Business Respect - CSR Dispatches No 74 - 23 May 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 return to the subject of small companies and 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/74.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

We're back! After a month's break due to unusual pressure of work (next time you hear Mallen go on about 'work-life balance' at an event, you should just laugh in his face!) hopefully we will be back on track with these newsletters again. We have been encouraged - even shamed - into action by all those of you that have either emailed or spoken to one of us at events to ask about where the newsletter had gone! Thanks as always for your interest.

Since we last sent one of these out, Mallen has debated the role of legislation in CSR with Andrew Pendleton, author of the Christian Aid report 'Behind the Mask' - which was the subject of some controversy following our critical review of same. This took place at the Ethical Corporation conference in London - which had the distinction of actually being picketed by a couple of dozen protestors who believed that to promote any concept of an ethical corporation was to be derided.

Did the debate arrive at any conclusion? Not so you would notice. But there were several times when there seemed to be points of agreement within grasp - if only people's terms of reference weren't so far apart.

This issue, we return to the theme of small businesses. Mallen took part in the European Commission seminar on how large companies mentor SMEs on their social responsibility. The message of the occasion was that by and large, they don't! However, there are enough examples of those that have taken a lead to be able to see the business case for doing it, and to illustrate the mechanisms by which it may be done. The presentation may appear next week on the BITC website - if so we'll draw attention to it here.

Meanwhile, on the mallenbaker.net website, voting has been continuing on the current poll. You will remember that it asks the question: Why should businesses engage in corporate social responsibility?

The current state of play is as follows:

They should do only those things that are supported by a solid business case 72 (13 percent)
They should do a range of things relevant to their impact whether or not there is a business case 339 (60 percent)
They should only do things because it is the right thing to do - if there is a business case that's not CSR 150 (27 percent)

561 people have voted to date. Looking at the poll, we can appreciate how much this newsletter must occasionally irritate and annoy some of you - since we are pretty solid on there being a business case for CSR! When so provoked, do feel free to email in to comment! (try to put the words 'Business Respect' in the title of the email - 300 plus spam messages come to the editorial address every day, and inevitably some legitimate emails are probably missed as a result.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 23 May 2004

Canada: Mining firms announce new code on sustainability

The Mining Association of Canada has announced that its 32 members have adopted a code of practice called 'Toward Sustainable Mining', covering corporate performance on environmental and social responsibility.

The move aims to improve public trust in the sector, which accounts for something like 400,000 jobs, and will cover areas such as energy use and other environmental issues, as well as stakeholder engagement.

Jim Carter, the chairman of the association, told a news conference that: "Towards Sustainable Mining is about improving our reputation by improving our performance. The status quo is no longer acceptable". Eventually, he said, the code would probably lead to independent third-party verification on operational standards.

Companies start to act on climate change

According to the Carbon Disclosure Project, more global companies are acknowledging their responsibility in relation to climate change, reporting their status and developing coherent strategies. The best are celebrated in a new 'Climate Leadership Index'.

The Carbon Disclosure Project represents 95 institutional investors, accounting for $10 trillion in assets under management, and claims to be the world's largest CSR initiative. In a statement, chairman James Cameron said: "The investment community is showing a profound new awareness of its fiduciary responsibility relating to climate change, and sending an unmistakable message to corporations that their investors will no longer tolerate a lack of accountability about their exposures and practices".

The 'Climate Leadership Index' celebrates the companies who responded to the organisation's questionnaire on the issue and whose responses demonstrated the best leadership in response to the issue. Companies making it to the Fabulous 50 include: Alcoa, Chevron Texaco, Dow Chemical, Ford, PSEG, and UPS.

Russia: Reebok accused of paying 'grey' wages

Reebok Russia is being sued by a former employee for having sacked him after he complained that it paid wages off the books. Sergei Suchkov, a former store designer, had told his employment agency of the practice.

Suchkov is suing for moral damages and seeking reinstatement.

The practice of companies keeping employees out of the official sphere in order to save on social security contributions is widespread in Russia, according to the Moscow Times. However, for a global brand such as Reebok, the revelation is an extreme embarrassment.

