Business Respect - CSR Dispatches No 45 - 15 Dec 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 and produced every two weeks.

In this edition we look back on what happened during 2002 in the field of corporate social responsibility.

In the news:

Feature articles on the internet:

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Topics:

Want to read a hyperlinked version of this issue? You can find one on the website at http://www.mallenbaker.net/csr/nl/45.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 end of the year approaches, and for many readers a festive season of some sort or another beckons! Best wishes to all for whatever celebrations may lie ahead ...

Our previous piece covering the debate at the World Business Council for Sustainable Development brought a considered response from Liz Crosbie, who also attended the event, on the issues of NGO stakeholders.

She says: "I am a strong supporter of good NGO/single issue campaigning but have severe doubts about building a corporate CSR movement on compulsory formal stakeholder engagement i.e. talking to NGOs/external verification. This is important when there is little indication that the major NGOs are any more than a bunch of individuals pursuing campaigns that rattle tins rather than working on the hard questions of resolving resource conflicts or defining sustainability on the ground. When the going gets tough i.e. how do we actually sort out the problems of sustainability in detail, not all NGOs want to stay the course and deal with the physical complexities of what is required. Often they move on when they get bored or can't find a simple solution.

"Even if NGOs were more accountable organisations themselves working to agendas agreed with their internal stakeholders, the growth of the corporate CSR community (we hope) will put impossible constraints on those NGOs. When you look at the NGOs' resources they don't have the personnel/money to engage with all the organisations that want their free advice/endorsement and we as CSR professionals have to discuss that as an issue.

"There is an danger in equating the NGOs with civil society and although right now it might be the best we can do, we need to have better mechanisms to reach people than use the NGO professionals to interpret and veto what is done. Especially in the developing world where their views are often very much in the minority. Lots of issues about NGOs as enablers etc. to be discussed in detail at some point. Right now many NGOs are not enabling in many cases and it is unclear who is making their agenda and whether they have accurate information on the questions they are trying to influence."

Liz's points chime quite well with the piece we ran near the beginning of the year on NGO accountability - and no doubt it won't be the last time the question will be raised!

Tomorrow (probably today by the time you read this!) we will find out whether the US Supreme Court will agree to hear Nike's appeal on the Kasky v Nike case reported on in previous issues. So the current state of the vote on this very topic on the website is highly topical.

The statement: What companies like Nike say in their CSR reporting should be protected by the same free speech rules as those covering their critics.

215 of you have voted so far. And of those, 134 (62.33%) of you agree with the statement, with 54 (25.12%) of you disagreeing, and 27 (12.56%) not sure. But perhaps the result - whatever it may be - will prompt you to come along and add your own view!

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 15 Dec 2002

India: Citizenship key driver for CSR

Indian companies see corporate social responsibility as central to corporate action, with "passive philanthropy" no longer a sufficient response to rising expectations, according to the CSR Survey 2002 - India report.

The report surveyed 102 Indian companies and was conducted jointly by the United Nations Development Programme, the British Council, Confederation of Indian Industry and PricewaterhouseCoopers.

It found that the most important driver for involvement in CSR within Indian industry is the desire to be a good corporate citizen, with this being seen as linked to brand reputation. Improved ties with local communities was also seen as a strong factor.

Indian companies remain to be convinced of the existence of a robust business case, however, with the lack of a direct provable link between CSR and financial success being quoted as the key deterrent to taking action. (India Times)

Ecuador: Oil workers held by Achuar Indians in protest

Eight workers for the Argentine oil company CGC are being held by Achuar Indians opposed to oil exploration on their ancestral lands in the Amazon jungle.

The Indians said that they will release the employees only when the company leaves the area altogether.

CGC has rights to explore for crude in an block of land totaling about 81,000 acres but the Indians claim the contract violates their ancestral land rights. They argue that under the 1998 constitution the government must consult local communities on oil activities in the lush Amazon jungle.

But Energy Ministry officials have said that CGC's contract is valid since it was awarded in 1996, before consultations were required. (Reuters)

Activist investors press GM, Ford for emissions cuts

Shareholder resolutions have been filed asking General Motors Corp and Ford Motor Co to reduce the level of emissions produced by their vehicles and operations.

The resolutions, put forward by a coalition of more than 30 religious orders, have been prompted by the companies' opposition to proposed legislation that would raise the US fuel economy requirements for vehicles, and also to a California state law requiring them to sell zero-emission vehicles there.

