Business Respect - CSR Dispatches No 60 - 27 Jul 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 'Redefining CSR' by Mark Goyder of the Centre for Tomorrow's Company.

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/60.html.

Copyright 2003 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

Following last issue's renewed appeal re. translations we had further very kind offers to provide translations for French, German and Hebrew. That just leaves Spanish, Chinese and Japanese as our outstanding ambitions! Thanks to Carlo Martellini, Kobi Nathen, Petra Roesler and Sonja Hansen for coming forward with offers.

We carried a news story last time about the UK airport operator over environmental charging for aircraft. Caroline Corfield from BAA contacted us with a correction. "I would like to correct a title you gave to a piece on your Business Respect Newsletter 'UK. airport operator urges government to tax air fuel'. We have never called for a tax on aviation fuel. What we have said is that the industry should mitigate and where necessary pay, for its external costs, for example through a form of emissions trading. However the issue of fuel tax is very sensitive and we have taken great pains to reject any proposals regarding a tax on aviation fuel. Such a tax would seriously disadvantage UK aviation on the global market. It is an idea we absolutely reject."

We're happy to make the correction. Since air fuel is one of the significant contributors to greenhouse gas emissions, it does seem strange that it remains the one across the world that is untaxed. Any process of pricing in environmental impact must surely lead to more expensive air fuel eventually. How does one go about getting global agreement to this so that unilateral action doesn't hit a single country's competitiveness?

The voting on our question re. the involvement of companies in public policy continues. As you may recall, the question goes: When it comes to lobbying on matters of public policy, companies should:

Lobby away and / or pay donations - legislators are grown-ups
17 (9%)
Lobby and / or pay donations - but they must disclose what they do
118 (60%)
Do nothing - corporate lobbying should be banned
61 (31%)

So far, 196 people have made their views known. Still time for you to add yours, of course!

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 27 Jul 2003

South Africa: Listed companies must comply with King II and GRI

Companies listed on the Johannesburg Securities Exchange (JSE) will be required from September 1st to comply with the King II corporate governance codes - including compliance with the Global Reporting Initiative Guidelines.

The second King Report covered corporate governance issues, such as director independence. The requirement for listed companies to follow its provisions puts the JSE at the extreme of stock exchanges requiring compliance with governance and social principles.

One of the consequences will be that companies will now be required to report on what they are doing about the AIDS epidemic, and how the company may be affected in terms of its performance.

Some are questioning, however, whether the requirement for full accord with the Global Reporting Initiative may place barriers in the way of smaller companies going for listing. Only ten South African companies currently follow the full GRI guidelines that have been criticised by a number of companies for 'placing the bar too high'.

William Frater, a senior analyst at Cape Town-based Frater Asset Management. Frater Asset Management told SocialFunds.com "The governance requirements are difficult for an emerging company to satisfy, and thus could present a barrier to entry for companies seeking new listings on the exchange. However, the extensive nature of adherence to the code, and the multifaceted way in which it will alter corporate culture, present significant challenges to even the largest and most prepared companies." (SocialFunds.com)

Japan: Fair Trade Commission seeks greater anti-monopoly powers

The Fair Trade Commission wants to revise the anti-monopoly law in Japan and to obtain the power to launch investigations into suspected offenders, according to the Japan Times.

The trade watchdog is also seeking higher fines for offenders, and to enhance its ability to gather evidence, giving it powers to carry out on-site inspections and to seize evidence under court-issued search warrants.

Under current law, the FTC cannot launch compulsory investigations unilaterally. (The Japan Times)

Good ethics pay off for oil companies

Oil companies, which carry an inherently high risk due to the nature of the industry, have benefited in recent years from the serious investment in processes to manage their social responsibilities.

According to a study, carried out by ethics rating agency Management & Excellence, problems for the oil industry are declining. For instance, big oil spills (over 700 tons) worldwide have declined to three per annum in the past three years, down from 50 in 1990.

In 2001 only 8,000 tons of oil was spilled, compared to 435,000 tons in 1991. Fatalities are still among the highest in all industries but are declining. In 2001 "only" 16 people lost their lives at BP, mostly in road accidents transporting oil in underdeveloped countries.

