Business Respect - CSR Dispatches No 48 - 26 Jan 2003

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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, with the World Economic Forum continuing in Davos, we review what CEOs are currently saying about 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/48.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

Another World Economic Forum - another round of protests. This time, however, the corporate responsibility issues pale in the public eye in the face of the global war brewing. Anti-Americanism seemed to be higher on the Davos agenda than anti-business.

That being said, none of the familiar complaints around globalisation have gone away. And with Nestle back in the news for all the wrong reasons, BP under fire in Alaska, and more rumblings on a range of rather familiar issues - it doesn't seem it's likely to go away any time soon.

Meanwhile, the World Business Council for Sustainable Development has launched a new CSR reporting portal. Regular readers will know this is a subject close to our hearts, and we'll include a proper review of the new site in the next issue (when we've had a chance to review it on a broadband connection - first observation: it's a bit of a dog on a computer with a modem!).

This, by all accounts, should be of interest to you too given the results so far of the website poll. We asked you how many social and environmental reports by companies did you read in detail last year?

The majority of you owned up to less than five (57 percent). But even if that meant zero for everyone who voted for it, the 26 percent who have read between five and twenty and the 16 percent who said more than twenty remain a pretty impressive bunch. We'd like to test your definition of reading a report 'in detail' mind!

If you haven't yet voted, your contribution would be much appreciated, as always. 85 have cast their votes so far.

Meanwhile, we've been approached several times now by website owners keen to use either the full newsletter - or at least the news stories within it - on their own sites. From this week, we have now established a syndicated newsfeed for the site that should make this easier. To locate, follow the xml button on the front page.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 26 Jan 2003

Nestle, Danone accused on baby milk substitutes

A study in the British Medical Journal has alleged that manufacturers of powdered baby milk substitutes - including Nestle and Danone - are violating international codes on baby milk promotion in Africa.

The companies, Nestle, Danone and US-based Wyeth, are accused of violating the 1982 International Code of Marketing of Breast-milk Substitutes. Transgressions typically included failing to include a statement about the health benefits of breastfeeding, or instructions for the safe preparation or storage of the formula.

The problems were exacerbated by the fact that something like 90 percent of health providers had never heard of the code, and almost two-thirds of mothers had never received any advice on breastfeeding.

Danone, which has a strong commitment to social responsibility in its business practices, said that it was surprised by the allegations. Only three of the twenty-one products named were, it said, actually covered by the code of conduct.

Nestle promised it would review the claims and would take all 'necessary steps' if it found there had been any errors. (BBC / BMJ / Datamonitors)

Pharmacia to let generics copy AIDS drug for poor countries

Pharmacia Corp. announced at the World Economic Forum in Davos that it is to allow generic drug companies manufacture cheap copies of its AIDS drug to sell in poor countries. The move comes after years of controversy over how pharmaceutical companies protect patent rights for life-saving drugs.

The company is to work with the International Dispensary Association in Amsterdam to provide licenses and technological skills relating to delavirdine, an anti-retroviral retailing as Rescriptor.

AIDS activists generally welcomed the move, particularly the company's use of a nonprofit agency as an intermediary. They have said, however, that billions in aid is needed from the West to enable the poorest companies to afford even the cheapest alternatives.

Pharmacia is being bought by Pfizer which was described as being 'strongly supportive' of the move. (Modbee / AP)

BP official calls for dramatic safety changes in Alaska

Following the accidents that left one worker dead and another severely injured, the top BP official in Alaska has said that the company must make dramatic changes to ensure safety at its operations there.

Steve Marshall, president of BP Exploration (Alaska) criticised BP's safety record saying that the company's future in Alaska depended on significant improvements. During 2002, BP had an average of more than eleven recordable injuries and six vehicle accidents a month in the country, as compared to a global standard of around three recordable injuries per month.

Steve Marshall's memo follows an earlier confidential report publicised recently that admitted the well had been re-opened "without taking adequate safeguards".

Both the accidents took place at Prudhoe Bay, North America's largest oil field. The latest incident remains under investigation by the Alaskan authorities, who have imposed great regulatory supervision on the company. The company was already under probation since 1999.

The impact of the recent events has begun to filter through to the concerns of shareholders. Henderson Global Investors had already suspended BP from its ethical funds following their review of BP's record in Alaska. Three other institutional investors are known to be reviewing their position as well. (Reuters / Datamonitors)

McDonald's obesity lawsuit thrown out

A lawsuit brought against McDonald's blaming the fast food chain for causing obesity has been thrown out by a US judge in a landmark victory for the company.

