Lesson 2 Overview

Summary

In this Lesson, our goal is to move from what may be more straightforward -- or at least semi-generally understood -- aspects of Planet from Lesson 1, and into the more esoteric. My intent in this Lesson, after showing the tremendous latitude organizations charitably extend themselves in Lesson 1, is to show you the even more amorphous People facet of sustainability. Where Planet aspects may have at least some anchor in the physical or empirical, People aspects rely on the definition and measurement of topics like worker engagement and happiness.

As we will cover in more depth in the second half of this course, it is essential in any measurement dealing with perception or emotion to pay special attention to research design and how questions are asked, as People-related aspects will deal with behaviors, perceptions, and survey results. If you have even a passing interest in the science of political polling, for example, you will very quickly see how selection bias, question design, and other factors can drastically influence outcomes. We will see how some organizations use this skew to their benefit.

In moving through this Lesson, my intent is to show you the second pillar of sustainability and all of the modern manifestations of it, but also to expose you to even more ill-defined aspects of Sustainability -- those which are made that much more malleable by the motivations of organizations.

Learning Outcomes

By the end of this lesson, you should be able to:

• discern People-centric metrics and initiatives within a Corporate Sustainability Report;
• evaluate an organization's approach to People issues through the lens of their stated Vision, Mission, and Values;
• discern strategies and tactics used in organizations with proactive approaches to People aspects;
• express how organizations engaging their workforces and communities benefit in tangible ways;
• articulate the value of the stakeholder engagement process.

Lesson Roadmap

Questions?

If you have any questions, please send them to my axj153@psu.edu [1] Faculty email. I will check daily to respond. If your question is one that is relevant to the entire class, I may respond to the entire class rather than individually.

Stakeholder Engagement

It takes two to speak the truth - one to speak and another to hear.

Institutionalized Listening

In essence, stakeholder engagement represents an organization actively seeking to engage and listen to those affected by its operations. Ideally, these discussions may have some applied structure or framework by which the groups may prepare, so that they may stay focused on the topic at hand, but should ideally be conducted without precondition. One could think of stakeholder engagement as being the model of frank, open, and honest dialogue.

While in theory, stakeholder engagement sounds quite simple, in practice, it can be difficult for an organization to be willing to pursue discussion with those who may be its most outspoken critics. In some cases, "outspoken critics" may be putting it quite gently, as those stakeholder groups may have been responsible for labor strikes, protests, negative PR, or other damage to the organization. In these cases, persuading management to engage those stakeholders who may have a history of adversarial relationships with your organization could prove even more difficult. Herein lies the importance of stakeholder engagement:

Your organization doesn't have to like it. In fact, it probably shouldn't.

In any organization, it is always easy to survey and talk to those with closer relationships with the organization, perhaps suppliers, industry groups, or lead customers. But, for the sake of both transparency and insight into potential opportunities, stakeholders "further away" from the organization, such as lost or lapsed customers, can represent a wealth of insight. Furthermore, few organizations are willing to go to this extent in research and stakeholder engagement, so the insights gleaned through these efforts may be that much more valuable.

If the organization truly seeks truth from a variety of outside perspectives, comfort is an unlikely result. Not many organizations are willing to make themselves vulnerable in this way, but the insights for both the sustainability program and potential innovations can be significant.

What are stakeholders?

As we go about the operations of our organization, stakeholders are those we affect, even into the outer rings of suppliers and into NGOs and other groups we may have little contact with.

From Krick, Forstater et al. (p.24):

Stakeholders are individuals or groups who affect, or are affected by an organisation and its activities. [(Freeman, 1984)]

There is no generic list of stakeholders for all companies, or even for a single company (these will change over time) – those who affect and are affected depends on the industry, company, geography, and the issue in question. New business strategies and changes in the business environment will often mean a new set of stakeholders. The box below highlights some of the broad groupings typically considered.

There are a number of different dimensions that you can consider when identifying stakeholders;

1. By responsibility: people to whom you have, or in the future may have, legal, financial and operational responsibilities enshrined in regulations, contracts, policies or codes of practice.
2. By influence: people who are, or in the future may be, able to influence the ability of your organisation to meet its goals – whether their actions are likely to drive or impede your performance. These can include those with informal influence and those with formal decision making power.
3. By proximity: the people that your organisation interacts with most, including internal stakeholders, those with longstanding relationships, those you depend on in your day-to-day operations, and those living next to your production sites.
4. By dependency: the people that are most dependent on your organisation, for example employees and their families, customers who are dependent on your products for their safety, livelihood, health or welfare or suppliers for whom you are a dominant customer.
5. By representation: the people that are through regulatory structures or culture/ tradition entrusted to represent other individuals; e.g. heads of a local community, trade union representatives, councillors, representatives of membership based organisations, etc.. .

The Five Stage Stakeholder Engagement Framework

Krick, Forstater et al. offer many excellent, practical resources in The Stakeholder Engagement Manual, centered around what they call the Five Stage Stakeholder Engagement Framework (p11).

Click here for a text description of the image above

The five stages of effective stakeholder engagement which come from 3 key areas: responsiveness, materiality and completeness.

• The five stages are:
  • Act, Review and Report: planning follow up activities, ensuring learning, reviewing the engagement, assuring your stakeholders,
  • Think Strategically: mapping stakeholders, identifying issues, setting strategic objectives, prioritizing,
  • Analyze & plan: reviewing progress, learning from others & identifying partners, learning about stakeholders, setting stakeholder objectives, defining margins of movement,
  • Strengthen Engagement Capacities: strengthening the ability to respond to an issue, developing internal skills, building stakeholders' capacity to engage,
  • Design the Process & Engage: Identifying the most effective engagement approach, designing the process.

Credit: Michelle Thulkanam. THE ROLE OF INTEGRATED COMMUNICATION (IC) IN STAKEHOLDER ENGAGEMENT [2]. Semantic Scholar [3]. February 1, 2014.

An Overview of the Stakeholder Engagement Tactics and Strategies

The Five Stage Stakeholder Engagement Framework may provide the intent and strategy of stakeholder engagement, but if those strategies aren't executed well in practice, the stakeholder engagement will fall short of its goals. Below, I have excerpted some key pages from Krick, Forstater, et al. to illustrate some of the tactics and checklists you could use to help guide your stakeholder engagement. Overall, it is a well-written instructional document covering a tremendous amount of practical concerns.

Stakeholder Engagement is an Important Concept on Two Fronts

A Core Mechanism of Sustainability

If transparency is a core precept of sustainability, then we can consider stakeholder engagement at the very foundation of it all. If we peel back all of the structures, reports, metrics, and missions in sustainability, what we are left with is an architecture built on stakeholder engagement. Here's why: a sustainability effort can only be as good as the stakeholder engagement upon which it is built.

There is a classic statement that holds true in many facets of both personal and organizational behavior, and that is the idea that 'it's not the original act that will get you in trouble, it's the cover up.' This is equally true of small children, public figures, politicians, and organizations. Honest, frank conversations with stakeholder groups may be extremely difficult, but will likely yield the foundational insights to improve... where ignoring stakeholder groups will only bring deeper scrutiny, more vocal criticism, and increased reputational damage. It would be overly idealistic to imagine that the types of long-term, untenable problems could be solved in the short term, but if nothing else, the organization may gain the perspective of these groups, and show that they are moving forward in best faith to become a more sustainable organization.

An Illustration

Credit: superfantastic via Creative Commons BY 2.0

Imagine a consultancy is tasked with the background research, stakeholder engagement and recommendations for the creation of a sustainability program for a European tobacco company. This firm undertakes the due diligence of creating a stakeholder list and engagement plan to interview and survey groups of stakeholders. They interview employees worldwide; tobacco co-ops and farmers, customers, retailers, supply chain partners, shareholders, and even the small union present at one of their facilities. By the time they are complete, they have an impressive battery of stakeholder interviews spanning 5 countries, and 120 stakeholders across almost 300 hours of interviews.

The tobacco company goes about prioritizing the concerns raised in the stakeholder engagement interviews, and begins its plans for the next ten years. It will audit working conditions at all of its global operations, assist the co-ops and farmers it works with to transition into water-efficient tobacco hybrids and less intensive farming practices, and begin a slew of other sustainability programs.

One problem: the stakeholder engagement chose to ignore what would be, by far, the most contentious stakeholder group: those who have suffered through a range of physical ailments from long-time tobacco use, and the families of those who have died. While these stakeholders could potentially be very hostile toward the tobacco company, they would likely be at the core of many of the most important sustainability issues facing the company.

By ignoring these groups or otherwise choosing comfort over truth, the tobacco company has essentially made itself even more of a target by publicly ignoring or otherwise minimizing those who have perhaps suffered greatly from the use of their products. Even in the modern era of cigarettes with massive warnings on every package, advertising limitations, and punitive taxes where we could consider customers to be well-apprised of the risks of smoking cigarettes, these are still essential stakeholder groups to include in any engagement effort.

