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2012 STING Corporate Accountability Index

Mar 20, 2012 2:31:33 PM - www.ft.lk

The STING Corporate Accountability Index is an independently researched analysis of the standing of corporate Sri Lanka against a model of responsible business practices. It is published in order to encourage more companies to adopt a holistic system of corporate responsibility. The adoption of such a system and making this the usual way of operating, is key to ensuring long term sustainability of the business as it involves engaging with and understanding its most important stakeholders.

STING Consultants have formulated a systematic approach for measuring to what extent companies are aware of, and manage, their social, environmental and economic impacts – otherwise known as their triple bottom line performance.
These rankings, which are published annually, highlight those companies that are adopting a structured approach, as opposed to those that do not, and who engage purely in philanthropic giving under the guise of being a responsible business.
The areas of measurement which together form the basic ingredients required for operating through an integrated framework of responsibility are as follows:
1.Corporate values: whether the company has established a set of high-level values or principles that define the role it wants to play in society, by incorporating aspects of accountability and responsibility in its corporate statements.
2.Stakeholder engagement: whether the company is aware of its key stakeholders, and the extent to which it engages with them, as well as whether the company provides adequate response to the key issues, concerns or grievances raised by stakeholders.
3.Identifying impacts, risks and opportunities: the extent to which the company is aware of the key impacts on economic, social and environmental sustainability that occur as a result of its operations, and whether the company identifies and responds to credible risks and opportunities arising from such impacts.
4.Policy coverage: the extent to which the company has policies in place on managing environmental aspects, labour practices, human rights, and societal concerns.
5.Management and governance: whether globally recognised management systems are in place with respect to the environment, health and safety, quality, and workplace practices. This section also assesses the nature of corporate governance, and the extent to which accountability and responsibility are integrated into core governance processes of the company.
6.Measurement and disclosure: whether the company measures its performance against key sustainability related indicators, and whether a sustainability report is published, addressing its environmental, social and economic performance and impacts, as well as the quality, comparability and credibility of information within such reports.
Overview
The results of the 63 companies listed on our Index had an average score of 49.4, which although remaining within the Bronze category, has seen steady improvements over the past three years. The overall positive trend was also mirrored in the fact that the number of companies producing sustainability reports which follow a globally established structure, had increased to 24 companies, 11 of which included external assurance within their reports, confirming credibility of information reported.
While the steady upward movements portrayed by the STING Corporate Accountability Index are an encouraging indication of the state of affairs in corporate Sri Lanka, it still remains a relatively poor result given the standing the topic of corporate responsibility now commands globally. The results continued to show a less than adequate rate of development in this field. It is only a handful of companies that perform exceptionally with strong levels of commitment translating into high standards of performance. Most however remain at an average level of performance with no significant improvements over the years, whilst some are yet to even recognise the importance of this approach to managing business, and to begin embracing the principles of sustainability and corporate responsibility.
It would therefore be useful to showcase the handful of companies who have understood what corporate responsibility and accountability is all about, by presenting overviews of the top 15 companies listed on the 2012 Index.
It is our hope that others will take inspiration from this and instill responsible practices within their own operations, thereby contributing towards the sustainable development of our nation, and helping us ready ourselves for the challenges of the future.
1.Dialog Axiata
Dialog Axiata continues to perform exceptionally on the Corporate Accountability Index and retains its number 1 rank in the 2012 Index. The company portrays best in class practices in many of the assessment points covered in the STING Corporate Accountability Model.
The company engages with its key stakeholders, identifies its material impacts and addresses these accordingly thereby managing risks, measures its triple bottom line performance and discloses this publicly through sustainability reports. The Global Reporting Initiative (GRI) Guidelines are followed in Dialog’s reporting efforts together with the AA1000 Assurance Standard, while the company has also conducted a gap analysis of its sustainability management processes against the ISO26000 guidance standard on social responsibility. In addition, a core focus of the company is inclusive business, serving the bottom of the pyramid, which ensures enhancing livelihoods, contributing towards economic development and social inclusiveness, while at the same time impacting revenues and profitability.
Further, the company’s community investment activities are inherently strategic, interlinked with its core business offerings. Dialog utilised its technological knowhow, and together with stakeholder partners, launched the Disaster Emergency Warning Network (DEWN), a mass alert early warning system which uses GSM communication technologies and devises and transmits alerts through the GSM network. Dialog has also invested its technical skills in developing the Digital Bridge distance learning initiative, which aims to bridge the gap between the quality of education in urban and rural schools, through access to a satellite educational channel featuring experienced teachers
2. Aitken Spence
Aitken Spence has in place an integrated sustainability policy framework which resulted in the company maintaining the position of best in class in terms of policy coverage. This framework, through the structured and formalised policy document, provides guidance to decision makers for better integrating the relevant sustainability principles into corporate policy and strategy.
