Business Respect - CSR Dispatches No 73 - 18 Apr 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 look at how corporate revenues can be misappropriated by corrupt governments, and ask what can be done.

In the news:

Feature articles on the internet:

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Topics:

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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

It has been a slightly longer break than usual between this issue and its predecessor. What can we say? For the first two years of production, Business Respect never took a holiday break at all. That can't represent healthy work-life balance!

Not that things have been quiet. Mallen has been provoking comment and debate following his recent article for Ethical Corporation (and on the mallenbaker.net website) on the Christian Aid 'Behind the mask: the real face of CSR' polemic. The one thing some of the campaigning NGOs seem to dislike most is criticism from anyone that can't be dismissed as being in favour of business as usual.

In fact, in a friendly discussion with one of the main critics of CSR recently Mallen was told that such writing was 'anti-civil society'. This is hardly the case, when the crux of the argument is that there is a valid role to be filled in holding laggard companies to account, but that the recent document simply didn't do a very good job. No doubt, the debate will continue further when Mallen shares a platform on legislation in the forthcoming Ethical Corporation conference with some of the anti-corporate critics.

A recent pamphlet on business produced by Friends of the Earth makes the following statement: "Because companies are so powerful we're never going to achieve a better world unless they are part of the solution. But it is clear they are not going to be part of the solution voluntarily." That phrase pretty much epitomises the gulf. Mallen is quite comfortable to stand on the alternative position, and to accept that there is a debate of real substance that follows about the role of business, and of legislation in achieving change.

By sheer coincidence, the article this time draws upon a rather more substantial piece of work by another NGO Global Witness. Their work provides food for thought on the dilemmas around corruption and showing that there is no inherent barrier to NGOs, with all the resource constraints they have, from producing quality contributions to the debate.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 18 Apr 2004

UK: Coors ads promoting responsible drinking 'make impact'

Research in Scotland has shown that television adverts by brewer Coors, owner of the Carling brand, are effective in encouraging responsible drinking.

Out of a sample of 360 male football fans, 46 percent said the adverts were more likely to make them drink in moderation. Coors said that, as far as it was aware, these were the first alcohol responsibility adverts run by a brewer on UK television.

The company said it had worked closely with the Scottish Health Executive and Alcohol Focus Scotland to ensure the adverts complemented existing campaigns.

Coors, a sponsor of the Celtic and Rangers football clubs, was also the first alcohol sponsor to offer alternative unbranded replica shirts for children.

Philippines: GlaxoSmithKline awarded for community programmes

GlaxoSmithKline has won two 'Anvil' awards, one for health advocacy and another for community relations. The awards, made by the Public Relations Society of the Philippines (PRSP) recognised the company's "outstanding corporate social responsibility projects".

The health advocacy award recognised GSK's 'Pinoy Health Pass' - a programme addressing critical gaps in the national health insurance programme that provides insurance cover for around 10,000 families each year. In addition to financial support, GSK augments the health education campaign through private practice doctors.

The community relations award of excellence was achieved for a community relations project to eradicate Lymphatic Filariasis (LF), a severely disfiguring disease caused by mosquito bites endemic in 36 areas in the country. GSK has donated, and continues to donate anti-parasitic drug albendazole until the disease is fully eradicated as a public health problem.

US companies CSR 'deadbeats'

US businesses are now seriously lagging behind their counterparts in Europe, Australia and South Africa in embracing corporate social responsibility, according to a new study.

The review, by Echo Research, shows that US companies are still stuck in a model based on philanthropy, and that they have a 'blind spot' that misses the growing importance of mainstream CSR.

Marianne Eisenmann, Managing Director of Echo Research, said "Our report shows that many U.S. enterprises are out of step with the global financial community that rates corporate social responsibility much higher on its agenda".

According to Echo, 88 percent of US financial institutions do not take socially responsible investing into account in their investment decisions. Only a third consider good CSR can result in better risk management, contrasted with 68 percent in Europe.

Europeans believe that the US has fallen behind on corporate social responsibility, with few companies coming forward to meet ethical index criteria.

US: SEC asked to clarify requirements on climate change risks

US public pension funds have asked the Securities and Exchange Commission to clarify whether companies will be required to disclose the risks faced from the onset of climate change.

The funds have written to SEC chairman William Donaldson to argue that the lack of clarity on rules means that many companies are avoiding disclosure of pertinent financial risks. Current requirements say companies must give information on anything that could have a material impact on their financial position.

