Business Respect - CSR Dispatches No 80 - 24 Jan 2005

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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 the business response to the tsunami disaster went too far.

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/80.html.

Copyright 2005 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

In its latest issue, the Economist has chosen to make a cover feature out of its scepticism over this thing called corporate social responsibility. Nothing new in the scepticism - the editorial line there has been consistent and clear for some time. The timing, of course, is something else, since the main trigger in this case is a response to the overwhelming and widespread business response to the tsunami disaster in Asia. Those commentators that have held steadfastly to the mantra that "the business of business is business" have obviously felt strongly enough about recent events to aim to make their mark. This could be the beginning of a concerted backlash.

In the view of these events, we thought we would update the website vote to take the temperature of views out there. It now reads:

When a world disaster strikes, business should consider whether to give support and conclude:

* Extraordinary events call for extraordinary generosity
* Whether they should divert part of their existing community budget
* That it is shareholders' money and not theirs to give

The previous vote which went up last time had generated rather little traffic - possibly a reflection on how few people are reading CSR reports in a way where their quality is really that important. The final tally was:

The quality of Corporate social responsibility reports:

Is good - they generally have the information I need 39 (31%)
Is variable - more robust quality standards are needed 71 (56%)
Is poor - they don't need my needs at all 17 (13%)

127 people voted. Thanks to those that took part.

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 24 Jan 2005

Europe: Chemical companies fined for illegal cartel

Chemical companies Akzo Nobel, Atofina and Hoechst have been fined by the European Union to the amount of $283m after the companies were found to have formed an illegal cartel over a 15 year period through which they rigged the market for MCAA, a chemical used in herbicides, plastics and textiles.

Between them, the companies controlled around 90 percent of the European market.

Akzo Nobel has complained about the size of the 84m euros fine levied against it, saying it had worked actively with EU investigators and this had not been recognised. The company says it has now adopted a 'zero tolerance' policy against cartel actions.

Nigeria: Shell could miss key deadline to end flaring

Chris Finlayson, the chief executive officer for exploration and production in Africa for Shell has said that the company may miss a key Nigerian government deadline to end the practice of gas flaring by 2008, according to the Financial Times.

According to the Nigerian government, failures to meet the deadlines will be met with serious penalties, currently unspecified. Shell has had a number of setbacks in the country, including serious social unrest which has disrupted operations and expansion.

The amount of gas flared by the company in Nigeria rose in 2003, reflecting increased production although the company says that the amount of gas flared per barrel of oil produced has fallen by half.

Chile: Sexual harassment in the workplace outlawed

The Chilean Senate has approved a law against sexual harassment in the workplace, bringing to an end a process that has taken over 13 years. A large number of women in Chile are believed to be subject to such abuse.

The law reforms the country's labour code and classifies sexual harassment as a misdemeanour. In this, it remains weaker than laws in force in other Latin American countries where sexual harassment is given the status of a crime and is not restricted to the workplace.

In 1993, a survey amongst workers in Santiago suggested that more than one fifth had experienced some sort of sexual harassment in the workplace. A third of these involved the individuals direct line manager, and another third by other people in authority within the company.

South Korea: Probe launched over chemical poisoning in sweatshop

Reports that eight Thai workers had been exposed to toxic chemicals at a plant run by Donghwa Digital have led to the arrest of two officials and the disappearance of the company president.

The officials are a plant manager and an administrative worker, who are being quizzed as to why they did not inform the employees of safety rules. The workers, all women, were allegedly exposed to hexane, a colourless solvent which can cause nerve damage on extended exposure, leaving them with what were described as 'crippling injuries'.

Representatives for the women said that they had been working in closed rooms without windows for up to 14 hours a day without protective clothing.

Donghwa Digital makes components for liquid crystal displays. Its president apparently fled in the aftermath of the report, and is being sought by police.

Kraft to curb advertising to children under 12

Prompted by the growing debate on childhood obesity, Kraft Foods has announced that it is to curb advertising of many of its snack food products to children. The company will phase out ads that currently run on television and radio shows.

The company has said that it will not stop all promotions to young children, particularly for foods that are more nutritious. It will continue to use cartoon characters in its promotional packaging.

The move affects products representing around $30bn of revenue for the company. It received a cautious welcome from campaigners on the issue, whilst being urged to go further and look at the other issues around packaging, web sits and toy give-aways.

Australia: James Hardie to pay $1.5bn over asbestos

James Hardie Industries is to sign a voluntary agreement to pay $1.5bn to asbestos victims, ending an extracted period where the company had been severely attacked for its stance and its impact on seriously ill people suffering from exposure.

The company said that it will create a special fund for cash aimed at the asbestos sufferers, which will receive annual payments from the company, set with an annual limit related to a set percentage of the company's cash flow.

US: Pfizer ends advertising of Celebrex following heart concerns

Pfizer has announced that it is to end the advertising around its top-selling drug Celebrex, following a study that suggested that high doses may lead to an increased risk of heart attacks.

The move will cover all forms of advertising, and follows comments by the Food and Drug Administration that it may consider requiring warnings on product labelling, or even that the drug should be withdrawn from sale altogether.

