Business Respect - CSR Dispatches No 66 - 16 Nov 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, as NGOs say they don't believe CSR reports, we consider again how the NGOs themselves should be judged for what they do or don't do in the name of holding companies to account.

In the news:

Feature articles on the internet:

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Topics:

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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

Mallen spoke last week at Ethical Corporation's conference on social and environmental reporting. He will remember the occasion as the time when he was introduced by the chair as having 'an amusing outlook on life'! But the really striking thing was that - having made comments during the panel discussion about the challenge to social reporting of the fact that so few of the intended audience actually read social reports - how many people considered this to be a controversial thing to say, whilst declaring their agreement with it.

When audiences of practitioners are asked whether they believe their intended audiences read their reports, they almost always admit that the answer is no. So how can this can be an unusual fact to acknowledge in the debate on the future of reporting?

There seems to be a lot of focus at the moment on indicators, and the exact form and style of reports, and on the cost of producing them. Such discussions seem to take place in an atmosphere that is rather divorced from the meat and drink of the communications industry - who is the target audience, are they responding to the communications directed at them, and if not - what can be done differently to make it so?

The only reason why companies will still be producing these reports in thirty years time - if nothing changes - is because the requirement to do so has been legislated. That, of course, is what some non-governmental organisations want. They don't believe the reports they read, but they want them to be compulsory anyway. More on this in the main article this time.

But it will be a bad thing if current practice is legislated for - simply because at the moment it isn't effective communication. There is still a lot of settling out to be achieved in the CSR industry re. which audiences will ever respond to formal reports, and how therefore one engages the audiences that won't. This has been a theme in the past in Business Respect, and it seems rather likely it will be a theme in the future too!

Meanwhile, as you will see from the news stories this time, British American Tobacco have finally yielded to pressure and pulled out of Burma. They might review the results so far of our current poll with some grim amusement, therefore.

In countries like Burma or Sudan where there are huge human rights challenges, companies should:
Withdraw - no company with a conscience should do business there 100 (24%)
Do business there - but use its influence to try to make things better 278 (68%)
Do business there - and keep out of interfering in politics 32 (8%)

There have been 410 votes in total. We will be changing this vote soon, so take this as your last chance to make your views known.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 16 Nov 2003

Philippines: President promotes sustainable mining

President Gloria Macapagal-Arroyo has said that the government is to implement a new policy of actively promoting environmentally sustainable mining. The comments came as she presented the 2003 Presidential Mineral Industry Environmental Awards.

"Our awardees tonight are concrete proof that you can have mining, you can have jobs and you can have concern for the environment at the same time," she said.

The companies winning the awards were the Silangan Mindanao Exploration Co., Bulacan Plant, Union Cement Corp-La Union Plant and Taganito Mining Corp.

The President said that it was her government's policy to promote responsible resource exploitation, providing economic growth for the country whilst working within the principles of sustainable development.">

Pfizer acts to tackle top cause of blindness

Pfizer has announced that it is due to donate over $500m of the antibiotic Zithromax to fight trachoma, the leading cause of blindness globally.

The donation, billed as one of the largest ever by a pharmaceutical company, is part of a worldwide programme to eliminate trachoma within twenty years. The action by Pfizer will provide around 135m doses of the drug.

Trachoma is caused by a parasite and appears in parts of Africa, Asia and Latin America. It thrives in poorer areas where poor sanitation is a problem. An estimated 6m people have been blinded by the disease.

Zithromax is the most potent drug currently available to fight the condition. Pfizer had already donated 8 million doses in the last five years. Some of the best results so far have come from Morocco, which has reduced trachoma by 90 percent amongst children, and hopes to eliminate the disease entirely within a couple of years.

BHP Billiton accused of breaking Global Compact for labour agreements

The Construction, Forestry, Mining and Energy Union (CFMEU) has accused BHP Billiton of breaking its commitments under the UN Global Compact by requiring Australian Workplace Agreements (AWAs) to be signed by employees at its Western Australian operations.

The union suggested that BHP had failed to uphold the right of collective bargaining by issuing the agreements. Its Mining Division president, Tony Maher, raised the issue at the company's annual general meeting.

The company defended itself in response. Chairman Don Argus said that the Company did not require companies to change their industrial relations framework, and that BHP was committed to freedom of association.

The company's position was also supported by the Australian government. Workplace Relations Minister Kevin Andrews said that companies were required by the compact to work within the national and legislative framework of the country in which they operate.

"BHP has every right to offer AWAs. The ACTU, in its ideological drive to abolish AWAs, has got its facts wrong when it claims the Workplace Relations Act is in breach of the ILO Convention 98," he said.

