Business Respect - CSR Dispatches No 125 - 13 Apr 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 look at how the top food companies are responding to the challenge of obesity.

In the news:

Feature articles on the internet:

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Topics:

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Welcome

Nothing is quite so personal as something that you put into your body. So it is no great surprise that public debates on what goes into our food excite considerable interest, with strong views on all sides.

At the sharp end of this debate are the food companies, who have discovered that simply following what the customer wants without due care to the consequences can lead to a big problem. A new report from Insight Investment and JP Morgan looks at how ten of the biggest food firms are now responding to the growing problem of obesity - and we review the report this issue.

If you are a reader of Business Respect and you live in, or near to, Kiev in Ukraine, you might be interested to know that I will be speaking on Friday 18th April at the conference "Civilized economy and civilized society through social responsibility" - focusing on some trends in global CSR as well as a few observations on the UK's government's engagement with the CSR agenda as an example of how governments can play a constructive part.

See http://csr-conference.org.ua for details. It would be great to see you there.

On a separate note: For all college students - I am looking to initiate a conversation with a small group of students interested in the issues around corporate social responsibility who might have some energetic, interesting ideas and perspectives on what sort of resources would really help to make more young people engaged on these kinds of issues.

This will be a short, collaborative conversation at first, but if some real energy emerges from it, we might go further in creating some sort of concrete collaborative project. If you would be interested in being considered to join such a discussion, send me a one pager about yourself (not a resume - tell me what makes you motivated about this area, and what skills, insights, quirks and creative urges would make you a valuable collaborator.) Send me a note by April 25th at mallen@mallenbaker.net.

Finally, I've added a new vote to the website. We all know that tougher times are coming - the thing that no-one seems to quite agree about is how much of an impact it will have on how companies approach corporate social responsibility. So I thought it would be interesting to get your views. The vote reads as follows:

In the face of an economic recession, companies will:
* keep CSR as a priority
* cut budgets, but still focus on key issues
* drop CSR as an unaffordable luxury

Over to you.

Mallen Baker
mallen@mallenbaker.net

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CSR News 13 Apr 2008

Hewlett-Packard releases list of suppliers

Hewlett-Packard has released a list of its top suppliers, representing 95 percent of the company's supplier spend, in a ramping up of transparency in the IT sector.

HP says that it requires all suppliers to comply with the Electronic Industry Code of Conduct, covering pollution prevention, resource reduction, hazardous substances and air emissions. The company hopes that the increased visibility will result in operational changes in practices, and will encourage other companies to follow suit.

Mark Hurd, Hewlett-Packard's chairman and CEO said: "HP is sharing our list of top suppliers to enable collaboration, increase supplier accountability and build on our commitment to supply chain transparency."

Ryanair faces probe over advertising breaches

Ryanair has been referred to the UK's Office of Fair Trading following a series of complaints about its adverts which have been found to be in breach of rules seven times for exaggerated claims and misleading prices.

The company has hit back and complained that it had been victimised by the Advertising Standards Authority, which was pursuing a clear "anti-Ryanair agenda". It said that the agency had followed unfair procedures and bias.

Advertising controversies around Ryanair have included ads which were accused of playing down the impact of aviation on the environment, and using a model in schoolgirl style clothes with a headline "hottest back to school fares". French President Nicolas Sarkozy and his wife also won a case against the company for using their picture without consent.

The Advertising Standards Agency said that Ryanair had been given every opportunity to put its house into order. "Instead, they have continued to mislead consumers and denigrate competitors."

Hong Kong: Work-life balance changes a big feature of the last four years

Companies in Hong Kong are showing a significant change in work-life balance for workers over the last four years, according to a review carried out by CSR Asia.

The research suggests that since 2004 the average working week for employees has decreased by around five hours. The rapid shift is ascribed to government action to move companies from a standard of five and a half working days per week to simply five.

According to CSR Asia, the change has had a beneficial effect. There has been a major increase in job satisfaction amongst those polled, and there are fewer people planning to change their jobs.

There remains further to go. Young men still work the longest hours of any demographic group and report negative health consequences of long hours working.

South Korea: Samsung Chairman summoned for second time over corruption probe

Samsung Group Chairman Lee Kun-hee has been summoned for the second time in a week to be questioned as part of a probe into alleged corruption at the country's largest company.

Lee was questioned previously for almost 11 hours with special prosecutors as part of an investigation which started in January and is now thought to be coming to a close. The probe was prompted by allegations that the company kept a fund totaling over $200m that was used for bribing prosecutors and judges. Other officials and even Lee's wife have also been questioned.

Samsung has denied the allegations.

BP named in Kazakhstan bribery lawsuit

Oil giant BP has been named in a major lawsuit over allegations of bribery involving government officials in Kazakhstan. Former CEO Lord Browne and current CEO Tony Hayward are also named in the suit.

