Perhaps despite, rather than because of, heavy state influence in French corporate behaviour, some of Frances big names are at the forefront of international...
French companies must stay within tight government-defined parameters when preparing their sustainability reports. But this sometimes restricts rather than stimulates the development of new ideas about corporate social responsibility.
Nigel Roome is professor of governance, corporate responsibility and sustainable development at Vlerick School of Management in Belgium. He says that though corporate responsibility is in principle voluntary, in France most companies have only started to take it seriously in response to state regulation. “Without that much less would be going on,” he says.
Sustainability consultancy Groupe Alpha, for example, criticises L’Oréal, the world’s largest cosmetics maker. Although L’Oréal is ranked 57th in the 2011 Global 100 most sustainable companies list, its reporting on workplace issues stops at the French borders. Groupe Alpha’s Natacha Seguin says: “This is in line with the text of the law but not with the spirit of it. We think the idea of the law is that companies should report about the whole group – certainly if you talk about a company that is doing business worldwide, such as L’Oréal.”
However, Francis Quinn, L’Oréal’s global director of sustainable development, says the company “has no problem in reporting on a global basis from the moment that it is clear what the definitions are that we are supposed to use for reporting”.
French reporting rules and terminology, he argues, are too specific to be used beyond France. Quinn adds that different reporting requirements create a problem for comparing the social and sustainable policies of companies. “Clearly the question of standardisation is a real issue. The more standard and international the parameters are, the better it is for everybody. It means you can compare between different companies in different countries. This also makes it easier to see who is making progress,” he says.
Standardisation across sectors for corporate responsibility reporting is a long-term goal, Quinn says. “When you get all different sectors together to come up with a common set of parameters, you discover that there is not a whole lot that is common to everybody.”
However, L’Oréal does report on its sourcing activities outside France. Its ingredients come from all over the world, often from plants grown in developing countries. As L’Oréal is so large (its research budget alone in 2009 was €609m), its sourcing of raw materials is a potential sustainability minefield.
According to Quinn, “more than 40% of our ingredients are materials of renewable vegetal origin”. That means that 60% does not come from renewable sources. “Our focus is on green chemistry. Today more than 65% of our new ingredients come from green chemistry. Even if that is not a natural resource, the ingredients used for it come from renewable resources, and the final products are 100% biodegradable.”
L’Oréal uses about 300 tonnes of palm oil a year in its products. It joined the Roundtable on Sustainable Palm Oil in 2007 and obliges its palm oil suppliers to be roundtable members. This made L’Oréal “the world’s first big company only using certified sustainable palm oil”, Quinn says.
The company also carries out, through independent consultancies, several hundred social responsibility audits of its suppliers each year. This is a “very well defined process” developed within a CSR Europe programme, Quinn says. “There were several companies involved and we took the lead in developing the process”.
L’Oréal tries to develop long-term relationships with suppliers. “We have been working with more than three-quarters of our suppliers for more than 10 years,” says Quinn. Long-term relationships can be the key to dealing with shortcomings.
Quinn says, for example, that L’Oréal is “not an expert in deforestation. That is why we are part of the Forest Footprint Disclosure project. We share what we do with people and ask them how we can do better. It is an ongoing process. When we choose to work with organisations, we want [to deal with] the real experts, who we believe can help us to do better.”
Leading the pack
Foods multinational Danone is considered one of France’s most far-sighted companies in corporate responsibility terms. Even in 1972, its then chief executive Antoine Riboud said: “Corporate responsibility does not end at the factory gate or office door. The jobs a business creates are central to the lives of employees, and the energy and raw materials we consume change the shape of our planet.”
Anne Catherine Husson-Traore, of French corporate responsibility research centre Novethic says: “You might find some investors who say that Danone is not doing so well on governance issues.” However, Danone “really does take good care of the working and social conditions of its employees, and they have a strategy that shows they understand the issues”.
Estelle Mironesco of socially responsible investment analysts Vigeo, says that, for Danone, “CSR seems to be embedded in their culture, and it is coming from top management”.
In 1988 Danone was the first company to sign an International Framework Agreement (IFA). IFAs are drawn up by global union federations and multinational companies with the objective of ensuring that International Labour Organisation standards are adhered to throughout the supply chain. The agreements are overseen by the International Metalworkers’ Federation.