A Core Mechanism of Insight, Innovation, and Research

In its purest form, stakeholder engagement is a type of ethnographic research (which we will be spending some time on later in the semester). Similarly to any ethnographic or insight research, the first goal of stakeholder engagement is not to argue, divert blame, explain circumstances, or present ideas. It is to listen and provide just enough structure and framework to the interview to keep it on topic. Even more than this, it is to listen enthusiastically, yet without bias. Ethnographic research is both a science and an art in and of itself, and we will devote a significant part of a lesson to it. We place emphasis on this tool because the stakeholder engagement effort we undertake to frame our sustainability program will also act as the foundational research for cognitive mapping and identifying potentially rich areas for innovation.

Deep stakeholder engagement efforts can be especially rich when compared to the information competitors or other organizations in your space may hold. Comparatively speaking, very few organizations have the budget or willpower to devote limited time and resources researching those who will absolutely not purchase their products. By far, the most common case is this: if a new product line is being launched and has only $50,000 for all consumer research, it will be spent researching perhaps three or four consumer segments of interest, perhaps across a few markets, or other constituencies related to selling or purchasing the product. It tends to be a tough sell for someone in an Insight or Research department to tell the Product Manager that they want to spend even a quarter (the shiny type, not the percentage) of the research budget to understand those who are not only unlikely to purchase, but who may be in polar opposition to even the idea of the product.  

In essence, part of stakeholder engagement is akin to understanding vegetarians' thoughts and feelings about their local steakhouse. While not the primary focus of the stakeholder engagement (or insight research), understanding those opposed to you can lead to some very interesting synthesis and opportunity for innovation (in the aforementioned example, if you have a group of ten thirty somethings going out for a celebration dinner, what are the chances that one (or more) of the ten is vegetarian or vegan? And how many times does this instantly eliminate a steakhouse from contention for that celebratory dinner? And what is the average check for a party of ten at a steakhouse? This is what insight and opportunity can look like.)

Workforce Training and Development

A True Story

Credit: Bridgeport milling machine (built in 1948) [5] by Darron Birgenheier [6] is licensed under CC BY-SA 2.0 DEED [7]

I'd like to take a moment to share an experience that I think frames the realities, challenges, and potential of workforce training.

I had been interviewing the owners of a family-owned, second generation machine shop located in a scenic, but somewhat downtrodden, part of Pennsylvania. Literally started in a garage by its founder, Bill Sr., it had grown into a 50 employee shop, tidily kept and loaded with modern CNC equipment, mills, and exotic alloys. Based on more than 40 years of reputation, the shop had more business than it could handle–much of it coming from major manufacturing plants on the East Coast who appreciated their attention to detail, honesty, and speed. He had a deep pride in what he had built, and loved telling people that everything you were wearing–everything in the room– had been created by something a machinist had made, be it a plastic die for molding a monitor casing or the cutters for the glass on your iPhone.

Bill Sr. was a grandfatherly figure who happened to drop in while I was talking to his son, who now managed the shop. We talked about the beginnings of the business, the failures and successes, but you could tell he was a bit reluctant to talk about something, that he was holding back a bit. So as we got further into the discussion, I asked him if there was something bothering him. He looked at his rather significant boots, and back up at me, and said, "I can't believe what's happening with the kids today." This bear of a man was visibly hurt.

He told me about his disappointment about the closure of both the metal shop at the local high school, and the local vocational technical school. He told me about trying to keep kids interested in the trades by taking days away from the shop to speak at the schools, and inviting classes to the shop. He said that when he spoke to the classes, he offered a full scholarship to Machinist School to anyone willing to raise their hand, and he guaranteed he would hire them the day after they graduated. It was not an exaggeration or a parable–it was a contract.

Not a single student raised their hand. Year after year.

He was hurt because "working with your hands" was so looked down upon these days... that college was pushed by high school counselors as the only option, even for kids who shouldn't be in college. He talked about seeing people unemployed or on drugs in the local town, and couldn't help feeling that it was a tragedy. He wanted to provide the area and its families with what he knew were stable, well-paying jobs. He gestured with his head to the gleaming, 1940s Bridgeport vertical mill in the corner of the shop. "See that? That's the machine I fed my family with for 10 years. That's the machine that built my reputation, that's the machine that started this business."

We talked a bit more, and you could tell he was getting upset and tears began to well at his eyes. I felt for him, so I wanted to change the conversation a bit. "So, out of curiosity, what would one of those Machine School graduates make that day after they graduated?"

He took a deep sighing breath. "Eighty thousand dollars. They would start at eighty."

Workforce Development and Sustainability

Workforce training and development is one of those initiatives that has yielded benefits in a range of ways: from providing a reliable, well-trained workforce for the organization (3P: Profit), to providing opportunity for advancement and stable employment for the employee (3P: People), to enriching communities by helping to provide stable employment and living wages. This is also another one of the facets of sustainability where a financial case can be clearly demonstrated, and can warm the hearts of even the most metric-driven CFOs and VPs of HR. The more specialized the skill needed by the organization, or higher the impact of losing an employee, the more workforce development and training becomes a compelling strategy for the sustainability of the organization. 

Let's examine the current realities of workforce training in America, contrast it to the workforce training development model in Europe, and then look at an example of an American workforce applying and adapting the European model to create a sustainable "win-win-win scenario" between an organization, employee, and local community.

Current Realities of the American Workforce

From the "Pathways to Prosperity Project [8]," Harvard University Graduate School of Education (Symonds et al., 2011) (emphasis is mine):

The “forgotten half” challenge has deepened with the growing importance of post-secondary education to success in the labor market. In 1973, nearly a third of the nation’s 91 million workers were high-school dropouts, while another 40 percent had not progressed beyond a high school degree. Thus, people with a high-school education or less made up 72 percent of the nation’s workforce. In an economy in which manufacturing was still dominant, it was possible for those with less education but a strong work ethic to earn a middle class wage, as 60 percent of high school graduates did. In effect, a high school diploma was a passport to the American Dream for millions of Americans.

By 2007, this picture had changed beyond recognition. While the workforce had exploded nearly 70 percent to 154 million workers, those with a high school education or less had shrunk to just 41 percent of the workforce. Put another way, while the total number of jobs in America had grown by 63 million, the number of jobs held by people with no post-secondary education had actually fallen by some 2 million jobs. Thus, over the past third of a century, all of the net job growth in America has been generated by positions that require at least some post-secondary education.

Credit: Symonds, William C., Robert Schwartz, and Ronald F. Ferguson. 2011. Pathways to prosperity: Meeting the challenge of preparing young Americans for the 21st century. Cambridge, MA: Pathways to Prosperity Project, Harvard University Graduate School of Education [9].

Workers with at least some college have ballooned to 59 percent of the workforce, from just 28 percent in 1973. Over the same period, many high school dropouts and those with no more than a high school degree have fallen out of the middle class, even as those who have been to college, and especially those with bachelor’s and advanced degrees, have moved up. The lifetime earnings gap between those with a high school education and those with a college degree is now estimated to be nearly $1 million. And the differential has been widening. In 2008, median earnings of workers with bachelor’s degrees were 65 percent higher than those of high school graduates ($55,700 vs. $33,800). Similarly, workers with associate’s degrees earned 73 percent more than those who had not completed high school ($42,000 vs. $24,300).

Going forward, these trends will only intensify. Although labor market projections, like all economic forecasts, are inherently uncertain, we are struck by the work of the Center on Education and the Workforce at Georgetown University. The Center projects that the U.S. economy will create some 47 million job openings over the 10-year period ending in 2018. Nearly two-thirds of these jobs, in the Center’s estimation, will require that workers have at least some post-secondary education. This means, of course, that even in the second decade of the 21st century, there will still be job openings for people with just a high school degree, and even for high school dropouts. But the Center projects that applicants with no more than a high school degree will fill just 36 percent of the job openings, or just half the percentage of jobs they held in the early 1970s. Even if the Center has overestimated demand for post-secondary credentials, the long-term trend is undeniable.

The message is clear: in 21st century America, education beyond high school is the passport to the American Dream. But how much and what kind of post-secondary is really needed to prosper in the new American economy?

The Georgetown Center projects that 14 million job openings—nearly half of those that will be filled by workers with post-secondary education—will go to people with an associate’s degree or occupational certificate. Many of these will be in “middle-skill” occupations such as electrician, construction manager, dental hygienist, paralegal, and police officer. While these jobs may not be as prestigious as those filled by B.A. holders, they pay a significant premium over many jobs open to those with just a high school degree. More surprisingly, they pay more than many of the jobs held by those with a bachelor’s degree. In fact, 27 percent of people with post-secondary licenses or certificates—credentials short of an associate’s degree—earn more than the average bachelor’s degree recipient.

Demand for middle-skilled professionals is exploding in the nation’s hottest industry, healthcare, which has added over half a million jobs during the Great Recession. Openings for registered nurses and health technologists—positions that typically require an associate’s degree—are expected to grow by more than 1 million by 2018. There will also be exceptionally rapid growth in such healthcare support jobs as nursing aide, home health aide, and attendant. Though such positions are still open to high school graduates, they are increasingly filled by people with some post-secondary education or a certificate. Similarly, over half of massage therapists and dental assistants now have a post-secondary certificate.

