Business Respect - CSR Dispatches No 119 - 20 Jan 2008

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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 role of innovation in corporate sustainability.

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/119.html.

Copyright 2008 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

When so many people in different parts of the world still think that the corporate social responsibility agenda is about philanthropy, it is important to be able to highlight the areas where it goes successfully to the heart of the business strategy.

A new paper does just this by focusing on the role of innovation in achieving corporate sustainability, and the review of this paper forms the article for this issue.

Incidentally, one of those academics, David Grayson, recently took over as the head of the Doughty Centre for Corporate Responsibility at Cranfield. David has recently released a number of other documents looking at areas such as the business case for CSR, and the role for smaller businesses. You can see some of these papers at the Doughty Centre website at: http://www.mallenbaker.net/jump.php?Link=5.

Last time's piece on predictions for the next five years certainly caught the attention of some of you. One reader wrote: "Looking at your 2013 list, I am intrigued by your predication that a 'big player' will be exposed. That may give credence to those who dismiss CR as PR and green wash however I think that there are weaknesses in reporting. We don't get the bad news and challenges but simply the good news and successes."

The same person, however, expressed dismay over the prediction that CSR would remain the term of choice over the next five years! I never said that the predictions represented my preferences, just a view of what would actually come to pass!

At the recent event where I spoke about CSR and private equity, my hosts there said that they had been intrigued by the prediction that one or two private equity firms would emerge as CSR leaders within five years. They said that they couldn't at this stage understand who that might be. Well, if it had been obvious, I guess it would have been a much less interesting prediction!

Still, I thought it would be interesting to make a related question the topic for one of the site votes - just to test the temperature amongst the readership. So the vote now has been changed to:

Private equity companies are, by their nature, less socially responsible than plcs.
* Yes, they are less responsible
* No, they are more responsible
* There is no difference between plcs and PE firms

The previous vote therefore has now ended. The final tally was as follows:

Which of these groups has done the most so far to respond to the challenge of climate change?
Governments 236 (22%)
Business 330 (31%)
Citizens 514 (47%)

Thanks to the 1,080 people that voted.

Mallen Baker
mallen@mallenbaker.net

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CSR News 20 Jan 2008

India: Court dismisses claims over Tata Nano factory

The High Court in Calcutta has rejected arguments by campaigners that land for Tata's factory constructing its new cheaply priced Nano car was illegally acquired.

Opponents had accused the government in West Bengal state of appropriating nearly 1000 acres of farmland by force. The legal petition had followed vigorous protests by local groups.

The conclusion comes just one week after Ratan Tata unveiled the new Nano car which will be priced at around $2500. The car created instant controversy, with many delighted consumers avowing their intent to buy one as soon as it was available, whilst environmental concerns were the chief story in western newspapers.

UK: Tesco avoids child labour cotton from Uzbekistan

Tesco has announced that it is to avoid buying cotton from Uzbekistan because of the country's continued use of forced child labour.

The company issued a statement saying that following discussions with campaign groups, the company had concluded that the use of organised and forced child labour continued in the country, and that as a result it would not use its cotton in its clothing.

Tesco said that it now required all of its suppliers to identify the source of raw cotton used in all Tesco clothing.

Campaign group the Environmental Justice Foundation praised Tesco's action, calling it "unprecedented from a major UK retailer".

Global Compact: Investors focus on failing companies

Investor groups, led by Morley Fund Management, have warned 78 companies that they are failing their pledges under the Global Compact by not producing progress reports.

According to the UN, 904 companies have so far failed to produce the update reports required. The investors have focused on the largest of the listed companies whose reports are overdue.

Companies included in the list of overdue reporters includes Premier Oil, Standard Chartered, Hermes, and Edelman. Several of the criticised companies said that they intended to produce reports in the near future.

The group has also praised a smaller group for good performance.

US: Companies put eco-patents into the public domain

IBM, Nokia, Pitney Bowes and Sony have announced that they have put 31 patented environmental technologies into the public domain for the benefit of society.

The companies said that the Eco-Patent Commons, which will be run by the World Business Council on Sustainable Development, would help to spur further innovation in areas that need speed in development, particularly in energy efficiency and water saving.

27 of the initial 31 patents have been contributed by IBM, including a patent for a process that converts pollutants into stable gases. Sony has donated a patent that enables the purification of waste water. Nokia has given a process for transforming old phones into new electronic devices.

France: Total found guilty over France's worst oil disaster

Total has been fined a maximum penalty of 375k euros and ordered to contribute towards nearly 200m euros damages for its role in France's worst oil disaster when the tanker Erika sank in 1999.

The disaster saw 20,000 tonnes of oil lead into the sea, contaminating around 400km of coastline. In addition to the company, the owner and manager of the Erika were also found guilty, along with the company that had certified the ship seaworthy.

Total was cleared of separate charges of complicity in endangering people and property.

UK: Bullying at work "endemic"

Bullying in the workplace is widespread in the UK, affecting a staggering 80 percent of employees, with a third of employees so unhappy they had considered leaving their job, according to the charity the Samaritans.

