Business Respect - CSR Dispatches No 141 - 24 Nov 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 make the case that CSR reporting is broken - and something fast and clever is needed to fix it.

In the news:

Feature articles on the internet:

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Topics:

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Welcome

Tomorrow morning I go head to head in a debate with Ernst Ligteringen, the CEO of the Global Reporting Initiative about the future of corporate social responsibility reporting. There will be some great knockabout stuff, I'm sure, to get Ethical Corporation's reporting conference off to a lively start. But of course, the issues are absolutely crucial. CSR / sustainability reporting is the most visible expression of what this movement is aiming to achieve. If it does a good job, then everyone is clear why companies should be engaging in this agenda, even when times are tough. If it doesn't, well it can do more harm than good.

Ernst and the team at GRI have done a lot of good work over the last few years getting more companies than otherwise would to see CSR as a wide-ranging agenda that goes to the core of how they make money. Obviously, I think what got us here isn't what will get us there - hence the debate. But we debate these things respectfully because they're important - there's no other reason for doing it.

For those who can't attend the session, the main feature for this issue touches on some of the key points that may be covered, at least from my side of the discussion! We may get a counterpunch for next time.

I've had some good feedback about the emailing system used to send the last issue, by the way - which is great. Under the old method, I started the newsletter rolling overnight, and six hours later it had all chuntered its way onto the internet. This way, it costs a little extra, but it's gone in, ooh, about ten minutes. When I left BITC to do this full time, I thought I would have masses of time - all those internal meetings you no longer have to do, right? But time remains the most limited resource even when it's all being used (mostly) productively! Darn.

Oh, and I checked the current website vote today for the first time in a little while. You'll remember it asks about how companies' CSR agenda will fare in the recession. Well, there have been 2,431 votes so far - a huge response, not surprisingly I guess. Still, even the best things come to an end eventually, so if you really want to have your voice heard on that question, you have just one more week.

Mallen Baker
mallen@mallenbaker.net

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CSR News 24 Nov 2008

UK: Primark pulls from PR Week event following protest threats

Fashion retailer Primark has pulled a presentation it was due to make at a PR Week conference following news that campaigners were targeting the event for anti-Primark protests. The company had been intended to highlight how it had survived bad publicity when TV broadcasters highlighted child labour in its supply chain.

Campaigners 'Labour Behind the Label' and 'Blood Sweat and T-Shirts' celebrated the move, saying that they had changed the company's message from one of 'we won' to one of 'we're on the run'.

The TV programmes had shown children sewing sequins onto garments which were subsequently identified in Primark stores. The company created some controversy when it immediately delisted the suppliers concerned.

A recent poll of British shoppers suggested that the company was now regarded by those who cared as the least ethical big name retailer on the high street. However, changing behaviour in the face of economic recession has favoured heavy discounters such as Primark, and suggests that at the moment rather fewer care about the revelations of child labour than want to find cheap clothes.

Germany: Former Siemens managers convicted in corruption charges

Two Siemens former employees have been given probation and fines when they were convicted of involvement in operating a 'slush fund' in order to win business.

The convictions were the latest episode in a major corruption scandal that has centred on Siemens, costing the company so far around 1.9bn euros, and which has seen the men's former boss, Reinhard Siekaczek, also convicted.

The men were said to have set up a complex network of shell operations designed to accumulate money that could be used to pay bribes for foreign contracts.

US: Environmental programmes provide financial returns for majority

Three-quarters of businesses that have solid corporate social responsibility programmes are seeing financial returns, particularly as a result of achieving environmental goals, according to a new report by the Economist Intelligence Unit.

Launching the report, the Economist's Matthew Bishop said that the bad news coming from global financial centres currently was like "the collapse of capitalism as we know it" and would therefore really test whether CSR was embedded within the DNA of the companies that claimed it.

The survey included 566 US-based executives, and found that 74 percent of respondents identified that CSR programmes had increased profits at their companies.

Australia: Wool producers risk ban with change to mulesing promise

Australia's wool industry has gone back on a promise to phase out mulesing by 2010, and now runs the risk that retailers that have threatened a ban will follow through on their threats.

