Sustainable Innovation


Social impacts of products

Underpinning company mission

Paint

An important reason to start measuring social impact is to underpin a company mission. More and more companies define company aspirations in terms of social impact. Take for instance Danone, that has a dual mission of business success and social impact. Philips aims to improve the lives of 3 billion people. And L’Oréal strives with its ‘Sharing Beaty for All’ program for all its products to have a social or environmental beneift. It is  important to substantiate these goals with tangible examples and report on progress based on solid metrics. How to do so?

Learning from NGOs and philantropy

Social progress is the ‘raison d’etre’ for Non-Gouvernemental Organisations (NGOs) and philantropic organisations. For NGOs it would be unthinkable not to track the number of people lifted out of poverty, the income generated for small holder farmers or the number of girls educated. A number of tools and guidelines have become available to forecast and track progress , for instance those ‘Global Impact Investing Network’. The reporting guidelines of the Global Reporting Initiative provide inspiration as well for companies that wish to steer on social impact. However, these type of guidances do not always provide the level of granularity needed to steer the social impact of products.

Social impact through products

Companies can create the largest positive impact with their products and services. Through products companies have the ability to create the most significant impact in society: billions of end-users are reached, manufacturing processes can be changed in own organisation and supplier organisations. The choices companies make for their products have a direct effect on the impacts the products have on the planet and people. These impacts are created in all stages of the product life cycle from extraction of raw materials – all the way to the producten, use phase and the end of life of a product.

Life cycle approach

The impacts created by products can be related to all stages of the product life cycle, .’Life Cycle Analyses’ have become a common methodology to assess the environmental impact of a product. Take for instance the standard defined by the World Business Council for Sustainable Development (WBCSD) for life cycle assessments in the chemical sector. It is also possible to assess the social impacts along the life cycle. If you wish to integrate ‘people perspectives’ a good source is the Handbook for Product Social Impact Assessments developed by a group of industry peers.

Better for people and planet

DSM strives for products and innovations to be measurably better for the planet (Eco+) and people (People+)  based on a life cycle approach. By 2020 65% of DSMs products should be ‘Brighter Living Solutions’, measurably better for planet or people. Some examples:

  1. Alpaflor® Edelweiss is a personal care ingredient. It contributes to better skin health and comfort, and is sourced in a very socially sustainable way, contributing to good working circumstances and prosperity of farmers in the Swiss Valais region.
  2. Synthetic chains made of Dyneema® used for marine structure mooring are 8 times lighter and 70 times less noisy than steel chains. Users experience a safer and more comfortable use, shipping companies report improved operational efficiency.
  3. Medical gowns reinforced with breathable Arnitel VT® contribute to the protection of surgeons against virus and bacteria in high risk hospital environments, and allow surgeons to work in a comfortable way.
  4. Decovery® is a plant based and waterborne paint ingrediënt for paints. It is a solvent free and low odor product, and reduces health risks of the people involved in production and the users of the product.

Benefits of social impact measuring

Social impact measuring is useful to underpin company missions. Life cycle assessments can be instrumental to spot new innovation opportunities and business differentiators. They also help to train product developers and sourcing managers to choose the most sustainable alternatives, and marketeers to communicate the differentiators in a balanced way. More about business benefits here.

– based on the earlier published article by Karen Maas (Academic Director Impact Center Erasmus) and Jacobine Das Gupta (DSM Corporate Sustainability) in Dutch for NRC Live Impact Day

 

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5 reasons to start measuring social impact

people

Companies taking the lead 

In January politicians, leaders of multinationals, entrepreneurs and scientists gathered at the World Economic Forum in Davos to discuss today’s societal challenges. It is encouraging to see that the private sector is taking a leading role in defining plans to mitigate climate change, ensure health and safety and move towards a circular economy. Companies employ the most employees in the world and have the largest investment and innovation capabilities. Nowhere else such significant impacts on society can be made as by companies if they run their business in a responsible way. Think about sustainable sourcing policies, careful choice of materials, eco-design, production methods, creation of jobs and good working conditions.