There will also be a huge number of job openings in so-called blue-collar fields like construction, manufacturing, and natural resources, though many will simply replace retiring baby boomers. These fields will provide nearly 8 million job openings, 2.7 million of which will require a post-secondary credential. In commercial construction, manufacturing, mining, installation, and repair, this kind of post-secondary education—as opposed to a B.A.—is often the ticket to a well-paying and rewarding career.

The European Apprenticeship Model

From the "Pathways to Prosperity Project," Harvard University Graduate School of Education (Symonds et al., 2011), emphasis is mine:

If you look at the U.S. secondary education system through a comparative lens, one big difference becomes immediately apparent: most advanced nations place far more emphasis on vocational education than we do. Throughout northern and central Europe especially, vocational education and training is a mainstream system, the pathway helping most young people make the transition from adolescence to productive adulthood. In Austria, Denmark, Finland, Germany, the Netherlands, Norway, and Switzerland, after grade 9 or 10 between 40 and 70 percent of young people opt for an educational program that typically combines classroom and workplace learning over the next three years. This culminates in a diploma or certificate, a “qualification,” as it’s called, with real currency in the labor market. In virtually all of these countries, vocational education also provides a pathway into tertiary education for those who choose to take it.

Upper secondary vocational education (or VET, as it is generally known) varies significantly in structure from country to country, but there are two basic models. The first, usually referred to as apprenticeship or the dual system, has students spend three or four days in paid company-organized training at the workplace, with the other day or two in related academic work in the classroom. Germany has the oldest and best-known apprenticeship system, which offers programs leading to recognized qualifications in about 350 different occupations. Switzerland also has a very highly regarded apprenticeship system. A second group of countries have opted for a model in which vocational education is mostly provided in school-based programs, although they all incorporate at least some work-based learning. These countries typically introduce students to a broad cluster of occupations (e.g., health care or IT) before narrowing the focus of training in the third year.

From a U.S. perspective perhaps the most important distinction among these countries is the age at which students are separated into different tracks. Germany and Switzerland have separate middle or lower secondary schools based largely on the school’s assessment of a student’s academic potential. This is a practice we deplore, and it is no surprise that the students in the bottom track German middle schools fare the least well in the labor market. Finland and Denmark, on the other hand, keep all students in a common, untracked comprehensive school up through grade 9 or 10, at which point students and their families, not the school, decide which kind of upper secondary education they will pursue. We believe this model makes much more sense for the U.S. to consider, but it would mean that we would have to be willing to abandon our reliance on the various forms of tracking, subtle as well as overt, that pervade much of our education system through the elementary and middle school years.

Despite their highly unattractive early tracking practices, there is much to learn from the German and Swiss apprenticeship systems. In many ways, they exemplify the new 3 “R’s” of much U.S. secondary school reform: rigor, relevance, and relationships. Thanks to high standards, those who complete a VET program have qualifications roughly equivalent to Americans who have earned a technical degree from a community college. As such, they’re prepared for more advanced studies in institutions of higher education, such as polytechnics and universities of applied science. The German federal states, which regulate education, are now working to improve access for such students.

In all of these apprenticeship systems employer organizations play a major role. They take the lead in defining occupational qualifications, providing paid apprenticeships or other work-based learning opportunities and (in collaboration with educators and trade union partners) assessing student performance and awarding certificates. In Germany, for example, they pay about half of the expenses associated with the system, contributing roughly as much as the government. Why are they willing to make such a substantial investment? Simply put, German employers believe that the best way to get a highly qualified workforce is to invest in the development of young workers, participate directly in their training and socialization at the workplace, and then hire those who have proven themselves to be productive at the end of the apprenticeship period. An added incentive is that apprentices can be hired for less than the standard wage, and terminated easily if they don’t work out. As a result, some studies suggest that the work and other benefits contributed by apprentices more than offset the costs to employers. No wonder roughly a quarter of German and Swiss employers participate in the dual system.

Strategic Advantages of Workforce Development

In creating a stable flow of reliable, highly-trained employees for itself, BMW has managed to bring a significant practice of their German plants to the US: apprenticeships. Combining the best of the American and German training models, potential employees are paid to be trained for what could be their position at BMW. During this process, BMW has access to see how a prospective employee performs and learns, and the prospective employee is able to see how they like the position and fit, as well. Importantly, with its more than 4,000 apprentices, BMW addresses a significant identified risk to its business.

From the BMW Sustainable Value Report 2013:

Despite diverse challenging economic conditions for the global automotive industry, the BMW Group was able to achieve very good results in 2013. This is mainly due to the commitment, creativity and expertise of our employees. We want to continue to make every effort to attract and keep the best people. Apart from the fixed and variable salary components, we also offer our employees a wide range of social benefits. Our employees are deployed according to their individual strengths and talents, which they can continue to develop by taking advantage of targeted, future-focused further education and training programmes.

At the same time, we still face challenges ahead. In Germany and other Western industrialised nations in particular, skilled workers will become increasingly scarce in the medium term. Demographic change is also having a considerable effect on the age structure of our workforce. It is therefore essential that we position ourselves on all relevant labour markets as an attractive employer, for all target and age groups. To achieve this we offer an attractive working environment that takes particular account of age and life phases. We constantly develop the skills of our employees to meet our high commitment to innovation.

Please watch the following 5:26 piece PBS did on BMW's apprenticeship program in its Spartansburg, SC plant:

Video: BMW plant in S.C. imports German apprenticeship program (5:26)

Working Conditions

Creating Sustainable Working Conditions Worldwide

While some of us could associate "sustainable working conditions" with compensation, benefits, diversity and the like, I would like us to focus our attention specifically on working conditions at the most basic level: workers are not beaten, they have the right to leave and quit on their own accord, and they have an expectation of safe working conditions. Basically, sustainable working conditions are to ensure that people are treated as humans regardless of where they work. Unfortunately, even in this day, this is not happening worldwide, and we do see some striking occasions of history repeating itself. In many cases, the repetition we see are some of the struggles facing workers in the United States in the 1800s-1900s being relived today in places like China and Bangladesh.

Today, with the worldwide prevalence of the internet and nearly a quarter of the world's population owning smartphones [11], poor working conditions and worker abuses are far more likely to be captured in realtime and disseminated instantly to a worldwide audience. Informed and aware consumers are also more likely to place pressure on those international companies operating in these countries to improve working conditions, and, as a result, many of the sustainability efforts of garment and electronics companies with offshore operations place heavy emphasis on working conditions in their supply chains. As we will see in the specific case of Nike, the reputational damage is swift in action and lasting in impact.

Working Conditions: History Repeating Itself

1911: New York City, USA

Credit: Crowds gather to mourn Triangle fire victims the day after the tragedy, March 26, 1911 [12] by Kheel Center [13] is licensed under CC BY 2.0 DEED [14]

From PBS [15]:

It was the deadliest workplace accident in New York City's history. On March 25th, 1911, a deadly fire broke out in the Triangle Shirtwaist Factory in New York's Greenwich Village. The blaze ripped through the congested loft as petrified workers–mostly young immigrant women–desperately tried to make their way downstairs. By the time the fire burned itself out, 146 people were dead. All but 17 of the dead were women and nearly half were teenagers.

The workers in the Triangle Shirtwaist Factory were among the hundreds of thousands of New Yorkers who toiled in the city's garment factories at the time. They came from countries such as Italy and Russia in search of a better future, and all around them they saw the riches promised by the American Dream. New York was in its Gilded Age and the Triangle Shirtwaist Factory was not too far from the limestone mansions of millionaires and the elegant shops of the famed Ladies Mile. Two men who had achieved the dream were the wealthy owners of the thriving Triangle factory. Isaac Harris and Max Blanck, immigrants who had arrived from Russia only 20 years earlier, had become known as New York's "Shirtwaist Kings," and each owned fully staffed brownstones on Manhattan's Upper West Side.

[...]

When a tossed match or lit cigarette ignited a fire on the eighth floor of the building, flames spread quickly. Blanck and Harris received warning by phone and escaped, but the 240 workers on the ninth floor continued stitching, oblivious to the flames gathering force on the floor below. When they finally did see the smoke, the women panicked. Some rushed toward the open stairwell, but columns of flames already blocked their path.

A few workers managed to cram onto the elevator while others ran down an inadequate fire escape, which crumbled under the weight, crashing to the ground almost 100 feet below. The only remaining exit was a door that had been locked to prevent theft. The key was tucked into the pocket of the foreman, who listened to the women's cries for help from the street. Hundreds of horrified onlookers arrived just in time to see young men and women jumping from the windows, framed by flames.

