Business Respect - CSR Dispatches No 46 - 29 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.

This issue we review progress on last year's predictions for the next five years in corporate social responsibility. And we wish all our readers a happy new year!

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/46.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

This time last year, we rather foolishly set down no fewer than nine hostages to fortune - predictions on what will happen within the world of CSR during the next five years. Now seemed like as good an opportunity as ever to review those predictions and see how they're holding up!

Hopefully better than last issue's prediction that the next stage of the Nike vs Kasky case was imminent, since the court's decision was postponed to later in January. So the current vote will remain on the website until then. To remind you, the statement is: "What companies like Nike say in their CSR reporting should be protected by the same free speech rules as those covering their critics".

So far, 240 people have voted, with 150 agreeing (62.5%), 58 disagreeing (24.17%) and 32 not sure (13.33%). Still time to make your views known though!

Having worked rather ceaselessly on the Business in the Community website over recent months, the Christmas break has allowed one or two little enhancements on the website at mallenbaker.net. Most significantly, news items now list other related news stories underneath the main text - making it easier than ever to find items of interest.

The news database has grown over the last two years. It is able to be sorted by topic, by month and by newsletter edition. Now this new enhancement makes it easy to pull out all the items relating to any single company. We think that it has probably become one of the most useful CSR news resources on the web. But if you think it could still be better, let us know how!

Finally - a very happy new year to all our readers.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 29 Dec 2002

Ethiopia: Nestle under fire for debt demands

Nestle has become embroiled in controversy over its demand for $6m from the famine-stricken government of Ethiopia as compensation for the previous nationalisation of its assets.

Reeling under the weight of criticism following the move, the company has declared that all the money so gathered will go into Ethiopian famine relief. The company's chief executive Peter Brabeck issued a statement making the promise, adding "we are not interested in taking money from Ethiopia when it is in such a desperate state of human need".

However the company made it clear that it had not abandoned its legal claim against Addis Ababa and that it intends to continue negotiations.

"We do think it's important for the long-term welfare of the people of Africa that their governments demonstrate a capacity to comply with international law," Brabeck said.

The claim dates back to 1975, when the then government of Ethiopia expropriated all foreign owned corporations, among them ELIDCO, a company majority owned by Germany’s Schweisfurth Group which was subsequently acquired by Nestle in 1986.

Aid agencies continued to call on the company to abandon its action against the Ethiopian government. (Addis Tribune (Addis Ababa))

Toy industry adopts new standards to stop sweatshops

The international toy industry has agreed to introduce tough new standards to stop sweatshop labour conditions.

The International Council of Toy Industries, which covers 95 percent of the industry, will implement independent ethical auditing to identify sweatshop conditions amongst suppliers in developing countries. The move constitutes the biggest ever industry-wide ethical agreement.

Within two years, more than 80 percent of toy products will have been assessed. From 2003 onwards the scheme will be a condition of membership of the British Toy and Hobby Association.

More than 2,000 factories will be assessed. China, which produces a significant majority of the world's toys, has agreed to join the scheme. (The Observer)

Taiwan: Diageo suffers storm over UK poster adverts

Diageo has formally apologised to Taiwan for offence caused by poster adverts used by the company on the London underground following a storm of protest in the country that represents a significant market for some of its products.

The adverts for vodka, held as impugning the quality of Taiwanese manufactured goods, appeared in the days running up to the Christmas break. The company has since removed them following a wave of criticism in the Taiwan media.

Diageo GB's managing director said that it was never the intention of the company to cause offence and that he apologised for and distress the adverts may have caused. (Taiwan News)

China's toy workers subjected to toxic sweatshops

New research has suggested that the 10 year campaign to improve workers conditions in the toy industry of China has barely begun to have an impact.

Monina Wong, author of a forthcoming report for the Hong Kong Coalition for the Charter on the Safe Production of Toys, said: "Wages have actually gone down, there is so much surplus labour. Conditions have improved a little, especially in overtime because big buyers are putting pressure on sub-contractors."

