Business Respect - CSR Dispatches No 108 - 25 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 review the recent report on 'how to earn consumer trust'.

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/108.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

In a world where all the evidence suggests that people are becoming better informed and, more importantly, cynical the question of what builds customer trust is an important one. This issue, we look at a recent report 'How to earn customer trust' which provides a contribution to thinking on this area.

Readers may remember that some time ago I set up a "Swicki" search page for stories around corporate social responsibility. The Swicki search provides specialist search which prioritises key authoritative sources for searches carried out, and brings together web pages and blogs specifically. It enables the community of its users to rate or recommend results, which in principle over time leads searches to be more and more accurate, and less tainted with irrelevant results.

I had noted somewhat ruefully that it didn't work as well as it might - with a good first page of results, but with some odd results for subsequent pages. Well, the good folks who provide the Swicki service have given it a complete overhaul, and not only does it now provide what it says, it has also added new tools to make it more effective. I have now started to find myself recommending it as a research tool because it has become genuinely useful. Have a go and see what you think.

http://www.mallenbaker.net/csr/swicki.html

Meanwhile, voting has started on the new poll on the website, and it's a reasonably close one this time. So far we have:

Recent announcements by the big supermarkets about environmental practices represent:

A real shift towards sustainable practice 22 (23%)
A small step only, with much more needed 41 (44%)
Nothing but cynical public relations 31 (33%)

Thanks to those that have voted so far. As ever, we look forward to hearing your views.

Mallen Baker
mallen@mallenbaker.net

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CSR News 25 Feb 2007

Japan: Yamaha employees broke rules the company helped to formulate on exports

Three Yamaha Motor employees have been arrested for allegedly attempting to bypass export controls for the export of a remote-controlled helicopter to China. It has emerged that Yamaha actually helped the trade ministry to formulate the stricter rules in 2005.

The employees are Kazuo Uchiyama, senior general manager of aeronautics, and two of his deputies Tafafumi Itagaki and Akihiko Suzuki. The police believe that they had full knowledge of the rules that they conspired to break. The men claim that they were unaware of the restrictions.

In 2005, METI officials sought the views of a number of businesses, with their most extensive discussions with Yamaha Motors. The altered rules placed export restrictions on models that could carry at least 20 litres of chemicals and could be programmed to fly autonomously or outside an operators visual range.

Starbucks and Ethiopia make joint statement to put an end to coffee row

Starbucks and the government of Ethiopia have released a joint statement about the well-publicised dispute over Ethiopia's approach to trademarking some of its varieties of coffee.

The statement said that the two had agreed to work together to increase farmer incomes and to assure sustainable production. However, Starbucks has not met initial demands that it unilaterally accept and recognise Ethiopia's claim for trademark status for its coffee. It has agreed, however, that it will not oppose or resist the government's attempts to achieve trademark status.

Most practically, the statement said that the company had agreed to double its coffee purchases from East Africa, including from Ethiopia. It will also provide technical support for Ethiopian farmers through a new Farmer Support Centre.

Australia: Plan to make protestors pay damages for successful boycotts

Australia's federal Treasurer, Peter Costello, has said that groups that organise boycotts against companies, such as the People for the Ethical Treatment of Animals (PETA), will be liable to pay compensation to the companies that they have targeted.

The moves will give the Australian Competition and Consumer Commssion powers to bring legal action on behalf of affected companies. The initiative follows calls for a global boycott of Australian wool over the practice of sheep mulesing.

Existing law already allows for the consumer commission to impose penalties on organisations seeking to hinder the supply of goods, for example by blockading the delivery of goods or services. Mr Costello argued that his proposal simply extended the same principle.

Critics said that consumers had the right not to buy products on ethical grounds, and the Greens described the move as 'McCarthyism'.

US: Fannie Mae closes down its foundation

Fannie Mae has announced that it is to wind up its foundation, one of the largest donors to local charities, but also a continuing source of criticism for the company over the alleged use of tax-exempt money to promote its corporate interests.

The function of charitable giving is to be taken back into the company, which will enable the company legitimately to tie its giving closer to its corporate interests, and will remove certain requirements for transparency in how the money is spent. The foundation gave $61m in grants last year.

The foundation has a history of supporting a wide variety of causes, including advertising to educate home buyers and poverty issues.

The action is part of a broader action at the company to overhaul its operations in the face of allegations of accounting manipulation.

India: Wal-Mart sees protests against planned presence

A visit by Wal-Mart vice-chairman Michael Duke has seen protests by small shopkeepers and communists over plans for a joint venture with Bharti Enterprises.

