Business Respect - CSR Dispatches No 72 - 14 Mar 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 issue, we review the results of the second Corporate Responsibility Index from Business in the Community.

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/72.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

This week sees the launch in the UK of Business in the Community's Corporate Responsibility Index. The results were included in today's Sunday Times supplement, and more detailed feedback on the trends and results will be given at the organisation's conference on the subject on Wednesday.

Last year's index saw a good deal of debate and this year's will probably be no different. Some of the key issues are explored in this issue's article.

Last issue, we said that the article on why the Christian Aid report 'Behind the Mask: the Real Face of CSR' was plain wrong was on the website - whoops! Well, it is now. Apologies to those that searched, but did not find!

On the website, we are bringing the current vote to a close. The final tally stands at:

Companies that seek to move jobs from the US / Europe to developing countries with lower costs
Can in no way be called socially responsible 160 (23%)
Are right to stay profitable, but should pay attention to how they make the change 482 (70%)
Should aim for maximum profitability, and not be hampered by unwarranted sentimentality 44 (7%)

686 people voted in total.

The results from recent votes suggests that most of the website visitors are largely business-friendly, but keen for business to respond fully and robustly. We thought it was time to test this with a vote that goes to the heart of what you think is the motivator of CSR activity. The new vote goes like this.

Why should businesses engage in corporate social responsibility?

They should do only those things that are supported by a solid business case
They should do a range of things arising from their impact whether or not there is a business case
They should only do things because it is the right thing to do - if there is a business case that's not CSR

As always, we welcome your views.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 14 Mar 2004

Kenya: NGOs say workers face harsh conditions in export zones

According to a recent report by Kenyan NGOs, around 36,000 workers work under harsh conditions in the country's Export Processing Zones (EPZs) including long hours, sexual harrassment and an absence of benefits such as maternity or sick leave.

The EPZs were set up by the Kenya government as industrial parks to facilitate the mass production of export goods, mainly textiles for the international market. Now the NGOs have launched a campaign to highlight working conditions there, suggesting that government policies to attract foreign investment encouraged factory owners to break labour laws.

Jennifer Miano, the executive director of the Kenya Human Rights Commission (KHRC), the organisation leading the campaign, said the major problem with EPZs was the lack of respect for and observance of basic human rights: "The first thing is to respect the rights of humans who are the primary instruments driving the global economy".

Ghana: Alcohol companies attacked for 'unwholesome' products

Ghana's Food and Drugs Board (FDB) has said that a number of the alcoholic and non-alcoholic beverages on the market are unwholesome, and warned customers to give them a wide berth.

Drinks included in the claims are: Marcel Ginseng Bitters and Irish Coffee, Ataadwe Ginger Wine and Apuskelele Gin Bitters. Also included are drinks from the Heavens Bridge company, such as Oboade Milky Drink, Citrus Punch and Oboade Ginseng. The beverages all carry a Ghana Standards Board symbol even though they have never in fact been registered.

Mr Thomas Adjei Duodu, Head of Premises Inspectorate Unit of the FDB,
said the factory had been operating under unhygienic conditions and below the basic guidelines of the Board.

The Ghanaian Chronicle attacked the practices in an editorial. "In so far as alcohol is a socially accepted drug legitimized by government, its production cannot be stopped. However, we cannot and indeed must not shirk our responsibility to maintain the strictest of standards."

US: Congress passes bill to disallow obesity lawsuits

The US Congress has passed a bill that will prevent people from suing fast-food restaurants and other food outlets if they become obese. The promoters of the bill said it was needed to deter frivolous lawsuits that could potentially bring down a legitimate industry.

The measure, proposed by the Republicans and passed by a vote of 276 to 139, was based on the premise that citizens exercise free choice about what they eat, and the move to get Americans fit and slim does not start in a courtroom.

Most Democrats opposed the measure, suggesting that the courts were well able to filter out frivolous actions, and the fast food industry should not be singled out for protection. So far, none of the obesity-related lawsuits brought against companies such as McDonald's have been successful.

