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BUSINESS RESPECT - CSR Dispatches#13/22-Sept-2001
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/csr and produced every two weeks.
In this edition we stick our neck out with predictions for CSR over the next five years. Will CSR survive recession, or even war? What will be the key tension that divides the CSR movement in two? And what will come to be the key benchmark for the socially responsible company?
In the news:
1. Businesses respond to World Trade Centre attack
This issue is also on the website at http://www.mallenbaker.net/csr/nl/13.html.
Copyright 2001 Mallen Baker. All rights reserved. For information on how to subscribe, go to http://www.mallenbaker.net/csr/nl/subscribe.html
In common with the rest of the world, we watched with shock and disbelief the pictures of events in New York last week. We can only join with the many thousands who have expressed sympathy to those affected, and solidarity for all those organisations now struggling to survive the aftermath.
Evil things have been done often throughout human history - but rarely can the actions of so few individuals have touched so many in such a shocking way.
Corporate philanthropy may be the very smallest, least important part of corporate social responsibility - but at a time like this it is the natural expression of companies as citizens. It is hardly surprising to note the massive uprising of support that has come from businesses across the world. At the time of writing, $360 million has been donated by US businesses alone - and the figure is growing daily.
There have, rightly, been few of the everyday stories of CSR that have broken through the barrage, so we thought we would give a bit of a change of pace this issue with a look towards the future.
Specifically, arising from a presentation Mallen gave recently at the Royal Society of Arts on CSR, in which a certain amount of speculation on future trends within CSR was called for. The result was a list of nine predictions which succeeded in provoking some interesting discussion and which we thought might be shared more widely.
See what you think - and if you vehemently disagree with any of them, let us know. The powerpoint slides are also available from the website.
Incidentally, Mallen also had the opportunity this fortnight to spend 24 hours as a guest of British American Tobacco, whose stakeholder consultation session was held in London. This event fuelled some of the comments in the predictions - and might lead to further reflections on the question of whether there can be such a thing as a socially responsible tobacco company. You may also have thoughts or experience relevant to this you might like to share!
New Powerpoint presentation (presentation given at RSA 19th Sept 01) available for download from resources page at http://www.mallenbaker.net/csr/CSRfiles/Resources.html
Businesses across the world have been responding to the recent events in the US with offers of cash and support - reflecting the state of shock felt in many offices and boardrooms.
In America, General Electric is to donate $10 million for the families of New York firefighters, police officers and rescue workers. Goldman Sachs has promised at least $10 million to the victims.
Cisco Systems Inc. donated $6 million and Microsoft is giving $5 million in cash and $5 million in technical support. Amerada Hess has pledged $5 million.
In Europe, Novartis has donated $3 million in addition to supplies of one of the company's products which is used to treat burn victims. Hundreds of other companies are matching employee donations, or giving smaller amounts. This includes smaller companies, restaurants, sports venues, food and drink companies - all of whom are finding ways to give.
Cone Inc, a firm which tracks corporate philanthropy, suggested that the chief drivers for the wave of activity were "enormous pressure from employees and from senior leadership".
It added that "Our research shows that Americans want their companies to address issues. (Newsday)
Shares in Talisman Energy Inc. spiralled on the Canadian stock market immediately following the tragic events in New York through fears that its involvement in Sudan, with its history of sheltering terrorists, would make it a target for punishment. Talisman stock fell nearly eight per cent as the impact of the attack was considered by Canadian investors.
Investors believe there will not be a sustained drop, due to the small amount of exposure in the Sudan, compared to the company's solid, profitable presence in more stable areas. However, any future revelation of a direct connection of the US atrocity with the Sudan could put added pressure back on. (Sudan Net)
A study by PricewaterhouseCoopers suggests that the pharmaceutical companies have to take further steps if they are to succeed in their current struggle to attract and retain new talent. In particular, they will have to create an environment where individuals feel they can "make a difference", improving the quality of life for people in wider society.
