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Ferrero: CSR – you’re spoiling us

By Alex Nichols on October 20, 2015 at 3:02pm.

Context
They’re a household name especially in the UK partly due to "The Ambassador's Party" advert in the 1980s (approx. 500k YouTube hits) which placed a mass-market product in an exclusive setting. But they’re mainly known for Nutella; say no more, except for ‘yum’. The choc industry is known for its adverts; think Milk Tray man, the saucy flake advert, the Gorilla, your last Rolo, Yorkie truckers…


So, they’re no strangers to getting a message across when they want to. Whilst Ferrero’s famous Rocher ad was entirely done in-house, they nonetheless show an aptitude for publishing a communication.
Ferrero is a giant Italian confectionery company. But it’s also a toy company, don’t forget. It is a multi-national family owned company with a turnover of 8.4bn euros, employing approx. 27,000 people. Mr Ferrero was committed to continuing in his father’s footsteps to build a lasting company that looks after its employees and the environment. May he rest in peace: Mr Ferrero died in Feb 2015.


It’s an impressive company. You get the feeling that it wants to break out of its Kinder Egg shell to reveal a bright new shiny butterfly of a report. But it’s not quite there. What is there is a fantastic depth of content, lots of data, lots of charts, plenty of CSR detail and a lot of pictures. They are GRI compliant, and very much on top of other standards that apply to their business. What it lacks overall is the communications punch. After reading the report I felt tired. Glad to have learned more about them, but ready for a break!


Their report is from 2013, covering the period 1 September 2012 to 31 August 2013. We await the new report, which will hopefully include Thorntons in it…

Content
I find that their “Four Pillars of CSR” are a little detached from (what I believe should be) their material issues. Repetitively, two of them relate to social enterprise/social affairs, and two relate to products. Time for a re-think? Or just use the content from the Value Chain graphic on p16 to re-build the pillars?
• OUR PRODUCTS
• THE FERRERO FOUNDATION
• THE FERRERO SOCIAL ENTERPRISES
• KINDER+SPORT


It’s a bit like opening a Kinder Surprise egg. You start handling the report, and looking through it, then you open it and you find some good stuff. But you have to work hard. It’s a bit fiddly. The CEO statement is a bit dense and wordy. (Not really GRI compliant either, if I am honest.)


It feels unfamiliar as a structure. For example, the chapters covering the four pillars start straight away. No preamble about ‘who we are’, sustainability context, issues, engagement, management approach etc. Bang! We’re off. That’s ok in a way but it gets a bit like wading through Nutella. I would at least expect a run-down of the material issues. (I later found them described on p99.)


So, we embark instantly, with the Product chapter! I was expecting some performance summary information to start me off. There’s some there, but it’s overwhelmed by other content.
Whilst quality is important, and should be covered in a CSR report, there’s a limit. The report is not intended to be a sales brochure (I hope), although it may be used in government relations, on toy safety for example. But it’s not clear why this lengthy content is here. I would think the ten pages of toy safety content warrants a ‘single issue’ document?


Also, much of the content on the products could be farmed out to other sections, on product & ingredients nutrition, for instance. It gets quite detailed, eg their commentary on “BMEE (Between Meals Eating Episodes)”. Why not put consumer complaints management in a separate subsection (if it’s a material issue)?


And then there’s content on taxing ingredients that should be in the Governance/Management Approach section(s). It starts to get a little confusing, lacking flow, making you want to rest with a cuppa and a Kinder. But, there’s some good solid content about ingredient quality, taste tests, lab tests, product launches, integrated manufacturing, quality management systems, audit results, some ‘latest news’ and some 2015 objectives.


The product section warms up with the discussion of how small (5g – 43g), individually wrapped portions help control a balanced diet: “The division of Ferrero’s products into portions has always been conceived and marketed in order to fit the various nutritional needs of consumers”. I can see the logic. But the science isn’t yet ready, so it feels premature to make a claim about “the metabolic neutrality and the positive role played by the Ferrero products”? They do have some objectives for 2015, “Objectives for 2015, to strengthen involvement in European and national initiatives that promote virtuous attitudes towards the food/health combination and make a “nutritional identity card” of Ferrero products about the “metabolic response”, for consumers (I think). As a parent, what would I do with a card about metabolic response though?