"The need to incorporate climate risk into standard corporate disclosure practices grows increasingly urgent," the letter argued.

Australia: Rio Tinto subsidiary workers given uranium-polluted drinking water

Energy Resources of Australia, Australia's largest uranium miner and a subsidiary of Rio Tinto, has flown a doctor from the UK to look at twelve workers who drank or showered in water polluted with uranium that was mistakenly channelled into drinking water.

The workers drank significant quantities of water which was around 400 times over the legal limit for uranium following a leak at the mine in Kakadu National Park. The men have been reported to be suffering significant ill effects having drunk the water. Mine managers had allegedly failed to inform workers about a leak of uranium for some time, during which the consumption took place.

Initially, the men have said, the company made no response to the situation other than to remove them from the site, which it did initially without paying for their transport. The company now says it is providing information and medical support.

Tarrant Apparel Group under attack by sweatshop campaigners

A coalition of human rights groups has attacked US garment maker Tarrant Apparel Group for alleged labour law violations in Mexico. The coalition, including the Maquila Solidarity Network and Sweatshop Watch praised companies that had withdrawn their business from Tarrant.

“We appreciate the efforts taken by Levi’s, Limited Brands and Charming Shoppes to address Tarrant’s labour violations,” US/LEAP executive director Stephen Coats said.

“We can’t say the same about Wet Seal, Federated or Tommy Hilfiger.”

According to the activists, Tarrant had been repeatedly urged by workers, human rights groups and its own clients to address labour issues within its Mexican operations but had failed to take action.

South Africa: Business approach to CSR still immature

In spite of the recent requirement by the JSE for 'triple bottom line reporting', many large South African countries are struggling to understand the importance of this approach to corporate social responsibility, according to a new report.

Interviews carried out with over 100 leading companies found that, although CEOs and executives have started to acknowledge the corporate citizenship agenda, most have not yet shown sufficient committed leadership.

This was the finding of the first annual report on South African corporate citizenship, The Good Corporate Citizen, published by consulting firm Trialogue.

Companies singled out for a positive mention included SA Breweries (SAB), Anglo American, Pick 'n Pay, Vodacom, Eskom and Absa.

However, for many of the rest stakeholder engagement is typically low, and few companies are producing reports that highlight their contribution to sustainable development.

US: Survey finds Sarbanes-Oxley is making its presence felt

A survey by PricewaterhouseCoopers of chief financial officers and managing directors has found that 88 percent expect that board directors will have more influence, and 73 percent believe that boards will be more focused on risk management, as a result of Sarbanes-Oxley.

The results come as evidence emerges that practice within companies to focus on audit processes has risen hugely, with the associated costs of compliance similarly mushrooming.

The cost of audits, for instance, has nearly tripled as accounting firms seek to cover their own risk liabilities by turning over every stone in their quest for malpractice.

US: Companies often illegally alter employee timesheets

According to the New York Times, major companies in the US often alter electronic records of employee hours in order to avoid paying overtime. Quoting specific cases from Toys 'R' Us and Family Dollar, the paper said that although companies have policies against such practices abuse was common.

The practice, known as shaving time, is the subject of a growing number of lawsuits from disgruntled employees against businesses. A jury recently found that Taco Bell managers had routinely engaged in the practice, and Wal-Mart has been accused by more than a dozen former employees of doing the same.

The approach towards store managers, where pressures are high to keep costs down and sales up, may increase the incentives for individuals to take part in illegal practices. For many, their success in this area is an increasing part of their job security and compensation package.

Mistrial declared in Tyco case

The judge in the Tyco case has declared a mistrial following allegations that a jurer had received a threatening letter after she had been accused of being in favour of the defendents.

The prosecution announced that it would seek a retrial against the former Tyco executives Dennis Kozlowski and Mark Swartz, who are accused of stealing around $600m from the company.

The case had received enormous press speculation following the apparent gesture of the juror concerned signifying an 'ok' sign to the defence team. The last few days have seen reports that the juror concerned was the sole voice in support of the defendents in the jury's deliberations.

South Korea: Top companies focus on social responsibility

The major conglomerates based in South Korea have announced their intention to boost their approach to corporate social responsibility, particularly focusing on job creation and contributing to society.

The influential business lobby, the Federation of Korean Industries (FKI) has held a meeting with the top 20 companies, which have agreed that they will hire 38,769 new employees this year, support their small company suppliers and contribute 896bn won to the community.

