Business Respect - CSR Dispatches No 54 - 20 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, we review GlaxoSmithKline's recent social and environmental report.

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/54.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

Having published every other weekend without fail for two years, we decided that the assembled readership would perhaps bear with us if we enjoyed the sunniest Easter break for years and published just two days later. Dreadful inconsistency we know, but at least it will halve the number of 'out of office' messages that come flooding back every time an issue goes out!

Another day later and we could have reported on the proceedings with the Nike v Kasky case (see Business Respect 47 for the most recent coverage of this case). Opponents of Nike in this instance have taken to the depressingly colourful slogan of opposing 'Nike's Right to Lie', which seems a straightforward misrepresentation of the issues in that case. Such misrepresentation, of course, would be a considerable problem were the critics held to the same stringent standards that they wish for the company - but there you go.

You don't have to be a fan of Nike to want to see the company win on this occasion. The likely consequences of a Kasky victory will be to set back the corporate accountability movement immeasurably by making any kind of corporate disclosure a vastly higher risk activity than it currently is. Nike may be the only one that has so far pulled back from its reporting activity, but we know of a number of others (some very credible in terms of their commitment) who are watching the outcome nervously.

The fact is that most commentators believe the court will find for Nike. The real implications may lie in the detail of the terms for that finding.

In the mean time, the poll on the website, which you'll recall focuses on the social responsibilities of Wal-Mart continues to break records as the most popular poll so far. Just a few weeks after being posted, 382 people have voted. The current results are:

The most important social responsibility a company like Wal-Mart can observe is:

Keeping its prices low 60 (15.71%)
Treating its employees well 106 (27.75%)
Minding its impact on local communities 216 (56.54%)

Still time to make your view known, though!

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 20 Apr 2003

Australia: Rows break out over promised Corporate Responsibility Index

Australia's top businesses have been asked to co-operate with a new rating index on corporate social responsibility, produced by a new company backed by the former Liberal leader John Hewson, RepuTex.

The rating index would be targeted at private investors and would cover aspects of corporate behaviour, including remuneration, diversity and environmental management. Nongovernmental organisations such as Greenpeace will also be involved.

However, several companies have made a high profile protest against the plans. Telstra and Caltex Australia have refused to complete the evaluation forms, and have accused the initiative of seeking to bully them into compliance using the threat of adverse publicity.

Bill Scales of Telstra told the Australian Broadcasting Corporation: "They suggest because we won't become involved with a private commercial firm that wants to rate us, that somehow we're not prepared to be rated for our corporate responsibility and that is simply not right."
(ABC)

Dominion $1.2bn settlement with Environmental Protection Agency

Dominion has said that the cost of its settlement with the EPA won't affect its earnings, cash flow or capital spending plans - but will result in a considerably better outcome for the environment.

The agreement, still to be finalised, resolves a suit filed against the company's Mt. Storm Power Station by New York. The settlement provides details on how emissions should be reduced.

"The results of this process prove that negotiating was the proper course," said Thos. E. Capps, president, chairman and chief executive officer. "Not only have we secured greater protection of the environment, but we have also demonstrated that more can be accomplished through cooperation rather than litigation."

As part of the $1.2 billion agreement, Dominion has agreed to install emissions-control equipment on its largest coal-fired generating units in both Virginia and West Virginia. By the time all the requirements of the agreement are instituted in 2013, Virginia and West Virginia should benefit from a 64 percent reduction in sulphur dioxide, a contributor to acid rain, and a 66 percent reduction in nitrogen oxide, which combines with sunlight to form ground-level ozone in the summer.

South Africa: Mbeki speaks against corporate apartheid lawsuits

President Thabo Mbeki has said that the South African government does not support litigation in the US courts against companies alleged to have benefited from apartheid.

During the debate on the final report of the Truth and Reconciliation Commission, he said that the government would not be a party to such suits.

He said: "We consider it completely unacceptable that matters that are central to the future of our country should be adjudicated in foreign courts which bear no responsibility for the well-being of our country and the observance of the perspective contained in our constitution of the promotion of national reconciliation."

He went on to say that, although citizens could take action on their own initiative, the government's focus aimed to be an inclusive one, involving all South Africans "including corporate citizens" in a voluntary partnership to develop the country. As a result, he said, the government did not intend to impose the wealth tax suggested by the Commission. (Business Day)

Citigroup and Rainforest Action Network declare 'ceasefire'

Citigroup, which over the last few days has been the target of vigorous campaigning by the Rainforest Action Network, has released a joint statement with the organisation declaring a 'ceasefire', and saying that they have entered an extended period of dialogue.

