Business Respect - CSR Dispatches No 136 - 14 Sep 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 the collapse of the World Bank agreement on the oil pipeline in Chad.

In the news:

Feature articles on the internet:

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Topics:

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Welcome

Last issue, the main feature focused on the difficult issue of how to do business in countries that are, by their nature, controversial. Namely in that case, Zimbabwe. This time, you might say we have the companion piece focusing on the announcement this week by the World Bank that it is finally bringing to a close the great Chad experiment. Each instance is distinctive albeit that some of the themes are the same.

In the mean time, I finally leave Business in the Community on Tuesday next week. Having been there for 13 years, it will be a big shift, but at least it means that this newsletter, and the website resource behind it, can begin to get more time and focus to turn it into a really useful resource. That's the plan anyway. More next time.

One of the requests that came out of the readers survey was that each issue can give indication of when the next issue is due. That's particularly relevant since as of next issue, publication date for Business Respect will move from the Sunday to Monday. That shouldn't make too much difference to you - it will make quite a lot of difference to me! The next issue, therefore, is due on Monday 29th September.

By the way, the readers survey also gave a majority in favour of sticking with the once a fortnight publication, although a significant minority opted for weekly, with a smaller minority going for monthly. There will be no change to this in the short term, but we will keep watching carefully to see at what point it may become sensible to make a change. Thanks again to everyone that took part.

Mallen Baker
mallen@mallenbaker.net

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CSR News 14 Sep 2008

Mexico: Wal-Mart de Mexico payment in store coupons unconstitutional

The Supreme Court in Mexico has said that Wal-Mart de Mexico, also known as Walmex, violated the constitution when it paid workers partly in vouchers that were only usable at the company's own stores.

The practice of paying in vouchers was outlawed in Mexico after the Mexican Revolution in 1910. The court said that any employment contract that required workers to take payment in this form would be null and void.

The ruling came after one of the company's employees complained about the practice.

The company defended the programme, arguing that the scheme was voluntary and helped employees to obtain basic necessities. However, it promised to review it with a view to how best to improve the quality of life of its workers.

Congo: Afrimex criticised by British government for human rights questions

The British government has highlighted minerals firm Afrimex as having failed to ensure its operations were not contributing to human rights abuses in the Democratic Republic of Congo.

Afrimex was accused of allowing rebel soldiers to fund activities from the company's supply chain, and of failing to work towards the end of child and forced labour. The complaints arose from the campaign group Global Witness, and triggered an investigation by the UK national contact point for the OECD Guidelines for Multinational Enterprises.

The government has now called upon Afrimex to create a corporate social responsibility document covering the impact of its supply chain on human rights.

Australia: Unease over companies tracking employees via GPS

Concerns have been raised about the growing use by firms in Australia of GPS tracking units to keep tabs on the movements of employees.

Increasingly, companies small and large are fitting the units to fleets of company cars. Software programmes can now send employers detailed reports showing routes, stops made, parked time, driving time, as well as the current position of any vehicles.

Although companies such as Telstra and Australia Post have used the units, they are gaining ground also with small firms who want to verify compliance amongst staff. Some of these companies do not inform employees that vehicle use is monitored - a practice which saw Telstra threatened with prosecution last year.

US: Kosher meat firm under fire following child labour violations

Agriprocessors, the largest US kosher meatpacker, may lose its certification for producing kosher food as criminal charges have been filed against it for more than 9,000 child labour violations.

The Orthodox Union, the major kosher certifying organisation in the country, has demanded far reaching changes at the company, including new leadership, or else it will suspend its supervision of production there.

The company would be crippled by such a move, as its Aaron's Best and Rubashkin's brands are currently staples in Jewish homes where kosher practices are upheld. It has annual kosher sales of around $80m.