But workers still have no contracts or unions, and little protection from owners who sometimes withhold part or even all of the wages due.

China makes 70 per cent of the world's toys and its exports, now worth $7.5bn (£4.7bn) annually, have doubled in eight years. In addition, China exports nearly $1bn of plastic Christmas trees, ornaments and lights, tinsel, plastic angels and bells, Santa suits, framed pictures of Jesus and Bible scenes. Hong Kong and Taiwanese companies that make goods for the likes of Hasbro (whose brands include Action Man and Bob the Builder), Mattel (makers of Barbie) and Disney have shifted production to the Chinese mainland, lured by the plentiful supply of cheap, unregulated labour. (Independent)

Ford settles claims it misled public about SUVs

Ford Motor Co has agreed to pay $51.5m to settle US state government claims that it misled consumers about the safety of its sport utility vehicles (SUVs).

The claims against Ford arose largely from the failure of Firestone tyres which had been linked to around 270 deaths. Ford had denied any wrong-doing.

Ford has already spent about $2bn to replace millions of allegedly faulty tires produced by Bridgestone's Firestone unit that were fitted as standard equipment on Explorers and other SUVs.

But Miller said the states' investigation focused on allegations that Ford continued to use certain Firestone tyres even after the company knew the tires had had an unacceptably high failure rate that heightened the risk of dangerous rollovers.

The states said they will use $30 million of the money from Ford to launch a national consumer education campaign on SUV safety. The remainder will cover legal costs, additional consumer education programs, and unspecified litigation going forward. (Reuters)

Microsoft sued by phone partner

British mobile phone maker Sendo is suing Microsoft for allegedly stealing its technology and passing it to other mobile manufacturers.

Sendo, formerly a Microsoft partner, says that the software giant used Sendo's knowledge and expertise to its benefit ... and then cut it out of the picture.

Sendo and Microsoft jointly developed the Z-100 Smartphone - a mobile offering PC-style functions - which was to provide Microsoft with a way into the market for next-generation telecommunications. However Sendo ended the partnership before launch of the phone saying that Microsoft's refusal to give access to the source code made it impossible for the company to tailor the software used in the Z-100. The company is now using Nokia software for the phone.

The move followed Microsoft's legal setback as Sun Microsystems won a temporary injunction requiring Microsoft to carry Sun's Java programming language in the Windows operating system. (BBC)

Australia: Mandatory SRI guidelines on the way

Fund managers would have to give detailed descriptions of ethical investment criteria and processes, under proposals contained in the long-awaited Australian Securities and Investments Commission (ASIC) discussion paper on the subject.

These amendments require investment product disclosure statements to disclose "the extent to which labour standards or environmental, social or ethical considerations are taken into account".

The amendments were reluctantly accepted by the Federal Government and have since been attacked by groups such as the Institute of Public Affairs as trying to impose ethical investment on the majority of investors.

ASIC argues guidelines will provide greater certainty for industry in how to comply and also allow consumers to assess whether "the product they purchase matches any SRI related goals they may have". (ASRIA)

Enron partners exposed to lawsuits

A federal judge in Houston has ruled that banks, law firms and investment houses that helped construct Enron's off-the-books partnerships may be sued by investors seeking to regain their losses.

Only two defendants - Deutsche Bank and Kirkland & Ellis - had claims dismissed against them. The suit will now proceed against a number of others, including Citigroup, J.P. Morgan chase and Merrill Lynch.

The judge ruled that the defendants could be construed as having sufficient participation in the preparation of false statements about Enron's finances to merit the suit, and suggested that there was evidence to support the contention that they acted with an intent to deceive. This served notice that one of the primary lines of defence - that the financial institutions and legal firms were actually engaging in the normal practices of their business - was not likely to succeed. (NY Times)

Ethics helps win war for talent

Companies could improve their chances of hiring and retaining talented staff if they are supportive of employees' home needs and pay more attention to environmental and community concerns, according to a recent study of over 1,000 workers.

