990s as organizations, notably the apparel industry, came under attack for human rights abuses, such as child labor, in the supply chain. Public outcry against immoral corporate practices forced employers to take responsibility for the social impacts of their business activities. Later, environmental issues such as those faced by Shell Oil in the Niger Delta (including two spills reported in 2008 that triggered ongoing social and environmental problems for almost 70,000 people in the Bodo region; these were just two of the 1,000 spills attributed to Shell in this region since the HRM’s Role in Corporate Social and Environmental Sustainability In May 2005, GE launched a sustainability program called “ecomagination,”21 with an aim to deliver products that would meet future environmental challenges while driving economic growth, committing GE to double research in clean technologies, introducing more clean-tech products, and reducing GE’s own environmental impacts. ecomagination has delivered consistently increasing revenues for GE since its launch— with $18 billion in 2010, 22 around 12 percent of the company’s overall revenues. of sustainability to serve HRM practitioners in determining where their organizations are at any given time. Eventually, as organizations progress, they form a sustainability strategy that integrates elements from all stages (see Figure 1). The HR manager must take into account the approaches and stages that characterize an organization’s sustainability profile and ensure that HR processes for embedding sustainability are aligned accordingly. For example, in an owner-led, valuesbased organization, advancing employee volunteering programs in the community may be much simpler for HRM than in a company primarily 1970s23) became much more positioned in the defensive stage. It prominent, and energy and utilities follows that the more advanced the companies started to use CSR as organization is in overall sustainability a platform to demonstrate good practices, the more the HRM role corporate citizenship. Other sectors, becomes strategic in nature. 25 such as tobacco and alcohol, have also adopted sustainability as PERFORMING HRM a defensive measure, aiming to present a responsible public image SUSTAINABLY to counter negative press and In the second role—performing reputational damage. HRM sustainably—the focus is These different routes to sustainability can also be viewed as a stage model on the professional HRM tools and processes that form the core of the HRM contribution and on executing processes in accordance with sustainability principles. For example, HRM typically defines the compensation and benefits (remuneration) policy in most organizations. In established organizations, remuneration polices are generally based on linking remuneration to the following: performance, potential, seniority in some cases, competitiveness in local markets, and a degree of equitable distribution of variable pay tied to business results. However, rarely do HR managers look at remuneration from a gender perspective. Statistics, though, show that in most industries, women are paid less than men. The 2010 U.S. Census data, for example, show that women who work full time still earn on average 77 cents for every dollar men earn for performing the same work. 26 By adopting a sustainability approach to remuneration, the HR manager would consider, among other things, how remuneration policy is applied in practice and evaluate it against such metrics as male-female pay ratio, taking action to address any imbalance. Figure 1. Carroll’s Pyramid of Corporate Social Responsibility24 Discretionary Ethical Legal Economic • Economic responsibilities: The first responsibility of any organization is to deliver an acceptable return for shareholders (while contributing to local and global economies through their core business). • Legal responsibilities: The second aspect of responsibility requires that organizations operate within the law at all locations in which they do business. •E  thical responsibilities: The third layer of the pyramid requires organizations to consider social and environmental impacts of their operations and, as far as possible, to do no harm while pursuing business interests. • Discretionary responsibilities: The fourth layer of responsibility is to proactively seek opportunities to make a positive contribution to society beyond profitability, compliance and business ethics. At the discretionary, or voluntary, level, organizations have a responsibility to understand broad stakeholder needs and to address societal concerns though their business practices. 5 HRM’s Role in Corporate Social and Environmental Sustainability The following section presents research on how to use HRM tools to embed sustainability, which tools to chose for different sustainability strategies or size, and what impacts on sustainability performance should be sought. THE ROLE OF HRM IN SUSTAINABILITY Using the tools of HRM to embed sustainability The HRM function can use its skills, knowledge and HRM tools in three main ways to help the organization embed sustainability: partnering, engaging and aligning. Partnering. The experience of many organizations suggests that HRM leadership can play a vital role in helping articulate the organization’s social mission, expressing the role of the business in society beyond that of simply making a profit. HRM can help support alignment behind this mission at the executive leadership level by contributing stakeholder perspectives and employee interests. Engaging. HRM must engage both internal and external stakeholders to identify the ways in which the organization can contribute to the social and environmental vitality of those most affected by a company’s actions. Engaging may include building partnerships with external organizations, such as nonprofit associations that can help identify or address the impacts of the company’s operations. For example, Unilever partnered with the nonprofit World Wide Fund for Nature to form the Marine Stewardship Council to create an environmental standard for sustainable fisheries. Aligning. HRM possesses the most important tools to support 6 implementation of a sustainability mission. All core HRM processes in an organization must be brought into play to support sustainable business strategy. These can be categorized into the areas of recruitment and selection, employee training, development and compensation, managerial support and communication, and organizational climate creation. Looking more closely, the HRM tools that research indicates can be used to embed sustainability fall into four main areas, many of which focus on the aligning role of sustainable HRM. Employee attraction and selection Employers have found that attracting applicants who value sustainability can enhance recruitment and retention. For example, when employees have a stronger fit with the eco-values of the organization, they are more attracted to apply, and many employers believe they are more likely to stay with the firm. 27 Organizations that project their commitment to caring for the environment can attract greater numbers of applicants, 28 and an employer’s commitment to sustainability is in some cases more compelling to applicants than pay or layoff potential. 29 In fact, in recent years, MBA students have shown a growing reluctance to work for an organization not seen as a “good citizen” with regard to the ecological environment or social issues. 30 In some cases, employers also integrate sustainability into their selection process and their onboarding activities. For example, the outdoor clothing company Patagonia “asks job applicants to be environmentally responsible in the preparation of their application materials.”31 Employee training, development and compensation Employees can develop their understanding of, and commitment to, an organization’s sustainability values and goals through training and development. 32 In addition to building awareness, skills needed for behavioral changes are provided through targeted training in such areas as environmental stewardship or life cycle analysis. At Mohawk Industries, for example, employees are tested to make sure they learn the waste-reduction techniques that have been taught. 33 Ongoing development is also imperative. Pricewaterhouse Coopers (PwC), for instance, sends teams of high-potential managers to developing countries for several months at a time. The managers work with a local partner on a sustainability issue, such as strengthening coordination in the battle against HIV/AIDS infections in Uganda, 34 in order to build deeper understanding of global sustainable development challenges and the role of business in solving them. Training and development should be supported by evaluation and compensation systems that incorporate the organization’s sustainability goals. 35 For example, at Westpac, an Australian bank group, executive team members have a specific emissions-reduction target on their yearly performance scorecard. 