Business Respect - CSR Dispatches No 134 - 17 Aug 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 what should a socially responsible company be doing about genetically modified crops.

In the news:

Feature articles on the internet:

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Topics:

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Welcome

Into the heart of the holiday season. All I can say is that if you're on holiday at the moment, I hope you're not doing it in the UK. Miserable, wet and, if not cold, then not exactly warm!

Some of you will have read recently that a small flurry of debate kicked off again on the issue of genetically modified crops, following comments by the UK's heir to the throne that received considerable interest for the strength of their invective. I thought it would be a good opportunity to see what the lens of corporate social responsibility brings to the debate - the answer is it's one of the trickiest ones out there. The issue makes up the main feature for this edition.

Mallen Baker
mallen@mallenbaker.net

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CSR News 17 Aug 2008

Canada: Wal-Mart has union contract imposed

A Wal-Mart store has had a labour contract imposed upon it, making it the first time for any such deal involving the company in North America.

The agreement stands between Wal-Mart and the local United Food and Commercial Workers Canada union. The company said that it would take time to study the judgement in detail, but that it had the potential to significantly affect the company's business model based on the lowest possible prices.

According to the union, the deal would immediately raise workers salaries at the store by just over two Canadian dollars an hour to 11.54.

India: Rising protests against factory building

Farmers and other campaigners are stepping up protests against a number of proposed factory developments across India, affecting companies such as Tata Motors, POSCO, and Vedanta Resources.

Farmers in the east of West Bengal state have stepped up protests against the car factory currently slated to be the home of Tata Motors 'Nano', which was previewed recently as the world's cheapest car and one which would improve pollution problems in many Indian cities. The factory is to be built on farmland which was compulsory purchased.

Farmers are also to campaign against South Korean steel firm POSCO which was granted permission by the Supreme Court to use forest land to build a $12bn factory, and Vedanta Resources which has won court agreement to mine bauxite on the Niyamgiri mountain which has been regarded as sacred by the Kondh tribe.

US: Fraud will cost firms $994bn this year

According to a new report, US companies lose up to 7 percent of their revenues to fraud, which potentially equates to $994bn across the whole economy.

The figure is contained in the report on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners, which suggested that the average case of fraud costs a business around $175,000, with losses reaching $1m or more in a quarter of all cases.

Smaller businesses, with fewer resources to monitor behaviour, tended to suffer the greatest losses, with an average of two years passing before frauds are detected.

The most common type of fraud pointed to by the study was corruption, followed by fraudulent billing.

US: American Airlines accused of safety breaches

The Federal Aviation Administration has said that American Airlines is guilty of major safety failures, including keeping planes in the air that were known to be in need of repair.

According to the FAA, jets flew dozens of flights during 2007 when pilots had reported that repair work needed to be done. The FAA intends to fine the company over $7m for the breaches, an amount which is said was justified because the company had been aware of the need for repairs but had deferred maintenance.

In one incident, the plane's autopilot malfunctioned during landing because of a faulty altimeter. However, the problem was not fixed, and the plane flew a further 36 times before being repaired.

Ghana: Call for companies to help clear up electronic waste

A spotlight has fallen on technology companies over the problem of the growing amounts of electronic waste in Ghana, with the government being urged to strengthen environmental legislation and the international community called upon to prohibit the export of e-waste to Africa.

The media were shown around the Agbogbloshie electronic waste dump in Accra by the campaign group 'Stop the E-Waste Dumping in Ghana'. NGO analysis of soil and sediment at the site had purported to show serious contamination from toxic metals, a hundred times above levels found in uncontaminated soil samples.

According to the group, vast quantities of electronic junk are entering the country under the disguise of being 'usable second-hand goods or donations' whereas in fact 90 percent of the equipment does not work, and simply have to be disposed of when they contain various toxic metals. Children often roam waste dumps dismantling such equipment for the copper components, exposing themselves to hazardous materials.

The group called upon some of the equipment manufacturers to pay their part of the bill for the clean-up.

US: Disneyland demonstration over hotel worker benefits

Protesters dressed as Disney characters were arrested during a demonstration protesting the company's proposals to reduce benefits for around 2,300 hotel workers.

The employees claimed that reduced benefits offered by Disney since their contracts expired in February would make it impossible for them to afford health care and would introduce a two-tier wage system.

According to the Unite Here Local 681 union, other hotels in the area provide health care and have given wage increases in recent months, leaving Disney's stance sharply out of step.