GlaxoSmithKline loses first round on challenge to AIDS drug patent

A district court in California has allowed a legal challenge by the Aids Healthcare Foundation aiming to remove GlaxoSmithKline's patent on AZT, the AIDS drug.

The argument behind the case is that the drug was developed using public funds, making the lucrative holding of the patent by the company akin to 'piracy'. The AHF alleges that the patent allowed the company to charge 32 times the cost of manufacture for the drug.

GSK said that the legal arguments being presented had all been tested previously in the courts and found to be baseless. Two judgements in 1993 and 1994 that found evidence to support the company's claim were followed by a refusal of the Supreme Court to hear an appeal.

The AHF believe that its success in the current case demonstrates that its claim is legally distinct from the previous cases.

General Motors settles car fire lawsuit

General Motors has announced that it has settled a lawsuit arising from a car fire in 1993. The case, which resulted initially in the largest product liability damages being awarded against the company, focused on the company's decision to place the fuel tank at the rear of the car.

The terms of the settlement are being kept confidential. The case initially saw an order in 1999 for the company to pay $4.9bn in punitive damages - a figure that was reduced on appeal to $1,2bn.

The accident came about when six people were burnt when their Chevrolet Malibu exploded when a drunk driver drove into the back of it. The passengers argued that the company had placed the fuel tank towards the rear of the car without due regard to passenger safety.

India: Coca-Cola attacked for 'toxic' fertiliser gifts to farmers

According to a BBC report broadcast on its Radio 4 'Face the Facts' programme, the Coca-Cola plant in Kerala has been providing commercial waste to local farmers as fertiliser which has proved to be contaminated with toxic substances.

The programme said it had discovered dangerous levels of cadmium and lead in the sludge produced by the plant which was lying on the fields of local farmers. It was alleged that the substance was actually useless as a fertiliser. BBC reporters also said they had seen waste leaving the factory to be dumped directly into a local river.

The Vice-President of Coca-Cola in India, Sunil Gupta, said that the fertiliser was absolutely safe.

However, Professor John Henry, consultant at St Mary's Hospital in London, said that the levels of toxins found in water samples taken near to the plant would cause serious problems of pollution that could have "devastating consequences".

Meanwhile, Coca-Cola is suffering a call for a boycott from unions across the world over the persistent allegations of involvement in the use of violence and intimidation by bottlers against workers in Colombia.

A current lawsuit had seen Coke removed by the judge from the case, with the process continuing against the bottlers. However, campaign groups have not been similarly satisfied that the company bears no responsibility.

Australia: Government to intervene in British American Tobacco case

The government is to seek leave in the High Court to intervene in the case of Rolah McCabe vs British American Tobacco.

The case saw the dramatic overturning on appeal of the original ruling, which awarded Mrs McCabe compensation after ruling that BAT had deliberately shredded documents that would have supported her case.

Since the appeal, the plaintiff has died.

Now the Victorian Attorney General Rob Hulls has reviewed new information submitted by a former tobacco employee and has suggested that the case merits government intervention, as it goes "to the heart of the justice system".

Firestone / Bridgestone settles class actions over faulty tyres

Bridgestone / Firestone has announced that it has settled numerous class action lawsuits over the tyre recalls that hit the company in 2000.

The settlement includes a commitment to spend over $15m on consumer education over safe driving, tyre and vehicle maintenance. Changes in the manufacture of some of the companies tyres have also been agreed.

Firestone recalled around 14.4m tyres in 2000 - and Ford recalled many more as evidence came to light that the tyres on Explorer vehicles had contributed to a sizeable number of road deaths, with vehicles rolling over following tyre tread separation. The case led to the acrimonious break-up of a longstanding commercial partnership between Ford and Firestone.

Bridgestone / Firestone continues to deny any wrongdoing, and said that it had agreed the settlement to avoid the expense of protracted litigation.

CalPERS sues AOL for $250m for misleading investors

The California Public Employees' Retirement System (CalPERS) is suing AOL Time Warner alleging that investors lost money from accounting irregularities at the company - both before and after the AOL merger with Time Warner.

