Business Respect - CSR Dispatches No 94 - 7 May 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, following the purchase of the Body Shop by L'Oreal we look at the dilemmas presented by the niche ethical brands.

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/94.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

Last time, I announced that I had set up a CSR-specific 'swicki' search engine on the website. This hasn't proven to be an outstanding success. First of all, the numbering of results seems to be a little strange, with results 1-15 being followed by results 30-45 for example. Secondly, a lot of the same pages seem to get duplicated.

Having looked at some of the more popular swickis, these problems don't seem to occur, so I have sent a note off to the good people that run it and hope to see if there's a solveable problem here. The principle of a search engine that the community continually improves is such an attractive one that I am reluctant to give up on it at the first hurdle. However, I'm not sure it proves as helpful as it should in its current incarnation.

Promising much, but not always delivering - it could almost be a lead-in for this issue's main article on the ethical niche brands. There are some pretty small companies here whose iconic importance has become huge - this article discusses some of the pros and the cons following the sale of the Body Shop to L'Oreal.

The subject is now the focus on the website vote. It goes as follows:

Companies that trade on their ethics such as the Body Shop should:

* Stay independent to preserve their brand
* Accept offers from responsible buyers that may help the company move forward
* Operate purely by the logic of the market, it's a brand not a religion

Let us have your views!

That therefore means the close of the previous vote. The final picture was:

Internet companies faced with demands of censorship by China
Should do whatever they are required to do by the Chinese government 53 (9%)
Should obey laws but do whatever they can to uphold their home values 323 (55%)
Should refuse to compromise even if this means not doing business in China 214 (36%)

Many thanks to the 590 people who voted.

Mallen Baker
mallen@mallenbaker.net

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CSR News 7 May 2006

Intel invests $1bn in low cost PCs for developing countries

Intel, the world's largest manufacturer of computer chips, has launched a new personal computer designed to provide low cost but good quality machines for developing countries.

The machines, currently labelled 'eduwise' will have wireless networking capabilities and will be able to run either the Microsoft Windows or the Linux operating system.

The company said that the move was part of a $1bn investment by the company in promoting the use of computers in developing countries. "No-one wants to cross the digital divide with yesterday's technology" said a spokesman.

Intel has already agreed a deal with Mexico to provide low cost PCs to 300,000 teachers over the next year.

Child labour figures fall for the first time

According to the International Labour Organisation (ILO), the number of children working has gone down by 11 percent to 218 million. This is the first time the figures have declined, and the ILO hailed the news by suggesting that many types of child labour could be eradicated in a decade.

Latin America saw the steepest decline. Brazil, for instance, saw numbers of very small children in work decline by 60 percent. However, there was no real decline in Africa, and declines have been greater in hazardous industries, with a 26 percent reduction. Asia remains the region where the most child labour continues.

The shift has been attributed to campaigns and new laws, with a number of countries beginning to focus on the problem with much greater seriousness.

US: Fizzy drinks companies to pull out of schools

Coca Cola, PepsiCo and Cadbury Schweppes have said that they are to pull most fizzy drinks from US schools, selling only water, juice and low calorie drinks. The deal was brokered by former President Bill Clinton and the American Heart Association.

The move is the latest development in a world-wide response to growing problems of childhood obesity and increasing criticism of the role of the food and drink companies. The change will influence around 35m American school children, around 16 percent of whom are considered to be overweight.

In the face of the controversy, a number of district and state legislatures have been considering a total ban on vending machines in schools - the voluntary move by the companies may mean that they are still able to maintain a presence. A number of schools say they benefit from the income from such arrangements.

Bill Clinton said that he had suffered his own struggles with weight, high cholesterol and other health problems because of a diet with too much fast food.

EU: Chemicals cartel fined 388m euros

Seven chemicals companies have been fined 388m euros for running a cartel that exchanged commercially important information and fixed prices of hydrogen peroxide and perborate.

The companies concerned are Solvay, Arkema, Akzo Nobel, Kemira, FMC Foret and Snia and Edison. Two other companies had been involved but escaped fines, which were Degussa and Air Liquide.