36 Incorporating environmental accountability into CEO compensation is also significant and can lead to greater monitoring and a lessening of environmental impact in some industries. 37 Finally, organizations such as 3M have used nonmonetary rewards for meeting environmental objectives. 38 HRM’s Role in Corporate Social and Environmental Sustainability Creating a sustainable organizational climate Creating an organizational climate that encourages employees to pursue the employer’s sustainability strategy is crucial. 40 Employees farther down the hierarchical ladder tend to see sustainability as less relevant than upper-level employees. 41 Often, an organization may need to change an entrenched culture that is not compatible with sustainability principles. Examples include the extractive industries, which are traditionally male dominated and where gender diversity may run counterculture, and the financial services sector, where privacy concerns and risk aversion have traditionally been incompatible with open stakeholder dialog and transparent reporting. Organizations must therefore understand the social and the environmental consequences of their business models. Employers also need to address the way in which various organizational subgroups, with their own unique norms and values, interpret corporate sustainability goals, motivations and values of the firm. 42 As an example, employees in some parts of an organization might see corporate sustainability efforts as trying to reduce resource consumption for purely economic reasons rather than for the preservation of the environment and the long term wellbeing of communities producing those resources. Employees’ interpretations can influence their decision-making, leading them to make different choices when selecting vendors or materials in product design or establishing the supply chain. Creating roles that focus on sustainability and incorporating sustainability responsibilities into job descriptions44 are important ways of developing an organizational climate conducive to sustainability. This process helps legitimize sustainability, and in fact a lack of sustainability roles can actually impede implementation. 45 Finally, HR-derived programs can shift the organizational climate toward valuing sustainability. Examples include providing subsidies for using public transportation or biking to work or offering paid time off for volunteering in nonprofit organizations. For example, Nike removed the individual waste bins that employees had at their desks in order to encourage recycling and raise consciousness about what is thrown away. Timberland maintains a Path of Service program that entitles all employees to paid volunteering time and tracks hourly utilization rate quarterly, showing how many employees actually take up this option. Management support and communication HRM tools can be used to ensure that employees are given the right support for sustainability behaviors, 46 backed by frequent communication of the importance of sustainability to the organization. 47 Research has shown that employees who perceive “strong signals of organizational and supervisory encouragement” are Intel implemented a compensation program tying not just top executive compensation but all employees’ year-end bonuses to progress on sustainability goals. Most of these goals are related to environmental sustainability and target such results as reducing their carbon footprint, increasing the energy efficiency of their products and purchasing more green energy. 39 The Mexican company Cemex, the largest cement company in North America, ranks 451 in the Fortune Global 500 firms. It has created a culture of sustainability through a variety of innovative programs, many of them focused on improving the safety and overall quality of lives of their employees and the communities in which they reside. Recently, the company instituted the Environmental Management System, which, as the company states, includes “a requirement that all business units consider community concerns when identifying the potential effects of our operations.” According to the company, “approximately 97 percent of our operations have community engagement plans, which help us to identify the communities near our operations, our impacts on them, and their needs; and then develop and implement effective, site-specific social programs.” Details are determined locally, but all community plans must be in accordance with Cemex’s social investment guidelines. Such internal requirements are part of raising awareness among all Cemex decision-makers of how the company’s business model affects the social and environmental contexts in which they operate. 43 more likely to engage in behaviors positive for the natural environment. 48 In talking about sustainability, words matter—how sustainability goals and values are communicated and using terms that employees can relate to can influence employees’ receptivity. 49 Couching the sustainability message in ways that relate to employees’ lives 7 HRM’s Role in Corporate Social and Environmental Sustainability To drive lasting cultural change that reaches all its employees, SAP in 2008 created 125 Sustainability Champions worldwide. Its major locations in the United States, the Asia-Pacific region, Germany and Canada are represented, and part of each Champion’s work time is devoted to raising awareness, education and mobilization among all 50,000 SAP employees around the globe. 50 example.52 Ray Anderson, the CEO of the innovative modular carpeting company, had an epiphany in 1994 that the traditional industrial model they had Which HRM tools should been using had to be replaced with one a company use to embed that “focused on sustainability, using a sustainability? cyclical model mimicking nature.”53 As a Although clear evidence, as discussed result, he turned Interface into a billionabove, exists for some of the best dollar corporation that has been named HRM practices for embedding by Fortune magazine as one of the sustainability, each organization “Most Admired Companies in America.” must decide which tools are most Others take a more incremental appropriate for its situation. The tools approach to improving their current an employer chooses to use, and products and operations by significantly which group of employees to focus reducing resource consumption and on the most, will depend on two key environmental impacts without a criteria: the organization’s approach change in their basic business model,54 to its sustainability strategy and the and community involvement projects resources available. are add-ons rather than core business value drivers. Starting with the approach to sustainability, some sustainability In terms of resources, large strategies require a complete organizations may have more rethinking of the business model of managerial and financial resources the organization. Interface is a prime available to devote to the creation may also elicit a positive response from employees. 51 of sustainable HRM tools or their implementation, such as monitoring vendors’ labor practices. However, smaller employers are sometimes nimbler and more creative in sustainable HRM tool design and in fostering a sustainable company culture. 55 Owner-led firms are often influenced more directly by the passion and principles of their founders (for example, Ben & Jerry’s and Timberland). Sustainable HRM and ITS Impact on Sustainability Performance As discussed previously, HRM tools can be used to embed a sustainability strategy. Yet the HRM function, in addition to developing and implementing HRM tools, should give equal attention to the impacts of its HRM system on the organization’s sustainability performance, particularly from a social standpoint—what are the positive and negative effects on employees and communities? An area of focus in terms of HRM systems’ impact on an organization’s sustainability performance may be How to Embed Sustainability Using HRM Tools ■■ Employee attraction: Using the organization’s commitment to sustainability in recruitment helps attract more applicants and at the same time ensures the right “fit” with the company’s sustainability goals. ■■ Employee attitudes: While the research is unclear whether an organization’s commitment to sustainability leads to higher employee retention, it does have positive effects on employee commitment and job satisfaction. ■■ Employee skills and knowledge: Many organizations provide initial and ongoing training and development on the knowledge and skills needed to achieve their sustainability goals, although the research on the impact of achieving sustainability goals is still limited. ■■ Employee sustainability goal attainment: Including sustainability targets in evaluation and compensation systems can lead to greater attention to and achievement of those goals. ■■ ■■ Sustainability organizational climate: Though the research is lacking in this area, a sustainability strategy will likely fail if the company’s organizational climate does not appropriately support it. Employee sustainability behaviors: Supervisory and organizational support can lead to more sustainability behaviors in employees. 