Business Respect - CSR Dispatches No 77 - 24 Aug 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 ask whether CSR is equal to the challenges set out in the Millennium Development Goals.

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/77.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

It's always good to remind yourself that the audiences we usually see at events focusing on corporate social responsibility are a select crew - speaking a language of their own and largely believing similar things. Mallen took part a few weeks ago in a debate at the ICA in London with some of the critics of CSR. Unlike the rather similar platform a month or two previously, which took place at the Ethical Corporation conference, this one saw an audience largely composed of NGO / ex-NGO people and others for whom the legitimacy of business to operate was not to be taken for granted.

You always know when you're into a polarised debate when people start answering each other on points that they never actually said. Mallen (and John Williams from the Centre for Tomorrow's Company) were asked 'isn't there any action by business that you think it should be criticised for'? This seemed to suggest an uncritical approach to business that it was hard to understand having come from what had been said before. Another questioner (the former head of an anti-tobacco NGO) called upon Mallen to justify his 'approving comments' in relation to tobacco companies - not only hadn't he mentioned tobacco at all on that occasion, but he hasn't made 'approving' comments ever!

The question for debate was 'CSR - A movement for change or just greenwash'. There are few words to express how old hat this pro-corporate / anti-corporate dialogue has become! What is more interesting is to reflect just how far CSR as a mechanism for change should be expected to go. Is it about a company seeking to have an overall positive impact on society - where the main reference point is the company and its impact? Or is it to operate as a real corporate citizen to look at how far it can play its part in helping to provide solutions for the challenge of sustainable development?

Sustainability have recently released a report that - taking the latter as its essential premise - finds that CSR, whilst it is making some useful strides forward, has reached a ceiling which makes its potential usefulness limited. We review these arguments in this issue's article.

Mallen (sadly this year not Vanessa) will be at the Asian Forum on CSR in Kuala Lumpur this year in the first three days of September. If you will be as well, why not get in touch and let's see if we can meet up. Failing that, do go along to Mallen's breakout session in the morning of the first day and say hi. All being well, a conference report will find its way into the next issue.

The current vote on the website is still attracting attention. The current status is:

The rising obesity problems in many countries will best be solved by:

New legislation to force food companies to reform their ways 59 (13%)
People taking personal responsibility for themselves and their families - we don't need people telling us how to live our lives 161 (35%)
All organisations, public and private sector, working together voluntarily to change behaviour 235 (52%)

455 people have cast their vote so far, to whom many thanks. We will probably change this vote soon, so make your view heard before we do!

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 24 Aug 2004

Parmalat to sue former auditors

Bankrupt Italian dairy company Parmalat has said that it is to sue auditors Grant Thornton and Deloitte Touche Tohmatsu for their alleged part in the company's collapse.

The suit is being filed as part of the company's attempts to get the money to pay its creditors. It is arguing that the financial institutions helped Parmalat's former leadership to pull the wool over the eyes of investors.

Parmalat became mired in scandal last year when its management revealed that figures it had used to inflate its profit figures to the tune of $5bn were fictional. Its debt was later shown to be closer to $18bn. Soon after the incident, Grant Thornton International expelled its Italian member branch.

Zimbabwe: Business group adopts Business Ethics Charter

The Confederation of Zimbabwe Industries (CZI) has announced a new Business Ethics Charter to be used by its members in dealing with moral dilemmas and ethical problems.

CZI president Antony Mandiwanza said that the document was needed to enhance the credibility of Zimbabwean industry, and called upon members to ensure that the Charter's values begins to drive the way they do business.

"No documents are consequential if the ideals contained in them are not implemented," he said.

Indonesia: Newmont Mining hits back at pollution accusations

PT Newmont Minahasa Raya, the Indonesian unit of gold mining company Newmont Mining Corp, has attacked NGO accusations that the company had polluted a bay creating local health problems for villagers.

The company has complained to the police that the unsubstantiated allegations had damaged the company's reputation. The groups include the Indonesian Forum for the Environment (Walhi).