Then there’s the Kinder Egg and the psychology of child play. It’s a significant industrial effort – for example, “during the different design phases of the toys, the company undergoes tests with parents and children to verify the relevance of a particular toy’s idea, or refine its design”. Safety is primary of course, but also, “some toys are not allowed, e.g. magnets, tattoos[!], anti-stress squidgy toys, toy weapons and toys depicting weapons, soap bubbles, erasers”. And it’s been doing it for 40 years. As a social contribution, it’s an interesting discourse on the benefits of playing with a Kinder Surprise, until it gets hoovered up, or thrown in the (plastics recycling) bin. 
Responsible communication, food advertising and labelling are covered well, so a “DMA tick” under GRI requirements for that issue. They really know their business. For instance, in TV advertising, Ferrero’s specific compliance rates for 2013 are pretty much 100% in most countries.


Then they discuss the obesity risk and health of “economically and socially underprivileged people”. So there’s a good spread of issues covered. And, at last, they signpost to another chapter (called Kinder+Sport, after one of the 4 pillars), to save piling it all into this one.


So what about performance type info? Judging by their CSR web site (I got tired of reading the 137 page report pdf), they are doing remarkably well against their targets. Most of them appear to be achieved early and on track for success. 


As I dived back into the pdf (with heavy heart by now) I pushed on to the Foundation chapter. And whilst there is a lot of people-related content, it’s just not engaging to read. Foundation related content feels detached in some way from the sustainability risks to which the company is exposed. And there are 16 pages of Foundation content – that’s a lot. Perhaps it’s worth producing it separately from a corporate sustainability performance document?


At this point I was wondering about the materiality process, which they mention in the pdf and online. I hadn’t scanned through the 137 pages at the start of this task. I thought a company profile and approach to sustainability section might cover it, or signpost it. But then I searched and found it on p99. What struck me is that it lists issues some of which don’t really come through in the narrative.


So I joyfully jumped back into the pdf to check. Social enterprise is extremely important, and it’s crying out for experienced practitioners with embedded supply chain relationships over decades to help. Enter “Ferrero Social Enterprises”. They appears to be a well organised system to set up (a) businesses that create local economic development (real jobs) and (b) local projects on improving childcare, health and education. Performance charts emerge, such as number of jobs and local sourcing. OK, so it’s September-October as I write and the 2014 report still isn’t yet available. But when it is, there will be some very interesting updates in the FSE work, in Cameroon, for example.


And whilst they are not measuring job “quality” or educational outcomes, they have made a start with their programmes. Installing a programme with the trust and collaboration of local councils and people takes many years. They do report in previous reports on similar projects, so they’ve been doing it for years. The projects in this report are under construction. Perhaps it’s time to quantify the outcomes of the work. What is the real impact of the FSE programmes of recent years? What learning is there as a result? How does Ferrero respond?


Persevering, I meet the final chapter. I yearn for a simple approach: tell me what is the issue we’re reading about and why it’s important, what Ferrero is doing, and how does it know it’s doing a good job (DMA). I skim-read through and see “Kinder+Sport is a proactive global project focused on the promotion of active lifestyles among young generations” in bold text. Then we get a patchwork of paragraphs and uncaptioned pictures, something about “paths for change”, a ‘Decalogue’ graphic (not sure what it’s saying) and box of logos (tiny) and so on. Basically I think they’re trying to tell me that they have a clear process to promote healthy active lifestyle, and how to measure what they’re doing. Suddenly there’s a table of Global Results 2012-13! The small text and dense writing puts the reader off. Yet, the programme is impressive, with good pedigree and bold goals. It’s almost on a par with Unilever’s!


And then the realisation hit me – I have another 90 pages to go. Covering some crucial topics such as company structure, targets, governance, materiality, diversity, employee safety, agricultural sourcing, human rights, environmental impact and (again) product quality. It’s GRI heaven, marvellous work! I feel reinvigorated, but have run out of time!


All GRI ever asked for is there. And perhaps that’s why it’s ‘at the back’ of the report. They’re crucial issues being covered by a tick-box approach which was often the case in G3.1 reporting, where reporters forgot about the principles such as being governed and focused by their materiality process. So, the G4 guidance should help matters.
What is needed here then is some rationalisation. There is CSR (four pillars) and then there are sustainability topics covered later, after a company profile halfway through!


It’s as if they can’t bear to let the CSR content go, as if someone in the organisation is resistant to change. Well, if so, please: let it go! Let’s look at CSR/SD through the lens of impact on the business and the stakeholders/environment. Anything else can be placed outside of a Sustainability Report.