The suit, which also targets BG Group and Statoil, has been filed by Jack Grynberg, the chairman of Grynberg Production Corporation, and alleges that the defendants bribed officials in order to win oil rights. Grynberg had a business relationship with the defendants, and has brought the suit in order to plead his own innocence of incidences of bribery that he said were carried out by the defendants without his knowledge.

The action was prompted by an existing case against a US businessman thought to be at the centre of a conspiracy to commit bribery in Kazakhstan. Grynberg has brought more than 73 separate lawsuits against rivals.

US: Ford details 30 percent greenhouse gas cuts by 2020

Ford has produced detailed plans for how its new vehicles emissions will be cut by 30 percent over the next 12 years - the first of the Detroit companies to do so.

The move bought it some credit with activist shareholder groups, such as the Interfaith Centre on Corporate Responsibility, which said that it would now shelve plans to put a shareholder resolution to the company's AGM.

In fact, the announced figure is close to the efficiency gains that the new US fuel economy standards will require, so the move is an early indication of compliance. However the company gained plaudits as being the first to carry out an extensive review to show how it would move forward. Investors are now likely to target GM, which has said in general terms that its plans on fuel efficiency are well advanced.

US: Oil firms asked to justify record profits

Senior executives from five of the largest oil companies have been called upon to explain why they should continue to receive tax advantages when profits soared to unprecedented heights during the last year.

The executives, from Exxon Mobil, BP, Shell, Chevron and ConocoPhillips, gave testimony before a committee of the House of Representatives, and argued that high oil prices had not been caused by the companies, and the huge earnings that had resulted were justified.

J.S. Simon, senior vice president of Exxon Mobil which made a record $40bn, said that the high earnings needed to be seen in the context of the scale of the business and its huge investment requirements, as well as the cyclical nature of the business.

In the meantime, Americans are having to come to terms with the end of the era of cheap gasoline. Although oil company profits are generally made on the extraction side of the equation, the contrast of higher retail prices and record profits is a potentially volatile mix.

UK: Asda-Walmart opposes extension of new code of conduct to overseas suppliers

Asda has said that it wants overseas suppliers excluded from a code of conduct being considered by the Competition Commission designed to ensure that suppliers enjoy fair trading terms.

The company said in its response to the Competition Commission that overseas suppliers, who have customers in other countries that are not subject to the same conditions, should be excluded. Existing codes of practice do apply to such suppliers if they are direct first tier suppliers.

Campaign groups attacked the company for taking a position which, they said, would prevent improvements in the conditions for workers abroad forced to exist on low incomes.

The retailers face difficult times at the moment with rising global food costs squeezing margins and challenging their market position of providing low prices.

Asda said that it was not the case that the company didn't want any code that would apply to overseas suppliers. "We are committed to ensuring all of the goods we sell are produced without exploitation and in acceptable working conditions. We have been active members of the ETI since 1998 and our ethical trading policy is closely aligned to the ETI's base code."

In a letter to the Guardian newspaper it went on to say that it had conducted more than 15,000 supplier factory audits in a number of countries.

UN business school initiative reaches 100 schools signed up

The United Nations has announced that its initiative to promote social responsibility through educational programmes has now been endorsed by over 100 business schools around the world.

Institutions taking part in the Principles for Responsible Management Education (PRME) commit to bring their mission and strategy into alignment with UN statements on sustainability, labour practices and anti-corruption. They are asked to put these issues into their standard curriculum for business education.

A Global Forum for Responsible Management Education is to be held later in the year at the UN headquarters.

CSR FEATURES from the Internet

CSR and the ABA - 11 Apr 2008 FROM Perspectives in responsible sourcing blog

The American Bar Association (ABA) held a meeting in New York from April 1-4, and CSR figured prominently on the agenda. Even in sessions not specifically geared toward CSR, it was mentioned either as a trend to be seriously accounted for in the future or as an issue to be addressed in current decision-making.

Read full story

Many Non-Profits Fall Short on Ethics - 3 Apr 2008 FROM Society for Human Resource Management

If you’re a nonprofit, the last thing you want is even a whiff of scandal.

However, fraud is as prevalent in nonprofit organizations—those often seen as having altruistic goals—as it is in business or government, and misconduct in these organizations is at the highest level on record, says an Ethics Resource Center (ERC) survey.

Read full story

Recent entries from Mallen's blog

Speaking another language - 8 Apr 2008

Some of the arguments for corporate social responsibility only make sense within a specific cultural context. In other cases, some would have you believe this was the case, but it is really another flavour of denial. The trick is to tell the difference. Read more

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Cutting out the fat

Article by Mallen Baker

We live in a fat society - and food companies are beginning to accept that although they do not bear sole responsibility for the fact, they have to respond to the issue. Now a new study has compared the responses by ten of the biggest food producers to sort out the leaders from the laggards.

