Business Respect - CSR Dispatches No 50 - 23 Feb 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 issue, we consider the difficulties for businesses of coming to terms with the human rights agenda.

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/50.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

We have started now to get very welcome emails from people across the world drawing attention to news stories relating to corporate social responsibility from their locality. We don't always use the suggestions that come through, but we do always follow them up and review whether they would be suitable and we are always grateful for the tip-offs! Please do feel free to forward items, and we will always try to give credit in the editorial column when such items appear as news.

Alternatively, however, we will almost never carry pieces that are unverified allegations of corporate or individual misdoing. It simply isn't in our power to subject such claims to the kind of scrutiny and objective analysis that would be required - although we always watch with interest when such instances break into the mainstream of attention.

The vote on the website as to the CSR report-reading habits of visitors has continued to gather responses. The question asks simply: How many social and environmental reports by companies did you read in detail last year?

The current responses come out as:

Less than five 152 (65.24%)
Between five and twenty 55 (23.61%)
More than twenty 26 (11.16%)

233 people have voted in total. We're leaving this one up for just another week or two before replacing it, so if you want to add your own response, please feel free. We do wonder who the 26 people who answered 'more than twenty' are, and what leads them to this broad corporate scrutiny. Are they assessing the behaviour and quality of companies? Or are they scrutinising the format and features of reporting - say, as a benchmarking exercise for their own report writing? If you were one of those 26 people, we would be fascinated to hear from you.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 23 Feb 2003

Business leaders warned of risks of ignoring climate change

Investors failing to take account of climate change in their asset allocations and equity valuations face serious investment repercussions over time, according to a new survey of the chairmen of the 500 largest global companies by market capitalisation.

The survey, from the Carbon Disclosure Project (CDP), found that while 80 percent of respondents acknowledge the importance of climate change as a financial risk, only 35-40 percent were actually taking action to address the risks and opportunities.

Managing the financial risks of climate change does not necessarily impose a net cost on companies. The report noted that those companies surveyed who were quick to reduce gas emissions stand to gain competitive advantage, in terms of both cost and market risk management. For example BP has cut annual CO2 emissions at their plants by 10 million tonnes, saving some $650 million.

Tessa Tennant, CDP chairperson said "We face a monumental educational challenge because most institutional investors have a 'knowledge deficit' when it comes to obtaining systematic, portfolio-wide information about the risks companies face when it comes to climate change."">

Bayer executives accused of knowledge of serious Baycol problems

Some senior executives at Bayer have been accused of having known for some time that the company's anti-cholesterol drug Baycol had serious problems before withdrawing it from sale.

Documents made public, including email messages, memos and depositions of executives suggest that a company analysis had noted side-effects relating to a rare muscle condition. The disclosure came as part of a legal action against German-based Bayer and its UK partner GlaxoSmithKline by more than 10,000 patients or their families.

Both companies insist that the marketing of Baycol was appropriate, and that the drug is safe when used properly. Bayer took the drug off the market in 2001 - it says because it found that doctors were not prescribing it as directed.

Bayer and GlaxoSmithKline have settled some of the cases outstanding, although the final bill for all cases could run into billions of dollars. (NY Times / Reuters)

UK: Littlewoods and Argos hit by Hasbro's 'Responsible Approach'

Littlewoods and Argos, two of the major UK retailers, have been hit with record fines by the Office of Fair Trading after toymaker Hasbro blew the whistle on a cartel in which it was itself involved.

Hasbro has defended its action, saying it took the "responsible approach" when it discovered that some of its employees had become involved with price-fixing with the two companies. It now faces tense times with the owners of outlets upon which it depends for a significant proportion of the sales of its toys and games.

Hasbro said: "These activities occurred almost two years ago and involved a small number of employees. Staff in the sales and marketing area who were involved in these activities left the company and a new senior management team was put in place."

Argos was fined £17.28m and Littlewoods £5.37m. Hasbro could have been fined £15.59m but the OFT cut this because it provided "crucial evidence" before a probe into the retailers had begun.

McDonald's takes the heat on obesity

McDonald's is facing a second lawsuit on its alleged responsibility for causing obesity - a development that has the entire fast food industry watching with anxiety for a future of tobacco-style class actions.