The Product focus and Country focus features are good content. A shame that they’re unlikely to be read by anyone. The Russian ice sculptures alone deserve a look.


Finally, we are presented with the Expo Milan 2015 that Ferrero are sponsoring and which gives them the opportunity to showcase sustainability event management practices and message. Good for them: it’s a creditable effort.

Communication
Overall they adhere to the principle of transparency well. You get everything, eventually. But what you need to know is obscured by clouds of content.


The principle of balance is possibly not being used – I saw no evidence that there are challenges in their business, but I bet there are; think of all those supply chains in sensitive commodities such as palm oil, sugar, coffee, chocolate.
The pdf report comes across as earnest, worthy but above all, heavy going. The communications feel a little schizophrenic, topsy-turvy. The website content is brief and open, bright and modern-looking. The report however feels more unsophisticated and dense, like a student report project.


The pdf report then feels like two reports clamped together, as if they’ve had to appease the person who looks after CSR projects over the years, while the sustainability person is pushing to get their material in! It all needs a big de-cluttering. Let’s focus on the key issues and sweep out the rest. Park all the extra stuff elsewhere. Eg, there is a lot of interesting historical content – but perhaps move it all into a Ferrero museum online?


On the subject of clunkiness, there are clickable links in the pdf of the report. Please make them so they open the target page in a new window or tab. I kept clicking and losing my page! Had to reload the whole thing.
The http://www.ferrerocsr.com/ site didn’t load. The http://www.ferrerosocialenterprises.com/ site loads, but it’s empty with a ‘Coming Soon’ banner across the top. I am now wondering if their programmes are stalled in some way, perhaps they’ve lost some key people internally? Running such crucial projects is challenging - if so, tell us!


Credibility
I am sometimes slightly doubtful about the transparency of family owned companies, they are often less transparent than listed companies, for obvious reasons. But the flip side is that they come from a legacy of family involvement, trust, passion and dependence, which can be a good thing. Decisions can be made on ethical issues more easily, for instance. Ferrero seems to be a good example, showing credibility and strength: “The key factors that distinguish the history and growth of the Ferrero Group are… the continuity of a family-owned business…”. 


Whilst it’s difficult to find and clarify, I believe the important information is there and credible. It’s just dense.
The targets are slightly unclear. They lead you to believe they’re on track, but then other content indicates the reverse, eg sugar sourcing online page. I am not quite sure what to believe.
Overall, they seem to take their reporting standards seriously. No complaints with the evident capacity of Ferrero to deal with these issues in their businesses.


One issue is the delayed social enterprise content online – it makes the reader think that all is not well in their camp, that the challenges of running social programmes are too great. If so, tell us. We’ll understand.
An assurance statement is there, assurance is provided by Deloitte. No external stakeholder panel is evident. Although the reporting is dense so it’s easy to miss details.

Some further points

- Make a link to the corporate site from the CSR site.
- On the Four pillars – we know what pillars look like, so no need to devote an entire page to a photograph of some (that look like they’re made out of those large concrete drainage pipe sections).
- Language & style: Use the language of sustainable development, a set of risks and opportunities affecting the value of the company and stakeholders, rather than the slightly out-dated “CSR”?
- Five languages! The CSR web page is available in 5 languages. Why? The German one loaded eventually. Took ages. The Polish one didn’t even load at all. Please explain the reason – is there a coordinated employee engagement process that I missed?
- The Code of Ethics – impressive in its length; but I would instead recommend spending the time and effort on ensuring it works at grass roots levels.
- Finally, online, the individual chapters of the report are available as downloads – but I wonder who really uses this function.


Recommendations
• Rationalise the book and the web pages – really use materiality as a process, and G4
• Restructure it: make the whole thing shorter and more succinct
• If desired, produce single issue support briefings on Quality, on Toy development, and on the Foundation.
• Write more succinctly and clearly
• Move on from the phrase “CSR”
• Caption your pictures
• Use a proof reader (for online and pdfs).

Alex Nichols runs international consulting projects for business on sustainability reporting, strategy, materiality assessment, stakeholder engagement, assurance and training. Alex is also Associate Director at Paia Consulting, Singapore, Senior Associate Consultant with IMS plc, Bristol, and a Senior Associate Consultant with Gorham & Partners mining strategy and research firm. www.alexnicholsconsulting.com   |  www.paiaconsulting.com.sg