Business Respect - CSR Dispatches No 96 - 4 Jun 2006

==================

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 consider whether the best respected badge for sustainable forestry is covering up bad practice in Uruguay

In the news:

Feature articles on the internet:

===================

Topics:

Want to read a hyperlinked version of this issue? You can find one on the website at http://www.mallenbaker.net/csr/nl/96.html.

Copyright 2006 Mallen Baker. All rights reserved. For information on how to subscribe, go to http://www.mallenbaker.net/csr/nl/subscribe.html

===================

Welcome

In this age of difficult dilemmas in the supply chain, customers have precious few pointers they can use to help them to support the businesses that are doing the right thing.

One of these pointers, on the issue of sustainable timber, has been the Forest Stewardship Council (FSC) certification process. There has long been controversy over whether this process should be extended to mono-culture plantations, but now a recent report has raised questions that go to the heart of the integrity of the certification process itself. We review the issues and the report in this edition.

It's worth mentioning that I have given up even trying to respond to some of the various student research queries I get about CSR as a result of the website. People that have done their homework and are asking for a specific comment related to an area that I have covered in an article or on the website will always get responses. But more often I get the 'here is my essay title - please give me your thoughts' questions. This is lazy research, and with the best will in the world no-one has time to respond to these sorts of queries. I have thought about putting an FAQ onto the website to cover some of the most common queries, but ultimately all the information any student could want is out there for the finding - it just takes a little time and thought.

Voting on the new poll on the website has been taking place. The current position stands as follows:

Companies that trade on their ethics such as the Body Shop should:
Stay independent at all costs to preserve their brand 63 (29%)
Accept offers from responsible buyers that may help the company to move forward 122 (56%)
Operate purely by the logic of the market, it's a brand not a religion 33 (15%)

Thanks to the 218 people that have voted so far. There is still time to make your views known!

Mallen Baker
mallen@mallenbaker.net

===================

CSR News 4 Jun 2006

UK: Journalist union calls for Yahoo boycott

The National Union of Journalists (NUJ) has called upon its 40,000 members to boycott Yahoo products and services in protest at what it describes as the company's collusion with the Chinese authorities.

In particular, the Union has denounced the company for its role in identifying journalists and pro-democracy writers which have subsequently been jailed. For instance, Shi Tao, who was sentenced to 10 years in prison for communications with the foreign press.

Jeremy Dear, the general secretary of the NUJ said: "The NUJ regards Yahoo!'s actions as a completely unacceptable endorsement of the Chinese authorities. As a result, the NUJ will be cancelling all Yahoo!-operated services and advising all members to boycott Yahoo! until the company changes its irresponsible and unethical policy."

L'Oréal wins court verdict on discrimination

L'Oréal has had charges of discrimination in its recruitment practices thrown out for insufficient evidence. The result comes amongst widespread unease about the attitudes prevalent in the French job market.

The complaint was brought by an anti-racist NGO, SOS Racisme, and was based on a fax that described the women that the company wanted to do product demonstrations, which included the initials BBR, standing for 'blue, blanc, rouge', the colours of the French flag.

The prosecution alleged that these initials are widely used to denote white people. The company said that all it meant was that they needed to speak good french. The judges decided that pointing to the use of the initials amounted only to 'supposition and approximation' and was not proof.

Malaysia: Rimbunan Hijau accused of 'golden chainsaw' assault

Greenpeace activists have said that they were assaulted by employees of the Malaysian logging company Rimbunan Hijau when they turned up at the firm to present it with a symbolic 'golden chainsaw' for what they described as 'achievements in forest destruction'.

According to the group, six of the campaigners were detained on the company's premises, a cameraman was assaulted and his camera broken. Police have questioned both the campaigners and company officials, but no charges have been brought.

Greenpeace said the award had been granted to Rimbunan Hijau because of its role in destroying much of the natural heritage in Papua New Guinea.

Portugal: Inditex investigating reports of child labour

Spanish firm Industria de Diseno Textil SA has said it is investigating allegations made in Portugal's Expresso that one of its suppliers in northern Portugal has employed children as young as 10.

According to the reports, children have been used in the production of shoes for Inditex's Zara chain. Inditex has said that the issue is covered under its code of conduct with suppliers and would constitute a breach serious enough to result in immediate termination of the relationship if proved true.

Inditex joined the Ethical Trading Initiative last year. It had audited the supplier in question, which has not been named, recently without detecting problems.

Korea: Daewoo founder jailed for 10 years

The founder of Daewoo Group, at its height one of South Korea's largest industrial firms, has been jailed for 10 years for embezzlement and accounting fraud.

Kim Woo-choong was also ordered to pay 21 trillion won and was fined 10m won. The court found him guilty of ordering executives to inflate the group's assets in order to get access to credit and transferring billions of dollars abroad.

The company began to have problems in the 1990s, and collapsed with the arrival of the Asian financial crisis in 1997. As a result, a number of the Korean chaebols have had questions raised about their financial arrangements.