Diageo faces storm over whisky changes

The leading distillers in Scotland have threatened to pull out of the Scotch Whisky Association unless it takes action against the drinks giant Diageo for changing its malt whisky Cardhu.

The industry is upset because of Diageo's response to its situation with dwindling stocks of single malt Cardhu, due to growing demand. The company has decided to produce a malt blend, with only a relatively minor change on the packaging of the Cardhu brand, changing the description of 'single malt' to 'pure malt'.

The other companies claim that the move threatens to undermine the quality associated with single malt whisky, and to confuse customers.

The matter has been the subject of prime minster's questions, and a meeting of the Scotch whisky all-party parliamentary group.

Diageo has said it is prepared to compromise with more extensive repackaging, but has defended the spirit of its initial decision, describing it as 'innovation'.

Japan: Mitsubishi Motors braced for product liability case

Mitsubishi Motors is due to face what, in Japan remains a relatively rare event, a product liability lawsuit, when they face charges that faulty design led to the death of a woman when a tyre rolled off one of its trucks.

The company denies that the accident was caused by error in the truck's production or design, and instead blamed faulty maintencance check-ups that left crucial bolts untightened.

Police raided the company's headquarters last month during the investigation of the death.

Around 50 instances of similar events, where tyres have fallen off the truck model 'The Great', have been admitted. Unlike such instances in other countries, the company did not carry out any kind of organised product recall, but instead carried out free inspections and changed parts in potentially affected vehicles.

There is not yet a tradition of serious penalties being levied against companies in Japan for product faults. The suit, being brought by the victim's mother, therefore faces an uphill battle to make a significant impact.

The suit follows a period during which the company has been found to systematically hide defects to avoid recalls. The discovery of this fact three years ago led to the recall of over a million vehicles.

A ruling on the current case is expected next year.

France: Former ELF executives jailed for corruption

Three former executives of the French state-run oil company Elf, including the former chairman Loik Le Floch-Prigent, have been jailed for embezzlement.

Le Floch-Prigent and former director Alfred Sirven received five years, with another executive, Andre Tarallo, receiving four. The executives were amongst 37 businessmen on trial for the misappropriation of around 300m euros from Elf during the last two decades.

The former chairman's ex-wife was also convicted of having received money from Elf in exchange for not talking about the dealings after the couple's divorce. She was sent to jail for one year, with a further two suspended.

The court had heard that Elf already had a culture of bribes, commissions and fixing fees paid to foreign officials that was in place when the individuals concerned joined.

British American Tobacco gives up on Burma

Following intense pressure from the UK government, British American Tobacco has finally thrown in the towel on its presence in Myanmar (Burma). The company announced that it would sell its 60 percent ownership in Rothmans of Pall Mall Myanmar Pte.

The company had held the line that it would continue to operate in the country for some time, arguing that in the absence of a formal international boycott it was not the company's place to pull out of a country because of controversy around its governance.

BAT director of corporate and regulatory affairs Michael Prideaux said: “The decision comes with regret, as our managers have established Rothmans as one of Burma's best employers, operating to high standards of business and corporate responsibility.”

The company's action was celebrated as a victory by the Burma Campaign, which had been campaigning against BAT during the last year.

US: Survey suggests CSR reporting will continue to grow

According to a recent survey of thirty companies, corporate social reporting is going to continue to grow in 2004 - suggesting that the inconclusive results of the Nike v Kasky case is not producing major impacts on numbers committed to reporting.

All but one of the companies that have already produced reports said that they intended to continue. They generally continued to believe that the reports were a valuable part in their company's progress towards becoming more socially and environmentally responsible.

Nearly three in four companies said they plan to increase information about their social and environmental activities. Over two in five respondents also said that they would increase performance goals and the reporting of progress against those goals. Over one-third of these companies plan to increase encouragement of stakeholder feedback on the reports.

The survey was carried out by the Public Relations Society of America in association with Business for Social Responsibility (BSR).

Wal-Mart faces action over allegations of hiring illegal workers

Wal-Mart has received a notification of investigation from the US Attorney accusing it of complicity in hiring illegal immigrants. The move follows recent raids on Wal-Mart premises across the US in the last month during which around 250 workers have been arrested.

Wal-Mart is not accused of hiring the illegal workers itself. But investigators have said that, with 13 subcontractors having admitted doing so over recent months, there seems to be a long-standing pattern of abuse that must involve the company.

The Maintenance Cooperation Trust Fund, an organisation that opposes the use of illegal aliens, told the New York Times that the use of illegal labour could provide as much as a 40 percent cost advantage through savings of tax, social security and other benefits.

Wal-Mart has denied the charges, and is expected to face grand jury hearings in December.

