Survival of the Greenest: An Interview with
Ken Larson, Director, Corporate Social Responsibility, at Hewlett-Packard
by Lee H. Goldberg
By means of introduction: Hewlett-Packard has had a long-standing tradition of environmental and social responsibility, a tradition that many people feel has also contributed to the company's overall success. HP's broad vision of corporate citizenship was validated this fall when recent study, jointly prepared by Standard & Poor's and a branch of the United Nations Environment Program, cited the company as having one of 50 of the best sustainability and environmental reports selected from a field of over 350. But while it might be easy to dismiss such an achievement as a simple public relations exercise, it turns out that there is increasing evidence that sustainability issues are becoming a strategic element of the business equation as global environmental regulations become tighter and natural resources become increasingly scarce.
A November 15, 2004 editorial in the green-techZONE noted that being a good global citizen also appeared to be good for business since HP, and most of the report's other "Top 50" companies also enjoy coveted "investment grade" credit ratings. While the report is hesitant to suggest a direct connection between corporate ethics and long-term profitability, it does note that "it is striking that enhanced transparency and disclosure via sustainability reporting is so clearly linked to companies that display strong levels of credit quality, a widely-recognized indicator of operating and financial stability."
With this in mind, we contacted Ken Larson, Director, Corporate Social Responsibility, at Hewlett-Packard to get his perspective on the results of the UNEP survey and on the state of the business world's relationship with society, and the environment. (Larson's responses to our questions appear in italics.)
analogZONE: Do the rankings in the UNEP/S&P survey reflect a company's actual sustainability performance or just the quality of the reporting process?
The survey assessed how well participating companies addressed the relationship between key environmental and social risks and the bottom-line. That being said, I believe the rankings are not only a reflection of the quality of a company's reporting related to such factors, but also its sustainability performance.
analogZONE: Why would a company be concerned about things that have been considered "externalities" until now?
For one thing, because our customers demand it: we had more than $5 billion in business tied to our citizenship performance in 2004, up nearly 100% from 2003. That's only counting the customer enquiries and RFPs we tracked, which is only a fraction of the actual. Our customers want to work with a company that they can trust, one that operates ethically and in a sustainable manner. Increasingly, investors are considering non-financial factors such as social and environmental performance, in their investment decisions. 52% of fund managers and analysts believe that these performance metrics will have significant impact on mainstream investment decisions over the next three years.
analogZONE: The Standard & Poor's study exemplifies a growing sense in the business community that good non-financial accounting is a useful indicator of a company's long-term performance. Are there any specific reasons that you, or HP, feel that this may be true? Will these issues eventually affect a company's access to investment capital?
Absolutely. HP has always recognized the value of corporate social responsibility as an element of our overall business strategy -- and with good reason. A CSR Europe study found that eight out of ten fund managers and analysts believe the management of social and environmental risks has a positive impact on a company's long-term market value. In addition, leading socially-responsible investment (SRI) companies outperformed other S&P 500 companies in 1-, 3-, and 5-year returns. Our engagement with SRI funds is a proactive effort to identify trends, obtain invaluable independent evaluation of our citizenship issues, and ultimately gain new investors. Leading investment analysts believe that companies that address these issues maintain a lower risk profile, which clearly factors into our ability to access capital.
analogZONE: It's pretty well-known that HP has a long record of commitment to environmental issues and sustainable practices. Less understood is why and how the company adopted them. How did things start, and how have these practices evolved over time?
HP has always been deeply committed to global citizenship. In fact, we identified it as a corporate objective, one of only 7 alongside others such as profit and market leadership, for example, in 1957. At the core of our global citizenship commitment is a devotion to ethics and community engagement. Global citizenship at HP encompasses a wide range of issues, but environmental stewardship is a priority. This has been demonstrated time and again through programs such as our internal product recycling initiative introduced in 1987, and efforts to reduce energy consumption at our facilities. Five years later, we extended our product recycling program to customers and introduced Design for Environment (DfE) to address the impact HP products have on the environment. Another milestone includes the opening of our first US recycling facility in 1997, making HP the only computer manufacturer to manage its own recycling operations in the US. This milestone was followed by the establishment of our Supply Chain Social and Environmental Responsibility (SER) Policy in 2002 through which all HP suppliers are required to conduct worldwide operations in a socially- and environmentally-responsible manner and, most recently, the introduction of a global recycling goal in 2004: to recycle 1 billion pounds of computer-related equipment globally by 2007.
analogZONE: If non-financial reporting becomes a standard business practice, what sort of impacts do you expect to see it make on the way companies are run? On society? On the environment?
Increasing transparency will result in greater accountability. This accountability will require companies to concretely address the impact of their operations, products and services on communities and the environment. We feel leading firms, like HP, have been committed to addressing these impacts and will continue to do so. The impact of more companies seriously addressing these issues could have a major positive impact on society and the health of our environment.
Editor's Note: In addition to the interview, Mr. Larson provided the following links which detail Hewlett Packard's environmental and social efforts.