Business Respect - CSR Dispatches No 116 - 9 Dec 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 edition, we discuss the recent fine for UK supermarkets on milk prices, and the impossible dilemma it presents for the future.

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/116.html.

Copyright 2007 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

Change is in the air, and hopefully for readers of this newsletter, they will all prove to be positive.

Since the newsletter was first started back in April 2001, it has been strict editorial policy that there should be no sponsorship or advertising in the newsletter. The focus has always been on content, and the fear was that permitting advertising would begin to detract from that main focus.

However, the clockwork-like regularity of the appearance of the newsletter that was a feature of its existence during the first five years has been harder to sustain during the last year. There have been all sorts of factors involved with this, but the bottom line is that we need to be able to secure the resource to be able to put dedicated time into making the newsletter regular, and developing further the quality, content and focus of it to serve the CSR community better.

As a result, I have decided that from January 2008, the Business Respect email newsletter will take up a number of sponsorships, initially limited to no more than four. These sponsorships will be advertised through a strictly defined format, prominant within the body of the email text but limited in size to retain the primacy of content. They will be available for periods of 1 year - which will be a guaranteed 26 editions.

We are finalising the terms of reference for these sponsorships. They will only be accepted from organisations which are appropriate given the nature of the publication, and that have a proposition likely to be of interest to the audience of the newsletter. Note that the newsletter currently has an opt-in only subscriber base of just under 9,000 which is spread across the world, with significant concentrations in the UK and the US.

We are already in advanced discussions with our likely first sponsor, and we look forward to announcing them in January. In the mean time, if you think you might be interested to join them and would like more details of the sponsorship rates etc. please contact us at mallen@mallenbaker.net. Please note, sponsorship is at a flat rate and available purely on a first come, first served basis.

In addition to the four annual sponsorships, we will take no more than one time-limited adverts per edition. These may be to promote an individual event of global interest, or a new publication, etc.

These changes will mean two things. Hopefully, if successful, they will create the capacity for us to devote dedicated time to the future development of the newsletter. This should mean more research behind features, the potential to develop additional content such as interviews, commissioned pieces of other writers, etc. to increase the value of the content. Secondly, by limiting sponsorships and advertising to those that will suit the type of audience served by the newsletter, you should have another channel to find out about services that will directly be of interest, and to the benefit of you or your company.

We have tried to strike the right balance. I am not a great fan of CSR websites that provide a soup of animated logos from a multitude of cross-sponsorship deals. The aim will always be to provide a useful resource to the interested practitioner or researcher. Hopefully, this will provide the right balance to enable that to happen.

Back on content: Those of you that have heard me speak at events over the last couple of years will probably have heard me remark one thing about the challenges of stakeholder engagement - stakeholders can be capricious. They disagree with each other. And they can punish you today for doing precisely what they demanded yesterday.

I was reminded of this line this week as the UK supermarkets - having responded to pressure on milk prices some years ago - were fined for having done so. The topic is the focus of our main feature for this issue.

Mallen Baker
mallen@mallenbaker.net

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CSR News 9 Dec 2007

India: G-Star ends Indian contract over working conditions

Dutch denim brand G-Star has ended a contract with Indian manufacturer Fibres and Fabrics International (FFI) over problems with working conditions at the company's factories.

G-Star issued a statement saying that it had been unable to achieve constructive dialogue between FFI and labour rights campaigners, including the Clean Clothes Campaign. FFI is pursuing a defamation case against some of the campaign groups, in the face of G-Star's wishes.

An Indian court has now issued arrest warrants against eight of the campaign activists that have been involved in the publicity around poor working conditions at FFI.

The Clean Clothes Campaign said that the court's action was akin to criminalising free speech, and would make it impossible for companies to credibly implement corporate social responsibility policies in India.

Major companies sharpening focus on human rights

New research on how the top FTSE100 companies manage human rights obligations has found that companies are making considerable progress in taking their responsibilities in this area seriously.

The research, carried out by EIRIS, found that 54 out of 100 have operations in countries identified as being at high risk for human rights violations, and of these 61 percent have made an explicit commitment to the UN Declaration on Human Rights.

Head of Social Research at EIRIS Louise Tippett said: “While a corporate policy statement on the UNDHR is significant as an indicator of Corporate commitment to uphold human rights, what's also needed is an assessment of how companies are implementing their commitments. Whilst our analysis reveals some evidence that FTSE100 Companies are taking Human rights seriously, it's clear that a lot still needs to be done".