An increasing number of young job seekers and older workers are more likely to choose employers with a track record on recycling over the pay and benefits packages they offer, according to the research by corporate think-tank The Work Foundation (formerly the Industrial Society).

The study found that around one in 10 are 'ethical enthusiasts' who hold such strong views on corporate social responsibility that it is likely to influence their choice of employer.

Companies with good corporate citizenship, for example those offering flexible working arrangements, and compassionate approaches to illness and family crises, also stand to gain, according to the study. (vnunet)

Canada: Hudson's Bay and Wal-Mart 'sweatshop retailers' of the year

Anti-sweatshop campaigners have named Hudson's Bay and Wal-Mart and 'Sweatshop Retailers of the Year', awarded by the Maquila Solidarity Network (MSN) with voting online by consumers.

"This year, Canada's own Hudson's Bay Company has joined the ranks of world-class worker rights abusers. It deserves to share the award with Wal-Mart," said Bob Jeffcott of MSN.

According to MSN, Hudon's Bay cut ties with three factories in Lesotho after workers reported human rights abuses. This action, the organisation argued, "discourages workers from acting as whistleblowers and virtually guarantees that sweatshop practices will be buried rather than addressed."

Separately, Wal-Mart is accused that factories producing for it suffer abuses such as excessive hours of compulsory overtime, poverty wages and verbal and physical abuse and sexual harassment.

The companies vigorously rejected the accolade. The Retail Council pointed out that both Hudson's Bay and Wal-Mart have been working with it over recent years to develop guidelines for its members. Both companies said that they had policies requiring vendors around the world to adhere to strict codes of conduct. (CBC)

Japan: Mitsui implicated in bribes

An executive of a Tokyo-based machinery maker has alleged that he was paid 200m yen to help Mitsui win contracts to build waste disposal facilities.

The sum is part of 360m yen in off-the-books money, reported by the company as business expenses, that is believed to have been channeled to the subcontractor from Mitsui to be used to win political favours and obtain the contracts.

At that time, Mitsui was lagging behind its competitors in the field of waste disposal facility construction. (The Japan Times)

Ecuador: CGC oil workers freed by Indian protestors

The eight workers for Argentine oil company CGC have been freed after being held for nine days by Achuar indians, protesting the company's oil explorations in the Amazon jungle.

The indians had initially said that the men would not be released until the company had left the area. However, talks with the Achuar leaders, government officials and CGC reached agreement that the hostages would be released and Quito would request the company to halt exploration until an agreement about the drilling can be reached.

The Achuar indians argue that under the 1998 Constitution the government must consult local communities on oil activities. In the past, Energy Ministry officials have defended CGC's right to explore for crude because its contract was signed in 1996. (Reuters)

CSR FEATURES from the Internet

Corporate governance: Insight says key is working within firms - 29 Dec 2002 FROM Reuters

Insight Investment Management, the newly-branded fund arm of HBOS, has been among the industry's more vocal advocates of good governance in its corporate investments.

But that does not mean it will only invest in companies that are proven squeaky clean. Investors seeking a balanced portfolio are better off using their clout as shareholders to ensure companies are run responsibly than simply shunning those that aren't, it says.

Read full story

Spotlight on ethical investment - 20 Dec 2002 FROM Financial Review

The billion-dollar ethical investment industry may be opened to greater scrutiny if a proposal by the corporate regulator to issue guidelines on the disclosure of investment practices comes to fruition.

The Australian Securities and Investments Commission released a discussion paper on Thursday asking if it should provide guidelines for financial institutions which are required by new laws to disclose how ethical issues influence investment decision-making.

Read full story

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The next five years of CSR - some progress

Article by Mallen Baker

This time last year, we made a number of predictions about what would happen in the world of corporate social responsibility over the coming five years.

It may not be five years later just yet - but it's worth nevertheless fearlessly casting an eye back on each of these to see whether trends since that time suggest the predictions will ultimately hold up or not.

