Business Respect - CSR Dispatches No 78 - 20 Oct 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 Corporation, the book and film that challenges some of the basic assumptions about what good business means

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/78.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

The issues around business and corporate responsibility seem to be as high profile as ever, with some of the discussion breaking into film and radio in a higher profile way than ever before. Mallen will be taking part in a panel debate following the UK preview of the film The Corporation, so we thought we would mark the occasion this issue with a review of that film, and particularly the associated book. It is a serious critique that stands out from some of the more rhetorical anti-corporate stable, and deserves a read.

On the website, the current vote has been attracting strong interest. The position stands at:

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

New legislation to force food companies to reform their ways 114 (14%)

People taking personal responsibility for themselves and their families - we don't need people telling us how to live our lives 293 (35%)

All organisations, public and private sector, working together voluntarily to change behaviour 436 (52%)

843 people have voted, and there is still some time left to make your own views heard.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 20 Oct 2004

Retailer Abercrombie and Fitch to boycott Australian wool

Leading fashion retailer Abercrombie and Fitch has said that it is to boycott Australian wool after being targeted by the People for the Ethical Treatment of Animals (PETA) and threatened with being the subject of graphic newspaper advertisements.

The company said in a letter to the organisation: "Abercrombie & Fitch considers the proper treatment of animals to be of critical concern, and it is committed to that end. We shall not support the Australian Merino wool market until both the practice of mulesing is ended and the live exporting of Australian sheep ceases".

The move is the first response to an international boycott called by PETA in response to what the organisation says are unacceptable practices in sheep rearing in Australia. In particular, PETA is urging an end to live sheep exports, and the cessation of the practice of "mulesing," which it describes as "atrociously cruel mutilation in which saucer-size portions of flesh are cut from conscious lambs’ hindquarters".

US: Ahold escapes SEC fine through 'extraordinary cooperation' on fraud charges

Dutch grocery company Royal Ahold NV has settled charges that its subsidiaries had fraudulently inflated earnings by nearly $830m. The company managed to escape paying fines due to what one SEC official described as 'extraordinary cooperation' with investigators.

Also settled was a separate, but related, action against former executives of the company, including the former chief executive Cees van der Hoeven. The charges were settled without admission of guilt on the part of the individuals or the company. However, the Dutch government is continuing to consider a criminal prosecution.

The Ahold case is the latest of a long line of companies that have been caught engaged in financial fraud. This settlement is remarkable for its leniancy, given the increasing trend for regulators to use increasingly hefty fines in such cases.

SRI analysts urge use of Global Reporting Initiative

A group of 17 analysts from US SRI groups has launched a statement urging a higher standard of reporting on corporate governance, environmental, labour and other key issues. The statement calls upon companies to start reporting annually on their policies, practices and performance.

Greater consistency in reporting is, according to the group, the answer to the growing barrage of requests for information from a wide range of stakeholders. The group is therefore encouraging companies to base their reporting on the Global Reporting Initiative guidelines to provide a core of consistency.

Trillium Asset Management Senior Social Research Analyst Steve Lippman said:“Companies have been asking us for guidance on how to meet the skyrocketing demands for information. At the same time, a growing set of investors is relying on data on companies’ social and environmental performance to make investment decisions. With this statement, we recommend ways that companies can increase the credibility, comparability, and utility of their reporting.”

Ghana: Cocoa producers under notice on child labour

Cocoa producers have been given less than a year to provide proof that their crop has been produced without child labour if they want to retain access to the international markets.

The Ghana Cocoa Board is introducing the requirement for certification in order to meet concerns amongst consumers worldwide on the issue. The country is second only to the Ivory Coast in its production of cocoa.

Studies into the issue had shown that children of farm labourers have indeed worked on cocoa farms, although research has not been extensive. Such practices have been indicators of real poverty amongst the labourers rather than systematic trafficking. Even so, child labour per se has become unacceptable amongst the markets for Ghana's cocoa.

United Arab Emirates: Business ethics campaign launched

The Dubai Ethics Resource Centre has launched a campaign to promote business ethics in a bid to safeguard flows of foreign investment into the country.

Businesses need to avoid issues of conflict of interest, and to embrace transparency and accountability, according to the Resource Centre.

Executive director Alex Zalami said that the aim of the campaign is to provide advice and support to the government and private business in Dubai. The focus will be on encouragement rather than punishment for transgressions, he said.

Canada: Concern over Noranda takeover by China Minmetals

Furious reactions have been provoked by the proposal by Canada's largest mining company Noranda Inc. to sell out to China Minmetals Corp, a state-owned enterprise accused by some of having been complicit in human rights abuses in China.

The company allegedly profited from forced labour in Chinese prison camps and, according to the Chinese dissident Harry Wu, still trades in goods made with such labour. Wu has said that one subsidiary of the company was run as a prison, with armed guards and electric fences.

The government has said that it will review the proposed deal carefully with a view to both ethical and economic issues.

Israel: Caterpillar under fire over demolitions

Caterpillar faces a shareholders' resolution focusing on the use of its bulldozers by the Israeli army to flatten the property of Palestinians in the West Bank and the Gaza Strip.