The change of heart, which according to the Financial Times came after four pro-mulesing directors were elected to the board of Australian Wool Innovation, means that companies such as Abercrombie & Fitch and Marks & Spencer are likely to avoid sourcing products from areas where the practice is carried out. Australia currently provides up to 85 percent of the world's wool for garments.

According to the AWI, there is not yet a viable alternative to the practice, criticised by animal rights campaigners as being intensely cruel and painful.

China: Baidu caught in scandal over false information

Chinese internet search engine has apologised to users of its service for its failure to police false claims made by some advertisers on its service, particularly medical service providers. Some companies have been using Baidu to post false information, and it has also been criticised for offering to remove negative stories for a fee.

Baidu said it was conducting an internal investigation, and it has removed medical advertisers until such time as they could show that they have a valid licence to practice medicine.

Baidu is one of the few search engines to mix sponsored links with search results without making any clear distinction. The highest bidders can command top placement on what appear to be organic search results.

The company disputes other allegations, such as that it might actively remove results where a company had refused to pay advertising. It said in a statement that there could be cases where its paid search platform could be used wrongly, but it was "committed to social responsibility and will continue to improve its sales and operational systems commensurate with its status as the leading Chinese language search engine".

Finland: Union boycott brings Stora Enso's exports to a standstill

The Finnish Transport Workers Union (AKT) has carried out a two-day boycott of Stora Enso's paper and wood exports in protest of workplace policies at the company.

The dispute hinges around allegations by the union that the company instructed subcontractors not to sign deals that accorded with union rates. The union wants special agreements with the subcontractors, but the Finnish Port Operators' Association says that the proposed agreements are not in line with existing collective agreements.

Stora Enso, which has also announced mill closures leading to thousands of redundancies, said that the company was an innocent party in the dispute, and branded the stoppage as illegal.

EU: Glass makers cartel fined for price fixing

Four manufacturers of car windows who between them control 90 percent of the European market, have been fined 1.38bn euros after they were found guilty of running a price fixing scam that cheated customers.

Asahi Glass, Pilkington, Saint-Gobain and Soliver were found to have illegally shared commercially sensitive information between them with a view to fixing the market over a five year period.

Saint-Gobain was the worst hit, with a nearly 900m euros fine to reflect its status as a repeat offender. It said that the fine was excessive, and announced its intention to appeal the decision.

Australia: Coal industry launches public engagement on climate change

Australia's coal industry has made a bid to win greater public support and understanding in the face of growing perceptions that it is one of the chief sectors to blame for climate change. The Australian Coal Association is running newspaper ads, and has set up a website aimed at spreading information and encouraging debate.

The site aims to present what the industry is doing in terms of reducing emissions and developing carbon capture technologies.

Australia is heavily dependent on coal, with around 80 percent of its energy mix derived from the fossil fuel, and with the country ranking as one of the world's major coal exporters. This fact is leading a greater urgency within the country to developing cleaner coal technologies.

US: Wal-Mart names Mike Duke new CEO

Wal-Mart CEO Lee Scott is to step down early next year, and Mike Duke has been named as his successor. Scott was widely credited with having taken Wal-Mart further and faster down to journey towards greater environmental sustainability in recent years.

Mike Duke's appointment was welcomed by mainstream investors, who see him as someone that has worked across the Wal-Mart empire and understands the business extremely well.

Duke was also very much involved with some of Wal-Mart's sustainability initiatives. Recently, he fronted the retailer's workshop with its Chinese suppliers where the company laid out a tightening of expectations on the environmental practices of suppliers. Whilst in China, Duke said in a speech there: "Wal-Mart and our supplier partners must operate in a more socially and environmentally responsible way wherever we do business. ... We at Wal-Mart are also committed to being a leader on sustainability."

Saudi Arabia: Government to sue tobacco importers

The Saudi Arabian government has said that it is to sue cigarette importers for around $34bn in an attempt to reduce the incidence of smoking-related diseases.

The move, which re-establishes proceedings from last year, is a signal that the government wants to address the issue of smoking, which remains extremely cheap in Saudi Arabia and is consequently a pervasive feature of social behaviour with around a quarter of all people smoking. Estimates put the economic costs of smoking-related diseases at over $1.3bn.

The suit is aimed at importers rather than the major tobacco companies behind the initial products. Such importers have considerably smaller financial resources to fight such an action.

