Business Respect - CSR Dispatches No 109 - 18 Mar 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 consider the recent initiative to introduce carbon labelling for products.

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/109.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

Is the recent announcement that certain products will carry a label indicating how much of a 'carbon footprint' the product has a revolutionary step towards the future, or a misplaced initiative that will fail in the face of consumer confusion? We consider the question in this issue's lead feature.

The subject is not so very far away from the focus for the current website vote. If you recall, the question and current answers look like this:

Recent announcements by the big supermarkets about environmental practices represent:
A real shift towards sustainable practice 37 (17%)
A small step only, with much more needed 106 (49%)
Nothing but cynical public relations 74 (34%)

Thanks to the 217 people that have voted so far. There is still time to make your voice heard!

Mallen Baker
mallen@mallenbaker.net

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CSR News 18 Mar 2007

US: Wal-Mart backs down over in-house bank

Wal-Mart has withdrawn its application to create an in-house bank after the controversy provoked by the move threatened to result in an approval process that would last years not months.

The company blamed a "manufactured controversy" over its plans to obtain a US banking licence, arguing that it had never entertained plans to enter into competition with the mainstream banking sector, only to reduce credit and debit card transaction costs. The company said it would now seek "other ways to serve customers".

The attempted move into financial services had provoked a wide coalition of unions, consumer groups and some state-level banks to get together to lobby the finance authority not to grant the licence. After more than 1,900 letters had been received about the application, the decision had been taken to hold public hearings.

Japan: Livedoor boss found guilty in fraud trial

Takafumi Horie, the former boss of internet firm Livedoor, has been found guilty of fraud following a high profile trial that has seen the company dubbed 'Japan's Enron'

Horie was sentenced to two years and six months in prison. Unusually for Japanese corporate scandals, he pleaded not guilty and says he intends to appeal. Often in the past, executives have confessed in return for more lenient sentences.

The judge said that Horie had overseen a network of decoy investment funds intended to manipulate the company's accounting and evade the law.

Horie's distinctive personal and business culture made him a popular figure with many, but put him in conflict with the country's conservative business establishment. As a result, the trial attracted great public interest, and the verdict was broadcast live on Japanese television.

UK: Carbon labelling scheme for products launched

A labelling scheme to show the carbon footprint of individual products to help customers choose what they buy is to be launched in the UK.

Walkers crisps will be among the first products to carry such a label, along with certain ranges of Boots shampoo and Innocent smoothies. It not only gives information about the carbon 'footprint' of the product, but it shows the company's commitment to reduce the figure. If companies fail to reduce the footprint over a two year period, the label may be withdrawn.

The scheme is to run on a trial basis for a year and is being promoted by the Carbon Trust.

Germany: BMW chief executive attacks EC emissions targets

Norbert Reithofer, the new chief executive of BMW, has attacked targets set by the European Commission for fuel emissions as "physically impossible" and "economically unsound".

The comments refer to plans to impose a limit of 130g per kilometre on CO2 emissions from all new cars by 2012. The german car industry, dominated by luxury brands such as Mercedes-Benz, Audi and BMW, has been active and vocal in a campaign against the controls proposed by the EU environment commissioner Stavros Dimas.

Mr Reithofer argued that different vehicle sizes should be given different limits, reflecting best practice for those vehicle types. Since small cars make up the largest part of the market, they would have to make a proportionately greater contribution.

BMW says it has cut fuel consumption across its fleet by 30 percent over fifteen years.

Gore targets investors on sustainability

Former US Vice President Al Gore has urged investors to consider climate change factors when making investment decisions.

Speaking at the National Association of ension Funds conference in Scotland, he criticised companies whose business plans were "blind to the carbon consequences" of how they did business. Increasing environmental damage, he said, would have a negative impact on the profits and performance of companies.

Companies that invest for the long term should find it easy and profitable to integrate sustainable factors into how they analysed potential investments.

Colombia: Chiquita says it paid criminals for protection

Banana firm Chiquita Brands International has said that it paid 'protection money' to a terrorist group in Colombia after threats had been made to staff.

