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and Tylenol
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BUSINESS RESPECT - CSR Dispatches#24/23-Feb-2002
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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/csr and produced every two weeks.
In this issue we ask how should Nongovernmental Organisations (NGOs) be accountable to the companies they target. We review Unocal's latest CSR report, and get feedback from the WEF Corporate Citizenship team.
In the news:
1. Monsanto found responsible for heavy PCB pollution
2. Chinese toy workers conditions attacked
3. Biggest US pension plan pulls investments from Asia
4. Japan: Snow Brand Food brought down by scandal
5. Kenya: Flower Firms Accused of Exploiting Workers
6. Starbucks targeted for new round of protests
7. New Zealand companies resist Kyoto Protocol
8. General Motors recruits suppliers in fight against fuel economy
9. Ford wins safety victory on Explorer
10. MBA students anticipate values conflicts
11. BP launches sulphur-free fuels
12. Dow Chemical announces major employee training for ethics
13. Japan: football targeted on child labour issues
14. Bristol-Myers Squibb acted improperly on patents
15. Companies increasingly at risk over human rights
Feature articles on the internet:
1. Pinstripe Protestors - Activists are learning to use the capitalist system - Feb 25th From Newsweek
2. Do-good mutual funds did not escape Enron fall - Feb 21st From Planet Ark / Reuters
3. Consumers force chocolate industry to takes steps to stop slave production - Feb 16th From Straight Goods, Canada
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Topics:
Welcome
New on the website
CSR News 23-Feb-2002
CSR FEATURES from the internet
NGOs - Moving Toward Power With Responsibility?
Unocal Corporate Responsibility Report 2000-2001
This issue is also on the website at http://www.mallenbaker.net/csr/nl/24.html.
Copyright 2002 Mallen Baker. All rights reserved. For information on how to subscribe, go to http://www.mallenbaker.net/csr/nl/subscribe.html
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Welcome
The focus on social responsibility remains firmly in the realm of fraud, misrepresentation, and financial calamity. The Enron saga goes on and on - lurching from time to time into the realm of farce. This week, for instance, we learned that the company had set up a fake trading room full of employees pretending to work to impress city investors. This may not be the first time employees have gotten by through pretending to work - but it's probably the first time they've been required to do it by the senior management!
At the same time, Allied Irish Bank found itself in big trouble when the revelation emerged that fraud at its US subsidiary had been going on for five years undetected.
An obvious case for ethical practices emerges - what a shame that it's not more obvious how enforcement can follow in the future. After all, if it were so easy how was it the case that so many of the ethically screened funds were burned - particularly by Enron?
Both the Domini 400 Social Index and the Calvert Social Index saw the company as one of the few energy firms that passed muster right up to the collapse. The company was also held by a number of other socially screened stocks.
One CEO for an ethically screened fund went on record suggesting that there was simply no chance that their screening process would have picked up what was happening with Enron - the bad practice was too well hidden. If it is really the case that - however sophisticated we may expect social and environmental reporting to become - such problems will always emerge as surprises, it really does underline the caution with which the CSR movement needs to use in picking its winners.
They may have CSR programmes coming out of their ears - but what sort of corporate culture do they really have? What do the people think who have to do business with them? There are certainly some companies we can think of who are in the news with good stories one day and provoking controversy the next.
It matters, because the integrity of the business case for CSR can be brought low most easily by discredited champions.
On a separate note, our piece last edition on the World Economic Forum statement prompted a response from Caroline Bergrem, project manager for the WEF Corporate Citizenship Initiative. Amongst the detailed comments made, she focused on our note of the document's "first base" nature - and the relatively small number of signatures attached to it.
"Maybe you are right, that we are still a lot less further forward than we might hope, but the Statement is a compromise coming out of our work with the signatory companies. At the same time, the document, as much as it is intended to engage the signatory companies, is also very much meant as a call to action and a management tool for companies and business leaders that have not yet bought in to or adapted the corporate citizenship beyond philanthropy into their more strategic business thinking and activities. In terms of the number of signatories, we made a conscious decision to work with this small, but very varied, group of companies as a task force, rather than to go out to all WEF members to get them to sign a statement. Our hope is that this is an ongoing process of dialogue and outreach, rather than a one-off statement."
Thanks to Caroline for the response. At the end of her message, she included a considerable challenge - "Based on your above comments, we would be very interested to hear your own concrete suggestions on what 'a redefinition of the mission of the private corporation within the 21st century - something that would build a post-Friedman consensus that redefined the landscape' would look like in writing."
Talk about calling someone's bluff! Well, we'll have a stab at answering this - but as ever would welcome any thoughts other readers might have.
