Business Respect - CSR Dispatches No 53 - 6 Apr 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 Business Respect celebrates its second birthday and reviews the new AA1000 Assurance Standard.

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/53.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

With this issue, Business Respect is officially two years old! Every fortnight without fail so far it has appeared with a mix of news stories from the world of corporate social responsibility, along with opinion pieces and reviews on some of the key companies and the significant tools for change that have emerged.

Having appeared one day on the website, with no associated promotion through any media, the newsletter now has a subscriber list well over 2,000 and continues to grow at a rate of around 70 new subscribers per issue. We are grateful over that time for all the communications, the rave reviews, the constructive feedback and the engagement that has come through. It has made it constantly fun and interesting to do - which is just as Business Respect remains a purely voluntary effort.

Through the last couple of years, we have watched with interest to see which stories attract the most interest. When it comes to attracting the punters, nothing quite does the trick like a feature about a high profile company. And appropriately enough, it seems that the top company for achieving this is Wal-Mart, the world's number one.

Last issue's feature on Wal-Mart attracted a small flood of traffic, with 1818 people coming to the website specifically to read that article in the first week. Not only that, but 35 forwarded the article to a friend (many times more than recorded for any other story on the site) and the Wal-Mart focused vote racked up more votes in the first fortnight at 231 than any vote so far in the last two years.

The vote, as you recall, invited you to opine on the most important social responsibility a company like Wal-Mart can observe. The results so far:

Keeping its prices low 39 (16.88%)
Treating its employees well 63 (27.27%)
Minding its impact on local communities 129 (55.84%)

A clear view emerging there, but still time to make your own view felt.

In an earlier story, we talked about the flak the campaigning NGO WWF had attracted from its own side in its deal with Lafarge. If you remember, Friends of the Earth accused WWF of 'inappropriate behaviour' given the company's plan to quarry up to 600m tonnes of rock from Roineabhal mountain, and suggested the organisation has allowed itself to be used by Lafarge.

Ruth Thomas, the Business Communications Manager with WWF responded to the story, and told us: "Engaging with companies, vital to leverage corporate expertise and funds, presents significant challenges to NGOs who have identified the potential negative impacts on their reputation. WWF in particular needs to meet the needs of a range of stakeholders - from industry to supporters. It would certainly be easier to reject working with large companies in sensitive sectors. Herewith lies the paradox: it is precisely these types of partners who can help deliver sustainable solutions with maximum effectiveness and efficiency."

Ruth was also kind enough to add: "I subscribe to Business Respect with enthusiasm and interest - and look forward to your regular informative mails." Did we mention that we always value reader feedback - both positive and negative?

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 6 Apr 2003

Companies gear up for a share of Iraq reconstruction

Halliburton, the company formerly headed by US Vice President Dick Cheney, has been reported as being out of the running for place of prime contractor for the reconstruction of Iraq once the Gulf War has ended.

Halliburton had been one of five major US companies bidding on the contract to rebuild roads, bridges and hospitals after the war, and had been a lightning rod for criticism of favouritism in the allocation of the spoils of war. Halliburton remains likely to act as a subcontractor for some of the work.

Meanwhile in the UK Stuart Doughty, chief executive of Costain, has come under fire for commenting that the government should bypass the United Nations in deciding on governance in post-war Iraq, in order to ensure that "those who have been violently against this conflict don't share in the reconstruction".

The comments have been attacked by aid agencies, who argue that the role of the UN must be key to the future of Iraq, as well as some of his competitors. The Guardian reported an unnamed executive from another UK company who responded: "I thought what Stuart Doughty said was disgraceful. I don't think it is at all seemly for companies to be making comments like that."

The rush of companies to get a slice of the action has provoked a certain amount of distaste from commentators on both sides of the Atlantic, although certain companies have pointed to the social value of the reconstruction work.">

China: Mine explosion followed by beating for bereaved relatives

A disastrous coalmine explosion has taken place in the northeastern province of Liaoning, leaving 25 miners dead and the wife of one victim hospitalised by company security guards for asking about compensation.

According to the China Labour Bulletin, on Sunday, 30 March, an explosion caused by a build-up of toxic gases ripped through the Mengjiagou coal mine near Fushun city in Liaoning, killing at least 25 miners.

Local villagers suggested that basic health and safety standards had been widely ignored at the mine in the cause of "ever-greater profits". Miners were said to have known for some time that the conditions had become unsafe but said that management insisted that work continue.