The new case, involving overweight children in New York, is based on the argument that customers are not fully aware of the ingredients that go into food served at the restaurant chain - and that some of these ingredients are harmful to health. The company, says the suit, engaged in 'deceptive practices' in its promotion and advertising.

The argument is being promoted following comments made by the original judge, Robert Sweet, when an earlier obesity case was thrown out earlier this year. He suggested that, although the original case was devoid of merit, an argument could potentially be advanced if such deceptive practices could be shown.

McDonald's said in a statement: "This senseless lawsuit's selective focus on only one food organization is not only absurd when you look at the facts, but is a serious disservice to anyone who is looking for real answers and information about healthy lifestyles, energy balance and personal responsibility".

Deloitte & Touche targeted following insider leak

Deloitte & Touche employees have been targeted for an email barrage following an insider leak of personnel details to animal rights extremists conducting an ongoing campaign against Huntingdon Life Sciences.

The Stop Huntingdon Animal Cruelty (SHAC) campaign said on its website that "Electronic protest software" had been set up to allow people to repeatedly email the accounts of 102 Deloitte & Touche UK employees. Deloitte & Touche are being targeted on the basis that they are Huntingdon Life Sciences' auditors and financial advisors.

The email and telephone details that were leaked are thought to be those of senior managers and secretaries in the firm's life sciences team.

Campaigners against HLS have been responsible for physical assaults and intimidation against the company's employees over the last couple of years. Their tactic of targeting financial supporters of the company led to it moving its listing to the US where the identity of major shareholders could be legally protected. The move has apparently been successful in slowing the rollercoaster success the campaign of intimidation had been enjoying last year, as financial services companies fled from the scene.

Unocal human rights case to be reheard

Unocal Corp has been given another chance to oppose a lawsuit proceeding against the company alleging human rights abuses in Myanmar.

The claim against the company comes from villagers who state that Unocal supported military abuse against them. Soldiers who provided security at Unocal's Yadana natural gas pipeline were said to have subjected local people to forced labour, rape, murder and torture.

A court hearing last year had previously ruled that the case, involving 18 farmers who alleged they had personally suffered abuse, could proceed to trial. The court is now to review this in a hearing with 11 judges.

The case may establish whether American companies can be held to accound for human rights abuses abroad.

Unocal has stated that it did not authorise nor condone the actions of the military. On its website, it states "At Unocal, respect for human rights is fundamental in all of our activities. We strive to convey this respect through our employment, economic development, environmental, security, and community practices."

Canada: La Senza targeted on workers' human rights

La Senza, the Canadian retailer, is being targeted by the Maquila Solidarity Network (MSN) over the approach of one of its key subcontractors in Thailand allegedly involving the serious violation of workers' rights.

The subcontractor, the Gina Form Bra Company in Bangkok, is accused of having engaged in arbitrary lay-offs, firings and intimidation of union members, false accusations against workers of gambling and sexual impropriety, and forged workers' signatures.

MSN has launched a letter-writing campaign from its website to encourage the company to seek to bring its supplier to heel. The move follows the launch of a similar campaign directed at Boutique Jacob, whose garments are also thought to be manufactured by Gina Form.

The factory is certified under the Worldwide Responsible Apparel Production (WRAP) certification program - criticised by some for having a weak code of conduct and not requiring public reporting or factory audits.

MSN said that the factory had contravened the rulings of both the Thai Labour Relations Committee and the National Human Rights Commission. The latter, stated that the company’s actions violate human rights and contravene sections of the country’s Labour Relations Act (1975).

Bill Ford sidesteps 'ethical distraction' with charity donation

Bill Ford, chairman and chief executive officer of Ford Motor Co., is to donate around $4m to charity when he sells Goldman Sachs shares from its initial public offering.

The move comes after shareholders demanded that the profits from such a sale should revert back to the Ford company - a demand that was rejected by the company's board of directors.

The controversy arose from a congressional committee report that suggested that Goldman Sachs had awarded significant quantities of 'hot' shares to executives of various companies - including Ford.

Ford has been a key customer of Goldman Sachs, spending around $87m for investment banking services. The fact that Ford received a higher allocation of shares than any other executive has highlighted the arguments around conflict of interest. Both parties have denied any link between the customer relationship and the allocation of shares.