Newmont insists that it regularly monitors its emissions, and complies with all laws regarding its business. NMR president director Richard Ness said that the management were 'disgusted' at the false allegations and said they were simply not true.

Walhi had said that 30 people in Ratatotok village had died from a disease associated with mercury poisoning after drinking water from the bay.

Australia: James Hardie 'treated asbestos victims with disdain'

James Hardie, the building products company, was accused of having done all it could to avoid paying compensation for victims of asbestos poisoning in a submission to a commission of inquiry.

The inquiry was set up to review whether the company had tried to avoid providing more money for victims by underfunding the foundation set up to settle claims.

The submission, by John Sheahan, SC, accuses James Hardie of ignoring the suffering of the victims that had been exposed to asbestos as a result of the products of two of its former companies. It says that the company did all that it could to ensure that legitimate claims would remain unmet.

In a separate move, the Labor Party said that it was considering whether it should accept any future financial donations from James Hardie given the apparent failings of the company's corporate responsibility.

Russia: Government lifts order on Yukos

Russia's Justice Ministry has lifted an order against the oil giant Yukos that threatened to stop them from pumping oil.

The government has said that Yukos owes nearly 100 billion rubles in back taxes - an amount that could force the company into bankruptcy. The authorities may settle some of the tax bill by forcing a sale of some of the parts of the company.

Outside commentators have continued to view developments with alarm. Rumours have now spread that former Canadian Prime Minister Jean Chretien may be involved as a mediator between the company and the government.

Malaysia: Business should help to eradicate poverty

Businesses need to fall behind governments in their attempts to eradicate poverty, according to Datuk Abdul Wahid Omar, Group Chief Exectuvie of Telekom Malaysia.

Speaking at the Langkawi International Dialogue (LID) he said that companies that play their part in meeting their social responsibilities can expect to generate better returns, whilst creating an educated workforce and enhancing the country's ability to attract foreign investment.

"This will create more opportunities for businesses to prosper," he said in his presentation on "Bridging the Gap Between Business Priorities and Poverty Challenges".

For example, he said that a more affluent population would lead to lower levels of corruption, which in turn would reduce the costs of doing business.

France: Vending machines in schools barred in fight on obesity

A ban on vending machines selling soft drinks and sweets has been approved by the French parliament following the rise in concern over obesity in children.

The legislation stopped short of banning advertisments for fast food, but manufacturers will be hit by extra tax equivalent to 5 percent of their annual advertising budget if they do not include health warnings in their adverts.

The measure will come into force from September next year, and will result in the removal of something like 8,000 vending machines. Many schools have opposed the move, saying the machines provide much-needed income.

Recent figures have suggested that obesity affects around 15 percent of French children which - whilst some way short of the current figure for Americans - has alarmed a society which has prized its cultural approach to good food.

Shell fined over reserves scandal

Royal Dutch/Shell has agreed to pay 83m uk pounds in fines to settle action over its mis-reporting of proven oil reserves the disclosure of which rocked the company earlier this year.

The company said it would pay around $120m to the US securities and exchange commission (SEC) for breaches of SEC rules, and 17m UK pounds to the Financial Services Authority. It also agreed to spend substantial amounts on improving internal compliance procedures.

The agreement does not halt the potential criminal investigation by the US department of justice, as well as a number of other litigation measures.

Jeroen van der Veer, chairman of the group's committee of managing directors, said: "There is a huge appetite among Shell people to get this company back on track" but acknowledged that the company had some way to go in rebuilding its reputation.

Indonesia: Timber companies crack down on illegal logging

Logging companies PT Daisy and PT Sumalindo Lestari Jaya are to trial a new system using bar codes to track the origin of timber put onto the international market as part of an initiative to combat illegal logging.

The programme is being supported by US and UK International development agencies and the retailer Home Depot. It is a response to the continuing assessment that up to three quarters of the wood originating from Indonesia has been illegally logged.