According to Suchkov, after he had complained about the situation with salaries, he was set an impossible task to complete - the full design of a Reebok store in just four hours and without proper tools. When he failed to achieve it, he was fired for incompetence.

Abbott Laboratories under attack for AIDS repricing

A cross-party coalition of US senators has called for an investigation into the action by Abbott Laboratories to increase the price of its antiretroviral drug Norvir by 400%.

The company increased its charge at the end of last year, taking it from around $54 per month to $265 per month. The senators said the action had been taken to maximise the company's bottom line "at the expense of patients suffering with AIDS".

Senator Ernest Hollings said: "Abbott's actions not only put the marketplace at risk but, more importantly, impact the medical options that the sickest people need for a hope of survivial". The group is calling for a Federal Trade Commission investigation.

The company also faces a class action lawsuit relating to the price increase, alleging that it violates the Illinois Consumer Fraud and Deceptive Business Practices Act.

Another Enron former executive pleads guilty

Paula Rieker, formerly the second in command of Enron's investor relations team, has pleaded guilty to charges of insider trading.

According to the Securities and Exchange Commission, Rieker provided 'substantial assistance' to Enron executives in spreading false statements about the state of the company's financies. She has agreed to cooperate with the ongoing government inquiry and will pay just under $500,000 in fines in settlement of a civil fraud charge.

The question is whether her cooperation will mean information will now be provided about the direct involvement of Kenneth Lay, former CEO, who was her direct line manager where she served as company secretary.

Martha Stewart may go for retrial

The odds of Martha Stewart being granted a retrial have improved as doubts have been raised over some of the key evidence that was presented during her initial court case.

Larry Stewart, who gave testimony against Martha Stewart as an expert witness, has been charged with perjury. His evidence concerned the ink on a broker's worksheet, and he had claimed to have been personally involved in the original examination of the worksheet.

Investigators now say that he was only involved in a later examination of the paperwork.

UK: Minister to launch CSR Academy

The UK's minister for corporate social responsibility, Stephen Timms, is to launch a new CSR Academy, which will support the development of specific CSR skills within mainstream managers and business practitioners.

"I hope that organisations from various sectors will take the opportunity to become programme partners with the academy when it is launched in July," Timms said.

"I'm confident this will play a significant part in ensuring that CSR becomes an integral part of the way we do business in the UK."

The Academy steering group, chaired by Clive Mather, UK Chairman of Shell, is examining ways of offering the training programme at business schools and other relevant institutions.

South Africa: JSE Corporate Responsibility Index launched

The Johannesburg Stock Exchange (JSE) has launched its Social Responsibility Index, following the King 2 report's call for 'triple bottom line' approaches from companies.

The JSE Index uses criteria on environmental, social and economic sustainability and will be applied to companies in the FTSE/JSE All Share Index that agree to take part.

The JSE said in a statement: "A company must address each of these pillars if it is truly to be said to have integrated sustainability into it".

Japan: Nippon Keidanren to promote social responsibility

The Japan Business Federation Nippon Keidanren has announced that it is to revise its Charter of Corporate Behaviour to explicitly promote greater corporate responsibility by its member companies.

In a section added to the organisation's Charter, it says that companies have an obligation to fulfill corporate social responsibilities. These include areas such as protection of human rights and personal information, as well as sound environmental management.

Keidanren is Japan's most influential business lobby.

Bank of America focuses on greenhouse gases

Bank of America is to take actions to reduce greenhouse gas emissions from the projects it funds and to end financial support for unsustainable timber projects.

In a statement, the company's chief executive Ken Lewis said: "The health of our environment has a very real effect on the health of our local and regional economies, and therefore on the health of our company".

The company has set a target to reduce the emissions of projects it supports by 7 percent from an initial benchmark of current emissions it is due to carry out. NGOs will be asked to help monitor the progress on the new policy.

Bank of America has also said it will use "due diligence" on loans to commercial logging opertions to ensure that it supports sustainably managed forests.

Procter & Gamble most consistent top corporate citizen

Procter & Gamble has been heralded as the most consistent performer in the 100 Best Corporate Citizens list produced by Business Ethics magazine due to its achievement in reaching the top five in each of the last five years. The company is ranked number 2 in the latest list.