Is it really that much of a problem? According to the World Health Organisation (WHO) over 1.6 billion adults are overweight, of whom around 400 million are clinically obese. In addition, 155 million school age children are overweight as well, which is one in ten children globally. The problem is seen in both developed and developing countries and, at the moment, the growing levels of attention being given to the issue has not made any difference to the year on year increase in the problem.

The growth in obesity is leading to other health problems that are associated with the condition, particularly increases in heart disease, stroke, cancer and diabetes. Changing diets - particularly in developing countries that are adopting more Western diets - and increasingly sedentary lifestyles are chiefly to blame.

The first response of food companies - that of denial - was pretty understandable. The truth is that they had been doing what any good marketing company should do - following consumer demands which, in this case, led them towards more convenience foods which could only be made as convenient as the consumer wanted by adding all sorts of extra components that you would probably not find in home cooked food.

Now things have changed. The food companies have felt the heat of public pressure, and have accepted that whereas before they believed they could only be held to be responsible for the things they actually did, they had entered a world where they were expected to do what they could to actually influence the behaviour of customers. This was new territory in many ways.

So they have begun reformulating products to make them healthier, they are providing more consumer information through labelling and other point-of-sale communications. They have been adjusting their marketing practices and are now to be heard debating whether or not it is legitimate any more to target advertising directly at children.

But it is never enough, and the threat of regulation is not far away. Legislators mutter about new rules over marketing, labelling and food composition. None of these measures would be realistically likely to have the slightest impact on the problem of growing levels of obesity, but it would fulfil one key political criteria - the need for the governments to be seen to be doing something about the problem, and to do so by coming down tough on one group that the general population believes are largely to blame, whether it's true or not.

In the face of this challenging business environment, the new report by JP Morgan and Insight Investment is very timely. The review looked at what companies were doing across their operations, and separated this into four sections:
* Framing the issue - how well the company understood the challenges
* Formulating objectives and strategy - what the company plans to do
* Governance mechanisms - how the company makes decisions and consults with external stakeholders
* Implementing the strategy - how it is doing in actually delivering against its analysis.

The companies that will get the most good cheer from the report are Danone, Unilever and Nestle. These three companies came in the top scoring section.

Danone was given credit for its comprehensive policy and strategy on health issues, as well as for its excellent product labelling and consumer information. Unilever did well because it had done the most in reformulating products across its range bringing them wherever possible within the FDA / EU nutrition standards. It has also produced a strong set of marketing principles, particularly in relation to marketing to children. Nestle's 60/40+ programme aims to ensure that the company's products are not only preferred by 6 out of 10 people, but also have a better nutritional profile than competitors, and provides accessible and affordable products to the poorest communities in many markets.

At the less happy end of the scale, PepsiCo, Coca Cola and Premier Foods. The report authors criticised the companies for having been slow to respond to the agenda, although all of them are to a significant degree committed to doing so.

Overall, the report authors said that they found a broadly encouraging picture of companies taking action on obesity, whilst seeking to do so in a way that gave them competitive advantage. European companies seem to be doing the most. The US companies are taking steps, but tend to focus these on their home markets with much less happening in developing countries.

One example of good progress is in the area of transfats. Danone eliminated transfats in 1998, and Unilever and Nestle have begun to remove them from their entire production. Pepsi is in the process of setting targets and hopes to be transfat free by the end of the year.

Other than the three 'top' companies, the biggest failing seems to be in actually communicating about the health and wellness programmes.

But consciousness has definitely been raised. Speaking at the CIAA Congress in 2006, Patrick Cescau, the CEO of Unilever said: "It is puzzling, with the benefit of hindsight, why a large part of the food industry took its eye off the 'nutritional' ball during the 1990's. Unfortunately, while we were focused on issues of taste, convenience and value consumers were getting fat, unfit and progressively unhealthier ... It is important to acknowledge that the issues we face as a European food industry are partly an outcome of our own success."

The report finishes with a number of recommendations. A key one is that companies should look at taking action across all markets, not just their home markets. It is one of the facts that breeds cynicism and disbelief - when a company only takes action in the places where it has been threatened with legislation, people assume that it is because the company wants to continue to 'get away with' bad practice where it can, to the detriment of health in those areas.

In this spirit, the report recommends that companies reformulate products across their whole portfolio, and that they should offer healthy options to the poorest segments of customers who are often the ones that have the poorest diet.

Of course, the food companies are not alone, and it would have been interesting to benchmark some of the other players in all this. How many of the computer games companies are accepting their share of responsibility for increasingly sedentary lifestyles? It has certainly been a point of debate for them, but how much has that translated into action? And what about governments? In the UK, the government contributed to the problem in the 1980s by selling off school playing fields, and is now seeking to make good by improving the quality of school dinners. What else should it be doing, other than pointing the finger of blame at the food companies?

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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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