Ford has acted in the clear hope that swift action on the shares, with no personal benefit for himself, will defuse the issue before it becomes yet another distraction after what has been a tough year. However, at least one of the company's shareholders, Roger Berger, has said that he intends to continue to pursue the issue. (Reuters / NY Times)

Japan: Chemical firms investigated on pricing

Mitsubishi Rayon, Kureha Chemical Industry and Kaneka are being investigated by authorities from Europe and North America for alleged monopoly pricing over chemical 'modifier' agents.

Modifiers increase the strength of vinyl chloride and plastic products. The substances make it easier for manufacturers to process and shape their products.

Japan's Fair Trade Commission investigators have raided the offices of the companies for evidence supporting the claims.

The companies are accused of inflicting financial damage on users of the modifiers through forming a monopoly. Taken together, the three companies dominate the domestic market for the substances. (The Japan Times)

Exxon Mobil CEO supports mandatory CO2 emissions reporting

Lee Raymond, the chairman and chief executive officer of Exxon Mobil, has said that the company supports mandatory emissions reporting as an essential precondition to polices designed to reduce the impact of global warming.

Exxon, much criticised by environmentalists as being the most active opponent of the Kyoto Protocol on climate change, already voluntarily reports emissions with a view to targeted reductions.

However, Mr Raymond also suggested that the world demand for energy would go up by around 40 percent more than current levels - much of which would need to be met by traditional fossil fuels. The only reason alternative sources will grow, he predicted, will be because of the policies of governments pushing investment contrary to the logic of market economics.

"Starting from such a low base today, wind and solar are unlikely to exceed a one-percent share of the world's energy needs by 2020, even with double-digit growth rates. Thus, oil and gas - representing 60 percent of energy supplies today - will remain the dominant energy source until at least the middle of this century."

Environmentalists have argued for some years that such an increase in the consumption of fossil fuels threatens to push greenhouse gas levels beyond sustainable limits.

Exxon's opposition to Kyoto, although not explicitly restated, clearly remains undimmed. "Avoiding undesirable social and economic consequences are critical objectives in developing actions that minimise the potential risk of climate change from energy use" he said, a clear reference to the negative consequences Exxon has made the foundation of its opposition to the global agreement.

Lafarge admits to German cement market cartel

The chief executive of french cement company Lafarge, Bertrand Collomb, has admitted that the company participated in what were described as 'unacceptable activities' in Germany's cement market.

"On certain German cement markets, our people did indeed behave unacceptably," Collomb told French financial daily Les Echos. "We must now be sure that everyone in the company understands that this type of activity is over."

Just two months ago, the company was fined around 250m euros by the European Commission for being part of a conspiracy to fix the price of plasterboard, a move which Collomb continues to insist was 'an overreaction'. (Reuters)

UK: Dixons refutes criticisms on 'worthless warranties'

The electrical retailer Dixons Group has hit back at what it describes as 'a campaign of mis-information' from the Consumers Association about the company's extended warranties.

Dixons Group Chief Executive John Clare challenged the accuracy of suggestions that few people claim on extended warranties taken out, arguing that the company's products go "far beyond the limitations of manufacturers' warranties".

The Consumers Association, criticising what it called the 'extended warranty rip-off', had argued that the products were overpriced, often go unused, and may duplicate cover the purchaser already has or even basic rights under the Sale of Goods Act.

"If a salesperson tries to sell you a warranty, just say 'no'. They're usually too expensive, generally go unused and you'll probably get a better deal elsewhere" said Helen Parker, editor of Which? Magazine.

In refuting the claims, Dixon produced tables purporting to show the inaccuracy of figures quoted by the consumer group. For instance, the Consumer Association figure suggested that the likelihood of a claim during the life of a three-year cover plan on washing machines was 12 percent. According to Dixons, the real figure based on historical claims is 71 percent.

Eu Parliament narrowly affirms CSR should be voluntary

The European Parliament has agreed a motion that promotes the uptake of corporate social responsibility by European businesses - but says that this must remain a voluntary movement.

The debate, held following the World Economic Forum at Davos, called for multinational companies to include social, societal and environmental concerns in their business activities. The Parliament also agreed that the process of globalisation must be accompanied by efforts to reduce poverty.

However, the vote was passed with the narrowest of margins, with 253 in favour, 248 against with 51 absentions. Richard Howitt MEP, the European Parliament's spokesperson on corporate social responsibility, said that it was only a matter of time - possibly less than two years - before what has been described as triple bottom line reporting becomes mandatory.

