Business Respect - CSR Dispatches No 92 - 9 Apr 2006

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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 'Social Footprint', a new tool aiming to measure corporate social impact.

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/92.html.

Copyright 2006 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

I always worry slightly about the tendency to want to see corporate social responsibility as a science, where carrying out a certain action should always deliver the same results. Businesses are, after all, made up of people. People change their minds. They do something different today to what they would have done yesterday. Poke them, and sometimes they'll jump one way, sometimes the other.

The scientific view also insists that everything can be measured and quantified. Certainly for as long as I've been involved in CSR, there has been a search on for the best way to measure performance and impact for community investment.

It is fair enough on the one hand. Any fool can give away a large amount of money to no great effect. You need to know that your programme is being well executed and achieving the desired benefits. But at the same time, sometimes there really are things that can't be measured without disproportionate cost, and it's a judgement call as to whether the ends are being achieved.

Not that people will stop trying. This issue we review the latest tool aiming to tackle the issue of corporate social impact - the 'Social Footprint'.

Voting continues on the website on the China question. The current position is as follows:

Internet companies faced with demands of censorship by China
Should do whatever they are required to do by the Chinese government 33 (8%)
Should obey laws but do whatever they can to uphold their home values 209 (54%)
Should refuse to compromise even if this means not doing business in China 147 (38%)

That places quite a lot of you in the fundamentalist 'no compromise' camp, although not the majority. That may, of course, change after a bit more voting!

Thanks to the 389 people that have voted so far.

Mallen Baker
mallen@mallenbaker.net

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CSR News 9 Apr 2006

Russia: Yukos condemns arrest of Vasili Aleksanyan

Russian oil giant Yukos has condemned the arrest of Vasili Aleksanyan, one of its senior executives, saying that it is yet another stage in the politically motivated persecution of the company that has driven it to bankruptcy.

Mr Aleksanyan is accused on money laundering, although formal charges have yet to be brought. He was originally appointed to work to protect Yukos assets in its fight against bankruptcy.

Yukos described the police action as 'brutal' and said that Mr Aleksanyan had been targeted simmply because he had accepted a position to work for the company. Most of the companies senior management has relocated to London.

BP recognised for carbon leadership

The Environmental Markets Association (EMA) has announced that BP is to be awarded its first Leadership in Environmental Markets Award, to celebrate the company's early action on carbon and climate change.

BP has attracted praise since it was the first major oil company to break ranks with the industry denial on climate change, and to state that precautionary action was justified. Since that statement, the company has reduced its own emissions by 10 percent below 1990 levels and has begun a cycle of major investment in renewable energy sources.

The company has also partnered with Edison International on a project to sequester carbon dioxide in oil wells.

Japan: Food companies abandon whaling industry

Five major food companies have dealt a blow to the Japanese whaling industry by pulling support from the company that runs most of the country's whaling ships.

The companies, Nissui, Gortons, Sealord and Bluewater Seafoods have divested their one-third share in Kyodo Senpaku. The move comes at the point when Japan and other pro-whaling nations seem likely to achieve a majority in the International Whaling Commission and follows some concentrated campaigning by environmental campaigners.

Greenpeace said that the result showed the power of consumers in globalised markets.

Alliance of global companies to develop energy self-sufficient buildings

United Technologies and Lafarge Group have joined together with the World Business Council for Sustainable Development (WBCSD) to create an alliance to show how buildings can be designed and constructed to run effectively without using energy from external power grids and with zero carbon emissions.

Other companies are expected to join the project to transform how buildings are built and operated.

According to the WBCSD, buildings today account for 40 percent of energy consumption in developed countries. The project contends that by 2050 all new buildings could be produced to a standard as to consume zero externally supplied energy with no resultant carbon emissions. The target would be achieved with a mix of onsite power generation and ultra-efficient building materials.

China: Shenzhen city government to build CSR into public spending

The Shenzhen city government has said that it may soon refuse to give contracts to companies that operate sweatshops or otherwise do not meet their social responsibilities, in a first indication of how CSR is influencing decision makers in China.