In the days that followed, a temporary morgue near the East River was set up for families to identify the bodies of their loved ones. Nearly 400,000 New Yorkers filled city streets to pay tribute to the victims and raise money to support their families. The ensuing public outrage forced government action. Within three years, more than 36 new state laws had passed regulating fire safety and the quality of workplace conditions. The landmark legislation gave New Yorkers the most comprehensive workplace safety laws in the country and became a model for the nation.

2013: Savar, Bangladesh

Credit: Alamy [16]. April 26, 2017.

From Manik and Yardley, 2013 [17]:

A building housing several factories making clothing for European and American consumers collapsed into a deadly heap on Wednesday, only five months after a horrific fire at a similar facility prompted leading multinational brands to pledge to work to improve safety in the country’s booming but poorly regulated garment industry.

By early Thursday, the Bangladeshi news media reported that at least 142 people died in the rubble of Rana Plaza, a building in Savar, an industrial suburb of Dhaka, the capital. Police officials put the death toll at 134, with more than 1,000 of 2,500 workers injured, many of them still trapped. Soldiers, paramilitary police officers, firefighters and other citizens clawed through the wreckage, searching for survivors and bodies.

Brig. Gen. Ali Ahmed Khan, head of the National Fire Service, said that an initial investigation found that the Rana Plaza building violated codes, with the four upper floors having been constructed illegally without permits.

“There was a structural fault as well,” General Khan added, noting that the building’s foundation was substandard.

The collapse followed a fire in November that killed 112 workers making shorts and sweaters for export and that led importers, including Walmart, to vow to do more to ensure the safety of factories where goods they sell are manufactured. The building collapse on Wednesday quickly revived questions about the commitment of local factory owners, Bangladeshi officials and global brands to provide safe working conditions.

The Bangladeshi news media reported that inspection teams had discovered cracks in the structure of Rana Plaza on Tuesday. Shops and a bank branch on the lower floors immediately closed. But the owners of the garment factories on the upper floors ordered employees to work on Wednesday, despite the safety risks.

Labor activists combed the wreckage on Wednesday afternoon and discovered labels and production records suggesting that the factories were producing garments for major European and American brands. Labels were discovered for the Spanish brand Mango, and for the low-cost British chain Primark.

Activists said the factories also had produced clothing for Walmart, the Dutch retailer C & A, Benetton and Cato Fashions, according to customs records, factory Web sites and documents discovered in the collapsed building.

[...]

“The front-line responsibility is the government’s, but the real power lies with Western brands and retailers, beginning with the biggest players: Walmart, H & M, Inditex, Gap and others,” said Scott Nova, executive director of Worker Rights Consortium, a labor rights organization. “The price pressure these buyers put on factories undermines any prospect that factories will undertake the costly repairs and renovations that are necessary to make these buildings safe.

The final death toll of the Rana Plaza accident would be more than 1,100.

Offshore, But No Longer Out of Mind

In some cases, what makes countries like China and Bangladesh attractive to low-cost offshoring are the same factors which can make them dangerous for workers: few environmental regulations, little concern for worker safety, lax enforcement, and little fear of worker litigation. Regardless of if a factory in one of these countries is complying with local regulations, it is becoming more and more common for companies to hold all factories in their supply chain–domestic or foreign–responsible to meet standards which may be far more stringent than any local law. The reason for these stringent standards is that the companies with offshore production are being made painfully aware of the tremendous financial and reputational risk of being associated with "sweatshops" or factories with substandard–or deadly–working conditions. In the case of Rana Plaza, brands such as Walmart, Benetton, and The Children's Place were linked to past or current production at the factory, and the public reaction was by no means positive. [18]

Few brands want to have images of their logo and clothing tags associated with working conditions that left 1,100 dead. Needless to say, the primary and secondary reputational damage to a brand from such an occurrence could be significant.

Credit: Screenshot from video by Nathan Fitch and Ismail Ferdous on April 14, 2014.

An example of offshore facilities being held to newly stringent standards happened just after the Rana Plaza tragedy, when the Accord on Fire and Building Safety in Bangladesh [19] and other international auditing initiatives specific to the garment industry in Bangladesh were created. In the case of the Accord, signatory companies from around the world agreed to support and help share costs for what would act as a private international regulatory body working within Bangladesh. Some notable signatories include Puma, Abercrombie & Fitch, Helly Hansen, and H&M. The Accord's primary charter is to audit, inspect, and report on the working conditions of factories in order to create CAPs, or Corrective Action Plans.

To provide some scope of the current working conditions present, in one inspection of 1,326 factories [20], it found a staggering 95,293 structural, electrical, and fire hazards. In the specific case of structural failure as happened in Rana Plaza, the Accord found that "Most buildings are not constructed in accordance with the structural design drawings. In just over 10% of the factories inspected, this resulted in an immediate requirement to reduce the loads in the building, such as storage, water tanks and other weight" (Accord, p.7).

Supply Chain Auditing Becoming the Norm

With the tremendous reputational risk of being associated with "sweatshops," intensive, unannounced supply chain auditing is becoming the norm in some industries, with consumer electronics, shoe, and garment production being among the most intensive. It would also seem that the responsibility is so serious that these companies do not rely on self-reporting or even local auditing capabilities... many go to significant effort and expense to execute all international audits with dedicated staff from headquarters to ensure valid, consistent inspection without potential for bribery or conflicts of interest.

We will delve more into this topic later in this lesson, specifically in examining the GRI aspects and indicators related to working conditions. As we will see in the case of Nike, there are many opportunities for companies to make real, deep, immediate impacts to improve working conditions if they commit to action.

Compensation and Benefits

Transparency is Not Always a Choice

As turnover happens in an organization, inevitably information on salaries and benefits will become public, perhaps within the halls of the organization itself, and sometimes in more public venues via lawsuits or online salary aggregation sites like glassdoor.com [21]. There are quite a few sites online now dedicated to anonymous sharing of company and salary information, and salaries of specific positions are made public, whether the organization wants it or not.

If stepping away from our 'sustainability lens' for a moment, compensation is a fundamentally complex and emotionally charged issue. For example, if one person comes to an organization and did a better job negotiating salary and benefits, does that create an imbalance somehow, or is that just smart business? Should a company founder or CEO have their compensation evaluated differently if they personally took on the risk of funding their fledgling company with their own money? Should a private, family-owned company be held to the same executive compensation transparency standards as a NYSE-listed corporation required to disclose salaries and compensation?

Therein lies an example of the decisions and arguments of sustainability, and as we will see, sometimes our job is to find that razor-thin line of being transparent, but also protecting the interests of the organization. While beating the drum of "transparency at all costs" sounds lovely in the spirited and hypothetical chatterings of a dinner with friends, the conversation with your boss, your boss's boss, or your boss's boss's boss will likely be quite different when you tell them you want to make their, their executives, and the Board's compensation public. Your friends may be buying you dinner for a while after that.

But, as we see in many cases in sustainability-related concerns, sometimes, being transparent will not be your choice. It may be someone else's.

B Corporation Guidelines for Compensation and Benefits

While quite a few sustainability standards delve into the aspect of compensation to varying degrees of detail, B Lab (the central hub of Certified B Corporation) offers a balanced view of compensation topics to be considered in their Impact Assessment. Formed as a straightforward set of assessment items, it asks questions in clear, unambiguous terms. While some standards may offer more open language and include somewhat undefined terms like "income equality," the B Corporation Impact Assessment is clear and decisive. This can be quite helpful for organizations to take the initial steps toward transparency and disclosure, and can seem quite a bit less intimidating than standards that may allow an organization to define an item themselves.

Especially in smaller, private companies, the need to take first steps and achieve modest successes in a sustainability program can not be underestimated, and the B Corporation Guidelines are especially well suited to these types of organizations. Their Impact Assessment also captures a Pareto-like slice of aspects and indicators, allowing it to deliver the majority of a meaningful sustainability assessment of an organization using a minimum of the aspects of a more widely scoped reporting standard, such as GRI.

Below is a brief look at the "Compensation & Wages" and "Worker Benefits" sections of the B Corporation Impact Assessment, as we can use it to scope the discussion with a bit more focus as opposed to speaking in general terms.

B Corporation Impact Assessment: Compensation & Wages

Metric	Impact Assessment Question	Weighting Assigned by B Lab
	Is an hourly living wage paid to all full-time, part-time, and temporary workers and independent contractors (excluding interns)?
	What % above the living wage did your lowest-paid hourly worker receive during the last fiscal year?
	What multiple is the highest compensated individual paid (inclusive of bonus) as compared to the lowest paid full-time worker?
	By what percentage has the company's total wages (excluding executive management) increased in the last fiscal year? Total wages are wages (including bonuses) paid to all employees during the last fiscal year.
	Have you acquired or referenced a compensation survey of your industry in the past three years?
	Based on referenced compensation study, how does your company's compensation structure (excluding executive management) compare with the market?
	In the last fiscal year, the company's bonus plan represented what % of the company's salary base (when calculating, exclude executive bonuses and salaries)?
	What % of non-executive, full-time employees participated in the company's bonus plan in the last fiscal year?