A recent study by the Centers for Disease Control and Prevention found that obesity and lack of exercise could soon overtake tobacco as the cause of preventable deaths.

Sportswear firms reviewing Olympic sweatshop claims

Major sportswear companies have said they are reviewing a report by Oxfam that said that, in the approach to the next Olympic gains, the companies were still benefiting from labour from workers that are being denied basic rights.

The companies targeted by the report include Puma, Umbro, Fila, Adidas, Reebok, Nike and ASICS. It claims that their business methods, including the cutting of order times and the reduction of prices, have led to suppliers cutting wages and forcing staff to work unreasonable overtime hours - often for little or no pay.

The report, Play Fair at the Olympics, has been prepared by Oxfam in conjunction with Labour Behind the Label and international trade unions, and is based on interviews with workers producing sports clothes and trainers in seven countries.

Oxfam admitted that the codes of practice operated by some of the main companies have led to improvements, but say that there is still a gap between the companies' ethical commitments and their purchasing practices.

Both Adidas and Nike said they were reviewing the report, and are committed to continually improving their practice. Both companies have teams of people who monitor supplier conditions, supported by independent monitors. Puma added that it was sceptical of the findings on its own sourcing activities, but was investigating further.

Oxfam called upon the companies to "make prices fairer, deadlines more appropriate and treat labour standards as important a criteria as cost, time and quality. Companies should work together with trade unions and NGOs to move toward an industry-wide agreement on respecting labour standards in global supply chains."

The organisation also suggested that the British Olympic Association must ensure that Olympics sponsors and licensees meet their responsibilities towards workers’ rights in their supply chains by making this a provision in sponsorship and licensing agreements.

For more info, see
http://www.oxfam.org.uk/what_we_do/issues/trade/
playfair_olympics_eng.htm

UK: Coors criticised for advertising health claims

Coors, the brewing company behind brands such as Carling and Grolsch, has been criticised by the watchdog the Advertising Standards Authority for making what it said were medicinal claims for its products.

The company had suggested in adverts that moderate consumption of beer could protect against heart disease, reduce blood pressure and be an "excellent source of vitamins".

The ASA reviewed the advert after a complaint by the London-based Food Commission, and ruled that the company had acted illegally. All future adverts by the company will now be required to be pre-vetted.

US: Insurers will hold companies accountable for unethical behaviour

Insurance companies will increasingly hold companies accountable for unethical behaviour and environmental pollution, according to one of the leading US shareholder activist groups.

The Interfaith Centre on Corporate Responsibility (ICCR) has said that the example of Swiss Reinsurance, which is now requiring companies to provide information about their policies and position on potential new laws on greenhouse gas emissions before granting liability coverage.

NGOs have a role in helping shareholders to hold the companies to account, and ensuring that the company is anticipating likely future moves, such as the introduction of carbon taxes, by ensuring it is prepared through improved energy efficiency.

The ICCR is a consortium of faith-based shareholder activists across a range denominations, religious groups, pension funds and dioceses which between them boasts funds of around $110 bn.

US: Ford to use Toyota hybrid technology

Toyota is to grant US car giant Ford a licence to use the company's patented technology for environmentally friendlier cars, enabling Ford to move forward on the production of vehicles that use both petrol and electricity for fuel.

Ford has said that it is planning to launch a hybrid version of its SUV, the Escape, later this year. The company has been severely criticised by environmentalists for promoting SUVs in spite of its commitment to improve environmental performance.

Former US vice president Al Gore criticised the Detroit motor companies for lagging behind on environmental performance, and needing to buy the technology to move forward from a Japanese company. He told a group of 200 business studies students that the companies should have been "hiring engineers to develop the technology, not lawyers to resist moves to raise standards".

Tetra Pak dropped from environment group over 'misleading' ads

Food carton company Tetra Pak has been ejected from a group of businesses set up by the Worldwide Fund for Nature (WWF) to protect endangered forests because it ran 'misleading' adverts promoting its environmental credentials.

The 95+ Group of companies is founded on a commitment to buy timber only from responsibly managed woodlands. They are also required not to make inflated claims in advertising promotions. Tetra Pak had been a member for seven years.

