Business Respect - CSR Dispatches No 107 - 11 Feb 2007

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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 ask whether the motor companies are failing to meet the challenge of climate change.

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/107.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

This time around, the attention turns to the motor companies. I am used here to carrying pieces that record controversies, but generally draw attention to the good initiatives that companies are taking in finding their way forward. In the case of the motor industry, however, it is hard not to question whether companies are really missing the scale of the challenge and are failing the test. This is the question for the main article for this edition.

Recent weeks have seen considerable movement by the supermarkets on issues around sustainability, with commitments by Wal-Mart, Tesco, and Marks & Spencer to put environmental concerns to the heart of their operations. The moves have been met by some commentators with genuine praise for what is seen as considerable ambition - whilst dismissed as a cynical ploy by others.

The vote on the website hasn't been changed for a while, so I decided now would be the time to take the temperature of opinion amongst readers of this newsletter. As a result, the vote has now been changed to read:

Recent announcements by the big supermarkets about environmental policy represent:

* A real shift towards sustainable practice
* A small, but important step with much more needed
* Nothing but cynical public relations with no substance

Please let us know what you think!

That means, of course, that we retire the previous vote. The final tally was as follows:

Companies that trade on their ethics such as the Body Shop should:

* Stay independent at all costs to preserve their brand 470 (29%)
* Accept offers from responsible buyers that may help the company to move forward 889 (54%)
* Operate purely by the logic of the market, it's a brand not a religion 285 (17%)

Thanks to the 1644 people that voted.

Mallen Baker
mallen@mallenbaker.net

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CSR News 11 Feb 2007

UK: Avian flu company under investigation for breaking regulations over imports

Turkey producer Bernard Matthews is under investigation over suspicions that it imported poultry from inside an avian flu exclusion zone in Hungary.

The company has also been accused of having left processed birds outside sheds on the site where the lethal H5N1 strain of bird flu was discovered last week. The action could potentially have increased the possibility of the strain infecting wild birds that could carry it further.

A number of the different units on the farm have tested positive for the virus, suggesting that it had become firmly entrenched. A delivery of partly processed birds was received at the site a couple of days before the first signs of the illness were spotted in chicks.

The incident is the second serious blow suffered by the company, after last year when celebrity chef Jamie Oliver criticised its 'turkey twizzlers' product for its poor nutritional value. Sales plummeted, and the product has now been withdrawn.

US: Wal-Mart civil rights case to go to court

Wal-Mart is to face a class action lawsuit that will be the largest civil rights action against a US firm - claiming that the company has exercised pay discrimination against over a million female employees.

The federal appeals court, by upholding an earlier ruling granting the action class action status, has created a suit that may benefit 1.5 million current or former staff, potentially costing the company billions of dollars.

Wal-Mart denies discrimination, and has announced that it intends to appeal the verdict. The company said that the action should not achieve class action status because its 3,400 stores operate as inidividual businesses, with pay and promotion set locally.

China: Starbucks bans trans fats

US coffee chain Starbucks is to stop selling food containing trans fats at its Chinese stores within the next six months.

The move follows a similar initiative covering around half of its operations in the US.

Trans fats have recently become a source of public debate and scrutiny. They are formed by a processed that aims to improve the shelf life of foods, but have been implicated in conditions of raised cholesterol leading to heart disease.

Indonesia: World Bank bans fraud firms from its projects

The World Bank has banned around 40 Indonesian firms from taking part in projects that it sponsors for between one and five years due to alleged fraud and corruption.

The companies, which include subsidiaries of a major motor manufacturer, are also joined by 29 individuals that are similarly debarred.

The Bank, which has listed the debarred firms an individuals, said that all those affected had been given the option to respond to the allegations.

UK: Ethical investment fund tops performance of UK stock market funds

The Co-operative Insurance Sustainable Leaders fund has become the best performing unit trust in the UK over the past year - the first time an ethical fund has achieved pole position.

Recent years have seen such funds growing in popularity, with 10 new funds launched last year. They have had a mixed record, with some years seeing relatively poor performance compared to other funds. However, this year sectors that the ethical funds avoid, such as tobacco and gambling, have been underperforming.

Australia: Retailer hits back at paper alleging child exploitation

Retailer David Jones is to sue the Australia Institute and its director over claims that the company had eroticised and exploited children in its advertising.

The suit is being brought under the Trade Practice Act and focuses on a discussion paper produced by the Institute that accused David Jones, along with other retailers, of having consciously sought to eroticise children in the interests of their bottom line.