P&G has donated to help disadvantaged youth in Vietnam, to combat childhood malnutrition in India, and to provide earthquake relief in Turkey. "Over 2 million children in developing countries die each year from water-borne diarrheal diseases," said P&G spokesperson Terry Loftus. "We have developed a technology that allows people in the developing world to clean and disinfect water in their homes at low cost."

Fannie Mae achieved the top slot, with its most visible impact focused on helping those who have traditionally been underserved to obtain home loans.

Overall, 29 companies have made the top 100 all five years. These include: Intel (No. 3), Avon Products (No.7), Herman Miller (No. 14), Timberland (No. 17), Cisco Systems (No. 19) Southwest Airlines (No. 22), AT&T (No. 43), Starbucks Coffee (No. 45), Merck (No. 48), and Medtronic (No. 57).

Agilent Technologies joined the list for the first time, shooting into the top 10 because of its approach to diversity and community investment.

For more info, see http://www.business-ethics.com/100best.htm

US: S.E.C fines Lucent $25m for fraudulent reporting

The US Securities and Exchange Commission has filed a civil lawsuit against Lucent Technologies plus nine of its former and current employees, for allegedly fraudulent reporting of revenue.

The suit follows a government inquiry into the company's inflation of its sales figures. The company - America's largest telecomms manufacturer - has agreed a settlement with the government, whilst not admitting wrongdoing. It will pay a $25m fine for its non-cooperation with the investigation.

In a statement, Paul Berger of the S.E.C said: "Stiff sanctions and exposure of their conduct will serve as a reminder to companies that only genuine cooperation serves the best interest of investors".

Israel: Securities Authority to introduce its own ethical code

The Israel Securities Authority (ISA) is to create its own ethical code of conduct following the introduction of its requirement of companies to announce whether they have such a code themselves.

The code of conduct will cover professional conduct and behaviour, as well as the approach by employees to dealing with the general public and companies.

The ISA has defined an ethical code as covering rules of behaviour, and establishing the duty of employees to adhere to the law, avoid conflicts of interest, and to consult superiors if in doubt about the ethics of any particular proposed course of action.

Employees are to be encouraged to report colleagues who are in breach of the code.

CSR FEATURES from the Internet

What's the Point of Corporate Social Responsibility? - 21 May 2004 FROM onPhilanthropy

What’s the point of corporate social responsibility? I've been asking myself that question a lot lately, and it seems I have company. More than 200 people turned up for a conference held in London last week on that topic, to discuss trends and best practices in corporate social responsibility in Europe. 

Read full story

Responsible attitudes - 19 May 2004 FROM The Guardian

After years of defending itself from charges of worker exploitation, Gap, the clothing retailer, last week made the shock confession that many of its 3,000 factories across the world fail to comply with minimum labour standards.

Such an admission would have been unthinkable a few years ago when Shell dumped an oil platform in the North Sea. But while this corporate confession - unlike its theological equivalent - does not instantly absolve Gap from its responsibilities, it does demonstrate the changing role of business in society.

Read full story

Hudson's Bay executive leads drive to stem sweatshop labour - 19 May 2004 FROM Globe and Mail

When George Heller sits down today with other international retail executives to give the nod to a framework for a global ethical sourcing pact, he will be capping three years of trying to stem sweatshop labour.

It's not as if the chief executive officer at Hudson's Bay Co. didn't have other matters on his plate, not the least being restoring Canada's oldest company as a relevant and financially strong shopping destination.

Read full story

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Finding the formula for responsible small companies

Article by Mallen Baker

One of the common arguments arising from the Corporate Social Responsibility movement - particularly in the developed economies - is that CSR is just as important for small to medium sized enterprises (SMEs) as it is for the big boys. I wonder why.

One response is that SMEs make up around 98 percent of the number of businesses, and therefore they have a huge impact and should be behaving responsibly. This is, of course, desirable. But the number of case studies of excellent practice by small businesses is rather limited in number. If the point is that we will only achieve sustainable development by influencing the full base of businesses to follow best practice then this is a venture that is doomed to failure. If CSR is to persuade SMEs to meet a global minimum threshold of environmental emissions, then that is almost certainly going to require political will, backed by legislation.