Worker Benefits

Metric	Impact Assessment Question	Weighting Assigned by B Lab
	Is health insurance offered to all full-time employees and their families?
	What % of paid health insurance premiums for individual coverage do full-time workers receive?
	What % of paid health insurance premiums for family coverage do full-time workers receive?
	At what juncture do your part-time/flex-time employees qualify for full-time health care benefits?
	Is there an Employee Retirement Plan (e.g., Pension, Profit Sharing, 401(k) available for all full-time tenured workers (tenured defined as with the company for greater of 2 years or life of the company)?
	What is the minimum number of paid vacation days / sick days / personal days / holidays offered annually to full-time tenured workers?
	What is the minimum number of days of paid maternity leave offered to full-time tenured workers?
	What is the minimum number of days of paid paternity leave offered to full-time tenured workers?
	What is the severance (excluding employees terminated with cause) offered in practice and in writing to all full-time tenured workers?
	What additional benefits are offered to full-time tenured workers? [list of insurances and other benefits]

If you are interested to see what responses to a full Impact Assessment looks like, here are Method's responses to the B Lab Impact Assessment Questionnaire. [22]

An Original Innovator in Compensation: Ben & Jerry's

Ben & Jerry's was an early innovator on a variety of sustainability issues, but they were especially so on the issue of worker and executive compensation, and specifically living wages and indexing executive compensation to that of employees. It is a model which quite a few other companies have adopted over the years including Whole Foods, which we will visit later in this Lesson. While Ben & Jerry's may have innovated in compensation, we have seen that admirable compensation practice fall by the wayside as the company matured and was then purchased by Unilever. Consider the progression of compensation practices over the years, as captured below:

From "Passing the Scoop [23]," Claudia Dreifus's interview of Ben Cohen and Jerry Greenfield, as they were seeking a new CEO to succeed Ben. The New York Times, 1994:

Q: Your company used to have a salary system where the highest-paid employee made no more than five times the lowest-paid one. It's been in the press that you've increased your own salaries.

JERRY: We went from a salary ratio of 5 to 1 to 7 to 1. The top salary moved from $100,000 a year to $150,000 year. Ben and I are not at the top salary within the company. The president of the company, Chuck Lacy, is. Ben and I earn $132,500. In order to get this new C.E.O., we are not going to restrict ourselves. I expect that we will be paying compensation at the low end of market rates for a C.E.O.

From Edwards, 2011 [24], in describing compensation in the years immediately preceding Ben & Jerry's sale to Unilever:

Ben & Jerry's once, admirably, had a 5 to 1 rule limiting the pay of its CEO -- $81,000 -- to the company's lowest paid worker. It required the CEO to raise the pay of his employees to create a pay raise for himself. Ben & Jerry's abandoned that rule in 1994 when the company couldn't find anyone to replace Ben Cohen upon his retirement.

During the 1990s, the 5 to 1 rule became a 7 to 1 rule, lifting the CEO's salary to $150,000.

By 2000, the CEO's pay rose to 17 to 1, or $504,848, not including stock options.

At that point, Ben & Jerry's was acquired by Unilever (UL) and the company stopped disclosing details about its CEO's pay. The board of directors no longer discloses its compensation either, even though board chairman Jeff Dossier claims he is "dedicated to creating a more just world." The compensation of current CEO Jostein Solheim is now a secret. That's less disclosure than is offered by Ben & Jerry's larger corporate parent.

Note that the 17:1 ratio was before the sale to Unilever, and that it did not include stock options. In the case of many executives, stock options are a massive portion of compensation, and many would consider the exclusion of options to be, at best a misstep, and at worst, a designed deception.

Then, Ben and Jerry's was sold, and the founders received their just compensation for their years of risk and work:

From Edmonson, 2014 [25]:

But the company eventually grew beyond the managerial abilities of its board, and after years of struggling, they were forced to sell to Unilever, the world’s second-largest food company. Co-founder Ben Cohen walked away from the deal with $41 million, and Jerry Greenfield got $9.5 million.

Working the numbers based on the 17:1 executive compensation ratio in place in 2000 before the sale, Ben's compensation that year would have been 1380:1, and he may have also walked away with options and other evergreen clauses. In many cases as we will see, the early ideals of sustainability create the "halo effect" for a brand, but the actual practices may erode or be hidden from view over time.

In the practice of sustainability and innovation, this is an omnipresent struggle: that we not only strive to create and live out ideals in organizations, but continue to grow the ideals over time as the organization grows. Unfortunately, as we will see throughout this course, companies that lived high ideals that faded over time may be subject to more criticism than than companies that never lived out high ideals in the first place (see "The Jilted Lover Effect"). Sustainability is certainly not without risk.

As we will try to cultivate throughout our time together, we will need to set aside our personal, idealistic passion for sustainability to also be able to judge situations, decisions, and business cases through an impartial, unbiased lens. It is through those optimist/realist lenses that we will be able to see the potential, as well as the potential risks. Sometimes, we will play the "short game," and other times we must take a longer view, and it is important to be able to take detached views at times. Companies may live by their ideals, but they can also die by those ideals.

So we may see both the idealist, passionate view that Ben & Jerry's "sold out" from their original ideals, but also the realist view that for the business to remain sustainable as it grew from a two-man operation into a powerhouse brand, finding a CEO capable of taking the reigns for sub-market compensation would be very difficult. Discussion of the finer points of compensation ratios becomes a bit moot if a sub 17:1-compensated CEO were to run Ben & Jerry's into bankruptcy.

Click for text description.

Figure 11: Initial Detection of Occupational Frauds

As Figure 11 demonstrates, tips are consistently the most common detection method for cases of occupational fraud by a significant margin, which has been an observed trend since we first began tracking this data in 2002. Management review and internal audit follow tips, which was also true for the 2010 and 2012 reports.

Figure 13: Source of Tips

It is well known that employees are a valuable source of information for discovering potential fraud, and Figure 13 shows that employees were the source of almost half of all tips that led to the detection of fraud. Occupational fraud has a negative impact on an organization, including those who work for it, which might explain why employees so often step forward. At the same time, there is often a risk of backlash for whistleblowers, which might explain why a substantial amount of tips came from anonymous parties (14.6%).

The fact that more than half of all tips involved parties other than confirmed employees emphasizes the importance of cultivating tips from various sources. For example, many employers circulate a whistleblower policy or fraud hotline information to employees only, but our data indicates that it is also advantageous to educate vendors, customers, and owners/shareholders on how to report suspicions of fraud.

Figure 14: Impact of Hotlines

The presence of a reporting hotline had a substantial impact on the initial fraud detection method in the cases we analyzed. Tips were the most common detection method for organizations with and without hotlines, but the benefit was much more pronounced in organizations with them (see Figure 14).

For organizations without hotlines, the reduced detection through tips resulted in other forms of detection being more prominent. Several detection methods tend to be associated with higher median losses and increased median duration. Some of these less-effective means of detection - by accident, notification by law enforcement, and external audit - were more than twice as common in organizations without hotlines.

Credit: 2014 Report to the Nations on Occupational Fraud and Abuse. 2014 Global Fraud Study. Initial Detection of Occupational Frauds, figure 11. Source of Tips, figure 13. Impact of Hotlines, figure 14. Association of Certified Fraud Examiners. (https://www.forensicaccounting.com.au/wp-content/uploads/2015/01/2014-re... [26])

Although many of the cases in which we are interested may not necessarily be considered "fraud," it could be expected that the same reporting and whistleblowing mechanisms unearthing fraud within the organization would similarly unearth any potentially damaging issue facing the organization.

A Brief View of Organizational Practices to Facilitate Whistleblowing

Credit: From Ravishankar, 2003 [27]:

Steps for Creating a Whistleblowing Culture

Create a Policy

A policy about reporting illegal or unethical practices should include:

Formal mechanisms for reporting violations, such as hotlines and mailboxes.

Clear communications about the process of voicing concerns, such as a specific chain of command, or the identification of a specific person in the organization, such as an ombudsman or a human resources professional.

Clear communications about bans on retaliation.

In addition, a clear connection should exist between an organization's code of ethics and performance measures. For example, in the performance review process, employees can be held accountable not only for meeting their goals and objectives but also for doing so in accordance with the stated values or business standards of the company.

Get Endorsement From Top Management

Top management, starting with the CEO, should demonstrate a strong commitment to encouraging whistleblowing. This message must be communicated by line managers at all levels, who are trained continuously in creating an open-door policy regarding employee complaints.

Publicize the Organization's Commitment

To create a culture of openness and honesty, it is important that employees hear about the policy regularly. Top management should make every effort to talk about the commitment to ethical behavior in memos, newsletters, and speeches to company personnel. Publicly acknowledging and rewarding employees who pinpoint ethical issues is one way to send the message that management is serious about addressing issues before they become endemic.

Investigate and Follow Up

Managers should be required to investigate all allegations promptly and thoroughly, and report the origins and the results of the investigation to a higher authority. For example, at IBM, a long-standing open-door policy requires that any complaint received must be investigated within a certain number of hours. Inaction is the best way to create cynicism about the seriousness of an organization's ethics policy.

