Business Respect - CSR Dispatches No 106 - 3 Dec 2006

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An email newsletter with news and discussion focusing on corporate social responsibility globally, looking at the companies in the news and the emerging issues. Linked to the website at http://www.mallenbaker.net and produced every two weeks.

In this issue, we introduce the Marketplace Responsibility Principles - launched this month by Business in the Community.

In the news:

Feature articles on the internet:

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Topics:

Want to read a hyperlinked version of this issue? You can find one on the website at http://www.mallenbaker.net/csr/nl/106.html.

Copyright 2006 Mallen Baker. All rights reserved. For information on how to subscribe, go to http://www.mallenbaker.net/csr/nl/subscribe.html

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Welcome

It still irritates slightly to see articles that criticise this thing called corporate social responsibility that take a perversely flawed premise of what the concept means just in order to knock it down. The passing of globally influential economist Milton Friedman a few weeks ago seems to have been the prompt for a rash of such pieces.

Some of them are located on websites that service the belligerent and rhetorical views of rabidly anti-CSR commentators. These are too entertaining to be annoying, and have little likelihood of having an influence beyond a very narrow circle.

Others come from more respectable places and carry an agenda. For instance, the coalition of NGOs that are coming together as a reaction to the European Commission’s insistence on a voluntary approach to CSR. The critique of these groups is that voluntary CSR does not address the core business practices of companies – it makes it too easy for CSR to be a PR smokescreen covering up bad practice.

It does reiterate one important point. If CSR is to become something long-lasting and enduring, it needs to deal with the main issues of interest and controversy over how businesses do business.

Business in the Community has just made its first stab at addressing this need by producing the Marketplace Responsibility Principles – a framework that focuses on responsibility in how businesses make their money. These are covered in more depth in this issue’s article.

Mallen Baker
mallen@mallenbaker.net

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CSR News 3 Dec 2006

European chemicals legislation moves closer

The European Parliament and EU governments have reached a deal on legislation covering the use of chemicals by business. The new law will see a shifting of the onus of proof onto businesses to prove that chemicals they use are safe.

The change will affect around 30,000 chemicals, and needs final EU assembly approval before becoming law. Once approved, the rules are expected to be phased in between now and 2018.

Companies will be required to provide lists of the chemicals they use, and to list any that constitute significant risks. Action plans to phase out use of the most dangerous chemicals need to be drawn up, although green campaigners had wanted outright bans and believed that their failure to achieve this came down to "intense lobbying" by industry.

European Commission fines companies in rubber cartel

The European Commission has fined five oil and chemical companies for fixing the price of rubber used for tyres, including Italy's Eni which received the largest fine at 272m euros.

Also hit by a large fine was Royal Dutch Shell - the size of the fine was increased for both companies because this was a repeat offence.

The offence came to light after German company Bayer informed the EC of the price-fixing, and was granted immunity from being fined itself.

Eni said that the fine was disproportionate and unjustified, and said that it was considering an appeal.

US: Tobacco case over low tar cigarettes thrown out by Supreme Court

The US Supreme Court has thrown out a damages claim of $10bn against Philip Morris for allegedly misleading people over descriptions of products as "light" cigarettes, confirming an earlier ruling by the Illinois court.

The court said that Philip Morris was not liable since the term "light" for lower tar products had been agreed by the Federal Trade Commission.

The suit had been brought against the company as a class action involving around 1.1 million smokers.

Uruguay: Controversial mill receives IFC funding after environmental all clear

The Orion paper mill, which is owned by Finnish company Botnia, is to receive $170m in funding from the International Finance Corporation (IFC) after a review gave the project a clean bill of environmental health.

The mill is located on the Uruguay River, which acts as the border between Uruguay and Argentina. The proposed site has caused protests in Argentina which insists that it will have a detrimental environmental impact on its neighbour without any compensating economic benefit.

According to the IFC, the mill would create 2,500 jobs and generate up to 2 percent of Uruguay's Gross Domestic Product. The mill will also generate enough electricity to offset 68,000 tons of carbon dioxide a year.

UK: British Airways attacked by archbishop for dress code rules

British Airways has been criticised by the Archbishop of York for its policy that bans a member of staff from wearing a christian cross above her uniform. Dr John Sentamu called the company's position "nonsense".

The company's policy dictates that any jewelry, including crosses, can be worn but must be under the uniform. Religious dress which practically cannot be concealed, such as turbans or hijabs, are exempt from the ruling.