On his campaign website, he said that ensuring businesses act in a responsible way had become a personal goal. "The way multinationals operate right across the world, but particularly in developing countries can have a devastating effect on our environment and on local communities."

US: CEO forum announces voluntary CO2 reduction measures

The Business Roundtable, an association of American chief executive officers, has launched a new initiative to promote voluntary action to reduce greenhouse gas emissions.

The move, titled RESOLVE (Responsible Environmental Steps, Opportunities to Lead by Voluntary Efforts), comes as a response to US President Bush's challenge to business to reduce greenhouse gas emissions whilst generating economic growth. The Roundtable said that its call to action would be accompanied by support for the companies who responded, with workshops, consulting support, an implementation workbook and examples of best practice.

The Roundtable currently has around 150 members and the aim is that all members should be signed up to the programme. As a voluntary programme, CEO's will not be asked to commit to specific targets for achievement, but will be expected to define their own programmes that measure progress in a way that makes sense for their business.

The initiative stands as a voluntary alternative to the mandatory approach to emissions control epitomised by the Kyoto Protocol. Dr Linn Draper, chairman and chief executive officer of Columbus-based American Electric Power Co launching the programme, said: "The sort of programme that's envisioned with the Kyoto Protocol just simply does not include enough nations to make it successful. We think that it makes sense to see if a voluntary programme in the US will work as we work toward international goals. But Kyoto simply didn't make sense for the US economy given the fact that the developed countries don't represent all of the potential big emitters in the world."

Switzerland: Cement industry agrees to drastic CO2 cuts

The Swiss cement industry (Cemsuisse) has agreed to reduce energy-related CO2 emissions by nearly 45 percent from levels in 1990 by 2010. The commitment underlines the action the sector has already taken in replacing fossil fuels with alternatives.

In addition to energy use, cement companies plan to reduce emissions further that relate to production processes, believing that these can be brought down 30 percent on the same timescale.

Cemsuisse is the first industrial sector to have signed an agreement on reductions with the Federal Department of Environment, Transport, Energy and Communications (DETEC).

Cemsuisse Chairman Leo Mittelholzer said that the arrangement put Switzerland into the lead in terms of sustainable cement production compared with other countries.

The action comes largely as a result of Switzerland's CO2 Law and the SwissEnergy action plan, under which around thirty such agreements should be agreed by the end of the year. In accordance with the CO2 Law, CO2 emissions must be reduced overall by 10% by 2010 compared with the 1990 level.

CSR FEATURES from the Internet

Rotten to the, hard or soft, core - 20 Feb 2003 FROM khilafah.com

Today’s multinational companies have had a devastating affect on the world. They have intermingled business and politics to the detriment of ordinary peoples. Whether by design or accident they have wrecked communities, exploited locals, destroyed natural environments and habitats and meddled in regional politics.

However, these multination companies are merely revamped versions of the older models that built the British Empire. The people who run these mega-companies swear that they eschew politics and devote themselves purely to profit, inevitably end up mired in local politics. This is largely because of the way the world is set up at the moment. What comes with vast amounts of money, is vast amounts of power. In the past these companies arrived bearing glass beads, Bibles and Maxim guns but now they bring free software, fast food and sports shoes. The mega-companies, whether old or new still all adopt a similar modus operandi.

Read full story

It makes cents to be responsible - 14 Feb 2003 FROM Globe & Mail

Canada's business leaders are in an unprecedented debate on how to fix corporate governance in the wake of the crisis of trust. This is good. But it's not enough. What's missing from Canada's mainstream business agenda is a game plan for corporate social responsibility.

Today's leading-edge practitioners of CSR (as the acronym goes) are neither touchy-feely do-gooders nor "just pretending" for the sake of public relations.

Read full story

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Companies struggle with the difficulties of human rights

Article by Mallen Baker

Companies genuinely, and with the best will in the world, struggle with how they can incorporate human rights principles into their practice around the world. They struggle particularly with how they can measure their performance in this area.

This is strange, because there are few principles that have gained such overwhelming force and power throughout the world than that of the primacy of individual human rights. From the time of the 1948 Universal Declaration, virtually all countries of the world have been committed in principle - if not in practice - to its aims.