Why should you start measuring social impact?

All impacts organisations have on society can be summarized as ‘social impact’. These can be from economic, environmental and social perspectives. How to measure this impact? How to identify the best opportunities for a maximum positive social impact? Where do companies create most impact? How to shift to new more sustainable consumption patterns? How to define priorities, and how to track progress?  Measuring impact has surfaced in recent years as a new important perspective in doing business. There are five reasons why:

(1) Underpinning company mission: An increasing number of companies have defined company aspirations and targets that explicitly refer to the social impact they aim to achieve. Philips aims to improve the lives of 3 billion people with health care solutions. DSM wants 65% of its products to have a measurably better environmental or social impact (Eco+ or People+). Underpinning these missions are  essential to monitor and manage performance.

(2) Requests for transparency: External stakeholders set higher expectations on transparency than before. Reporting financial and non-financial results are becoming common practise. Companies are not only asked to be transparent about their profits and revenues, but also to inform the general public about the status of ‘externalities’ such as the safety, health and employee engagement of their staff as well as the green house gas emissions of their sites.

(3) Consumer expectations: A large majority of consumers expects that companies take responsibility for healthy, safe and decent working conditions under which products are being produced. Two thirds of all consumers sense responsibility to purchase products that support environmental or societal goals (Globescan). Half of all consumers state they are even prepared to pay more for products that have a clear environmental or social benefit (Nielsen). Producers of goods or services that want to tap into this pull will need to come up with evidence that shows the positive impact on society is not biased, but real.

(4) Changing investor preferences: The investor community increasingly steers on the social impacts of investments. Before, most investors applied an exclusion policy, avoiding certain sectors. Nowadays investors increasingly steer their portfolio based on performance on several Environmental Social and Governance factors (ESG). For companies this is a reason more to track and manage these factors more closely.

(5) Employee engagement: Last but not least, the ‘sense of purpose’ of a company has become the most important reason for Millenials to work for that company (Deloitte). And this not only accounts for the Generation Y. Many people like to work for a company that has a social mission in its headlines. It inspires people to get up in the morning.

Impact measurement important for companies to flourish

Measurement of social impact is still in its early stages. There are ongoing discussions how to do this, and how to monetise externalities. Integration of impact measurement results in business cases is expected, and even on company balance sheets in the future. There is much to be explored, and much to gain. The progress in the coming decade will be instrumental to have better insights in the real social impact of companies, and be able to steer, for a healthy planet, a prosperous society and companies that flourish.

– by Karen Maas (Academic Director Impact Center Erasmus) and Jacobine Das Gupta (DSM Corporate Sustainability) published previously in Dutch: NRC Live Impact Day



Business benefits of measuring social impact of products

Consumers are acutely aware of the provenance of the goods they purchase. They have greater access to product information than ever before, and are empowered to make more responsible purchase decisions. There is now evidence that a majority are also willing to pay more for them. A study by marketing research group Nielsen found that 55% of online consumers across 60 countries would pay a premium for ‘green’ or socially responsible goods. Clearly therefore, there is now an opportunity for businesses to develop products and services that have demonstrable ecological or social benefits.

As consumers, we are accustomed to seeing ‘eco-labels’ on products and services. In contrast to the range of methodologies used to assess a product’s environmental impact, there is still a scarcity of tools and metrics to estimate the social impact of these products. A cross-industry social impact assessment method for products has not existed, even though many companies have implemented important social initiatives across their supply chains and operations.

Attempts to develop metrics for social impacts have often resulted in instruments that can be applied to a company as a whole, but are not easily translatable for the products within an industrial context and the daily practices of product developers and marketers. The main reason for this is that measurements of how a product affects society and individuals are difficult to quantify. For example, to prove that a product contributes to the wellbeing of end-users, a company would need consumer research to assess their increase in perceived wellbeing when using the product. The task is further complicated by the sheer volume of real-time product information that can now be accessed in different formats, and the social complexities of a globalised world in which the balance of economic prosperity is rapidly shifting.