Tetra Pak fell foul of WWF because of a campaign run in the UK last year in which it claimed that its cartons "protect what's good", saying that trees used for its wood pulp were replaced by a greater number of newly planted trees.

WWF called the claim 'misleading and unverifiable' and told the company that if it didn't resign, its membership would be terminated.

Tetra Pak said that it had resigned due to its failure to gain Forest Stewardship Council (FSC) accreditation for its supplies, but said that it was moving towards such accreditation. The company defended its advertising, saying that the claims contained within it were true and that it hoped to rejoin the group once it had achieved accreditation.

Red Carnation Hotels CEO charged with tax evasion

Beatrice Tollman, the chief executive of the international chain Red Carnation Hotels, has been charged with evading tax by channeling over $35m through secret offshore bank accounts.

Her son, Brett, has been jailed for over two years for his part in the scam, with her husband on the run from the police somewhere in the UK.

Mrs Tollman is accused of having fled the US last year when she discovered that US investigators were reviewing her business operations, and used a range of aliases to access the accounts.

The Pope: 'Pursuit of profit is not the sole end'

Pope John Paul has argued for better ethical practices in the financial and commercial sectors during an address to the conference on 'The Business Executive: Social Responsibility and Globalisation'.

In his message to the more than 80 business leaders and others in Rome, the Pope said that ethics is what "ensures that business activity remains sensitive to its fundamentally human and social dimensions."

"Since the pursuit of profit is not the sole end of such activity, the Gospel challenges business men and women to embody respect both for the dignity and creativity of their employees and customers and the demands of the common good," he said.

"Christians charged with responsibility in the business world are challenged to combine the legitimate pursuit of profit with a deeper concern for the spread of solidarity and the elimination of the scourge of poverty which continues to afflict so many members of the human family".

Nicaragua: Companies found liable for pesticide-related illness

Shell Chemical, Dole Food and Standard Fruit have been ordered to pay over $80m to farmers whose health has been affected by the use of the pesticide nemagon over 30 years ago.

Around 80 farmers had been sickened by the chemical through its use on banana plantations. The award, made at the Managua civil court, will mean that 80 farmers will get around $1m each.

The ruling is the second time farmers have received such an award, following proof of the effects of the chemical on people. Complaints include kidney and skin ailments to cancer.

However, following the former award, the companies refused to pay. The position has led the Nicaraguan government to now take a mediation role with the companies.

CSR FEATURES from the Internet

What's Ur Moto? - 14 Mar 2004 FROM Outlook India

How did US multinational telecom giant Motorola, claiming to be a "global corporate citizen dedicated to ethical business practices", manage to bag tenders worth Rs 900 crore for supplying telecom equipment from Bharat Sanchar Nigam Limited (BSNL)? By paying huge bribes to BSNL officials as grease money through middlemen and front organisations, according to what the CBI has found out.

Read full story

We may be closer than we think - 11 Mar 2004 FROM Kansas City Star

“When typical citizens talk about business ethics, what really gets under their skin are executives who enrich themselves while driving their companies into the ground. Protecting employees' jobs, they say, should be a top ethical priority for American business.

“When executives talk about ethics, they are very concerned about the damage that recent scandals have done to business' reputation and the need to restore public trust…Business leaders did not talk about saving jobs in moral and ethical tones the way the public did.”

Read full story

Companies Facing Ethical Issue As Drugs Are Tested Overseas - 14 Mar 2003 FROM Political Economy

"Dr. Louis G. Lange, a cardiologist and the chief executive of a small biotechnology company, has a new drug that, if approved, will be the first new treatment for angina in a quarter-century.

Like many drug companies, Dr. Lange's, CV Therapeutics of Palo Alto, Calif., tested its new product overseas, where studies go faster because it is easy to find patients who are eager to participate. But the company's testing is nearing its end, and Dr. Lange is faced with an ethical quandary: Is his company obliged to make the drug available to the patients in poor countries like Russia who took part in the studies?