The Jewish Voice for Peace is working with Christian groups to raise the issue at the company's AGM, arguing that the company cannot disclaim responsibility if it continues to sell the equipment to the Israeli regime in full knowledge of how it is routinely being used. The move mirrors a similar resolution last year.

The move focuses on the company's Code of Worldwide Business Conduct, which promises to take into account social impacts from its operations. The company counters that it cannot police the use of its vehicles across the world.

Papua New Guinea: Durban Deep attacked for lack of corporate responsibility

Oxfam has continued its ongoing attacks on Durban Roodepoort Deep for its alleged ongoing pollution at its Tolukuma gold mine. The organisation said that the company had become 'a law unto itself'.

Oxfam's campaigner on mining accused the company of a range of practices that were unacceptable, including incidents of chemical pollution to engaging in exploration activities without community consent.

The report said that more than 160,000 tonnes of waste products produced by gold extraction are released into local rivers, causing serious health problems for people that use the water for bathing.

Durban Deep, which has produced a corporate responsibility report dealing specifically with its track record at the mine in question, one of its most profitable operations, has defended itself against the criticisms, saying that it has always stayed within the law. Oxfam, it said, had now established a tradition of making groundless allegations which have subsequently disproved by third-party investigation.

Australia: Campaigners criticse Coca Cola support of food study

Research for the Australian Sports Commission, suggesting that the rise in childhood obesity is linked to declining physical activity rather than rising food intakes, has been attacked by critics because it was sponsored by Coca-Cola.

The New South Wales Centre for Public Health Nutrition at the University of Sydney suggested that the research had been focused only in areas where the conclusions would not harm the interests of its sponsor. Dr Tim Gill, Principal Research Scientist for the Centre, said that there would usually be a degree of control exerted by the sponsor.

However, the report's authors say that the sponsorship by Coca-Cola had no impact on the terms or the conclusions of the research. Dr Tim Olds said that the evidence from around the world suggested that children are, if anything, eating less than they used to. But decreased physical activity has been the principal factor in the increase in obesity.

UK: Report shows how Conrad Black 'looted' Hollinger

Former media magnate Conrad Black siphoned off more than $400m from his company Hollinger International according to a report put before a Chicago court - reducing the company to the role of 'piggy bank' and violating every rule of corporate responsibility.

Money was squandered on high cost prestige items, such as the buying or leasing of two corporate jets and the $90,000 refurbishment of a Rolls-Royce car. It was also used for dinner parties and high cost accessories for Black's wife, Barbara Amiel.

The report, which has been produced for the company's new management, describes the reign of Conrad Black as having constituted 'a corporate kleptocracy' where the concept of fiduciary duty had simply not applied.

Hollinger is now suing Black, along with others, for the return of over $1.25bn.

US: Sweatshop fears lead to MBNA to cut off T-shirt supplier

US bank MBNA America has stopped buying T-shirts from Canadian supplier Gildan Activewear following fears about working conditions in the company's supply chain.

The bank has traditionally given away the T-shirts at baseball games to people that apply for credit cards, but accusations that the garments had come from a Honduran sweatshop have led the company to shift its purchasing elsewhere, at least until the claims have been resolved.

Gildan Activewear had provoked protests from campaigners for allegedly closing a factory after workers tried to start a union. They had called for the factory to be kept open, and for working conditions to be improved.

Australia: Westpac leads Corporate Responsibility Index

The results of the first year of the Corporate Responsibility Index in Australia have been announced, with Westpac heading the list, and other companies such as BP, Rio Tinto, BHP Billiton and Toyota also doing well.

The results represent the first time that the CR Index methodology, developed by Business in the Community, has been applied outside of the UK, and it showed that leading Australian companies perform just as well in many areas.

St James Ethics Centre's executive director Simon Longstaff said: "Both British and Australian companies fall short of community expectations that they not only develop policies for responsible business practice, but also implement these".

St James Ethics Centre introduced the CR Index in partnership with The Sydney Morning Herald, The Age, Ernst & Young and Business in the Community.

GlaxoSmithKline agrees disclosure on negative trials

GlaxoSmithKline has settled the lawsuit against it around accusations that it concealed studies showing that its drug Paxil had problems. The company has agreed to disclose information on all clinical studies of its drugs.

The company also agreed to pay $2.5m and is to provide the results of all trials undertaken since the end of 2000, according to the New York Attorney-General Eliot Spitzer.

Spitzer had filed the original lawsuit which contended that studies showing that Paxil may not work in the treatment of children, and may lead to suicidal behaviour, were suppressed.

GSK insists that the charges were baseless, and said that it had settled only in order to avoid the cost and time of litigation. It published its studies on Paxil on its website some months ago.

CSR FEATURES from the Internet

Corporate social responsibility and Tibet - 22 Sep 2004 FROM Phayul.com

Working on corporate social responsibility issues in Tibet involves all the issues that come into play in China, and then some, says John Ackerly.

Few international companies have been interested in Tibet, mostly because of its remoteness, poor infrastructure and small population.