It is much the same response if we think that the actions of millions of SMEs investing in their local community will help to transform social issues, solve problems such as poverty and homelessness, and outstrip the programmes that the transnational corporations will do individually. There is just no evidence that existing means of inspiring and spreading best practice will ever reach that kind of critical mass.

So there must be something else.

For many of the transnational corporations, the improvement of the social responsibility of SMEs is simply a matter of controlling their supply chain risks. In developing countries, it is often within the small suppliers where you can find the child or forced labour, the environmental or health and safety problems. With some of the extended supply chains that now exist for the biggest and most reputation-conscious brands action to require minimum standards as a price of business is making a demonstrable impact on overall standards in some of the most difficult business environments in the world.

On the other hand, there are plenty of people who argue that CSR can have a negative impact if it is 'imposed' upon small companies in developing countries. It can increase costs, and make it difficult for the smallest companies to compete. Companies that supply multiple large customers can find that they have to contend with multiple codes, each with slightly different requirements. Like most things, the key point is not whether it is done, but how it is done.

The best larger companies provide support for the suppliers that are asked to meet standards, and follow emerging international codes such as the Ethical Trading Initiative base code. B&Q, for instance, provides a 'phased' approach to requirements. It has a set of minimum policies - covering certain points of non-negotiable standards such as not employing child or forced labour. Then it has a set of further standards that suppliers are required to meet within two years, and which the company will support them in meeting. There are additional aspirational standards which are open-ended, and which may engage the supplier in a process of continuous improvement.

H&M have brought in a further refinement - they actually benchmark their suppliers and feed back the results. Not only does this provide the suppliers with useful information about how they are performing in different areas, it also helps to inspire a little healthy competition between their suppliers to perform better.

This is all very well, but it doesn't explain why one would promote CSR to the small companies in developed economies where many of the defensive supply chain issues are less of a concern, other than strictly as a minority concern for the afficionados. For sure, there are some great examples of SMEs responding to rising social concerns and creating innovative products or service solutions that meet a need. These market niches may be important parts of developing solutions for the future, and SMEs are often faster on their feet and more innovative that some of the larger corporations. But it is still a minority sport.

The answer lies in the contribution SMEs make to the economy overall. In some of the poorest societies, the entrepreneurliasm of the poor is the most sustainable and effective way to address poverty. Support for people in village economies to improve their business skills, marketing and financial management - particularly if supported by access to capital - can make a huge different in enabling local wealth creation. A thriving SME sector is one of the strongest features of a healthy economy.

That's why programmes of business support in places like Thailand, with the TBIRD project, focus on building sustainable businesses in rural areas. That's why quite a few companies, such as Shell through its Livewire programme, encourage and support young entrepreneurs in the belief that in simply adding to the wealth of indpendent businesses they improve the overall economic situation. Shell, of course, include information on the importance of sustainable development for their entrepreneurs as well, although most schemes don't do this.

The simple fact is that CSR should be promoted to SMEs because it represents better business. Small companies can reduce their costs by managing their environmental impact. They can retain their best staff by making them feel proud to work for them, and by showing that they are an active citizen in the local community. They can sell more if they nurture the relationships between the company and its customers, its people, and the community overall. It doesn't need acronyms or big corporate language to achieve - it just needs vision and good leadership.

This case is gaining currency. In the UK, for instance, a number of organisations that have traditionally been focused on the mainstream support and encouragement of small companies have grouped together as the SME consortium to produce materials that support small companies in improving their social responsibility. The initiative, focusing on 'the small business journey', is producing a website - an initial version of which is live at http://www.smallbusinessjourney.com.

The more that information on CSR becomes a mainstream part of small business support, the more it will quickly evolve away from the current approach - where it is a slightly simplified version of what is produced for the big corporates - towards something that is practical, hands on, and pretty robust in terms of the business case. Probably, the phrases CSR and sustainability won't even be used.

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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