Business Respect - CSR Dispatches No 69 - 11 Jan 2004

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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 edition, we review our predictions for the next five years in corporate social responsibility.

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/69.html.

Copyright 2004 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

A happy new year to all our readers!

As with previous new year editions, this time around we turn our attention to review our predictions of the development of CSR over the coming few years.

One prediction that isn't on our list because it falls under the category of the totally obvious is the sad fact that during 2004 more company names will be added to the roster of infamy for corruption and fraud.

At the end of last year, we got our first case in point. The scandal of Parmalat, with its invented offshore assets and its apparent 8bn euros hole in its accounts, has started us off in the worst possible way. Whether or not all the goodwill generated by all the CSR activities in the world makes a jot of difference to the reinforcement of negative attitudes to business provoked when such cases emerge will remain a point of debate.

As with Enron, we here have a company that could be said to have had a considerable profile as a positive contributor to the community. Also, some have said that since, in this case, the people concerned did not salt away billions for their own personal use, but instead got engaged in an increasingly desperate attempt to keep loss-making concerns going, to keep jobs, and to keep community programmes, one might infer that the collapse had actually been caused by too much social responsibility.

That wouldn't be any definition of social responsibility that we recognise - we have always said that the first premise of corporate social responsibility is to be profitable. Although this on its own isn't enough, the case of Parmalat illustrates only too well the impact of the alternative. If it can't be done sustainably, it should be done differently.

Of course, not many people really believe Parmalat was just too socially responsible for its own good. Family owned responsible companies - such as Smuckers, this week reported as the number 1 best US company to work for, have proven that doing the right thing by your people can make for a healthier, more successful business. Not the reverse.

Finally, the issue re. companies outsourcing workers to locations with lower labour costs looks likely to become a big issue for the year. We have finally gotten around - as promised a couple of issues ago - to changing the vote on the website. It now reads:

Companies that seek to move jobs from the US / Europe to developing countries with lower costs

1. Can in no way be called socially responsible
2. Are right to stay profitable, but should pay attention to how they make the change
3. Should aim for maximum profitability, and not be hampered by unwarranted sentimentality.

We look forward to hearing your views.

For the record, the final tally on the previous vote was as follows:

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 - 191 (24%)
Do business there - but use its influence to try to make things better - 541 (69%)
Do business there - and keep out of interfering in politics - 57 (7%)

789 people in total voted. Thanks to you all.

Finally, December saw us cross the 3,000 line for subscribers to this newsletter! We are delighted as ever to have the opportunity to produce material of interest to so many. Who knows where we will be this time next year?

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 11 Jan 2004

Hewlett-Packard wins case of diversity over religion

Hewlett-Packard has won a discrimination lawsuit in San Francisco, US, where an employee that had been sacked for not supporting policies on diversity had claimed religious discrimination.

Richard Peterson, a long-time HP employee, had reacted against posters promoting the company's commitment to diversity that featured an employee who was gay. He responded by posting a public notice, drawn from Isaiah in the Bible, declaring homosexuality as a sin.

The company had taken the posters down, but said that it had never required the litigant to change his religious beliefs - only to show due respect and tolerance to co-workers.

Mr Peterson would not relent, so the company fired him. The claim that the firing represented discrimination on the grounds of religion was rejected by the court, saying that an employer does not need to accomodate beliefs that would lead to discrimination against others.">

Saudi Arabia: Lucent faces lawsuits on two fronts

Lucent Technologies is being taken to court both in Saudi Arabia and in the US - in one instance for allegedly violating Saudi regulations, and on the other not following Equal Opportunities legislation.

Vikraman Nannoo, an Indian national, is suing the company after he was fired for protesting some of Lucent's policies. He said he was offered compensation below that which was required. The company also broke its own rules by allowing some former employees to work for competitors, although it had a clear policy against this.

The Arab News quoted one US Lucent employee as saying that some of the actions taken by the company's local executives, if taken in the US, "would bring down the company with multimillion dollar lawsuits".

Lucent defended its record, and said that it was a world leader in most of the countries in which it operated for workplace practices.

US; Smuckers tops Fortune's list of Best Companies To Work For

J.M.Smucker, the century old family-owned food company, has topped the poll for the best company to work for - the first manufacturer to do so. The company is run by the two brothers, Tim and Richard Smucker, who remain committed to keeping the family tradition alive in a firm that now employs nearly 3,000 employees.

The company's workplace formula has clearly paid some dividends - the company's stock has given a total return of 100 percent over the last five years. They say that their father Paul Smucker had set the corporate values that have endured ever since: Listen with your full attention, look for the good in others, have a sense of humor, and say thank you for a job well done.