The company is to pay a court settlement of $25m following an inquiry by the US Justice Department after it had admitted that it paid about $1.7m to the United Self Defence Forces of Colombia, which is listed by the US and the EU as a terrorist organisation which has carried out massacres in his recent past, although it is now involved in the peace process.

Chiquita said it had only acted out of concern for the safety of its employees. It has since sold its Colombian banana operations. The company had initiated the inquiry when it approached the US Justice Department four years ago.

US: Charges dropped against former Hewlett Packard chair

Criminal charges brought in connection with the corporate spying scandal at Hewlett Packard against Patricia Dunn, former chair, have been dropped.

The action had been taken after it was revealed how she had launched a vigorous internal campaign to identify the source of a boardroom leak, leading to the use by private investigators of tactics that were held to have invaded the privacy of the individuals at whom they were directed. The revelation led to Ms Dunn resigning her position.

She had been accused, along with three others who have entered 'no contest' pleas, of conspiracy and unauthorised access to computer information.

India: Campaigners attack Tata's clean up offer at Bhopal

Campaigners have demonstrated against the offer by Tata Group to pay for, and clean up, toxic waste left by the 1984 gas leak disaster in Bhopal. The company was accused of seeking to let Union Carbide off the hook and pave the way for its new owner Dow Chemical to return to India.

Around 100 people took part in a protest following Tata Group chairman Ratan Tata's letter to the Indian government offering to set up a trust fund to clean up the contamination. The site has been deeply controversial throughout the decades following the incident at what was then a pesticide factory, claiming 22,000 lives.

The protesters insist that Dow Chemical should itself clean up the site, and that the Union Carbide officials at the time should be punished.

UK: Private equity companies to produce voluntary code on disclosure

The private equity industry has responded to attacks in recent months with an agreement to produce a voluntary code that will improve the disclosure of businesses privately owned.

The announcement by the British Venture Capital Association showed that the sector is taking seriously the growing levels of criticism by groups that fear the increasingly powerful companies are destroying jobs and value for short term returns.

Senior private equity managers argue that they actually help to create jobs by building more financially successful businesses. The move for disclosure reflects the growing understanding that lack of information is a barrier to such claims being accepted.

Unions criticised the announcement for relating to the companies owned by the private equity firms, not the private equity firms themselves.

CSR FEATURES from the Internet

Private Equity versus Public Trust - 15 Mar 2007 FROM Seeing the Possibilities

On both sides of the Atlantic, in Europe and America, private equity finance firms are having the best of days and the worst of days. Over the past weeks we have witnessed record-breaking deals and buy-outs. Ever new acquisition targets are being announced as high street brands, media companies, public utilities and household names are being taken private, often into the commercial intensive care wards.

Read full story

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Buying into carbon reduction

Article by Mallen Baker

In the UK, the Carbon Trust has launched a new approach to raising awareness and giving consumers information - carbon product labelling. The approach is to be trialled with Walkers crisps, several Boots cosmetics and Innocent smoothies via their website. With Tesco having separately committed to carbon labelling for a wide range of its products, it seems like this is the way of the future.

Interestingly, the Carbon Trust scheme is not purely descriptive - companies that take part commit to not only report, but to reduce, the carbon impact of their product. If they don't do this over a two year period the label will be withdrawn by the Carbon Trust.

The move followed a report by the Carbon Trust last year that broke new ground by showing how carbon emissions are produced by product type, rather than the traditional way of showing them by industry sector. This showed that recreation and leisure represents the largest part of UK consumer emissions at 31.6 MtC. Following a little way behind and more or less bunched together with equivalent contributions are space heating, food and catering, household and health & hygiene - all in the low 20s. Clothing and footwear comes in at 16MtC, with commuting trailing at 13MtC.

Aggregated figures hide a lot, of course. But this approach to weighing up carbon footprint makes a great deal of sense. Traditional sector-based approaches to attributing carbon impact give energy producing companies a vast footprint compared to the rest - a fact that leads many to describe them as the biggest 'part of the problem' and 'difficult industries'. Of course, it is consumers who - in one shape or another - consume this energy either directly or embedded in the products we consume so this approach has always seemed really just a convenient way of passing the buck.