India has a growing retail industry currently worth around $300bn, which has already attracted a number of international investors, such as Carrefour, Metro and Tesco. Protestors fear the impact on small shops and communities by the continuing encroach by foreign multinationals.

According to Indian law, foreign retailers can only run either cash-and-carry or franchise businesses. The Wal-Mart / Bharti join venture is planned to be the former.

Australia: Hardie board directors quit in face of legal action

Three directors of James Hardie Industries have stepped down after the Australian Securities and Investments Commission (ASIC) announced it would bring a civil action against them.

The directors, including chairman Meredith Hellicar, tendered their resignations and were praised by the company for acting in the best interests of the company, and for the role they had played in finalising an asbestos compensation funding proposal.

Acting chairman John Barr said that Meredith Hellicar especially had "worked incredibly hard at great personal cost" to bring about a settlement on the asbestos issue.

Companies sign joint statement on climate change

A major group of companies and other organisations from across the globe have endorsed a post-Kyoto framework for change on business practices and their impact on climate change.

Signatories of the agreement - created by the Global Roundtable on Climate Change - are drawn from lots of different sectors, including air transport, energy, technology and the financial sector.

The statement calls upon governments to set targets for greenhouse gas emissions, and to use financial instruments such as pricing of carbon emissions. Signatories include Allianz, Bayer, Citigroup, DuPont, General Electric and Volvo.

Jeffrey Immelt, chairman and CEO of General Electric said: "Global businesses are assuming their just place as catalysts for action on climate change. But action by business alone is not enough. While we believe that applying technology against problems will create positive business opportunities that can result in positive change, national, state and local governments, academia and other non-governmental organizations must step forward with equal force."

US: Record number of shareholder resolutions on climate change

An activist investor group has announced the creation of a Climate Watch list, a group of ten comanies that are accused of lagging behind their industry peers in their response to climate change.

Investors involved in the group have filed shareholder resolutions with the ten companies, along with 26 other businesses, aiming to increase their attention to business risks and opportunities from climate change. These are numbered amongst overall 42 such resolutions as part of the 2007 proxy season, nearly double the number of climate-related resolutions that were filed three years ago.

The Climate Watch companies include: Wells Fargo, Allegheny Energy, Massey Energy, Consol Energy, ACE, ExxonMobil, ConocoPhillips, and Bed Bath & Beyond.

Mindy S. Lubber, president of Ceres, which helped coordinate the shareholder filings, said: "We want all companies to understand the business impacts of climate change – and plan for it accordingly. It’s is what any corporate director would expect of their CEO."

US: Green Mountain Coffee Roasters tops corporate citizen list second year running

The annual survey of the '100 Best Corporate Citizens' has been released by CRO magazine, and is led for the second year by Green Mountain Coffee Roasters - the first time the same company has topped the list twice consecutively.

The list, which is drawn from around 1,100 of the largest US publicly traded companies, puts into the top ten: Advanced Micro Devices, Nike, Motorola, IBM, Agilent Technologies, the Timberland Company, Starbucks Coffee Company and General Mills.

Activity around the environment was the big feature for this year's list, with a growing focus on the use of sustainable materials and on tackling climate change.

Ivory Coast: Trafigura to pay for toxic clean up

Trafigura, the Dutch oil trading group, has said that it will pay nearly $200m to clean up the consequences of a pollution incident involving toxic waste.

The company has stressed that the payment does not constitute damages, and it is not admitting liability for the event, during which ten people died and thousands of others fell ill. The company said that waste had been passed to an authorised company for incineration, but instead the waste was dumped.

The Ivory Coast government is to drop any future prosecution over the affair.

Johnson & Johnson executive exits over fraud probe

Johnson and Johnson has said that payments made by some of its foreign units may be in breach of the US Foreign Corrupt Practices Act, and that one of its Executives has stepped down.

The company has promised to cooperate with the investigation by the Securities and Exchange Commission.

Michael Dormer, worldwide chairman of J&J's medical devices and diagnostic unit is resigning. Analysts suggested the action was being taken to demonstrate the company took the situation seriously in order to pre-empt legal action.

CSR FEATURES from the Internet

Businesses grow more socially conscious - 14 Feb 2007 FROM USA Today

Activists have argued for decades that companies, as good corporate citizens, are morally obligated to adopt socially responsible business practices. On their end, companies say they exist to sell products, make money and please shareholders — not to save the world.

But those clashing views may be finding common ground, say business experts on the movement known as "corporate social responsibility," or CSR.

Read full story

When do 'good' firms go 'bad'? - 13 Feb 2007 FROM Los Angeles Times

SUSTAINABLE FIRMS. Green businesses. Socially responsible corporations. A growing number of magazines, activist groups and websites publish such lists, suggesting that one can distinguish the good companies from the bad.

