Business Respect - CSR Dispatches No 98 - 2 Jul 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 consider how sustainability will ever be achieved if not through business action and innovation.

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/98.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

A couple of weeks ago I ended up speaking at the Business in the Environment conference in Leeds, UK, and part of the programme called for a short debate on the title 'this house believes we would be better off with less'. This debate fell under the definition of 'a bit of fun', because if we're getting serious on that topic then you have to define who is the 'we', what do you mean by 'better' and what do you mean by 'less'. I now buy music digitally and walk around with my entire music collection. There is much less printing, plastic and other material - but do I have less or more? And so on.

But the part of the debate that did become quite pointed was really focusing on the point of substance - what is the realistic aim of public policy in order to achieve sustainability? After all, whatever the science is telling us, would people vote for less - consistently and over time? I didn't think so, and it rather got to the nub of the challenge we have that the broader movement to promote sustainability is antagonistic towards business - and this thing called corporate social responsibility. Actually, if we're dealing with solutions rather than lazy rhetoric, it should be the reverse. Or should it? This is the question we explore in this issue.

Last issue's article on the International NGO charter mentioned in passing about the need for NGOs to consult with the companies that they may occasionally target and attack. I mentioned as an example of this not happening the Christian Aid 'Behind the Mask: The Real Face of CSR'. Serves me right for making provocative references that were incidental to the main focus of the article. Christian Aid came back and wanted to state that they have strict procedures that mean that before they publish a case study that is critical of a company they must first seek a response from the company on each of the substantive points. They claim that they then make every effort to reflect the company's view, and that this was the case with 'Behind the Mask' in 2004.

Obviously, there was disagreement on this at the time, with each of the companies profiled furiously asserting that they had not been approached and that the claims had a number of factual inaccuracies. Two years later is not the time to disentangle the claim and counterclaim, but it is a good example of the importance of that particular provision.

Interestingly, I asked whether Christian Aid would be signing the International NGO charter and got a resounding silence in response. Hopefully the sound of thoughtful consideration rather than anything else.

Not that everyone thought that the Charter was such a step forward. One correspondent commented: "The Charter's words are grounded in statements of 'we will' but what will happen if they don't? They are going to 'listen to stakeholders' suggestions', they are going to 'make it easy for the public (does this include NGOs/CBOs?) to comment on...programmes and policies'. I just have this nagging feeling (perhaps born from world-weary experience) that they might 'listen' and that’s it. It would have been nice if 'listening' was tagged with 'and change our ways'".

Another correspondent was good enough to send some warm words following the minor altercation over the 'Social Footprint' article (am I getting more controversial in my older age, or are people getting more sensitive?). "I've just been reading your newsletter and following the negativity towards it I wanted you to know how much I appreciate it as a source of information and opinion - it is very helpful. I'm responsible for looking at the CR Supply Chain strategy for [our company] and we need as much information as we can get to help us to implement the most realistic policy for both our Supply Chain and us. As we're a process driven aerospace company we have extra difficulty persuading those of an engineering disposition as to the importance of an evolving, non-prescriptive subject like CR. The stories and opinions you give are useful for us in our debates." Thanks for the encouragement - and glad if what goes in here can be helpful for anyone involved in making stuff happen within business or elsewhere.

Mallen Baker
mallen@mallenbaker.net

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CSR News 2 Jul 2006

US: Judge rules prosecutors actions against KPMG unconstitutional

A US federal judge has said that pressure from prosecutors on big four accounting firm KPMG to cut off legal fees for ex-employees was unconstitutional.

The 16 former employees are at the heart of the illegal tax shelters scandal which nearly threatened KPMG's collapse as it was faced with an indictment which was averted with promises of co-operation.

US District Judge Lewis Kaplan said that the Justice Department's decision that if the company had continued to pay the legal bills of the executives then this would be 'unco-operative' was wrong.

He said: "KPMG refused to pay because the government held the proverbial gun to its head. Had that pressure not been brought to bear, KPMG would have paid these defendants' legal expenses". He said that the Justice Department's zeal to bring wrongdoers to justice had led it to violate the constitution it exists to defend.

