Lessons from retail royalty
With six million customers a week, British firm Kingfisher is the largest home improvement retailer in Europe as well as Asia. Tom Idle talks to the man who oversees the giant's social responsibility worldwide
In fact, only US giant chainstores Home Depot and Lowe's sit between Kingfisher and world domination in this market.
First, a few facts: Kingfisher's operating companies have 775 stores, employ 72,000 staff and sell products to ten different markets around the world. More than six million customers pass through the doors of one of Kingfisher's stores every week, helping to achieve a profit of just over half a billion pounds last year.
While Kingfisher's apparent brand deficiency doesn't seem to have caused problems for profitability, it has certainly created challenges for its director of social responsibility, Ray Baker - the man charged with creating a sustainability framework across the business. "We don't have the Kingfisher brand hanging above the doors of our operating companies," he tells me. "If you are in the UK you will recognise B&Q. In Europe, Kingfisher is known as Castorama. or Brico Depot. So, we have to work within a framework with the activity of the branding going with the operating companies and that gives us challenges with our sustainability programme."
I met up with Ray at Kingfisher's impressively shiny offices situated down the road from London's Paddington station. Like many corporate and social responsibility professionals, his background is in employee relations and personnel matters. It wasn't until around 2000 that he began concentrating on social and environmental issues, first leading B&Q's efforts and then joining the parent company in 2004 to tackle it on an international basis. "B&Q have been at the forefront since 1989," he tells me in his Bristol-lilt. "In 1989, B&Q opened two new stores that only gave jobs to the over-50s. That was very pioneering at the time."
The following year, the firm took on a person to take responsibility for the environmental issues. Interesting, as Ray tells me, this was prompted by a phone call from a journalist. "He asked how much tropical timber B&Q sold.
"The answer was, 'We don't know,' to which the journalist replied, 'Well, if you don't know, you don't care.' So, B&Q said, 'We do care, we still don't know, but we'll find out.' So that started them on their programme for primarily looking at the timber they were selling."
The 1990s social and environmental agenda of business was certainly different from what we expect today, and although all of Kingfisher's businesses have had a programme of one sort or another over the last couple of decades, it wasn't until 2001 that the group decided to look at responsibility issues across the business as a whole.
And that's where Ray came in. "I am a facilitator. I promote opportunity for sustainability within the business. I make sure we harness both the activity and the good work that goes on within our operating companies across environmental and social issues."
But despite more and more organisations on the scale of Kingfisher and its operating firms, striving to embed corporate responsibility practice into the heart of the business, I wonder how much of what Ray does actually influences the decisions being made at the very top. I'm quickly and assertively reassured that his work is "very" influential, however.
In fact, the framework Ray has developed, Steps To Responsible Growth now provides an overarching management system for the CR activity being carried out across the whole business. "It allows the operating companies to work through a series of actions - there are a total of 165 - to progress at a rate that is within their economic growth," he says.
"B&Q has been around since 1969 and had programmes in place since 1989. But Russia, China, Poland and Turkey are very much starting out on their programmes."
Steps To Responsible Growth has three levels. The first, Minimum Action requires the firm to have an action plan saying what they are going to do and how they are going to do it. The second is Policy Target, with an expectation of meeting the basic policy requirements. And the third, Leadership Position recognises those leading on debate and action. Targets are set against these three levels and each of the operating companies report bi-annually on their progress.
But while this pragmatic approach to sustainability is necessary, Ray admits that his work does need some "visionary" thinking too, and his vision of what a sustainable future might look like is an area that he is talking to the board about right now. "If we want to be a business of the future, we have to prepare ourselves for the challenges we might face in five, ten or 15 years," he tells me.
"We can see some of those challenges already - climate change, a change in demographics within the business, emerging markets, the way customers are responding to environmental issues." As a result, the governance on all decisions, policies and programmes are agreed for, with the mandate of the Kingfisher executive committee and chief executive.
Ray is currently a member of the Cambridge University Business and the Environment Programme Climate Change Leadership Group, as well as the Business In The Community Marketplace Impact Taskforce.
He is chair of both the EuroCommerce and British Retail Consortium (BRC) policy advisory groups on corporate responsibility and was a member of the European Multi Stakeholder forum on CSR.
Suffice to say, he is a very well-connected practitioner in his field - something he feels is imperative if action is to be made in environmental improvement. "The issues that face us will not be solved by any one member of the society, or any one government, or any one organisation," he argues. "The value of being part of these groups is that you have collective thinking, new ideas and different inputs.
"It's not just about these groups but how these groups connect with the wider society."
He stresses that he has to talk to the likes of Greenpeace, as they are in China on illegal timber (more of that later), he has to talk to governments to ensure the right kind of new regulation comes out, and has to talk with like-minded organisations in the retail sector, hence his involvement in EuroCommerce in Brussels with the BRC, and the European DIY Retailers Association. "If you don't, you are very isolated because issues like climate change need a lot of collective thinking."
I go on to enquire what he thinks of the current state of play when it comes to corporate responsibility. "It varies," is the short answer.
"Over the last five years, you've seen an uptake in interest in corporate responsibility," he continues. "Some of that is being driven by changes in regulation and new legislation. Some is being driven by interests that people have at certain levels. But a lot of it is being driven by the fact that it makes good business sense."