According to city government sources, a set of CSR guidelines is to be produced by the end of 2006, which may include the provisions relating to the terms on which the government would grant contracts to private firms.

In a report released at the same time, figures were given suggesting that Shenshen companies have a long way still to go on CSR. Less than 10 percent of respondents in a survey of employers and workers said that Shenshen companies fulfilled their social responsibilities.

The report suggested that the government might create a CSR standard against which to vet suppliers, and instigate an award system to recognise best practice.

Parmalat to be sued by Bank of America

Bank of America has secured permission from a US judge to bring a $1bn fraud suit against disgraced dairy firm Parmalat.

The bank is charging the company with fraud, conspiracy and deceit over the state of its finances. Parmalat was declared bankrupt in 2003.

Parmalat is itself suing a large number of banks, including Bank of America, for around $10bn alleging that the banks played a significant role in the company's downfall.

Former Parmalat chief, Calisto Tanzi is still on trial for fraud and false accounting.

Hong Kong: Controversy over cut price cigarettes

Philip Morris has provoked criticism in Hong Kong over its recent steep price reductions on some of its key brands, a move which some are saying is driven by the desire to attract new young smokers before a ban of smoking in public places comes into force.

According to the Standard newspaper, the company is due to cut 20 percent from the prices of brands Marlboro and Next. The company has said that the move is simply to be able to take on the lower priced brands in a key part of the market.

However, Kwok Ka-ki, Hong Kong's medical sector legislator, said that the price cut appeared to be directed at attracting young people.

Bangladesh: Government aims to punish fire hazard factories

The Bangladesh government is to carry out a concerted push against factories that are flaunting safety rules following a rash of factory fires that have led to loss of life.

The recent fires have particularly affected garment firms, many of which have failed to meet requirements over procedures and present fire-fighting equipment. In addition to the government's initiative, the Bangladesh Garment Manufacturers and Exporters Association is also target non-compliant factories. It has said that it is aware of around 170 factories that carry a high risk of fire.

UK: Catering firm hit by public concern on healthy school dinners

Major catering company Compass has said that its business providing school meals in the UK has suffered from the sudden explosion of criticism of unhealthy school dinners following the high profile TV series on the subject by celebrity chef Jamie Oliver.

Compass was criticised in the programme for some of its products, leading the company to review the menu choices it offers, replacing some of the worst items with a greater variety of fresh produce. The company said the transition towards healthier eating in schools was still hampered by resistance to change on the part of schoolchildren used to a diet of highly processed foods.

The attention has also shifted to the other influences on children's choice of diet. Consumer organisations have criticised the UK's communications regulator for rejecting a blanket ban on food advertising aimed at children for products containing large amounts of fat, salt or suger. The Jamie Oliver programmes, in addition to looking at provisions in schools, identified the awareness of good diet at home as being a key factor leading to problems.

South Korea: Hyundai exec faces corruption charges

Lee Ju-eun, the chief executive of Hyundai Motor's subsidiary Glovis, has been arrested on charges arising from the alleged embezzlement of 7bn won for use in political lobbying.

The move follows the previous arrest of Kim Jae-rok on charges of unlawful lobbying. Other of the company's top officials have been barred from leaving the country whilst investigations continue.

Hyundai has previously been in trouble over election campaign financing - it faced an investigation three years ago leading to the conviction of its vice-chairman Kim Dong Jin.

US: Zurich Financial Services settles claim over bid-rigging

Zurich Financial Services is to pay $153m over charges by New York, Illinois and Connecticut of bid-rigging. The company, which has not admitted any illegality, was alleged to have conspired with other insurers to fix prices for policies.

Zurich was credited by New York state Attorney Eliot Spitzer for its willingness to recognise the problem and to promise significant reforms to its operations.

The move follows similar charges against American International Group, which paid $1.6bn in compensation as a result.

Australia: Telstra tells government compulsory CSR reporting would be a burden

Telstra has claimed at a parliamentary committee in Canberra that formal requirements for CSR reporting would be an unwelcome extra burden on business that could put Australian companies at a disadvantage.