8 HRM’s Role in Corporate Social and Environmental Sustainability expressed in terms of the impact on employees’ physical and emotional health, as well as the impact on employees’ families and their communities resulting from the design of the organization’s HRM system. In other words, the core question for HRM practitioners is whether the HRM system and the way HRM tools are used result in enhanced sustainability performance for the organization along the three dimensions of equity, well-being and development. Equity In designing a sustainable HRM system, HR managers must examine its impact on diversity and inclusion, employee voice and human rights. Impahla Clothing Company, a privately owned garment manufacturing company based in Cape Town, South Africa, with fewer than 200 employees, places great emphasis on the economic welfare of employees. The company’s stated targets in its Sustainability Report 2010 include maintaining a zero short shift policy (in order that employees can maintain their levels of income), ensuring a zero redundancy (layoff) policy and promising that wages will be paid in full, on time and, where possible, in the presence of performance and special gratitude awards. These are significant public commitments to enlightened and sustainable employment practices in a small business, which, even in the presence of financial pressure, understands that its sustainable success is tied to the ongoing economic well-being of its employees. 56 Diversity and inclusion involve measuring the impact of HR processes on hiring women, members of minority groups, people over the age of 45, people with disabilities, or those who have been unemployed for extended periods of time and may have difficulty reentering the job market. At the same time, important “social bottom lines” that contribute to equity include providing “voice”57 to employees through creating an inclusive corporate culture, giving employees complete freedom to organize into unions, and ensuring respect for their human rights in the workplace. Well-being Perceptions of sustainability by consumers and other stakeholders are often significantly influenced by the way organizations approach employee well-being. In a survey of consumers, the Do Well Do Good Public Opinion Survey on Sustainability, published in November 2011, 58 respondents picked two employee issues related to wellbeing when asked to rate a total of 17 issues in terms of how important they are for organizations to address. The two top issues selected by consumers were (1) Pay employees competitive wages and benefits (for example, health care, pension); and (2) Provide training and educational opportunities for employees. Clearly, HRM practitioners must consider the external impacts and perceptions of HR policies in the workplace as a crucial factor in determining approaches to employee well-being. In a 2010 article, Jeffrey Pfeffer challenged HRM practitioners to think about the social impacts of their HRM systems, in addition to pay and economic stability. From job design to the provision of health insurance to the amount of stress from work hours, the direct and indirect effects of At Loblaw, a large grocery retailer in Canada, sustainable HRM is manifested in several programs to engage employees and reward them for positive contribution. Loblaw sees “Being a Great Place to Work” as integral to the company’s CSR program. Best practices at Loblaw include “Morning Huddles” (short morning meetings held every day at 9 a.m. to provide employees with relevant information that will help them do their job) and a recognition program designed to acknowledge colleagues who go above and beyond what is expected of them in their jobs. Recognition can come from peers, managers or even external sources such as customers or suppliers. This holistic approach by Loblaw to employee engagement, alongside other activities, led to an increase in measured employee engagement and a reported 11.5 percent decline in turnover in 2010. Furthermore, the company has been repeatedly recognized as one of Canada’s Top 100 Employers. 59 HRM systems on workers’ health and their lives can be enormous. Being accountable for these impacts should be part of an organization’s sustainability strategy. Well-being also affects workforce planning in the HR function, placing an onus on sustainable HRM systems to hire, develop and terminate employees in ways that avoid large layoffs whenever possible. When layoffs are necessary, employers provide support for those dismissed,60 thus mitigating negative impacts on society, especially in local communities where the organization operates. 9 HRM’s Role in Corporate Social and Environmental Sustainability In December 2011, the European car maker Volkswagen made a bold move in response to employee complaints that work and home lives were becoming “blurred:” The company turned off e-mails from Blackberry servers to employees outside of work hours. 61 This change applied to shift-working staff, not managers, and is an attempt to provide a preventive approach to staff work-life balance and stress-reduction while improving overall performance. One company that has demonstrated accountability in this regard is Burgerville, a regional chain of fast food restaurants in the U.S. The chain, in addition to sourcing locally and sustainably, offers all employees health insurance for a minimal cost—in an industry that almost never does! Its reason—because it is the right thing to do in light of its overall sustainability strategy.62 Employee development Increasing the knowledge, skills and employability of workers is crucial to ensuring a positive impact from a sustainable HRM system. Providing a work environment in which employees thrive through training, promotion opportunities or enriching lateral moves, and adequate supervisory support and recognition can lead to positive impacts from the sustainable HRM system created. This section has described the HRM tools that research has shown to be effective in the journey toward sustainability. Scholars also call attention to the need to look at the sustainability impacts of using a particular HRM tool on the wellbeing, equity and development of employees and their communities. In order to implement an HRM system that achieves both goals—helping the organization enact a sustainability strategy and enhancing the sustainability of the HRM function as an influential voice in the business— organizations need sound processes and metrics, which form part of an overall roadmap. THE ROADMAP TO SUSTAINABLE HRM Organizations may embark on the sustainability journey from different starting points and may even have different endpoints or objectives in mind. However, the development of sustainability comprises many common elements that apply across sectors and organizational types and that are relevant to forming a sustainability strategy and program. These commonalities create a prototypical journey to sustainability that applies to all organizations, although each one will find itself at a different place on this journey. The return on investment (ROI) on comprehensive, well-run employee wellness programs can be as high as six to one. Unilever reports a return of $5.44 on every $1.55 spent on employee wellness through its Lamplighter program. If all Unilever employees worldwide were to engage in this program, the potential savings for the company with a minimum $1.55 spent per employee would amount to over $600,000 per year. The savings show up in reduced absenteeism, reduced employee turnover and increased employee productivity. 63 10 At Mahindra & Mahindra Limited, India, a $7 billion company in the utility vehicle, tractor and information technology businesses, all new employees undergo a specific sustainability orientation program. To ensure ongoing awareness of the value of sustainability to this company, which already produces two zero-emission electric vehicles, employees watch a film on sustainability before every training session, regardless of the topic or at what level the employee is in the training. 