Recently, the Roundtable for Product Social Metrics a group of European industry leaders including Ahold, AkzoNobel, BASF, BMW Group, DSM, L’Oréal, Marks & Spencer and sustainability consultants PRé Sustainability published the Handbook for Product Social Impact Assessment. The Handbook is the result of two years of close collaboration and is the first practical methodology tested and accepted by a group of major businesses for assessing a product’s social impact throughout its lifecycle. It has been formulated based on international standards and consultations with researchers, industry hubs, development organisations and NGOs.

The Roundtable has tested the methodology in 6 different pilots, assessing a variety of their products ranging from protective coatings and personal care products, to office chair components and automotive parts. The findings from these initial pilots, in particular insights into often complex value chains, were used to further refine the methodology. Three key stakeholder groups are taken into consideration: workers, consumers and local communities.

Stakeholder Groups Handbook PSIA
Stakeholder Groups taken into account in Handbook Product Social Impact Assessment
http://product-social-impact-assessment.com/handbook/

The assessment gives practical guidance for capturing social performance data. The resulting dashboard shows the performance in all life cycle stages, from raw materials extraction up till disposal. The pilots showed that the methodology can provide a clear framework by which companies can analyse lifecycle data.

Roundtable partners DSM, l’Oréal and AkzoNobel piloted the product social impact assessment approach on two products: a serum and a hand cream. Both products contain ingredients from AkzoNobel and DSM. They looked at the impact of the product on end-users as well as farmers’ wages and job security.

hand-cream-serum-pilot
Personal care product used to pilot methodology
http://product-social-impact-assessment.com/pilot-serum-hand-cream/

The assessment helped to highlight specific product differentiators that otherwise might not have featured so prominently on a product developer’s radar such as workers condition’s and local community impact. Other potential benefits arising from using the methodology are identifying new product ideas, identifying and mitigating supply chain risks and improving employee engagement. This approach has the potential to be beneficial for all companies that wish to innovate based on social impact performance metrics that take into account the whole value chain.

Extract of article The Guardian October 28th – by Jacobine Das Gupta (DSM) and Charles Duclaux (L’Oréal). http://www.theguardian.com/sustainable-business/2014/oct/28/new-tool-measure-social-impact-products



ADN orchestrates non-food surplus donation to French charities

The ‘Agence de Don et Nature’ (ADN) has become thé intermediary trusted partner between donating enterprises and certified associations in France. Enterprises can donate their unsold goods for the good cause, reassured that items will not be resold. Associations are happy to receive goods against a small financial compensation.. A promising new organisation in France based on a not-for-profit principle inspired by Gifts in Kind International (1).

  

Stéphanie Goujon, Chief Executive Agence de Don et Nature

Yearly, 400 million euro non-food goods are being destroyed in France (Study AT Kearney Office 2009). Companies are searching for proper destinations of their industrial surplus, but want to be guaranteed that the items are not being resold for legal reasons. They also want to be reassured that the associations that can be trusted. How to find these NGO’s ?

8 million French people live below the poverty line having less than 30 euro per year to spend (study of INSEE in 2009). A few hundred NGOs and Associations are supporting these people in France. NGO’s need money for their activities, but as well.. office furniture, paper, clothes, cleaning products, and so on. Where to find the generous companies that could help them out ?

Organisation Agence du Don en Nature

‘Agence du Don en Nature’ was created in April by a group of French social entrepreneurs, supported by the foundations of Carrefour, l’Oréal and Leyton & Associés, inspired by the American ‘Gifts in Kind International’. It has quickly become known in France as the intermediary logistics organisation, not-for-profit, that matches the needs of charities and offer of non-sold items of enterprises.

AND is run by CEO Stéphanie Goujon. Mrs Goujon has a background in the Fast Moving Consumer Goods sector (P&G, Danone and Unilever). She works in close cooperation with a team of highly qualified volunteers of different backgrounds like private equity, supply chain, HR and Internet.