Apple investigation into sweatshop claims 'still open'

Apple has said that, contrary to some reports, its investigation into alleged sweatshop abuses at its Foxconn Electronics supplier is still open. At the same time, Foxconn has hit back at coverage in a filing with the Taiwan Stock Exchange strongly denying charges.

An Apple spokesman told BusinessWeek magazine: "We are still investigating the working conditions at Foxconn's manufacturing plant in Longhua. This is a thorough audit, which includes employee working and living conditions, interviews of employees and managers, compliance with overtime and wage regulations, and other areas as necessary to insure adherence to Apple's supplier code of conduct."

In its filing, Foxconn said that recent reporting by international media had made grossly inaccurate claims without independent verfification. The company said that rather than being illegal, its overtime rate was equivalent or better than that required by law in China.

BP faces US price-fixing charges

BP faces prosecution in the US over alleged price-fixing activities in the propane market. The US authorities have said that the company bought up large amounts of propane in 2004, pushing up the price by more than 40 percent.

The Commodity Futures Trading Commission alleged that once the company had established a 'dominante and controlling' position, it deliberately held back supplies in order to push up prices, to the detriment of consumers in around 7m households that used the fuel to heat their homes.

The company has denied any wrongdoing and said that it will fight the charges in court. However, one former trader has pleaded guilty to taking part in a conspiracy to manipulate the market.

BP is also to face a criminal inquiry into the huge oil spill in Alaska earlier this year, a fact which it only admitted after an internal email was leaked to journalists.

Japan: OECD doubts commitment to confront business corruption

In a new report, the OECD has accused Japan of being unwilling to implement the anti-corruption convention it signed in 1999 in relation to its businesses' activities.

The report acknowledged that the country had increased its efforts in the last year, but highlighted the continuing absence of prosecutions since Japan signed the convention.

The convention targets those companies that pay bribes to officials, usually in developing countries, to achieve business transactions.

Denmark and the Netherlands are also mentioned by the report as needing to do more and, separately, NGO Transparency International says that around 24 of the 36 signatories of the convention have not done enough to implement it.

Fairtrade sales continue to increase globally

Worldwide sales of products carrying the Fairtrade mark have gone up by over a third to around $1.4bn last year, according to the Fairtrade Labelling Organisation.

Over 500 producer groups are certified to supply Fairtrade products, which include coffee, tea, chocolate, sugar and fruit.

The highest selling product is Fairtrade coffee, which enjoys 4 percent of total coffee sales. Fairtrade and equivalent brands are starting to hit the mainstream, with companies such as Nestle producing these products for the first time, to the delight and some and the fury of others.

Microsoft faces EU fine

The European Commission is thought to be ready to impose fines against Microsoft of 2m euros a day in a ruling that the company has failed to fully implement an antitrust finding in 2004.

Microsoft was supposed to provide competitors with information about the Windows operating system that would enable them better to develop software to run on it. The company has said that it has now started to provide this information, but Brussels, which demanded immediate action in December last year, has suggested that the company has acted too late.

A full official ruling will be made on 12th July.

British Airways investigated over alleged price fixing

British Airways is facing an investigation into an alleged cartel that fixed flight prices through fuel surcharges following an intervention by rival company Virgin Airline.

Virgin told the UK's Office of Fair Trading about conversations between a BA executive and one of its employees which it alleged sought to co-ordinate activity over fuel surcharges.

A raid on BA's offices has been followed by two senior executives being put on leave. The company denies that there has been any price fixing.

China: 30 firms in Guangdong blacklisted for defaulting on wages

Thirty companies in China's Guangdong province have found themselves on a local government blacklist for repeatedly refusing to address concerns around defaulting on workers' wages.

The companies have reportedly defaulted on more than 20m yuan, and are thought to represent only the most visible and resistent part of a widespread practice.

According to China Daily, the Guangdong Provincial Labour and Social Security Department had been publicising the bad records of certain companies on wages for some time, but had decided to create the blacklist because the companies had refused to respond to education, warnings or punishments.

The companies included the Guangzhou Baoying Shoes Factory, which last year defaults on the wages of over 500 staff, provoking violent protests at the plant.

Pharmaceutical companies attacked for irresponsible marketing

A new report by Consumers International has accused top European pharmaceutical companies of using irresponsible marketing to promote their products.

