Business Respect - CSR Dispatches No 126 - 27 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 review a report on managing CSR issues with small companies through the supply chain.

In the news:

Feature articles on the internet:

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Topics:

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Welcome

The theme for the next couple of months for me seems to be Central and Eastern Europe. Not only was a speaking last week at a very well organised event on corporate social responsibility in Kiev, Ukraine, but I have another coming up in Bratislava in Slovakia, and a tour of no fewer than three countries in the South Caucasus at the beginning of June.

So it is quite fitting that this time around, the lead feature on managing SMEs through the supply chain should share this broad geographical focus. Although a review on a recent report talking about managing SMEs in the global supply chain, it happens that the focus for that report was exclusively suppliers of Hewlett Packard from the Czech Republic, Hungary and Poland. Nevertheless, it provides an interesting snapshot of current practice.

And now, I would like to ask you - valued reader - for a small favour. This is something I haven't done before, and I hope you will consider the request.

It is just this. Please help to support Business Respect as a free email service to the community of people interested in corporate social responsibility. PASS THIS ISSUE ON with your recommendation to a friend (or two!) you think might be interested. After all, the chances are that's how you heard about it - right?

Thank you! It won't now be the last time of asking - hopefully each time you will be able to think of one or two specific colleagues that will have particular interest in that issue's lead feature, or one of the news stories.

The vote on the website is the closest we've ever run at the moment. You may recall that it goes like this:

In the face of an extended economic recession companies will:

Keep CSR as a priority 86 (39%)
Cut budgets, but still focus on key issues 83 (37%)
drop CSR as an unaffordable luxury 54 (24%)

Thanks to the 223 people that have voted so far. Still time to make your own views heard.

Mallen Baker
mallen@mallenbaker.net

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CSR News 27 Apr 2008

Australia: Hugo Boss to ban wool produced using mulesing

Hugo Boss has said that it will avoid wool for its fashion clothing chain from producers still using the practice of mulesing by 2010 saying that such practices contravene the company's corporate values.

The move prompted the Australian Wool Growers Association to say that it expected Australian producers to have largely moved towards alternatives to the practice within the two year deadline. At the moment, it said, farmers are using pain relief techniques whilst searching for viable alternatives.

Around 15 to 20 percent of the Australian wool farms producing 'superfine wool' supply Hugo Boss.

Campaign group People for the Ethical Treatment of Animals (PETA) have been waging an ongoing struggle against Australian farmers to see an end to mulesing.

Organic labelling under attack over addition of food miles factor

Ethical shopping company the Co-operative Group has attacked the move by the Soil Association to include a prohibition of air freighted goods within its organic labelling system.

The company said that it makes no sense for the Soil Association to place such a large emphasis on air freight, which can be a relatively small part of the total environmental impact of products, whilst ignoring bigger factors and the social benefit in developing countries of the trade.

The Soil Association has countered that it might consider including air freighted goods that meet certain social criteria, for instance have been produced to Fairtrade standards. The group says that as little as half a percent of organic produce is currently air freighted.

The Co-op however argues that even modified the plan misfires because it may unwittingly favour goods that provide a poorer environmental option, and needlessly punishes poorer producers whose processes are often more environmentally friendly.

UK: Campaigners attack Unilever over palm oil

Campaigners dressed as orangutans scaled the walls of Unilever's London headquarters, as well as protesting outside a factory elsewhere in the UK, in protest at the company's sourcing of palm oil.

According to the campaigners, one of the sources of palm oil - the peatland forests of Indonesia - are one of the last remaining habitats of the orangutan and is being damaged by the extraction of the oil. They called on the company to stop trading with suppliers that are involved in the destruction of the rainforests.

Palm oil is used in a wide range of food and cosmetic products and has been identified as a key sustainability issue. Unilever is one of a number of companies that has joined a Roundtable on Sustainable Palm Oil.

US: Employees attest to widespread greenwashing by firms

A recent survey of US employees has suggested that 59 percent of employees believe that their own companies could do more to be environmentally friendly, with a full 68 percent believing that most companies engage in 'greenwashing' - making green claims not backed up by reality.

