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Monday, 23 October 2017

Intelligent approach

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Intel’s love affair with CSR began over ten years ago, before it became the buzzword it is now. Since then the company has applied its reputation for innovation and creativity to sustainability, and is convinced it is reaping benefits not just in enhanced reputation, but in its bottom line. Solomon Teague reports.

Intel was an early mover in corporate social responsibility (CSR), becoming the sixth company to sign up to the Global Reporting Initiative (GRI), which promotes the reporting of environmental and social performance in much the same way as companies report their accounts.

In some ways Intel was in a privileged position to do this, admits Dave Stangis, Intel’s director of CSR. Its business has not given it high exposure to the worst excesses of environmental and social malpractice that companies are now finding it pertinent to shun.

The post of director of CSR was created eight years ago, after Stangis argued for it, wrote the job description, and then interviewed for it. The firm had been hosting meetings for analysts interested in socially responsible investing since 1997, and saw that it needed to be proactive an area in which it anticipated much growth.

CSR is not all about extra financial costs to do things “the right way”. Implementing an effective CSR programme is about viewing costs on a different time horizon, said Stangis. He argued that in many instances today’s expenditure leads to tomorrow’s savings and risk mitigation. A successful programme depends on the CFO and investors understanding this.

It is therefore important to find a way to evaluate prospective CSR-driven initiatives for the benefits they will deliver. This is very difficult to achieve when looking at different types of projects. For example, comparing an energy conservation project with a water de-polluting project is much more difficult than comparing two different water de-polluting projects.

Inasmuch as they can be compared, however, the return on investment for energy conservation projects is actually comparatively low in the short term compared to many other types of project, although over the longer term the picture is different. Intel therefore separates prospective projects into types, so they can be appraised in the context of similar types of project that are expected to save money on similar time horizons.

Since 2001 it has made US$20m investments in projects excluding those in energy conservation, from which it has made savings of more than US$40m, according to Stangis.

Its next efforts will be in the water conservation area, said Stangis. While this does not currently seem like a pressing issue there is no knowing what might happen to the price of water in the future, he argued. It is consistent with the policy of trying to anticipate problems before they arise, and using resources sparingly.

The simple argument for CSR is one of public relations: it is not clear that consumers gravitate towards companies that have strong CSR practices, Stangis concedes, but they certainly punish companies that are perceived to be behind the curve in this area. Clearly consumers are also willing to pay a little more for the clear conscience that comes with association with better CSR. There is therefore an obvious cost benefit to pursuing a CSR programme, and a risk management consideration in being a laggard, said Stangis.

Investors, too, are interested in a company’s commitment to CSR. A decade ago socially responsible investing was a niche within the asset management industry, but now it has become increasingly mainstream. Investors might well factor in CSR factors to their investment decisions on the basis that poor practice is a risk – be it reputational or litigious – in the future.

The mindset that a CSR programme fosters helps the company to develop a longer term approach to business decisions of all kinds, helping employees anticipate problems before they arise, said Stangis. “Eventually it will become hard to distinguish CSR decisions from better business decisions generally.”

A company with good CSR – argue its proponents – will have employees who have learned to take the initiative and consider the implications of the decisions they take, incorporating responsibility into the decision-making process and therefore saving money in the longer term.

“We are trying to drive the idea of empowering our employees to take decisions that consider the short and long term impacts on the environment and the community of their actions,” said Stangis. At Intel this has already started to bear fruit, with cost savings being driven by individual departments as diverse as IT, modelling and purchasing.

And where once ideas were generated from the top and flowed down the chain into the company, now Stangis’ role has become more about assisting employees or departments refine or implement their own initiatives, with ideas being generated at the grass-roots level.

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