It comes soon after the World Wide Fund for Nature (WWF) pulled out of an agreement with the Asian Pulp & Paper Company, and called for a boycott of its products saying the company used wood from a protected forest.

MBA graduates value ethics higher from money

A survey of over 800 MBAs from 11 leading business schools has found that a substantial number say they are willing to forgo some financial reward in order to work for a company with a track record in corporate social responsibility and business ethics.

The survey sought to identify those aspects that affect MBA job choices. The results showed the most important factor to be that of intellectual challenge, but over 97 percent said that they would forgo financial benefits in favour of CSR. On average, they said they would be willing to forgo 14 percent of their expected income.

A previous survey carried out before the Enron scandal, showed that 94 percent of MBAs were willing to forgo an average of 12 percent of their income to work for socially responsible companies. No survey has yet been carried out to identify whether the choice of a socially responsible company actually does lead to lower remuneration.

The research was by David B. Montgomery of Stanford and Catherine A. Ramus of UC Santa Barbara.

KPMG creates new Global Centre for Leadership & Business Ethics

KPMG International has created the Global Centre for Leadership & Business Ethics, an independent organisation that will recognise individuals who exhibit "extraordinary business ethics and leadership qualities".

The Global Centre will manage and administer the nomination process for the Laureate Award & Medal Series, which will honour those who are committed to excellence in business ethics. The awards are inspired by the Nobel Prizes.

The Laureate Award will honour a leader who best exemplifies business ethics and who has shown his or her commitment to excellence. Medals will be awarded for Leadership, Corporate Governance, Reporting & Disclosure, Social Responsibility and Education.

KPMG said it will name a chairman for the Global Centre soon, followed by a call for nominations for the Laureate Award & Medal Series. The awards will be presented in the same week of December when the Nobel prizes are awarded.

Pilgrim's Pride fires staff after cruelty video

Pilgrim's Pride Corporation has fired eleven workers after being embarrassed by the People for the Ethical Treatment of Animals (PETA) which produced a video showing the workers at one if its slaughterhouses grossly and gratuitously abusing the animals sent there for slaughter.

PETA's videotape shows employees "ripping birds' beaks off, spray-painting their faces, twisting their heads off, spitting tobacco into their mouths and eyes, and breaking them in half — all while the birds are still alive". The videotape was recorded by an investigator working undercover.

Pilgrim's Pride is a major supplier to the KFC chain. Having viewed the tape, KFC demanded the firing of the workers involved in the incident and said it would not continue the relationship unless it was satisfied the abuse had ended.

In addition to the sackings, the Pilgrim's Pride said it had put quality assurance monitors into the plant, and pulled all workers off the production line to receive education and training on animal welfare policies.

PETA, which said it had selected the plant because it had been awarded KFC's 'supplier of the year' accolade, has been pressuring KFC to require suppliers to treat animals more humanely.

KFC said in a statement: "KFC is appalled by the actions of Pilgrim's Pride employees at this one facility in Moorefield, West Virginia. As a responsible corporate citizen, we require all our suppliers to treat animals humanely. This behavior by Pilgrim's Pride employees is not only appalling, it violates the standards we have in place for all our suppliers."

However, the company went on to attack the PETA description of the incident as 'KFC cruelty'. "We think it's outrageous that PETA is unfairly singling out KFC. They've done this because we're the most recognized brand selling chicken today, and our name, Kentucky Fried Chicken, is synonymous with chicken. So we have become their target.

"The truth is, we sell about 5% of all the chicken in America today -- that's less than the leading burger chain. But because our brand stands for chicken, they've targeted their campaign on us. Not on any other supermarket or QSR chain. Yet these companies buy their chicken from the same suppliers you do - like Pilgrim's Pride. You didn't see them hold today's press conference in Texas, where Pilgrim's Pride is located. They held it here to try to exert pressure on us."

Jewellery body to set standards on corporate social responsibility

CIBJO, the World Jewellery Confederation, has committed to establishing a set of standards for the sector on corporate social responsibility.