The group said it has analysed marketing programmes for leading companies, including Bayer, GlaxoSmithKline and Johnson & Johnson. Although direct advertising to consumers is banned in many European countries, the report draws attention to other methods that the companies use to seek to influence opinion.

These include various lobbying practices, including the sponsorship of lobby groups and disease awareness campaigns, as well as offering hospitality packages for medical groups.

Drug company representatives have said that their marketing activity is tightly regulated.

Australia: Mandatory CSR reporting not recommended

A federal parliamentary committee has recommended that CSR reporting should remain a voluntary activity for Australian businesses.

The Joint Committee on Corporations and Financial Services has stated that it does not believe that mandatory standards will lead to improvements, but that businesses will be expected to show that voluntary action can improve performance.

The chairman of the committee, Grant Chapman said that a number of businesses already did well when measured against international standards. But plenty of others still had further to go.

One recommendation that caused a fair degree of comment was one that suggested that companies should reflect on how well company bosses have prepared the firm for the long-term future in its remuneration proposals.

CSR FEATURES from the Internet

The 100 Worst Corporate Citizens - 1 Jul 2006 FROM Alternet

For the past 52 years, Fortune magazine has been publishing a list of the largest U.S. corporations, an annual chance for chief executives to brag that "my revenue is bigger than yours." For the past seven years, Business Ethics magazine has issued another kind of ranking -- a list of what it calls the "100 Best Corporate Citizens" -- that promotes virtue over size in the perennial game of corporate comparisons.

Read full story

The Business of Business - 26 Jun 2006 FROM The Washington Post

THE DEBATE over the role of business dates back at least a century, to the time when President Theodore Roosevelt broke the power of those "malefactors of great wealth." But today's debate is more heated than usual. Even though there is always a good argument for the notion that the business of business is business, corporations are under mounting pressure to define their goals more broadly.

Read full story

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The crucial role of business in saving the planet

Article by Mallen Baker

For decades, the science of sustainability has been obvious to anyone that cared to take an interest. The bit that requires courage and leadership - the politics and the economics of sustainability - has been a lot further behind. We know what we have to do, the question is how and what role does business have to play.

That science is pretty simple on one level. We should not use renewable resources faster than they can be renewed. We should not deplete non-renewable resources faster than alternatives can be found. We should not create wastes faster than they can be properly absorbed into the environment.

None of these elements are fixed. We can boost the output of renewable resources and we can reduce consumption. We can extend the lifetime on nonrenewable resources through more efficient technologies, and we can innovate with alternatives. We can reduce the creation of waste, and we can do things that may make them more easily absorbed and assimilated into the environment.

At the moment, we remain severely out of balance. A recent statement by the US Government said that it expected worldwide greenhouse gas emissions to increase by 75 percent by 2040. Even if that is wildly pessimistic, there is no light at the end of the tunnel on this one.

The question is how do we get there? Environmentalists have been saying for decades that we need to change our lifestyles to consume less. This has not proven to be a saleable message, and it's time we came to terms with why, and what we can do about it.

Let's be clear about this. No government of any democracy in any country of the world, nor international institution of authority, has gone to its constituency to argue for reduced consumption and reduced choice. Not once. Never. We can't even point to one brave government that took the stand and got voted out for its troubles. To reflect upon this fact decades after the Brundtland Commission first coined the phrase 'sustainable development' and to draw no call to action from it would be complacency in the extreme.

The first thing is to note what we still don't know. We don't know where the environmental thresholds are, and that may be a good or a bad thing. Ecosystems rarely gracefully decline. Rather as they are put under stress, they absorb the stress for a while, then show signs of distress, and then they can collapse rather suddenly. Will we experience a point where the global system, rather than growing a percent or two warmer will tip over into a different, more hostile state altogether? We don't know. All we know is that the current systems are showing signs of stress. We should not take it for granted catastrophe could not happen tomorrow.

Equally, nobody has proven that in order to achieve sustainability we will all have to wear hairshirts. Nobody has proven that the education and stimulation of foreign travel must be barred to all. Nobody has proven that fun and frivolity must be banned, with utility strictly rationed. There is still a gap between making do with less and suffering the least.