The publicly available Integrated Sustainability Policy of Aitken Spence takes a holistic view on corporate responsibility, and includes a wide range of aspects that are essential to address. These include compliance, ethical conduct, environment, community outreach, sustainable processes, governance, stakeholder engagement, quality, customer service, talent management, innovation, health and safety, human rights, information security, continuous improvement and credible reporting.
The internally circulated version of this policy is supplemented by clauses, sub clauses, and corresponding action points under each aspect, which provide the operating companies within the group with guidance for gradual implementation through a tier-based system. The company’s aim is that this policy will be a dynamic statement which will be reviewed and updated in line with changing realities on the ground, and awareness and training will be conducted where necessary, in order to facilitate its implementation.
3. Maga Engineering
Maga Engineering has in place a sustainability management framework which governs its activities. The company also adheres to the standards laid down by various international lending organisations that fund large-scale infrastructure investment projects in Sri Lanka. Maga Engineering has realised its most key impacts on sustainability as a consequence of its business operations, which are risks to health, safety, and the environment.
While stringent risk management continues to take place within the company, it has also progressed to turning some of these into opportunities. Maga has turned the risk of environmental non-compliance into an opportunity through its capabilities in green building. The green industrial plant ‘Thurulie’ of MAS Intimates was constructed with full integration of eco-friendly requirements from architectural design realisation, to energy efficiency, water usage, waste management, bio-diversity, worker well-being and sound construction methodologies. Maga provided an additional service then, by ensuring that operations within this plant would continue along a green path, as this was intrinsically ‘built-in’ at the start. Thurulie was recognised internationally as being the first ‘new-built’ factory in the world to achieve LEED Platinum status, in 2010.
4. John Keells Holdings
John Keells Holdings maintained its status of best in class in the category of Management and Governance.
Many of the Group’s subsidiaries have management processes and systems in place that are certified to globally established standards. The company is also committed to externally developed sustainability initiatives, through being a signatory to the UN Global Compact, as well as integrating the principles of the GRI into its sustainability monitoring systems.  The corporate governance framework and systems of the company meet the requirements of the Code of Best Practice on Corporate Governance, which was issued by the ICASL in 2008 and the listing rules of the CSE. In addition, the responsibility for corporate sustainability performance has been integrated into the core governance structure of the Group through a Group Sustainability Committee which ensures that sustainability issues are taken into consideration when business decisions are made. The company further ensures accountability to its stakeholders through formal open communications policies, and a whistle-blowing mechanism whereby employees can voice their concerns by direct email to the Chairman of the Board.
5. Cargills Ceylon
Cargills maximises the positive benefits created for its stakeholders, particularly within its supply chain, through its direct linkage with farmers. The company fosters a mutually beneficial relationship with its farmer suppliers, assisting them to increase their productivity thereby helping to raise their standards of living, whilst guaranteeing quality raw materials for the company. Cargills provides farmers with training on best practices in agriculture and animal husbandry, assistance through providing necessary infrastructure, establishing fair and transparent pricing policies, and by providing them with greater access to markets.  The  company realises and minimises negative impacts as far as possible including by encouraging the use and reuse  of ‘go green bags’, and through its innovative pig power project, where waste pork fat is converted into fuel used in delivery trucks.
Certified management systems are also in place to ensure social and environmental impacts are managed.
6. Hatton National Bank
HNB promotes sustainable development of the Sri Lankan economy, by developing the bottom of the pyramid. Its strategy for development banking provides finance for small and medium enterprises, and financial services to persons previously considered to be “non-bankable”. Development is thereby fostered through financial inclusiveness of these individuals.
HNB also strives towards sustainable development, by encouraging its own supply chain to implement sustainable practices, through its Green Procurement Policy. This ensures sustainability criteria are considered when evaluating suppliers prior to awarding contracts and suppliers’ environmental credentials are taken into account in the appraisal process.  HNB further promotes sustainable development through its financing of renewable energy and sustainable power generation. The bank therefore ensures that energy, a vital ingredient of development is available in a sustainable form.
7. Diesel and Motor Engineering
Beyond having implemented the foundations of corporate accountability including values statements clearly signed off by the company leadership, and policies and management systems, DIMO surpassed expectations in terms of sustainability reporting for the year under review. The company stood apart from all others, by being the only company to have attempted an Integrated Report, integrating sustainability aspects throughout the entire annual report, as opposed to the clearly separated financial and sustainability reports characterised by other reporting companies.