Caterpillar celebrates Dow Jones placing as protestors complain

Caterpillar Inc has celebrated its inclusion for the third year in the Dow Jones Sustainability World Index, just as protestors in Iowa slammed the company for selling equipment to Israel that would allegedly be used 'to bulldoze Palestinian homes'.

Caterpillar said that it has a clear focus on social responsibility, sustaining the environment and delivering strong financial results - factors that have earned it its place in one of the most rigorous benchmarks of corporate behaviour.

"Caterpillar has a long-standing commitment to social responsibility and we are honored to be included in the Dow Jones Sustainability World Index for the third consecutive year," said Ali M. Bahaj, Caterpillar vice president. "We continue to demonstrate that a strong focus on social responsibility and sustaining the environment contribute to delivering strong financial results and creating profitable growth opportunities."

At the same time, protestors in Iowa alleged that the company's bulldozers are being used by the Israeli government to destroy homes and olive groves. The protestors included Cheryl Brodersen, the aunt of the woman who was killed earlier this year by an American-made Caterpillar bulldozer.

Caterpillar has responded to the protests pointing out that Israel is not a boycotted country by the US and it is down to politicians to define such measures. The company said it does not sell products in restricted countries.

UK: Unhealthy food advertising to children may be banned

The Food Standards Agency, the government's food watchdog, is considering introducing a ban on the television advertising of 'unhealthy' foods as concerns have increased about the growth of obesity amongst children.

The measures may also inlcude the prevention of supermarket sales of sweets at checkouts.

The government believes that obesity could cost society £3.6bn a year within the next few years, and could become a significant factor in ill health across the country.

The moves follow the publication recently of research suggesting that advertising to children made a signficant impact in their consumption of foods with high levels of fat, sugar and salt.

Food manufacturers could face penalties if they knowingly promote unhealthy foods to children. According to the Daily Telegraph, a consultation paper being discussed at the agency suggests that the food industry should be made aware of "its role in children's eating habits in the context of corporate social responsibility". (China Daily)

Australia: Corporate governance challenge posed by new report

A study of corporate governance in the top 250 listed companies has found that few are raising their game sufficiently to match higher standards following recent corporate scandals. However some dispute the importance placed on the growing number of governance guidelines.

The report, released by Horwath showed that the largest companies have in fact improved their governance, although plenty of the others have not. It said that the overall picture was 'disappointing', with the independence of board directors having lessened during the last year rather than being strengthened.

One of the large companies that received poor ratings was Harvey Norman. A piece in the Sydney Morning Herald observed that the company, whilst achieving the lowest possible ranking on governance, had seen significant growth in share price and profits over recent periods.

Gerry Harvey, chairman of the company, told the paper that the low score in the governance report was like "getting one out of five in Latin, but 99 out of 100 in maths".

CSR FEATURES from the Internet

A return to sweatshop days? - 14 Nov 2003 FROM North County Times

By 1900, corporations employed hundreds of thousands of children under the age of 16 and a million women to work in crowded and unsafe factories. Women were paid half of what men made and children made even less. Workers could be fired at any time for any reason and were often replaced by immigrants who were willing to work 12-hour days, seven days a week and for less pay.

Fast forward to 2003 and observe some of the same horrors occurring with the Wal-Mart poverty-wage, sweatshop business model which is eerily similar to that which developed in the late 1800s. It is a model that Wal-Mart has fine-tuned with the utmost efficiency. Last year its profits topped $8 billion and S. Robson Walton, one of the ruling members of the Wal-Mart Empire, now ranks as the wealthiest person in the world at $65 billion, according to London's "Rich List 2001."

Read full story

Human Rights Supersede Profit - 11 Nov 2003 FROM Business Day (Johannesburg)

Wittingly or unwittingly, individuals do things that injure other individuals. For society to function, it must provide individuals with incentives not to do so, through rewards and punishments, regulations and fines.

Motivating corporations to do the right thing is even harder. After all, corporations don't have a conscience; it is only the conscience of those who run the corporation, and as recent US corporate scandals have made all too clear, conscience often takes a back seat to profit.

Read full story

Looking past profits for society's sake - 10 Nov 2003 FROM China Daily

If a child is asked "What is Coca-Cola?''on the street in Beijing or Shanghai, he or she might sneer at the ignorance of the person inquiring. However, when a journalist presented the same question to a group of children at a remote mountain village, they all told him "It's a school.''

They happened to be pupils of a Coca-Cola Project Hope school, who may have never actually tasted the famous soft drink, but knew where their education was coming from.

Read full story

The noble feat of Nike - 7 Nov 2003 FROM The Spectator

A Nike is a shoe that simultaneously kicks people out of jobs in the West, and tramples on the poor in the Third World. Sold for 100 times more than the wages of the peons who make them, Nike shoes are hate-objects more potent, in the eyes of the protesters at this week’s G8 riots, than McDonald’s hamburgers. If you want to be trendy these days, you don’t wear Nikes; you boycott them.