Work-life balance and ethics are also a focus - they are seen as taking centre stage particularly for knowledge workers. Kevin Delany, co-author of the report, suggested "People are questioning whether their personal interests and objectives will be respected and addressed by companies already under considerable pressure to satisfy the expectations of their shareholders". (KCSA)
A week-long protest has taken place against Starbucks, with protestors in the United States and Europe urging the company to strengthen its commitment to the promotion of Fair Trade coffee. Shops in 300 different cities in the US and Europe were targeted.
The action was co-ordinated by the US Organic Consumers Association, which called for the company to go further than simply stocking Fair Trade, but to properly promote it. Fair Trade coffee guarantees the growers a better price for their crop.
Starbucks responded to the protests with a statement that it totally supports Fair Trade. (Dow Jones)
Accenture and Charles Schwab have become the focus for company good practice relating to downsizing. With the widely expected downturn likely to produce a lot more downsizing over the next couple of years, the companies are showing that a more creative approach can make for a much better experience.
Approximately 1,000 US employees of management consultancy Accenture have opted for its FlexLeave programme, through which staff can take a sabbatical of up to 12 months on 20 per cent salary.
Financial services company Charles Schwab, which plans to reduce staff numbers by 25 per cent this year, has promised a bonus of $7,500 (£5,100) to any redundant employee it rehires in the next 18 months and is offering bursaries of up to $20,000 to staff who want to study.
According to the UK's Industrial Society, some companies are now putting more thought into how to soften the blow. They are spending more time explaining to staff why redundancies are needed; investing more in training the managers who have to break the news; and offering staff more counselling, outplacement consulting and financial advice. (FT)
Suez, the leading European energy company, has joined up with the United Nations Volunteers programme (UNV) to promote the services of corporate volunteers in developing countries.
A key objective is to support the public and private sectors through short term advisory missions related to the company's areas of expertise - energy, water and waste management. Volunteers will give direct advice to governments, companies, institutions or other organisations with an impact in the relevant areas. (UN)
Commercial auditing companies may be incapable of effectively addressing labour rights issues around the world. So argues a new report released by the New Academy of Business, drawing on research conducted on banana plantations in Costa Rica. The research sought to assess the auditing methodology defined by Social Accountability International - creator of the SA8000 standard.
The report argues that many of the preconditions for social accounting are often absent - such as the neutrality of auditors and the possibility of assessing real working conditions in just a few days. An alternative approach with greater employee involvement could be the way forward.
Japan Tobacco, which is the world's third-largest cigarette maker, is joining British American Tobacco and Imperial Tobacco is taking the EU to court over new labelling rules. The rules dictate that cigarettes may not be sold under a "mild" or "light" label from 2003.
The company is challenging the rule on the basis that its best-selling "Mild Seven" brand would be outlawed - whilst it is a well known and accepted brand across the world. The "Mild" in the brand name relates to flavour, not to tar strength.
The EU rules are motivated by the view that nothing should be permitted on cigarette packets that give the impression that the contents are somehow more "healthy" than standard cigarettes. The fear is that such labels will encourage more people to smoke, or to continue smoking.
The tobacco companies have argued that the law prevents them from undertaking a socially responsible path - to reduce the harm to human health created by their product. The inability to promote lower tar cigarettes as better means that many customers will continue to smoke full tar cigarettes in the view that all cigarettes are much the same.
BAT and Imperial have also opposed the directive's requirement for larger and more graphic health warnings on packets. (FT)
The Tobacco Association of Malawi says it has formed a task force to eliminate child labour on tobacco farms. The association's vice-president Amin Mponda-Lungu said the practice was evil and had to stop.
The move came as the chief executive of the International Tobacco Growers in Africa, Garbett Thyangathyanga, admitted that the industry routinely employs children. He suggested that many of the youngsters were employed by tobacco estates - usually to supplement their parents' income.