This is commendable as integrated reports are the future of sustainability disclosure, as global investors have realised how interconnected sustainability performance is with financial performance, and have increased demand for reports that fully reflect how companies within their investment portfolios are performing.
DIMO structured its 2010/11 report around its strategic imperatives: financial capital, customer capital, human capital, business partner capital, institutional integrity capital, community capital, and environment capital, which shows the importance placed by the company on aspects of sustainable business, and how this is integrated throughout its operations.   
8. Aitken Spence Hotel Holdings
The company adopts the Integrated Sustainability Policy of its parent company, and also places importance on the principles of the UN Global Compact, in governing its activities. The company continues to report on its practices through its own GRI-based sustainability report which covers the operations of four owned hotels each in Sri Lanka and the Maldives. This level of disclosure is rare for a company within a larger group, and is commendable.
The hotels and resorts within the Group have a long history of implementing sound social and environmental practices. Heritance Kandalama was awarded LEED Certification in 2000, long before sustainability and green building had become buzz words.
Other measures in place for managing social and environmental impacts include certified environmental and food safety management systems, waste water treatment and recycling, organic farming, and sourcing from the localities of operation thereby enhancing livelihoods and promoting economic development. The use of alternative energy is also key at Aitken Spence Hotels, through biomass gasification which was pioneered at Heritance Tea Factory. The company has also begun calculating its carbon footprint at Kandalama and is taking steps to reduce this. A strategy of offering further eco-tourism products and services is also in development.
Aitken Spence Hotels also maintains an external seal of approval of its sustainability practices through a sustainable tourism certification system.
9. Access Engineering
Access Engineering is a newcomer on the STING Corporate Accountability Index, having voluntarily submitted information for assessment. Opening oneself up for scrutiny is an encouraging sign of a company that is committed to transparency, a key component of accountable and responsible business.
The company has in place all core ingredients including detailed policy manuals for environment, health, and safety. Access Engineering has solidified its commitment to sustainable construction through gaining certification of its environmental management system against the ISO14001standard.  The company has adopted a philosophy of going green, which requires adopting and implementing an eco-friendly viewpoint in all standards, systems, processes and practices used in its construction work. Indeed, the company’s core business practices are a testament to this. Its construction design work includes sustainable practices such as reducing the usage of materials and substituting with reusable materials where possible, sourcing locally and protecting the environments in which construction work takes place, increasing the use of natural light and ventilation through its designs, and implementing rainwater harvesting for buildings.
The company constructs its temporary worker facilities on sites in an eco-friendly manner as far as possible, blending in with the surrounding environment. Steps have also been taken for using sustainable construction materials by replacing those that are polluting, not reusable and otherwise environmentally un-friendly. The company also understands the impacts on the surrounding environment in its localities of operation, and takes mitigating actions to avoid these. Felling of trees during road works is avoided as far as possible by negotiating for design changes and where felling is unavoidable, the company compensates by planting new trees along the roadside.
10. Printcare
The company has implemented the fundamentals of corporate accountability including policies which provide employees with guidance on how sustainability objectives must be met. Printcare also formulated a Green Team in order to implement an environmental management system in line with ISO14001, for which certification was gained.
A number of impact areas have been identified and dealt with by the Green Team, particularly in the realms of waste management. These include waste being sorted for recycling, food waste being given to nearby farms for use as an input material, waste materials which include inks and chemicals being appropriately disposed of, and machinery being re-designed to reduce waste through for example reducing the spillage of inks. Steps have also been taken to improve and upgrade waste water treatment facilities so all waste water discharged is safe for the surrounding environment.
Printcare has also realised the immense environmental impact created by the printing industry, through use of paper and cardboard which directly contributes to deforestation and as a result, climate change. The company therefore includes printing services using more sustainable materials, in its product offerings. Printcare’s own Annual Report for the year 2010/11, which included its first GRI-based sustainability report, was printed using soy based inks on paper produced by a Forest Stewardship Council certified mill, whilst recycled board was used for its cover.
11. CIC Holdings
As CIC operates most of its businesses in rural or semi-rural areas in Sri Lanka, the company’s strategy is to build rural economies and to improve the social standards of the rural communities in which it operates. The company’s sustainability efforts are directed towards training paddy, vegetable, herb, and poultry farmers and providing them with technical assistance, thereby ensuring they enhance their productivity and as a consequence their livelihoods, whilst at the same time guaranteeing quality raw materials for the company.  The company has in place a number of environmental and food safety certifications across its agriculture based operations, including organic certifications. The company also works towards ensuring that its industrial sector business operations occur in an environmentally sustainable manner, including through waste management, water resource management, and by introducing safer chemicals.