The group announced the move, stressing the importance of continued consumer confidence in the industry. The decision was taken following a meeting of CIBJO's Council in Milan, Italy.

CIBJO President Gaetano Cavalieri, said: "During the past months, we have been confronted with a number of topics that, when not tackled properly, will lead to a loss of consumer confidence in jewelry, and as such has the capacity of severely damaging our industry. Most recent examples of such topics are synthetic diamonds which, when not properly and fully disclosed, can create havoc in the diamond jewelry business.

"The jewelry industry and trade worldwide needs to address, tackle and solve these issues without delay, thus taking them off the industry’s agenda, and, consequently, off the agenda of industry watchdogs, interest groups and a variety of NGOs."

CSR FEATURES from the Internet

Looking at corporate social responsibility - 29 Jul 2004 FROM The Jakarta Post

Private enterprise funded development programs are becoming more widespread in the business world as more and more enterprises are becoming concerned with the social implications of their activities.

This concern is reflected in voluntary business initiatives that some international firms have made to varying degrees of success in the Indonesian extraction industry. These may comprise employee and volunteer programs, training and education activities for local communities, micro credit schemes, supplying schools and small businesses with equipment.

Read full story

The benefits of trading places - 27 Jul 2004 FROM Financial Times

Monte Hummel, head of the WWF conservation group in Canada, recently swapped his environmentally friendly Toyota Prius to be chauffeur-driven round Toronto in a Cadillac. Scott Hand, the usual occupant of the luxury vehicle and chief executive of one of the world's largest mining companies, was meanwhile discovering the low-emission delights of Mr Hummel's hybrid petrol-electric car.

Their vehicular initiation was part of an unusual job exchange in which the corporate chief executive became the boss of the conservation campaign group for a day, and vice versa.

Read full story

CityDev chief: Corporate social responsibility not a fad - 21 Jul 2004 FROM The Business Times (Singapore)

IT'S not just about making money, it's about making it ethically, says City Developments managing director Kwek Leng Joo.

Such values have earned CityDev a place on the London-based FTSE4Good Index, alongside only one other Singapore company - Singapore Airlines.

Read full story

Banks move to repair damaged reputation - 20 Jul 2004 FROM East African Standard

After taking a thorough beating in the court of public opinion for making obscene profits in the face of growing national poverty, commercial banks appear to be taking deliberate steps to mend their battered reputation. Over the last couple of years, banking institutions have come up with social, environmental and economic responsibility programmes to plough back part of their hefty profits to the community.

According to an internal survey of bank contribution to Corporate Social Responsibility (CRS) in Kenya, more banks than ever before are funding social development programmes. Besides, the survey also indicates that the size of each bank’s financial contribution to such programmes is closely linked to their profits.

Read full story

The business of business is business —Henry Miller - 20 Jul 2004 FROM Daily Times (Pakistan)

One of the easiest things to do is to spend other people’s money on causes in which you believe; one of the most difficult, but most meaningful, is to spend your own money. If these executives donated even 5 per cent of their salaries to such causes, they would be worthy of admiration, even if the causes were repugnant to some of us.

Calvin Coolidge, the American president, once said that the business of America was business. He might have added that the business of business everywhere is to pursue profits, for lately some corporate leaders seem to have lost sight of that elementary precept.

Read full story

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Is CSR a movement for change that is underachieving?

Article by Mallen Baker

The corporate responsibility movement is hitting against real limits because of the distance of most initiatives from core business. In the face of the Millennium Development Goals, CSR is providing precious little in the way of a substantial business contribution towards tackling some of the most significant development issues facing human kind.

This is the key message of a new report by Sustainability, produced for the Global Compact, called 'Gearing Up'. The report argues that in order to address the fundamental questions of how to achieve real scale and impact, companies have to shift their focus from individual initiatives and programmes towards a more effective global governance framework.