Rainforest Action Network had accused the company of undertaking its operations without regard to social and environmental standards. It attacked the company for being "one of the world's top funders of the fossil fuel and logging industries".

The joint statement promises that the company will take early additional measures "to reduce degradation or destruction of endangered ecosystems in the conduct of our business."

Citigroup also said it would report greenhouse gas intensity of future power projects in our project finance business, and seek to identify investments in less carbon-intensive sources of energy moving forward.

Philippines: Business group seeks 10-year strike ban

The Federation of Filipino Chinese Chamber of Commerce and Industry has said that it will create three million jobs over the next two years if the government bans nationwide strikes for the next ten.

The business group's president, Robin Sy, said that most of his members had held back expansion plans in fear of the growing round of labour strikes, and that a strike moratorium would encourage the companies to create more jobs.

He said that discussions with members led him to believe that the number of jobs that might be generated following such action could number around three million. The unemployment rate in the Philippines has increased to around 11 and a half percent.

In the past few weeks, food and beverage giant San Miguel Corp. and retail giants SM Prime Holdings Inc. and Rustan Corp. have been hit by labor strikes due to disputes between management and their respective unions. (Philippine Daily Inquirer)

Canada: Climate change vote for Imperial Oil shareholders

Imperial Oil shareholders are to vote on a resolution that would require the company to spell out potential financial liabilities associated with its greenhouse gas emissions, and to put in place a plan that would reduce this liability.

This is the first such resolution to go forward to an AGM in Canada, following recent changes to the Canada Business Corporation Act, which previously gave companies broad discretionary power to dismiss shareholder proposals.

David Hallman from KAIROS, which is co-ordinating the resolution, said: "For many years, churches and religious orders have been pressuring oil companies about the need to take responsibility for climate change. We are encouraged that finally, as investors, we have the opportunity express concern in this formal way".

The movers of the resolution said that Imperial had advised the Canadian government to not ratify the Kyoto Protocol on climate change. This action was held in contrast to companies such as Shell and Suncor, whose position had been much more supportive, and BP whose action to reduce greenhouse gas emissions had produced positive revenue outcomes for the company.

Australia: No major review in competition law

A review of Australian competition law that had raised the possibility of major changes in the area of the misuse of market power has concluded that no such change should take place.

Several organisations, including the Australian Competition and Consumer Commission, argued before the review committee that existing Australian law in that area was too weak.

The review committee decided instead to introduce an "effects" test to strengthen existing provisions. It also recommended change in penalties, calling for criminal charges for companies caught out engaging in cartels.

The Australian Government endorsed the report but is concerned about the issue of definitions of cartel behaviour.

Human Rights Watch: Iraq's oil must meet humanitarian needs

Human Rights Watch has called for Iraq's oil, post-war, to be managed in a transparent and accountable manner that "meets humanitarian needs and ensures respect for human rights".

The organisation said oil revenues should be directed first to meeting the humanitarian needs of Iraq's people. Prior to the war, approximately 60 percent of Iraqi families received their sole sustenance from the Oil-for-Food program. Because of the conflict and the initial suspension of the Oil-for-Food program, humanitarian needs will increase substantially.

Human Rights Watch said another pressing issue was who should manage the oil. "There is an inherent conflict-of-interest if the world's largest oil importer is seen to be managing the world's second largest oil reserves," said Arvind Ganesan, director of the Business and Human Rights Program. "The only way to deal with that is to allow functioning Iraqi institutions, or an independent mechanism with Iraqi participation, to manage the oil resources for the good of the Iraqi people."

Calpers urges GlaxoSmithKline to cut AIDS drugs prices

The California Public Employees Retirement System (Calpers), the US's largest pension fund, has urged GlaxoSmithKline to review its policy of charging for AIDS drugs in developing countries.

In a letter to GSK chief executive Jean-Pierre Garnier, Calpers president, Sean Harrigan, said the company faces serious damage to its reputation and its share price because of the controversy surrounding the pricing of Aids treatments.

Calpers praised Glaxo for its existing humanitarian aid programmes, but argued that the nature and scale of the issues would leave the company open to criticism regardless.

Mr Harrigan said: "We request that GSK's corporate responsibility committee imme diately and continually evaluate the company's humanitarian efforts in light of a changing environment, including its response to the Aids epidemic."