UK: Impact of advertising on children to be investigated

The UK government is launching an inquiry into the possible harmful effects of advertising on children as concerns continue to grow about the growth in society of such phenomena as anxiety, eating disorders and under-age alcohol consumption.

Children are thought to see around 10,000 TV adverts a year, according to the government. Parents have registered concern about young people being exposed to images of commercialisation, particularly those which might encourage the sexualisation of girls.

The inquiry will be carried out by child psychologists to look at whether commercial pressures lead to an overall negative impact on children.

Nigeria: Companies face fines for gas flaring

Oil companies operating in Nigeria have attacked government plans for start fining them for gas flaring as focusing on an unrealistic deadline and likely to cause immense economic damage.

Companies face a fine of $3.5 for every thousand cubic feet of gas flared in the new year. They have said that it is not practical to end flaring yet, and they want the deadline to be put back two years to 2010.

The companies have also said that projects to end flaring have been delayed by violence that has dogged the Niger Delta over recent years.

Gas flares are seen as a hazard to local communities and a significant contributor to greenhouse gas emissions. Companies in Nigeria flare around 2.5bn cubic feet of gas every day.

US: Carmakers face deal on fuel efficiency

Congressional negotiators have agreed a deal that will require manufacturers of cars and light trucks to meet an average fuel efficiency performance of 35 miles to the gallon.

The auto companies had fiercely resisted the changes when a similar measure went through the Senate, and had proposed a weaker alternative arguing that the measure would push them beyond what is currently technically achievable. The CEOs of the major Detroit giants had been to Capitol Hill as part of the lobbying effort, but apparently were unsuccessful in achieving major concessions.

If the agreement becomes law, it will see a major change in expectations. Fuel efficiency levels have not been changed in the US since 1984. The change will represent a 40 percent increase in vehicle efficiency. However, standards remain below those set elsewhere in the world. In Europe, the level has been set at 40 miles per gallon, and in China 35 miles per gallon as standard.

Businesses call for action on climate change

150 businesses from across the world have called for a legally binding and comprehensive deal on climate change to encourage businesses to invest in low-carbon technologies.

The statement, from companies drawn from Europe, the US, China and Australia, is targeted at heads of state ahead of talks in Bali on the successor to the Kyoto agreement.

"A sufficiently ambitious, international and comprehensive, legally-binding United Nations agreement to reduce greenhouse gas emissions will provide business with the certainty it needs to scale up global investment in low-carbon technologies," the statement said.

It was thought likely that the call from business would continue to be resisted by the US government under the current administration.

US; British Enron bankers face jail

Three British bankers, controversially extradited to the US on charges arising from Enron, look likely to face a three year jail sentence.

David Bermingham, Gary Mulgrew, and Giles Darby have admitted one fraud charge after a plea bargain. The outcome is a considerable success for the defendents since they potentially had faced up to 35 years in prison.

The three said they had conspired with ex-Enron staff to defraud their company, NatWest of $19m, splitting $7m between themselves. According to prosecutors, the men advised the NatWest to sell part of an Enron-owned firm for less than it was worth. They then left the bank and bought a stake in the company, selling it on at a higher price.

Their extradition to the US hit headlines in the UK as, under arrangements brought in due to concerns over terrorism, the US was able to seek extradition without presenting evidence.

Mining companies in Africa under attack

Mining companies have accused the campaign group War on Want of using inaccurate and out of date information in a new report attacking them for pollution in Africa.

The campaign group, which is one of a coalition urging the UK government to introduce legislation to force companies to operate to UK legal codes abroad, said that Anglo American, AngloGold Ashanti and Vedanta are failing to abide by voluntary codes of conduct.

The War on Want report focuses on cyanide spills in Ghana which AngloGold Ashanti said date from late 2005, following which the company had cleaned the site up. The company took the mine over the year before, and had invested in new, better infrastructure and engaged with local stakeholders. Other accusations arising in South Africa and Zambia have brought similar rebuttals from the companies concerned.

War on Want have been criticised previously for a report that accused a number of retailers of using suppliers that exploited workers, but then refusing to give information to identify the suppliers concerned.

Gap planning 'sweatshop free' label

Gap is planning to label its products as 'sweatshop free' in a bold move to push the boundaries of the debate behind working conditions in the apparel industry.

Proposals currently being considered may include labels enabling consumers to track online exactly where garments have been made. The system is similar to the highly successful RugMark programme, which has made a real impact on child labour in India's carpet industry.