It became soon obvious that ADN would need a place to store the goods of donating enterprises at a secure place and not too far from Paris where most associations are located. With help of partners Groupe SOS and Fairplace, ADN found a storage of 4000m2 and 5000 palets in Chambly-sur-Oise which is just 30 minutes by car from Paris Gare du Nord.

Agence Don et Nature warehouse of 4000 m2 a Chambly-sur-Oise (60)

Since the start in 2009, already 20 corporate and 38 charity partners have signed up. Last year, products with a value of 6,4 million euro have collected, 2,4 million euros in products have been donated, and between 50,000 and 100,000 people have received the goods via the charities in France.

Benefits for the partner associations

If associations needed clothes, paper or shampoo in earlier times, they were counting on personal relationships between founding partners and enterprise directors. It these relationships resulted in the supply of some goods, the better. Unfortunately, often the right product could not be found, had been already send to the landfill. Or contacts within the enterprises were lacking at all.

ADN allows associations to express their needs for specific products and does all efforts to match this need with the offer of non-sold items from the donating companies. An online product catalogue is available. It can be used to make an order and get the goods delivered. Only a small financial contribution is asked to cover logistic expenses. 

 

The ADN website has a ‘product catalogue’ which shows the actual stock and latest specific items offered by the donating entreprises.

Charities are very enthusiastic. They can now precise their specific needs like ‘toothpaste’ or ‘children underwear’, instead of ‘cleaning products’ or ‘clothes’. The associations only pay a small financial compensation for the logistics costs. A volunteer of ADN makes sure the products are delivered from ADN warehouse to the charities head office within 7 days. 

Association partner contract guarantee that items won’t be resold. ADN signs partner contracts with the adhering charities. Among the conditions are the guarantee that items will not be resold, but only used by the volunteers and benefitting people of the association.

 

Partner Charities of Agence du Don en Nature

Benefits for donating entreprises

Many companies start to remodel their Supply Chains to minimize their stock and unsold goods. Despite these studies, enterprises have to admit it seems inevitable that enterprises maintain to produce goods that end up unsold. 

CSR and Sustainability Policies make people realise that it may be a good idea to donate the surplus of brand new goods to charities instead of destroying it.

The Agence du Don en Nature guarantees the donating enterprises that goods won’t be resold on the market and supply a yearly transport report of the destination of the goods. Enterprises are happy to report this in their respective annual Sustainability Report. They can also profit from tax deductions in some cases, though this is certainly not the most important requisite, according to Stéphanie Goujon.

Entreprise partners are very satisfied by ADN services. ‘l’Agence du Don en Nature offers [us] various advantages. As a logistics specialist, she has implemented [both] ethical and transparency parameters [by partner association contracts] which guarantees us from a legal point of view that products are distributed to the right people (4).

Partner Corporates of Agence du Don en Nature

What are outlooks for Agence du Don en Nature ?

One of the key success factors is the high involvement of the donating and founding companies, such as Coca Cola, HSBC, Groupe SEB, ATKearney and Price Waterhouse Coopers, explains Stéphanie Goujon. Supply chain directors and consultancies offer their expertise to set up the logistics and distribution chain. Without this support the association would not be so efficient and successful, Mrs Goujon acknowledges. She is therefore keen on carefully maintaining these partnership relations as ADN keeps growing in the coming years.

Supply-demand balance. Some products are over-asked and currently under-supplied. For instance baby nappies, sleeping bags, socks and baby clothes are very much demanded by the charities, whereas potentials suppliers seem to have found alternative destinations. A new initiative steered by a group of Science Po students (French University of Technology) is the Ambassador Program aiming to understand better the association needs and notably find new donating enterprises for the most required products. This initiative will certainly help to improve the match between the donated goods and requested products.

Ambitious Goals. With all these activities going on, ADN has set itself ambitious goals : By 2011 it wants to help 1 million French people by 2011 by distributing goods representing a value of 10 million euros.

French enterprises and associations are invited to learn about the program and join : www.adn.org : ‘Moins de gaspillage – plus de partage’ or :  ‘Less wasting- more sharing’.  