The companies also agreed to implement more robust approaches to corporate governance, particularly in relation to the giving and receiving of gifts as part of business deals and the establishment of ethical codes of conduct.

Companies involved in the agreement include Samsung Group, Hyundai Motor Group, SK Corp, POSCO and Doosan Corp.

US: Ministers call for Hershey boycott over child slavery

Ministers in Harrisburg have called on Hershey Foods to do more to curb the incidence of child slavery in cocoa production, calling its current approach as "inadequate, sluggish and ineffective".

The move, from around 40 churches, is designed to raise awareness of the plight of children in Nigeria, Cameroon, Ghana and the Ivory Coast, and to raise the heat on one of the companies the ministers hold responsible.

The company has responded that it, along with the other major chocolate companies across the world, have been taking moves since the problem was first highlighted two years ago. An industry-wide monitoring system is planned, and it is expected that all farms will be covered by this by mid next year.

A company spokesman said that the company had played "a leadership role" in moving the industry forward in this area.

CSR FEATURES from the Internet

Corporate social Responsibility; Office Politics - 15 Apr 2004 FROM Post Magazine

Corporate social responsibility has become one of the buzz phrases of the financial services industry in recent years.

Its popularity has been boosted by a number of high-profile financial scandals, such as Enron and Equitable Life, which have prompted consumers and investors to put companies under greater pressure to explain their actions. Not only do they want to hear that companies are a success and making a profit, they want to know this is being achieved in an ethical and sustainable manner.

Read full story

Sinopec, BASF attend Sustainable Development Forum - 31 Mar 2004 FROM China Business News Online

The big players in China's chemical industry- including global giant BASF, domestic leader Sinopec, and a number of representatives from the Chinese government- visited Shanghai on Tuesday, March 30 to participate in the Symposium on Sustainable Development, also attended by Interfax. They discussed the challenges facing China as it seeks to build on the unprecedented economic transformations of the last two decades.

As Interfax reported, both BASF and Sinopec were involved in the establishment of the China Business Council on Sustainable Development (CBCSD) in January this year. While the CBCSD is currently in its early stages, its membership is growing to include most big players in China's economy, from home and abroad. Companies like Shell, Baosteel, and First Automotive Works are involved.

Read full story

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Oil on troubled waters

Article by Mallen Baker

How much are companies responsible for the actions of governments in the countries where they do business? Often it comes down to the degree of collusion required. Companies may argue with some justice that their presence helps to improve the situation. In other cases, the revenues they generate can be clearly seen to go towards unfortunate ends.

A recent poll on the website showed a majority of people believing that companies should stay in countries such as Burma and try to use their influence, but one after the other companies have been pulling out in the face of overwhelming pressure. British American Tobacco left Burma, protesting all the way but finally prompted into the move by the direct intervention of the British government. Talisman Energy, after clinging on for over a year, left the Sudan with an audible sigh of relief.

Now, Global Witness have produced a report that illustrates how revenues from oil, gas and mining – funds that should ideally be funding sustainable economic development – have been misappropriated in Kazakhstan, Congo Brazzaville, Angola, Equatorial Guinea and Nauru. The report stands as a considerable challenge to those that believe companies should continue to operate in areas with huge shortfalls in political governance.

In such countries, there is often no official information about the quantity or use of revenues from natural resources. The companies are also less than transparent about what payments have been made to the governments. Such a cloak of invisibility over significant amounts of money is an open invitation for bribery and official corruption.

The problem has been acknowledged, and initiatives duly wheeled into place. Last year, the UK Prime Minister Tony Blair launched an action plan to improve the transparency of oil, mining and gas revenues worldwide through the Extractive Industry Transparency Initiative (EITI). The initiative was a practical response to the growing strength of the 'publish what you pay' campaign led by a coalition of NGOs. But there is a long way to go.

In Kazakhstan, the biggest ever foreign corruption investigation in US legal history has uncovered corruption involving the diversion of oil revenues. Key government figures demanded "unusual fees" of Chevron and ExxonMobil to go to a middleman. Allegedly, this arrangement resulted in nearly $80m being passed back to President Nazarbayey via a complex chain of overseas bank accounts. This figure is probably just the tip of the iceberg.

Congo Brazzaville saw activity by French state oil company Elf Aquitaine, which dealt easily with the ruling elite and, according to Global Witness, financed both sides of the civil war there. Senior former Elf officials now languish in jail in France for the misuse of company assets.