Disney said that negotiations are ongoing, and the offer has not yet been finalised. It criticised the union for being more interested in publicity stunts than it was in striking a deal.

Uzbekistan: Major retailers call for end of child labour in cotton

A coalition representing the US major retail and clothing companies has called on Uzbekistan president Islam Karimov to tackle the endemic presence of child labour in the country's production of cotton, saying that the current situation is 'totally unacceptable'.

The move included the National Retail Federation, the Retail Industry Leaders Association, the American Apparel and Footwear Association and the Association of Importers of Textiles and Apparel.

Retailers in the US and UK have started to take action by avoiding Uzbek cotton in their merchandise following reports of forced child labour in the sector. Companies include Gap, Marks & Spencer, Target and Tesco. Although child labour is banned in Uzbekistan, the country has largely turned a blind eye to widespread practice to the contrary.

South Korea: Disgraced business leaders pardoned

The South Korean president Lee Myung-bak has pardoned some of the country's most senior business leaders who had been convicted of various crimes over recent times.

The amnesty of 74 business leaders includes Chung Mong-koo, Hyundai's chairman, along with others convicted of embezzlement and fraud. The move was criticised as implying immunity for businessmen against the law, but was welcomed by business lobby groups such as the Federation of Korean Industries, which argued that the recent convictions had been a disincentive to investment.

Nearly 350,000 people in total were covered by the amnesty, issued in advance of independence day.

Australia: Bosses told to end bullying in workplace negotiations

Australia's Workplace Ombudsman has said that bosses should understand that swearing and bullying should not be a feature in discussions about employees wages and condition.s

The Ombudsman executive director Michael Campbell made the statement after a Donut King franchisee was fined $12,000 by the Federal Magistrate's Court for abusing an employee who was reluctant to sign an Australian Workplace Agreement.

The court had heard that the franchisee, Jim Martinoski, repeatedly swore at the employee and threatened to cut her hours if she didn't sign. Her hours were subsequently cut from 35 to 15 hours a week, after which she resigned her position at the firm.

Canada: Greenpeace breaks into site to protest tar sands

A group of campaigners from environmental NGO Greenpeace broke into a site owned by Syncrude Canada Ltd, a consortium of different oil companies, in Alberta to protest against the company's involvement in new oil sands developments.

The protesters blocked a waste water pipe and unfurled a banner labelling tar sands as 'the World's Dirtiest Oil'. The campaign group is urging the government of Alberta not to approve new licences for the extraction of oil sands.

Earlier, Syncrude was allegedly involved in a pollution incident which led to contamination of a tailings pool. The government is considering suing the company.

UK: Innocent smoothies attacked over green claims

Innocent drinks, which have created a brand identity based on its ethical and environmental credentials, has been accused of misleading consumers about how its fruit is transported around the world.

According to the company's website, its fruit always travels by boat or by rail in order to use less fossil fuel than air freight or road transport. However, the UK newspaper the Daily Telegraph said that it had found evidence that the drinks were transported to the UK from the European continent in road tankers for bottling in the UK.

Campaigners were quick to accuse the company of making false claims.

One of the company founders, Richard Reed denied that there had been a deliberate attempt to mislead customers, but accepted that since they moved production overseas they hadn't publicised the change. He said that the information on the website was out of date, and would be rectified.

China: 'Gyoza' poisonings hushed up

Pesticide contamination which caused a food poisoning outbreak earlier this year in Japan had already caused an outbreak in China which had been kept quiet in advance.

According to the Japan Times, an unknown number of Chinese suffered food poisoning in June from the chemical methamidophos after they ate frozen gyoza producing by Tianyang Food. A recall was issued against the product, but it then went on to be redistributed on the Chinese market.

The Chinese government said that the incident was being investigated. It had informed Japan of the incident several months ago, but the Japanese government had kept the news quiet until news sources found out about it recently.

Israel: Nissan attacked for portrayal of Arab sheikhs in electric car ad

Car maker Nissan has provoked fury for a TV ad made by Israeli advertiser Inbar Merhav Shaked which portrays a group of violent Arab oil sheikhs attacking the company's new electric car.

A Saudi official has demanded an apology from the company for the ad, which shows the Arabs leaving a hotel and encountering the car. On learning of its fuel-efficient features, they begin to attack the vehicle. At the end of the ad, a voice-over says "It's clear the oil companies won't like you".

The company defended the ad by saying that it was a funny campaign and was appreciated as such by both Jews and Arabs.

CSR FEATURES from the Internet

African firms start to take action on climate change - 14 Aug 2008 FROM AlertNet

With global warming expected to hit Africa hard, some companies in the "forgotten continent" are taking action themselves to fight climate change.