The row attained a high profile when a British Airways check-in worker Nadia Eweida lost her appeal against the company's policy. The company said that the policy was the same for all its 34,000 uniformed staff, and that other airlines had the same policy.

US: Rupert Murdoch squashes OJ Simpson murder book

Rupert Murdoch's media companies have backtracked on plans for a controversial book and TV interview with OJ Simpson following major public outrage.

The former American football player's book, "If I Did It", describes how he would have killed his ex-wife if he had been guilty - a guilt which many of the US public still believe to be fact.

The publisher had said that it considered the book to be OJ Simpson's confession. But Mr Murdoch stepped in, accepted the view that it had been an "ill-considered project" and expressed regret for "any pain this has caused" following a wave of complaints about bad taste.

UK: Corporate killing law set to reach final stage

A new law to punish companies for negligence leading to the death of employees or customers is due to be introduced, having been including in the Queen's Speech which lays out Bills to be introduced before the British Parliament.

The Corporate Manslaughter Bill was introduced in the last parliamentary session, but is now expected to become law during the coming year.

Fierce debate had revolved around the early drafts of the Bill, which had suggested that individual directors could be held liable for deaths caused by the company. Arguments that this would provide sweeping disincentives for good executives to take board positions, especially within high risk industries, led to these provision being withdrawn. The Bill as now drafted would see unlimited fines for the company, but not personal liability for directors.

Demand for such a law has grown since a number of high profile disasters, particularly rail crashes. Current legislation theoretically provides a remedy, but proving cases has, in practice, proven almost impossible since it requires that proof be provided that a named senior person has been guilty of gross negligence.

The new law will simply require proof of serious failing of senior managers generally in the company's operations.

New Zealand: Fonterra facing investigation over Saddam Hussein bribes

Dairy company Fonterra is to face a police investigation over its relations with a Vietnamese company that has been accused of paying substantial bribes to Saddam Hussein's regime in Iraq.

The move follows initial questions a year ago over claims of kickbacks to the Iraqis over milk powder contracts, where the company was held by the Government to have been cleared of the allegations.

The company said that it stood by its previous statements of denial of any wrongdoing.

Korea: Workers would not report wrongdoings

Four out of five employees in Korea would not report colleagues wrongdoing to their manager or to company ethics departments, according to a new report by the Korea Chamber of Commerce and Industry (KCCI).

Out of 300 staff surveyed, 70 percent said they would only give personal warnings to their colleagues about bad behaviour, whilst 8 percent said that they would completely ignore the problem.

According to the KCCI, the results showed that although growing numbers of companies are creating ethics departments, the corporate culture still remains one of loyalty to friends and colleagues above keeping the rules.

Most of the survey respondents, however, suggested that since their company launched an ethics initiative, the company's working environment had substantially improved.

CSR FEATURES from the Internet

Ethics debate booted about - 3 Dec 2006 FROM The Sunday Times

In the lobby of Timberland's New Hampshire headquarters are collections of the company’s iconic yellow boots redesigned by children and charity workers across the world. Drawn on, painted over, plastered with photos — there’s one from Seattle covered in coffee beans — the boots commemorate community projects where Timberland and its staff have lent a hand.

Read full story

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The Marketplace Responsibility Principles - shifting the focus to how you make your money

Article by Mallen Baker

On December 1st, Business in the Community launched the Marketplace Responsibility Principles. This is the first framework that describes what leading businesses should aspire to in terms of responsibility in the ways that they make their money.

Yet another article in a UK newspaper (The Observer) suggested that "the majority of CSR" is a PR smokescreen behind which businesses go about their business as usual - that of making money for shareholders. Ignoring for now that the writer is clearly under the misapprehension that 'proper' CSR should somehow be contrary to, or separate from, the running of a successful business, the article does nevertheless act as yet another reminder that core business practice is now the focus.

The Marketplace Responsibility Principles have been drawn up to frame two things. The first is the question of what businesses should be aiming to achieve in the way they do business. The second is to identify the management behaviours that make it more likely that businesses will meet these aspirations successfully. The Principles cover relationship with customers, with suppliers, with governments, and finally impacts of products or services on third parties and the environment.

The Principles have been produced by a senior business leadership team the Marketplace Taskforce, including a number of CEOs and other senior decision makers from companies including global brands and UK-specific companies. The group was chaired by Mike Clasper, former CEO of BAA, the international airports group.