Groupe Alpha’s Natacha Seguin says IFAs are “a way for trade unions and the top of the company to follow the internationalisation of the firm”. French companies are second only to German ones in the number of IFAs signed. Other French signatories are hotel group Accor, Carrefour, EDF, France Télécom, Lafarge, Peugeot Citroën, Renault, chemicals firm Rhodia, and high-tech metal tube maker Vallourec.
Lafarge is another of France’s most responsibility-focused companies. Lafarge is the world’s biggest cement producer, and a world leader in building materials. It was the only company in its sector to be included in Corporate Knights list of the global 100 most sustainable companies, though it has dropped out of the 2011 list.
Vigeo’s Mironesco says Lafarge has done extensive work on its carbon footprint. “When it builds new cement factories, it really applies the best environmental standards,” she says. More generally, she adds, companies with the biggest impact on the environment, such as the chemicals and construction sectors, are making advances on sustainability. “They have to. They are also under tremendous pressure from NGOs.”
The management of companies in these sectors recognise the risk factors and realise that they have to act.
Novethic’s Husson-Traore says Lafarge “has really understood the issues for its sector”, citing the firm’s partnerships with NGOs as an example of good practice. Lafarge operates in nearly 80 countries and sponsors development programmes dealing with issues such as the fight against diseases or increasing computer literacy in countries such as India and Indonesia.
Case study:CDC on the caisse
The Caisse des Dépôts et Consignations (CDC) is a quintessentially French institution. It is a public body, but its mission is to manage the state’s many investments in the private sector, and to reinvest its profits for the greater good. It has social responsibility at its heart, though the term was not in use when CDC was founded in 1816.
CDC was originally designed as a safe repository for civil servants’ pension funds. It made its first local development loan in 1822 to the port of Dunkirk, and provided its first social housing loans in 1905. It is now working to a strategic plan for the period until 2020, with a range of targets that would be considered corporate responsibility in any private financing institution.
It will build 90,000 social homes a year, many in eco-districts built to standards set out by the Grenelle environment process. CDC also provides cash for university eco-campuses, and will finance a huge renewable energy programme. A subsidiary, CDC Biodiversité, helps rehabilitate ecosystems, especially in connection with infrastructure projects.
CDC also works to tackle climate change, by managing France’s carbon market trading registry, and by investing in funds that back emissions-reducing projects.
As a major investor through its management of the pension savings of French public servants, CDC is influential in responsible investing. It deploys its investment power in accordance with the United Nations Principles for Responsible Investment and the UN Environment Programme Finance Initiative. And it has proven that sustainable investing can be profitable: it generated €2.5bn in profits in 2009, all to be reinvested in its “general interest projects”.
Case study: Danone’s micro-lending yoghurt revolution
Danone, one of France’s foremost corporate responsibility practitioners, has worked with micro-lender Grameen Bank since 2006. Their Bangladesh-based joint venture, Grameen Danone Foods, combines a for-profit business model with contributing to the fight against malnutrition in a country where more than half of children under five do not get enough to eat.
The company’s product is a yoghurt, Shokti Doi, which is enriched with nutrients and targeted at children, with colourful packaging and a price of five Bangladeshi taka (about 5p). The yoghurt is made from local ingredients and contains enough vitamin A, iron, zinc and iodine to cover 30% of a child’s daily needs.
Production of the yoghurt is low-tech. Grameen Danone Foods does not use machines in its factory if workers can be taken on in their place. Grameen Bank provides micro loans to local farmers that supply the production plant, located in Bogra, northern Bangladesh. Grameen also provides start-up loans to the “Grameen Danone ladies”, who sell the yoghurts from door to door. There were more than 500 such yoghurt ladies by the end of 2009.
The production of the yoghurt is also designed to be environmentally non-damaging. The Bogra plant is heated using solar power and has a rainwater recovery system to minimise the impact on local water systems. The yoghurts are packed in biodegradable pots.
The project has been well received. It is a viable business producing a useful product, and creating sustainable employment without exploitation either of people or the environment.
But it has not been without its problems. A price increase in April 2008, in response to rising raw material costs, caused a crisis. “Consumer demand immediately collapsed … the sales ladies network disintegrated completely,” says the company. This was overcome by reinstating the previous price, but reducing the yoghurt pot size.
Since then, the company has expanded, promoting the yoghurt on television, and extending distribution to Bangladesh’s capital, Dhaka.