If you switch it to allocate energy emissions to the areas where they are actually used, you see construction, retail distribution, hotels and catering, wholesale distribution and health & veterinary services at the top of the consumption chain.

But how important is carbon labelling actually going to be in reducing carbon emissions? Do we really think that consumers will switch brands, or maybe begin to abstain altogether from certain products because of the information they receive about the carbon footprint?

The jury is definitely out, and the current trial being undertaken by the Carbon Trust won't give us this information, since people won't have the basis to compare across brands until the mark is much more widely used. When Tesco finally begins to deliver on its commitment to use a similar mark across thousands of products, perhaps we will then begin to see.

There are some obstacles that can be predicted. First of all, people have little point of reference. So we now know that a 250ml bottle of Innocent Drinks' Mangoes and Passionfruits smoothie has a carbon footprint of 294g. What we don't really know is whether that's good or bad. Few people can really envisage what it means to emit 100g of carbon.

In the UK at the moment there has been furious fuss and debate over another form of labelling - food nutrition labelling. Some companies have been using a form of labelling that gives percentage figures on a number of counts for recommended daily amounts. The government's preferred form has been a 'traffic light' system, with red, amber and green indicators for each measure to encourage consumption of healthier foods. It may well be that there will be pressure from some for a similar approach here. The problem is that establishing for every product type what would fall into which category would be long, detailed, and contentious.

In some ways, the Carbon Trust label neatly sidesteps this by ensuring that the mark carries with it a commitment to reduce the impact, with a threat of withdrawal if reductions are not achieved. So whether you know that the figure given is good or bad, at least you know the company has committed to improvements.

I am not so sure this is a good thing. It turns the initiative from a descriptive label, providing information that gives consumers the power to choose, into being an endorsement mark. Any company carrying the carbon label will be promoted de facto as being good because of the commitment they have made to reduce. The confusion between an information system and an endorsement mark may mean that neither is done very well.

The power of an information label is that you should be able to persuade all manufacturers of all products eventually to buy into it, or ultimately as the debate moves on over the years it may even become required. That way, you can make comparisons.

However, if it is a much more exclusive club, where companies that can reduce their emissions easily will buy in, it will inevitably have a smaller take-up and the risk then that fewer consumers will recognise it. It runs the risk of penalising the early mover company that took action some years ago to reduce its carbon footprint and can now only make further improvements at high cost, and rewarding the late arrival, who can improve through a number of easy wins. All in all, whereas there is a good argument to have an endorsement brand for those companies that do well in this area, it should probably be something different to the informational carbon label itself.

But actually the main benefit of carbon labelling doesn't come from any of the above. It's most powerful contribution in the short term will be to raise awareness and understanding amongst consumers to lead them to better accept and support necessary public policy to mitigate climate change.

Five years ago, we pretty much knew what we now know about climate change. And yet, as far as most people were concerned it was invisible, untouchable, unsmellable - some scientific thing that might impact on grandchildren or grandchildren's grandchildren.

Now, the physical signs are evident. They have seen footage of melting glaciers, and experienced abnormal weather patterns, and they are beginning to understand that something is going on. It has become real, and personal. This however, is only a start.

The power of carbon labelling is that whenever they go to shop, they will see evidence of the importance of this issue. It will underline for them that this is something serious. It won't matter so much whether they then choose one product over another. It will matter more whether they support higher fuel duty, or airport taxes, or a range of other things that are calculated to get us living within our means. At the moment, such support is by no means guaranteed.

No elected government, and no global governance institution, has put forward a platform of people making do with less, for obvious reasons. In most cases, it is going to be about finding innovative solutions to reduce impact by enabling people to continue to have the things they currently have, but differently. But in some instances, the solution simply won't be that easy. Politicians will never have the courage to act on these unless the public is ready for them. Carbon labelling is more about readying the way for necessary action than it is about what kind of washing powder you choose to use.

Because ultimately, at some point consuming unsustainably will need to be removed as a legitimate consumer choice.

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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