Mallen Baker
Vanessa Wood
editors@mallenbaker.net
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NEW ON THE WEBSITE
A "Companies in the News" page has been added for Enron to the website at http://www.mallenbaker.net/csr/CSRfiles/enron.html
News stories have been updated
Voting is ongoing on the current poll - whether or not it is ever right for a socially responsible company to downsize unless it is in a real crisis. Current voting is running in favour of those who believe that downsizing can not be justified - but there's more time to make your views known. See the poll at the entry page http://www.mallenbaker.net/csr/index.html
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CSR News 23-Feb-2002
Monsanto found responsible for heavy PCB pollution
Monsanto has been found liable for negligence for the emission of PCBs - one of the most toxic persistent chemicals created by man - into a residential area in Anniston Atlanta, US.
The company produced PCBs at the site for 40 years - the chemicals were widely used as an electrical insulator - and shut down production years before PCBs were actually banned by the US federal government. Vast quantities of the chemicals were flushed into nearby creeks and buried underground.
The court had earlier heard evidence that the company had known many years previously that the chemicals were dangerous. It has since spent more than $40m on pollution clean-up and testing.
The amount of damages is still to be announced, and it is now expected that there will be a major class action lawsuit involving a further 15,000 residents. (NY Times)
Chinese toy workers conditions attacked
Some of the largest toy manufacturers in the US have been accused of violating Chinese labour laws and international standards in the conditions of workers employed making their products.
According to the National Labor Committee for Human Rights, which organised a demonstration outside the annual Toy Industry Association convention in New York, workers are badly paid and exposed to dangerous toxins. The protestors named Hasbro, Mattel / Fisher-Price, Toys 'R' Us and Wal-Mart as being at the heart of the problem.
The campaign is asking the companies as a first step to remove toxic oil paints, glues, solvents and plastics from their products, and to provide independent health and safety training. It has produced a report "Toys of Misery 'Made in China'".
The Toy Industry Association responded by suggesting that the campaigners had simply gotten their facts wrong. "The conditions, if true, would be appalling. Fortunately they are not." (Yahoo Singapore)
Biggest US pension plan pulls investments from Asia
The California Public Employees' Retirement System (Calpers) has removed four south-east Asian countries from its list of countries it will invest in due to ethical concerns.
Indonesia, Malaysia, the Philippines and Thailand will now be removed from the Calpers portfolio, although the move is expected to have a limited impact on the markets.
Malaysia and Indonesia in particular were dropped over concerns around human rights performance. The countries join a Calpers blacklist which includes Jordan, India, Egypt, China, Columbia, Pakistan, and Sri Lanka.
Calpers is very influential on others, due to its size and investment record, although a previous socially motivated pull out of tobacco did not lead to others following its initiative. (FT / Reuters)
Japan: Snow Brand Food brought down by scandal
Snow Brand Food, the meat processor subsidiary of Snow Brand Milk Products, has announced that it is to shut down by April following the destruction of its brand image by scandal.
The company had hoped to keep going, but had been faced by an almost total collapse in customer confidence following the admission by the company that it had deliberately mislabelled beef in order to qualify for government BSE hand-outs.
The move leaves the parent company still struggling to survive following its own role two years ago in a major poisoning outbreak. It has said that a new revival plan will be unveiled before the end of March.
Meanwhile, Kyodo Meat Product Ai became the latest company to be investigated by the government following allegations that it used beef imported from the US in assorted products that were labeled as being of Japanese origin in order to benefit from higher prices. (BBC / Japan Times)
Kenya: Flower Firms Accused of Exploiting Workers
According to the Kenya Human Rights Commission, the growing flower industry neglects and abuses its workers. The position was described at the Commission's conference, with claims that starvation wages combined with the sexual harassment of women workers, the lack of provision of essential safety equipment and exposure to chemicals leading to a range of health problems.
The situation prompted a coalition of workers, shop stewards and human rights officials to produce a list of demands for changes in the area of workers' rights.
The claims are not, however, universally supported. Industry, government and top trade union officials have praised the flower farms, suggesting that they were part of a well-regulated and profitable industry. The Kenya Flower Council offers its members training programmes on chemical handling, and has a Code of Practice for welfare of workers and environmental protection.
Kenya is Africa's leading exporter of cut flowers, supplying around 25 percent of European Union imports. (The East African (Nairobi))
Starbucks targeted for new round of protests
Protestors are due to gather at Starbucks' annual meeting for the second year to argue for hormone-free milk and a stronger commitment to farmers. Stores in six different countries are also to be leafleted.
In the face of the pressure, the company restated its commitment to environmentally friendly products and fair wages for coffee farmers.