In the statement of claim, David Jones said that it had suffered damage as a result of the Institute. It is the first time that a claim relating to the sexualisation of children has been brought.

The Institute has said that it will defend its research.

UK: Masterfoods to end adverts aimed at under-12 year olds

Masterfoods, which produces confectionary bars such as Mars and Snickers, has said that it will stop targeting any of its advertising at under-12s in the face of growing concerns about childhood obesity.

The company already has a policy of not targeting children under six. Its new policy will also include websites that are aimed at the key target group.

Television regulator Ofcom has suggested that it will ban 'junk food' advertising during TV shows aimed at under-16s, as well as adult programmes that are known to attract a lot of children viewers. A number of commentators suggested that the move had been designed simply to attract good publicity from something due to be legislated anyway.

Korea: Hyundai boss jailed for embezzlement

The chairman of Hyundai Motor Company Chung Mong-koo has been sentenced to three years in jail having been found guilty of embezzlement.

Chung had built a multi-million dollar fund for personal use and to pay lobbyings and politicians. Part of the fund was used to seek to smooth the way for his son to take control of the company.

The judge in the case rejected calls to jail Chung for six years, taking into account his positive contributions to the country's economy and support for charity.

Hyundai has said that it will be appealing the decision.

EU hand out record fine to cartel after ABB blows whistle

Eleven companies, including ABB, Alstom, Hitachi, Mitsubishi, Siemens and Toshiba have been hit with a fine of 750m euros for fixing prices in electrical generation equipment. Over half was levied against Siemens for having been the leading force in the cartel, whilst ABB had its fine nullified due to its role in denouncing and documenting the cartel.

The fine against Siemens was the largest at 418m euros that the EU had levied against any single company for taking part in a cartel. The arrangement, which had fixed prices paid by public utility companies and consumers, had run for more than 16 years.

ABB said in a statement: "ABB companies and employees are not permitted under any circumstances to engage in any anti-competitive practices".

A number of the companies have said that they will appeal the ruling. Siemens said that it was "completely shocked" at the level of damages imposed.

Germany: EU rejects automobile lobbying on emissions

The European Commission has rejected warnings from Germany's car industry that jobs would be destroyed by legal curbs on car exhaust emissions.

Commission spokesman Johannes Laitenberger said in response to the companies' lobbying that the best way to preserve jobs was to embrace and anticipate change rather than to resist it.

The Commission has delayed the date for announcing legislation to limit carbon dioxide emissions from cars as a debate continues over exactly how it should be framed.

US: Business climate change coalition calls for action

A group of US-based companies and several environmental NGOs have created the US Climate Action Partnership (USCAP) and are calling on the federal government to enact strong legislation to achieve significant reductions in greenhouse gas emissions.

In a statement, the group said that delay in action would increase the risk of unavoidable consequences that will force greater and costlier action in the future.

The Alliance brings together Alcoa, BP America, Caterpillar, Duke Energy, DuPont, FPL Group, General Electric, Lehman Brothers, PG&E, and PNM Resources, along with leading environmental groups.

It has issued a set of principles for what it describes as a "mandatory economy-wide, market-driven approach to climate protection".

“The time has come for constructive action that draws strength equally from business, government, and non-governmental stakeholders,” said Jeff Immelt, Chairman and CEO of General Electric.

The six principles are: [1] Account for the global dimensions of climate change [2] Recognize the importance of technology [3] Be environmentally effective [4] Create economic opportunity and advantage [5] Be fair to sectors disproportionately impacted [6] Recognize and encourage early action.

CSR FEATURES from the Internet

CSR belongs at the very core of business - 6 Feb 2007 FROM The Age

CORPORATE social responsibility continues to be seen or spoken of as a sort of extended apology for the corporation. The business community can and should be more confident and assertive about the competencies and value of the corporation.

Only by making it consistently clear that CSR is a natural and vital extension of these competencies and core values — not an offset or an apology for them — will business, and the community, reap a sustainable return from its CSR investment.

Read full story

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Running out of road

Article by Mallen Baker

Every now and then an industry is faced with the challenge to adapt and change at a scale and speed that demands imagination and commitment. Sadly, the response by many representatives of the motor industry to the news that the EU is to raise fuel efficiency standards suggests that industry is still in denial about the changes required.