Although many CSR initiatives are evolving in the right direction, with companies beginning to take action on an increasing number of key issues, the fact is that such action is often disengaged from any long-term strategy. Many leading companies pursue disjointed and conflicting activities. Whilst they employ environmental management systems, their lobbyists seek to lower legal environmental standards, for instance.

The report takes an important step towards highlighting one of the most difficult questions for the CSR movement overall - what is it for? In the UK, it began over 20 years ago when senior business leaders responded to a spate of inner city riots in the conviction that business had to invest in the health of society in order to be able to carry out healthy, long-term business. This has hardly ever led to any kind of far-reaching strategy for economic regeneration or urban renewal. More often it has been expressed in terms of short-term actions focused on easily visible symptoms of the problem. But how far does it go? Should we expect CSR to provide answers for poverty, hunger, and environmental sustainability issues across the world? Is CSR only worthwhile if it triumphs where government, civil society, and communities across the world have so far failed?

For the report's authors, the answer is essentially "yes". The implication of 'Gearing Up' is that CSR is the business contribution to sustainable development. Not only that, it has to be carried out in full knowledge that in many parts of the world governance is failing - and in the absence of governments showing real leadership, companies may be best placed to act as the catalyst that makes the difference.

Can companies play a real part in helping to achieve major global objectives, such as the Millennium Development Goals? Only if they focus on changing some of the rules of the game. "Companies need to foster progressive alliances with other business actors, civil society organisations and - above all - governments. The aim: to help scale up CR by linking into system level change, particularly in governance frameworks."

Why have the commitments of leading companies not yet translated into more significant progress on sustainable development goals? A consultation by Sustainability came back with a number of reasons. Only a fraction of companies world-wide are committed to corporate responsibility. What they do is not necessarily well focused.

Of course, the achievements of some of those that are can be extremely impressive. For instance, on climate change, many companies have committed to - and achieved - significant reduction policies. DuPont, for instance, achieved its target of reducing emissions by 65 percent from 1990 levels.

But absolute emissions have increased nearly 9 percent during the same period overall. Andre Fourie of South Africa's National Business Initiative said of business: "They think more about what goes into their GRI report than how they connect to systemic change. Yet, ultimately, this is not about reducing CO2 emissions by 1% but about helping build a system that reduces society's total emissions by 60%."

This is not easy stuff. On the one hand, it seems to be rather unfair to begin castigating the CSR movement for not having achieved what it never set out to achieve - single-handedly delivering the human race from its own folly. On the other, with business providing the engine of wealth creation that has been such an important part of reducing absolute poverty, it is inconceivable to see solutions that don't harness it. But, as the authors contend, this will only happen if CSR becomes core business.

Rather than finding market failures that can be exploited to make major profits, CSR champions should be finding solutions to market failures that make it more difficult for them to operate sustainably. Then they need to persuade others - particularly governments - to play their part in implementing those solutions.

The implication of the Sustainability report - as well as the messages from many of the campaign groups - is that unless CSR can begin to address this very soon, it will lose its momentum and legitimacy. And yet can this be the case when there is so little sign of the other necessary actors showing the necessary leadership.

According to the report, governments need to play their part in changing the rules of the game to make a meaningful difference on areas such as climate change, world poverty and human rights. Civil society needs to provide consistency in how they target high impact companies, and to be transparent and accountable in turn, whilst focusing on system-level reforms rather than ad-hoc changes. So far, there are few examples of governments or NGOs making the same kind of step change showed by DuPont.

What's needed is a greater consensus on what the end goals really are. If corporate social responsibility is the business contribution to sustainable development - can we agree that the millennium development goals are the priorities for action? How much can be achieved by leadership companies innovating and changing the terms of reference for their marketplace? And how much needs to become a new minimum standard, that can only be put in place by real action to change the market signals which drives business action?

Since we have no definitive agreement over which of these are the right questions, it's hardly surprising if CSR is not delivering the answers. However, if CSR is now about core business - as surely it is - this is where the focus now shifts.

'Gearing Up' is available from Sustainability's website.

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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