British American Tobacco pressed over Burma

British American Tobacco came under renewed pressure over its presence in Burma during its AGM, with the deputy chairman Kenneth Clarke challenged to justify apparent contradictions in previous statements about the regime.

Clarke, having agreed that the regime in Burma left a lot to be desired argued that BAT should not withdraw from Burma because it would mean making 500 people redundant, "throwing them and their family into a state of destitution".

“Ken Clarke admitted that he is happy to keep doing business with the dictatorship in Burma, regardless of the moral questions”, said John Jackson Director of the Burma Campaign UK. “ The only bottom line for Ken Clarke and BAT is if it’s legal and makes a profit then they’ll do it.”

BAT chairman Martin Broughton said: "The key question is can a business extend a commitment to human rights far beyond the workplace?  Many stakeholders understand that however successful or large a company is, it cannot interfere in telling governments how they should run countries.  We are a business and our influence can be far less than some stakeholders assume.  We cannot campaign on issues that are for the diplomatic or political community.  What our companies can do is operate to high standards of business practice and corporate social responsibility.  This is how, over time, business can contribute to a more positive future by spreading best practice in areas such as honest trading, fair employment, good environmental management and community support.

"If you think this is easy, I can tell you it is not.  Burma is in great economic turmoil, but we have no plans to exit.  If you were to ask our local company’s 500 employees if they think we should leave, I do not think you would hear what you hear from the Burma Campaign, which says our business should sack all its people and close its factory.  I question whether this perspective has anything useful to add to employment matters."

Unaccountable lobby groups ‘threaten credibility of CSR’  

The UK's Investor Relations Society has published a new survey that it says suggests that the credibility of corporate social responsibility is being undermined by the demands made on companies by 'CSR lobby groups'.

Whilst not naming or describing any such groups, the main focus of the organisation's attention rests on questionnaire fatigue and the fact that more than four in ten in-house investor relations practitioners believe that CSR generally has been overblown as an issue.

68% of in-house investor relations practitioners ‘agreed’ or ‘agreed strongly’ that questionnaire fatigue ‘is a real problem’. However, more than eight in ten (82%) believed CSR reporting is a central part of any good IR programme, and three-quarters (75%) said CSR is no less important in a bear market. 
   
Andrew Hawkins, Chief Executive of the Investor Relations Society said:  
   
"The CSR lobby is generating so many complaints about the type and volume of information requested that this goodwill is rapidly being eroded.  
"Matters are made worse by the sheer number and apparent lack of accountability of many of these groups. It is quite clear that many of the lobby groups in question don’t merit serious attention but companies simply don’t know which these are."
   
‘These groups also need to show on whose behalf they are acting before they can properly be taken seriously. As companies are required more than ever to demonstrate good corporate governance as a matter of basic managerial competence, it is ironic that many of the lobby groups operating around CSR are certainly not transparent nor, it seems, accountable to anyone.’  

FTSE4good boosts human rights criteria

FTSE4Good - the ethical index attached to the FTSE Group - has announced a more stringent set of human rights criteria for its socially responsible index series.

Companies hoping to feature within FTSE4good will need to meet the new standards from September 2003, or run the risk of being dropped from the list.

FTSE Group said it had undertaken a broad public human rights consultation during 2002 with almost 200 responses from corporations, fund managers, non-government organisations and private investors. These responses formed the basis of the new criteria.

Companies operating in the Global Resource Sector have to meet the higher human rights criteria by September 2003. Companies with significant involvement in high-risk countries, as defined by the Ethical Investment Research Service (EIRIS) which provides the resource base for the index, must meet higher human rights standards starting March 2004.

Will Oulton, Deputy Chief Executive FTSE Group said: "We are confident that by working closely with companies to help them understand the enhancements to the human rights criteria we will again see significant steps made to improve standards."

Sony prepares for 'shock and awe' game

Sony has patented the term "Shock and Awe" as a trademark for use in a computer game on its PlayStation 2 platform.

According to the Guardian newspaper, the company registered the term as a trademark with the US Patent and Trademark Office on March 21st, one day after the start of the Iraq war.

The phrase was used by the US to describe its approach to the bombing of targets in Iraq in the early stages of the war, and achieved worldwide fame. Sony's critics have described the early action by the company as being crass, and evidence of US arrogance.