64 Similarly, some aspects of sustainable HRM will be common across all HRM functions in any organization, regardless of size, sector, geography or even leadership style. A possible route to sustainable HRM is shown in Figure 2. SUSTAINABLE HRM, LEADERSHIP AND STRATEGY The sustainable HRM roadmap starts with leadership and strategy, assuming in an ideal world that the sustainable HRM function would work within a broad business sustainability direction that an organization’s leadership establishes and supports. In some cases, the HR manager will help define and lead implementation of many aspects of this sustainability strategy; in others, the HR manager will have no direct involvement. In a few organizations, sustainability efforts may start at a grassroots level through employee initiatives before becoming formalized in HR processes. Either way, in a sustainability-led organization, the role of sustainable HRM gains legitimacy and provides a platform for the creation of HR infrastructure, policies, plans and programs, that HRM’s Role in Corporate Social and Environmental Sustainability Figure 2. Possible Sustainable Organization Roadmap Showing the HR Contribution Corporate Sustainable Leadership and Strategy Executive Management Team-Led Sustainability Implementation Identify and engage with stakeholders affected by HR policies, processes and performance Implement, measure and report HR effects Select and prioritize HR issues relevant to supporting a sustainable organization Develop an action plan, scorecard and measurement system for HR’s contribution to organizational sustainability Review and revise all HR policies, processes and structures in line with sustainability principles align with organizational strategic sustainability objectives. This next section examines the following topics: Even in the absence of sustainability leadership and executive team support, HRM must still develop sustainability within the HR function. Many of the core HR processes in any organization can be performed through a sustainability lens and bring benefits such as cost savings, business development, employee engagement and empowerment of local communities. As sustainable HRM brings benefits to the organization, HRM as a function will be seen to deliver robust, sustainable people programs that contribute to the achievement of business objectives.65 ■■ Underlying ideal conditions that support a framework for action by the HRM leadership in any organization. ■■ Practical steps that HRM can take to advance along the roadmap to achieve sustainable HRM in a sustainable organization. ■■ Leading sustainability frameworks that may serve as guidelines for sustainable HRM, with a special focus on the leading reporting framework in use by thousands of companies around the world, the Global Reporting Initiative (GRI), 66 and the core HRM issues it addresses. ■■ Metrics of sustainable HRM that define both HRM performance and the outcomes of value to the organization, society and environment. ■■ New skill sets that sustainable HRM leaders must acquire to fulfill their role within a sustainable business. ORGANIZATIONAL READINESS FOR SUSTAINABILITY Just as any house, building or factory must be built on a solid foundation, the journey to sustainability must begin at a point that assumes a certain set of preconditions to form the optimum 11 HRM’s Role in Corporate Social and Environmental Sustainability Figure 3. Organizational Preconditions for Sustainability Organizational Culture Sustainable HR Tools and Processes Executive Management Team-Led Sustainability Implementation Corporate Sustainable Leadership and Strategy Compliance Governance Ethics Organizational Culture foundation for sustainability in any organization. Figure 3 depicts five preconditions for the successful application of sustainable HRM (or indeed for a sustainable organization): compliance, governance, ethics, culture and leadership. more ambitious plans to advance sustainable practices. Three pillars of sustainability Compliance is the state of being in accordance with all national, federal, regional or local laws, regulations and government authority retquirements. Not being in accordance with such When an organization has these five regulations often incurs sanctions in preconditions in place, it is ready to the form of business limitations, fines commence the sustainability journey or even legal proceedings. Compliance and stands a good chance of success. with labor regulations is a critical start Compliance, governance and ethics point for sustainable HRM. 67 serve as the three pillars of a solid Corporate governance is “the platform for the development of sustainability. Organizations may take system by which companies are directed and controlled.”68 Of several years of concerted effort to particular relevance to corporate reach this point. The role of HRM is governance is the way the board to verify that these three pillars are of directors performs its duties firmly in place before deciding on 12 to ensure corporate integrity, and in many cases, the way the board directs the organization’s strategy regarding sustainability. For HRM, board direction on sustainability can provide a necessary, legitimizing and empowering framework for advancing sustainable HRM practices. Business ethics is a set of behavioral guidelines by which all directors, managers and employees of an organization are expected to behave to ensure appropriate moral and ethical business standards, typically beyond the letter of the law. Ethics usually includes guidelines relating to conflict of interest, corruption, bribery, maintaining business records, discrimination, showing respect for people and more. Publicly traded companies in many countries are HRM’s Role in Corporate Social and Environmental Sustainability What can the HR manager do to promote a corporate culture that is receptive to sustainability? Beyond articulating and leveraging the organization’s social mission, HR managers can promote some practical aspects of corporate culture to set an effective stage for developing sustainability. These might include the following aspects: ■■ Embedding business ethics. ■■ Employee updates on business results, programs and developments. ■■ Open exchanges or round table discussions with senior management. ■■ Development of social networks for internal collaboration and communication. ■■ Suggestion boxes or programs for employees to contribute new ideas. ■■ Encouragement of processes—meetings with customers, suppliers and community groups— to elicit stakeholder input about their expectations of the organization. The online auction company eBay has engaged hundreds of thousands of employees in a sustainability culture. It all started with an employee-driven suggestion—eliminate Styrofoam cups from the break room and use recyclable cups. As employees began to understand how this one action was a way for them to make a difference, more suggestions emerged, and after some time, the CEO of eBay himself proposed ideas to make eBay more sustainable. In this case, a small, practical action changed behavior and led to the birth of a new culture of sustainability at eBay. 69 required to develop a formal, written code of ethics, which serves as a framework for business behavior. Often such a code is linked to core business values and corporate culture. For sustainable HRM, having a strongly articulated and enforced ethical corporate stance can provide an effective springboard for communicating sustainability values. Corporate culture What are the necessary preconditions for sustainability in terms of organizational culture? A sustainable organization typically promotes a culture of ethical, respectful and integrity-driven behavior, empowerment and engagement of employees using collaborative networks, diversity and inclusion, open and interactive dialog with stakeholders, business transparency, and business processes that include social and environmental considerations. Equally, the sustainable organization tends to build a corporate identity aligning itself with the principles of sustainability.70 Unilever recreated its corporate vision and mission nearly 10 years ago: “We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life.” This is a compelling, highly accessible social mission, appealing to external and internal stakeholders and having the potential to engage employees at a deeply emotional level. It is far more compelling than the former purpose that emphasized understanding the “aspirations of our consumers and customers and respond[ing] creatively and competitively with branded products and services.” More recently in 2010, Unilever published a “Sustainable Living Plan” that established a target to “help more than one billion people improve their health and well-being.” Unilever’s 167,000 employees are encouraged to understand how their roles contribute to a sustainable world, rather than simply to improve the bank balances of Unilever’s shareholders and investors.71 Organizations can often support cultural change by starting with small actions and practical changes in behavior, prior to implementing a long process to embed a sustainability culture. In some cases, small actions can lead to big shifts in culture, providing a more solid foundation for cultural change at a more macro level in the organization. Sometimes, such changes can be developed at a grassroots level, and HRM can embrace and develop such initiatives; in other cases, HRM practitioners can initiate such change. Leadership for sustainability As in most organizations, change needs to be driven by leadership. In a sustainable organization, leadership demonstrates its commitment to sustainability through establishing a sustainability vision, strategy and commitment to action plans that deliver sustainable growth. 