1. There will be a growing emphasis on the quality of management of corporate social responsibility - not just whether you do it at all.

This prediction centred of the heart of the business case for CSR. People ask the question whether you can draw a correlation between socially responsible business practice and economic performance or share price.

But there is no other aspect of management where you would expect such a link to be automatic, regardless of the quality of your work.

Progress: Not much yet. Whether a company 'does' CSR remains pretty much a yes / no question. However, the factors that led to the prediction remain in place, and we think it still holds pretty good.

2. CSR will increasingly be defined by core business issues, managed strategically across the business.

Last year, we said "this is already happening, and happening fast. The days when CSR could be seen as the philanthropic work of the business are gone. The speed of this varies depending on where you are in the world - but the companies which are the trailblazers are often those who have faced serious problems or are particularly exposed. For them CSR means hard choices about how the company does business, not about what it does as an add-on extra."

Progress: Significant over the last year. Many companies that had dealt predominantly with social investment programmes have moved around to look at their performance across the agenda. British American Tobacco produced their report this year that focused on product responsibility issues. The pharmaceutical industry, the alcohol and gambling industries, even utilities and service companies have started to address product responsibility seriously.

NGO initiatives are now starting to reflect the state of the marketplace on this as well.

What hasn't yet been achieved is a body of best practice case studies of companies successfully integrating the issues across their business. There have been a number of statements of intent that set out the challenge, however.

3. Companies will become much more sophisticated about how they communicate with stakeholders

Last year, we said "[CSR] reports are most impressively defined by who does not read them. Customers don't read them. Mainstream shareholders don't read them. Often, employees don't read them either - although some will.

"But a report is really just a means of communication - and if a company wants to enjoy the real benefits of enhanced corporate reputation as a result of solid positions and work on areas that matter to their most important stakeholders, they will need to find ways which communicate simply, whilst building trust and - ideally - real engagement."

2002 has been the year when companies began to realise that there isn't one development path for CSR reporting that would solve this problem. The Global Reporting Initiative began to be seriously challenged as the route that would legitimise stakeholder reporting.

What we haven't yet seen is a vision of the future. There are companies producing larger and larger reports - many of which purport to follow the GRI guidelines. No-one yet is really showing how the company takes the dialogue out to its major stakeholders. Maybe it can't be done. If not, it will be the death of social reporting.

4. The growing expectations on business will survive recession (and even war, if need be)

This time last year, things looked very bleak. There was a lot of uncertainty about whether the CSR movement would survive the downturn at all. And war was in the year.

Progress: This year, things look pretty bleak and - well, that whiff of war is in the air again. Some of the CSR consultancies have had a tough time of it, but by and large the drivers for social responsibility haven't been much affected by changed circumstances. This prediction seems spot on (so far!).

The real test remains how well the CSR community has done its job. Those that have introduced companies to an integrated, core-business approach to CSR will see commitment continue to grow. The continuing spread of information around the world makes it impossible for companies to ignore this agenda. However, those who have been sold a CSR-as-philanthropy line - where good things are done with a community budget as a complete sideline of how the business makes its money - these areas will be the ones to be cut. Because they cost money, but don't measure or demonstrate their value.

5. How you downsize and what you make will become the two most significant benchmarks

Last year we said "there will be a lot of downsizing going on over the next year or two. All those companies who have declared their values-driven approach are about to find that approach tested. It is not, after all, what you do during the good times that is the measure of your character.

"Equally - the current controversies for business are about their core products. GM foods, AIDS drugs, tobacco, you name it. That isn't to say that you cannot be socially responsible if you sell harmful products. But you certainly can't if you don't seriously engage in the harm that your products cause - and seek to resolve the problems at source."

Progress: The issues around downsizing have neither retreated nor much advanced during the last year. Issues of product responsibility however certainly have. GM products have been in the news consistently in the last year, as has tobacco. In the latter case, we have seen the first instance of a tobacco company seeking serious engagement.