We have seen it before. Food companies were initially angry and defensive about suggestions that their products - or the way they marketed them - made a contribution to growing levels of childhood obesity. Many of them are now reformulating products and adopting voluntary codes on marketing to children. Likewise, mobile phone companies were extremely reluctant to take on any sort of responsibility for the growing phenomenon of street crime fuelled by theft of mobile phones - now measures to make it harder to steal and use mobiles is standard.

In the case of the motor industry, we have heard the talk and the promise that suggests the writing on the wall has been read, and serious moves are now underway. Unfortunately, every now and then the optimism is challenged.

The recent announcement by the European Commission that it plans to require higher standards on CO2 emissions from cars - limiting such emissions to 130g/km (as opposed to the current average emission levels of 163g/km) provoked furious opposition, particularly from German car makers. A letter from the German motor industry warned that the move would put EU competitiveness and employment at risk. The EU Commission dismissed the argument, responding that the best way to preserve jobs was to embrace and anticipate change rather than resist it.

In the event, no-one was left happy. The original EC proposal that a standard of 120g/km was slightly relaxed, infuriating the environmental groups who accused the EC of a sell-out to the motor lobby, whilst the motor lobby saw it as precious little concession at all.

The affair has highlighted yet again the distance between thinking on the issue of climate change across most of the world - and in the EU in particular - contrasted with attitudes in the US, the spiritual home of an increasingly desperate segment of the industry.

Recently, the chief economist of DaimlerChrysler - a company which spans both worlds - Van Jolissaint, commented that European attitudes to climate change were akin to "chicken little" running around shouting that the sky is falling in.

"The rest of the world", he said "views the threat of global warming with much more alarm than we do."

He dismissed the recent Stern report as political, and said that climate change represented a "small but continuing forever problem" that should be met by small incremental steps, not huge changes. But measures such as fuel efficiency standards, he added, have "welfare losses to the general public" and therefore are disproportionate. In spite of the public protestations of commitment from US companies, the bluntly honest comments probably reflect more of the mindset than the companies would cheerfully admit.

It's not as though there is no vision in sight. Over a decade ago, Amory Lovins wrote the phenomenally inspiring "Factor Four" book - looking at ways in which technical innovation and the improvement of processes could deliver savings genuinely of the scale required.

Lovins painted the picture of the Hypercar, where the Rocky Mountain Institute in Colorado had a go at re-thinking the entire concept of the car. They came up with the Hypercar - lightweight (up to 75 percent lighter than a conventional car) sleeker (drag reduced by 60 percent) and more efficient (road and tyre energy loss cut by 60 percent). The car would be a hybrid - petrol and electric. The concept, apparently, has the backing of the White House as well as the big three US motor giants.

Many years later, and the benefits of that backing is significantly absent.

Progress is certainly being made. In January, the Toyota FT-HS, the Chevrolet Volt and HHT Technologies Plethore were unveiled and each features a significant amount of the lightweight composite material in their construction. But in terms of achieving the vision of large scale reductions, there is still a long way to go.

Given the comments about Chicken Little, it is no great surprise that DaimlerChrysler cars can be found at the bottom of the pack in terms of the fuel efficiency of major motor manufacturers. Ford is not a great deal better. The company has, of course, introduced a hybrid SUV hoping to stem the flow away from the high-profit vehicle. But projected volumes of hybrids have been reduced.

What is the difference between the US major motor companies and the more successful 'visionaries' - principally Toyota? Is it because Toyota has the strategic and political vision to accept change and embrace it? Probably less than you might think - Toyota also launches its share of gas guzzlers in spite of the iconic Prius.

According to James P. Womack is comes down to that old standby quality of management and process. Toyota simply has a better management process which tries out many approaches to every problem and gets the winning concept to the customer very quickly with low cost and high quality. In addition, he says "GM and Ford are clueless as to how to work with their suppliers. Sometimes they try to crush their bones - which only works when the suppliers have any profits to squeeze, and few currently do. Then they embrace contentless cooperation that ... fails to produce lower costs, higher quality, or new and better technology. Toyota, by contrast, is getting brilliant results and lower prices from American suppliers like Delphi while also giving suppliers adequate profit margins. How? By relentlessly analysing every step in their shared design and production process to take out the waste and put in the quality".

Companies based on such processes can respond to the new challenges more quickly and innovatively. Companies that try to fend them off - not because they are evil or stupid but because they can't work out how they will meet the challenge without disadvantage - watch their market share dwindle.

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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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