"The high greenhouse gas intensity of US vehicle manufacturers undermines the competitive positioning of US automakers both here and abroad," according to Patricia Daly, executive director of the Tri-State Coalition for Responsible Investment.

Meanwhile, Honda was named as the company that produces the least-polluting vehicle fleet in the US market, according to a survey from the Union of Concerned Scientists. It was followed by Toyota, Nissan, Ford, General Motors, with DaimlerChrysler in last place.

Ford was the only company that had moved up in the rankings according to the UCS survey - a result the group attributed to the influence of company chairman Bill Ford Jr. (Ananova / AFX / Reuters)

Australia: BAT firms cleared in document shredding case

A court ruling that found that British American Tobacco's document destruction policy was designed to frustrate potential legal claims against it has been overturned on appeal.

Australian firm Clayton Utz had been accused by the original trial judge of helping BAT to "subvert" the discovery process in the product liability case and BAT's advisor Lovells was held to have written a "sinister" memo. Both cleared of wrongdoing.

The appeal judgment says of the memo: "It struck the judge as somewhat sinister… yet appears to us to be no more and no less than a document fully and frankly setting out the difficulties facing the tobacco industry given that a wave of litigation was by then expected."

The case is now expected to go to a re-trial next year. (Legal Week)

US: President Bush promotes corporate volunteerism

President Bush has launched a programme to draw 500 businesses into a volunteer service network, telling business leaders that encouraging such work is part of corporate responsibility.

The initiative 'Business Strengthening America' arose from Bush's State of the Union speech at the beginning of the year. More than 100 companies are currently members, having pledged to use corporate resources to mobilise employees and customers. The President has set a target of 500 companies by June.

"If we want to usher in a period of responsible behaviour in America, people must behave responsibly, and part of behaving responsibly is (to) understand the responsibilities that come with being a CEO," Bush said. "It's not only the responsibility to tell the truth; it's the responsibility to use your position to encourage compassion."

The President identified a business case for involvement, centred around improving morale and supporting a company's public image. (AP / Bradenton.com)

Canada: Government to crack down on corporate crime

Finance Minister has promised a review of the Criminal Code as a first step towards getting tough with corporate crime and following the US moves to boost investor confidence.

He said Ottawa should review whether any new corporate regulations should be mandatory, rather than voluntary as they are now.

Manley also said Canada could investigate the American and British models to see whether parts of their systems could be incorporated into a Canadian solution.

A committee Manley appointed to look into Canada's corporate regulations will report next year. (CBC)

Vendors accuse Microsoft of anti-Linux lobbying in the Third World

Linux vendors and US government officials have accused Microsoft Corp of carrying out a major lobbying and public-policy campaign to stop US government agencies and developing countries from using 'open source' software in general, and Linux in particular.

According to the Wall Street Journal, Microsoft has in the past year argued with the US Defence Department over the content of a report extolling free software, and organised a global lobby to oppose laws that mandate the use of open-source software.

Open source software, such as the Linux operating system, has grown in popularity in recent years, and has particularly been boosted recently with the move by Microsoft towards more expensive licensing terms whilst at the same time announcing record profits.

Vendors accused Microsoft of targeting charitable gifts of software to countries which were looking at open source alternatives. For instance in India, where at least one state government endorsed Linux recently, Microsoft Chairman Bill Gates last month announced a $400 million gift of donated software and business-development aid.

Microsoft insists that its gifts are made "to meet a social need". (Ananova / AFX)

Survey highlights confusion over where CSR reporting goes next

A new report from SustainAbility and the United Nations Environment Programme has identified seven top CSR reporters from across the world, whilst also flagging some degree of confusion as to where the art of social reporting has to go.

"Trust Us: The 2002 Global Reporters Survey of Corporate Sustainability Reporting" shows the top companies to be The Co-operative Bank, Novo Nordisk, BAA, British Telecom, Rio Tinto, Royal Dutch/Shell, and BP.

The review of 50 CSR reports also identified that the size of reports has grown over the last year, with companies expanding and deepening their treatment of the social and economic dimensions of sustainability. But the increase in data has not necessarily made for better reports - indeed in some ways the growth in detail risks impeding transparency as readers struggle to absorb all the information.

