national workshop on pack india... · web viewnational workshop on promoting corporate citizenship...
TRANSCRIPT
NATIONAL WORKSHOP ON
PROMOTING CORPORATE CITIZENSHIP
IN INDIA
This information pack comprises extracts from various sourcescompiled on the occasion of the
National Workshop on Promoting Corporate Citizenship in India8-9 April 2002, New Delhi
Organised by
TERI NAB UNV UNDP
In collaboration with
BC
Copies of this information pack are available from:
Ms Kamal Singh, Head – Governance & Social Justice, The British Council, 17 Kasturba Gandhi Marg, New Delhi 110001Tel: 00 91 11 (0) 3711401 extn.210 Email: [email protected]
Ms Aparna Mahajan, UNDP/UNV Business Community Relations Specialist (India), TERI, Darbari Seth Block, India Habitat Centre, Lodi Road, New Delhi 110003Tel: 00 91 (0) 4682100/4682111 Extn 2342 Email: [email protected]
Information in this pack may be freely used with due acknowledgement to the source, except whatever is marked copyright © for which permission should be obtained from the copyright owner
300 copies, March 2002
2
Contents Page No.
National Workshop on Corporate Citizenship in India: 5Background / Aims and Objectives / Programme / Partners
Briefing paper on Corporate Responsibility, prepared for the9
British Council, by New Academy of Business
Understanding and Encouraging Corporate Responsibility19
in South Asia, Update One: Altered Images: the 2001 state of corporate responsibility in India pollby Ritu Kumar, David F Murphy and Viraal Balsari, published by TERI
Extracts from websites: some © material
From The Financial Times, March 2002 4-part series on Corporate Social ResponsibilityPart 1: Inside Track: does caring boost the bottom line?
25Part 2: Inside Track: Why Nike has broken into a sweat
29Part 3: Inside Track: How Mosanto got bruised in a food fight
33Part 4: Inside Track: Bitter taste of success, Starbucks
37
UN’s Global Compact 41
Promoting a European framework for 47
corporate social responsibility
The Millennium Poll on Corporate Social Responsibility63
By Environics Ltd, Canada
Global Corporate Citizenship: The Leadership Challenge 65
For CEOs and Boards: World Economic Forum, Switzerland
Corporate Social Responsibility in the IT Industry in UK71
Foreign & Commonwealth Office, UK75
3
Global Citizenship Unit
Department of Trade and Industry, UK 77
Amnesty International UK Business Group, UK 81
Business in the Community 85
Ethical Trading Initiative87
International NGO Training & Research Centre 89INTRAC
The Prince of Wales International Business Leaders Forum 90
SustainAbility Ltd 91
Centre for Tomorrow’s Company 92
Corporate Citizenship Unit, Warwick Business School 93
Institute for Business Ethics 97
Institute for Social & Ethical Accountability 101
New Academy of Business 103
New Economics Foundation 106
Business for Social Responsibility 109
The Conference Board, USA 113
Partner’s Websites:
Tata Energy Research Institute www.teriin.org
UN Volunteers www.unvolunteers.org
4
New Academy of Business, UK www.new-academy.ac.uk
The British Council www.britishcouncil.org.in
5
National Workshop on Promoting Corporate Citizenship in India
8-9 April 2002, New Delhi
Background
The United Nations Volunteers and New Academy of Business, UK, are jointly implementing an action research project on current trends in business-community relations and corporate citizenship in seven developing countries, of which India is one. (Project Website: www.new-academy.ac.uk/unv.htm www.undp.org.in/unv). The host institution for the project is TERI (Tata Energy Research Institute), New Delhi.www.teri.res.in/core/unv.htm www.teriin.org/events/docs/cor.htm
This National Workshop is being organised as a part of the initiatives under the action research project, with the thematic focus on Promoting Corporate Citizenship in India : Challenges & Opportunities.
With trade and commerce becoming more global and complex, new and greater demands for enhanced corporate responsibility and transparency are being placed on companies by a wide range of international stakeholders. Businesses today are realising that the world is not made up of strangers, but of their own neighbours, customers, employees and shareholders. To make globalisation work for all the world’s people, the UN Secretary-General, Kofi Annan, introduced the Global Compact in 1999, calling on business leaders to embrace its nine principles upholding human rights, labour rights and environmental responsibility.
By combining social action with good community relations, and employee development, corporations and businesses provide solutions to social problems, strengthen the local economy, build goodwill towards their companies, and achieve business goals.
Aims & Objectives
- To bring together business and development practitioners for brainstorming, dialogue and experience sharing on corporate social responsibility, business community relations, through an assessment of the prevalent scenario and emerging trends.