The EU Competition Commissioner Neelie Kroes said that the size of the fines were intended to reflect the seriousness of the offence, especially since some of the companies were repeat offenders.

Ford invites customers to offset carbon emissions

Ford Motor Company has announced a 'Greener Miles' programme that invites Ford owners to purhase carbon offsets to cover their vehicle usage.

The drivers are asked to visit the website of the company's partner in the scheme, TerraPass, and to calculate the amount of CO2 emissions they generate in a year. They can then support the production of renewable energy programmes to the equivalent amount.

Ford has said that the scheme is designed to help people in the short term to address the growing concern over climate change. It is not intended to become an alternative to work to improve the energy efficiency of vehicles, work which has proven difficult over the last few years.

South Korea: Hyundai chairman charged with embezzlement

Chung Mong-Koo, the chairman of Hyundai Motor Group, has been arrested on embezzlement charges. The move follows accusations that he and the company paid politicians and officials for business advantage.

The arrest is the latest development in an investigation into the company that has been running over the last two months.

Mr Chung denies the charges. His place at the company will now be taken by the vice chairman and chief executive Kim Dong-jin.

UN Principles for Responsible Investment launched by Kofi Annan

Kofi Annan has signalled the launch of the new Principles for Responsible Investment by sounding the opening bell and the New York stock exchange, flanked by pension funds worth more than $2,000bn.

The Principles represent the first global charter that places environmental, social and governance standards at the heart of investment strategy. The six principles for responsible investment aim to show how the long term value of assets is supported by sustainable practices.

The Principles were developed during a nearly year-long process convened by the UN Secretary-General and coordinated by the UN Environment Programme Finance Initiative (UNEP FI) and the UN Global Compact.

UN Secretary General Kofi Annan said: "These Principles grew out of the understanding that while finance fuels the global economy, investment decision-making does not sufficiently reflect environmental, social and corporate governance considerations – or put another way, the tenets of sustainable development".

Environmental campaign groups have expressed scepticism about the Principles, arguing that voluntary frameworks make little difference to decisions actually made on the ground. But other commentators have noted that the new initiative begins with a greater degree of commitment than previous initiatives.

Philip Morris apologises for Maori 'mistake'

Louis Camilleri, the chief executive of Altria, parent group of Philip Morris, has apologised for launching a brand of cigarettes in Israel called 'Maori Mix' that used imagery from the Maori people and a map of New Zealand.

The public acknowledgement of error was prompted by the complaint made at the company's AGM by anti-smoking activist Shane Bradbrook, who accused the firm of abusing the Maori's culture and traditions. Smoking is prevalent amongst Maoris - it is the leading cause of death.

The Maori have gone to great lengths in the past in preserving their imagery, creating a trademark called Toi Iho that provides a process for the development of products using Maori imagery and culture.

Chad: World Bank and government reach interim deal over oil

The World Bank has announced that it has reached an interim agreement with the government of Chad to unfreeze some of the blocked oil profits and to resume lending following the recent dispute over how money was to be used.

The Bank is to resume lending and to release funds from an escrow account in recognition of new guarantees about how these resources will help to meet needs in education, health, community development and other social causes.

Chad had torn up a previous deal whereby World Bank support for oil development was achieved through guaranteeing that revenues would go to the support of the poor, as well as into a fund for future generations. The government had said that it needed resource to support its security in the face of insurgency threats. In response, the World Bank had frozen funds. Under the new deal, spending on security will not come from the released funds.

The World Bank has said that the interim deal will provide time to work on a further, more permanent agreement.

Chevron CEO confronted by rainforest activists

Two rainforest leaders called upon Chevron CEO David O'Reilly at the company's AGM to face its responsibilities for pollution in the Ecuadorian Amazon.

Emergildo Criollo, of the Cofan people travelled to the AGM and argued that Chevron activity had put the survival of his tribe's culture at risk.

O'Reilly acknowledged that there were issues in the former concession where Texaco, bought by Chevron in 2001, operated an oil field in partnership with the government of Ecuador. But he insisted that it was the government and the Ecuador national oil company that bore the responsibility for what he described as 'reprehensible behaviour'.