The Global Reporting Initiative guidelines have been influential, with 60% of the reports surveyed based on them to some extent. However, the broad adoption has merely heightened the sense that there is a crisis of materiality that the guidelines will have to address. (greenbiz.com)

Sustainable Development concept gaining ground within business

The concept of sustainable development is gaining acceptance inside companies around the world, according to a new survey of 212 business leaders from 50 countries by Canada-based Environics International.

Nine in ten of the business leaders surveyed say that sustainable development is accepted as a desirable goal in their company with six in ten strongly agreeing that the benefits of being proactive around sustainable development outweigh the costs.

Three in four respondents said their company regularly reports on their social and environmental performance; another two in ten say they will do so soon. (greenbiz.com)

Cracker Barrel finally bars sexual orientation discrimination

Cracker Barrel has agreed to bar sexual orientation discrimination following a decade of opposition after a successful shareholder resolution requiring them to act.

The resolution achieved 58 percent support from shareholder's at the company's annual general meeting - the highest recorded for a social policy resolution.

"This is a milestone," said Shelley Alpern, assistant vice president at Trillium Asset Management and co-chair for shareholder activism at the Equality Project, a group that advocates barring sexual orientation discrimination in corporate EEO policies. "Cracker Barrel, which once was the very face of anti-gay bigotry, has finally acknowledged that its lesbian and gay workers are part of the mainstream of the American workforce."

Over ten years ago, a former vice president of the company had issued a memo explicitly detailing the company policy of requiring companies to display 'normal heterosexual values'. Although the policy was later retracted, the company had refused for years to add sexual orientation explicitly to its equal opportunities policy. (Socialfunds.com)

Canada: Tobacco Act survives challenge from cigarette manufacturers

Canada's three biggest cigarette manufacturers have failed in an attempt to challenge the 1997 Tobacco Act as unconstitutional. The companies had argued against the legislation on the grounds that it prohibited them from advertising their brands to consumers.

A Quebec Superior Court judge rejected the challenge from Imperial Tobacco Canada Ltd., Rothmans, Benson & Hedges Inc. and JTI- Macdonald Inc. noting that the health risks associated with smoking justified the measures.

The act requires cigarette manufacturers to put large, graphic health warnings on their packages and restricts cigarette sponsorships and advertising. Among the restrictions is a ban on advertising at sports events and in large-circulation magazines. (CBC)

Investors press for Bhopal settlement

International investor funds, including Trillium Asset Management, Domini Social Investments and the Calvert Group have advised Union Carbide to settle claims of liabilities of over $500m arising from the Bhopal gas leak. They have suggested that the company risks losing billions of dollars in market capitalisation if it fails to do so.

A letter has been sent jointly by the funds to the Dow Chemical Company, which took over Union Carbide in 2001 along with all its assets and liabilities. Union Carbide has been accused of failing to prevent further leakage of chemicals from the abandoned factory, leading to soil and groundwater contamination.

Madhya Pradesh chief minister Digvijay Singh recently announced that his government would petition the Supreme Court to order Dow to pay for the clean up of the site. (Financial Express)

CSR FEATURES from the Internet

Let's learn the lessons from failures - 13 Dec 2002 FROM The Times of Oman

The collapse of a global auditing firm following the financial failure of Enron was “a lesson to all auditing firms”, concedes Nicholas Blake, chief executive officer of Accountants Global Network (AGN), a global association of separate and independent accounting and consulting firms, headquartered in London.

In his keynote address at a presentation on "Bank Lending Norms and Corporate Governance" held in Muscat, Blake mentioned that the International Accounting Standards Board had re-engineered itself to regulate the accounting profession in general ...

Read full story

SA looms large in governance microscope - 13 Dec 2002 FROM Business Day

Harvard University and the World Peace Foundation's Robert Rotberg, writing in the Financial Times recently, made an impassioned argument for the need to improve the way Africans govern themselves.

His argument includes the sweeping statement that "if governance could be improved, in Africa and elsewhere, infant mortality rates would fall, the struggle to contain the AIDS epidemic might be winnable and civil wars would prove less deadly", because "well-governed states perform for their citizens" ...

Read full story

DJSI Adds "Sin" Stocks to Indexes, Calling into Question the Definition of Sustainability - 6 Dec 2002 FROM Socialfunds.com

On September 4, the Dow Jones Sustainability Indexes (DJSI) and the Sustainable Asset Management (SAM) announced the reconstitution of the DJSI based on their annual analyses of eligible companies.