Assess the Organization's Internal Whistleblowing System

Find out employees' opinions about the organization's culture vis-à-vis its commitment to ethics and values. For example, Sears conducts an annual employee survey related to ethics. Some questions are: Do you believe unethical issues are tolerated here? Do you know how to report an ethical issue?

Diversity and Inclusion

Understanding Definitions and Usage in Society

As a stand-alone term as used in sustainability and in reference to organizations, what I will refer to as the more formally defined "capital-D" Diversity tends to activate entire constellations of ideas for people, many of which are arranged around concepts of race, gender, sexual orientation, age, religion, and others. The University of California, Berkeley offers forth a definition of Diversity [28], which captures the essence of most definitions of Diversity you will see across a range of organizations, from universities to NGOs to corporations:

Diversity refers to human qualities that are different from our own and those of groups to which we belong; but that are manifested in other individuals and groups. Dimensions of diversity include but are not limited to: age, ethnicity, gender, physical abilities/qualities, race, sexual orientation, educational background, geographic location, income, marital status, military experience, parental status, religious beliefs, work experience, and job classification.

Now, consider the broader, strict definition of "little-d" diversity as found in the Merriam-Webster Dictionary [29] and as we could apply to virtually any topic, from the diversity of species in a wetland to a diversity of thought:

the quality or state of having many different forms, types, ideas, etc.

We could argue that in 2015, the popular use is far more weighed toward Diversity as referred to in the Berkeley definition. Consider the Google Ngram results from more than 20 million scanned books [30] spanning more than 200 years as to the relative use of the forms of "diversity" in English-language books published in any country from 1850-2008. I have added the terms "sustainability," "African-American," "disability," and "equality" to provide some insight into the use of associated terms:

And for a measure of comparison across use in other languages, the relative use of "diversity" in books published in other languages:

We will revisit the importance of the popular use of the term, how it relates to organizational framing, and how it can relate to our sustainability efforts, in a moment.

Exploring How People Understand and Frame Diversity

Take a moment to consider the concepts of "diversity" and "risk" within an organization. If you happen to have a piece of paper around, just take thirty seconds to jot down a few ideas or concepts that you may associate with these two words. You don't need to do some profound meditative thinking, just whatever associations come to mind.

To bring a few more perspectives into the discussion, on a Saturday afternoon, I posed the following question using an online survey tool to 123 American adults representing a range of socioeconomic factors:

"If you owned a business, what would you consider the #1 risk of NOT having diversity in your organization?"

The online research is by no means meant to be a scientific poll, but instead to act as a very quick and inexpensive way to understand sentiment, space, and short verbatim responses on a given topic. Of course, as the topic becomes more specific and technical, the participant criterion becomes more finite and selection becomes more rigorous... but for open topics where we desire a volume of free associations and quick inputs, this structure can be invaluable. We will be covering research design in far greater detail as we discuss Beta testing in later lessons.

Below are the results, represented as a cognitive map. Click/drag will move you along the map, and Ctrl+mouse wheel while you are over the map will allow you to zoom in/out.

As we will also explore in later lessons, we are looking for our innovation concepts to have some level of "background resonance" from which we can build. In this case, note the high prevalence of open "little-d" diversity themes and unprompted links to organizational prosperity and innovation, while it would appear that the blue path may deal more with the negative frames for not having diversity as 'the risks of discrimination.'

When we are "pencil sketching," we can begin to see a theme that could merit further research and which can serve as the very early nucleus of a message/strategy: There are already some very rich associations and links made between diversity and innovation, even when we are asking a very open, non-directed question. If we were seeking to understand what pathways and messages on diversity we wanted to include in our sustainability mission, for example, our next step would be to delve into all of those positive associations in far more depth using other research methodologies.

How could this be of strategic interest? If we were a media company, we might want to explore how diversity can reinforce creativity, a core facet of our operation. We could use this in focusing our efforts in recruiting new talent, in reinforcing our strategic position on diversity, or in setting diversity aspects and indicators. Perhaps if we wanted to create a unique cause for our agency to support, it could be to support the importance of diversity for creativity to middle schoolers.

Sometimes, in research, like in land exploration, the goal is to understand the entire landscape so that we may even begin to understand what could be of interest. To do so, sometimes one needs to take the highest vantage point possible to provide the widest view.

Organizational Frames for Diversity

Just as we seek to understand the thoughts and frames individuals have for Diversity, we can also consider the embedded frames which influence how an organization views Diversity... and ultimately, the types of actions they may choose to take, if any. At times, Diversity is used in a superficial way within organizations and sustainability programs without consideration of the deeper, long-term and more strategic implications of diversity. As we delve more deeply into our research and analysis this semester, we will begin to understand how organizations frame this, and other aspects of sustainability, and how it can affect innovation.

Consider three potential frames or perspectives on Diversity within the organization:

Diversity As an Essential Basis of Innovation

Throughout the semester, we will explore methodologies and processes to gain insight, and ultimately, to find opportunities from which we can innovate and create. We will see that having diversity of thought and perspective on a team is a core need for innovation, and that innovation thrives when built from diversity. But, consider that this is "diversity," not "Diversity." For an organization to truly operate that third frame above, "Diversity as core strength," it must seek and embrace diversity wherever it can: diversity of experience, diversity of color, diversity of perspective, diversity of belief, diversity of sexual orientation, diversity of education, diversity of approach. (This is also a driver as to why this course is structured around cases and discussion: so that we may all benefit from the discourse and diverse viewpoints afforded by our unique experiences and personalities.)

The following is from Stephanie C. Hill, now a President at Lockheed Martin, recounting her experiences [34] as a integrated-product team leader... and a young African-American woman:

Perhaps the most important outcome of my experience as team leader was that it helped me evolve my understanding of diversity into a broader concept of inclusion. Diversity of age, gender, skin color, ethnicity, and more—the attributes of a diverse workplace that are the first to come to mind—is often visible and easy to identify and requires focus to engage and develop. The presence of diversity that you can see is often an indicator of an inclusive environment that embraces diversity of thought. A team dynamic that opens the door to inclusion will elicit ideas that spring from varied professional, educational and social experiences.

It's a truism that the best teams are greater than the sum of their parts. I believe that is only true when those parts are diverse. When everyone looks the same, acts the same and thinks the same, is it any wonder that they often fail to embrace—or even produce—innovative and unconventional ideas?

Underscoring Ms. Hill's experience is an interesting body of research by Van der Vegt and Janssen (2003) titled, "Joint Impact of Interdependence and Group Diversity on Innovation [35]" that works to underscore that it is diversity of thought, experience, and behavior–not simply demographic Diversity–which functions to help drive innovative thinking in groups. Emphasis is mine:

Third, our results showed cognitive and demographic group diversity to be significantly interrelated. This provides some initial empirical support for a “trait-approach” to group diversity in which objective demographic differences are presumed to affect interaction and performance only in so far as such diversity is directly linked to differences in such underlying attributes as knowledge, skills, values, and beliefs (McGrath et al., 1995). Nevertheless,the modest relationship between demographic and cognitive group diversity found in this research suggests that we must be careful in equating both types of group diversity. Apparently, team members’ perceptions of cognitive diversity are influenced by other factors as well. More research that examines the exact relationships between demographic and cognitive group diversity as well as the antecedents and consequences of cognitive group diversity is clearly needed. Nevertheless, although cognitive and demographic group diversity were only modestly related, they were found to have similar moderating effects on the relationship between interdependence and innovative behavior. This does suggest that it is indeed the diversity in knowledge, values, and skills, resulting from demographic differences, that potentially promotes individual innovative behavior in work teams.

An Example of Diversity Driving Innovation

OXO, the now ubiquitous housewares and utensils company, was founded by the retired Sam Farber while he watched his arthritic wife in pain as she used a metal-handled peeler. Built on the foundation of Sam's diverse experiences and age, OXO would begin with a peeler design, turn a profit in year one, and grow at a compound annual growth rate of 30%+ every year from 1991 to 2004. [36] Sam Farber would unveil the newly minted OXO Peeler at the the 1990 Gourmet Products Show [37], and would go on to sell for three times the price of the incumbent metal handled peelers found in most kitchens.

Please watch the following 5:07 video made by the design house that worked with Sam Farber, addressing the importance of real people–and "the extremes"–in design.

Video: Objectified: Smart Design OXO Good Grips Story (5:07)

"People" in the CSR

Significant Variation in Organizational Emphasis

People aspects and indicators are highly varied in CSRs worldwide, with what is probably the most variation of any of the 3Ps. Some companies have tremendous emphasis on People aspects and address not only concerns internal to the organization, but also the entire supply chain. These organizations also tend to have a very high level of stakeholder engagement, not only as an input for the creation of People aspects and indicators, but many times, as an output of the creation of those aspects and indicators. For example, if an organization annually polled and surveyed the labor union at their manufacturing sites to address an important People aspect for their sustainability program, the very act of collecting that data and engaging union members would be a significant act of stakeholder engagement.