Fortune reports some of the practice that has followed. For instance, plant supervisors have been known to serve celebratory barbecues after hitting new records; managers routinely thank teams with lunches and gift certificates.

US: Worldcom can again bid for government contracts

Telecoms giant Worldcom has been removed from the list of companies excluded from bidding for work from the US federal government following improvements to its accounting standards and "business ethics weaknesses".

The company was removed from the list last year following the major $11bn accounting scandal that put its name second only to Enron on the blacklist of corporate wrongdoing.

MCI chairman and CEO, Michael Capellas, welcomed the move saying that the company had taken "extensive steps" to boost its overall integrity, including a corporate ethics programme complete with a new Chief Ethics Officer and company-wide training.

Australia: Animal trade companies told to improve

The Australian livestock industry has been told that it faces new legislation to require better animal welfare practice and to prevent a repetition of the scandal around the Cormo Express incident, where 57,000 sheep were stranded at sea for nearly three months in poor conditions.

A government inquiry into the industry has said that in this case, self-regulation has failed, and said that there now needed to be a more comprehensive set of rules to improve performance.

It also said that the Australian Quarantine and Inspection Service should be given extensive powers to grant, or revoke, export licenses. Vets should be compulsory on journeys longer than 10 days.

The inquiry was led by John Keniry, former Australian Chamber of Commerce and Industry president.

Companies responded cautiously to the proposals, but responded negatively to a suggestion that exports should be banned from Portland and Adelaide for part of the year.

CEOs believe mainstream investors will focus on CSR

The World Economic Forum has released a survey showing that over 70 percent of CEOs believe that mainstream investors - who have previously viewed issues around social responsibility as a minority interest only - will increasingly come around.

The WEF report looks at how CEOs, along with Chief Financial Officers and Investor Relations Officers currently communicate the strategic importance of the social and environmental aspects of their performance to investors.

According to the report, there is already an increased interest from pension funds, insurance companies and other shareholders, although there is still some way to go.

A number of problems were identified that need to be overcome. These include problems of definition of corporate citizenship or corporate social responsibility, problems of making the business case and with the quality and quantity of information, and problems of skills and competence in managing and measuring CSR.

Australia: Corporate political donations halved

Contributions in Australia to the political parties by companies have halved over the last year - a change that is being widely credited to the growing importance of corporate governance good practice.

Donations have slumped to just over $100,000 - having previously been nearly $220,000. Some of the effect is likely to reflect the vagaries of the electoral cycle, with the peak in donations coming aorund the time of the last State election. However, many have pointed to a trend in decline.

Australian Shareholders Association chairman John Curry said that he supported the trend, and expected it to continue, adding that it was the responsibility of taxpayers to make the decision to donate to political parties, not company executives.

UK: Barclays Bank agrees outsourcing jobs deal

Barclays Bank has signed a deal with the finance workers trade union that will see jobs moved from the UK to India or other locations with lower labour costs.

The agreement promises early consultation with workers about decisions that would affect them along with an extensive programme of support to help displaced workers find new jobs. In return, the union accepts that jobs will be lost in Britain.

Barclays has already created 500 jobs in India and is considering the further outsourcing of IT jobs. The agreement applies to all projects that involve offshore outsourcing.

Last year, telecommunications company BT reached a deal with its main union on a similar basis, although that agreement also explicitly gave assurances about the working conditions of the new workers who received offshore outsourced jobs.

Japan: Companies inundated by calls for social responsibility information

The increasing demand from western-based companies for information from their suppliers is leading to a huge growth in requests for information from Japanese companies, according to the news server Asahi.

Companies are being inundated by questionnaires seeking details on environmental and social policies. Increasingly the response to such questions is determining success in achieving a business relationship.

According to Asahi, electronic parts manufacturer TDK Corp has said that it receives 800 enquiries every month from corporate customers - compared to only 10 a month two years ago. Other companies have confirmed the trend.

In addition to customers, the top 500 companies also get up to 30 detailed questionnaires from socially responsible investment firms. (Asahi)

Madagascar: Business initiative to tackle poverty launched by PM

A programme to involve business in alleviating poverty has been launched by the Prime Minister Jacques Sylla. The launch of the initiative, 'Growing Sustainable Business for Poverty Reduction', was organised by UNDP and brought together government, business and civil society.

"For my Government, the public sector and private sector are complementary and contribute together to development," said Mr. Sylla. "The role of companies goes well beyond the production and sale of goods and services".

Amongst the companies involved, Electricite de France (EdF) is involved in projects to supply power to rural and poor communities. The first of these will begin work within months.

Total is supporting small to medium-sized fuel transport companies in expanding their operations. It is working with communities to improve the safety of fuel transport.