6. There will be growing tension between business-led CSR and NGO demands for better globalisation

Last year, we said "many NGOs support CSR because it is "going in the right direction" - but this support is qualified and time-limited. When the often unrealistically high expectations of NGOs of what would constitute companies "doing the right thing" are not met, there will be a backlash against CSR by those who therefore decide it has no value or substance."

Progress: We do believe 2002 has seen the heightening of tensions. NGO attacks on businesses are not new - but the focus has increasingly been those companies that have made the most progress rather than the least. There is an inherent rejection of CSR if it falls short of anything other than the full unvarnished values of the NGO community - which it always necessarily will. There is more to come on this.

7. The business of social accountability is professionalising – there will be firmer standards in the future

The rise of AA1000 and the Institute for Social and Ethical Accountability will lead to the growth of expectations on CSR professionals - in much the same way as has taken place with the environmental standards for business. This ought to be a good thing - although the problems of the quality movement are ones to learn from - too few good quality assessors and too many company approaches bolted on using off-the-shelf bureaucratic systems. Really what's needed is better quality leadership - and it's difficult to plan a system to provide it.

Progress: The revised AA1000S and SA8000 standards represent progress in this area. The growing use of third party verification for social reports likewise - although there is still something of a crisis in the definition of the value of this verification that needs to be resolved.

8. Governments will largely refrain from legislation on CSR

Last year, we said "By and large, when governments look at this area in any detail, they are brought back to the basic truth that regulation can only defend against bad practice - it can never promote best practice. Add that to the fact that there are no obvious legislative measures to bring in for this area that any campaign group is highlighting - and you come to the conclusion that moves will be limited to the kind of thing in the UK company law review - moves to encourage, and to pressure companies on disclosure."

Progress: So far, this has been borne out by events. The EU White Paper certainly pulled back from any of the intrusive activity that some featured, and attempts in the UK to introduce requirements for CSR reporting have been fruitless so far. France has been the exception - with legislation there to require reporting.

9. Political lobbying is a landmine waiting to explode

Last year, we said "few of the CSR frameworks in circulation draw attention to the need for transparency on the attempts of companies - for better or ill - to influence the public policy process. It may well be a tobacco company can defend its existence in the market for an adult product which people buy from free choice. But it makes a big difference to that equation if said tobacco company has been engaged in lobbying to obstruct laws that would improve the public health.

"But whatever the starting point expectations may be, the company's record on lobbying will increasingly be expected to be a part of what the company reports related to social responsibility. And here I think you will find companies at their most defensive - and their most unwilling to allow full disclosure. It will also be a key flashpoint for the NGOs and the campaigners."

Progress: Some companies - notably BP - have made high profile statements that they will refrain from political donations in all the areas they operate. Certainly, the role of political lobbyists has come under some scrutiny following the wave of corporate corruption scandals. The role of companies like Exxon in lobbying around the leadership of the Intergovernmental Panel on Climate Change has also been an issue this year.

There remains some way to go on this one, however.

So overall? No predictions that have proved to be way off the mark to the extent that they would be retracted. A good number that described trends that have certainly proved themselves over the last year - and a number whose value remains to be proven. Not bad for the first year!

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In the news from the latest issue

Nepal: Relatives of killed workers sue US firm KBR for trafficking

US: Proposed Alaskan mine survives people's vote

Merck accused of dressing marketing up as science

Australia: Business lobby group warns over carbon trading

India: Tata Motors threatens pull-out from West Bengal

US: Climate change resolutions making impact on companies

Japan: Details of carbon labeling confirmed

Canada: Wal-Mart has union contract imposed

India: Rising protests against factory building

US: Fraud will cost firms $994bn this year

US: American Airlines accused of safety breaches

Ghana: Call for companies to help clear up electronic waste

US: Disneyland demonstration over hotel worker benefits

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

... more news stories

To make any comments / suggestions re. this site, please contact mallen@mallenbaker.net
Business Respect - most recent edition added on 17th August 2008