Telstra's company secretary, Douglas Gration, suggested that the company saw its Universal Service Obligation as a regulatory burden. He argued that once such measures became required by law, the impetus changes from looking at how the company can better engage with its community into one of simply satisfying the regulator.

The Parliamentary Committee is due to report in June on how companies can best take responsibility for issues beyond the interests of shareholders. It will recommend whether a voluntary or regulatory approach is preferred.

Nigeria: Oil worker hostages released

Militants have released three oil workers that have been held hostage for over a month as part of a protest against how Nigeria's oil wealth could benefit poorer communities more.

The kidnapping took place as part of a wider wave of violent attacks on oil installations in the Niger Delta. The men work for a contractor operating on behalf of Shell and are all said to be in good health. The end of the kidnapping is unlikely to signal any pause in the violent attacks on Western targets in the region.

One of the demands of the militant group is for $1.5bn in compensation from Shell for pollution in the Delta.

CSR FEATURES from the Internet

Corporate social responsibility a necessity - 30 Mar 2006 FROM The Age

Research shows that doing the right thing because it is the right thing can be more lucrative than being motivated solely by profit, writes Tim Costello.

If recent newspaper headlines are a measure of Australian corporate responsibility, then this country has a long way to go.

Read full story

This business of moral coercion is just a hoax - 29 Mar 2006 FROM The Australian

Corporate social responsibility is a con job. If we needed reminding about this absurd craze sweeping the business world, it came a few weeks ago when AWB boss Andrew Lindberg resigned. His company had paid $290 million in illegal kickbacks to Saddam Hussein's tyrannical regime in Iraq.

Yet, while those illegal bribes were being siphoned off to Iraq under the UN oil for food program, Lindberg was being hailed by newspapers hawking the latest Corporate Responsibility Index as one of the leaders of corporate social responsibility in Australia. Why? Because talk about corporate social responsibility fell off Lindberg's lips as easily as Australian wheat rolled into Iraq, lubricated by AWB bribes.

Read full story

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Measuring corporate social impact - art or science?

Article by Mallen Baker

For years, people wanting to measure and report real performance in corporate social responsibility have been frustrated over one area in particular - the apparent impossibility in making any kind of real objective measurement of the company's social impact. Now, a new tool claims to solve this problem - the Social Footprint.

The Social Footprint, produced by the Centre for Sustainable Innovation, promises great things. It is, according to the Centre, "a corporate sustainability measurement and reporting method that quantifies the social impact of organizations on people". Further, it "produces the true bottom-line oriented measures of impact" and says that this means that 'true Triple Bottom Line measures can now be taken and reported for the very first time'. This is heady stuff indeed.

How does it do this? In some ways, it takes an approach that will be familiar to some as the 'ecological footprint' where impact on the environment is assessed. The Social Footprint focuses on the concept of 'social capital'. Unlike environmental or natural capital which is limited and which can not easily be created by humans, social capital is produced by people and can be grown virtually at will.

The tool is based on what is described as the 'quotients approach'. Simply it goes like this. You take any aspect of behaviour and check whether it is sustainable relative to the impact it is having. For instance, an environmental example would be if a certain geographical region produces 10m gallons of freshwater per year, and a company or community in the region uses 15m gallons per year, then you do the simply calculation of 15/10 = 1.5. Any figure greater than 1, in this example, is unsustainable.

That example, of course, relates to an ecological footprint. Environmental impact is very much about science, so this method is generally a straightforward one. It is a much more controversial proposition to apply the same logic to an area as difficult to define as social capital.

They do, however, give some examples of how this would work. If a certain community has a need for $10m a year in order to provide a primary education for all of its children, but residents are only spending $2m a year, then the calculation 2m/10m = 0.2. In the social cases, anything less than 1 is unsustainable.

The concept, therefore, hinges on defining 'a minimum level of sufficiency for the social capital of interest to us - values that fall below that level can lead to undesirable, if not dangerous, social outcomes.'