13 HRM’s Role in Corporate Social and Environmental Sustainability The Ten Principles of the UN Global Compact ■■ Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and ■■ Principle 2: make sure that they are not complicit in human rights abuses. ■■ Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; ■■ Principle 4: the elimination of all forms of forced and compulsory labor; ■■ Principle 5: the effective abolition of child labor; and ■■ Principle 6: the elimination of discrimination in respect of employment and occupation. ■■ Principle 7: Businesses should support a precautionary approach to environmental challenges; and ■■ Principle 8: undertake initiatives to promote greater environmental responsibility; and ■■ Principle 9: encourage the development and diffusion of environmentally friendly technologies. ■■ Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.  In the absence of sustainability leadership, HRM may (and should) adopt sustainability principles in core HRM functions. This process may mean, for example, developing an approach to recruitment that encompasses principles of diversity and inclusion, instituting an employee wellness program that goes significantly beyond legal requirements, or starting an employee volunteering program. These actions by HRM advance sustainability and contribute to improved business results, possibly leading to more discussion and acceptance of a sustainable approach at the executive level and throughout the organization. 14 72 EXISTING SUSTAINABILITY FRAMEWORKS Many frameworks are available to support sustainable workplaces in developing a sustainability strategy. Each organization should examine specific issues related to its industry, sector or geography to establish the optimum sustainability strategy. This section examines the characteristics of leading global frameworks for business sustainability, which have a direct connection to sustainable HRM, and distills these frameworks into common themes and performance requirements. Most of these frameworks rest on a core set of principles and practices, which provide a foundation for the development of sustainable HRM.73 After a brief overview of alternative frameworks, the remainder of this section looks in more depth at the Global Reporting Initiative (GRI) Framework. The United Nations Global Compact Created by the United Nations in 1999, the Global Compact is a policy initiative that asks organizations to adhere to 10 universal principles underpinning responsible business practices. The principles cover human rights, labor standards, environmental stewardship and anticorruption. In committing to uphold these principles, organizations also commit to report annually on their progress in doing so. Using these principles as an umbrella framework of a corporate sustainability policy, HRM can develop a set of policies and processes that align with the principles and ensure they are manifested in the practices of the organization. The Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises Designed to ensure that the operations of large organizations are in harmony with government policies and to enhance their contribution to sustainable development, the OECD guidelines are a comprehensive set of tools covering human rights, employment standards, bribery and corruption, environmental practices, community interaction, and more. The guidelines set out clear frameworks in which HR policies and practices can be developed.74 International Standard ISO 26000 ISO 26000 is a quality standard, though not for certification, that provides guidance on key themes of social responsibility across the broad spectrum of topics. It is intended for use by organizations of all sizes anywhere in the world, with particular attraction for small and medium-sized enterprises (SMEs), which may find other frameworks too cumbersome. HRM’s Role in Corporate Social and Environmental Sustainability what should be reported but also for It contains principles of social and environmental responsibility as well as what should be done. guidance for action and expectations Given that the GRI is the de facto for implementation.75 leading framework for sustainability reporting and that the number SA8000 of organizations using the GRI SA8000 is a certifiable standard Framework grows significantly focusing on the aspects of human every year, HR managers must rights and labor standards of business understand it in order to be part of an operations and prescribes both effective corporate reporting team. process and performance criteria. By familiarizing themselves with the One of the earliest certification GRI requirements, HR managers standards, used as early as 1998, it retain credibility as partners in the has been adopted by close to 2,500 sustainability strategy discussion and facilities around the world with almost performance reporting process. 1.5 million employees. SA8000 is The GRI Framework covers a often used as a tool for ensuring range of HR-related activities in human rights in extended supply support of sustainability related to a chains rather than being limited to responsible workplace: human rights, direct employees. An important part safety practices, labor standards, of this standard is its focus not only on standards of performance but also performance development, diversity, on management systems that need to employee compensation and more. In 2010, the Framework was updated be put in place to ensure the proper to version 3.1 and now includes 76 outcomes. new guidance on gender diversity and human rights. The performance The Global Reporting indicators contained in the GRI can form an initial scorecard for Initiative (GRI) Framework HRM’s contribution to a sustainable The Global Reporting Initiative is a organization. network-based, multi-stakeholder organization, with a mission to Many of the standards referred advance the “mainstreaming of to above use common reference disclosure on environmental, social points, such as the Universal 77 and governance performance.” The Declaration of Human Rights and GRI Framework was first published other broadly accepted international in 2000 and has undergone several labor conventions, and are therefore revisions and updates, with the similar at their core. To provide the current version being version 3.1 best support for sustainability, HR (version 4 is due for release in 2013). managers should align HRM policies and tools to the selected standard or Most organizations that publish approach (such as GRI, ISO 26000 sustainability reports—close to 6,000 per year on a global basis—use the GRI or SA8000) their organization has adopted. Framework to guide their reporting. By doing so, they often find that the need to report creates an internal catalyst Commonalities among effect for developing strategy and labor standards action plans in the organization. The Given the commonalities in all these GRI Framework can therefore be seen standards, organizations can develop as a guidance document not only for a generic roadmap for sustainable HRM that includes the key elements from each. As GRI is the prominent framework used for reporting on sustainability, one option for HRM is to review GRI’s performance requirements and reporting indicators and to use this as a basis for action. In doing so, of course, HR managers must take into account organizational size, sector, culture and maturity in adapting to change. Any process developed to implement different aspects of sustainability performance should be tailored to an organization’s current state of mind and practice and be aligned with other organizational processes as far as possible. The following section examines these performance elements through the framework of GRI indicators and provides guidance for sustainable HRM. THE GRI FRAMEWORK AND HRM-RELATED INDICATORS The GRI Reporting Framework addresses all aspects of organizational sustainability, including strategy, governance, ethics, and economic, social and environmental aspects of business, requiring disclosures on management approach and actual performance. Sustainability reporting is still voluntary in most countries, but those organizations that elect to report in line with the GRI Framework offer disclosures in each of these areas. While HRM is only one dimension of sustainable business, the GRI Framework includes many references to policies and performance, which fall within the functional responsibility of HRM. These indicators are included in the different categories of sustainability indicators in the GRI Framework. The GRI 3.1 Reporting Framework identifies 84 sustainability 15 HRM’s Role in Corporate Social and Environmental Sustainability Figure 4. Global Reporting Initiative (3.1) Indicators and HRM Relevance Indicator Category Total Number of Indicators 6 84 26 Economic 9 2 Environment 30 0 Labor Practices 15 15 Human Rights 11 8 Society 10 1 Product Responsibility 9 0 performance indicators used in sustainability