Read full story

Gap's New Look: The See-Through - 1 Sep 2004 FROM Fast Company

On May 12, Gap Inc. released a report that had jaws dropping in corporate boardrooms and activist corridors across the land. The 40-page "social-responsibility report" details, with unflinching honesty, the problems the $6.5 billion clothing retailer found in the 3,000 factories it contracted to produce clothing for its Gap, Old Navy, and Banana Republic brands. The company discovered persistent wage, health, and safety violations in most regions where it does business, including China, Africa, India, and Central and South America. The infractions range from failure to provide proper protective equipment to physical abuse and "psychological coercion." Though discoveries of the worst violations (such as child labor) were rare, Gap reported that it had pulled its business from 136 factories and turned down bids from more than 100 others when they failed to meet its labor standards.

Read full story

Corporate Social Responsibility - 26 Aug 2004 FROM The Korea Times

The main objective and primary social responsibility of a firm or a company is to maximize its profits and remain financially successful. This priority is widely accepted in the textbooks and corporate executive offices in the United States and other industrialized capitalist countries.

I am confident that most employees of a corporation would also agree with this priority.

Read full story

Business ethics codes arrive in Israel - 26 Aug 2004 FROM Jerusalem Post

Amartya Sen, Nobel laureate in economics, likens business ethics to oxygen: We take an interest only when it's absent.

Sen's metaphor was on my mind as I took part this week in a seminar on corporate codes of ethics, sponsored by the Business Ethics Center of Jerusalem (BEC).

Read full story

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Corporate Social Responsibility moves centre stage

Article by Mallen Baker

The question of the role of business in society has received a high profile in recent months with a couple of films that have sought to shine a critical spotlight on what many see has the dominant institution of our times.

Of these, Super Size Me, is the least interesting. The idea that it's news that if you eat nothing but McDonald's burgers you will get fat is a fact so mundane that it seems hardly worthy of comment, let alone making the premise for a full picture. Of course, the picture still manages to make some reasonable hits - particularly on the lack of real interest and supervision in a number of school canteens.

Recent research in the UK suggests that parents believe that schools, families and individuals are primarily responsible for influencing diet choices, with less than 1 in 10 seeing the main focus as being companies. So there is a real message here about how far those institutions do or don't embrace that responsibility.

However, the more interesting work is 'The Corporation' - a film documentary based on the book of the same name by Joel Bakan. This book is a welcome relief from some of the desperate rhetoric of the anti-corporate movement, and poses some frank and fundamental challenges to the movement for corporate social responsibility.

The main contention of the book is that the company, as an institution, is so fundamentally gripped by its requirement to maximise short term returns for its shareholders that, even though companies may be run by people of integrity and good conscience, it will always inevitably behave with a disregard to the consequences on society.

It shows how leading business figures, such as John Browne of BP, have been able to make real progress and to show real leadership in moving BP towards the cause of sustainable development. It quotes Browne when he says that following such a path is done primarily because it makes perfect business sense. But then observes that when the business sense is not there - such as in the issue of whether or not exploration should begin in the Arctic, BP's position reverts to that which will make it the most money.

Corporate social responsibility, therefore, will not ever really play a part in making businesses into good corporate citizens. If the corporation was a person, it would be a psychopath. It lies, steals, even kills without hesitation when it serves the interests of shareholders to do it.

There is a serious point here. There are, indeed, real limits imposed upon businesses by the short term nature of the market. The fact that shareholders enjoy the privileges of ownership without carrying any of the responsibilities of ownership has produced one of the great anomalies of our time. It is not as though shareholders even have the ability to shape their own expectations - the law expects them to be served through financial returns. It does not recognise that shareholders might want companies to behave ethically, or to do something to build value in the long term.

This isn't a point that is exclusive to issues of social responsibility. The evidence from Jim Collins' 'Good to Great' research is that real, sustainable value creation follows from steady, quiet investment over a period of time rather than chasing every quarter's figures.

There is no doubt that we are reaching the end of progress in the development of the contribution of corporate social responsibility unless the fundamental issue about the role of business in society can be tackled.

In the mean time, the observation that CSR activity will only be undertaken when there is a solid business case is not the issue. After all, many of us have spent a lot of time in recent years arguing the business case. The issue is more one of how more of the different business leaders, making judgements based on their perception of the issues, and their realistic options, can be encouraged to show the kind of leadership and imagination Browne did in seeing how BP's enlightened self-interest could help to reshape its industry and to address a serious global problem. If all businesses imaginatively and with skill embraced only the business case options available to them, it would make a huge impact.

For the rest, there is regulation. If society doesn't want to drill for oil in Prudhoe Bay it can refuse to allow it.

The Corporation is a useful, well written and researched contribution to the debate around the role of business in society. Although it is critical of business, it does not demonise companies nor the people that lead them. It seeks to illustrate some of the consequences of how businesses are structured, and the dynamic that leads their decision making.

To be fair, it could do more to acknowledge the positive impact that the economic activity of business has alongside the downsides. And the features it attributes to business are not exclusive to that institution - after all the similarly amoral nature of the nation state has been a subject of discussion and historical analysis for a much longer period of time.

But CSR activists would do well to read this book and / or see the film. It is a useful challenge to complacent thinking on both sides of the fence.

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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