"The environment is not being taken very seriously in most of the emerging markets, because we haven't started feeling the pressure yet," Adan Mohamed, chief executive of Barclays Bank Kenya, told Reuters.

Read full story

Social responsibility sharpens corporate competitiveness - 9 Aug 2008 FROM VietNamNet Bridge

In the context of increasing international integration, local businesses are working to develop corporate social responsibility (CSR) as a new competitive edge alongside improving product pricing and quality.

Recalling a story 20 years ago when Binh Tien Consumer Goods Company (Biti’s) first received requests from major European and American partners to inspect its CSR implementation, the former export director Nguyen Van Toan said the move has brought the company a lot of benefits.

Read full story

Companies urged to get on board with CSR - 8 Aug 2008 FROM Business Edge

Two recent reports are sending a message to publicly traded companies: Get onboard if you want to succeed in an era of corporate and social responsibility (CSR).

"Firms are coming to understand the importance of corporate social responsibility and sustainability (in relation to) competitive performance, but their focus on CSR at the operational level has kept these issues out of boardroom strategy," says Coro Strandberg in the report The Role of the Board of Directors in Corporate Social Responsibility, by the Conference Board of Canada.

Read full story

Recent entries from Mallen's blog

What's your social responsibility for something not happening? - 17 Aug 2008

The New Yorker recently carried a piece about what it called the Permission Problem. It began by noting that in the second decade of the twentieth century it was almost impossible to build an aircraft, because so many different people owned patents for different parts of it, no-one could manufacture a plane without being hauled to the courts. Read more

Looking for unsung ethical heroes - 10 Aug 2008

This may be a long shot, but I'm looking for great stories about the positive power business can have in the world - and of the power of individuals, particularly marketers, to make a difference. I'm talking about doing the right thing when it comes to the business making its money - not who does what in terms of charitable activity. Read more

An example of the hidden vulnerable customer - 10 Aug 2008

A mother in West Virginia is leading the charge for a product recall after the Wal-Mart child's walkie-talkie that belonged to her three year old picked up an explicit conversation between truckers being conducted via CB radio. It's another example of how vulnerable customer issues are so often hidden from view - a million miles from the minds of the product designers or marketers. Read more

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How can companies resolve the dilemma of GM crops?

Article by Mallen Baker

If you ever wanted an example of how difficult it can be to interpret what you should do in the light of what your stakeholders think, you only need to consider the current state of play in relation to genetically modified (GM) crops at the moment.

The way most companies approach stakeholder engagement is simple. You ask your stakeholders what they think of you. You may do this by having a feedback section on your website, or by holding focus groups. Or having a third pary polling organisation carry out a poll. You then get a report that says 'key stakeholders are saying this'. You then ask yourself which bits you can do without much pain, and feed back that you are going to do these things. The rest is filed.

The fact that you have heard and responded makes for a good process. It means your stakeholder engagement leads to action. Right?

Sometimes it really is that simple. But often the choices facing companies are more complex, stakeholders vehemently disagree with each other, and sometimes stakeholders change their mind. It means that companies have to get better at interpreting what the messages are, working out how stakeholders' views will develop in the face of likely scenarios.

Ten years ago, GM food gave us a case study on the simple side of the equation. Several companies, and most focus on Monsanto as the chief loser of this story, promoted GM technology as the essential bridge to the future. European consumers rejected it in droves - fuelled by stories about how companies are really just doing it for commercial gain (the so-called terminator gene, whose job was to ensure farmers could not save seed to plant the following year) and the unspecified fear that GM food would harm them (neatly summed up in the label 'Frankenfood').

Monsanto, and a number of others, dismissed this mood as 'hysteria'. They said it did not reflect the science, and they expected the mood to change once more reasoned debate came to pass. They may or may not have been right about the science, but they were certainly wrong about how the mood would change. They lost the public debate. The company suffered the consequences, and Europe remained tightly a GM-free zone.

So the simple story here is - listen to your stakeholders, and if they are telling you not to do something, don't do it. But the simple story, for all that it can devastate you in the short term if you get it wrong, is not the end story.

Change is coming. We are due to add 2.5 billion people to the tally by the year 2050 - which is more than the total world population in 1950. You don't have to be a rampant advocate of birth control to see that is likely to be unsustainable.

We have gotten to the stage where we are close to the edge of our current capacity to feed everybody, and over the edge of our capacity to feed everybody at an affluent level. That is to say, we can just about cope so long as there are no big climatic changes that affect the productivity of agriculture, and so long as half the world's population agree to remain poor.