CSR FEATURES from the Internet

Companies embrace role of social responsibility - 19 Nov 2008 FROM Gulf News

Dubai companies are increasingly using corporate social responsibility to enhance their performance and competitive advantage, the Dubai Chamber of Commerce and Industry's Centre for Responsible Business (CRB) said yesterday.

"Dubai wants to be at the forefront of business and corporate social responsibility as a business strategy, it makes sense that there will be a large take-up of the idea," said CRB manager Gillian Foster.

Read full story

Intention of CSR projects questioned - 11 Nov 2008 FROM The Jakarta Post

Corporate Social Responsibility (CSR) is gaining momentum in Indonesia, with a constant stream of CSR events in Jakarta. But some questions remain over the intention of such gestures.

One skeptic is Reinhard Hutabarat, the headmaster of the free Street Children School. "The help is good, but as long as it is not used for political gain or for a certain party to get some one-sided benefits. From our experience, most of the time street children are used as the background for publicity," Reinhard told The Jakarta Post after a Ramadan event.

Read full story

Recent entries from Mallen's blog

In difficult times, look after your supply chain - 24 Nov 2008

A recent piece from the BBC highlighted how small companies in India are being hit as their big corporate customers throw the brakes on orders that had already been placed, or seek to take supplies on credit. This is, of course, just a snapshot of a similar story unfolding in supply chains across the world. But some companies are showing that they understand the imperative of looking after key suppliers. Read more

Spot the waste of space - 23 Nov 2008

Gerry Harvey, billionaire Australian retailer, has said that donating to charities such as homelessness charities is "just wasted". More, he said that because homeless people "are not putting anything back into the community" it is just "helping a whole heap of no-hopers to survive for no good reason. They are just a drag on the community". Read more

Killing you softly - 21 Nov 2008

I once got gently chastised by the chairman of a debate I was taking part in when I speculated that one must be able to imagine what would a socially responsible armaments company look like. "Killing people more nicely" he mused. But in Western Ontario, a defence company has just won an award for integrity, so someone must think the concept is a runner. Read more

Was Motrin ad really irresponsible advertising? - 20 Nov 2008

You've heard it all before - edgy advertising campaign sparks outrage by offending part of the community, issues apologies, pulls ads, is used as case study in irresponsible marketing etc. Well, yes and and no. The recent Motrin ad in the US, which sparked a wave of angry responses from bloggers and twitterers, was not so straightforward. Read more

Can you have a short award-winning CSR report? - 18 Nov 2008

Doing the rounds at the moment - the revelation that if you have a longer corporate social responsibility report, you're more likely to win an award for it. So obviously, we should all be doing longer reports, right? Read more

Can you be your best self at work? - 17 Nov 2008

The more I am involved with the movement behind corporate social responsibility the more I am convinced that it is not about corporates, but about the individuals that work in them. Read more

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What point the story with no plot?

Article by Mallen Baker

I read another review of a company's corporate social responsibility report today. The review is typical of the genre. It talks about whether the company sets targets. It talked about whether the report follows the GRI guidelines. It talks about whether the report is assured by an independent third party. The only thing is doesn't talk about is how that company is actually performing on a social, environmental or economic scale.

Nothing screams louder that here is a state of the art that remains completely immature - when the focus is on the how of reporting, not the what of reporting. After all, you don't see reviews of companies' annual report and accounts on such a basis.

By any scale of usefulness, CSR reporting is broken. If it wasn't broken, then commentators would be writing news stories based on what was in, not in, or hidden between the lines of, CSR reports. They would be doing this because it would provide extra insights to those wanting to understand the company and its prospects. Almost nobody is, so rather than arguing about whether or not good reports should have twenty or fifty items in the appendices, it would be worth asking why not.

After all, these are serious, newsworthy issues. The fact that banks engaged in irresponsible lending might just be the straw that breaks the back of a very mighty camel indeed. Nobody scanned the CSR reports of the banks for evidence that they were doing the right thing. The growth in computer games is one of the significant factors that is leading to greater childhood obesity - nobody is talking about how well the different companies are anticipating the moment the spotlight will fall upon them. Some of the retailers have rewritten their supplier terms and conditions to a very one-sided balance, but nobody is now evaluating which, in the face of the downturn, may have pushed their suppliers to failure point, representing a key risk to the business.