The group's research, which was based on interviews with 2,600 adults, said that younger employees were the most susceptible to stress. Around thirteen million working days in the UK were thought to have been lost to stress during 2005.

Half of those questioned said that they had witnessed a colleague reduced to tears at work, and a third believed that employers ignored the problem.

South Korea: Samsung raided over bribery claims

Police have raided the headquarters of Samsung Group as part of ongoing investigations into alleged bribery and corruption. The firm has been accused of having run a "slush fund" to the value of around $215m.

The company, which has denied the allegations, has been described by former Samsung lawyer Kim Yong-Chul as having bribed prosecutors, judges and government officials.

EU: Microsoft faces new antitrust probe

After years of battling with the European Commission over previous charges of monopolistic behaviour, Microsoft faces a fresh probe into whether it has abused its dominant market position.

This time, inquiries focus on whether the bundling of the browser Internet Explorer into the Windows operating system unfairly excludes alternative browsers such as Opera. The question is one that bears strong similarity to the previous action which was found against the company initially in 2004.

The Commission is also to review whether the company withheld information from companies seeking to make their products fully compatible with Microsoft software. The new complaint has been backed by a number of corporations, including IBM, Sun Microsystems and RealNetworks.

Canada: Consumers using corporate social responsibility in buying decisions

Researchers have said that consumers in Canada are using corporate social responsibility in evaluating their willingness to pay for a product.

The study "Reward or Punish?" from the Richard Ivey School of Business also said that consumers will punish companies for unethical behaviour, for instance those that exploit foreign workers.

According to a statement by the school: "The era of self-interested companies trying to maximize wealth at any cost appears to have been supplanted by an era of corporate social responsibility. This research represents an important step towards understanding consumer psychology by demonstrating that consumers can influence the price a company can charge for a product."

Norway: Government pension fund drops companies with links to munitions

The Norwegian government global pension fund has excluded Serco Group, GenCorp and Hanwha Corp from its fund on ethical grounds because the companies are involved either in producing nuclear weapons or cluster munitions, according to the finance minister Kristin Halvorsen.

The fund has seen others companies excluded in the past, including Wal-Mart and Boeing, when the national Council of Ethics has found firms to fall outside of its ethical criteria. 27 companies in total have been excluded in the last four years.

Hanwha, a South Korean company, was dropped according to the finance ministry because it had confirmed that it is engaged in the manufacture of cluster weapons. Serco of the UK and GenCorp from the US, were both held to be involved in nuclear weapons production.

US: Shell sued for refinery pollution in Texas

Shell is facing a federal lawsuit over pollution at its refining and chemical plant along the Houston Ship Channel. The suit, brought by the Sierra Club, seeks a fine of up to $32,500 for each of around 1,000 separate incidents.

Shell has already paid fines on some of the incidents, but the Sierra Club argued that these have been set at too low a level, and are treated by the company as an acceptable cost of business.

Shell has said that it hopes to "continue discussions" with the Sierra Club on the circumstances behind the lawsuit.

Last year, a study by the University of Texas suggested that there could be a link between childhood leukemia and proximity to the refinery.

CSR FEATURES from the Internet

How good should your business be? - 17 Jan 2008 FROM The Economist

How wonderful to think that you can make money and save the planet at the same time. “Doing well by doing good” has become a popular business mantra: the phrase conjures up a Panglossian best-of-all-possible-worlds, the idea that firms can be successful by acting in the broader interests of society as a whole even while they satisfy the narrow interests of shareholders. The noble sentiment will no doubt echo around the Swiss Alps next week as chief executives hobnob with political leaders at the World Economic Forum in Davos.

Read full story

Business scandals teach lesson few in Japan learn - 14 Jan 2008 FROM The Japan Times

Without a doubt, 2007 will go down as an "annus horribilis" for many industries in Japan, particularly the food industry. The list of scandals and crises last year was long indeed, and began right in January with the discovery that crowd-pleasing confectioner Fujiya had been mislabeling products for years.

That the iconic brand was capable of such deception was a shock — even to a public that is fairly used to coverups and other malfeasance. Fujiya since has come under the protective wing of former rival Yamazaki, but other companies guilty of similar crimes have fared less well.

Read full story

The Moral Instinct - 13 Jan 2008 FROM New York Times

Which of the following people would you say is the most admirable: Mother Teresa, Bill Gates or Norman Borlaug? And which do you think is the least admirable? For most people, it’s an easy question. Mother Teresa, famous for ministering to the poor in Calcutta, has been beatified by the Vatican, awarded the Nobel Peace Prize and ranked in an American poll as the most admired person of the 20th century. Bill Gates, infamous for giving us the Microsoft dancing paper clip and the blue screen of death, has been decapitated in effigy in “I Hate Gates” Web sites and hit with a pie in the face. As for Norman Borlaug . . . who the heck is Norman Borlaug?