As we will see in our exploration of Nike in our case this week, sometimes the high level of attention to People aspects may also be the result of past negative incidents. Occurrences such as episodes of major PR damage, labor strikes, or NGO investigation tend to nudge organizations to pay more attention to those aspects in the future.

At the other end of the spectrum lie some of the same companies actively chasing "the White Whale of Sustainability [39]" in regard to Planet aspects. Perhaps because of a superficial understanding of sustainability (i.e., "greenwashing") or perhaps because they wish to take a somewhat more passive approach to sustainability, these organizations will have a tendency to do one of two things with People aspects:

1. Include a few, somewhat generic aspects and indicators for employees. The scope of these efforts will tend to be as passive as possible, perhaps a short employee survey with no open-ended questions, or maybe a staged employee picture with a single statistic. We can not consider it meaningful stakeholder engagement when the effort itself is superficial, and the only stakeholder group engaged receives paychecks bearing the signature of the CEO of the organization in question.
2. Completely ignore People aspects and indicators. Typically, this is a symptom of a "greenwashed" sustainability effort.

People Aspects and Indicators in Sustainability Reporting

People Aspects and Indicators in Corporate Sustainability Reports

Employment

Employment

Aspect of Employment	GRI G4 definition	Example of the indicator as presented in CSR
New employee hires and turnover by age, gender and region	G4-LA1 Report [40]	[41] Click on image to see a larger version. Text Version of the LA1 - Total workforce by employment type, employee contract and region, broken down by gender image [42]
Benefits extended only to full-time employees	G4-LA2 Report [43]	[44] Click on image to see a larger version. Text Version of Benefits for Permanent Employees Chart [45]
Return to work and retention rates after parental leave, by gender	G4-LA3 Report [46]	[47] Click on image to see a larger version. Text Version of Return to Work and Retention Rates After Parental Leave by Gender Image [48]

Occupational Health and Safety

Occupational Health and Safety

Aspect of Occupational Health and Safety	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Percentage of total workforce represented in formal joint management-worker health and safety committees	G4-LA5 Report [49]	All production sites have a mandatory health and safety committee that covers all of the employees working on the site. Within Yara offices there are varying degrees of formal health and safety committees depending on local legislation. 33 of the 44 reporting countries have a health and safety committee in place. 8056 employees are covered by the mandate of the local health and safety committee, which, based on number of permanent employees, equals 82.5%, up from 58% in 2012.
Type of injury and rates of injury, occupational diseases, lost days, and absenteeism	G4-LA6 Report [50]	Text Version of injury and rates of injury, occupational diseases, lost days, and absenteeism table [51]

Diversity and Equal Opportunity

Diversity and Equal Opportunity

Aspect of Diversity and Equal Opportunity	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Composition of governance bodies and breakdown of employees per employee category	G4-LA12 Report [52]	[53] Click on image to view a larger version. Text Version of Ethnicity by Gender Table [54]

Equal Remuneration for Women and Men

Equal Remuneration for Women and Men

Aspect of Remuneration for Women and Men	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Ratio of basic salary and remuneration of women to men by employee category	G4-LA13 Report [55]	[56] Click on image to view a larger version. Text Version of Salary Comparison Graph [57]

Supplier Assessment for Labor Practices

Supplier Assessment for Labor Practices

Aspect of Supplier Assessment for Labor Practices	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Percentage of new suppliers that were screened using labor practices criteria	G4-LA14 Report [58]	[59] Click on image to view a larger version. Text Version IWAY Audio Data Table [60]
Significant actual and potential negative impacts for labor practices in the supply chain and actions taken	G4-LA15 Report [61]	[62] Click on image to view the larger version. Text Version of the Number of Deficiencies per Labor Standard/Management Aspect for all Audits 2012 [63]

Labor Practices Grievance Mechanisms

Labor Practices Grievance Mechanisms

Aspect of Labor Practices Grievance Mechanisms	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Number of grievances about labor practices filed, addressed, and resolved	G4-LA16 Report [64]	[65] Click on image to view a larger version. Text Version of the 2012 Worker Complaints by Major Failure Category Diagram [66]

Child Labor, Forced or Compulsory Labor, and Assessment

Child Labor, Forced or Compulsory Labor, and Assessment

Aspect Category	Aspect	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Child Labor	Organizations and suppliers identified as having significant risk for incidents of child labor, and measures taken	G4-HR5 Report [67]	[68] Click on image to view a larger version. Text Version of the Responsible Sourcing Program Graph [69]
Forced or Compulsory Labor	Operations and suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures taken	G4-HR6 Report [70]
Assessment	Total number and percentage of operations that have been subject to human rights reviews or impact assessments	G4-HR9 Report [71]

Supplier Human Rights Assessment

Supplier Human Rights Assessment

Aspect of Supplier Human Rights Assessment	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Significant actual and potential negative human rights impacts in the supply chain and actions taken	G4-HR11 Report [72]	[73] Click on image to view a larger version. Text Version of the Nike Audit Chart [74]

Local Communities

Local Communities

Aspect of Local Communities	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Percentage of operations with implemented local community engagement, impact assessments, and development programs	G4-SO1 Report [75]	[76] Click on image to view a larger version. Text Version of the Levels of Community Engagement, Impact Assessments, and Development Programs Diagram [77]

Public Policy

Public Policy

Aspect of Public Policy	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Total value of political contributions by country and recipient/beneficiary	G4-SO6 Report [78]	[79] Click on image to view a larger version. Text Version of the Target Corporate Political Contributions List [80]

Compliance

Compliance

Aspect of Compliance	GRI G4 definition	Example/Presentation of the indicator as presented in CSR
Monetary value of significant fines and total number of non-monetary sanctions for non-compliance	G4-SO8 Report [81]	[82] Click on image to view a larger version. Text Version of the Global Environmental & Safety Compliance Performance Data Summary Table [83]

Sustainability Innovation Leaders - People

For this examination of sustainability innovation leaders, we are going to examine three companies and how they can help people through social enterprise and focus on People. Think of this as an examination of three strata of People as opposed to three examples:

• Greyston Bakery - We begin by looking at People on the local scale, and how a company can actively transform a community and the lives of those within it.
• Patagonia - We continue by looking at Patagonia's approach to supply chain sustainability and how they can affect workers worldwide through sustainable sourcing and supply chain innovation.
• CyArk and Iron Mountain - We close by looking at how a unique partnership has the potential to play a role in world history for generations to come. It's also an example of how every company can have a unique slant on sustainability and how it ties to their core business.

Greyston Bakery

Please watch the following 6:55 video.

Video: Greyston Bakery | Ben & Jerry's (6:55)

The Insight

Much of the insight of the very creation of Greyston is owed to its founder Bernard Tetsugen Glassman, a former McDonnell Douglas aeronautics engineer turned Buddhist priest and Zen master. The original Greyston insight from Roshi Glassman was that a profitable venture could be used to fund a non-profit for social good, in this case, to provide housing to the homeless.

The Opportunity

To take on their mission to change lives as both an input and an output of the Greyston process, the organization takes a very practical approach: making the best brownies and cakes possible, efficiently and profitably.

Proof of their approach of conventional means to unconventional ends? Their longtime CEO, Julius Walls Jr.: "Most of our customers had zero awareness of what Greyston was. They just thought we made great cakes" (Stewart, 2003). [85]

GRI Planet Aspects

• Programs for skills management and lifelong learning [86] (G4-LA10)
• Breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity [87] (G4-LA12)
• Percentage of operations with implemented local community engagement [88] (G4-SO1)

Vision

As elegantly stated in their materials, "We don't hire people to bake brownies, we bake brownies to hire people."

From "Our History [89]": "In the 1980s, our founder, Roshi Bernie Glassman recognized that employment is the gateway out of poverty and towards self-sufficiency. In 1982, he opened Greyston Bakery, giving the hard-to-employ a new chance at life. His open-door policy offered employment opportunities regardless of education, work history or past social barriers, such as incarceration, homelessness or drug use."

Innovation

There are many innovations at play, but one is found in the combination of what may be seen as two pretty common enterprises: a 501(c)3 for economic renewal and a profitable bakery. The foundational innovation of Greyston lies in the coupling of those two enterprises and the radically simple approach to hiring: show up, get a number, and you get a job when your number is called. No questions asked.

Storytelling

Rich, authentic storytelling, as we can see from the video. Although Greyston appears to be a bit more of an ingredient brand at this point (Ben & Jerry's, private labeled cakes at restaurants), it would appear that their story may get more play publicly as their brownies and cookies are now carried through Whole Foods.

Achievement

They do a nice job at capturing some of the basic metrics of their entrepreneurial and social successes thus far: 30,000 lbs of brownies per day, 300 units of affordable housing created and funded, 2,200 Yonkers community members served, 500,000 Whole Planet brownies sold through Whole Foods (with 1% of sales going to the Whole Planet Foundation for microcredit loans), community training programs, gardens, clinics, free daycare, and more.