The case had been closely watched by a nervous fast food industry, mindful of the precedent of the tobacco industry where there has been a deluge of costly class actions.

The lawsuit had been filed five months ago by the parents of two girls in the Bronx who alleged that McDonald's failed to properly disclose the ingredients of its food and led to health problems including diabetes, high blood pressure and obesity.

In his determination, Judge Sweet said: "If consumers know the potential ill-health effect of eating at McDonald's, they cannot blame McDonald's if they, nonetheless, choose to satiate their appetite with a surfeit of supersized McDonald's products".

Anti-McDonald's campaigners probably found themselves able still to raise half a cheer, however, when the company reported its first ever loss alongside a backdrop of falling sales. (NY Times)

KPMG expects S.E.C. complaint over Xerox audits

KPMG, the global accounting firm, has stated that it expects the Securities and Exchange Commission to file a civil complaint against it for work carried out as auditor for Xerox Corporation.

KPMG, which has said that it stands by its audits, said that the complaint would probably name the firm, three current partners and one former partner.

"Today's charged regulatory environment has resulted in inappropriate actions being taken," KPMG's chief executive, Eugene D. O'Kelly, said. "The result is a great injustice to KPMG and the four partners involved."

If the S.E.C. files a complaint, KPMG would become only the second major accounting firm to face such charges in recent decades. The first was Arthur Andersen, which settled fraud charges in connection with its audit of Waste Management in 2001, the year before it was driven out of business as a result of the Enron scandal.

Davos: Unilever chief concerned at threat from public distrust

Niall Fitzgerald, the chairman of Unilever, has warned of the danger posed to business by the public perception of corporate governance during his speech to the World Economic Forum at Davos.

He said there are three types of company: fraudulently managed, incompetently managed and competently managed. The thrust of legislation is aimed at snaring the first, and might in passing help the second group, but does nothing to the well-run firms.

"My fear is that there is a new perception that all business is run by the first category of people," he said, noting that any move to legislate on this basis will "kill business."

Fitzgerald said US companies could learn from European firms which tend to observe the spirit of accounting laws, not just the letter. "A significant problem in the U.S. was its rules- rather than principles-driven accounting system," he said. (Yahoo)

PR News award winners for best CSR communications announced

PR News has announced the list of winners of its annual CSR awards, companies that have taken CSR to a higher level with innovative and thoughtful campaigns and ongoing programmes".

Winners of the 2002 program were honored in four categories: Community Affairs, CSR Report, Diversity Communications and Environmental Communications.

Hill & Knowlton took the community affairs category, for their work on Hewlett Packard's "Give Thanks America" alongside Fairmont Hotels & Resorts for its Adopt-a-Shelter program.

Comcast were named as having produced the best CSR report.

Scholastic National Service took the prize for diversity communications, for its Lincoln University partnership.

Singer Associates were awarded top environmental communications for Norcal Waste Systems' "Turning Garbage into Gold".

"In a year in which corporate malfeasance was more likely to be in the news than corporate volunteerism, our winners accomplished powerful change for the better within their communities," said Peggy Stuntz, editor of PR News. (PR News)

Canada: CEOs rate RBC highest

Canada's leading business executives have voted RBC Financial Group (Royal Bank) as being the nation's most admired and respected corporation, according to a survey released by Ipsos-Reid.

RBC came out on top in the eighth annual Canada's Most Respected Corporations Survey. The survey measured nine specific categories, with RBC topping the poll for: long term investment, human resource management, financial performance, corporate social responsibility, corporate governance and top-of-mind assessments.

The rest of the top five were: Bombardier, BCE (Bell Canada Enterprises), Magna International and Loblaws.

Honesty, integrity, trustworthiness and credibility were identified by more than half of the participating CEOs as qualities that "first come to mind" when they hear a company or executive is respected. (The Mississauga News)

US: Top five CO2 emitting utilities face shareholder action

The five largest carbon dioxide (CO2) emitters amongst US electric power companies are simultaneously facing global warming-related shareholder resolutions in the coming annual meeting season.

American Electric Power (AEP), Southern Co., Xcel Energy Inc., TXU Corp., and Cinergy Corp. are being targeted by a coalition of shareholders that includes the State of Connecticut Plans and Trust Fund and members of the Interfaith Center on Corporate Responsibility (ICCR) including the Presbyterian Church, USA.

The shareholder resolutions focus on the potential risks to shareholders posed by the five utilities' production of CO2, the primary greenhouse gas emission linked to global warming.