Read full story

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The Corporate Responsibility Index - valuing the companies that count

Business in the Community launched the second year's results of its Corporate Responsibility Index today, with a supplement in the UK's The Sunday Times. 139 companies completed a detailed questionnaire giving information about company policy and practice across a broad range of social responsibility areas.

The top 100 companies have then been celebrated as 'Companies that Count'. Top of the list are National Grid Transco, followed by BP, Unilever, Veolia Water UK and Aviva. Other major companies in the top regions of the Index include names such as Co-operative Bank, J Sainsbury, Barclays, Rolls Royce, BT Group and Scottish Power.

The Index has been developed by business but it is no light touch. It requires evidence against a broad range of areas and as a questionnaire is reported by many to be painful to complete, and in providing a ranked table has proven to be a particularly challenging exercise for some. Probably the biggest story is about the trends in how companies are responding to the rapidly changing expectations upon them. They are growing more sophisticated in how they identify the key marketplace issues affecting them, and have come to understand that CSR is now about core business practice, not just a bit of volunteerism in their spare time.

That being said, the numbers that are engaging in this kind of public benchmarking remain relatively light. That doesn't mean, per se, that those choosing to not take part neither care nor make efforts to improve. The state of the art has moved pretty quickly, and the majority of companies are reluctant to be too far ahead in the vanguard - particularly given the campaign groups' penchant for punishing first movers by holding them to higher standards than they hold against everyone else.

Nevertheless, the willingness to stand up and be counted is increasingly going to be a prerequisite for being taken seriously. So far, much of the debate and discussion around CSR has been about whether you 'do it' or not - as though being a responsible business was simple to define in such on or off terms. The value of a tool such as the CR Index is whether it moves us towards understanding that the key parameter is quality of management - about how well the company responds to the many complex choices it faces - and that there is often no easy answer. That is why some companies can be highly rated in some areas whilst being perceived to make mistakes elsewhere.

This is no different to the other ways in which businesses are judged. If financial analysts simply looked at the most recent performance figures and talked up those with good figures with no reference to market conditions, future issues, and confidence in the top team at the company, they would be pretty poor analysts. The measures contained within the CR Index are only useful if they are a potential indicator of future performance. It measures management engagement - something which you can at least make useful comparisons across industry sectors. It can not, and never could, make cross-sector comparisons on performance.

Not everyone is a supporter, of course. Sadly, the Observer ran a news story that pretty much mirrored its similar piece last year - ie. questioning how companies from high-impact sectors such as oil or extractives can be at the top of a table whilst those from perceived lower impact industries can be found at the bottom. On that basis, why bother doing a questionnaire at all? Why not just put companies from 'harmless' sectors at the top, and the rest at the bottom? It would be a meaningless exercise, that allowed of no possibility that companies may choose to rise to the responsibilities of their sector - or may complacently decide to not.

The same article also quoted the anti-corporate campaigners who described the exercise as 'useless'. It certainly seems to be these areas that are becoming the fault lines between the business-led and the NGO-led CSR movement. In Australia, for instance, the CR Index has been introduced by parties originally involved in the much-criticised Reputation Index which had been predominantly driven by NGOs. A recent report said that NGOs in Australia feared that the introduction of the Index their was the start of an anti-NGO agenda by business.

What both sides are surely looking for is a legitimate mechanism for providing useful information that encourages companies to rise to the reasonable expectations upon them. NGOs need to accept that they are not accorded automatic legitimacy - their voice is given weight the more they are seen to be effectively representing valid interests - and that if they promote methodologies that are simply unrealistic they will not be accepted. Businesses who, after all, have to jump through all the hoops in this area, will need to understand that they will fail if they don't ensure that business-led initiatives are robust, and at least in touch with the issues and concerns of their primary stakeholders - some of whom will include those NGOs that pass the aforementioned test.

The first thing that happens when any new tool such as the CR Index is launched is that its methodology will come under attack from those that either do badly by it, or who are not involved in it. The measure of its importance is how well it stands up to that attack. The fact that more companies took part in the second year than in the first, and that CSR champions in Australia saw it as a preferable solution for benchmarking there makes me think that it has largely passed the test. Coverage in the next few days will probably help to inform that view.

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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