As the argument at the AGM proceeded, one shareholder apparently not involved in the dispute called upon the company to help the situation regardless of whether it was actually liable.

Atossa Soltani, Executive Director, of Amazon Watch, criticised Mr O'Reilly's position: "He is either being lied to by his local counsel or he chooses to be blind to the mountain of evidence being produced at trial."

Indonesia: Freeport faces official audit

Indonesia's Supreme Audit Agency (BPK) is to audit Freeport Indonesia to establish whether the company's reports provide an accurate reflection of how its profits are distributed.

The move follows accusations that the company's activities are arranged to benefit foreign investors disproportionately compared to the poor communities where it operates. In particular, the company had been accused of showing a different figure in its reports to those recorded by the government's own revenue records.

The head of the BPK, Anwar Nasution, said that the audit was important to remove suspicions and unrest around Freeport's activity.

Freeport has said that it has nothing to hide, and it has no objection to the audit.

CSR FEATURES from the Internet

Good, Better, Best Corporate Citizens - 4 May 2006 FROM The Motley Fool

For anyone who has even a passing interest in identifying ethical -- or socially responsible -- companies to invest in, a list of such stocks can be interesting reading indeed. Business Ethics magazine recently released its list of the "100 Best Corporate Citizens," which not only piqued my interest but also inspired contemplation of the criteria by which some of us weigh corporate "ethics" or "social responsibility."

Read full story

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Scratching a niche

Article by Mallen Baker

There has been a furious reaction to the shock news that HSBC is to take over the UK's Co-operative Bank in its attempt to reach a new ethical market segment.

Or at least there would be, if that particular story was true. The Co-op is one of the last remaining iconic niche ethical brands that hasn't been swallowed up by a mainstream rival. Every time it happens, whether to the Body Shop, Green & Blacks, or Ben & Jerry's, there is moral outrage from those that see an important symbol of a different way of doing business being corrupted.

The niche brands are given huge profile in the debates around the value of corporate responsibility. Sometimes that can be positive. More often, however, it is not.

On the plus side, these companies can be first movers in identifying best practices that will then go on to influence the rest. Because they have less ambivalence about their own business case, they can take risks, be bold and ultimately set the trends.

On the other hand, they can lead both advocates and critics alike to forget the business case completely. The ethical niche players encourage us to believe that they will be successful because they are ethical, and that somehow the standard requirements of good management, responsiveness to customers and effective processes are not the key success factors that they are for all other businesses.

The Co-operative Bank has been successful because it has been run as a business aiming to be true to its niche. The Body Shop has been much more uneven as a business, because it has often been run as a campaign. Anita Roddick is loved and admired by campaigners not because she ran a successful business, but because her anti-corporate language appeals to their loathing of bigness. That's fine - but when mainstream businesses look at the Body Shop's progress over the last five years, they see a situation where they have less to learn on ethics than they would have to teach on business fundamentals.

And when activists respond with fury to the takeover they positively reinforce the perception that those that want their ethics to be strong want their champions to be small. It is the same reaction that attacks the move towards large companies taking up Fairtrade brands. We think these things should be run by friendly, small concerns. Anything else will be insufficiently pure.

Frankly this is about corporate responsibility as recreation. It is not about maximising the positive power of business to make a difference in the world.

And there is a huge lack of realism in what motivates some of these corporate takeovers. Activists seem to believe that big, bad and ugly companies think that buying an ethical brand will give them something to hide their ugliness behind. The truth of it is that these companies make a commercial decision based on the fact that these ethically branded firms bring with them a market segment that will expand their overall penetration. It's why niche players in all sorts of other contexts get bought up, and it's no different here.

Of course, only a badly run corporate would buy up one of these brands and then change the fundamentals that give the brand its strength. Rather than being afraid of these buyouts, we should be keenly interested as to whether good management, investment in marketing and other aspects, might lead that brand to being a more powerful champion of its kind.

So long as we keep fighting this, we are admitting that we are not ready for the big time.

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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