Japan: Livedoor corruption trial begins

Four former executives from the internet firm Livedoor have gone on trial facing charges of falsifying accounts. The company's founder Takafumi Horie will face court at a later date.

One of the four has admitted the charges, and apologised for the trouble that had been caused. Reports suggest that other defendants have admitted to some of the charges. The company is also on trial, and has said that it has entered a corporate guilty plea.

The charges involve actions to inflate profits and giving out misinformation about the company's transactions.

Dow awarded for leadership in energy management

Dow has been recognised for outstanding leadership in energy management by the annual Industrial Energy Technology Conference, citing the companies success in pursuing aggressive energy efficiency goals.

The company has reduced its energy intensity by 22 percent over ten years. It has used Six Sigma management approaches to support best practice programmes, as well as supporting programmes to help other energy users to save power.

The company's efforts have saved it approximately $4bn, helping to defend it against rising energy costs and reducing greenhouse gas emissions. This month, the company announced a new goals of reducing its energy intensity by a further 25 percent.

Switzerland: Credit Suisse to go carbon neutral

Credit Suisse has announced that it aims to make its domestic banking operations carbon neutral during this year.

The company will offset all its greenhouse gas emissions from Swiss operations as well as business flights from the country. In order to do this, around 80,000 tonnes of emission reduction certificates will be retired annually.

Credit Suisse has said that it is also looking at extending the programme to its other sites around the world. It has already achieved 20 percent reductions of emissions through environmental management processes.

Liberia: Firestone accused of profiting from illegal rubber

According to a new report by the Liberian government and the UN, Firestone is one of three companies that is benefiting from rubber that is obtained from plantations that are illegally occupied.

On two of the sites named, there are allegations that the human rights of rubber tappers are frequently violated, with workers treated like slaves. The sites are occupied by former combatants in the country's civil war.

The government said that previous reassurances by the company that it did not obtain rubber from the sites had been cast into doubt. The remarks underline difficulties in the country of being able to track the source for rubber.

Enron: Lay and Skilling found guilty

After a spectacular trial, former Enron bosses Kenneth Lay and Jeffrey Skilling have both been found guilty on charges including massive fraud and conspiracy.

The verdict brings to an end a process that started with one of the most notorious corporate collapses in recent times - an event that made the name 'Enron' synonymous with corporate irresponsibility and corruption.

The wake of the affair led to the creation of the massive Sarbanes Oxley legislation in the US, as well as the destruction of the company's auditor, Arther Andersen.

Jeffrey Skilling was found guilty on 19 of the 28 charges he faced. Ken Lay was found guilty of all six charges. Both men now face a lengthy jail term.

Shell to appeal Niger Delta fine

Shell has appealed against a court ruling in Nigeria fining it $1.5bn for environmental damage in the region caused by its operations.

The company has said that it will not pay the fine until the appeal is heard, although the court imposed a deadline that expired this week. In the mean time, militants in the region have threatened to increase violent attacks on oil installations.

Recent actions have included the bombing of installations and kidnappings of oil workers. The government has promised a crackdown against the violence.

CSR FEATURES from the Internet

Corporate Social Responsibility: What the Smart CEO Needs to Know - 2 Jun 2006 FROM Greenbiz

Corporations exist primarily to create wealth by developing new and innovative products, pleasing customers and delivering shareholder value. This "value proposition" has been the source of the private sector's great influence and legitimacy in society for many decades. Increasingly powerful stakeholders challenge this view by arguing for a new context of business in which wealth creation is but one of a number of objectives necessary to ensure society's well being.

Read full story

=================================

Forest Stewardship Council - Facing a Crisis of Confidence?

Article by Mallen Baker

One of the longest established and best respected initiatives on business and sustainable development is the Forest Stewardship Council (FSC). The growth over the last decade of FSC certified timber has been one of the positive signs about how collaborative standards can be set and change business practice. Now, a critical report of practice in Uruguay has attacked FSC accreditation of plantations there as covering up socially and environmentally unsustainable practice.

Planting trees, and even better forests, is one of those activities held to unquestionably be A Good Thing. Forests mean carbon dioxide taken out of the atmosphere, and more stable ecosystems with reduced soil erosion.

But of course there are forests and there are forests. The controversy in Uruguay comes from the impact of large-scale monoculture plantations of eucalyptus and pine trees. The approach taken with these plantations have for years been criticised as having a heavy social and environmental impact.

Now the World Rainforest Movement have produced a report analysing the certification of some of the companies taking this approach in Uruguay. The report, whilst aiming to be supportive of the FSC and its overall mission, nevertheless offers a powerful critique on the assumption that FSC certification can equal peace of mind for the buyers of timber.

It focuses instead on four specific companies and their activities in Uruguay, EUFORES, COFOSA, FYMNSA and COFUSA. The report reviews the public documents related to the companies' FSC certification and considers the environmental, social and economic issues, and also pulls together some observations and stakeholder feedback on the ground.

The EUFORES certification report (to take one of the companies as an example), produced independently according to the FSC process, was carried out by SGS.