reporting. Of these, as shown in Figure 4, 31 percent are directly related to HRM, which suggests a significant role for HRM, second only to the single most dominant element of the GRI Framework, environmental impacts. compared to local minimum wage at significant locations of operation. ■■ EC7: Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation. Economic indicators cover the economic impacts of an organization on global, national and local economies. Sustainability, in the “triple bottom line” context, assumes a fundamental robustness in terms of financial performance and an understanding of an organization’s economic effects on society. The GRI Framework, therefore, requires a reporting entity to disclose the extent and nature of such economic impacts. The two economic indicators directly relevant to HRM are: Both of these indicators reflect the direct impact of HRM policies on local economies, well beyond the internal aspects of HRM. As an employer, a sustainable organization will seek to compensate employees beyond minimum wage levels, which are usually determined as providing the most basic needs of employees for subsistence with dignity (food, shelter and utilities, clothing, health care, and education). The legal minimum wage in most countries may not always be sufficient to afford even this low standard of living. EC5: Range of ratios of standard entry-level wage by gender Similarly, local hiring is a way to show commitment to local communities Economic indicators ■■ 16 Indicators Directly Relevant to HRM while ensuring a local workforce (that is, nationals of the countries of operation), which is familiar with local culture, customs and work processes. Hiring locally also supports business continuity, reduces cost (expatriation comes with a major price tag) and builds local stakeholder relationships. HRM, in supporting a sustainable organization, should develop a policy related to local hiring and measure results. Labor practices and decent work indicators The GRI Labor Practices Indicators are largely formulated using the platform of the International Labor Organization’s Decent Work Agenda,78 which was developed to provide a set of minimum expectations that would ensure the implementation of four strategic objectives relating to the establishment of productive employment, fair globalization, HRM’s Role in Corporate Social and Environmental Sustainability An example of best practice in the area of living wage is demonstrated by Novartis, the pharmaceuticals company. Novartis conducted a project in conjunction with BSR,79 a large NGO promoting corporate social responsibility, to determine what actually constitutes a living wage around the world in all the countries it operates in, as a way to develop and measure its progress against the UN Global Compact principles. Novartis defines a living wage as: ■■ Basic food need for employees and their immediate families. ■■ Basic rent. ■■ Basic health and education for employees and their immediate families. ■■ Clothing for employees and their immediate families. ■■ Transportation to and from work. Novartis took a proactive stance on defining a living wage and on adopting a policy for all its business units that required them to adjust the wages of 125 employees in 2005 through 2007. It went beyond compliance with the law to develop a plan meaningful to their key stakeholders. Novartis believes it makes good business sense. “Novartis considers the living wage initiative an opportunity to contribute to the improvement of labor standards and have a positive impact on communities where the company operates. This is particularly important in developing countries where legal protections for workers may not be as advanced as in industrialized nations.”80 poverty reduction, and equitable, inclusive and sustainable development. As such, the GRI Labor Practices Indicators are closely linked to disclosure of employee demographics and adherence to minimum norms, which define how organizations should protect rights at work, encourage equality and advance job creation. As a minimum demonstration of sustainable business practice, organizations are required to disclose the demographics of their workforce and the way in which they frame terms and conditions of hiring. Such disclosures reflect the stability of employment and include, for example, whether an organization hires employees on permanent or temporary contracts. One aspect of sustainability practice that can be discerned from these figures is gender equality. Organizations that do not positively encourage the hiring of women may demonstrate gender imbalance, perhaps even discrimination, in their overall employee figures or employee turnover figures. Gender balance has been shown to support the delivery Labor Practices Indicators—Employent LA1: Total workforce by employment type, employment contract and region, broken down by gender. LA2: Total number and rate of new employee hires and employee turnover by age group, gender and region. LA3: Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations. LA15: Return to work and retention rates after parental leave, by gender. of improved business results81 as well as to strengthen local economies. Indeed, gender ratio improvement is seen as a critical success factor in the mining and extractives sector in several emerging economies and presents HRM with both an opportunity to contribute to business continuity and a challenge to develop a strong pool of female recruits and to drive an organizational culture that will enable them to progress. One of the necessary roles of the HR function is to ensure employee inclusiveness and representation in line with legal requirements and normative practice in many countries. In some countries (for example, Germany), the law requires employee representation on the governing bodies of corporations. 82 As a minimum, therefore, HRM must ensure that local labor laws are upheld with regard to recognition of employee representation and collective bargaining. In many instances, however, there is evidence of antiunion (union-busting) activity preventing effective representation by employees, which is directly opposed to the principles of decent work and employee rights. 83 However, in an organization built on sustainable HRM principles, HR managers may work more collaboratively and in a true spirit of dialog with employees and their representatives, which may serve to build greater employee loyalty and enhance employee retention. Similarly, by offering employees extended 17 HRM’s Role in Corporate Social and Environmental Sustainability Anglo American, the only major mining company with a female CEO, has driven recruitment and development of women in the male-dominated mining industry. “Women in mining” champions have been appointed at company sites, and several measures have been put in place, including a Code of Good Practice for employees who are pregnant and coaches to promote female recruits. Women now comprise 14 percent of Anglo American’s South African employee base, with 16 percent in management positions. 84 These values indicate strong performance in the industry and exceed the South African Mining Charter requirements, which prescribe that women should represent a minimum of 10 percent of the total workforce. A five-year study published in 2009 revealed that private-sector employer opposition to the efforts of American workers to form unions had intensified. The study concludes that employers are more than twice as likely to use 10 or more tactics—including threats of firing and actual firings—in their campaigns to thwart workers’ organizing efforts. Today’s antiunion activities include a greater focus than in the past on more coercive tactics designed to intensely monitor and punish union activity. 