In addition, a British company has indicated similar plans on the title "Conflict Desert Storm II: Back to Baghdad". SCi Games, part of computer games publisher SCi Entertainment, registered the title as a trademark to follow on from its original PlayStation and Xbox game, Conflict: Desert Storm.

The applications now establish a pattern, with similar sweeps made after the September 11th terrorist attacks on a 'war against terrorism' theme.

Brazil: Cataguazes Papel executive arrested for toxic spill

One of the directors of Cataguazes Papel, the pulp and paper factory at the centre of one of Brazil's worst environmental disasters, has been arrested and others are on the run from the police.

The directors are being held personally accountable for a toxic spil from the factory that caused major environmental damage in two rivers and forced thousands of households in Rio de Janeiro to lose their water supply.

The spill mostly consisted of 320m gallons of caustic soda, used in the paper bleaching process, and has affected the Pompa and Paraiba do Sul rivers.

Fishing and agricultural irrigation have been banned in the affected areas. Ecologists said it could take the ecosystem up to 15 years to recover.

US: Limits placed on punitive damages

The US Supreme Court has overturned a $145m punitive damages award levied on State Farm Insurance Co and in so doing has established a clear direction on how such penalties should be handled in future.

The justices argued that although the company had mishandled a customer's claim, the huge award had been "neither reasonable nor proportionate" to the actual damages incurred - estimated at $1m.

In almost every case, they said, punitive damages should be a single-digit multiple of the actual harm caused.

Businesses celebrated what they saw as a landmark case, drawing a line behind a string of similar cases where companies had been hit by soaring punitive fines imposed by juries.

Others expressed concern of the potential downside - specifically that some companies might begin to make the judgement that it would be cost effective to make a deficient product on the assumption that the compensation to people who get hurt would be less than the cost of making the product safe.

In a separate development, a judge in Chicago temporarily blocked the portion of a multibillion dollar award against Philip Morris, indicating that the company might not be forced to post a $12bn appeal bond. The company has argued that the size of the award against it runs a real risk of forcing it out of business.

CSR FEATURES from the Internet

Starbucks growth abroad comes with risks - 20 Apr 2003 FROM indystar.com

Having installed its chic coffee stores across much of North America, Starbucks Corp. is aggressively expanding overseas. Like other global retailing icons, it is finding that international fame carries a price.

Starbucks has been boycotted by antiwar protesters in Lebanon and criticized by New Zealand advocates seeking higher coffee prices for farmers. Faced with the possibility of terrorist attacks, the company has pulled out of Israel. What some see as growth, others see as corporate colonialism. What some see as international expansion for Starbucks, others see as the outright hijacking of foreign cultures.

Read full story

Africa, politics and divorce -- how Elf spent its millions - 20 Apr 2003 FROM Hoovers Online

A month into one of France's biggest ever corruption trials, an avid public has gorged on a rich diet of African bribes, political skullduggery and sensational divorce -- all paid for from the illicit millions of the formerly state-owned oil company Elf.

Days of cross-questioning of defendants and witnesses at the criminal court in Paris have provided a feast of insights into the extraordinary profligacy practiced in the early 1990s at the top of one of the country's biggest enterprises -- with the knowledge and collusion of the political elite.

Read full story

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GlaxoSmithKline - Seeking a cure for public mistrust

Article by Mallen Baker

There is a real dilemma facing a company like GlaxoSmithKline. On the one hand, the company makes demonstrably socially desirable goods - medicines. The company's products save and enhance lives. How absurdly easy, then, for the company to unite around a mission to improve the quality of life, and to fire up some of the best talent in the world to make a profit in this cause.

But therein lies the problem. Significant numbers of commentators, NGOs and the general public have come to believe that there is something inherently disturbing about a company that saves lives making a profit at all. When there are so many people dying in the darkest poverty in the world, how can any company with a heart aim to make a profit at their expense?

The dilemma has had the entire pharmaceutical industry caught in a vice-like grip over the last couple of years - how does a socially responsible company respond to such an enhanced set of societal expectations?

For an answer to this, perhaps one might start by looking to GlaxoSmithKline's recent social and environmental report - their second. After all, if such reports are to provide real value, they should be able to engage such a crisis of expectations.

Needless to say, the company confirms the basis for the expectations from the opening chief executive's statement. "Corporate responsibility is an integral part of our business – it is inherent in the mission of the company. GSK makes a significant positive contribution to society around the world, through the medicines, vaccines and healthcare products that we research, develop, manufacture and sell."