In the aftermath, the wife and brother of a miner who was killed in the blast were allegedly physically assaulted for having approached the management to ask about compensation.

The accident apparently took place when the electricity supply at the mine failed approximately ten minutes before the explosion, disabling the gas extraction equipment. Attempts were made to reconnect the electricity, but no precautionary evacuation of the workforce was undertaken. (China Labour Bulletin)

South Africa: Gold Fields extends HIV drugs to employees

Gold mining group Gold Fields has announced that it intends to extend its existing health programme to include the provision of antiretroviral drugs for employees with AIDS.

The company previously provided a limited supply of the drugs aimed at preventing mother to child transmission. Now it is intended that the programme will be introduced on a pilot basis at all South African operations.

Ian Cockerill, Chief Executive Officer of Gold Fields, told Business Day: "Our programme has now reached a level of maturity and efficiency where we can confidently extend [the programme] in the knowledge that we will be able to manage the process effectively and in the best interest of our people. This is a timely and logical next step for us. " (Business Day)

US: Tobacco companies hit at 'prejudicial ads'

RJ Reynolds and Lorillard are suing the State of California for TV anti-smoking adverts that the companies say vilify the industry and prejudice potential jurers in tobacco-related cases before they even step into the courtroom.

The move gives some sense of the growing sense of dismay in the industry following a series of multi-billion dollar awards that threaten to undermine any future profitability for the sector.

One ad highlighted shows children in a schoolyard being rained upon by cigarettes, with a narration suggesting that companies deliberately seek to target children by selling near to schools.

The governor of California, Gray Davis, said that the state wouldn't back down from its media campaign against the tobacco companies. "My message to Big Tobacco is this: so long as I am Governor, the state of California will continue to tell the truth about your product: smoking kills," Davis said.

Since 1989, cigarette sales have dropped by nearly half in California. Anti-smoking groups suggested that the companies' action was proof that they were not really serious about stopping children smoking.

Bayer fortunes improve after second court win

Bayer's fortunes seem to have improved considerably after a second court win over its cholesterol drug Baycol substantially revised downwards the expectations of its legal liabilities.

The company still stands to pay around $2bn in out-of-court settlements - but this figure stands as a fraction of the exposure that had previously been believed.

The second case involved a woman in Mississippi who had filed for damages, and almost immediately followed a similar case in Texas. The two victories for the company may now deter others from around 8,400 lawsuits from going to court.

Bayer said it was "gratified" at the verdict. "Bayer maintains that the company acted responsibly in the development, marketing and voluntary withdrawal of Baycol and that patient safety was always a top priority for the company", it said in a statement.

South American Coca-Cola bottler to stand trial for murder

Panamco, the main South American bottler for Coca-Cola, is to stand trial for allegedly hiring paramilitaries to kill union leaders in Colombia following a ruling in a US court.

The suit, brought by the United Steelworkers of America and the International Labour Rights Fund, set a precedent for actions of this kind under the US Alien Tort Claims Act. Other companies with actions pending under the Act include Canada's Talisman Energy.

However, attempts to get Coca-Cola itself included were dismissed by the court, arguing that the company's bottling agreement did not give it "explicit control". The unions are expected to appeal Coke's exclusion.

Coca-Cola and the bottlers have denied any involvement in the violence in Colombia, which is rated as the most dangerous place in the world. Coke announced itself to be relieved at the ruling.
(BBC / Voice of America)

Most companies not disclosing more than legally required

A new survey of corporate governance transparency has concluded that most companies are not disclosing more than they are mandated by law to disclose. Large firms tend to have the most open approach to governance, with Pfizer in the top rank.

The survey, conducted by Sibson Consulting and Spencer Stuart, used a governance transparency metric that measured how companies were giving information about 52 governance attributes that are not required by law to be reported.

The association between companies that score high on the metric and their key financial performance measures was also stated. According to the authors, the largest companies scored highest, and the higher scoring companies had "a moderately higher median return on equity" than lower scoring companies.

Unsurprisingly, companies with governance committees scored almost three times higher than those without.

Donald Gallo of Sibson Consulting said: "The broad message is that the public must still take it on faith that companies are taking a proactive approach to corporate governance. In this era of heightened scrutiny, limited information on key policies and practices raises important questions. No news is not necessarily good news."