Starbucks buys one percent of the world's coffee output. It now offers organic cow's milk and soy milk in many of its 5,000 plus cafes and last year it agreed to a major purchase of fair trade coffee.
The company has hit back at the protestors, complaining of "inaccurate" and "grossly misleading" information and accused them of targeting Starbucks as an easy route to maximum publicity, whilst ignoring the company's socially responsible performance. (Reuters)
New Zealand companies resist Kyoto Protocol
Chris Baker, the chairman of the Greenhouse Policy Coalition - which includes a number of greenhouse gas emitting industries - has renewed the group's opposition to ratification of the Kyoto Protocol.
In response to the government's national interest analysis on the protocol, published last week, Mr Baker argued that the economy came first - and that if Australia refused to ratify the treaty, New Zealand businesses would surely be disadvantaged in they were required to go it alone.
The protocol would require New Zealand to cut emissions to 1990 levels between 2008 and 2012 or else purchase carbon credits to account for the excess. (Stuff)
General Motors recruits suppliers in fight against fuel economy
General Motors has sent a letter to its suppliers urging them to register opposition to tougher fuel economy standards with their senators. The company provides a suggested form letter, along with a request for copies.
Environmentalists criticised the move, and accused the company of using its muscle to force smaller companies dependent on its patronage to provide it political support. The company suggested the move was legitimate, and in no way represented strong arm tactics. (Reuters / Wall Street Journal)
Ford wins safety victory on Explorer
The US National Highway Safety Administration has denied a request by Bridgestone / Firestone to investigate safety defects in the Ford Explorer suggesting that the vehicle is no different to other SUVs in this regard.
The decision was a vindication for Ford's claim that the recent problems with tyres in accidents lay with problems in the tyre manufacture, not in the design of the Explorer. The company described it as "the exoneration we've been looking for". (NY Times)
MBA students anticipate values conflicts
According to a survey of nearly 2,200 MBA students from 13 major international business schools, MBA students anticipate stressful conflicts of values during their careers.
Not only that, but because they believe they have no power to change companies' values, they suggest they would choose to leave rather than change the company.
The survey, which was carried out by the Aspen Institute, also found that the two years of the business school programme tends to shift the MBA student's priorities from meeting customer needs and product quality into shareholder value.
Many MBA students remain unsure what social responsibility means in a business context - and are as likely to believe it is something that belongs in the HR department as part of a company's drive to keep workers happy. The main message seems to be that many MBA courses are still failing to provide proper business case examples of CSR in practice. (Aspen Institute)
BP launches sulphur-free fuels
BP has introduced Sulphur Free Unleaded petrol and Sulphur Free Diesel at a number of locations in Scotland as a first step to a wider roll-out.
BP states that the new fuels are the cleanest petrol and diesel fuels available in the UK, containing virtually no sulphur. The move has been made six years ahead of EU legislative requirements.
Immediate environmental benefits include the reduction of sulphur dioxide emissions that are a cause in the development of 'acid rain', and a reduction in particulate emissions that create air pollution and contribute to respiratory problems.
Sulphur Free Unleaded and Sulphur Free Diesel are also claimed to improve catalyst efficiency and are treated with advanced additive technologies to optimize performance and fuel economy. (BP)
Dow Chemical announces major employee training for ethics
The Dow Chemical Company has announced a company wide initiative to transform the way in which its 50,000 employee workforce is trained to handle ethical issues.
The programme builds on the company's award-winning e-learning infrastructure, and contains a curriculum for employees presenting potential issues they will face in their work, customised according to job role. This will include such topics as preventing workplace harassment, conflict of interest, antitrust and bribery.
Richard L. Manetta, corporate vice president, said "what we're about to undertake supports our global program that ensures that everything we do reflects an unwavering commitment to integrity." (Stockhouse)
Japan: football targeted on child labour issues
The Japanese non-governmental organisation Action against Child Exploitation is targeting the coming World Cup for protests on the use of child labour.
The organisation's message is that many soccer balls are manufactured by children in developing countries. Pakistan and India are the main exporters of soccer balls, and reports remain about the use of children. ACE has presented a petition to the Japan Football Association and JAWOC, the Japanese organising committee for the 2002 World Cup asking that such products should not be used. (Asahi)
Bristol-Myers Squibb acted improperly on patents
Bristol-Myers Squibb has been found guilty of acting improperly when it filed an additional patent for one of its drugs, BuSpar, in an attempt to prevent generic versions of the drug being produced when its original patent expired.