- To share good practices in corporate social responsibility and corporate citizenship for promoting corporate/NGO partnerships and training and/or on-line initiatives
6
- To explore potential for joint partnership initiatives between
corporates, NGOs, academics, media and others with the United Nations Volunteers/ New Academy of Business / TERI and the British Council
Participants
80 participants; individuals and cross-functional groups from public and private sector organisations, multi-national corporations, consumer groups, NGOs, civil society groups, development agencies, trade unions, trade associations, academic and media organisations.
Programme
Monday, 8 April 2002
Inauguration by Mr Arun Jaitley, Union Minister of Law, Justice & Company Affairs
Plenary Session 1: Enhancing Business Community Relations & Promoting Corporate VolunteeringChair: Dr MB Athreya, President & Founder Member, Indian Centre for Philanthropy and Management Adviser, Athreya Management System
Plenary Session 2: Company Presentations on CSR & Corporate VolunteeringChair: Mr R K Narang, Distinguished Fellow, TERI and former CMD, Indian Oil Corporation
5.30 – 6.30 pm : Videoconference from the British Council’s Knowledge & Learning Centre, 17 Kasturba Gandhi MargSpeakers from London: Mark Goyder, Centre for Tomorrow’s Company David Halley, Business in the Community Kavita PrakashMani, SustainAbilitySpeakers from Delhi: SL Rao, Distinguished Fellow TERI PD Jose, Indian Institute of Management, Bangalore Shankar Venkateswaran, Partners in Change
Tuesday, 9 April 2002Plenary Session 3: CSR practices – how best, how fair?Chair: Mr Prashanto Bannerjee, CMD, Gas Authority of India Ltd
7
Focus Group Discussion: facilitated by team from New Academy of Business, UK
Valedictory Session
The following eminent speakers have been invited to make presentations (confirmation awaited in some cases):
Ms Lakshmi V. Venkatesan, Founding Trustee & Executive Vice President, Bharatiya Yuva Shakti Trust (BYST)
Mr Shankar Venkateswaran, Chief Executive, Partners in Change,
Dr Parth J Shah, President, Centre for Civil Society
Dr Vikas Goswami, Director General, Business & Community Foundation
Mr Partha Mukherjee, Director, Legal and Corporate Affairs, Glaxo Smithkline Beecham Consumer Healthcare
From Pepsi Foods Ltd
Mr Vijay K Gupta, Vice-President – Brand & Cororate Communications, Wipro Ltd
Mr S R Gupta, Executive Director, Lupin Human Welfare Research Centre., Bharatpur
Ms Samyukta S Rao, A.G.M., ICICI, Mumbai
Mr Derek Jackson, Group QA Manager – Environment and Non-Food, The Co-operative Retail, U.K.
Prof. P D Jose, Corporate Strategy & Policy, IIM Bangalore,
Dr Krishna Lala, Consultant, International Resources for Fairer Trade, Mumbai
Ms Geeta Das, Associate Vice President, ORG-MARG, Mumbai
Dr Brenda Gael McSweeney, Resident Representative, UNDP and UN Resident Coordinator India
Dr David F Murphy, Programme Director, New Academy of Business, UK
Dr RK Pachauri, Director-General TERI India
8
Mr Edmund Marsden, Director, The British Council India
9
Organisers
TERI : Tata Energy Research Institute , New Delhi, established in 1974, is a dynamic and flexible organisation, deeply committed to sustainable development having a global vision and a local focus. TERI is the largest developing–country institution working to move human society towards a sustainable future. From formulating local and national level strategies to suggesting global solutions to critical energy and environment related issues, TERI has a presence nationwide and overseas – US, UK, Japan, Russia, United Arab Emirates and Germany. www.teriin.org
UNV/ UNDP : The United Nations Volunteers , is the volunteer arm of the United Nations. Established by the UN General Assembly, UNV, which works through UNDP’s country offices around the world, promotes volunteer contributions to development and serves as an operational partner in development cooperation at the request of the UN Member States. www.unvolunteers.org
New Academy of Business, UK: NAB is an independent business education organisation and a registered U.K. charity that was established in 1995. Since its inception, the New Academy has been at the forefront of a new wave of business thinking and action on global corporate responsibility. www.new-academy.ac.uk
The British Council : The British Council is the United Kingdom’s leading cultural relations organisation, with the largest overseas operation in India: offices in four main metros and a network of 11 libraries. The Council operates as a division of the British High Commission in India. Through its network the British Council promotes the diversity and creativity of British society and culture, and works in partnership with local organisations in areas of mutual interest.www.britishcouncil.org.in
10
Briefing paper on Corporate Responsibility prepared for the British Council
by New Academy of Business, UK
This briefing paper provides an outline overview of corporate responsibility issues in an international context but written specifically from the viewpoint of experience in the UK.