The minimum working age in Malawi is fourteen, and those found breaking the law can be jailed for up to five years. (allafrica, BBC)
Companies have to put in place socially responsible practices or risk damage to their brand and their reputation, a Hong Kong gathering of small to medium sized businesses has been told. Andrew Samet, the former US Government labour representative under President Clinton, said management needs to put resources into an accountability system for CSR pro-actively. It would be too late to turn attention to it only after a crisis has struck.
In his view, the main CSR issues were labour and the workplace, environmental and community welfare problems, as well as human rights, corporate governance and health issues such as HIV/AIDS.
"The backlash against globalisation and increasing penetration of the Internet into the Third World means CSR policies are a business necessity" he said.
Knowing and anticipating the CSR requirements of buyers and their customers would become a competitive factor, particularly for the garment industry when country quotas were abolished in 2005, Mr Samet added. (SCMP)
Mirant, the leading US energy provider, has committed itself to providing $50m to fund climate change initiatives. The payment, which will be made over ten years, was announced upon the launch of Mirant's first annual environment report.
The report includes a comprehensive climate change action plan, outlining the company's commitment to reduce its own emissions as well as contributing to research in the common good. Its focus will include greenhouse gas source reductions, energy efficiency improvements and carbon sequestration projects. See http://www.mirant.com
Wendy's has agreed to campaigners demands for assurances on animal welfare, leading the "Wicked Wendy's" campaign to be called off, and adding the restaurant chain to the growing list of fast food giants who have complied. The campaign, organised by People for the Ethical Treatment of Animals (PETA), demanded that companies conduct unannounced inspections of slaughterhouses, along with a raft of other animal welfare measures.
Delighted with its continuing success, the campaign group has promised that a new campaign target will be selected in the coming weeks. Chains such as Wal-Mart and Kroger, or chicken restaurants, such as Churches or Chick-fil-A, are being considered. (PETA)
Companies including ExxonMobil, Shell, Phillips Petroleum, Occidental and the El Paso Group have reached a settlement - the second largest in the history of the US Superfund programme - to clean up a heavily polluted site in Texas. The companies were just some of the many that, back in the 1950s and 1960s, dumped toxic waste at the site.
The US government sued fourteen of the companies in 1998, seeking to hold them accountable for the historic damage. The clean up cost will reach to around $120m. (Reuters)
Socially responsible investment (SRI) research bodies from 12 countries have joined forces to provide data on companies' social and environmental performance for institutional investors.
The Sustainable Investment Research International (SIRI) group will offer standardized profiles of the largest 500 global companies as well as SRI consultancy services.
The group has spent the last year standardizing the research practices of its members, who will pool their research on companies in the FTSE Euro top 300 index, Standard & Poor's 100 in the US, and 100 Canadian and Japanese corporations. Each member will continue to research its respective national markets.
The partners are PIRC (UK), Kinder Lydenberg Domini (US), AReSE (France), CentreInfo (Switzerland), Caring Company (Sweden), Scoris (Germany), Triodos Bank (Netherlands), Michael Janzi Associates (Canada), Avanzi (Italy), ECodes (Spain), Stock at Stake (Belgium) and the Sustainable Investment Research Institute (Australia). (SIRI)
Many of the companies who made headlines by their absence from the FTSE4good index when it was first launched have now been admitted. Tesco, Royal Bank of Scotland, BG Group, BOC and John Laing are the most significant.
One inclusion which raised a few eyebrows was that of Marconi, which came into the fold in the aftermath of the controversy over the way it handled a profit warning in July when its shares were suspended for a day.
Many of the new entrants have been included after providing extra information. (FTSE)
1. There will be a growing emphasis on the quality of management of corporate social responsibility - not just whether you do it at all.
People ask the question whether you can draw a correlation between socially responsible business practice and economic performance or share price. It is the holy grail of CSR to be able to prove such a link to establish the watertight business case.