The company could ultimately end up paying hundreds of millions of dollars in fines if the court finds that the company violated the law in keeping generic versions of its drugs off the shelves. The practice of using secondary patents to seek to extend the period of no-competition for drugs has been widely criticised, and this case could now have implications for other brand-name companies who have been accused of similar practices.
Bristol-Myers Squibb said it is considering an appeal. (NY Times)
Companies increasingly at risk over human rights
Multinational companies face a growing risk of being associated with human rights violations, according to research published in London yesterday by Amnesty International and the Prince of Wales International Business Leaders Forum.
The research examines the operations of 129 leading companies in 34 countries where human rights abuses including torture, forced child labour and denial of freedom of expression occur.
Presented as a series of detailed world maps, it highlights risks facing telecommunications, utilities and food and drink companies as well as those in sectors more commonly linked to human rights issues, such as arms manufacture and oil and gas exploration. (FT)
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CSR FEATURES from the Internet
Pinstripe Protestors - Activists are learning to use the capitalist system - Feb 25th From Newsweek
A CULTURAL REVOLUTION IS underway as protesters in pinstripes figure out how to work the capitalist system. To learn the new language, Greenpeace in Australia sent its corporate campaigner to a 10-week strategy course for company directors, and Friends of the Earth can now draft shareholder resolutions.
Protest groups tap members over the Internet for business expertise, commission financial studies, collect free advice over lunch with sympathetic investment bankers and poach talent from the corporate world. "We finally realized it’s all about money, so we have to talk that way," says Fouad Hamdan, a Greenpeace director in Germany ...
http://www.msnbc.com/news/709208.asp
Do-good mutual funds did not escape Enron fall - Feb 21st From Planet Ark / Reuters
The Pax World Balanced fund , which prides itself on its ethics, is one of the biggest mutual funds that promotes investing in good corporate citizens.
So it may come as a surprise that the socially conscious fund's top holding at one point in 2000 was Enron Corp. , the now bankrupt energy trader facing scores of shareholder lawsuits and intense scrutiny over its accounting practices ...
http://www.planetark.org/dailynewsstory.cfm/newsid/14639/story
Consumers force chocolate industry to takes steps to stop slave production - Feb 16th From Straight Goods, Canada
The global chocolate industry knows there's a problem at the source of its main ingredient. Every pound of chocolate we buy uses 400 cocoa beans, but for thousands of African boys working on farms and plantations in Ghana and Cote d'Ivoire, the harvest brings the incalculable theft of freedom and childhood.
Companies like Hershey's, Nestle, and M&M/Mars have banded together with the world's chocolate makers to tackle the problem, but some think it's not enough: US-based Global Exchange wants Hershey's and M&M/Mars to change how they buy ingredients. It's demanding they go fair trade.
http://www.straightgoods.ca/ViewFeature.cfm?REF=327
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NGOs - Moving Towards Power With Responsibility?
According to Edelman, Europeans trust NGOs higher than the top rated corporations by a margin of nearly two to one. The three top rated brands in Europe are Amnesty International, the World Wide Fund for Nature and Greenpeace. This is not the case in the US, where the top corporate brands - Microsoft, Coca-Cola, McDonalds and Bayer still rank around 15% higher than the NGOs.
Nevertheless, across the world, many NGOs are finding that their word is given more weight than that of many corporations. The interesting question is - just when does this trust begin to translate into any kind of transparency about the integrity with which it is earned? When will NGOs have to practice what they preach on accountability?
In the first instance, most of these organisations are membership-based. Some are better than others in having mechanisms for being accountable to the membership.
Many NGOs then will campaign for legislative change - and indeed some have been very successful at this. For instance, in the UK Parliamentary Acts such as the Home Energy Conservation Act and the Road Traffic Reduction Act came about through the initiative of Friends of the Earth and the Association for the Conservation of Energy.
Does the NGO have any responsibility for whether such legislation (or conversely, the blocking of legislation) has the positive impact claimed? On the one hand, no it doesn't - since if the process goes through the legislature, the Parliament takes on the responsibility to make sure what eventually passes is good legislation. But this rather depends on the relative integrity of the process through which it passes - and the power of the NGO to get its own way.
Increasingly NGOs will campaign against named companies - and this is where the questions get particularly tough. When GAP suffered some financial disruptions - anti-GAP campaigners were quick to boast that these difficulties came about in part because of their activities.
Suppose they were right about that - but wrong about the case they had been making against the company. How is that NGO - whose word is trusted by the public - accountable both to the public which has taken its word and to the company who has been falsely damaged - probably with some impact on a percentage of the workforce?
It may seem a little early to ask such questions - there is always the response that points to the bigger gaps in accountability behind some of the major corporate power across the world.