85 One recent example is the German telecommunications firm, Deutsche Telekom. The company has come under fire for union-busting activities in its U.S. subsidiary, T-Mobile USA. T-Mobile is accused of legal maneuvers to delay a unionrecognition ballot and using other forms of pressure on workers to avoid pursuing representation, including surveillance of workers, training managers in antiunion tactics and spreading misinformation about union activity. The website www.weexpectbetter.org is targeted at raising awareness for Deutsche Telekom’s alleged human rights abuses of and support for T-Mobile workers who request union representation. Deutsche Telekom employs more than 250,000 employees worldwide, of whom 38,000 work for T-Mobile USA and contribute around 24 percent of Deutsche Telekom’s total revenues. The anger at Deutsche Telekom is acerbated by the fact that, as a company headquartered in Germany, it has no option but to engage with unions under German law and is a signatory to the United Nations Global Compact, in which freedom of association is a core principle. In late 2011, the Trade Union Advisory Committee (TUAC) published a detailed paper86 criticizing Deutsche Telekom’s Sustainability Report, highlighting the failure of Deutsche Telekom to disclose information about global practices and instead to focus mainly on operations in Germany.87 Research 88 shows that collective bargaining coverage is the only HRM-related GRI Indicator in which companies openly disagree with GRI expectations. According to GRI, “Collective bargaining is an important form of stakeholder engagement…that helps build institutional frameworks and is seen by many as contributing to a stable society. Together with corporate governance, collective bargaining is part of an overall framework that contributes to responsible management. It is an instrument used by parties to facilitate collaborative efforts to enhance the positive social impacts of an organization. The percentage of employees covered by collective bargaining agreements is the most direct way to demonstrate an organization’s practices in relation to freedom of association.” Nevertheless, in sustainability reports many companies report that their collective bargaining coverage is zero percent. Some even explicitly state that they are opposed to collective bargaining. For example, the U.S. insurance firm Allstate states in its Social Responsibility Report 2009: “Allstate is not a unionized company. We recognize that unions play an important role in society, but the company does not believe a union can accomplish anything for our employees that they cannot accomplish for themselves by dealing directly with the company.”89 Labor Practices Indicators—Labor and Management Relations LA4: Percentage of employees covered by collective bargaining agreements. LA5: Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements. 18 HRM’s Role in Corporate Social and Environmental Sustainability Labor Practices Indicators—Occupational Health and Safety LA6: Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs. LA7: Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region and gender. LA8: Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases. LA9: Health and safety topics covered in formal agreements with trade unions. The Philippine company Cebu Holdings invests in the awareness of the workforce of serious diseases and implements four main health and safety programs: the Drug Free Workplace, TB Prevention and Control in the Workplace, Anti-Sexual Harassment, and HIV/AIDS Prevention and Control. 90 advanced notice of operational changes, an organization demonstrates respect for employees and concern for their well-being in situations where workplace changes may lead to job losses, job changes or transfers. The implications for sustainable HRM include the development of union-friendly policies and proactive consultation to address employee concerns prior to finalizing changes. Occupational health and safety is one of the most basic forms of corporate responsibility and is often managed outside the HR function by professional, often certified, safety managers, whose presence in the business is required by law in most countries. The safety manager typically addresses aspects of the physical working environment, industrial hygiene, safety training and risk assessments related to occupational disease. However, in addition, safety management (such as hours spent in training and hours and days lost due to accidents) has a potentially significant impact on business continuity and employment costs (including insurance premiums), so the HR manager is a critical partner in the creation of a zeroaccident workplace. In many cases, occupational health factors may be affected by those aspects of the working environment that are not directly quantifiable, such as management culture, stress factors and discriminatory practices. The implications for sustainable HRM include the need to assess the impact of such factors on the overall health and well-being of employees and to take measures to address them. 91 Corporate Responsibility for Employee Well-Being In recent years, two companies have made headlines due to their particularly high rates of employee suicides—France Telecom (24 suicides in 2008/2009) and Foxconn China (9 suicides in 2010). In both cases, the reasons cited for the suicides were related directly to organizational culture: long shifts, military-style discipline, a lack of recognition and work overload. These cases illustrate how HR policies shape the workplace. HRM is uniquely positioned to improve employee well-being by creating better working conditions and more positive workplace cultures. Labor Practices Indicators—Training and Education LA10: Average hours of training per year per employee by gender and by employee category. LA11: Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. LA12: Percentage of employees receiving regular performance and career development reviews by gender. 19 HRM’s Role in Corporate Social and Environmental Sustainability In a sustainable organization, investment is made in the development of employee skills and competencies, resulting in both business benefits (more capable employees) and in a contribution to society (more employable employees). These investments are not new for HRM— most HR managers are responsible for developing training programs and employee performance evaluation processes as part of their core role. In a sustainability context, the emphasis is on the degree of value these processes add to the employee as a key stakeholder. Instead of training being defined primarily as necessary to meet business objectives, training and personal development are seen as adding value to individuals. In cases of downsizing, for example, employees released by an organization should have amassed an arsenal of skills and competencies during their tenure, making them more employable by other companies and fulfilling an obligation to them as stakeholders in their company. This process also makes a significant societal contribution, lessening the burden of high unemployment costs. Additionally, in a sustainable organization, employees must be aware of and familiar with the principles and practices of sustainable business, so HRM must ensure that training and development programs include focused training on the application of sustainability practices in the company and on the way these affect different internal roles and processes. In traditional HRM, performance evaluation is driven by the need to identify performance gaps and improve performance to achieve business objectives. Often, performance is tied to compensation and career opportunity. In a sustainable organization, however, in addition to these business imperatives, 20 MAS Holdings, the Sri Lankan apparel manufacturer, has been internationally recognized for its programs to advance and empower women through investment in their professional development. In addition to maintaining basic workplace standards (for example, a limit on working hours and overtime, age limits, and safe working conditions), MAS gives its workers—over 90 percent of whom are women—benefits such as free transport and breakfast and on-site health care services. The MAS “Women Go Beyond” program is focused on promoting knowledge, awareness, leadership skills, attitudinal changes, and the ability to balance work and personal life, providing growth and empowerment for the company’s female workforce. Each year, achievements are celebrated through the “Empowered Woman of the Year” awards ceremony. MAS Holdings confirms that this program improves employer capability, loyalty and motivation, while providing the company with a larger pool of stable talent from which to select future managers. 92 employees as stakeholders are seen as having a right to transparency with regard to their relationship with their employer. Thus, employees should receive regular, formal feedback about their performance. By ensuring such quality feedback, HRM creates an infrastructure for equitable compensation and career progression opportunities. Diversity, equal opportunity and health and safety aspects of sustainable organizations help shape the way employers manage diversity on governing bodies, practice nondiscrimination, and identify specific health risks for employees and address them. The creation of such policies and approaches falls to the HRM function, which must also put monitoring systems in place. HR policy often covers, for example, the ratio of salaries between men and women, which confirms equality of opportunity, but in practice, HRM must measure the actual remuneration levels to identify possible gaps. In some cases, supporting equal opportunity and nondiscrimination may actually take the form of encouraging the hiring of local employees to build local skills and support the local economy. In 2011, for example, Samsung Engineering was honored for its approach to “Saudization” —a CSR initiative to recruit, educate and train Saudi engineers at the company’s new multimillion-riyal engineering center called Samsung Naffora Techno Valley. By December 2011, Samsung At Starbucks, every new employee at every level goes through a threeweek immersion program when they join the company. A major part of this program includes the corporate responsibility practices of the company. 