The people who have a stake in businesses are supposed to understand that the value of owning shares in a company is not down to the value of those shares today, but the potential value of the shares tomorrow based on the company's ability to generate future cashflows. By and large, CSR reports - whether GRI, independently assured, or printed on hemp with biodegradable ink, are not being accepted as providing useful evidence in making that equation.

In the last couple of weeks, there was a story suggesting that longer reports win prizes - shorter ones don't. And although the authors of this research didn't suggest that padding a report out for the sake of it would do the job, it did make one wonder as to what criteria rewards a piece of communication for flying in the face of accepted good communication practice.

It all depends what you think reports are for. The most common answer is that it is a statement, made in the spirit of accountability, to all the interested stakeholders of the business. This is its downfall, because it defies the laws of gravity to speak to so many different audiences at once and expect all their needs to be met.

The financial analysts who care at all will say that they are not interested in stories, they are interested in data. In principle, they are interested in understanding those factors that will influence future performance - particularly around quality of leadership.

The campaign groups are not much interested in the majority of reports - but they will look at those of any 'lightning rod' companies, in sensitive industries or big brands with some historical baggage. They are interested in issues at an expert, albeit often highly partisan, level.

Customers are interested in issues that affect them, often at an entry point level. They respond well to authentic stories, although they respond badly to poor quality corporate PR speak.

Employees are interested in issues that affect them, and may affect how they feel about working for the company. They are interested in issues and processes, and come to the dialogue with a beginner level for some of the issues, but with an expert - and occasionally cynical - eye to the company's claims relating to consistent behaviours around values.

Never mind suppliers, shareholders, local communities. Craft me one communication that meets just the audiences outlined above, and you deserve an award. If not a medal.

You can see companies exploring the space - trying to find modes of communication that will be accepted as authentic, but which will have better penetration into key audiences. Take Cadbury, for instance, the UK headquartered chocolate company. Its latest web-based report, dearcadbury.com, uses a lively, straightforward approach to encourage people that are not CSR geeks to explore the issues, and to hear a story. There is still a section for the boffins who know their stuff. But they dropped independent assurance this year, because it costs a lot of money and it is by no means clear what value the different audiences actually place on it.

The Cadbury site is indicative of the fact that companies are trying out new things because they know the state of reporting has not yet arrived to a point where it meets the communication needs of the companies and their various audiences. So they are innovating, and trying new things out.

Where are the frameworks, the all-important standards in all of this? The Global Reporting Initiative, although it has done good work to date, almost by definition cannot be part of this process. It has a top-heavy structure of multi-stakeholder committees that guarantees slow, ponderous progress - suitable perhaps for a legislative process, but not for something fast moving and dynamic. And the fact that it is multi-stakeholder by design means that it cannot arrive at anything other than a negotiated compromise for a framework that is designed to be all things to all people.

The reporting of the future is likely to be very different. We will see datastreams going from companies directly into the spreadsheets of analysts, with expert third party commentators then providing the context as to what those figures mean. Completely separately to that, companies will have established effective communication mechanisms with their direct stakeholders - customers, employees, local communities, which establishes a dialogue about issues.

The thing that this future suggests is no single report. Information defined by the needs of the audience, rather than the armchair theorising of professional stakeholders. And, hopefully, a process of communication that encourages businesses to drive change through their business - not simply to expend large amounts of energy into turning the handle on producing an annual report that nobody much wants or reads.

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In the news from the latest issue

India: Gujarat drops planned CSR requirement in law

Italy: Investment banks may face lawsuits over unfair bonds

India: Hundreds of child labour cases taken forward

France: Sarkozy / Blair summit to look at ethics in business

US: Voluntary ban on pharma gifts to doctors begins

UK: Carbon positive cement developed

China: Head of dairy pleads guilty over tainted milk

UK: Companies squeezing suppliers for cash

Italy: Parmalat founder gets ten years jail for fraud

Taiwan: listed companies must disclose on social responsibility

US: Siemens settles over worldwide bribery

US: Light cigarette suit can go ahead

India: Government to launch product label as guarantee over child labour

UK: Lush cosmetics firm funds direct action airport group

... more news stories

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Business Respect - most recent edition added on 5th January 2009