The legal action arose after nearly 400 illegal immigrant workers were arrested at its factory in Iowa, of whom 32 were allegedly under the legal working age of 18 and working in dangerous roles that could lead to exposure to hazardous chemicals. The company said that it never knowingly hired underage workers or illegal immigrants.

Norway: Government pension fund drops Rio Tinto over ethical issues

The Norwegian government has criticised Rio Tinto for what it described as 'grossly unethical conduct' and environmental damage, and has moved to exclude the company from its pension fund.

The fund has excluded 26 other companies in the past, including Vedanta Resources and BAE Systems, over ethical or environmental concerns, and there is a possibility that the move will spark other socially responsible investment funds to follow suit.

According to the government, the decision had been prompted by Rio Tinto's Indonesian mining operations which is believed fell below expected standards with large scale pollution of local waterways.

The company said that the move had been unexpected, and countered that it maintained high environmental standards at all of its operations.

Brazil: New oil reserves will be invested in eradicating poverty: Lula

President Lula da Silva has said that the profits from the newly discovered offshore oil fields will be used by the State to invest in technology and education, and eradicate poverty.

The discovery by State-owned Petrobras of reserves large enough to produce billions of barrels of oil has led to a fierce debate over how the fields should be exploited, and profits used.

The government's determination to take a bigger share of the profits, possibly by creating a new fully state-owned company to manage the reserves, has provoked concern by private investors who currently have a 60 percent stake in Petrobras.

Australia: Power firms not preparing for low carbon future - WWF

Environmental campaign group WWF has said that too many power firms in Australia are failing to plan for a lower carbon future.

The group said that it had carried out an assessment of nineteen major firms, and found that eleven of these were not ready to deal with the significant changed reality that a carbon-constrained world would present.

It named its worst performers as being Alcoa, Intergen and Rio Tinto, whilst Origin Energy was granted top marks and was credited, along with TRUenergy, for having publicly available emission reduction targets.

However, Rio Tinto has commented that it was marked down by the group because it did not respond to a request for information from WWF rather than because the score accurately reflected the company's practice. Out of the 19 companies approached, only six responded, with WWF assessing the remaining 13 from publicly available information such as annual reports and websites.

Alcoa also responded to say that the company was continually reducing greenhouse gas emissions, and that its operations in Australia were amongst the most efficient in the world.

India: Farmers end protest over Tata Nano plant

Farmers who have been engaged in sometimes violent protest against the construction of the Tata Motors car plant in West Bengal have said that they are suspending their activities after the government promised to return some of the land that had been taken.

The move comes after Tata had threatened to pull altogether from the site in the face of the violence and damage done to the plant. The site is slated to be the home of the new Tata Nano, celebrated on launch as the world's cheapest car.

The crisis was initially created when the government took over 1,000 acres of farmland for the factory. Offers of compensation to some of the farmers were rejected in the face of demands that at least 400 acres should be returned.

Protests have initially been suspended for seven days, whilst details of the return of land are resolved.

Nigeria: Graduates group challenges Chevron

The National Association of Itsekiri Graduates has written to Chevron Nigeria to complain of what the group describes as 'corporate irresponsibility' in relation to the company's alleged marginalising of the Itsekiri people.

In a statement, the group said that the company's approach to corporate social responsibility was not in the interest of the well-being of the Itsekiri, an ethnic group of the Niger delta area numbering around 450,000 people. It complained that Itsekiri graduates has been discriminated against in terms of recruitment.

A petition to the company leadership from the Itsekiri Movement for Peace and Justice has warned of "unpleasant consequences" if more Itsekiri are not recruited into management positions in the company's operations in Warri and Escravos.

The move is the latest in a long history of conflict in the region with complaints about Chevron not providing opportunities for workers in the local community, and with conflict between the Ijaws and the Itsekiri over the benefits of the company's presence. Six years ago, a group of Itsekiri women occupied the main plant in the area for 10 days, trapping workers on site by preventing planes or helicopters from landing. At that point, Chevron signed a pledge to provide regular jobs for local people, as well as to provide local infrastructure.