In terms of environmental issues, the SGS report, whilst acknowledging that the main environmental effect of Eucalyptus is heavy use of groundwater, does not deal with the potential impact of the plantation in this regard. One of two independent peer reviewers of the report has drawn attention to evidence elsewhere of impact on groundwater flow and quality of eucalyptus plantations.

The report does not cover the impacts of the plantation on soil structure, nutrient loss and recycling, changes in pH and other potential impacts arising from use of chemicals. Again, one of the peer reviewers has pointed out the deficit.

Impact on wildlife is not covered, in spite of evidence that it leads to both a drop in the populations of certain species and an explosion in populations of others which may have a significant impact on neighbouring people (such as poisonous snakes).

On chemicals use, the certifiers found that EUFORES was still using a product that is banned by the FSC, GOAL. The report noted that GOAL would be phased out with an alternative chemical used instead. In 2005, a subsequent surveillance report indicated that this had not happened. FSC certification was not withdrawn.

On the social side, the World Rainforest Movement attack a statement in the SGS report that the plantations have created more jobs than were present in the previous usage of the land. This is simply not supported, in their view, by the evidence.

Likewise, the SGS report notes that the company believes itself not to be responsible for the conditions provided by subcontractors, which is not the FSC view. During an assessment visit, the certifiers found evidence of poor quality protective equipment being used by sub-contractors, and that there were workers with no social benefits, medical cover, health and safety measures or sanitation provided. Workers had been charged the equivalent of five days pay for safety equipment, in contravention of the law. In spite of this, the SGS report reached the conclusion that the company had a serious approach towards safety and health issues.

So much for the certification documents. The critique of the process seems to be backed up by some of the information gathered amongst communities on the ground. Inevitably, such material is open to the charge of being selectively represented, and subjective in the first place. However, it succeeds in putting a human face on the impacts that can otherwise be described in a rather technical fashion.

Farmers in the surrounding area say that within a few years after the plantations were established, their wells and the surrounding wetlands had dried up. An article published in 1999 described the effect, and the impact had been well known in the region. Somehow this was not discovered by SGS.

A local nurse told the researchers that she always tried to explain to new doctors the situation and the impact it had on their practice. People would often come to medical appointments dirty, or not show up at all. "The thing is that here, aside from the fact that people have been left without water in their wells, all of the freshwater ponds have disappeared too. So sometimes, when people have no water to wash their kids before bringing them to see the doctor, they just don’t bring them."

In some areas, the main problem has been the upsurge in venomous snakes, known as 'yaras'. These have flourished because garter snakes, that eat the yaras eggs have found that their preferred food, frogs and toads, have disappeared once the streams have dried up. The yaras have killed pigs, calves, cows and even horses.

One former contractor said that when he had worked for EUFORES he had been required to apply chemicals including GOAL, glyphosate and Agil. He and his colleagues were given no training, equipment or protection. Nor were they provided with drinking water, housing or bathroom facilities.

These are just selections. Overall, the case against each of the four companies is broadly similar, with detail after detail building the case which is, in summary:

* The model of plantation being followed is environmentally damaging, particularly because of the impact on water.
* The social impacts are also serious, with poor working conditions for sub-contractors and other impacts.

Overall, there seem to be two challenges here to the FSC. The first is that large scale mono-culture plantations are not environmentally appropriate in the first instance for inclusion in the FSC scheme. The second is that these companies in Uruguay should never have been certified, even against the existing criteria.

This is a challenge which the FSC is considering, with a well established review of policy towards plantations under way. Various organisations have submitted arguments to this review.

What the review won't do, according to the FSC, is to abandon the certification of plantations. The review instead is determined to identify what level of performance plantations should be evaluated against and whether current criteria guarantee that this level is being met. In principle, this should address both problems for the future, although the status of the existing company certifications is another matter.

There is a certain amount of ideology that can creep into such discussions. There's no doubt that in the large scale production of timber that is needed in the world, there will be some impacts and trade-offs and therefore always campaigners willing to criticise. That being said, the evidence offered overall on these specific companies in Uruguay certainly paints a compelling picture of a system that most consumers of FSC timber would be unwilling to support.

As ever, the science is only part of the debate. The FSC only has a role if it provides a trusted brand that enables companies to manage their supply chain in a sustainable way. Stories such as these from Uruguay, however significant in the overall scale of FSC volumes of timber, represent a possible erosion of that trust.

This is just the first rumbling of what could turn out to be a credibility crisis for the FSC. It needs to be able to show it is addressing the issues, and doing so in a robust way. It is in nobody's interest that the system that most groups have held to have the most credibility should be undermined by an issue of integrity.



The FSC were invited to comment on the Uruguay report that is the subject of this article. There was no response, but any subsequent response will be reported.

=================================

All content may be quoted with appropriate acknowledgement by any non-profit or non-commercial organisations. Others please contact mallen@mallenbaker.net. No guarantees are made to the accuracy of any articles. This electronic publication is independently produced, and should not be taken as representing the views of any organisation.

Send comments and editorial contributions to mallen@mallenbaker.net

To unsubscribe go to http://www.mallenbaker.net/csr/nl/unsubscribe.php

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