Business Respect - CSR Dispatches No 87 - 30 Oct 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 review how Tamiflu maker Roche is coping with the raised expectations on bird flu.

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/87.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

Response to last issue's articles about whether or not companies that make products that kill can be ever be socially responsible was more substantial than for any previous article we've carried. Most were very supportive and appreciative, with a few more critical. Thanks for all of those, and apologies that we have not been able to respond to all.

For those of our readers based in the UK who like to explore some of the grey areas, you may be interested in the first Business in the Community marketplace seminar taking place on the morning of 10th November. Covering three themes - corporate lobbying, supporting vulnerable customers, and managing controversy over your products and services - it will cover a lot of interesting ground. You can find details at the address http://www.bitc.org.uk/events/events_calendar/emerging_market.html

Please note - we don't generally cover event details in this newsletter, but we do reserve the right to put in ones that Mallen is directly involved in! So please don't send us event details for listings.

Mallen will be at the BSR conference in Washington next week, and will look forward to meeting any Business Respect readers there. Do feel free if you see him to walk right up and say hi.

Voting on the website has been brisk. The proposition "Companies that make products that kill can be socially responsible" has produced the following views so far.

If they seek to reduce harm and manage their other impacts 142 (35%)
If they diversify out of harmful practices 77 (19%)
Under no circumstances 182 (45%)

Thanks to the 401 people that have voted so far. There is still time to make your views known!

Mallen Baker
Vanessa Wood
editors@mallenbaker.net

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CSR News 30 Oct 2005

Details revealed on oil-for-food kickbacks

2,200 companies have been accused of paying $1.8 bn in illicit payments to Saddam Hussein's government as part of the United Nations oil-for-food program by an independent report produced by a UN committee.

According to the report, the Iraqi government followed a policy of favouring France and Russia, for following policies deemed to be more 'friendly' to the regime. Companies from different countries tried to reposition themselves with appropriate connections to be able to benefit from the trade.

Companies that are alleged to have paid special surcharges to the regime are named in the report. DaimlerChrysler is alleged to have paid $7,000, and Volvo Construction Equipment paid $317,000. One third of the total oil exported ended up with Russian companies, such as Lukoil and TNK.

Austria: Regulators investigate BAWAG loan to Refco boss

The Austrian authorities are reviewing whether a 350m euro loan paid to former Refco chief executive Phillip Bennett was made in breach of proper rules. BAWAG has denied that rules had been broken, although it admitted that management had been at fault in failing to submit the loan to the bank's credit committee.

American commodities and financial futures firm Refco has been rocked by the charging of Bennett with fraud and concealing a loan ahead of a stock market flotation. Its former boss could face 20 years in jail if found guilty. The action has seen the company's share price drop sharply and it has now filed for bankruptcy.

"Toxic Trash" gathers in Africa

The Basel Action Network (BAN) has said that large quantities of obsolete computers and other electronic equipment sent to Nigeria for 're-use and repair' and ending up being dumped creating serious environmental contamination from toxic components.

The organisation has produced a photo-documentary report showing some of the scrap waste which had been sent in the belief it would be recycled and put to good use. The report says that although there is a legitimate market for computers, TVs and cell phones, local receivers complain that as much as 75% of the contents of containers shipped to Lagos each month are junk, not repairable nor marketable. This electronic waste is being discarded and routinely burned.

Jim Puckett, coordinator of BAN said: "Re-use is a good thing, bridging the digital divide is a good thing, but exporting loads of technotrash in the name of these lofty ideals and seriously damaging the environment and health of poor communities in developing countries is criminal".

Textiles Global Union attacks Chinese social responsibility standard

Neil Kearney, General Secretary of Textiles Global Union, said that the Chinese textiles standard CSC9000T is a watered-down version of an effective multi-stakeholder code, SA8000, which was beginning to have an impact in factories in China. Companies which support this new initiative would, he claimed, be worsening slave-like conditions of many Chinese workers.

The CSC9000T code has been produced in response to the growing demand for assurance on working conditions in factories in developing countries, and the belief in China that external standards devised in countries with different values and approaches were not effective for Chinese businesses.

According to Mr Kearney, this represents an undermining of effective global standards. In particular, he highlighted the fact that CSC9000T follows the legal position that the only union workers can join is the All China Federation of Trade Unions, controlled by the state, and that it does not provide for the guarantee of a 'living wage', control excessive working hours, and prevent discrimination on the grounds of political affiliation or sexual orientation.