It has certainly made good business sense for the likes of B&Q, whose successful energy and water usage campaigns highlighted that its customers shared the desire to reduce their environmental impacts.
Research among consumers reveals around 80% actually want to do something to reduce their impacts but almost the same percentage actually don't know what to do about it.
And it's not just the general public that has shifted its attitudes. Trade customers visiting Screwfix Direct and Trade Depot are now asking for help and more information on sustainable products. "Things are gradually changing," says Ray.
As mentioned, six million people walk through the doors of one of Kingfisher's stores every week. That is a staggering audience of people that might be influenced in their sustainable purchasing decisions, and a massive responsibility for the likes of B&Q, I suggest. Ray accepts the point: "We have a big responsibility because we are a business that interfaces with ourselves - after all, you and I are customers too," he proffers, pointing to himself and me. "Businesses like B&Q and Castorama in France have an ideal opportunity to pass this on to their customers.
"We have to take that responsibility seriously because it's not just about providing products to customers. It's about how we source those products, what they are made of, who makes them and how they are disposed of at the end of their life."
And that's just the start of it. As Ray recalls: "If you go back in time, a shop was a shop. You bought something, you gave your money, you took it, you used it. Nobody thought much about it. But now we have to ask ourselves lots of questions."
Among those questions Ray is asking every day: What's the raw material? What forest did it come from? Is it a legal forest? Is there certification that says it's legal? Do we have a chain of custody for it? Are those people being treated fairly within that forest? How are we transporting it? What sort of carbon is being used in transporting it? What happens when the customer takes it home? What happens when they don't want to use it anymore? The whole area is a lot more complicated than it was ten or 15 years ago.
The conversation leads towards that of timber sourcing - one of the biggest challenges for Kingfisher and one of the more contentious issues for the business and its sustainability credentials.
At present, 69% of the timber sold by Kingfisher companies is from a certified source. I ask whether this figure is too low. Ray is quick to point out: "We are not saying that the other 31% is from uncertified sources. We are not saying the rest is illegal. We are saying the other is made up of timber that may be from recycled material."
Kingfisher's target is to increase this figure to 75% by 2010 - "a realistic target and we will go past that target, there's no question about that". The hurdles at the moment are availability and price, and of course the biggest challenge of all - China. But, thanks to Greenpeace, progress is being made, as Ray tells me. "Greenpeace approached us. They said, 'We've looked around your stores in China and we think some of the timber you are selling may not be from fully certified sources.' We said, 'You're probably right.'
"The challenge in China is that we only have a small part of the Chinese retail market. Most Chinese timber retail is being carried out in street markets which have no visibility whatsoever of any of the products they sell."
In the partnership, which began mid-2007, hopefully Greenpeace will play a role in engaging with governments in the Far East. And hopefully B&Q will promote sustainable timber to its customers in China and work hard to get more certified wood into the store. "Over time, we might make a difference. It's a long process and not easy."
Back in Europe, things are a little easier. Ray has been doing a lot of work talking to customers to find out their expectations of companies like B&Q and Castorama.
Of course, as you'd expect, they want quality products at the right price. But increasingly they want information and options that allow them to make the right (sustainable) purchasing decisions when it comes to home improvement.
"To give you an example," says Ray, "you might buy paints. Some paints have a low VOC [volatile organic compound] content and some have higher. But we label these for customers and invite them to make a choice. What we are saying is that, on your behalf, we are working very hard with the manufacturers to get to the point where all of the paint that we sell has low VOC content."
Elsewhere, Kingfisher is working with suppliers to create ranges of light bulbs that will be low energy because, although customers are not necessarily banging on the door asking for them, they are increasingly looking around for low energy options. "They can't do anything about it unless we do our part in pioneering that with our big manufacturers. And it's in our interests to make sure we look after our customers needs."
But it's not just the customers that must be appeased. One of the main reasons for Kingfisher's consistent measurement and verification of its responsibility actions is to keep investors and stakeholders happy in the knowledge the company is continuous improving.
Part of this involves organising roadshows to keep them up to date. "The investors are now asking different questions from what they might have asked three years ago. Back then, they were asking for facts and figures, targets and KPIs to back up the case studies we showed them. They've now moved on a stage."
At the last roadshow, investors were asking how the facts and figures were materially affecting the profit of the business. They assume the verification is done and now they want to see how sustainability is being embedded into the business.
Something that will have kept stakeholders at bay was the performance of Kingfisher in last year's Business In The Community Corporate Responsibility Index, in which they achieved the highest (Platinum) ranking). And then there is the inclusion in both the FTSE4Good and Dow Jones Sustainability indices that "request information that does force you to look very hard at what you do and how you can verify it".
Ray can be proud of what he has achieved at Kingfisher in a relatively short space of time and he seems excited by the next phase of his role which he says will adopt more of a "leadership" approach.
"Up to now, the role has been a very pragmatic, practical approach - almost a management approach to social responsibility. I've been creating a framework and understanding of what we should be doing. I think we've got that now.
"But that doesn't go away because, when I go to Russia, CSR is not a topic of conversation you will hear very often.
"So the pragmatic approach will still be there for at least the next five years anyway."
Ray's achievements can be replicated, he says, and he's keen for others to follow his lead. "Look around to see who is doing these things already and tap into their resources. My advice is: whatever you do, make it manageable," he concludes. "Make it pragmatic and real to your business."