The survey, carried out by Harris Interactive for recruitment firm Adecco, suggested that over a third of workers now said that the environmental issue might affect their choice of which company to work for, with younger employees particularly being willing to sacrifice a part of their salary expectation in return for working for a company with good practices.

The poll covered 2,281 adults aged 18 and older.

US: Investment banks accused of schizophrenia on climate change

According to a report released by environmental group Ceres, key investor champions of climate-change related activity have simultaneously been voting against resolutions demanding companies disclose more information on their climate strategies.

The report named companies Morgan Stanley and State Street Global Advisors as being guilty of inconsistent approaches, having developed climate change related products but failing to deliver similar sentiments towards companies whose shares they hold.

Morgan Stanley's mutual funds supported none of the 215 climate resolutions they might have over the three year period 2004-2007.

The companies named, however, dispute whether the resolutions brought were always framed in a way that should be supported. Morgan Stanley said that it votes on a case-by-case basis to determine impact on shareholder value, and generally votes against proposals requesting reports that are "duplicative, related to matters not material to the business, or that would impose unnecessary or excessive costs".

Ceres countered by arguing that mutual funds that ignore climate resolutions are failing in their fiduciary responsibilities. The organisation praised Goldman Sachs as being the firm that supported the largest number of shareholder resolutions.

UK: Retailers in tobacco price probe

The UK's Office of Fair Trading has suggested that tobacco firms and supermarkets including Asda-Walmart, Sainsbury and Tesco, have been involved in an arrangement to swap information on future tobacco pricing which, whilst falling short of price-fixing, had the same effect for customers and would be, if proved, illegal.

A further allegation, which also involved tobacco firms Imperial Tobacco and Gallaher, was that the companies had an understanding that the price of some brands would be linked to rival brands, hence hampering true price competition.

Tesco responded to the charge saying that it did not believe it had acted in any way that would harm consumers and it looked forward to seeing the detail of the allegations. Imperial Tobacco likewise rejected the charge that it had acted contrary to competition law.

The OFT has said that there should be no assumption that any of the named companies have broken the law, but it would act with heavy fines if any of them were found to do so. The OFT's caution may have been prompted by the recent payout it was forced to make to supermarket Morrisons after it had incorrectly suggested the company had broken rules over milk pricing and found itself sued for defamation.

South Korea: Samsung chairman resigns over tax evasion charges

Lee Kun-hee, the chairman of South Korea's biggest company Samsung, has quit his job following the bringing of charges against him of tax evasion and breach of trust.

The high profile figure in South Korea's business community made the announcement at a televised press conference, where he bowed to the people and apologised for the troubles that had been caused.

The three-month investigation into affairs at Samsung had concluded that there was no evidence of other accusations, that the company used a slush fund to bribe prosecutors and judges.

Mr Lee continued to deny any wrong-doing, but said that he assumed responsibility for problems at the firm.

Anglo American ties safety to managers promotions

Anglo American has ramped up its programme to achieve zero deaths in accidents at its mines with an initiative to tie manager's promotion to the accomplishment of health and safety targets.

The announcement, made by group chairman Mark Moody-Stuart at the company's annual general meeting, underlined the intention to achieve a change in corporate culture. The most recent year saw 40 deaths at Anglo American's operations - down from 44 the previous year.

Chief executive Cynthia Carroll said that they would no longer accept a gradual approach - the company needed to achieve a step change in performance.

The company also faces other social responsibility challenges. Campaigning NGO ActionAid recently attacked Angloplat's programme to relocate 10,000 people for its platinum mine. The company said that it had aimed to achieve relocations in ways that genuinely improved the quality of life of the people affected.

France: Carrefour targeted for China boycott call

Chinese activists are urging a boycott of French retailer Carrefour, reflecting outrage in the country following the pro-Tibet protests that targeted the Olympic Torch relay in Paris.

Messages being spread via the internet allege that Carrefour's parent company gives financial support to the Dalai Lama, and have been fueled by outrage that protestors tried to wrestle the torch from Chinese Paralympic fencer Jin Jing.