But there is no other aspect of management where you would expect this. Is there any correlation between companies who conduct marketing campaigns and economic performance? No. There may be such a correlation between those who have conducted effective campaigns - but there have been plenty of disastrous - or just mediocre - campaigns which had a negative impact.
At the moment, it seems enough that companies carry out some kind of community investment, or equal opportunities promotion. And the more of it they do, the more grateful we are. But unless the activity is driven by a solid business case approach, with solid outcomes aligned both to the business objectives and the societal needs - it will run the risk of failing.
Let's put it another way - CSR will either begin to discriminate between good and bad social responsibility or it will become discredited and practiced only on the margins.
2. CSR will increasingly be defined by core business issues, managed strategically across the business.
This is already happening, and happening fast. The days when CSR could be seen as the philanthropic work of the business are gone. The speed of this varies depending on where you are in the world - but the companies which are the trailblazers are often those who have faced serious problems or are particularly exposed. For them CSR means hard choices about how the company does business, not about what it does as an add-on extra.
Not all the promoters of CSR have kept up with this.
3. Companies will become much more sophisticated about how they communicate with stakeholders
At the moment, we are glad to see a growing momentum of companies moving towards some form of social and environmental reporting. CSR reports - usually paper and web based - are appearing in greater numbers, and some of them give solid, pertinent information about company performance in a range of areas. Initiatives such as the Global Reporting Initiative should lead to greater consistency about the areas such reports should cover.
But these reports are most impressively defined by who does not read them. Customers don't read them. Mainstream shareholders don't read them. Often, employees don't read them either - although some will.
The point is that the style and format of such reports serve the needs of a particular, informed group of stakeholders. These are small in number, but potentially influential.
But a report is really just a means of communication - and if a company wants to enjoy the real benefits of enhanced corporate reputation as a result of solid positions and work on areas that matter to their most important stakeholders, they will need to find ways which communicate simply, whilst building trust and - ideally - real engagement.
That will make for more of a challenge for those of us who spend some time reviewing the effectiveness of these pieces of corporate communication!
By the way, there's a big debate out there about whether CSR reports will be web-only within the next five years. For the record, my view is that they won't be. People still want something they can hold in their hands. The current solution where people produce smaller, cheaper, paper-based reports with much more extensive background detail on the web will be the model that will last. But more interesting will be to see how the companies begin to use the website medium to present the same information in different ways to different audiences. That is more likely to represent the real progress in the next few years.
4. The growing expectations on business will survive recession (and even war, if need be)
There's a lot of nervousness out there about how the social responsibility agenda will fare with the arrival of the downturn - and that was before the events of the last fortnight raised the stakes on the same questions very sharply indeed.
But many of the drivers for change are boosted by tough times - not harmed by them. Show me the smart company that thinks the time to play fast and loose with its reputation is when times are hard. Hear the evidence reported last time that companies remain as focused on attracting and retaining the key talent, even though they may be laying off portions of their staff. Ask yourself whether companies respond to slimmer profit margins by paying more for the waste of resources such as energy, water and raw materials.
The real test is how well the CSR community has done its job. Those that have introduced companies to an integrated, core-business approach to CSR will see commitment continue to grow. The continuing spread of information around the world makes it impossible for companies to ignore this agenda. However, those who have been sold a CSR-as-philanthropy line - where good things are done with a community budget as a complete sideline of how the business makes its money - these areas will be the ones to be cut. Because they cost money, but don't measure or demonstrate their value.
5. How you downsize and what you make will become the two most significant benchmarks
There will be a lot of downsizing going on over the next year or two. All those companies who have declared their values-driven approach are about to find that approach tested. It is not, after all, what you do during the good times that is the measure of your character.
There's not a vast body of best practice out there on socially responsible downsizing, but there's some (see the article on the website for more on this, and in this edition's news section). You often won't get the credit for it at the time - there are plenty of people who feel companies should just never let people go. But you'll find that your approach has boosted your reputation as a company which cares about its people - and when things change, that will be a benefit you will be able to cash in.