But lets suppose for a moment the pressure for NGO accountability grows. What are the sorts of policy statements and promises that would be fit for purpose in this situation? They would surely include measures such as:
- Accuracy of information: the NGO promises to its stakeholders that the information it promotes and uses for the basis of its campaigning will be accurate and up to date in terms of its factual content - whilst reserving the right to draw whatever conclusions from these facts it chooses.
- Dialogue and consultation: the NGO promises it will discuss allegations with the company concerned to ensure that there may not be additional information which would support the company's innocence of charges.
- Impact on stakeholders: the NGO promises it will monitor the effect its campaigning has on stakeholders, such as the employees of a target company, and will seek to minimise harm to innocent third parties by targeting pressure on parts of the company which have decision making capacity where possible.
- Respect for safety and privacy: the NGO promises it will not publish information or make statements that will encourage any breach of the personal safety or privacy of people at whatever level in the company targeted.
- Aims and objectives: the NGO promises to publish its aims and objectives with regard to a campaign against a company - and to account for whether those objectives are commensurate with the issue or problem attributed to the company.
Who will demand such accountability? Companies targeted by NGOs will be seen as merely fighting back to defend themselves. Legislators will fight shy of making enemies amongst the NGO community unnecessarily. Can NGOs demonstrate the power of their position by having the integrity to recognise the value of practicing what you preach, so moving towards such a position without being pushed?
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"Corporate Responsibility at Unocal - Putting Our Values Into Action" 2000-2001
" Unocal has a significant stake in the social and economic viability of the communities in which we work and invest. The lengthy investment cycles of the energy industry require a long-term "licence" to operate, a stable business climate, capable workers and community goodwill and acceptance. Our goal is to earn - and keep - the respect and trust of all our stakeholders" - Charles Williamson, Chairman and CEO
The latest Unocal Social Responsibility report is well designed and, as it launches into its overview, seems determined to cover all the bases. The company identifies its values statement, which covers ethics and values, communities, workplace and environment, and develops further sections on each of these.
But it doesn't take long for the report to become deeply disappointing. The best CSR reports we have so far reviewed have combined the reporting of solid data (compared against hard targets) with a human-face narrative that puts the company's work into context.
Unocal provides predominantly narrative. It gives no real sense of where the company is going or what targets it has set. It gives precious little feedback on stakeholder perceptions. Precious little at all that is verifiable or measurable. And it matters.
This is most obvious in the assessment of achievements to date - many of which are procedural, and few of which are quantified. Targets for the future don't seem to promise much improvement. For instance, amongst the targets you will find:
"Continue intensive efforts under way in Indonesia and Myanmar, and expand activities in China, Vietnam, Bangladesh and Brazil as Unocal's business in those countries grows.
Enhance civil society by promoting economic and social progress, drawing largely upon our employee involvement and Unocol Foundation programming.
Seek opportunities to further reduce emissions, prevent pollution and conserve energy."
Very unsatisfying. Very unspecific.
The breadth of the report suggests a company which is engaging the broad range of issues - and could potentially do well as it builds profile and trust in those areas. But at the moment, the company's confusion at the difference between its own self-perception and those of its external stakeholders is palpable.
For instance "still we face a great challenge. How do our stakeholders reconcile the discrepancies between Unocal's corporate responsibility reports and the negative perceptions and allegations that often appear in the media and on the websites of numerous organisations?"
If that's the issue, it might be interesting to see a report that comprehensively covered the perceptions and expectations of those stakeholders and responded to them - with an action plan where appropriate, and with well-reasoned positions or rebuttals where not.
This seems to be alien territory for Unocal. In Sept 2001 the company says it carried out its most extensive survey of worldwide employees. "The findings are helping us better understand what excites and motivates people at Unocal". However, none of these findings are shared in the report. No figures that will help us understand what are the issues for the company at the moment - or indeed to reassure the staff that the company really has heard what they said. Instead the findings "will be used in several management workshops"
The only solid data in the report covers recordable injuries and illness frequencies - and one or two non-standard environmental measures. Each of these show that performance is headed the right way. But the question is inevitably raised that, since figures are not given for so many other important areas, does that mean that performance in these areas is not so good?
This is not a report - it is a promotional brochure. Without serious self-analysis and verifiable data this isn't even a helpful narrative.
Whether the good work Unocal is doing weighs up against its overall impact on society is impossible to tell. The lack of specifics in its projected future work programme must raise serious questions about the company's seriousness of intent. Given the undoubted sincerity of the Unocal staff who are out there trying to make a difference, this is a shame.
You can download the report from: http://www.unocal.com/responsibility/01cr_report/ucl_cr_report_2001.pdf
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