The filings make the following statement: "We believe that taking early action on reducing emissions and preparing for standards could better position companies over their peers, including being first to market with new high-efficiency and low-emission technologies. Changing consumer preferences, particularly those relating to clean energy, should also be considered. Inaction and opposition to emissions control efforts could expose companies to reputation and brand damage, and regulatory and litigation risk." (Power Engineering)

Global Compact and WBCSD seek coherent CSR approach

The UN Global Compact and the World Business Council for Sustainable Development have announced that they are to cooperate more closely for a coherent approach to corporate social responsibility

The WBCSD and Global Compact say that they are seeking to share experience and learning in the area of the most effective performance models and tools to integrate the universal principles of the Global Compact into business strategy.

Björn Stigson, President of the World Business Council for Sustainable Development, said: "There is considerable scope for synergy between the WBCSD programs and the dynamics of the Global Compact. While supporting the Global Compact will rightly remain an individual company initiative, I am pleased that we can now provide an official advisory capacity to further promote the spirit of partnership between the UN and the business community."

Meanwhile, the WBCSD has launched a sustainability reporting portal that brings together different aspects of company reporting from across the world.

The reporting portal, accessible via www.wbcsd.org, aims to provide visitors with an understanding of the issues companies are currently tackling in their sustainable development reports and the kind of information they are presenting. (WBCSD)

For more info, see http://www.wbcsd.org

Canada: Tobacco companies challenge advertising ruling

Imperial Tobacco, JTI-Macdonald and Rothmans are fighting a decision of the Quebec Superior Court that dismissed their challenge to federal advertising restrictions.

The companies suggest that the December ruling failed to address some constitutional issues and contained factual errors. The companies say that the 1997 Tobacco Act is too broad because it bans most forms of tobacco advertising without establishing a direct link between product advertising and consumption.

The companies contend the restrictions go beyond what is necessary to
protect public health. In his ruling, Justice Andre Denis disagreed, noting that cigarettes kill 45,000 Canadians a year.

"(Tobacco companies) are trying to save an industry in inevitable
decline," wrote Denis in his ruling. "Their rights, however, cannot be
given the same legitimacy as the government's to protect public
health." (CBC)

Australia: New business standards promoted

Companies are being urged to develop a more active social conscience by a set of draft corporate governance guidelines released by Standards Australia for comment.

The guidelines would also establish measures for the protection of whistleblowers who drew attention to company lawbreaking.

Standards Australia suggested that, in the wake of the controversy about inadequate corporate controls at HIH, the guidelines would help to restore investor confidence and help the companies better manage their business. Amongst the issues suggested for corporate action are employment, health and safety, environmental impacts and communication with stakeholders and the local community.

(The Australian)

Nestle settles claim with Ethiopian government

Nestle has come to an agreement with the Ethiopian government over its controversial claim for damages, marking the end of what many have described as a public relations disaster for the company.

Nestle had claimed $6m from Ethiopia at a time when the country is facing widespread famine. Now the company has announced that it has agreed on a figure of $1.5m, all of which will go directly to famine relief.

The settlement has been interpreted by many as a u-turn by the company following a public outcry. The gesture by the company of putting the funds into famine relief seems unlikely to erase the impression the incident has created.

The dispute arose from the historical act by Ethiopia in 1975 of nationalising part of Nestlé Germany, and then selling it on over ten years later to a private investor. (BBC / Nestle)

CSR FEATURES from the Internet

Corporate Social Responsibility Affects Farmers - 20 Jan 2003 FROM American Farm Bureau

Corporate social responsibility may sound like merely the latest in a series of shallow, trendy phrases - but it's directly affecting agriculture right now, and that effect is probably going to grow, according to two agricultural communications counselors.

The trend that has led some restaurant chains to require specialized production practices of the farmers who produce the meat and other animal products that the companies sell, said Bob Giblin, research director, and Judy Rupnow, research counselor, both of Morgan&Myers, a major marketing firm headquartered in Wisconsin.

Read full story

A Business Perspective on Global Corporate Responsibility - 16 Jan 2003 FROM Yahoo

Whether this past year in Washington or next week in Davos, "corporate responsibility" has become synonymous with combating company wrongdoing. But for the vast majority of global firms who play by the rules, the term signifies something rather different.

What do companies mean when they say they are committed to operating responsibly? And what instruments do they find most effective in measuring and improving their impact on stakeholders and on society? A new statement from the United States Council for International Business (USCIB) provides much-needed answers.