France: TotalFinaElf rejects competition ruling

TotalFinaElf has denied that it took part in collusion in setting fuel prices in France at its highway service stations following a ruling to this effect by France's Competition Authority levying a fine of 12m euros.

The company had been accused, along with French subsidiaries of BP, Shell and ExxonMobil, of exchanging data by telephone to set petrol prices at the pump. Accoding to the Competition Authority, "Such practices helped favour a rapid convergence of prices to a higher level than would have prevailed if oil companies had followed their own pricing alone".

TotalFinaElf denied the charge, saying it had done "nothing more than collect information on prices displayed by other service station operators, which is a normal part of doing business in a competitive environment".

The company went on to say that the similarities among fuel prices could be explained by a number of factors, including high fuel taxes, operating constraints specific to highway service stations, similarity in re-supplying conditions and the similarity of the products sold.

Noting that the Competition Authority itself had acknowledged these factors three years ago, the company indicated it is considering an appeal to the ruling.

General Mills heads list of top corporate citizens

General Mills, Cummins Inc and Intel have been named as Business Ethics Magazine's Best Corporate Citizens for 2003. General Mills achieved the top slot having originally come in at No 67 in the 2000 listing primarily for its service to the community and to women and minorities.

For instance, the company has funded a partnership between Glory Foods, a minority-based food company, and the Stairstep Initiative, a community organisation, to create Siyeza Inc. General Mills invested $2m to create 150 jobs in a company where the employees will be owners.

According to Business Ethics, General Mills is distinguished in that it funds an organisation's operating costs, which it says is a good indication of its long term commitment to communities. "Business ethics and corporate social responsibility are bedrocks of our culture", said Siri Marshall, senior vice president of corporate affairs for General Mills.

Cummins was particularly commended for its practice of giving out micro-loans to jump-start small businesses near its overseas plants.

Intel received its high score as a result of dual areas of excellence in service to employees and the environment. For instance, Intel has a strong Environmental Health & Safety programme which sees it working to upgrade solid waste handling in places like Malaysia and China to standards higher than those practiced locally. For employees, Intel offers 22 weeks of maternity leave, 10 more weeks than the federal mandate.

Not everyone who initially made the list stayed there, however. Business Ethics said that they had pulled UnumProvident from the list after a California jury in January ruled the company had acted with fraud and malice in denying disability payments. "No matter how good their community programmes or environmental policies might be, such behaviour does not constitute good citizenship", the magazine said.

South Africa: Firms face apartheid reparations demand

The Truth and Reconciliation Commission has recommended to the South African government that businesses such as Anglo American and De Beers should be made to pay reparations to the victims of apartheid.

The Commission, which suggested amongst other measures a wealth tax, focused its comments on key business sectors that it said benefited most from apartheid policies, parastatals, mining companies and international institutions.

Anglo American executive director of corporate affairs Michael Spicer said on allafrica.com: "Since the government and other parties have indicated their desire for a formal debate on the report and indeed we understand that the minister of justice is convening a one-day session on the subject we have indicated we are willing to participate in a constructive spirit".

De Beers said if it were ever asked to pay reparations it would probably channel the request through the company's De Beers fund. This suggests that the contribution would be made by reducing other funding of community programmes.
(allAfrica.com)

Lundin and OMV criticised for resumed oil exploration in Sudan

Sweden's Lundin Petroleum and Austria's OMV have attracted criticism for their decision to resume oil exploration in southern Sudan. The companies said that their action had been made possible by "positive developments in the peace process and the improved conditions in the concession area".

The first stage of reinvolvement will be repair work carried out on infrastructure in an area approximately 600 km south of Khartoum. Lundin first suspended operations in this area in January 2002 as the security situation became particularly poor. The company said that there had now been a return to a peaceful environment in the area.

This claim has been attacked by human rights groups and campaigners, however. Eric Reeves on vitrade.com said that "This is precisely the area in which the Khartoum regime has very recently engaged in savagely destructive civilian clearances. These clearances and other atrocities directed against southern civilians have been authoritatively chronicled by the US-led Civilian Protection Monitoring Team.

"Despite these obvious realities, with breathtaking cynicism, both OMV and Lundin Petroleum cite 'progress in the peace talks' as the reason for their resumption of exploration and production activities."