GSK is a huge company, with over 100,000 employees operating in 150 countries. It has sales of around £21m, with a trading profit of £6.5m and a research and development spend of about £3m.

Its report leads off with the beneficial impact made by its core products. Society's expectations have changed. Diseases that once had a devastating impact are now controlled, which has led many within the developed world to take good health for granted. This is a fair point rather often missed by the sector's critics.

The company recognises that those changing expectations have now led to questions being asked about access to its medicines. Such concerns led it to introduce the orange card scheme in the States to provide discounts for low-income people. It has led to an active programme of price reduction for essential drugs in developing countries - to a deafening chorus of both praise and bitter criticism.

"GSK is committed to contributing to health improvements in a sustainable manner, so we set our preferential prices for ARVs and anti-malarials at levels that cover direct costs but on which we do not make a profit. In this way we can offer these prices for as long as patients need treatment." The report goes on to give further details of the number of tablets donated in a variety of local contexts.

This area is followed up with information about GSK's community investment. The company's community investment and charitable contributions in 2002 totalled £239 million, of which £112 million was related to the company’s Patient Assistance Program for financially disadvantaged patients in the US.

One case study provided for its support involved PHASE – Personal Hygiene And Sanitation Education – introduced to provide hygiene education for school children, with the aim of reducing diarrhoea-related disease and deaths associated with poor hygiene.

PHASE started in partnership with AMREF (African Medical and Research Foundation) and operates in Kenya, Nicaragua and Peru. In Kenya, 83,000 children in 247 schools are benefiting from this basic education, while in Nicaragua it will reach over 27,000 primary school children and 20,000 in Peru.

On research and development, the company addresses the issues around animal research, arguing that its approach is to reduce the use of animals in research wherever possible, to refine this use to ensure relevance and to replace animal experiments with other kinds where permissable (the company is legally required to test medicines on animals before those medicines are released). Figures are provided that show a broadly static use of animals in tests against an ever-rising profile for the quantity of research and development carried out.

Diversity is a focus for its section on employees, with figures showing that 19% of the 24,000 strong US workforce is made up of 'people of colour'. Within global senior management, 81 percent are men, 19 percent women.

On human rights, the company has carried out an internal review and declared itself to be in compliance wherever it operates as an employer with the Universal Declaration and the core conventions of the Internataional Labour Organisation. The company has put in place 'binding requirements' to ensure that major contractors and suppliers adopt the same standards.

On environmental performance, the company has targeted a number of emissions for reductions, such as volatile organic carbons and CFCs. There is no mention here of greenhouse gases or climate change.

There is a section also on business ethics - and the company's structure for upholding its basic code of conduct throughout the business - from the top levels down.

The good points about this report include the prominence given to some of the major issues, and the fact that basic narrative about these issues is often combined with a case study that helps to tell the story with a greater deal of local colour.

However, it is not all there. There are a number of issues one might expect to have seen dealt with in GSK's report that are notable by their absence.

Not dealt with is the issue of patents. The pharmaceutical companies have been accused so often of aggressive and anti-competitive behaviour on how they register and re-register patents that it must count as a serious benchmark of business integrity. Can a pharmaceutical company survive without taking part in the attack and counter-attack of patent abuse? If not, shouldn't someone point out the flaw in the system that makes this so? If yes, then what kind of code of conduct should be developed to give a basis for sound behaviour in this area?

Secondly, GlaxoSmithKline - in common with many large corporations - has recently felt the heat from its stakeholders over the issue of executive remuneration. Worth a few words, surely.

Finally, how consumers obtain information about drugs, and the effects of the advertising of such drugs is also a key issue. It can include factor such as whether consumers were sufficiently well warned of potential side effects or addictive properties.

The main problem, however, as with so many of these reports is the rather light touch on performance data. Narrative without data is essentially warm words. There is no independent third party verification of the report - although with the lack of data there is not much actually there to verify.

But the most fascinating and frustrating deficiency in this report - that is made up mostly of narrative - is the lack of empathy within that narrative. There is very little here about the dilemma the company faces - about the human element of real frustration that must run through the company on how it responds. This is a very safe report about a potentially fascinating and praiseworthy company that really doesn't help us to anything other than a very surface-level understanding. I am not sure which stakeholder group amongst the company's many would find it to be of value.

Echo's Perception Index put GSK in as one of the top four for integrating CSR into its business practices. It is difficult to see how this leading edge position translates so far into its public reporting.

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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