According to the suit, AOL overstated its advertising revenue by over $1.7bn through the use of what CalPERS described as "sham transactions and improper accounting practices". The combined company has since restated the revenues.

The suit alleges that AOL artificially inflated its publicly reported advertising sales, and kept it inflated to avoid a reaction by the stock market prior to the merger with Time Warner. AOL was ultimately forced to write down over $54 billion in goodwill – the largest writedown in corporate history.

"We are filing this suit in California to be in the strongest possible position to aggressively obtain recovery of assets lost through this fraud and deception upon investors," said Mark Anson, CalPERS' chief investment officer.

Canada: Conference board announces national CSR report

The Conference Board of Canada has launched the development of a new annual publication, the National Corporate Social Responsibility Report, promising that it will be "a single comprehensive source of information on the state of corporate social responsibility in Canada".

"CSR is an urgent social and political issue. It matters to the public, private, and not-for-profit sectors," said Mark Schacter, Director of Governance and CSR. "This report, which will be Canada's only basic reference tool on the state of CSR, will provide a sound basis for the development of CSR strategies and policies. It will also contribute to a fruitful public debate on the role of corporations in society."

The Conference Board said that the report would cover trends and practices in CSR in Canada and internationally.

US: Lawsuit against gun industry dismissed

A lawsuit alleging that the gun industry had not done enough to curb the availability of illegal weapons has been thrown out by a US federal judge, although the manufacturers were criticised for 'careless marketing practices'.

The suit was dismissed because the plaintiffs, the National Association for the Advancement of Colored People (NAACP), were unable to show that its members were uniquely harmed - even though it was successful in showing that they suffered relatively more harm.

The target companies for the suit included Smith & Wesson, Glock and Browning Arms, who were alleged to have allowed corrupt dealers to provide guns to criminals. The companies responded that it was unlawful and unfair that they should be held responsible for the criminal use of legal products.

The judge in the case did, however, criticise the companies for taking too few measures to reduce the "public nuisance they individually and collectively have created".

CSR FEATURES from the Internet

Kyoto Protocol helps Chinese industries catch up - 25 Jul 2003 FROM Asahi.com

Its status as both a developing nation and a rising industrial power give China the unique advantage of being able to lure foreign technological assistance.

A key advantage China enjoys is the so-called clean development mechanism (CDM) of the Kyoto Protocol on global warming. The mechanism exempts developing countries that have signed on to Kyoto from obligations to reduce emissions of greenhouse gases.

Read full story

Tainted-food scare gives Nichirei an appetite for fewer additives - 23 Jul 2003 FROM The Japan Times

Since being involved in a scandal over tainted spinach last year, Nichirei Corp., the nation's largest maker of frozen packaged foods, has been working toward recovery by selling products that contain fewer additives than those of its rivals.

In fiscal 2002, Nichirei's annual sales of frozen packaged foods slipped 3.6 percent from a year earlier to 165.6 billion yen. The dent in sales was caused by the discovery of an abnormally high level of residual agricultural chemicals in spinach imported from China. The Agriculture, Forestry and Fisheries Ministry ordered several importers and food processing firms, including Nichirei, to recall all products containing the contaminated vegetables.

Read full story

Thailand's CP Group and Corporate Responsibility - 18 Jul 2003 FROM Asian Food Worker

In the 15 May 2003 edition of the English-language daily newspaper The Nation, published in Bangkok, two pieces appeared which to a casual observer seemingly had no connection.

The first drew attention to the 10th anniversary of the Kader toy factory fire, considered the worst industrial factory fire in history, when 188 workers were killed and over 500 injured on 10 May 1993. Locked exit doors, improper design and an almost complete absence of safety equipment caused the high death rate.

Read full story

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Redefining CSR as a process that starts at the heart of the company

Article by Mallen Baker

Mark Goyder has laid down a challenge to the movement for corporate social responsibility in "Redefining CSR", produced by the UK's Centre for Tomorrow's Company. Widely reported on publication as an attack on the "box-ticking" approach of some advocates, it is in fact a much more valuable review of the difference between companies who take the message into the heart of the company and those who simply comply with today's expectations whilst leaving the core untouched.