This is one of those arguments that sounds great in theory, but becomes impossible in practice. Even the Centre's own simple example does not stand up to any kind of scientific approach. Who says that it will cost $10m to provide primary education for children in that area? That figure can only be taken as a given if (a) education services are being provided as economically efficiently as possible, with no wasted spending (b) the quality and the focus of education is as good as it can possibly be, and consistently so wherever it is delivered and (c) there is some meaningful threshold that shows that the $10m version of education provides a consensually agreed level of attainment that $9m cannot. This is not going to happen.

In most educational situations that one can observe around the world, the issue is not simply one of resources, it is also one of leadership within schools, of good quality management of processes, and a culture of support for the learning process by parents. To turn the issue of educational provision into a mathematical equation that ignores qualitative facts will surely produce the wrong answer every time.

When the Centre tries to apply its methodology to a more complex real-life example, the problem becomes even more obvious. What they have done is to look at Wal-Mart and its contribution, or lack of it, to the achievement of the Millennium Development Goals (MDG).

The argument goes like this. The MDG have been agreed by the UN and most nations as the top development targets, covering areas such as eradicating extreme poverty. In addition, the UN has identified a threshold of 0.7 percent of GDP from developed nations in order to achieve these. Every citizen has a per capita share of the responsibility to meet these goals. Wal-Mart employs over a million US citizens, and therefore we can ask whether or not Wal-Mart is contributing its pro rata share of the US contribution to fully fund the MDGs.

Needless to say, if you do the sums against Wal-Mart, it is woefully failing the task. In fact Wal-Mart apparently contributed to the MDGs only through their payment of federal taxes.

But the apparent logic of the exercise is pretty spurious, unfortunately. The idea that any organisation is responsible on a per capita basis relating to its workforce is simply nonsensical. Governments take responsibility for national goals, and may find resources for these from the places where those resources are best found - they are not obligations spread across the population.

Nothing in this approach factors in whatever impact, positive or negative, Wal-Mart has through the basics of its trade. The fact that it sources goods from many developing countries may be a factor that creates jobs and wealth in those countries. There may be other aspects of how it operates that would create further problems in those countries, particularly where genuine sweatshops operate. In any case, quantifying such impacts to feed into the equation is impossible.

Likewise, the simple assumption that everyone bears equal responsibility for everything is too simplistic. Governments understand, for instance, that wealthy people should contribute more to meeting such goals than people on a minimum wage. If you took any measure - even one fully funded by government, and measured it against a workforce like Wal-Mart's where people are predominantly at the lowest end of the payscale - you would come up with a deficit on this system for this reason.

And then, of course, there are still some other equally challenging assumptions made. The figure of 0.7 percent of GDP has been a figure promoted as a good level of national investment in world development for many years. There is certainly no equation proving that this figure is actually the real cost of meeting the millennium goals - a cost that we simply don't know. Their achievement will probably come much more as a result of promoting the development of sustainable trade in developing countries, tackling cultures of corruption as well as providing some of the basic infrastructure than it will by the transfer of aid funds. In any case, it is certainly a harder figure to quantify than that $10m for the theoretical education bill.

In short, the Social Footprint comes up with a simplistic equation that is bound to mark companies down for behaving unsustainably without providing a real metric that measures what's going on. It is a brave attempt, but really simply underlines why everyone has been finding this whole field so difficult for so long.

Story link

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In the news from the latest issue

US: GlaxoSmithKline could face $6bn risk over diabetes drug Avandia

Bangladesh: 21 people killed in factory fire

Uganda: Tullow Oil controversially get licence to flare gas

UK: Alcohol health labelling may become compulsory

US: Key companies quit climate change coalition

Australia: Google refuses government request to censor videos

Japan: Court finds tobacco company not liable for illnesses

UK mining groups failing to reduce deaths

Zambia: Chinese companies accused of creating 'slave labour' conditions

UK: GlaxoSmithKline targets low cost vaccine for malaria

South Africa: Apartheid case against companies divides opinion

US: Pension group TIAA-Cref disinvests from Sudan

US: UTStarcom pays $3m for China bribery

UK: Ryanair attacked for "puerile and childish" payment policy

... more news stories

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