But what we do know, is that no-one will vote for hairshirts. Not the US, not the billions of people living on subsistence money who aspire to the Western lifestyle, not the football fans that have flown to Germany to indulge in fun and frivolity. No-one. And even if they did once, they would probably change their mind after four or five years of imperfect implementation and vote it out at the next opportunity. Hardly a basis for long term sustainability.

If sustainability is to mean something, it has to be a system that will deliver stability on an ongoing basis - not subject to political whims, not to be abandoned at the first sign of electoral unpopularity.

The only approach that will work is one that goes with the grain, depends on people being the way they are rather than the way we would like them to be. Solutions that somehow depend on people becoming less selfish or consumption-minded than they are, without being clear about how such a miraculous transformation is to be achieved, are just so much self-indulgence.

It is sometimes argued that there will have to be a benevolent green dictatorship to require us to all do what is good for us. The history of humankind gives no evidence that dictatorships are ever benevolent, and they have certainly never been sustainable. The resources required to keep the population subject requires very inefficient behaviour and ultimately, as Gandhi once observed, every dictatorship throughout history has eventually fallen. People will be free, regardless of the consequence.

Of course, some people say that we will after all do this things because we have no choice. We must adopt our hairshirts or perish. But there is always a choice, and if those were genuinely the only two choices the human race on past form will choose to perish. So we had better hope that there are more than two choices.

So what is the third choice? And where does business come in, exactly?

The third choice is to aim to give people the things they want, only to do it sustainably. After all, I don't want gigawatts. I don't want fossil fuels. I want heating and lighting, I want to be able to use the internet and listen to music and - well, all sorts of things.

We do know that affluent societies tend towards population stability. In many countries we are soon to face the downside of this - an ageing population. We also know that generally, once people achieve a certain level of material consumption, they don't go for more and more, they go for better. These two facts give a glimmer of how one can achieve an affluent, steady state society. Goods that meet peoples needs, but do so in a much more sustainable way.

We have already made progress in this area, not because politicians have shown a great deal of courage (things like the Kyoto Treaty may have helped, although it is notable that its biggest advocate - Europe - will fail woefully to meet its own Kyoto commitments) but because businesses have seen the writing on the wall and are beginning the journey. Global companies are setting themselves the target of carbon neutrality long before any nation has done the same.

With existing technology, we could make a car that is much more fuel efficient than the ones we have now. With more innovation, we may produce zero emission cars that are still stylish and thrilling to ride. We already have, with the internet, ways of transmitting information, music, video and a lot else besides in a much less resource intensive way. Does resource efficiency have to mean going backwards? No, it means having more for less.

So does that mean it's all in hand? We can sit back and wait for the engineers to solve the problem for us? Not in the slightest. The current ambition of effort by the broad global business community is a very long way from being sufficient. We need more from the leadership companies, and better support from an intelligent raising of the standards by government. We need well-targeted action by NGOs to draw attention to the worst abuses (as opposed to current strategies to discourage action by spending the most energy attacking the leaders for not being perfect already).

And it doesn't mean that there won't be some things freely available now that become scarcer later. If it proved impossible to radically improve the energy efficiency of air travel, for instance, it could well be that the cost of air travel - through whatever mechanism - would rise to reflect better its real cost, bringing to an end the era of cheap travel available to all, but still a widespread form of getting around. But we don't start of the premise of assuming that more efficient air travel is impossible.

The point is this. The most active proponents of sustainability tend to disdain business. Businesses are 'psychopaths' that are the cause of the problem and the problem will be solved by regulating them out of existence. Ironically, businesses are probably the best solution that we have to the challenges that face us as a society, because they are the ones that can innovate, can produce solutions, can be a part of the engine of development that will eventually bring developing countries out of poverty that may, just may, have a whisker of a chance of achieving sustainability.

Let's put it this way:
1. Government's taking courage and selling the message of less consumption to its citizens = no sign
2. The forces of benevolent dictatorship lining up to take power = never heard of them
3. Businesses innovating to produce more socially beneficial goods and services, made in more environmentally efficient ways = some first signs

But in order for that hope to be realised, more businesses need to follow the leadership currently being shown by the few. More leadership needs to be shown by governments as the price for getting to avoid going to the electorate on a platform of 'making do with less'. It remains our choice - for now.

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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