Other companies involved include the major Indian conglomerate, Tata Group, and some of the other major multinationals including Rio Tinto and Coca-Cola.

The initiatve grew out of the growing UN Global Compact business network.

IBM Korea officials charged with corruption

48 government and IBM Korea officials have been indicted in the investigation of corruption in the bidding on government contracts.

IBM's South Korean affiliate, IBM Korea, had won $55m in contracts from government allegedly through bribery. The company has admitted that the actions took place, and expressed regret over the incident.

Prosecutors have indicted Jang Kyong-ho, the executive director of the company responsible for government business. He has been accused of helping Winsol, a local distributer of IBM servers, to win procurement contracts through prearranged bidding.

CSR FEATURES from the Internet

CSR run amok - 8 Jan 2004 FROM National Post (Canada)

Corporate Social Responsibility, known as CSR, gets nothing but good press. The idea that corporations have a higher moral duty other than making profits, that they must spend some significant amount of money and effort performing social good works and mounting community programs, is assumed to be beyond question. Even when some of CSR's leading corporate practitioners spectacularly and ingloriously flame out, any possible connection back to CSR is ignored. But what if CSR itself may be one of the causes of corporate disaster?

The possibility that CSR might be at the root of corporate collapse can be found in two recent high-profile corporate meltdowns -- Parmalat and AOL Time Warner.

Read full story

Corporate activists need further scrutiny - 7 Jan 2004 FROM The Sunday Times (South Africa)

Corporate social responsibility has become an activist tool that brilliantly employs the intertwined doctrines of stakeholder participation, sustainable development, the precautionary principle and socially responsible investing.

These doctrines primarily reflect the concerns, preferences and gloomy world view of a small cadre of politicians, bureaucrats, academics, multinational nongovernmental organisations (NGOs) and wealthy foundations in affluent developed countries.

Read full story

Asking the Do-Gooders to Prove They Do Good - 3 Jan 2004 FROM The New York Times

A programme to involve business in alleviating poverty has been launched by the Prime Minister Jacques Sylla. The launch of the initiative, 'Growing Sustainable Business for Poverty Reduction', was organised by UNDP and brought together government, business and civil society.

Wanting to know how a charity or foundation spends the millions it collects, or, more important, whether the programs it runs do any good, would seem reasonable, even necessary, to most people.

But reasonableness and need have never been sufficient to put ideas into practice. There are millions of these groups — commonly referred to as nongovernmental organizations, or NGO's — worldwide, but few are subjected to that kind of meaningful oversight, say the specialists studying NGO accountability.

Read full story

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The next five years of CSR - some progress

Article by Mallen Baker

In our first new year edition of Business Respect, two years ago, we made a number - nine no less - of predictions about what would happen in the world of corporate social responsibility over the coming five years. Two years in, and in the spirit of accountability, let's see how we're doing.

1. There will be a growing emphasis on the quality of management of corporate social responsibility - not just whether you do it at all.

This prediction goes to the heart of the business case for CSR. All those who look for conclusive evidence of a link between CSR and the bottom line have to have some way of rating how well CSR policies are put into practice, not just what is the rhetoric.

There is no other aspect of management where you would expect such a link to be automatic, regardless of the quality of your work.

Progress: Some. As more and more companies adopt the policies and begin reporting, we are seeing fewer news stories based on the fact that a company has produced a report, and we are just starting to see a few that use the reports as a basis for analysing what the companies are doing (for example Ford and its performance on vehicle energy efficiency). Business in the Community's Corporate Responsibility Index also focused the minds of some businesses that had previously thought they were leaders when they found themselves ranked in the lower quintiles. The power of the approach is due to spread - with the CR Index framework being actively pursued as a model for Australia and elsewhere.

However, the fact that most news stories are either 'for' CSR or 'against', there is still a long way to go in improving maturity in this discussion.

2. CSR will increasingly be defined by core business issues, managed strategically across the business.

Since this prediction was made, we have seen the first tobacco company reports - that have necessarily dealt with product issues first and foremost. We have seen Diageo's report, focusing on responsible drinking. And we are starting to see growing interest in how businesses deal with 'marketplace' issues. Other business sectors, for instance the pharmaceuticals, are dealing more robustly with at least some of their product issues, if not all.

Last year we said "What hasn't yet been achieved is a body of best practice case studies of companies successfully integrating the issues across their business. There have been a number of statements of intent that set out the challenge, however." That statement remains true today.

3. Companies will become much more sophisticated about how they communicate with stakeholders

Over the last year, we've made comments on conference platforms about CSR reports that nobody reads. We've covered a couple of articles looking at how quickly the state of the art needs to move on.

The fact is that CSR reports are most impressively defined by who does not read them. Customers don't read them. Mainstream shareholders don't read them. Often, employees don't read them either - although some will.