If society decides that the desire for people to have the children they want, and for human numbers to increase as high as they can, is a given then we all face a big challenge. If we decide the opposite - that human numbers have reached the point where they need to be held in check, we also have a challenge. So get ready for a bumpy ride one way or another.

We will not support the numbers that come with the first scenario without systems improvement. That means innovation in crop production, sustainable fisheries - the whole lot. And it might just include GM, where there is at least an arguable case that some forms will produce crops that are more resistant to drought, more efficient with lower inputs and so on.

If that is the case, then the socially responsible company would have a duty to take the public with them - to engage public opinion because of the benefit to be obtained. It shouldn't take 'no' for the final answer.

Of course, the history of the debate doesn't leave them well placed to do that. Developing a new product and presenting it as the answer to a complex problem works for some, not for all. No surprise if a company has defined itself around one particular technology that it sees that technology as the answer to serious problems in the world.

The thing is, the company can only focus on the technology, not the context. Suppose we managed - just - to support those numbers because we pushed all the systems, innovated, and managed to produce enough food to cope. Does it constitute a sensible global policy to be living so close to the edge of the capacity of our natural life support systems that there is no room for 'give'. Would we be vulnerable to the slightest shock to the system - a climate event creating a bad harvest, for example - leading to largescale famine, water starvation and / or conflict?

And what then - do we continue to grow? Or do we, at that point, identify limits to growth. Why then, and not now? These are bigger questions than individual companies can answer. Unfortunately, governments are not rising to the challenge to date.

In the mean time, GM crops have become widespread outside of Europe. In the US, 73 per cent of maize, 87 per cent of cotton and 91 per cent of soya is grown from GM seed.

Never mind what your views are about the policy choices relating to all this - ask yourself which of the following a socially responsible company should do:

* Respect customer choice - particularly relating to things that they put into or onto themselves. If the customer doesn't want your product then they are not 'hysterical' they are the customer.

* Seek to influence the customer - use your marketing know-how to encourage them to change behaviour to more sustainable consumption patterns.

* Seek to develop technologies that can help in the fight against worldwide poverty and hunger, especially if they can reduce carbon emissions as well.

* Take a precautionary approach to technological change, taking great care to potential unintended environmental consequences - especially for introductions that once released cannot be 'recalled'.

At different points all of these have been celebrated as the practices of socially responsible companies. The GM debate is the one where they all exist at once, in direct contradiction to each other.

So what should a GM company do?

It's no big surprise that there is no magic bullet. But you might try the following:

* Define yourself around finding solutions to the problem, rather than around one technological solution. As they say, if all you have is a hammer, all problems look like nails. The top three GM companies, Monsanto, DuPont and Syngenta all have mission statements that arguably do this, focusing on statements such as 'helping growers meet global challenges'. The difference between these statements being platitudes and being real is how objectively the companies review ongoing developments and alternatives. In practice, this is hard to do once you've built up an expertise in one area.

* Carry out scenario planning, producing realistic future possible scenarios based on variables such as public acceptance for GM, population numbers, climate change, evidence of unintended consequences for a released product, etc.

* Set up a semi-independent team internally to review all information and evidence relating to farm productivity and world nutrition on an ongoing basis - with a brief to provide a critical view of the arguments to feed back into decision makers.

* Define stakeholder engagement processes as a mechanism to get the best on-the-ground early feedback of the consequences or likely consequences of action, rather than as measure of how successfully public opinion is being swayed to a pro-GM point of view.

* Get used to the fact that some people will hate and distrust you, but don't let it stop you from engaging. Retreat behind the barricades and you're done for.

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In the news from the latest issue

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Japan: False labeling in the spotlight again for Nippon Meat Packers

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Novartis nears swine flu vaccine but won't donate any to developing countries

Bangladesh: Factories required to control pollution by 2010

UK: Alliance Boots leaves Ethical Trading Initiative

Saudi Arabia: Tobacco companies face compensation suit from smoker

Indonesia: New eco investment index launched

Nigeria: Shell pays $15.5m to settle Saro-Wiwa suit

US: Mattel fined $2.3m for lead on toys

Netherlands: Shell will compensate shareholders for reserves scandal

UK: British business targeted in US bribery investigations

Brazil: Products of Amazon destruction still widely consumed: Greenpeace

Colombia: Drummond disputes accusations over paramilitary support

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Business Respect - most recent edition added on 30th June 2009