Sources : 1. Presentation AND may 2010, 2. Site ADN : http://www.adnfrance.org/, 3. Supply Chain Magazine ‘ADN, une chaîne efficace entre donateurs et associations http://www.supplychainmagazine.fr/TOUTE-INFO/Archives/SCM043/Experience-43-ADN.pdf, 4. Moins de gaspillage, plus de partage’, Rapport d’activité Responsable 2009.



AkzoNobel Uses Eco-Efficiency Assessments for Major Business Decisions

Few companies have embedded their Sustainable Strategies to such an extend as AkzoNobel does. Top Management Bonuses are related to  sustainable KPI’s. Major Business Decisions are made on the basis of both economical as well as environmental impact analyses. My interview with André Veneman, Corporate Director Sustainability,  has been very inspiring. Find hereby ‘Best Practices’ at AkzoNobel.

AkzoNobel is a worldwide operating chemical company, employing 58,300 people generating an annual turnover of 15,4 million euros (2008). AkzoNobel has three business units:  (1) Decorative Paints, (2) Performance Coatings (industrial, car refinishes, marine and packaging coatings) and (3) Specialty Chemicals.

Product examples : Flexa (Decorative Paint), Fluorex (Car Refinishing – Paint Film on PVC of Volvo ) Resicoat (Industrial Application – Valves)

Hans Wijers, CEO as of 2003 was convinced that Akzo Nobel could only survive if it increased its economical value by reducing its ecological footprint.

Andre Veneman, AkzoNobel Corporate Director Sustainability

André Veneman was sked to lead Sustainable business development together with the management of Health, Safety and Environment.. Veneman accepted, under the condition that the Board of Directors would support him to ‘Go All The Way’ :  Implement all processes necessary to embed Sustainability in the organisation. After a career at ‘Doctors Without Borders’ he became determined to organise sustainable processes. He knew this could only be done by throughout analyses, sincere communication and strong interventions.

Veneman started first to create a proper CSR foundation. Veneman and his team analysed all AkzoNobel processes, risks and prepared the company to be ready to match all new standards and legislation. Examples are REACH for Chemical Products, Business Principles embedding, a Vendor Policy to make sure the suppliers actively support AkzoNobel Business Principles and Global HSE standards. A Sustainability Council was installed. NGO’s like Amnesty and WWF were invited to exchange and advise on societal and environmental challenges and the role and responsibility of Akzo Nobel.

An explorative research among suppliers opened they eyes of many. The results of this study, about social and environmental operations of suppliers, showed that some out of 200 suppliers were top class, many of them needed to improve but 8 needed to be removed immediately from the suppliers list. Moreover : The board decided to accompany its key suppliers to improve sustainable circumstances. Nothing to do with philanthropy but business logic : AkzoNobel wants to build partnerships with key suppliers and could not afford that they would be closed down one day or the other. AkzoNobel Sourcing Department now uses Sustainable Supplier Visits to ensure suppliers meet AkzoNobel sustainability standards.

AkzoNobel calculated its ecological footprint in 2007 in six fold, highly structured way: CO2 emissions, water, materials, waste, risk and toxicity. The company generates itself 3 million tons green house gas emissions, but suppliers add 15 million and in the utilisation phase customers are responsible for another 10 million. It makes an overall footprint of 28 million tons C02/year. It is AkzoNobel goal to have reduced its CO2 emissions by 10% in 2015 and by 25% in 2020.

1. What are Corporate Responsibility Objectives of AkzoNobel ?

AkzoNobel has defined three CSR goals (1),defined by the Board in 2008.

1. Remain in the top three of Down Jones Sustainability Indexes. (as of 2007).

2. Reduce total recordable injury rate

3. Deliver step change in people development, partly through substantially improving diversity in the company.

An Eco-Efficiency Analyses for every important Investment Decision (over 5 million euros). For every investment, an ecological summary accompanies the usual financial business case. Veneman explains that it has happens more than once that investment scenario’s with a smaller financial gain for lower ecological are being prevailed above others scenarios that would result in higher revenues but a substantial larger ecological footprint.