The dotcom crash taught us that business practices that seek to defy the laws of gravity eventually come crashing down to earth. In ten years time, companies will not be producing expensive reports that nobody reads. The question is whether they will have moved onto more effective communication, or whether the movement will have been shown to have been a passong fad.

Progress: Pretty slow. At the moment, companies are piling into the standard reporting pool - and only the first movers show any signs of beginning to re-evaluation the effectiveness of their communications. mm02, for instance, included a section on CSR in its mainstream presentation to city analysts. Many present said that this was a first.

4. The growing expectations on business will survive recession (and even war, if need be)

Since the prediction, we have had not one, but two wars and some pretty tough times economically for a lot of businesses. CSR consultancies have suffered since there has been less corporate spending, but by and large the issues behind the CSR agenda show no sign of going away, or sinking down on the boardroom agenda.

5. How you downsize and what you make will become the two most significant benchmarks

The first of these has turned into a more complex equation than we had thought. The phenomenon of the moment is not simple downsizing. Given the tough times of the last couple of years, most downsizing has been prompted by poor performance and - although never popular - the outrage that accompanied the actions of successful companies that downsized to optimise has been less in evidence.

The outrage currently is reserved for companies outsourcing - reducing head count in the US and in Europe, and increasing it in India, Thailand or China. We have covered the arguments about this in a previous issue, but there is no doubt that some companies, BT and Barclays, for instance, have sought to go about this process in a way that is more sympathetic than others.


6. There will be growing tension between business-led CSR and NGO demands for better globalisation

Two years ago, we said "many NGOs support CSR because it is "going in the right direction" - but this support is qualified and time-limited. When the often unrealistically high expectations of NGOs of what would constitute companies "doing the right thing" are not met, there will be a backlash against CSR by those who therefore decide it has no value or substance."

Some of these tensions came to the fore this year with the Nike v Kasky trial, that saw a number of activists attacking the company by using its own CSR reporting against it. However, a significant number of NGOs did not agree with the Kasky side as well.

The various campaigns for legislation on CSR areas is some testament to this phenomenon as well. In the UK, the CORE coalition is seeking compulsory reporting, following the view that business simply cannot be trusted to do this kind of thing voluntarily.

The author went to one debate recently at the IoD on the topic "CSR is just a PR fig-leaf". The audience was predominantly decision-makers from NGOs. The proposers of the motion won hands-down when it came to the vote.

7. The business of social accountability is professionalising – there will be firmer standards in the future

Last year saw the development of the AA1000 standard for auditors, making steady progress towards making Accountability the equivalent of a professional institute.

In some quarters, we also detected a quiet backlash - whether something that will grow or just a background murmur that will diminish - reacting against the detail and complexity of the AA1000 model and others of its kind. Companies are looking for something that is robust without being top-heavy. This strand may come to be an important one in the development of standards going forward.

A number of companies have positively decided to forego third party verification for their reports. Unless you're an NGO hate-figure, a tobacco or oil company, the argument that actually not many people will place so much weight on the third party statement is quite a persuasive one. This will only be resolved when the intended readership of reports is settled. If reports become predominantly a tool for communicating with financial stakeholders and regulators, the information in them will be more focused and possibly even easier to assure. If they remain allegedly to communicate with all stakeholders at once, it will remain a pretty difficult thing to professionalise.

8. Governments will largely refrain from legislation on CSR

Two years ago, we said "By and large, when governments look at this area in any detail, they are brought back to the basic truth that regulation can only defend against bad practice - it can never promote best practice. Add that to the fact that there are no obvious legislative measures to bring in for this area that any campaign group is highlighting - and you come to the conclusion that moves will be limited to the kind of thing in the UK company law review - moves to encourage, and to pressure companies on disclosure."

So far, EU policy discussions have stayed this side of legislation. Some legislation around tightening rules on potential corruption to try to stem the flow of Enrons has taken place, although it is arguable about whether this is about CSR when it is simply seeking to prevent blatant criminality.

That doesn't mean that pressure isn't being applied. For instance, the South African's JSE has now required companies to report on social and environmental performance as a condition of listing.

9. Political lobbying is a landmine waiting to explode

There have certainly been some rumbles on this. The creation of the 'Say what you Pay' movement, associated with George Soros, has put pressure on companies to make donations public. And Halliburton was the source of some discontent when it swept the board for contracts in Iraq - an outcome surely unrelated to the fact that US Vice President Dick Cheney was formerly a top dog at the company.

Nevertheless, this one has been a murmur so far. The occasional article in the CSR press refers to the need to include information on political lobbying as part of a company's open disclosure - it's not yet made it into a great many company reports.

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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