Many social investors were surprised at the addition of companies from the tobacco and arms manufacturing sectors. Tobacco producer British American Tobacco and arms manufacturer United Technologies are new DJSI constituents that have been shunned by many social investors for years ...

Read full story

Ex-GM CEO makes "green" auto industry comeback - 3 Dec 2002 FROM Planet Ark

Nearly 10 years to the day after he was pushed out as chief of General Motors Corp, Bob Stempel shoveled a handful of dirt to break ground for a new plant in Ohio that could make him a key player in a more environmentally-friendly automotive industry.

Stempel, 70, could easily have retired to a comfortable life after his tenure as chairman and CEO of GM ended in October 1992 with a boardroom coup. But now as chairman of Energy Conversion Devices Inc. (ENER.O) he works 60 to 70 hours a week, and flies around the world to visit clients as he makes his case for battery-powered vehicles ...

Read full story

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2002 - A Year in Corporate Social Responsibility

Article by Mallen Baker

2002 was a year that inherited a good many rumbles from the previous year. The full implications of the corporate governance debacles of Enron and Worldcom were still working their way through the system, but awareness was high that all the rules had changed. The only thing people didn't know was just how far, or how quickly, things would go.

Individuals were called to account through the year, and many articles and enquiries opined about the long term implications for business in general, and corporate social responsibility in particular. Easy comments that Enron - which had maintained a profile of socially responsible community involvement - discredited the CSR movement gave way to a better considered understanding of the breadth of the elements that made up a responsible business.

Integrity, ethics and corporate governance had to be the complementary characteristics that supported business programmes to improve impact on society. Either without the other gave a false picture. This was a lesson that emerged from the speeches and articles of business leaders and legislators through the year.

There were echoes of other issues as well. The animal research company Huntingdon Life Sciences, which had found salvation in the arms of US investors following a protracted and often violent campaign in the UK, had its chief US backer pull out after the campaigners moved their focus to the US. The company looked as though it would disappear at the end of 2001 - brought down by the unwillingness of any of its backers to stand up to the violence and intimidation of the extremists. But in the event, the company has limped through 2002 and still survives.

Firestone was still reeling from the fall-out of the major tyre recall that had been forced upon it during the acrimonious dispute with Ford over safety performance. Although the lack of a united front clearly damaged both companies during 2001, Ford showed that its far-reaching and expensive action to initiate a wider recall helped to reinstate the consumer's trust much more quickly than its supplier - who was perceived to fight the action from beginning to end. 2002 was the year that Firestone - and its Japanese parent Bridgestone - felt the pain.

In Japan, the roll-call of corporate crises continued, with Snow Brand back in the news again, following the exposure of its Snow Brand Foods subsidiary's falsification of beef labelling to benefit from government subsidies. The crisis quickly led to a boycott of its products fuelled by widespread consumer disgust at the company's actions, and the subsidiary very quickly collapsed altogether.

Nippon Ham quickly followed, with a similar scandal, topped by Tepco which was caught out falsifying safety records at one of its nuclear power plants.

The California Public Employees' Retirement System (Calpers) caused a significant ripple with its decision to pull out of certain parts of the world where it said there were ethical concerns. Indonesia, Malaysia, the Philippines and Thailand were removed from the portfolio. Although considered to be one of the largest and most influential schemes in the US, the action was not widely emulated. Indeed, Calpers came in for quite a bit of criticism for the move.

When it came to lawsuits, one dominated the business pages through much of the year, which was the Microsoft antitrust action. In the event, the company managed to sidestep the more radical remedies pitched and to emerge relatively unscathed with all but reputation intact. Rumbles continued though, with the European Union considering action, and a strong suspicion from some of the company's corporate clients that it remained an effective monopoly.

Then there was the Saipan lawsuit, which saw Gap temporarily cast as the villain of the piece when it sought to block a number of garment companies from settling in the suit alleging sweatshop conditions in their factories. Gap disputed that the suit had any substance, and was determined to face it down. In the event, after some considerable time, the settlement was reached with the companies admitting no fault.

Silliest suit of the year was probably that brought by Exxon against Greenpeace and other campaigners for their use of the 'E$$O' satirical logo. The company claimed that the modified logo could lead to confusion with the Nazi 'SS' symbol - a contention that was given fairly short shrift.

