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ENVIRONMENT &
S U S TA I N A B I L I T Y S E RV I C E S

How the leaders

become leaders
The differentiating aspects of
corporate responsibility performance
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How the leaders become leaders - the differentiating
aspects of CRI performance
Validation of participant responses
to the CRI reveals basic building
blocks and differentiators of
corporate responsibility
performance. Our analysis shows
that the leaders are stepping up to
the challenge in four key areas:
identifying their material risks and
opportunities in the areas of
community, environment,
marketplace and workplace through
formal and integrated risk
management processes, engaging
with stakeholders in an interactive
dialogue, transparently disclosing
performance using structured and
consistent reporting methodologies
and subjecting their systems and
data to independent assessment by
third parties.
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C O R P O R AT E R E S P O N S I B I L I T Y
Understanding materiality is one of the most critical aspects of a successful
corporate responsibility approach. Material issues are those that can influence the
decisions and actions of stakeholders, including not only shareholders, but other
interested stakeholders such as employees, local communities in the area of
company operations, various levels of government or interested non-government
organisations. Approaches to identifying material issues that fail to involve the full
suite of stakeholders run the risk of failing to identify issues that can have a
significant impact on brand and reputation, and consequently, shareholder value.
Corporate responsibility approaches that do not clearly focus on material issues can
suffer from a lack of direction, result in inefficient targeting of company resources
and have limited impact in improving environmental and social outcomes.
Engaging with stakeholders goes hand in hand with understanding materiality. The
simplest way to understand the issues that will influence the decisions and actions of
stakeholders is to ask them what they are. Invariably, companies that actively
engage in stakeholder dialogues and invest in building long term relationships with
stakeholders report the value of receiving unique perspectives on business activities
and the consequent identification of business opportunities that may have otherwise
remained unidentified.
Once material issues are understood, there is often a flow-on effect to improved
reporting practices. A good understanding of material issues tends to lead to clear
objectives being set in these areas, followed by the development of key performance
indicators and the setting of targets to drive action. When this framework operates
well, and when there is top level commitment to transparency, the company has a
clear structure for reporting outcomes.
Finally, as companies realise the bottom-line value being gained from their
corporate responsibility approach, they are increasingly seeking independent
assessments of their systems to identify areas for improvement. In addition, they are
also realising the value of third party assurance in providing stakeholders confidence
in reported information that is of importance to them.
Used to its full potential, the CRI provides companies with a robust framework for
advancing their corporate responsibility approach. It identifies the key pieces of the
puzzle that, when in place, will result in a culture where corporate responsibility is
integrated within business practice. Companies that are willing to make this long
term investment in building a robust approach to corporate responsibility are likely
to achieve the benefits being reported by the leaders, such as improved brand and
reputation value (and consequent shareholder value), attraction and retention of staff
and improved access to capital.
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CRI Section Basic Building Blocks
Strategy ■ Corporate responsibility related
values, principles and policies.
■ Transparent public reporting of CR
values, principles and policies.
■ Top level (Senior Executive/Board)
commitment to CR within the
company.
Integration ■ Clearly defined procedures and
behaviours in relation to business
conduct that are communicated and
upheld through active monitoring.
■ Direct responsibilities allocated for
CR issues, with inclusion of CR
issues in performance appraisals and
links to remuneration.
■ Training and briefing sessions held
on CR issues, at all levels within the
company.
■ Public reporting based on
descriptive summaries of key issues.
Management ■ Strategies in place for managing key
community, environment,
workplace and marketplace risks.
■ Formal OH&S and environmental
management systems in place.
■ Environmental and social
stewardship of core products and
services.
■ Formal codes in place regarding
responsible selling and marketing
practices.
Performance ■ Centrally aggregated data for key
impact areas.
■ Data based on mostly verifiable
information.
■ Demonstrated management
improvement across a range of
environmental and social indicators.
Assurance ■ Established systems for collating
and reporting data, with internal
sign offs.
■ Willingness to disclose high level
feedback report in the public
domain.
Differentiators
■ Allocation of specific CR responsibilities at top level
(Senior Executive/Board).
■ Integration of CR issues into overall business risk
management processes and clear identification of material
CR risks.
■ Regular reporting of CR issues at the Board/Senior
Executive level, focused on reporting against consistent
KPIs in material risk areas.
■ Stakeholder (including staff) opinions sought on whether the
company lives up to its CR values and commitments.
■ Formal mechanisms in place to consider CR issues are
incorporated in strategic business decisions.
■ CR issues incorporated in performance appraisals of senior
management and executive and remuneration or bonuses
linked to outcomes.
■ Regular and active stakeholder engagement to obtain input
and feedback on strategic direction.
■ Transparent public reporting that:
- incorporates the methods used to identify material
risks;
- identifies the key stakeholder groups, the engagement
conducted with these groups and the outcomes of this
engagement;
- identifies performance against set targets; and
- includes an independent assurance statement that covers
completeness, materiality and responsiveness.
■ Strategies contain clear objectives, management and
performance targets for each key risk.
■ Public disclosure of strategies and targets.
■ Third party independent assessment of effectiveness of
strategy implementation.
■ Dialogue-style engagement with key stakeholders informs
appropriate management practices.
■ Formal supplier selection processes that incorporate
consideration of environmental or social performance.
■ Engagement programs with suppliers focused on improving
environmental and social impacts down the supply chain.
■ Well established KPIs that appropriately reflect performance
over time (e.g. efficiency, rather than absolute indicators).
■ Publicly reported performance targets.
■ Independent verification of data.
■ Demonstrated performance improvement across a range of
environmental and social indicators.
■ Independent assurance processes that assess the effectiveness
of data collation systems.
■ Willingness to fully disclose survey responses on request.
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Adelaide Melbourne
91 King William Street 8 Exhibition Street
Adelaide SA 5000 Melbourne VIC 3000
Tel: 08 8233 7111 Tel: 03 9288 8000
Fax: 08 8213 1775 Fax: 03 8650 7777

Brisbane Perth
1 Eagle Street 11 Mounts Bay Road
Brisbane QLD 4000 Perth WA 6000
Tel: 07 3011 3333 Tel: 08 9429 2222
Fax: 07 3011 3100 Fax: 08 9429 2436

Canberra Sydney
51 Allara Street 680 George Street
Canberra ACT 2600 Sydney NSW 2000
Tel: 02 6267 3888 Tel: 02 9248 5555
Fax: 02 6246 1500 Fax: 02 9248 5959

Gold Coast
Level 5,
12-14 Marine Parade
Southport QLD 4215
Tel: 07 5571 3000
Fax: 07 5571 3033

This article was prepared by:

Kirsty Bailey, Manager, CRI Validation, Ernst & Young
Liza Maimone, Environment and Sustainability Services National Practice Leader, Ernst & Young

For Further Information please contact:

Liza Maimone
Tel: +61 3 8650 7348
Fax: +61 3 9655 2970
Email: liza.maimone@au.ey.com

ERNST & YOUNG www.ey.com/au

© Ernst & Young Australia 2006.

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