The company is investigating the boycott calls, but has said that it does not want to be involved in politics or sport in China.

CSR FEATURES from the Internet

UAE firms give something back - 27 Apr 2008 FROM Emirates Business 24/7

Corporate social responsibility (CSR) has been gaining ground in the region as more companies demonstrate their willingness to give something back to the community. But while multinationals appear to be leading the way in the UAE, local companies are catching up and realising its value, not only in helping others, but also in enhancing credibility among their peers.

Read full story

CSR guideline spurs sustainable development - 14 Apr 2008 FROM ChinaDaily

The guidelines for CSR (corporate social responsibility) were released earlier this month, which urge industrial corporations and related institutions to shoulder social responsibilities to obtain sustainable development.

The guidelines are issued by 11 national industrial federations and associations, including the CFIE (China Federation of Industrial Economics), a group of federations and associations engaged in iron, steel, oil, chemicals, light industry, textiles, building materials, non-ferrous metals, electric power and mining industries.

Read full story

Recent entries from Mallen's blog

Don't rush to legislate - 21 Apr 2008

The New York Times carried a great lesson for all those that, as soon as they see a problem with corporate behaviour (or indeed anything) believe that the way to respond is to rush into legislation without pausing to consider consequences. In this case, it is the new rules around corporate lobbying. Read more

Welcome to the real world - but which one? - 21 Apr 2008

I've just had a go at playing BT's 'Better Business Choices Game'. It's a scenario planning game, to get the visitor to their society and environment website into the mindset of starting a new business, but doing so on the basis of a number of potential scenarios of how the world may turn out, and the different choices those scenarios may imply for choices over products, target customers, suppliers, energy etc. Read more

Celebrating a sustainability leader - 18 Apr 2008

I occasionally get into arguments on platforms about how, and to what extent, flying will be constrained in the future by the requirements of climate change policy. The argument is never about whether it will happen, only about how. My position is that it will be done through the price mechanism, which always attracts strong reactions from those who say that it is unfair to penalise poorer people from enjoying what has come to be seen as a staple, rather than a luxury. However, I've changed my mind about the best way to discourage people from flying. Read more

Success as superior planning, or try-it-and-see dumb luck? - 15 Apr 2008

I just did a 2000 word essay on the Business Case for CSR for Ethical Corporation, and I was trying to find a quote about how decisions really get made in business. I looked high, I looked low, and just couldn't turn it up. Then wouldn't you know it, right after I've submitted the piece, there it is. So I thought I should at least put it here. Read more

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Getting to small companies through the supply chain

Article by Mallen Baker

When it comes to corporate social responsibility, one of the biggest challenges remains how to influence the practice of the millions of small to medium sized firms (SMEs). These companies don't go much on the corporate geek-speak of CSR. Many of them struggle to survive on a daily basis. But any multinational corporation knows that its reputation may be on the line if one of its SME suppliers fouls up big time - it is something that now has to be managed.

A report produced earlier this year as a result of a collaboration between Hewlett Packard and the Danish Commerce and Companies Agency offers some guidelines to the big companies wanting to get a handle on their SME suppliers.

The report, 'Small Suppliers in Global Supply Chains' looked at HP's current practices and carried out on-site assessments of some of the companies in its supply chain in Czech Republic, Hungary and Poland. Ironically, the European, Middle East and Africa region accounts for only 5 percent of HP's total supplier spend. It might have been interesting to review how well practices work across its global operations, but this is the price that comes with European funding for the project.

HP carries out a fairly familiar approach to managing issues in its supply chain. It uses preliminary risk assessments to identify where the biggest issues may lurk, and which suppliers they may affect. They then get the suppliers identified as potentially at risk to carry out self-assessment questionnaires, and then decides which should be followed up with on-site audits. The audits produce a list of non-compliances, and the company then manages the improvement process and maintains regular dialogue with those suppliers.