In Angola, Global Witness alleges that over $1bn per year of the country's oil revenues has gone unaccounted for since 1996.

In Equatorial Guinea, the country's oil boom seems to be making little difference to the quality of life of its citizens. The recent evidence uncovered by journalists that major US oil companies may be paying revenues directly into an account under the President's control may have something to do with it.

The suggestion by Global Witness is that, in each of these cases, business at least colludes with some knowledge of the corruption as part of the price of continuing to do business in these countries. However, it is very clear that the arrangement is not one that the companies are likely to be satisfied with. The misappropriation of legitimate revenues paid to governments may or may not morally outrage the executives that see it take place – but the resulting poverty and instability that afflicts the countries increases costs and makes business an overall riskier prospect. Each of these countries scores badly for exposure to corruption, bureaucracy, counterfeiting and theft, organised crime, unfair competition, asset security and extremism. Companies that open themselves to charges of complicity with corrupt elites can suffer the consequences when the dictators are deposed.

It is hard to overstate the size of the problem. According to new research by the World Bank Institute (WBI), more than $1 trillion is paid in bribes across the world each year – a figure which puts the percentage of money changing hands as bribes at one thirtieth of all the total money spent. Countries that actively tackle corruption and improve political governance can boost their national incomes by as much as 400 percent.

This is an area where it is difficult for individual companies to take sole action. When BP - in the light of its policy commitment to pay no bribes - wanted to disclose payments in Angola it immediately faced the threat of losing its licence to less principled competitors. Voluntary action in CSR is often the most powerful way of finding solutions - however situations where virtue is punished so powerfully make it difficult to find the way forward.

The EITI has considered a response to this fact with a proposal that disclosures would be confidentially given to a third party, such as the World Bank itself, and then only aggregated figures released. This would avoid individual companies being singled out - and might give more information that we had before. However, it is hardly a strong enough approach to either satisfy a range of legitimate critics and commentators. Nor will it actually drive change in the countries where corruption is worst.

What is to be done? It is all too tempting to imagine that the answer to the failings of national governments is to place legal obligations instead onto multinational companies, but it seems an unsatisfactory indirect route to address corrupt elites. And, after all, if the rules on companies are not globally enforced, then it simply provides a legal straightjacket on companies from developed countries where they will lose out to companies that have no compunctions. Such companies will also not respect communities or the environment. Surely, we want public policy to promote the benefits of good practice in such areas rather than make it unable to compete.

When international institutions provide aid it already understands the principle that it should promote good governance in the recipient countries. Throwing good money after bad is in no-one's interest. Could there be an extension of this principle whereby lack of transparency over revenues is considered prima facie evidence of poor governance? And with the onus firmly on the government, could the fact that it deals with companies that don't produce figures on what has been paid equally as such evidence? Equally, the vast majority of nations could come to the point of agreement that they will insist on transparency, and they will refuse licence to operate to any extractive company that does not operate on such a basis. This could at least then produce the desired reward for good practice.

Unfortunately, the latter measure could only work if introduced for all countries at once. Like the Kyoto Protocol, it would be the kind of agreement that would need to reach a fairly high threshold before it came into force - otherwise the small numbers of first movers punish their national corporations by giving them a disadvantage.

It is frustration with the absence of global consensus amongst governments that tends to lead people back to damaging legislative proposals to force upon those businesses that actually are doing the most to be pushing the change agenda. Since there are always alternatives waiting in the wings, it seems to be only a device for punishing companies, not for creating improved governance for the benefit of the citizens of the countries concerned. Therein lies the dilemma.

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In the news from the latest issue

Indonesia: Nike supplier to pay $1m unpaid overtime to workers

Netherlands: Walmart blacklisted by major pension fund

UK: Warning that lean business models present huge national risk

France: EDF fined for illegal spying on anti-nuclear campaign

US: Surveillance firms attacked for 'we sell to anyone' attitude

UK: Olympics ethical sourcing code attacked for choosing Dow

Japan: Tepco failed to act on risk assessment of tsunami

WHO chief says tobacco firms using dirty tricks to keep people smoking

China: Wal-Mart apologises for mislabelled pork

India: Monsanto sued for biopiracy

Nigeria: Shell linked to military abuses in 1990s

US: Amazon slammed for warehouse working conditions

World's largest companies taking action on climate change

Germany: Stasi documents suggest IKEA used GDR prisoners as slave labour

... more news stories

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Business Respect - most recent edition added on 18th January 2012