Simplified and fictive example of combining financial and ecological summaries as input for the companies investment decisions

2       How does CSR contribute to Innovation ?

AkzoNobel is continuously innovating in its three main key industries : Construction (responsible for 35% of the companies revenues), Transport, (20%) and Energy (40%). Subjects of improvement are functional performance (solvability, drying time and scratch resistance) and eco indicators (toxicity, energy efficiency, natural resources, emissions of waste, land use and risks).

18% of the product portfolio consists of Eco-Premium Solutions. The Eco-Premium Products all have a clear ecological advantages with a normal or better functional performance. By 2015, AkzoNobel wants to have the proportion increased to 30%.

An Eco-Premium example is ‘Dissolvine GL’, a chelating agent. Chelators serve inactivate (metal) ions in liquids. Among other application areas are shampoos and food products. Dissolvine GL is based on 86% non-fossil and sustainable resources. Ammonia is produced as a side-product but can be collected and re-used.

Molecules Model of a chelating agent that is used to inactivate metal ions. Dissolvine GL is one of the ‘chelating agent’ products of Akzo Nobel, an Eco-Premium product representing  a  high economical value with a low environmental impact.

50% of Managers Bonus is now related to Sustainable Development. Half of the yearly variable bonus of the Top 1000 executives is now directly related to sustainable performance, which consists of Eco-Premium Innovations, carbon reduction, safety, operational efficiency  talent development and the companies position in the DJSI index.

Exchanges with NGO lead to new product ideas. An NGO explained AkzoNobel 12 years ago that classical biocidal antifoulings had to be phased out because of their toxicity to marine life. It motivated AkzoNobel to develop non stick, smooth polymer antifoulings. Scallops and see weed will not attach. Due to the very smooth hull, large container sea ships now could save more than 6% petrol use : An economical and ecological gain. global shipping is responsible for 2,7% of the worlds green house gas emissions (2009 numbers). The use of this very smooth Intersleek antifouling alone could potentially reduce global carbon-emissions of containerships with 80 million tons compared to classical antifoulings.

New polymer ship coating (Intersleek 900) that enables an energy consumption of over 6% of vessels

Customer exchanges that launch new product innovations. Akzo Nobel has set up various customer exchanges. Discussions are moving towards a more extensive needs analyses. Questions are ‘What challenges do you face with respect to Sustainability’ ? ‘What would you expect from us in terms of products and services?

An example of a product developed by intensive involvement with stakeholders is ‘Redicet’, launched in 2007. Redicet is an asphalt product (or butimen). Redicet is stronger and more resistant than the other asphalts on the market. It enables a more efficient transport which means energy savings for car drivers. The road workers working circumstances have improved substantial : The asphalt does not to be heated at a very high temperature and pollution has been reduced. Lastly, an overall cost reduction of 20 to 40% is possible.

Redicet, a new asphalt with higher performance, lower pollution and better working circumstances

Painting powder that can be melted at lower temperature. Office furniture makers asked  AkzoNobel to develop lower paint powder temperature (now 230 degrees) that enables to lower the producers energy spend and environmental footprint. It has been the start of  new developments.

Office furniture (Arféo) coloured with powder paint.

3.What are outlooks ?

Sustainability has been embedded and can only accelerate, Veneman concludes. At AkzoNobel, after having created the foundations, and embedding sustainable decisions into the companies strategy, Veneman foresees further cooperation between departments.

One of the next steps will be a structured and common approach for co-creation with customers, NGO and industry partners. In order to create new innovations stakeholders will be increasingly implicated in the process. Among other implications, it will bring new definitions of intellectual property and responsibilities between AkzoNobel and its partners.

Sources : 1. Delivering Tomorrows Answers today, Akzo Nobel 2008 Report ; 2. The Carbon Footprint of Shipping, 2009 by Joint NGO’s (Seas at Risk, Milieudefensie, Noordzee Foundation),