The company acted swiftly to terminate relations with a supplier that was recently shown by the UK's Observer newspaper to be using child labour via an unauthorised subcontractor. It has said in a subsequent statement: "Under no circumstances is it acceptable for children to produce or work on garments".

Merck settles Vioxx claims for $4.85bn

Merck has agreed to pay to settle legal claims that its drug Vioxx, which it withdrew from sale in 2004, caused some users to suffer strokes and heart failure. The company is to set up a fund to compensate victims.

The company has not admitted liability, and voluntarily withdrew the drug following research that suggested it might have negative impacts if used for 18 months or longer.

It will be hoping that the action will bring to an end most of the 26,000 separate lawsuits that have been brought against the company. Out of the cases that have so far reached court, Merck won 12 and lost five.

US: Yahoo attacked over jailing of reporter in China

Yahoo has been attacked by a US congressional panel for being "at best inexcusably negligent" in evidence that it gave over the case of a reporter jailed by China following evidence provided by the company.

Yahoo's executive vice-president Michael Callahan has been accused of giving false information to the panel during its investigation early last year. At that point, he said that the company had no idea why the Chinese government wanted to locate the journalist, Shi Tao. A document has since emerged suggesting employees of the company were aware it was connected to "illegal provision of state secrets".

Yahoo has denied the charge, and said that it is committed to human rights, and has always been open with Congress. The information relating to the document had only come to light after the testimony had been given.

Consumer groups hand out 'worst product' awards

An international gathering of 220 consumer organisations has attacked a number of products for being socially irresponsible, with top prize going to sleeping pills marketed as beng targeted at children.

The World's Worst Products Awards, part of the Consumers International Conference, were aimed according to the organisers at highlighting failing of corporate responsibility and abuse of customer trust.

The sleeping pills, produced by Japanese firm Takeda Pharmaceuticals, are marketed in the US under the slogan "back to school". The advertising does not, however, mention the health warnings that "further study is needed prior to determining that this product may be used safely in pre-pubescent and pubescent patients".

Other companies criticised were Coca-Cola for its Dasani bottled water (campaigners said it was nothing more than tap water), Kellogg's for cartoon character promotions and tie-ins and Mattel for what was described as 'stonewalling' investigations into recent problems of lead-based paint on its products.

Australia: Telecoms companies set voluntary code to end text scams

Telecommunications companies in Australia are to sign up to a voluntary code to rebuild trust in the sector following a scandal over the mis-use of premium text services.

The draft voluntary code, produced by the Telecommunications Carriers' Forum, follows investigations by the Commerce Commission of the competition run by TMG Asia Pacific, where expensive texts were sent to customers who then found it difficult to unsubscribe from the service. The Commission took action after receiving hundreds of complaints.

The code would tackle these problems by requiring companies offering such services to require customers to clearly consent to receiving texts in full knowledge of costs. There should also be explicit information showing how to unsubscribe from the services. Customers that have run up a bill larger than $30 would be sent a warning to alert them to the fact.

CSR FEATURES from the Internet

Muckraking ethics - 1 Nov 2007 FROM The Jerusalem Post

The ongoing Tiv Taam controversy illustrates a common business ethics dilemma: the legitimate limits of industrial espionage by competitors and news media.

Read full story

Turning the screw on fraud - 1 Nov 2007 FROM Supply Management

It must have seemed like Christmas had come early for former Ikea buyer John Brown as he received kickbacks of more than £1 million to ensure he bought goods including crackers and candles from companies owned by one individual.

But the festive spirit quickly vanished when Brown was jailed along with Adam Hauxwell-Smith and Paul Hoult after admitting corruption and fraud charges last month (News). The case bears witness to what can happen when buyers give in to temptation.

Read full story

Doing Good: Do It Right - 29 Oct 2007 FROM Management Today

You're keen to implement CSR, but it's a demanding exercise to establish a sound and effective policy that percolates through the entire organisation and shapes everything it does. Mark Vernon and Craig Mackenzie offer 20 top tips to put you on the path of righteousness.

Read full story

Recent entries from Mallen's blog

Focusing on skills - 6 Dec 2007

Business in the Community held a major gathering for top business leaders this evening, with the Prime Minister in attendance, to focus on the importance of improving skills and developing talent. Read more

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Crying over spilt milk

Article by Mallen Baker

There is no greater myth in corporate social responsibility than the idea that there is always an obvious right thing to do, which will bring reputational and business benefits. And there is no better illustration of this fact than the way that UK supermarkets have been comprehensively stuffed over the recent milk price-fixing row.