Equally - the current controversies for business are about their core products. GM foods, AIDS drugs, tobacco, you name it. There's no credit fitting low energy lightbulbs in your building if you're investing in hugely environmentally damaging projects across the world. Investing in your people and community is good - but if you sell tobacco and you don't take the same socially responsible approach to the huge issues around your product, then you won't be taken seriously.
That isn't to say that you cannot be socially responsible if you sell harmful products. But you certainly can't if you don't seriously engage in the harm that your products cause - and seek to resolve the problems at source.
6. There will be growing tension between business-led CSR and NGO demands for better globalisation
This was the one prediction during the RSA presentation that created most debate. Surely, NGOs will embrace CSR because it is fully in line with the world they want to create? This is a battle where the enemy is lack of understanding and inertia, because once they "get it" they are all lined up on the right side? And the other objection comes from those who believe that there is no difference between business-led CSR and NGO demands - both arise from people working sincerely to make a difference to the world we live in.
My view is that many NGOs support CSR because it is "going in the right direction" - but this support is qualified and time-limited. When the often unrealistically high expectations of NGOs of what would constitute companies "doing the right thing" are not met, there will be a backlash against CSR by those who therefore decide it has no value or substance. One can already see this backlash emerging through the writings of columnists such as George Monbiot.
Conflict is not necessarily a bad thing. Conflict is often a necessary part of the process of change - and as the rules of the new business environment emerge there will necessarily be a lot of discussion, debate and disagreement.
But there are certainly some who feel that if businesses undertake this agenda because it's good for business rather than good for the soul - then on some level that "doesn't count". Speaking as someone who spends most of his time promoting business solutions, I just don't believe that's the case. There will be many change agents within business who do what they do because they are personally committed and motivated, but without the business case tools to justify it to the business, it won't wash. For change within a business to be sustainable, it has to support the business logic which drives the company inthe marketplace.
7. The business of social accountability is professionalising there will be firmer standards in the future
The rise of AA1000 and the Institute for Social and Ethical Accountability will lead to the growth of expectations on CSR professionals - in much the same way as has taken place with the environmental standards for business. This ought to be a good thing - although the problems of the quality movement are ones to learn from - too few good quality assessors and too many company approaches bolted on using off-the-shelf bureaucratic systems. Really what's needed is better quality leadership - and it's difficult to plan a system to provide it.
8. Governments will largely refrain from legislation on CSR
Some of my colleagues have particular trouble with this one. With the UK Government appointing a CSR minister, and the EU producing its green paper on CSR - surely the implication is that legislation must follow?
By and large, when governments look at this area in any detail, they are brought back to the basic truth that regulation can only defend against bad practice - it can never promote best practice. Add that to the fact that there are no obvious legislative measures to bring in for this area that any campaign group is highlighting - and you come to the conclusion that moves will be limited to the kind of thing in the UK company law review - moves to encourage, and to pressure companies on disclosure.
9. Political lobbying is a landmine waiting to explode
Few of the CSR frameworks in circulation draw attention to the need for transparency on the attempts of companies - for better or ill - to influence the public policy process. It may well be a tobacco company can defend its existence in the market for an adult product which people buy from free choice. But it makes a big difference to that equation if said tobacco company has been engaged in lobbying to obstruct laws that would improve the public health.
This isn't simple, because attitudes to company lobbying vary enormously. Such activity in the UK and other European companies would be seen as nothings short of scandalous. In the US, it is widely expected and to a large extent tolerated.
But whatever the starting point expectations may be, the company's record on lobbying will increasingly be expected to be a part of what the company reports related to social responsibility. And here I think you will find companies at their most defensive - and their most unwilling to allow full disclosure. It will also be a key flashpoint for the NGOs and the campaigners.
Any thoughts about any of these? Share them with us!
Publication reviews will be back next issue.
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