Read full story

Corporate responsibility should be the norm - 11 Jan 2003 FROM Asahi

Lectures and seminars for business executives are flourishing. But their popularity is of a nature that comes and goes.

Corporate social responsibility (CSR) is rapidly gaining in popularity as a theme of discussion taken up at these gatherings.

Read full story

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What do the CEOs know about CSR?

Article by Mallen Baker

We usually report the headline results in brief of the various surveys that give snapshots of changing attitudes to corporate social responsibility. However, with some of the world's most powerful CEOs gathered together at Davos, now seemed like a good time to review the changing attitudes of this particular group.

Hill & Knowlton have recently released a review of the attitudes of CEOs, comparing the views of leaders from the US, Canada, Germany, the UK, Italy, Belgium and the Netherlands. It gives an interesting insight into the messages currently being heard at the top.

Almost at the same time, the official World Economic Forum CEO study has been released. Most of the following comes from the former - with a few observations from the WEF document added at pertinent points.

What do CEOs see as the biggest threat to corporate reputation? CEOs in Belgium had the largest degree of consensus here, with over 70 percent of them seeing criticism in the print or broadcast media as being their biggest threat. Many of the other countries, particularly the UK and Germany focused on allegations relating to product safety as the big threat. CEOs from the US seem to be sleeping quite soundly at night, however, with less than 30 percent worried on this score. Indeed, US CEOs didn't get above 50 percent agreement on any potential threat.

The Boards of companies in Belgium, the UK, and the Netherlands
are more likely to monitor the effectiveness of corporate reputation management, while only a minority of companies in Germany, Italy, and Canada do so.

Most of the sample seems fairly united about the main objectives for managing corporate reputation - increasing sales. Only in Germany was there a priority that came anywhere close, let alone higher, which was promoting transactions and strategic partnerships. Interestingly, a medium sized minority within much of Europe and Canada are convinced this also feed through into your stock price. Not the Americans, nor the Germans and the Belgians.

Also, nobody had much time for the argument that building credits with the public through your proactive corporate citizenship could pay many dividends if it all goes wrong. 'Helping to withstand the impact of a crisis' scored single figure ratings all round - where it even registered at all. This is one of those key business case lines that clearly hasn't resonated so far.

When it comes to the relative importance of different stakeholders in influencing your reputation, there are results that are both surprising and obvious in equal measure. Far and away the most important are customers - in the 90 percent range for all respondents. Employees are extremely high up there as well, for all countries but Italy for some reason.

Here's where one of the big Atlantic divides come in. US and Canadian CEOs see the reputation of the CEO as a big factor here - 80 and 72 percent respectively see this as a big factor. It is considerably lower rated in Europe, where the cult of personality around the person at the top is rather less pronounced. The influence of Non-Governmental Organisations (NGOs) is put below 20 percent by all, and considerably lower for some.

The surprising point is that the WEF survey differed markedly in some key points here. The role of the customer was nowhere near as highly rated in that survey - just over 60 percent. NGOs, however, were much higher in the pecking order than in the Hill & Knowlton study. Why the disparity? It's worth reflecting that CEOs are not one homogenous group - and those likely to take part in the WEF survey may be considered to represent higher profile international companies used to being the target of NGO activities than the - possibly more representative - group used by Hill & Knowlton. Just a guess.

Across the world, CEOs seem to believe that corporate social responsibility will be more important in the future than now. Generally, to the tune of 80 percent or more. I have always been unimpressed by this figure, that has consistently come through in polls for this audience over the last few years. It doesn't seem to translate into measures of whether these individual CEOs intend to focus more time and resources on it within their own business in the next three years.

What are the aspects of social responsibility that will be most important in the future?

There are some areas here of overwhelming agreement. The treatment of employees is one. High ratings as well for ethical values, and for corporate governance (no great surprise there at this particular phase of history). The lowest scores come for community investment, and for relationships with NGOs. Supply chain relationships also score highly.

The WEF survey suggested that integrating these issues into supply chain management remains something of a minority sport, however. The issue most often built into supplier relationship agreements is the environment, with health and safety close behind. However, even for these issues it is less than 30 percent of companies that currently take action.

Overall, the key messages seem to be that CEOs have developed a higher degree of awareness around the issues over the last couple of years. In some areas, they perhaps remain informed by the shock of recent events, than by an analysis of longer term trends and risk factors.

But I wonder whether the current direction of development for the practice of CSR is as well focused on the key issues of concern - and particularly the key stakeholders of concern - as they might be.

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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

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Business Respect - most recent edition added on 17th August 2008