Special Feature - ICTI ethical toy program

Cost-effective Solutions to Power Start your ESG Performance

Sarah Ng of the ICTI Ethical Toy Program shares how companies can successfully communicate their ESG story, highlighting specific services which can help those at the start of their ESG journey, or those who want to make further progress.

Background

Businesses are facing increasing regulatory, investor and consumer pressure to measure, report and improve their ESG (Environmental, Social and Corporate Governance) performance, while executives are looking for ways to kickstart their ESG journey with confidence. For many of us, ESG reporting seems daunting - but it doesn’t have to be. What’s more, it can be very valuable.

Problem

Did you know 40% of UK manufacturers are operating without a sustainability policy? In a recent survey, 95% of respondents said they were planning to introduce one by summer 2022 (Presmedia). On a broader scale, a survey conducted by KPMG found that 80% of companies worldwide now report on sustainability. This trend indicates a likely surge in ESG Reporting.

In addition, multiple studies have proven that a company’s non-financial ESG performance can directly correlate with its profitability and the growth potential of the business. ESG reporting indicates whether an organisation has the capability and the management systems in place to identify and manage its regulatory, reputational and organisational risks successfully.

The ICTI Ethical Toy Program (IETP) constantly engages with the toy industry to understand its needs and is supporting programme members to develop their capability regarding ESG reporting. Using insights gained from our work, we’d like to share our experiences of how companies can successfully and confidently communicate their ESG story. This article will also introduce specific services which are helping companies at the very start of their ESG journey, or who want to make further progress.

Toy brands, retailers, vendors and manufacturers are all seeking effective solutions that are not bound by their borders: in other words, solutions that work in all countries and regions where their business activities and partners are present. Technology solutions that enable user-friendly and interactive data collection, and that streamline workflows and processes, are required. Using such technology lowers operational costs and reduces resource requirements, enabling a company’s people to focus on product development, marketing and sales.

Digitising data collection can optimise the gathering of specific information, helping to drive ESG reporting forward. For example, closed questions which offer a distinct set of pre-defined responses help ensure data quality for more accurate insights. Open questions can help provide more qualitative data. For data to be tangibly useful, you need to know what data to collect and then be able to collect it efficiently.

Furthermore, with the unpredictable spectrum of Covid-19 outcomes and circumstances, a digital platform which can be deployed at scale cost efficiently, and is accessible anytime and anywhere, is of great value.

Flexibility of choice reduces duplication, allowing both independent and integrated reporting

Confusion is one of the common issues shared between businesses at the beginning of their ESG reporting journeys, which can impact investors looking to include ESG goals (e.g.: carbon emissions, forced labour, business ethics and more) in their portfolios.

For example, larger companies in Europe are required to disclose information on how they operate and manage social and environmental challenges. The stock exchanges in many countries also require such disclosure from listed companies. However, there is no standardised format for the required report, so the focus and topics contained within vary dramatically between companies and reports. This variation makes it difficult to compare and assess companies accurately.

Data and insights that have had independent validation are therefore valued. They can be adapted for various reporting formats avoiding duplication of effort, and additional cost. Collaboration is key - by working together, more can be achieved, and transparency increased.

Map a path for improvement

Understandably, businesses are nervous about uncovering risks that may hide beneath the sustainability iceberg, but it is important to remember: “You can’t improve what you don’t measure”. When becoming more responsible for its environmental and social impacts, the first step for a company is to understand what it is already doing. From there, it can develop a roadmap for improvement. Apart from measuring its direct impacts and improvements, it should also consider the different tiers within its supply chain and seek to achieve the required transparency. Technology can help here. Companies are often nervous about their ability to manage issues in their supply chain, but support is available to make it possible for all, no matter their size or budget. A company’s customers expect it to know who it does business with and will hold it to account. IETP is the only specialist toy industry programme that helps companies create their plans and deliver them. We provide the necessary training and support to enable them to reduce the risk of disruptive issues, saving them time, money and resources in the process.