He attacked companies that might be supporting the development of CSC9000T, and particularly singled out Canadian company Hudson's Bay.

Mr Kerney said: ”With even a good code, who would trust the Chinese authorities to implement it when they don't enforce their own labour legislation and they collude with factories to gain certification under external codes through cheating ? One recent study suggested that nine out of every ten Chinese factories were breaking the law and that seven out of eight were maintaining falsified records of their employment practices”.

Botswana: Mining companies accused of flouting ILO conventions

The Botswana Federation of Trade Unions (BFTU) has said that Debswana and BCL violated International Labour Organisation (ILO) Conventions in sacking members of the Botswana Mining Worker's Union (BMWU).

The union said that the two mining companies had denied workers freedom of association and the right to organise collectively.

Debswana, the joint venture between the Government of Botswana and De Beers, had dismissed 461 employees for participating in an illegal strike, although nearly 4,000 workers actually took part. The BFTU claimed that the dismissal of only the workers that had been singled out was in contravention of Debswana's own disciplinary procedures.

The BFTU alleged that BCL had dismissed four BMWU members for their activity as union representatives, in breach of the company's code of conduct that holds the union accountable for the actions of its representatives, rather than the individual.

US: Congress shields gunmakers from lawsuits

The US Congress has passed legislation to protect firearms manufacturers from liability lawsuits. The move hands the National Rifle Association its strongest legislative victory for some time.

The bill will have the consequence of ending a series of lawsuits which have sought to hold gunmakers accountable for negligance when their weapons are used in crimes. Only cases where defective weapons or criminal behaviour by the gun maker are involved will remain basis for bringing a lawsuit.

President Bush welcomed the passage of the bill, arguing that it would end "frivolous lawsuits".

Japan: Executives pay the price for unpaid insurance benefits

Senior executives of life insurance company Meiji Yasuda have resigned to take responsibility for a scandal over the firm's failure to pay insurance claims. Company President Ryotaro Kaneko, Chairman Mikihiko Miyamoto and Deputy President Yukichi Ozawa are to step down, although they claim that they had no knowledge of improperly refused payments.

President Kaneko admitted that payment failures had occurred as a result of a failure of internal mechanisms that were his responsibility.

Investigations have suggested that there have been over 1,000 cases of unpaid insurance benefits, to an amount over 5bn yen, which may have been the result of the company adopting a policy of limiting the number of pay outs.

Oil man indicted over Saddam Hussein kickbacks

Oscar Wyatt Jr has been indicted by a New York federal court on charges of having paid millions of dollars to the Saddam Hussein regime to sell Iraqi oil under the United Nations oil-for-food programme.

The indictment says that Mr Wyatt arranged for secret payments to be made through overseas companies that he set up and other intermediaries, with the money ending up in Iraqi government accounts in a Jordanian bank.

Wyatt was arrested by the Federal Bureau of Investigation and has been released on $2.5m bail. He denies the charges.

McDonald's to include nutrition information on packaging

McDonald's has said that it is to put nutritional information on its food packaging in restaurants in what it describes as a first for the fast food sector.

The labelling, which will use simple icons and bar charts in an attempt to make information easily understandable, will focus on five key aspects thought by experts to be most meaningful in terms of nutrition - calories, protein, carbohydrates, fat and sodium.

The move has been welcomed by some campaigners, although others have criticised the move for failing to give information before customers have ordered rather than afterwards.

Wal-Mart pledges major focus on the environment

Wal-Mart Chief Executive Lee Scott has said that Wal-Mart will now aim to become a 'good steward for the environment' with a target ultimately of using only renewable energy sources and producing zero waste.

Speaking to the store's employees in a speech made public, he said: As one of the largest companies in the world, with an expanding global presence, environmental problems are our problems." He added that the company was coming to realise that many of the issues where the company had been on the defensive represented opportunities not problems.

Targets adopted by the company include doubling the fuel efficiency of the truck fleet within 10 years, cutting solid waste produced by 25 percent within 3 years, and investing $500m per year in efficient energy technologies.