The claim that such distinctions are possible is likewise central to ethical mutual funds, indexes and stock rating services that recommend "responsible" investing — with some even asserting that "better" firms have superior financial performance.

Read full story

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Weighing the value of trust

Article by Mallen Baker

If one could show that achieving a great reputation for corporate social responsibility would automatically mean a higher share price and greater sales success, you would have your business case signed, sealed with a pretty pink bow, and delivered. It doesn't, however, happen like that. Instead it comes down to a more complex relationship of trust with the customer.

Now Corporate Culture, a progressive UK consultancy that looks at business strategy, communications and CSR, has produced a Customer Trust Index, to seek to unravel some of the messages around a complex area.

The Customer Trust Index is based on the views of approaching 2,500 adults and according to the report "How to earn consumer trust" there are three headline messages.

The first headline message is that what people believe is a more powerful influence on their buying behaviour than price, quality or reputation. The research suggested six key personal beliefs that most come into play when people are making decisions around what to buy. These are:

* Self-esteem and peer respect
* Improvement and progress
* Planning and saving
* Coping with life's challenges
* Freedom to live now
* Security

Understanding these beliefs and how people apply them can help a company to build a better understanding of how to communicate with different segments of their market.

The second headline message is to do with communication, and suggests that the most powerful method of communicating with customers is word of mouth. This chimes well with the learnings of the new internet age, where the empowerment of consumers through blogs, or through sites that encourage customer feedback such as Amazon, has led to some of the most powerful marketing of all - peer recommendation. In the same way, it has also enabled activist customers to bring criticisms into the public arena. Sometimes to great effect. For instance, it was a well known and influential blog that first coined the phrase 'Dell hell' which then entered the popular language through the take-up of the national press.

The third, and final, headline message of the report suggests that winning trust comes as a result of following four simple steps. The steps are:
1. Your product or service should meet the expectations of customers. This is one of those 'no-brainers' that everyone knows and yet it seems to remain the preserve of the exceptional to truly understand what it means. It is not, the report points out, the same as total quality, since expectations will be different for differing product offers.
2. You are only as good as the last personal contact you have with your customer. This is also something that many in business purport to understand, and yet simply fail to organise or mobilise their business to make it work. All of us have our own stories about the positives and the negatives on this score in our dealings with businesses.
3. You speak to me in my life. Every sale is personal, and it is to do with the needs, wants, hopes and aspirations that exist at the individual level.
4. You are seen to act responsibly. This can be implied as much as realised, until something comes along to draw attention to the gap. For many customers if the quality of the product is good, it meets their needs and the customer service is good, they will instinctively believe that the company is a responsible company. If evidence emerges to the contrary, then it can damage the individual's faith in their prior assumptions, and perhaps also cause them to question their other beliefs about quality.

According to Corporate Culture, if a company loses trust 76 percent of people say that they will simply stop buying the product. If a company proves itself to be trustworthy, however, 42 percent will buy more products and 54 percent will recommend the products to others.

Many will have developed a healthy scepticism about such polls attaching percentages to people's buying behaviour when there is a strong element of possible wishful thinking behind the people that respond to the questions. Nevertheless, the report is an important one because it takes a clear and unsentimental view to what actually informs customer trust. It is not as simple an equation as to say that CSR = trust. But likewise it talks about the role that responsible behaviour has in supporting the other elements that build trust.

Many marketing directors would say that they can thrive and flourish without having to become known for their corporate social resopnsibility. None would argue however that they can thrive if their customers lose trust in their products. But in order to engage that debate, there needs to be a rational, evidence-based view on how that trust is won or lost. The Corporate Culture report provides a good start in being able to do this.

What it isn't, however, is an Index that shows which companies have currently been successful in earning trust, and which haven't. In an age where rather a lot of company rankings are produced, this is something of a relief. It would probably have done a lot to undermine the argument had something so much based on intuitive impressions of large numbers of people been turned into something that purports to be more scientific.

It also isn't the last word on trust, as it isn't the first. There is a lot in common here with work carried out in the past to look at what builds exceptionally strong customer loyalty. As ever, the students of corporate social responsibility are well advised to look toward what works best in making businesses successful first. What creates long term business success? What creates thriving customer relationships? And only then which of the answers to those questions also relate to responsible business practice?

This report is a helpful addition to the debate about what real counts in corporate practice.

Story link

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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

To make any comments / suggestions re. this site, please contact mallen@mallenbaker.net
Business Respect - most recent edition added on 17th August 2008