UK: Advertising watchdog bans ExxonMobil ad over green claims

ExxonMobil has disputed a ban on its TV ad in the UK by the Advertising Standards Authority. The ban was provoked by the statement in the ad that liquefied natural gas is one of the most environmentally friendly fuels - a claim disputed by environmentalists.

The company said that the commentary in the ad, provided by three company employees talking about energy challenges in the future, was "accurate and truthful" since it did not make excessive claims for the fuel, but simply noted that it had an important role to play in delivering energy to meet growing demand and that it was 'one of the world's cleanest fuels'.

The ASA said that viewers would not see comments about the fuel as a comparison with other fossil fuels, but rather in the context of all the energy sources listed in the advert, which includes renewable sources.

Ghana: Deal struck with EU to fight illegal timber

Ghana and the EU have signed a deal to aim to stop illegally logged timber from Ghana being shipped to market in the EU. According to the World Bank, 60 percent of logging across Ghana is currently not legal, leading to rapid deforestation.

The EU has said that it hopes for similar deals with other African countries, which will see it deny entry to any Ghanaian timber that is not verified as from a legal source.

The sale of timber has become one of Ghana's top export industries, but has resulted in the country's tropical forest cover shrinking over the last fifty years to a quarter of their original size.

US: Airlines reduced emissions last year

The Air Transport Association said that US airlines carried over 20 percent more passengers and cargo but managed to reduce fuel use and emissions during 2007.

According to the group, 3 percent less fuel was used resulting in over 11bn fewer pounds of carbon dioxide (around 5m tonnes) than were produced in 2000.

Changes have been brought about by increasing fuel prices, with airlines retiring older less efficient planes and introducing technology onto others designed to boost mileage. Airlines say they have doubled fuel efficiency since 1978.

Companies are committed to improving efficiency further over the next twenty years by 30 percent.

EU: MEPs vote to give carmakers breathing space

A report passed by Members of the European Parliament has said that motor manufacturers should get an additional three years to meet new standards on carbon dioxide emissions.

The Industry and Energy Committee passed the report by 35 votes to 21, and the move could represent a significant easing of European Commission proposals around reducing emission levels to 120g of carbon per km by 2012.

According to the report, only 60 percent of the fleet of any manufacturer would be required to meet the 2012 target, with the rest falling into line by 2015. It would also allow some degree of offsetting the performance of very efficient cars against some of the lower performing vehicles.

Green groups attacked the report, accusing the MEPs of responding to pressure from the car industry. The proposals still have to get support from the Parliament's full house, and the national environment ministers are due to discuss in October.

Japan: Mikasa Foods admits using rice in food unfit for human consumption

Mikasa Foods has said that it imported rice from China and elsewhere with higher levels of pesticide residues than allowed for human consumption, and sold it in products such as 'shochu' alcoholic drinks and rice crackers.

The farm ministry said that it had ordered the company to recall the products affected. The company had bought around 1,800 tonnes of imported rice from the government. High levels of Aflatoxin were detected in about 3 tonnes of the rice which had been imported from Vietnam.

Mikasa Foods President Mitsuo Fuyuki had said that he was aware that the company had used the rice. There are not thought to have been any ill effects amongst consumers to date, but the revelation will cause concern following on from the recent serious poisonings that occurred due to the imported 'gyoza' dumplings from China.

UK: Retailers price promotions push unhealthy food

Supermarkets are offering too many cut-price reductions for fatty or sugary foods with the number of such promotions having doubled over the last two years, according to a report by the National Consumer Council (NCC).

The consumer group carried out a survey in March, covering Asda-WalMart, Co-op, Marks and Spencer, Morrisons, Sainsbury's, Somerfield, Tesco and Waitrose, reviewing the nature of all price promotions in the stores at the time.