Cost-effective and time-efficient solutions

IETP has developed a range of solutions for businesses of all sizes and sectors looking to kickstart their ESG

1) For the “E” - Environmental Questionnaire Back in the 1990s, there were around 70 different Codes of Conduct ethical toy manufacturing, making it very difficult for toy factories to comply with the varying standards of all their customers. This created significant duplication of effort and increasing costs, which is why an industry-wide ethical manufacturing standard - The ICTI Ethical Toy Program - was called-for.

The toy industry and other sectors are now facing a similar challenge with environmental data. While the demand for measuring environmental impact is high, businesses are collecting diverse data, translating figures into multiple metrics, and having to use many different platforms - duplicating effort, time, and resources for those with multiple businesses partners and customers.

With its trusted reputation, achieved through our factory social certification and assessment programmes, a demand to provide an aligned and scalable environmental questionnaire was presented to the ICTI Ethical Toy Program. Companies want a one-stop service provider for social and environmental data gathering, support in getting it right, and expertise in responding to challenges.

We have therefore created an online Environmental Questionnaire. The questionnaire has been developed with the support of a dedicated group of responsible sourcing experts representing all parts of the global toy industry and covers a range of topics such as Environmental Management Systems, Energy Usage, Water Use and more. It has been designed to enable businesses to kickstart their environmental reporting.

Through a newly created technology platform, we will also enable the collection of a uniform set of data which can be used by any company for internal and external reporting as well as to identify opportunities for further environmental improvements.

2) For the “S” - Social Impact Assessment (SIA) In 2020, we responded to industry requests and developed a new service. The Social Impact Assessment Program is a remote assessment that verifies a vendor or supplier’s ability to identify, manage and mitigate labour standards risks in their business and their supply chain. It assesses the capability of the management systems in place to manage the social impact an organisation has on people and communities as a result of its actions, activities, projects, programmes, or policies.

A company can have a positive or negative social impact - this assessment programme helps ensure it has a positive impact.

The programme is welcomed by manufacturers, agents, distributors, and licensees who tell us they have found the assessment process valuable. It offers a low cost solution for companies who want greater visibility of their partners capability and processes, for those who want to increase oversight beyond Tier 1 suppliers, and as a development and education programme for suppliers who may never before have participated in any form of labour standards programme.

The assessment process is supported with a userfriendly online portal to make self-assessment and data-driven-analytics easy. Following completion of the assessment, each participating company receives a tailored development plan, identifying areas to focus on and specific recommended actions it can take in each area to improve.

The Social Impact Assessment is a stand-alone tool, but it can also create a pathway to our factory social certification programme.

3) For the “G” – Self-Assessment Questionnaire To support good corporate governance, IETP will be delivering a new solution for global suppliers in response to the significant demand for remote monitoring and assessment. We are investing in technology designed to enable greater efficiencies and plan to launch a new online platform in early 2022.

This platform will collect policy and procedure information from factories ahead of an on-site visit, reducing the audit man-day requirement without reducing quality or transparency. This new platform will enable easy reporting, supported by documentary evidence of areas such as responsible recruitment, processes to ensure no forced or child labour, and other examples of good corporate governance. It will also capture insights directly from workers, further validating standards at the factory.

The required data will be collected via a Self- Assessment Questionnaire, completed at the supplier’s convenience prior to an unannounced on-site audit. This innovative data collection platform will be available to suppliers that have demonstrated good social performance and transparency in the factory certification programme as recognition of their genuine engagement.

IETP understands businesses need support to start their ESG journey with confidence. We provide that support through solutions that can be deployed at scale, efficiently and cost effectively. IETP is the only specialist programme created by the toy industry for the toy industry. We are the best partner to support your ESG journey.

To find out more about our services and how we can help you, get in touch at info@ ethicaltoyprogram.org or visit our website www.ethicaltoyprogram.org.