The company has also ventured along the path of sustainability performance monitoring and reporting. Its first GRI – based sustainability report was developed and released during the year under review.
12. Commercial Bank
Commercial Bank has understood that the greatest impact created by its operations on society and the environment, is through financing the business activities of clients, and that therefore, the most powerful way in which it can contribute towards sustainable development, is by choosing whom to invest in based on sustainable criteria, and by exerting pressure on its borrowers to improve their practices.
The bank has implemented a Social and Environmental Management System (SEMS), together with a Social and Environmental Policy, the purpose of which is to review and manage the social and environmental risks and issues associated with the bank’s investments.  Phase one of the SEMS involves carrying out rigorous social and environmental evaluation prior to approving any requests for financing, ensuring that projects are only financed when they are to be developed and operated in line with the established social and environmental standards. This integrates the SEMS with the Credit Policy of the bank. Phase two is the project review phase, which ensures that all projects are indeed being operated in line with the requirements of the SEMS. Commercial Bank has also developed special products and services that support entities that wish to implement environmentally friendly technologies, including ‘Green Loans’ where funding is provided at a concessionary rate.  
13. Asian Hotels and Properties
The company being part of the John Keells Holdings Group, has in place all policies, governance structures and management systems that are cascaded across the Group. The hotel division of the company which includes Cinnamon Grand Colombo and Cinnamon Lakeside Colombo, has in place certified environmental, food safety, and occupational health and safety standards. These hotels can also attest to their commitment towards sustainability, through Green Globe Certification, which requires that all the fundamentals of sustainable tourism business practice in the realms of sustainable management, labour and economic practice, cultural heritage, and environment, be in place.
These hotels have also taken a number of innovative steps to inculcate the concepts of environmental protection and protection of Sri Lankan cultural heritage amongst their employees, guests, and the wider community. At Cinnamon Grand, much work is done on raising awareness of cultural heritage, through the restaurant Nuga Gama, ‘the village in the city’. The restaurant serves Sri Lankan cuisine prepared by village cook women who are employed for this purpose, while retaining the indigenous traditions of our culture. The restaurant’s operations provide livelihoods for these women and maintain cultural sustainability, whilst also being a core service offering for guests, generating revenue. The livelihoods of micro-entrepreneurs, and indigenous traditions, are further promoted as rural craft families have the opportunity to develop their products and market these through the ‘kade’ at Nuga Gama.  
14. Watawala Plantations
In addition to the governing policies and sound risk management practices in place, Watawala Plantations also manages its sustainability efforts by opening itself up to external scrutiny by voluntarily endorsing associations and charters on sustainable practice relevant to its industry.
Watawala is a member of the Ethical Tea Partnership which aims to improve the lives of tea workers and ensures that tea drinkers are confident that their tea has been produced in a socially and environmentally sustainable manner.  The ETP lays down a number of standards which tea producers must comply with. Watawala can also confirm its social and ethical standards through Fair Trade Certification of a number of its plantations.  
In addition, the company recognises the critical importance placed upon organisations within the food chain in managing food (and beverage) safety risks. Watawala is on the pathway to ISO22000 certification for food safety management of a number of its estates, which is to be cascaded across all plantations. The company is also very aware of the impacts created on the natural environment as a result of agricultural practices, and has therefore taken steps to preserving its forests and plantations through agricultural best practices and environmental conservation including steps taken to avoid soil erosion, treatment of factory effluents to avoid pollution of streams, the use of natural organic compost as fertiliser, amongst others.
15. John Keells Hotels
The company has in place the necessary fundamentals in terms of policies and governance structures as a result of being part of the John Keells Holdings Group. A differentiating factor of John Keells Hotels is their commitment to sustainability through adherence to the standards of Green Globe Certification.
The Group’s properties must maintain certain standards in terms of sustainable management, as well as labour, cultural, and environmental standards, in order to maintain their certification.
These hotels have used this as a foundation and implemented a number of innovative sustainable tourism solutions catering to the growing market of ethically conscious travellers.
These include retrofitting their properties with energy efficient equipment and lighting systems, the use of alternative energy, installation of water saving features and water treatment facilities enabling recycling and reuse for purposes such as gardening and flushing. Waste sorting facilities have also been established, allowing for reusing and recycling waste materials where possible, and only biodegradable housekeeping and laundry chemicals are used, thereby causing minimal environmental damage.
Some of the group’s hotels have also set up organic vegetable gardens and farms within their premises, which are immensely beneficial as they enable fulfilling their food & beverage raw material requirements without the use of pesticides and other chemicals, they reduce the dependence on packaging that is associated with purchasing produce from elsewhere, and they are an additional source of revenue as excess organic produce can be marketed externally.