Critics of the company have argued that it has advertised the drug in an overly aggressive fashion, to the point of potentially encouraging overuse amongst patients that actually might receive little benefit. The complaints have reinforced Pfizer's reputation as an aggressive marketer of its drugs.

So far, the company has not gone so far as to suggest that the drug may actually be recalled from the shelves. It maintains that the drug is not dangerous when taken at normal levels.

Japan: NHK aims to restore trust following scandals

NHK, Japan's public service broadcaster, has screened a special show with a live appearance of the NHK President Katsuji Ebisawa, as part of an attempt to win back public trust following a series of scandals.

At the start of the programme, Ebisawa apologised for "damaging public trust", although the company has still not seen any high level resignations as a result of the scandals, which saw employees embezzling significant sums.

NHK had seen a significant revolt amongst viewers, with around 113,000 households across the country refusing to pay fees as a result of the scandals.

Canada: Imperial Tobacco accused of involvement in smuggling

According to court documents, Imperial Tobacco is alleged to have been involved in a cigarette smuggling network in the early 1990s and to have defrauded the government of more than $600m in taxes.

Imperial Tobacco has denied the allegations, insisting that it has taken part in no illegal activities. Although it knew that such activity took place, it had only dealt with authorised resellers.

According to the recently unsealed documents, the cigarettes entered Canada via the Akwesasne Mohawk reserve bordering Ontario, Quebec and the US.

Last month, the company's Montreal headquarters were raided, and saw thousands of documents seized. No charges have yet been brought.

General Motors and DaimlerChrysler take on the challenge of hybrid technology

General Motors and DaimlerChrysler have announced that they are to collaborate to develop fuel-efficient hybrid technology to challenge the current supremacy of Japanese motor giants Toyota and Honda.

The two companies have signed a memorandum of understanding that should pave to the way to greater innovation in fuel-saving technology, pooling the technical expertise of both companies.

In a statement, DaimlerChrysler boad member Thomas Weber said: "Our planned cooperation will draw on the technical expertise of two of the largest auto companies in the world. The result is expected to be a series of strong hybrid propulsion systems that will serve as a solution for our alternative powertrain needs."

Toyota, whose Prius hybrid cars are currently the market leader, said it would double the production of Prius next year.

Alcan awards $1m prize to Forest Stewardship Council

Alcan has awarded its first year's Alcan Prize for Sustainability to the Forest Stewardship Council, saying that the FSC is an example of how businesses, NGOs and governments can work together to achieve sustainability.

Travis Engen, president and CEO of Alcan said: "We congratulate the FSC for its accomplishments in promoting responsible management of the world's forests, and have a sincere hope that adding the first Alcan Prize for Sustainability to its funding will enable even greater achievements in the future".

The FSC is responsible for the evolution of standards to ensure environmentally sustainable management of forests. Its logo is used to promote products manufactured using timber from well managed sources.

The Alcan Prize for Sustainability was run in partnership with the International Business Leaders Forum (IBLF). Robert Davies, CEO of the IBLF, said: "In our view, the FSC exemplifies an environmental and social NGO at the centre of an exceptional and innovative partnership among business, the public sector, and civil society to raise business standards and have a practical impact on the pressing challenge of economic, environmental and social sustainability in forestry."

Unocal agrees in principle to settle human rights lawsuits

Unocal has said that it has reached an agreement in principle to settle a longstanding action based on allegations of corporate complicity in the use of enslaved labour for constructing the Yadana gas pipeline in Burma.

According to the lawyers representing villagers from the area, soldiers carried out a variety of atrocities in the process of clearing the pipeline's route on behalf of the company. The action was being brought under the contentious Alien Claims Torts Act, and was seen as a key test as to whether multinational corporations could be held responsible in U.S. courts for alleged violations in developing countries.

Unocal has consistently denied that it was responsible for any human rights violations during the pipeline construction.

CSR FEATURES from the Internet

CSR backlash - 15 Jan 2005 FROM National Post (Canada)

In classic CBC form, the producers of the network's flagship morning public affairs show, The Current, turned their guns on corporations. Following the format of juvenile college radio journalism, one of the show's staff went out to nail a couple of major corporations for their feeble attempts to bring corporate social responsibility to the tsunami crisis. Holt Renfrew's offer to turn 10% of a day's revenue to tsumani aid was portrayed as a cheap ploy. "Why just one day?"

Read full story

The great CSI debate - 14 Jan 2005 FROM Business in Africa

Often seen as a band-aid for all corporate cuts and bruises, the reality in today’s business world is that is Corporate Social Responsibility (CSR) initiatives and activities must go well beyond fancy rhetoric.

The management and entrenchment of Corporate Social Responsibility (CSR) in business has become an immense challenge for business leaders, especially with the inherent volatility and uncertainty of today’s economic environment. At best it can be likened to walking a tightrope.