The framework has been designed for decision makers, and has been kept as simple as possible. So the key principles are:

* Respect your customers
* Support vulnerable customers
* Seek potential customers within excluded groups
* Manage the impact of product or service
* Actively discourage product misuse
* Actively manage responsibility in your supply chain
* Treat suppliers as partners
* Work with the rule makers
* Have consistent standards

Each of these covers a range of individual issues, many of which are very sector specific. Every company would claim at a rhetorical level to respect its customers. But the specific details are what counts. Does the company honour its contracts fully? Does it disclose information covering areas about which the customer is concerned (such as, for instance, the presence of genetically modified ingredients) or does it campaign to keep such information off labels? Does it review the impacts of the chemicals it uses in products to ensure that it is protecting its customers interests? Or does it follow the pack, and change only when forced to by legislation?

Perhaps the most important part of the Marketplace Responsibility Principles, however, is the management behaviours. These, again put simply are:

* Be consistent
* Anticipate trends
* Aim to deliver quality results
* Put at the heart of business strategy
* Part of the culture
* Encourage and motivate responsible behaviour
* Mainstream not niche
* Share best practice within the business

You can't get the full story just from the headings - you need to see the expanded explanation from the document. You can download this from http://www.bitc.org.uk/marketplaceprinciples.

The management behaviours are a very important part of all of this. For too long, those promoting CSR have focused on programmes that are carried out with an uncritical eye. The process has seemed more important than the outcome. However, in any other aspect of running the business it is accepted that skill in execution, and timing, and judgement, are crucial to success. It is much the same in this regard as well.

For the Marketplace Responsibility Principles, the management behaviours were cross-referenced with some of the most influential recent management thinking on what makes businesses successful, to see where there are overlaps between conventional best practice with the CSR agenda. Then a series of detailed case studies were carried out on successful businesses that had demonstrably been leaders in a number of the aspects of the Principles. The rule was that they had to be successful businesses - not that companies doing the right thing can't suffer setbacks and problems, but we needed to show that it worked in the marketplace. Secondly, that they had to be recognised widely as being leaders in the aspect of focus.

The six companies eventually selected were 3M, Camelot (the runner of the UK national lottery), retailers Marks & Spencer and Waitrose, Fonebak (winner of the BITC marketplace innovation award this year) and Tata.

Interestingly, each of the case studies demonstrated that the selected companies demonstrated all but one of the management behaviours - and the one that was absent was universally absent in each. That led to the Principles being amended to reflect what was really happening in these businesses.

The Marketplace Responsibility Principles are about how companies make their money. In theory, the areas that they describe should be the ones that most closely align with business performance and the valuation of businesses by the financial markets. Business in the Community is now carrying out this dialogue with some of the chief investment officers of major funds to begin to test the proposition.

Generally, when people seek to "prove" that CSR supports share performance or the bottom line, they do not distinguish which elements of CSR relate to wealth creation, risk and reputation management and so on. So it is not a surprise that no such correlation exists. And it may well be the case that financial institutions have not done well enough in factoring in some of these elements into their assessment of the ability of businesses to generate long term cash flows. But perhaps the time has come for this omission to be challenged.

Business in the Community is inviting businesses to sign up to the Principles, so it would be worth any readers aiming to get their CSR work into the heart of their business to have a look. You can see more about BITC's marketplace work generally by going to:
http://www.bitc.org.uk/marketplace.


Declaration of interest: The author works directly with the Marketplace Taskforce which discussed, amended and agreed the Principles and was the principal author of the document.

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In the news from the latest issue

Nepal: Relatives of killed workers sue US firm KBR for trafficking

US: Proposed Alaskan mine survives people's vote

Merck accused of dressing marketing up as science

Australia: Business lobby group warns over carbon trading

India: Tata Motors threatens pull-out from West Bengal

US: Climate change resolutions making impact on companies

Japan: Details of carbon labeling confirmed

Canada: Wal-Mart has union contract imposed

India: Rising protests against factory building

US: Fraud will cost firms $994bn this year

US: American Airlines accused of safety breaches

Ghana: Call for companies to help clear up electronic waste

US: Disneyland demonstration over hotel worker benefits

Uzbekistan: Major retailers call for end of child labour in cotton

... more news stories

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Business Respect - most recent edition added on 17th August 2008