The NCC said that only 12 percent of the promotions were for fruit and vegetables, with an average of 54 percent for foods the campaign group deemed unhealthy. It said that Morrisons was the worst offender, with 63 percent of its promotions focusing on unhealthy foods. The best-performing retailer on the NCC's measure was Sainsbury's.

The report was attacked by the British Retail Consortium, who said that the information was out of date with the retailers having carried out much higher levels of price cutting on fruit and vegetables in the last six months. And offering 'treat' foods in the run up to Easter is standard, so to take a snapshot in March is misleading.

CSR FEATURES from the Internet

Seeking the sweet spot, where financial and social returns converge - 8 Sep 2008 FROM The Globe and Mail (Canada)

Three years ago, The Economist magazine declared that corporate social responsibility was a "regrettable" public relations victory. Last January, it somewhat grudgingly acknowledged that CSR is a matter of enlightened self-interest.

A lot has changed in three years - even in Canada. Top-down pressure on corporations from securities regulators and large institutional investors and bottom-up concerns from consumers and shareholders are reinforcing the need to pay more attention to environmental, social and corporate governance risks.

Read full story

Socioeconomic issues: B-schools must do more - 8 Sep 2008 FROM Livemint.com

(India) Corporate social responsibility, or CSR, has been the buzzword for the past few years in many business schools. CSR has now evolved to corporate sustainability. This paradigm shift was much needed. CSR smacked of a charity-like approach. “With great power comes great responsibility,” one senior executive said while referring to CSR at one of the conferences that I attended.

The approach of corporate sustainability, on the other hand, is more pragmatic. By addressing socioeconomic and environmental concerns, it's not as if the corporate world is doing charity; it is important for its own survival.

Read full story

Biz models need green revamp: Coke chief - 8 Sep 2008 FROM The Japan Times

Corporate social responsibility projects aren't just things you do to be nice, but things you invest in because they are crucial to your long-term business interests, Coca-Cola Chairman Neville Isdel told a recent seminar in Tokyo.

"They are nice things to do, but if that is the only reason that we're doing them, they would be cut out of the budget when the business is tight," Isdel said. "If we're only doing them because they are nice, they should be cut in the first place."

Read full story

Recent entries from Mallen's blog

Socially responsible gamblers? - 13 Sep 2008

The inclusion of Partygaming in the recent FTSE4good index listing has provoked some comment on the Citywire blog. Can it every be right, Deborah Hyde asks, that gambling and oil companies can find themselves on a socially responsible index? Read more

E.On's 'Ratner' moment - 11 Sep 2008

The energy companies are treading a fine line at the moment, with price rises leading to high profits, whilst poorer people struggle to pay bills and face a harsh winter. So it's just what you need at such a moment to have one of your executives in the UK making a joke to a Parliamentary committee that a hard winter would mean "more profits for us". Read more

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The end of the Chad experiment

Article by Mallen Baker

The World Bank president Robert Zoellick has finally pulled the plug on one of the most interesting experiments in recent years as Chad failed to live up to its side of the bargain over what would happen to money from the country's oil.

The initial hopes had been high. The World Bank provided loan funding for the development of the Chad-Cameroon pipeline by a consortium headed up by ExxonMobil. In return, the government agreed that money would be held securely in an escrow account, and that 72 percent of it would be dedicated to ending poverty in the country with a further 10 percent put into a fund dedicated to benefiting future generations after the oil has run out.

Indeed, it was so strongly framed that initially groups like Amnesty International attacked it because in any disagreement between national legislation and the agreement, the agreement prevailed. This could lead, the group argued at the time, to a situation where the government was prevented from helping its own people. That, however, turned out not to be much of a problem.

Instead, the government set about breaking the agreement with a view to securing for its own purposes a greater slice of the cash. Programmes for the poor are seen to be rather less of a priority than propping up a regime in some considerable trouble with increased military spending. Chad is seen as being one of the most corrupt regimes in the world. It should not be a great surprise.