Read full story

A Russian Twist on Responibility - 14 Jan 2005 FROM Moscow Times

For the last year corporate social responsibility, or CSR, has been the "in" business term in Moscow. It seems hardly a week goes by without a conference on CSR in some suitably swank hotel, where representatives of the government, big business and foreign consultants get together to talk about CSR and what it means for business in Russia. Given the buzz about CSR, one might expect that Russian business is adopting CSR as its new mantra, but the fact is that corporate social responsibility as defined internationally remains poorly developed in Russia

Read full story

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Did business go too far in responding to tsunami?

The business response to the tsunami disaster in Asia has been swift, substantial, and has provoked the kind of soul-searching debate over the role of companies in extraordinary times that gives an important taste of things to come.

As someone who writes on corporate social responsibility reasonably often, I can't remember the last time I wrote a piece on the nature of corporate philanthropy. The 'real' issues are much more to be located in the strategic challenges to the business licence to operate. It is about how businesses create wealth, not just how they spend it.

It takes a disaster to remind everyone that there is still a basic argument about putting something back. Interestingly, this time that response - which many of us accepted as wholly correct - has provoked a more public backlash than one might have expected in the circumstances. I have seen more economic commentators gently, but insistently pushing the "remember that this is shareholders' money" line than has been the case on previous occasions.

How to disentangle this? A couple of things are worth noting. First of all, the critics of CSR are often the keenest to portray it as being solely about corporate giving. This is, after all, where the business case can be portrayed as weak or absent, and where the point of it is furthest away from the established purpose of business - to create cash for shareholders. However keen we are to promote the business response to this disaster, we shouldn't fall into the trap of reinforcing this.

Corporate social responsibility, properly understood, is about sustainable wealth creation. It is about companies creating the maximum positive impact on society through their core activities, and supporting these by wisely investing in people and communities. In an age of growing criticism of the very nature and impact of business, such behaviour is nothing more than clear-sighted leadership. That's before you even get to dealing with issues around the obligations that should come with the rights that the legal entity of the corporation enjoys - corporate citizenship.

But smart businesses know that they cannot exist as little islands of prosperity amidst a sea of deprivation. Investing in the health of communities is essential to long term success. This is not the same as simply throwing away a certain amount of money on good causes simply to hit the conscience button.

Businesses after all are able to bring a number of aspects to community investment that reflects their strengths. Business is good at innovation, and where companies collaborate to produce solutions for social issues the results can often be powerful and sustainable. Business brings skills and product that can be important, particularly in building the capacity of civil society agents to be more effective. And business can take a more long term strategic view about what support needs to continue into the long term, whereas public giving is strongly influenced by today's headlines.

A lot of current corporate philanthropy now reflects this - and has moved from pure philanthropy to community investment. The social issue is selected because it has a strategic fit with the core business of the company. The approach is built around partnership with NGOs or other actors in that issue, and involves a range of mechanics including pro-bono support and skills transfer, cause-related marketing as well as cash. The good programmes are clear about the intended impact of such interventions, how that impact will be sustained and why it is in the business's interest to do it.

Of course, when a disaster like the tsunami comes along, there is no place to plead that this doesn't fit the strategy. Extraordinary events call for an extraordinary response.

Interestingly, this has been almost overwhelmingly an employee-driven response, which the companies have wisely supported. Most people watched with mounting horror, day after day, over the holiday period as the story unfolded before their eyes. By the time they came back to work in the new year, they were utterly committed to doing their bit. And the businesses responded quickly and in kind.

By January 10th, US companies were estimated to have donated more than $180m in cash and products. The World Business Council on Sustainable Development reported that its members (where there will be some overlap with the figure above) had by the same point donated over $250m. The UK's Business in the Community reported that donations from UK businesses had reached over 50m UK pounds.

Do these figures represent fair generosity, or a reckless waste of shareholders' cash?

This latter point seems to be a point of philosophy that can never be resolved. Surely, it seems to me, if shareholders find the thought of a single penny of their money going into the community to be too onerous then they simply shouldn't invest in the companies that do it. They do have a choice where they put their money after all. But since most well-run businesses understand that managing for the long term means motivating staff to feel proud of the company they work for, and to build good relationships within the community, they will probably only have the poorly run businesses left to invest in. Good luck to them on that.

The bigger question is whether that figure represents anything at all other than a diversion of already planned expenditure away from causes that need support to the high profile disaster of the moment. How many of these companies will be going to their AGM saying that, under those extraordinary circumstances, the corporate giving figure went up in order to maintain existing support to the community whilst helping the immediate crisis? Rather more, I fear, will be going back reporting the same level of corporate giving that they have traditionally reported, which means that someone has lost out big time.

This is where the corporate strategic overview needs to be brought into play. Many charities are fearful that the public appetite for giving, having been sated through the tsunami crisis, will be reduced for the causes to which they traditionally give. Businesses must be able to see the need to keep continuity here, and to shift the resource available accordingly.

This should not be reckless - there is of course a common-sense limit to the resource that business has available - but it is a reflection that the obligations of citizenship are most tested when the health of society is at real risk.

A minority of shareholders may grumble and make the comment that it is the shareholders who pay the management's salary. But they are wrong. It is the customers who pay the management's salary, and the employees whose good will is essential to making that happen. They should let them get on with building that relationship to ensure long term business success.

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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

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Business Respect - most recent edition added on 17th August 2008