Structure

They have a brief, but very impactful and well-structured 2014 Annual Report. [90]

Interestingly, in service of capturing the entire story of achievement, they cite savings realized by both the County and local government because of Greyston initiatives.

The Secret

Greyston's elegance and effectiveness is in its simplicity. In essence, it is a charitable enterprise which does not rely on your charity in purchasing its products, as it asks nothing but for its baked goods to be considered against all others.

It is no wonder Greyston's founder is a Zen master.

Patagonia (Footprint Chronicles)

Please watch the following 1:40 video.

Video: The New Footprint Chronicles - Patagonia's supply chain examined (1:40)

The Insight

Elevating the sustainable supply chain, telling stories around it, and making it a core differentiator.

The Opportunity

To continue to extend Patagonia leadership in sustainable sourcing and practices, a core tenet of their brand. There is also an excellent opportunity to help justify the (sometimes significant) Patagonia price premium on every product page.

GRI Planet Aspects

• Percentage of new suppliers that were screened using labor practices criteria [58] (G4-LA14)
• Total number and percentage of operations that have been subject to human rights reviews of impact assessments [92] (G4-HR9)

Vision

Patagonia Mission Statement: "Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis."

In speaking specifically on The Footprint Chronicles, We promote fair labor practices, safe working conditions and environmental responsibility throughout the Patagonia supply chain." Also, from the video, "We wanted to make it easy and engaging for customers to learn about our products, and more about the suppliers that make them for us."

If you nest or link those three statements, it is possible to connect the tangible, customer-facing cues all the way up to the highest-level Mission of the company. This is essential to connect tactics to strategies, and we will be exploring and mapping how we can make this happen two lessons from now.

Innovation

I'd like to make something amply clear here, and a theme we will revisit throughout the course: "innovation" does not always mean that you have to create Cold Fusion or cars that run on water. Innovation can be, at times, as simple as having the willpower and vision as a company to do something others do not, can not, or will not. This program is a perfect example. Many companies with solid sustainability programs might rate or refer to suppliers anonymously, far fewer will mention suppliers by name... and then there's Patagonia, calling out the specific suppliers who are used to create the product right there on every product page.

Storytelling

Revealed in layers. Patagonia reveals the core information about the suppliers at the first level, on the product page, with a few notes about what the supplier does and why Patagonia partners with them. At the second level is The Footprint Chronicles Map [93], where they list all of their suppliers with a bit more information and talk about initiatives and standards used for suppliers. Finally, one could read their sustainability report (of sorts), Environmental and Social Initiatives [94], for the fully granular data and content.

This mechanism is effective because it does not foist massive amounts of supplier information on the valuable real estate of the product page. It instead tells a brief story, and links to a microsite/landing page delving into the topic and Patagonia's approaches.

Achievement

Patagonia addresses supply chain successes fully in its CSR, but the achievement specifically for this program is having the willpower and vision to add it to the product page. That, in and of itself, is an achievement.

Structure

Much like Greyston's Zen-like simplicity, Patagonia's structure for this initiative is as transparent and honest as it is simple: if a supplier is used for this garment, they are listed. They do not limit it to a special subset of products, or a sub-branded 'Patagonia Platinum': it's on every shirt, every pack, every wetsuit.

The Secret

It's another fantastic, yet subtle mechanism to reinforce why you pay more for Patagonia. In a world of seemingly infinite options, and with REI, EMS, Arcteryx, and other competitors a click away, constant reinforcement of brand and message is essential.

CyArk and Iron Mountain (Partnership to document world heritage sites)

Please watch the following 5:14 video.

Video: Cyark Technology & Iron Mountain (5:14)

Summary

Also, a great tour of the Iron Mountain facility [95], and some of the priceless archives it holds.

The Insight

For a company that archives important documents, objects, and data in an ultra-secure mine (Iron Mountain), there could be an excellent opportunity to partner with a non-profit working to capture something which can not be physically archived: digital versions of some of the world's most important archeological and cultural sites.

The Opportunity

To do a service to humankind while doing a service to your brand.

GRI Planet Aspects

Percentage of operations with implemented local community engagement [88] (G4-SO1) [One could consider this far more ranging than local community].

Vision

From the Iron Mountain partnership page [96]:

CHALLENGE:
Ensure the data used to document world heritage sites remains safe, secure and available for future generations.

SOLUTION:
Innovative technologies and services from Iron Mountain, Crossroads Systems and Spectra Logic.

VALUE:

Innovation

Much of the innovation is in the partnership and the fact that the various providers partnered to supply CyArk with a solution to fit their unique needs.

Storytelling

There are certainly stories to be told, and many are indeed told effectively. It does feel that given the importance of the CyArk project, some of the materials on this partnership initiative spend far too much time talking about the companies as opposed to the importance of the project, etc. This may simply be a function of the audience, but it feels there is more opportunity to tell stories.

That said, the core story of CyArk and Iron Mountain can be that of a very compelling partnership, and one tightly tied to the core missions of both companies.

Achievement

Perhaps a little weak. It appears that after the initial partnership blast, CyArk has recorded all of the achievement and progress toward its goals on its pages [97], but Iron Mountain has stepped back a bit. This may simply be the tempo of business moving onto new messages, but given the potential for telling rich stories about their sustainability partnership and core business, perhaps Iron Mountain is leaving some value behind.

Structure

This is a story-driven initiative program, and while captured in Iron Mountain's sustainability report [98], it isn't necessarily highly structured. Iron Mountain mentions a paragraph on CyArk's mission, and that is essentially the extent of it. This is Iron Mountain's first CSR, so they absolutely had other concerns on which to concentrate, but like the other facets, it would seem that there is additional value to be taken away from what they have already done with the program.

The Secret

It's hard to overestimate the halo value of Iron Mountain being able to say that they 'are entrusted with the digitized versions of the world's most important sites... for posterity.' Might make you a touch more comfortable sending them your legal documents to archive for seven years.

• Manage growing data volumes in a secure, cost-efficient manner
• Protect mankind’s cultural heritage
• Focus more time and resources on mission goals

Closing Remarks

Credit: Panoramic Supercell, Throckmorton, TX [99] by Kelly DeLay [100] is licensed under CC BY-NC 2.0 DEED [101]

A timid person is frightened before a danger, a coward during the time, and a courageous person afterward.

There is no room for timidity or passivity in approaching People aspects of sustainability. You can't purchase "negative PR offset credits" or "worker happiness credits" like you can with carbon emissions, you can't expect a consultant to come in and "fix" things as you might with a facility energy audit. The fact that you are dealing with human beings, from customers to NGOs, to employees domestically and abroad, makes this element of the 3Ps very different from Planet or Profit.

Furthermore, addressing People aspects and indicators is an exercise in fluidity, and you may find that because we are dealing with people, perceptions from completely unrelated issues can influence behavior. Have a product recall? You may see increased media scrutiny of your organization and its treatment of workers. Have a multi-year run of prosperity in the organization and experience associated stock value increases? You may find stakeholder groups which were previously friendly beginning to question executive compensation. Conversely, if you are known as a good partner in the community, you may find NGO discussions having a far more positive tone.

People aspects of sustainability are also an interesting microcosm of society, and tap into what can be some fairly polarizing topics. And, by "fairly polarizing," this does not equate to "makes for lively dinner conversation." This equates to the fact that you may be one of the people in the mix of stakeholder engagement, or talking with NGOs not at all happy with your organization or the fact that you personally make a living from an organization with which they fundamentally disagree. You could, in fact, be the lightning rod in those polarizing discussions.

But, all that said, delving into People aspects is arguably some of the most rewarding work in sustainability, and fertile territory for innovation.

From the hands-on, physically (and frankly, emotionally) exhausting effort needed for robust stakeholder engagement, to initiating community engagement, to establishing grant programs and worker training programs, these efforts are all as ambitious as they are difficult. As we will explore in later Lessons, this difficulty is many times rewarded with your organization gleaning insights which can act as a significant platform for innovation. Where competitors may be performing focus groups with placid participants paid to attend and kept happy with snack food, robust stakeholder efforts will allow us the the ability to not only "get out front" of potential issues, but also to understand rich opportunities for innovation.

Recapping, our goals through the end of this Lesson are to:

• discern People-centric aspects and initiatives within a Corporate Sustainability Report;
• evaluate an organization's approach to People issues through the lens of their stated Vision, Mission, and Values;
• discern strategies and tactics used in organizations with proactive approaches to People aspects;
• express how organizations engaging their workforces and communities benefit in tangible ways;
• articulate the value of the stakeholder engagement process.

To these ends, this week's case will focus on two of the world's most recognizable brands, both of which have suffered significant reputational damage from People issues. In Nike's case, most of the damage was suffered in the 1990s, while, it could be argued Apple continues to bear reputational damage from People issues as of the time of writing. We will discuss not only the strategies each company used to approach their respective People issues and how it relates to their stated Vision, Mission, and Values, but also the tactics which they use to execute those strategies.