Lundin Sudan and OMV insist, however, that their assessment of the current situation included discussions with representatives of the local authorities, NGOs, members of relevant UN organizations and the international monitoring team - all of whom confirmed that the conditions in the southern part of the country have markedly improved.

CSR FEATURES from the Internet

Citigroup CEO speaks amid protest - 3 Apr 2003 FROM The Ithaca Journal

At first listen, it may have appeared that Citigroup CEO Sanford Weill and the protesters that greeted his Cornell University appearance were on the same page.

"Financial services, properly delivered, are a force for tremendous good in the world," he said.

Read full story

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A standard to build trust in company social reporting

Article by Mallen Baker

Accountability has released the AA1000 Assurance Standard in an attempt to put some degree of quality and rigour onto the growing process of social reporting. The question is how well does it succeed?

Its aim, according to the launch statement, is to make certain that corporate claims are rigorously assessed, and to help satisfy growing demands from investors and regulators for disclosure of robust, relevant information spelling out the links between business performance and social and environmental impacts.

There is a real need here. If social reporting is to continue and to become a significant factor in how business performance is judged, it needs to be able to be verified as being accurate and comprehensive. Given the steady increase in consultants and others offering assurance services, some degree of professionalisation of the industry needs to take place to ensure quality.

Accountability's approach is based on three key factors that need to be considered in the assurance of company reporting. These are materiality, completeness and responsiveness.

On materiality, the assurance provider must look for information that relates to legal compliance areas relevant to the business, information that relates to the company's stated policy positions, peer-based norms (ie. the issues and factors considered to be material by the company's peers and competitors), and finally those issues considered to be relevant by the company's key stakeholders.

On completeness - in spite of some fairly dense language in the standard text - the principle seems to be simply the extent to which the company can accurately reflect how it actually performs in the areas considered to be material throughout all levels of the business.

On responsiveness, the assurance provider is expected to evaluate how well the company has responded to stakeholder concerns. Note that this doesn't require that the company agrees with, or complies with, everything that external stakeholders say. But it must be able to show that it has responded in a consistent and considered way.

In addition to general guidelines on the process of assurance, the standard includes specific requirements that the Assurance Provider must be demonstrably independent from the reporting company. It also gives a basic description of the sort of competencies such an assurer should exhibit.

The basis of the framework is generally well thought through - and should help to achieve the goal of greater credibility for an important part of the reporting process. However the basic elements, with their reassuring aura of due process, slightly mask an undoubted problem, which is the degree of interpretation and opinion called for on the part of the assessor.

For instance, the assurer is meant to provide commentary to establish whether the organisation has an effective process in place for managing aspects of Sustainability Performance and responding to Stakeholder views, including any significant weaknesses in the underlying organisational processes, systems and competencies. This goes way beyond verifying the accuracy of information, and checking its range against industry norms. Also, the assurer is meant to provide suggestions on how the company can improve in the future. The assurer essentially becomes a commentator - taking knowledge of industry standards and turning them into an opinion about this company's overall systems approach.

No one would dispute the usefulness of having such a commentary. However, it moves the assurance process from one akin to the audit carried out on a company's reports - where the verification is on the quality of the information - to one which includes the informed expression of opinion. However informed, such opinion is necessarily subjective and very much at the mercy of the quality of the individual assurer.

This dilemma is a real one. Much of the interpretation around a company's social and environmental performance is subjective and context-specific. It is difficult to have a quality process that seeks to make sense of this that doesn't involve a human element. However, it remains to be seen whether a genuine and robust quality process can emerge from something that can still be carried out to the letter and still fail through the lack of insight of the person carrying out the assurance.

Also, achieving quality in assurance is no panacea. The authors of the standard seem to have high hopes when they suggest that the credibility of reports through assurance may be a factor in reversing the lack of trust in companies by broad ranges of stakeholders.

The fact is that such stakeholders simply do not read sustainability reports - and the barrier to them doing so is not the lack of assurance. The distance between the reports that companies address to their stakeholders and the ways in which those stakeholders actually choose to take their information is one that the sector has made little headway in addressing.

The AA1000 Assurance Standard will be a useful tool to professionalise social reporting - and thereby make it into a useful tool for company intelligence. Key audiences that will benefit from this include financial analysts, journalists and other commentators.

It doesn't yet save the social reporting movement from the fact that it hasn't yet found a way to talk to the stakeholders whose views count the most.

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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