Most far-reaching lawsuit remains the Kasky-Nike affair in California. The day after this newsletter goes out, we will hear whether the company's appeal to the Supreme Court will be heard. The potential impact of the case on companies' willingness to be transparent about their work on social responsibility is significant.

Legislators pondered whether there should be more regulation to require social responsibility - and mostly held back. The European Commission produced its thinking on CSR and signalled that it had generally accepted the argument that CSR needed to be based on voluntary action. Not everyone agreed, and France brought into being legislation to require CSR reporting. The UK saw campaigners draft a bill to do something similar there, but the government was largely unmoved.

George Bush discovered corporate responsibility post-Enron, and oversaw the creation of legislation in the US to require higher standards of corporate governance, whilst missing many of the essential messages businesses have already embraced within the CSR movement. The higher profile this brought helped to keep the issues high on the agenda and to put pressure in particular on CEOs to raise their game.

One of the early indications that the rules have changed came when discontent over executive pay exploded into the limelight, reaching into areas previously unheard of. In the US, Jack Welch - who was seen as the consummate successful performer - was vilified for the staggering size of the remuneration and benefits he continued to receive from GE - appearing to break for the first time America's conviction that the rewards for great success could have no limit.

In the UK, the successful and admired Lord Browne endured a turbulent AGM where his £6m pay package came under serious attack from various quarters. Ironically, even the shine of success was tarnished by the end of the year as the company was forced to downgrade its financial forecasts several times in a row.

At least he managed to hold onto his deal. GlaxoSmithKline found itself in hot water when they proposed a huge increase for CEO Jean-Pierre Garnier. This was harder to sell as a success story, given that GSK's performance had been poor during the year. In the event, sufficient investors pitched into the outraged groundswell that the company backtracked - at least for the time being. Their argument, of course, had been that the increase brought them into line with US-based competitors. Critics attacked the benchmarking approach by which, they said, executives who all wanted to be in the upper quartile of pay pushed each others remuneration through the roof.

This was the year that Talisman Energy, having denied for some time the rumours that it was about to sell its controversial stake in the Sudan ... sold its controversial stake in the Sudan. Having produced its first CSR report in 2001 focusing specifically on why it was more socially responsible to stay, it finally gave up and went, leaving the field open - it said - for less concerned companies.

One company that had a very good year all things considered was British American Tobacco. BAT managed to confound some of its severest critics by releasing the first social and environmental report from the tobacco industry - one that more stringently followed the emerging standards than any other. The company managed to strongly challenge the notion that there can never be a socially responsible tobacco company by displaying serious intent. The mixed reviews it received showed its success - coverage would normally be universally hostile. And the inclusion of the company in the Dow Jones Sustainability Index was the icing on the cake. Needless to say, if BAT continues its progress there will be more interesting controversy to come.

Then came the Earth Summit. Ten years on from Rio the initial hopes and expectations seemed a very long way away, and we were left with a carnival of interests that managed to live down to the extremely low expectations everyone had of them. The World Business Council for Sustainable Development managed to show business to be one of the most effective players there, following a forward-looking solutions-based agenda. This was all too much for some of the NGOs, who suggested that the business presence at the summit was plain inappropriate and somehow showed that the agenda had been hijacked. However, alternatives to an approach including business around the table seemed to be in short supply.

In Africa, the most serious crisis of the moment is that of HIV/AIDS. 2002 was the year when the debacle of the pharmaceutical industry taking the South African government to court began to fade, and the new story was of companies operating in South Africa who were rising to the challenge of directly supporting their own workers in the face of a deadly epidemic. Old Mutual, AngloGold and Anglo American were all early movers who said that they would pay for antiretroviral drugs for their employees.

Within the CSR world itself, various of the main standards and guidelines were updated. At the start of the year, SA8000 underwent a revision, which brought in the addition of homeworkers to be covered under the scope of the standard. Accountability launched AA1000S - the first of an intended series of standards based on the accountability framework. The Global Reporting Initiative guidelines were updated, prompting a number of reflections both here and elsewhere as to whether it was fully on track with the challenges that social reporters face.

Overall, 2002 saw more companies reporting their CSR performance than ever before. It saw some real issues around corporate governance and integrity that have a long way to run before they're settled. And it could well in retrospect be seen as the turning point where the citizenship of companies became an indisputable requirement of a licence to operate.

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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

To make any comments / suggestions re. this site, please contact mallen@mallenbaker.net
Business Respect - most recent edition added on 9th August 2010