The headline news has been that supermarket giants, including Asda-Walmart and Sainsbury's, have admitted taking part in fixing the prices for milk and cheese in 2002 and 2003 that, in the words of the Sunday Mirror newspaper and many others "milked an extra £270 million from shoppers".

Consumer groups, such as the National Consumer Council, went for the jugular. "Today’s admission of guilt by Sainsbury’s and Asda confirms that these supermarkets have been creaming off money from their customers in breach of competition laws – helping neither customers nor their farm suppliers.

"Without the OFT’s investigation this shameful episode would not have come to light. It will do enormous damage to the reputation of supermarkets. Consumers have always trusted supermarkets to provide value for money, but they will be more sceptical about their claims in the future."

There is an interesting dynamic here. We all know and agree that healthy competition helps to keep prices low. Here, we seem to have entered the perspective that says that anything other than the lowest achievable price is somehow theft from shoppers. There was a different perspective at work in 2003.

At that stage, the big concern and political pressure was around the desperate state of the milk industry. Farm gate milk prices were hitting rock bottom, and there was great outrage that the supermarkets were paying insufficient prices to the farmers to ensure sustainable livelihoods. Nobody then was talking about the imperative to keep prices rock bottom.

The National Farmers Union reflects this situation in its own response to the fines: "This was a period of time that was extremely difficult for dairy farmers when prices were very low for a sustained period and there was great pressure on dairy companies and retailers for a farm gate price increase."

In response to the political pressure on them at the time from the farmers and the government, the supermarkets raised prices for milk between October 2002 and October 2003. The fact that they did this in response to the concerns over milk prices was known, and supported at the time.

For instance, the UK government, in its formal response to the Thirteenth Special Report of the Select Committee on Environment, Food and Rural Affairs, said "We conclude that the July and September 2003 retail price increases were transmitted to farmers ... We welcome the decisions of the supermarkets to increase the retail prices of liquid milk and cheese last year while specifying that the price increases must be passed along to farmers."

The government went on to say: "We urge the supermarkets to place more weight upon their social responsibility to ensure, at the least, a sustainable farmgate price for British dairy farmers."

They didn't mention the part about the OFT fining them if they did.

All the supermarkets affected are furious, but most have come to the conclusion that it was better to minimise the consequential costs through compliance. Justin King, CEO of Sainsbury said: "We are disappointed that we have been penalised for actions that were intended to help British farmers".

Tesco has said, however, that it will fight the Office of Fair Trading's ruling arguing that it did not take part in any collusion. Tesco was the first company to raise its prices at the time, although its defiance is thought legally risky given the larger penalties it may be hit with should it lose.

What has been the cost to the companies? Well, so far a 116m uk pounds fine. But there may be more to come. One leading law firm said that the big supermarkets faced potential lawsuits by consumers. Cohen, Milstein, Housfeld & Toll said that it was "analysing the options for legal action on behalf of all consumers and small businesses".

This is not to argue that the supermarkets have been flawless paragons of virtue. The dairy supply chain in particular has a complicated history of claim and counterclaim of bad practice, with bad will and blame being the order of the day. Undoubtedly the supermarkets will bear some responsibility for this.

But the issue underlines just how difficult it is to square some of the difficult supply chain issues with the consumer expectations of lowest possible prices. When prices paid to producers are too low, everyone agrees that for the sustainability of food production, they should be increased. But if an individual supermarket acts alone, it hits only some producers and makes that supermarket uncompetitive. If they all act together, the action - however politically approved at the time - is criminalised, prosecuted and presented as theft from shoppers.

This has not been a good outcome for those who argue for greater accountability of corporations to stakeholders. There will often be cases, of course, when different stakeholders energetically disagree, and the company has to balance competing demands in its decisions over the right thing to do.

Sadly, stakeholders can also be capricious. We have now the best illustration to date that they can penalise you today for doing what they demanded you do yesterday.

Does that mean that companies should now disregard stakeholder concerns and simply focus on the bottom line? Of course not. But in the same way that many companies have found disappointment in producing new products to meet the demands of representative customers in focus groups - like the ones who said they preferred the taste of "New Coke", for instance - likewise they need to consider and interpret stakeholder demands and accept that the decision is always theirs, as are the consequences.

We will see more of this. Environmental sustainability implies higher prices. Consumer organisations want low prices. Pressure on food supplies will go up. Solutions will be difficult to achieve by individual companies acting alone. Running retail just became a whole lot more political.

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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