Read full story

Business ethics matter to consumers - 10 Jan 2008 FROM Western News

Do consumers care enough to reward ethical companies and punish unethical companies? Will they pay more for a fair-trade cup of coffee and less for a t-shirt lacking organic cotton?

Researchers at the Richard Ivey School of Business have found a strong relationship between a company’s ethical behaviour and a consumer’s willingness-to-pay.

Read full story

Recent entries from Mallen's blog

Private equity in the spotlight - 17 Jan 2008

I spoke at Cass Business School last night at a session entitled 'Can CSR and private equity co-exist?'. Mixed audience of businesses and students – around about 150 strong. Read more

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Innovation for sustainability - can we meet the challenge?

Article by Mallen Baker

The business environment is changing dramatically. Climate change and poverty have become market shapers that will not disappear with economic hard times. Adaption and innovation is the successful business response to such changes, so how far can corporate sustainability become a feature of innovation within business?

A new paper "A new mindset for corporate sustainability" produced by six academics from across the world, and sponsored by BT and Cisco, explores how innovation can act as a crucial driver for business sustainability and success. It gives a good, accessible overview to a number of trends that are driving business change and, particularly helpfully, provides a number of case studies that - whilst including some of the 'usual suspects' includes more examples across the world.

The group start by considering what are the key drivers of innovation in companies' approach to sustainability. They identify three:

* Boardroom commitment to sustainability helps build a framework for robust corporate governance.

* Investors are becoming increasingly receptive to sustainability.

* Sustainability offers a proven and legitimate framework for exploiting new avenues for innovation.

In support, they quote rcent research released by Goldman Sachs which showed how more of the leading performers have adopted governance measures and social and environmental policies. The implications have been widely accepted, with 90 percent of CEOs saying that they are doing more now than they were five years ago to incorporate environmental, social and governance issues into their companies' strategy and operations.

Of course the debate, not really dealt with by the authors here, has been where the cause and effect lies. Do companies that adopt sustainable policies become more successful as a result? Or is it rather the case that more successful companies are generally just better managed, and this is one of the things that they therefore do?

The essence of the first would suggest that it is possible for a badly managed company to become successful by implementing sustainability policies. Put like this, it is surely not a proposition many would support. It is much more likely that the factors of good management that make up successful companies include, but are not limited to, engagement with corporate social responsibility and sustainability. It is a qualification I always want to make when I see graphs suggesting how CSR or sustainability boosts bottom line performance.

The group identify three main areas of innovation which can help businesses to put sustainability into the heart of their business strategy: Research and development within the business; supply chain innovation; and go-to-market strategies.

They suggest that companies ask the following questions of themselves and their products:

* How do our prices compare with the total cost of product manufacture / development, sale and disposal at the end of its life?
* Are our technological advances mostly incremental?
* Where can we remove material content from our products?
* How can our service content be dramatically increased?
* Where can our waste products be added to other processes?
* How do our products and services create social value?
* How can our own operations create social value?

Examples of innovating within the business include Interface, with its move for corporate customers of its carpets to a service model, rather than one based on shifting as much product as possible.

On the supply chain, the authors quote Marks & Spencer for its knowledge interchange with 12000 suppliers around the world, aiming to build capacity amongst its suppliers for identifying new environmental and social standards.

In 'go-to-market' strategies, the authors review some of the different businesses that are addressing the potential new markets at "the bottom of the pyramid", such as Mexican cement firm Cemex and Grameen Phone.

Some of these examples are well known in the CSR literature, of course. But the authors look wider. They say that whilst the view that "sustainable business is good business" has gained widespread favour in the West, companies in emerging markets have a harder mission. The view there is that sustainability programmes are an extra cost rather than an investment with benefits, and therefore they will lose their competitive advantage.

But there are leading companies that are beginning to make progress. For instance, Shenzhen Water, which has focused its innovation efforts on areas including sewage treatment, decontamination of bedload and water recycling. The company established the Institute of Water Technology Research for Safe Drinking Water, which has led to 19 paent applications in sustainable water use.

Overall, the paper is a good summary - accessible to non-academics - of how sustainability can be effectively embedded into business innovation. Its sole irritation is that the authors felt the need to create a new acronym - the inelegant S2AVE, which stands for Shareholder and Social Added Value for Environment Restoration. Such acronyms only create more barriers to communication, frankly.

But on the more substantive plus side, the paper provides a good ten part set of conclusions providing guidance for companies looking to learn from the leaders. These are straightforward aims that, taken together, will help companies to really embed sustainability into their future as a business. That they might be considered straightforward, even sometimes obvious (such as "Make innovating for sustainability a part of your company's vision") it is remarkable how often such aims are declared mundane and obvious by companies that nevertheless do not do them.

This is a useful paper for the business leader and the student alike.


"A New Mindset for Corporate Sustainability" by Professor David Grayson, Dr Mark Lemon, Professor Sarah Slaughter, Dr Miguel Angel Rodriguez, Professor Zhouying Jin, Professor Simon Tay.

You can download a copy of the document by using the following link:

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