This being the case, you would think that it would constitute an easy area of agreement for companies engaged in socially responsible business practice. And yet quite the reverse seems to be the case.

Attention is nevertheless being focused, partly as a result of growing sophistication in the definition of corporate social responsibility (CSR) and partly as a result of growing evidence of a legal appetite for companies to be held responsible for certain aspects of their behaviour in regard to human rights around the world.

It would be simpler if the debate were simply about whether the direct actions taken by a corporate entity violate such rights. However, the focus remains as much about whether the action - or inaction - of a company supports or condones the human rights violations of others, an altogether more difficult area to assess.

According to the International Council on Human Rights Policy, companies may be complicit in human rights abuses if they:

1. Directly or indirectly assist the perpetrators of human rights abuses.
2. Go into join venture with a government where it might be reasonably foreseen that the government, or its agencies, is likely to commit human rights abuses in carrying out its part of the agreement.
3. Benefit in any way from human rights violations.
4. Maintain silence and / or inaction in the face of human rights violations.

Certain tools are available. The UN Global Compact, although often criticised by NGOs for what is seen as a lack of enforcement in its administration, finds favour with many companies because it is centred on the key UN declarations, and provides a useful guidance for companies on how to relate such principles to business practice. Other measures, such as the Sullivan Principles, also include human rights provisions.

The frequent issues with which companies need to deal include:

1. How they operate in areas likely to be the scene of human rights abuses. This can include conflict zones (Talisman's troubled history in the Sudan is a case in point) or areas where the state may use force as a routine tool of government policy.

2. Labour standards, either in the company's own factories or - more often - in the factories of suppliers. What defines minimum acceptable labour standards can become a point of some contention, with NGOs often quoting US dollar-equivalents for salaries paid to workers - a measure that is meaningless unless related to the local context of purchasing power for that amount. Hence, the work on the part of some to define a 'living wage' amount. Novertheless, issues around harrassment, violence and intimidation, forced or bonded labour, child labour and the banning of trade unions are general points of common concern.

Other issues include the use of security forces, equal opportunities, the rights of indigenous peoples, and the seizure of land and assets for development.

The defining of the issues is a lot simpler than resolving them. Perceptions of human rights differ markedly across the world, and what is obvious and correct in one culture is highly contentious in another. Western NGOs and journalists - not to mention consumers - will strongly resist a blanket argument that says companies can operate purely to local standards when those local standards may include behaviour that is abhorrent to reasonable people. Likewise, attempts to impose western human rights standard in developing countries can provoke protests there on the suspicion that such requirements are being used to create protectionist barriers against the local population. People may demand their right to work in sweatshops - largely because they see little alternative when the availability of cheap labour is their primary selling point.

Companies may develop codes of conduct that cover these areas, but those who seek to report their performance have struggled with meaningful measures. An area so subject to local context resists normalised reporting.

Codes of conduct - well drafted and implemented - can frame a statement of values and standards that employees of the company are expected to reflect in their daily duties. The difficulty of measuring achievement however leads to a large degree of scepticism on those who disbelieve the sincerity of companies on this matter.

A good indicator should be something quantifiable, that tracks changes year on year, and that measures things wholly in the influence of the company. These indicators are hard to identify. Certainly, the Global Reporting Initiative, for all that it represents a cross-sector collaboration to identify meaningful social indicators, is not particularly successful in this area.

So what can companies do? In the first instance, they need to realise that a mature approach to CSR will include an approach to human rights - increasingly so even for apparently low-impact companies with limited exposure in developing countries. This needs to lead on to the framing of business principles, the development of either a group-wide approach, or a country-wide approach, and the inclusion of outcome monitoring into the company's overall approach to business. Principles of behaviour need to be built into the individual assessment procedures for managers, and any failures in the implementation of the company's approach should be reported.

Most of the standard CSR policies are about the kind of business a companies does - its products, the environmental impact it has, the way it develops and nurtures its people, etc. The approach to human rights is part of the other side - the part that describes how the business behaves, and that reflects the company's overal ethical compass. Like senior executives behaving honourably - there is no immediate bottom-line business case for observing human rights. There is only the starting point that - as expressed by the UN principles - there are minimum expectations upon businesses as corporate citizens and the company will eventually find itself punished if it knowingly and persistently transgresses them.

One cannot use the absence of a business case to justify the abuse of human rights. It is as straightforward as that.

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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