So I was interested to hear someone not only praising Nike sweatshops, but also claiming that Nike is an example of a good and responsible business. That someone was the ruling Communist party of Vietnam.

Read full story

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The accountability of NGOs

Article by Mallen Baker

Burson Marsteller, the major public relations firm, this week released a real 'dog-bites-man' story. Apparently, the majority of campaigning Non-Governmental Organisations (NGOs) who focus on issues around corporate accountability are sceptical of what companies put into their reports. That this should make the news at all just shows how easy it can be to turn surveys into headlines.

It remains somewhat depressing, however. If you spend any time with the company practitioners who review, compile, collate and craft these reports, you weary of the automatic cynicism that often greets the results. They must wonder why they bother.

Of course, this should only be a real problem for those companies whose big drivers on CSR include the opinions of NGOs. Actually, that is rather fewer than you might think. Although the big, battle-hardened veterans have learned to focus quite carefully on what the campaigners are saying and doing, for most companies the bigger focus comes from what their employees, customers, shareholders and communities are saying. The fact that NGOs don't believe their reports isn't that big a deal. It is more a concern that said employees, customers, shareholders and communities don't even read them.

Of course, those companies will respect NGOs, in the way that you would respect a potentially fierce but currently dormant dog. They know that were they to become the target of a concerted campaign it could be damaging. Companies such as Burger King and Wendy have been quick to respond, for instance, when they found themselves targeted by the ruthlessly effective People for the Ethical Treatment of Animals.

But there is a striking element in the fear that companies often feel for NGOs - it is precisely the analogy of the dog that might turn, rather than the person with a guilty conscience. A survey of business people about their attitude to NGOs would make fascinating reading - from my limited conversations I suspect it would find that many see NGOs as likely to pick on a particular company for no better reason than the pursuit of publicity.

This suspicion that the targets of NGOs are chosen for reasons other than clear analysis of right and wrong is a real challenge to the campaigners. They would like to believe Burson Marsteller when they say on the launch of their report: "NGOs demand that CEOs hear them, pay attention to their position, and change their company ways regarding the issues they advocate. CEOs need to deal with social and environmental issues in a spirit of cooperation rather than confrontation." But it seems to be confrontation upon which many NGOs thrive. Indeed, they must be aware of how much harder it would be to attract members with campaigns that did not hit the headlines. It is conflict that hits the headlines, not consensus.

I had the depressing experience last week of attending a debate entitled 'CSR is just a PR fig-leaf', hosted by the Institute of Directors. The audience was largely NGOs and charities. The arguments in favour of the motion were frankly poor, and laden with cynicism. If you can show that a couple of companies to have behaved badly, and then go on to suggest that this proves that all companies are the same, then apparently this is a winning argument. For win it did.

The question has been asked before, but not yet convincingly answered: how should NGOs be held accountable for the way they operate? The question is being raised at the moment in the UK following campaigning by one of the lead environmental groups around 'ghost ships' coming to the UK in a toxic state. Many are saying that the campaigners are distorting facts and sensationalising in order to make a big impact. It may yet be shown that this is not the case - but if the accusations stick, what will that mean for how that group operates in the future?

At least one colleague of mine said that he/she had left a major environmental NGO when it became obvious that the organisation chose its targets on the basis of which company they felt like attacking, before going out to find dirt that could justify the attack. There was no analysis about who constituted the greatest problem. No strategy about how positive results might be attained.

It may well be this is not true for many good NGOs. The question is how can we tell the difference? What is the accountability framework for NGOS that the good ones can sign up to in order to show that they consider the consequences of their actions, seek to get their facts right, and don't play fast and loose with the public's trust - their greatest asset.

The trouble is that it isn't the CEOs of companies that are following a conflict model - they are very used to forming partnerships and seeking mutual benefit. The NGOs don't currently have a business model that can survive without conflict. That runs the risk, unless they are very good indeed, at making them into the enemy of solutions where those solutions require partnership and dialogue.

Unfortunately, the only voices currently raised in favour of NGO accountability (this journal notwithstanding!) tend to be rather right wing business-aligned coalitions of the worst sort - who would like to wipe out the NGO community altogether to relieve themselves of the occasional inconvenience they cause. There is a real gap for an organisation that supports the good that the campaigners can do, but seeks to push them towards best practice in their own context. It can't come from the business groups. It has to come from the NGOs themselves.

In the mean time, many of the smart companies are working out that if they engage their shareholders, customers, employees and communities, they will have little really to fear if the NGOs come knocking.

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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