Is this the best way to engage? Since the report is not a comparative survey of different approaches, we can't really say. If prioritisations are well done, and the process for following suppliers up is robust, it has a lot to be said for it.

One thing that HP say that they have found from their time spent on the process so far, is that it is much better if Supplier Relationship Managers who handle the entire relationship with suppliers are the ones who monitor social and environmental issues. They are, after all, the ones who best understand the procurement process. In other words, managing social and environmental issues works best when it is integrated into how the company does business anyway.

HP evaluates suppliers using a scorecard mechanism which covers technology, quality, delivery, cost and business fundamentals (which includes the components on social and environmental performance).

However, HP's standard approach fails to do one thing - which is to actually reach SME suppliers. Traditionally the company has been similar to many other companies in that it has only focused on 1st tier suppliers - ie. the companies that it buys directly from. These companies tend to be large contract management companies. There are no SMEs in HP's list of 1st tier suppliers.

Of course, if you look at the most common stories of labour rights abuses, environmental pollution and health and safety violations - these tend to be found in smaller companies at least at 2nd and often at 3rd or above tiers. It may not be easy to follow the product all the way down the chain, but it is increasingly essential.

After all, journalists and NGOs make no distinction. If they discover abuses in the manufacturing of a big brand product, however far down the chain, it is the big brand that will feature in all the resulting headlines.

HP has now recognised that it needs to move beyond 1st tier, and it has been part of an industry-wide collaboration on the Electronic Industry Code of Conduct, believing that pooling resources at this level is the best way to cope with the required reach and complexity of managing supply chains beyond the 1st tier.

In Central and Eastern Europe, the SMEs reviewed for this report generally met legal requirements. Their management systems were often inadequate, although the report found that actually having a certified management system such as an iso 9000 or iso 14001 was no guarantee that actual management control and performance would be noticeably better. In particular, occupational health and safety were often the key area where failings were discovered.

The majority of SMEs reviewed demonstrated a reactive approach to CSR, with management systems only implemented at the request of large customers. As ever, legislative requirements were the principal driver. Their large customers do not typically carry out social and environmental audits.

Those that had enjoyed assistance in improvement from their bigger customers said that the most useful help was getting constructive input into how to improve inadequate processes, and providing a robust business case as to why improvements should be made.

Given these factors, it is not hard to understand some of the recommendations the report authors make to multi-national corporations.

These include focusing on 2nd and 3rd tier suppliers, and seeking to recruit 1st tier suppliers into the process. After all, they are the ones that hold the direct relationship with those companies. HP see great value in creating direct relationships by carrying out on-site audits themselves rather than using third party auditors - but they still recognise the importance of developing understanding amongst the 1st tier suppliers of what needs to be done and why.

The most important factor though is to follow up. Gathering information is all very well, but the large companies should follow up with an active management process designed to support the SMEs in driving performance up. In an environment like Central and Eastern Europe, where the awareness of SMEs of social and environmental issues is very low, positive engagement to provide a good business case, and practical tools and support to help improvement, should be expected as a prerequisite for meeting improvement goals.

The report provides an interesting and useful voice on engaging SMEs through its study of one leading company's practices. In an area of rapidly changing perception and practice, it is still some way from being the last word in implementing supply chain best practice.

Story link

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In the news from the latest issue

UK: Tesco to stop sourcing from Zimbabwe

British American Tobacco under fire for practices in Africa

Japan: Index to be introduced to rate companies on environment

Punitive damages on Exxon Valdez slashed

Switzerland: Campaign group demands investigation of Nestle 'spying'

India: Rules on CSR disclosure to be produced

US: Retailers falling short on sustainable fisheries

Hong Kong: Sustainable fashion initiative launched by top textile firms

Ethical behaviour tied to better financial returns

SRI investors support UN business and human rights report

Honda begins production of next-generation fuel cell car

Chinese interests could be targeted in Sudan

India: Businesses warn about impact of AIDS

Business leaders lobby for carbon cuts

... more news stories

To make any comments / suggestions re. this site, please contact mallen@mallenbaker.net
Business Respect - most recent edition added on 22nd June 2008