Goyder sees a key distinction between what he describes as 'compliance CSR' or a more fundamental process that he calls 'conviction or values-led CSR'. Compliance CSR sees a company undertaking the community programmes, the ethics statements, the environmental management systems purely to keep up with external demands. One might think that such a company was a long way forward. But the case of Enron - a company that had a good profile for its compliance programmes - illustrates the point of how action without the guiding light of real values and substance can unravel in the harsh spotlight of public accountability.

For Goyder, the correct interpretation of CSR is the expression of a company's purpose and values in all its relationships. Examples of such a values-led approach appear, however, to be the exception rather than the norm.

But there is a problem here. The flaw at the heart of this argument is that the values-led approach depends on top quality leadership to be effective. Goyder himself makes the point: "A well-led organisation will always seek to create the optimal value in all its relationships. In a way, that is simply good leadership. The most impressive corporate leaders have always been those whose vision of a successful business stretches beyond the product and the profits to their positive impact on the world around them."

The promotion of the features of good leadership will always, of course, be a worthwhile activity. However, a model of sustainable development that depends on enterprises being universally well-led is doomed to failure, since the majority simply do not meet this criterion. Should any expression of corporate social responsibility be held to be invalid if it is not fully incorporated into the corporate DNA, even if it helps the company to meet targets on environmental and social impact? It is a difficult question.

Of course, in some cases it is about being able to tell the truth about a company by what it does rather than what it says. Goyder gives the example of a company in his experience that trumpets its employee volunteering and yet within which it is well known that such activity is not something to be engaged by the ambitious manager intending to progress. There must be a difference between companies that undertaken CSR without having a strong values-led approach and those that undertake it purely cynically and for show.

Goyder has some extremely valuable points to make about confusions that exist about such concepts as the 'triple bottom line'. For instance, some companies claim in their reports that the economic part of the triple bottom line is where they show the creation of shareholder value, but this does not really stand up within the concept of sustainable development. He says: "Wise companies will restrict their use of the phrase 'triple bottom line' to a description of the economic, social and environmental impact of the company on the world around it: they will not use it as an umbrella term to describe the totality of everything that they measure and report."

How companies report is an important part of the mix, and the move towards the Global Reporting Initiative (GRI) across the world is not helping. "It is clear from this that GRI is not attempting to cover the whole crucial issue of intangibles reporting. Its focus is not, and cannot primarily be, on helping shareholder value analysts better understand where the future wealth of the company will be created. So companies will still need to develop other measurement and reporting mechanisms beyond the scope of GRI's thinking once shareholders wake up to the importance of relationships and leadership to the future success of their investment.

"That is not the only problem. If you look at the social and environmental indicators of GRI, many of them are based on the external, societal codes that business is expected to comply with. For example, under the heading 'Labour relations' the indicators include: 'participation in tripartite bodies, percentage of organisations represented by independent trade union organisations, and policies for formal worker representation.' These, and many more examples, are areas where views around the world will differ about what represents progress in social responsibility. If the number of worker representation mechanisms increases, is that a good thing or a bad thing? Does it imply a reduction in entrepreneurship or an increase in involvement?"

Goyder gives the example of ABB as one company that had tried to produce a GRI report only to find its mix of indicators did not provide the tools to give a meaningful account of the company's unique character and progress.

The trouble is that legislators are now moving onto this territory and the GRI provides a crude tool to apparently meet compliance objectives - a point that has just been confirmed by the actions to do just this by the JSE in South Africa. Goyder worries that the result will be an increase in the 'push' of compliance, but no accompanying 'pull' by businesses internalising the values society seeks to promote.

The text is not perfect. There are certain statements made which seem rather rhetorical and unproven. Overall however, Mark Goyder provides a useful, thoughtful narrative in 'Redefining CSR'. If successful, it should prompt many the CSR movement to tighten their understanding of what makes a best practice company, and what are the limits of expectations of 'one-size-fits-all' compliance frameworks.

"Redefining CSR", Mark Goyder, Centre for Tomorrow's Company 2003.

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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