CSR FEATURES from the Internet

Corporate sector has to do more to clean up its act - 25 Oct 2005 FROM Shanghai Daily

The Asian Development Bank argues in its Asian Environment Outlook 2005 that the corporate world needs to be more responsible for environmental protection, otherwise the Asia-Pacific region's economic growth will not be sustainable.

Sustained economic growth in Asia and the Pacific — especially in China, India, and parts of Southeast Asia — has led to a rapid decline in income-based poverty. Unfortunately, this has been accompanied by a corresponding rise in pollution and the degradation of natural resources.

Read full story

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If Roche sneezes, the Pharmaceutical Industry catches a cold

Article by Mallen Baker

Some years after the pharmaceutical industry first shot itself squarely in the foot when it tried to sue the South African government, the issue of patents for essential drugs is once again centre stage. This time it is predominantly flu drug Tamiflu maker Roche that has to resolve the dilemmas at the heart of the industry.

Companies like Roche, GlaxoSmithKline, Astrazeneca and Bristol Myers Squibb are not drug companies. They are innovation companies. They invest huge sums in the development of new effective drugs - and then are able for a limited time to use patents to recoup the cost of that innovation before generic manufacturers who bear none of the costs of research can move in to copy and produce cheaper versions. Without the patent protection, they cannot innovate. Without new drugs in the pipeline, they will fail.

It is a business model that makes perfect sense - until you add millions of people in poor countries who need the products of that innovation in order to live, with governments that either lack the means or the will to purchase the required drugs at full price. The innovation model is not designed to deal with pandemics. That is the heart of the dilemma.

When this first entered into the frame with the onset of AIDS as a tragic reality in Africa, the companies found their business model fundamentally challenged by a broad mass of the public who, disinclined to dwell on the niceties of pricing policies, rode a wave of moral revulsion that profits could be made from drugs that people needed to live. The industry did what companies often do when faced with such a fundamental crisis - they panicked. They defended the status quo, realising only too late that the rules had fundamentally changed.

Roche is clearly taking greater care, having learnt some of the lessons of the past. Having initially resisted calls for its anti-flu drug Tamiflu (not developed by Roche, but licensed to it) to be made available to others to manufacture, it has begun negotiations with other companies on the basis of licencing them to manufacture the drug to meet what will clearly become huge worldwide demand. Generic firms Teva, Barr, Mylan and Ranbaxy will be starting production within a month, and these will almost certainly be followed by others.

The main concern for the company has been to ensure it can supply governments with supplies. Roche has doubled production each year in the last three years, and is due to massively increase this rate of growth. However, this won't be enough. At least forty governments have placed massive orders to be able to protect their populations in the event that the feared mutation of bird flu takes place.

One of the challenges the company faces is just how to prioritise its supplies. Lots of companies, for instance, have been building up stockpiles to protect their employees in the event of bird flu. Natural enough - surely a sign of social responsibility on the part of those companies.

Except that the stockpiling of the drug for the feared pandemic may mean shortages this winter for ordinary flu. Roche has now halted shipments of Tamiflu in the US to try to prevent this hoarding and ensure that supplies will be available for the winter. A website running a vote on whether companies are irresponsible to hoard is running at a 75% yes vote. Sometimes you just can't win.

Roche is, however, playing a delicate game. It has kept the initiative by offering to licence the drug. But governments, particularly in Asia, are concerned that the licence fee will be set too high, and have indicated their willingness to disregard the patent if this is the case. Fundamentally, the dilemma remains. The industry cannot resolve this dilemma on its own - it is time the UN and governments faced up to this inbuilt problem rather than simply taking the easy route of always blaming the companies.

Ironically, Roche may ultimately find that the problem - and the benefit - passes from it altogether. It is currently in dispute with the drug's developer, Gilead Sciences, which had granted Roche the contract to market and promote the drug. Gilead had been concerned that Roche had not been sufficiently committed to the drug, and had served a notice of termination. This has gone to arbitration, which must be completed in 18 months. Until then, any licences to produce Tamiflu need to be obtained from Roche. Gilead's patents do not expire until 2016.

Roche has acted well, and avoided the negative publicity of the AIDS drug producers. Fundamentally, however, it faces a crisis where its shareholders will only be served if their interests are put second - but note not forgotten or disregarded - to action that is equal to that required to meet the potential human catastrophe. Any company in Roche's position that moves too quickly to maximise the profit benefit of the surge in demands is apt to find its licence to operate well and truly revoked.

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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

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