The previous World Bank president Paul Wolfowitz had already slammed the breaks on a couple of years ago when the government decided it would unilaterally tear the deal up and threaten the oil companies that they either handed over the cash the government felt was owed to them, or the facilities would be seized without compensation. In that event, they were eventually able to agree a solution - but one that ultimately was just delaying the inevitable.

Almost as soon as the ink was dry on the agreement, it became obvious that the government was not putting resources into the education, health, infrastructure, rural development and governance projects it was meant to. It had signed up in cynical spirit to create delay.

So last month, Zoellick wrote to Sudan's president Idriss Deby to highlight what he saw as repeated failures of detail, and to request that the government repay the outstanding balance of $65m still owed to the World Bank. Since the oil profits are now flowing to the tune of about $1.4bn, this was not much of a problem, and the repayment was made at the beginning of September.

That said, there is a separate $200m agreement between the International Finance Corporation and the oil companies. This is not affected by the latest move, and the key question will be what Exxon will choose to do next. At an earlier stage, it said it would only take part if the World Bank was involved and an agreement in place to lower its risk. That was then, and a lot of money has been invested since that makes big gestures more costly. But Exxon will not enjoy the spectacle of future fighting in Chad the fuelling of which can be described as flowing directly from its oil revenues.

The Chad government has said that the World Bank decision will not affect output from the pipeline. Exxon has not yet made any kind of statement. Two of its major partners have already left the stage. At the end of August President Deby told ChevronTexaco and Petronas who, between them, held around 60 percent of the country's oil production, to ship out because they were disputing the governments escalating tax demands.

Life in Chad has been deteriorating not improving, with money supposedly spent on development being wasted on shoddy projects at inflated prices, all to the enrichment of people that have become friends of the government. Meanwhile education remains poor and child mortality rose from 1990 to 2006.

Plenty of groups have met the news with a huge 'I told you so', having predicted the demise of the agreement for some time. Campaigners said that their argument that the World Bank should not support big mining or oil deals had been vindicated.

But many would say that it was better to have made the attempt and failed than simply to presume it could not be done from the start. At least the lessons are there now to be learned.

And the hard lesson here is that it is just not possible for external bodies to force a positive outcome in countries where there is endemic corruption and there is poor leadership. One member of the ill-fated World Bank oversight panel said: "We knew from the beginning how this would end. Chad is a corrupt country with no real democracy. The government has simply enriched itself."

So we are back once again to the main onus being on companies to work out how they deal with the governments of corrupt regimes. Perhaps they should walk away. The expectation is that the 60 percent gap opened up in Chad will soon be filled by Chinese companies who are less troubled by the dilemmas of supporting the government with the revenues it demands. Is it better to have companies in place that are at least committed to combatting corruption, and trying to make a positive impact in the local communities where they operate? Or by so doing, is the company inevitably compromised beyond defence.

You can consider the question and quietly decide what you will do. For ExxonMobil, with so much at stake, the decision cannot be so easy nor so quiet.

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In the news from the latest issue

Apple suppliers in bribery charges

UK: Gap, Next and Marks & Spencer respond to Indian worker abuses

British court delays Yevgeny Chichvarkin extradition hearing

New integrated reporting coalition launched

Netherlands: Trafigura guilty of exporting toxic waste

Kazakhstan: Philip Morris suppliers used child and forced labour

US: Nestle to drop 'deceptive' health claims

China: Hang Seng launches corporate sustainability index

Monsanto GM seed ban is overturned by US Supreme Court

Bhopal trial: Eight convicted over India gas disaster

Nestle announces NGO partnership to verify palm oil

Macmillan faces World Bank ban over Sudan payments

Mining giant BHP Billiton admits it may have bribed foreign officials

Foreign firms pledge not to give bribes in Russia

... more news stories

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Business Respect - most recent edition added on 9th August 2010