93 Labor Practices Indicators—Diversity, Equal Opportunity LA13: Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity. LA14: Ratio of basic salary of men to women by employee category. HRM’s Role in Corporate Social and Environmental Sustainability The Dow Chemical Company conducts pay equity studies to verify that pay for men and women is fair and equitable. Dow reports two sets of figures: one based on salary levels adjusted for factors such as tenure and performance ratings, and one set with unadjusted base salary data for a selection of roles. Unadjusted data shows that men are paid slightly more in all technical roles, while women are paid more on average in administrative roles. 94 Recent research suggests of all core labor performance standards defined by GRI, the ratio of basic salary of men to women is the least reported. Only 50 percent of the businesses listed on the Forbes 250 that have adopted the GRI Initiatives claim they report data about this indicator. 95 Furthermore, of those that do, only a few organizations provide the salary data required by GRI. Instead, many claim, similar to the German chemical firm BASF, that “we provide equal opportunities for all employees and are committed to the equal treatment of both men and women. We do not make any distinction between men and women when it comes to setting salaries.” 96 Han’s F&B Pte Ltd (Han’s) operates a chain of bakeries, full-service restaurants and cafes in Singapore. In response to labor shortages and other operational challenges, Han’s started diversifying its workforce in 2006 through facilitating work for mature workers and recruiting employees from over 10 countries, people with disabilities, and exoffenders. The company reports that within a span of three years, the productivity of Han’s workers increased by 40 percent, and the net earnings per wage dollar more than doubled. Additionally, an inclusive workplace improved employee engagement—staff absenteeism is low, and staff turnover dropped fivefold between 2006 and 2009. 98 in the UAE to employ not less than 15 percent Emirate nationals. A local hotel and tourist resort company, Jumeirah Hotels, has pursued a program of “Emiratisation”—hiring, developing and retaining UAE nationals who want to start a career in hospitality and tourism. Jumeirah has a dedicated Emiratisation team and program in place to attract more nationals to the Jumeirah business. The company is also a part of the Department of Tourism and Commerce Marketing Taskforce for Emiratisation in the Tourism and Hospitality Industry, which runs industry-specific training and development programs in association with the Emirates Academy of Hospitality Management, part of the Jumeirah Group. 99 Human rights indicators Human rights indicators in the GRI Framework have largely been bolstered by the work of UN Special Representative John Ruggie in 2007 through 2011 and the publication of the Guiding Principles on Business and Human Rights: Implementing Engineering had increased its Saudi 97 the United Nations “Protect, Respect employees to 250. and Remedy” Framework, endorsed A similar approach exists in the United by the UN Human Rights Council in Arab Emirates, where the growing June 2011.100 The GRI Human Rights number of expatriates living in the UAE Indicators reinforce international is a matter of concern at close to 85 labor conventions relating to freedom percent of the population. In December of association, nondiscrimination, 2010, the Ministry of Labor announced and elimination of child and forced a new law requiring companies based labor. However, the interesting point for HR managers is that the concept of human rights extends throughout an organization’s value chain, whereby organizations assume responsibility for contracting with goods and services suppliers in a way that encourages or requires them to adhere to similar human rights standards. Given that an organization’s operations may be outsourced or provided through third-party vendors with whom the HR function contracts, HR managers must ensure consistency between in-house organizational policies to protect human rights and the policies observed by vendors providing people-resources. This shared responsibility in the value chain has been widely exposed for many years through stories of human rights abuses in apparel industry supply chains in the mid-1990s, and in more recent years in electronics industries (sweatshops). Practices that force unreasonably low pricing in vendor organizations can lead to continued human rights abuses, and global organizations bear part of the responsibility to address such issues.101 Such practices include the use of child labor, unpaid or excessive overtime hours, a lack of reasonable hygiene facilities, and safety measures or restriction of freedoms such as confiscating passports or preventing employee association and collective bargaining. Additional 21 HRM’s Role in Corporate Social and Environmental Sustainability Human Rights Indicators HR1: Percentage and total number of significant investment agreements and contracts that include human rights clauses or that have undergone human rights screening. HR2: Percentage of significant suppliers, contractors, and other business partners that have undergone human rights screening and actions taken. HR3: Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained. HR4: Total number of incidents of discrimination and corrective actions taken. HR5: Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights. HR6: Operations and significant suppliers identified as having significant risk for incidents of child labor, and measures taken to contribute to the elimination of child labor. HR7: Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labor. HR8: Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations. In 2011 in Dhaka in Bangladesh, a fire in a garment manufacturing factory killed 25 workers and injured 100 more. This event followed several other fires at other locations in recent years. Global clothing manufacturers such as Gap Inc. and J.C. Penney were criticized for their failure to enforce satisfactory safety procedures, and NGOs called for greater attention to factory inspections and employee representation.102 abuses may also involve violence such as beatings, rape or other forms of physical abuse. Sustainable HRM should take a proactive role in ensuring that all employees involved in supply chain dealings are aware of the implications for potentially explosive human rights issues. In this way, HRM influence extends to creating systems that encompass organizational values based on respect for human rights 22 throughout all company operations, not just operations directly under the organization’s control. Society indicators At its most basic level, HRM must lead a culture of ethics and familiarization with the corporate position on anticorruption by all employees. Most often, the company’s code of ethics and related practices will cover this position. While systems may never be foolproof and G4S is one of the largest global vendors of security services, providing security personnel to a wide range of customers.103 G4S employees work on customers’ premises and in a sense represent those customers to external stakeholders. HR policies must take responsibility for ensuring that such workers are employed by G4S with due regard to their basic human rights and that they are fully trained in the ethical requirements of the business. In addition, HR managers in customer companies must ensure that such employees are treated with due care while they perform their duties at customer sites. This care may range from providing suitable, weather-protected work stations or protection from exposure to disease to training in dealing with violence. Both G4S and its customers share a responsibility to protect employees while they carry out their duties. G4S customers must be prepared to support pricing for services, which enables companies such as G4S to ensure fair and decent terms and conditions of work for security employees. HRM must support alignment between in-house policies for employee rights protection in vendor contracts to avoid being complicit in human rights abuses in the extended value chain of its organization’s business. some employees will be dishonest, HRM must create the conditions for the company’s ethical health. The implications for sustainable HRM include providing formal training in all aspects of corruption and measuring the numbers of employees trained and hours spent in such training. In the U.K. in 2010, the Bribery Act came into force as an attempt to clamp down on corruption in business. The HRM’s Role in Corporate Social and Environmental Sustainability Society Indicators SO3: Percentage of employees trained in organization’s anticorruption policies...
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