Historical Context
The idea of ‘corporate responsibility’ is not new. Its roots lie in the 19th century idea of ‘enlightened self interest’ promulgated by British industrial philanthropists such as Titus Salt, James and George Wilson, the Clark family and the Cadbury brothers. In addition to worker housing, their philanthropy extended to a range of public and social buildings such as churches, shops, parks and hospitals. While many of these business welfare schemes could be linked to the application of Christian principles, early industrial philanthropists also understood the relationship between long-term profitability and the health and welfare of the local communities where their businesses were located.
Despite a long history of corporate philanthropy, it was not until the 1960s and 1970s that formal corporate codes of conduct and environmental policies first appeared in response to changing social and legal conditions in many Northern countries. Some of the early corporate codes served as general policy statements aimed at establishing broad ethical principles for employees. Others included more detailed guidelines on employee conduct in business situations and clear monitoring procedures. Formal environmental policies were largely introduced as responses to new regulatory demands.
Globalisation and the New Context of Business
Globalisation is one of the key drivers of corporate responsibility today. As awareness has developed of the scope and range of business impacts through globalisation, there has been growing attention given to the social, environmental and ethical dimensions of business practice. There are currently 53,000 transnational corporations with 450,000 foreign subsidiaries selling US $9.5 trillion of goods and services annually world-wide. The dismantling of trade barriers and the emergence of global markets have significantly enhanced the economic and political power and influence of business. In 1997, foreign direct investment in developing countries topped US $400 billion, a seven-fold increase since the 1970s. Transnational corporations now have highly developed international networks that enable them to benefit from differences in costs and regulations at the national level. The rise of intra-firm or intra-
11
industry trade (up to 33% of world trade) and the growing mobility of production and labour are other significant features of the globalisation of business.
With trade and commerce becoming more global and complex, new and greater demands for enhanced corporate responsibility and transparency are being placed on companies by a wide range of stakeholders. The expansion of internet and satellite communications has provided activists and NGOs with new networking tools to co-ordinate strategies and monitor corporate activities across the globe. Over the past decade well-known international firms in different sectors and geographical locations have faced growing concerns about the socio-economic and environmental impacts of their operations in the developing world. Examples include accusations about human rights and ecological abuses by major oil companies operating in Nigeria, Colombia and Ecuador, and the labour practices of well-recognised apparel and footwear brands that purchase finished products from Central America, Asia and the Pacific. The ‘double-edged sword’ of globalisation has granted business both global economic power and a new sense of global responsibility.
Current Thinking on Corporate Responsibility
Over the past decade, the idea of corporate responsibility has expanded to include governance1, stakeholder2 relations and accountability alongside traditional concerns, such as philanthropy and legal compliance. The corporate responsibility agenda now routinely includes questions about the environmental sustainability of business practices, the role of business in urban regeneration, the creation of healthy communities and ethical dilemmas such as child labour in the supply chain, bullying in the workplace and work-life issues. Current corporate responses nonetheless range from the minimalist to the discretionary to the strategic. The key arguments for and against corporate responsibility are summarised in Table 1 below.
Some business thinkers have recently re-interpreted corporate responsibility as corporate citizenship (McIntosh et al, 1998) or corporate global citizenship (Tichy et al, 1997). Corporate citizenship embraces a “complex relationship of interlocking rights
1 “Corporate governance is concerned with the relationship between business and society. Central to this concern is who owns the company? Who benefits from its activities? To whom is the company accountable? How are directors appointed?” See McIntosh et al (1998), p.284. One of the main issues in corporte governance is the company’s strategic power structure nd the role of a wider constituency of stakeholders in this structure. See Wheeler and Sillanpaa (1997)22 Defined as “any group or individual who can affect, or is affected by, the achievement of a corporation’s purpose.” See R.Edward Freeman (1984) Strategic Management: A Stakeholder Approach, Boston: Pitman, p.53
12
and responsibilities” (McIntosh et al, p.xxi). Corporate global citizenship is based upon three supporting pillars: the moral (‘doing the right thing’) the social (community integration), and the economic (long-term survival)3
Although the emergence of corporate citizenship “may well represent a paradigm shift”, the change process is more likely to be one of “radical evolution, rather than revolution” (ibid., p.36). The current corporate responsibility or corporate citizenship agenda nevertheless has a much more global orientation than in the past.
In addition to complying with related state regulations and international legal instruments, a growing number of individual companies and industry associations are demonstrating corporate responsibility through the adoption of voluntary initiatives. These include workplace codes of conduct, social and environmental certification and labelling schemes, and other initiatives that promote business standards in labour practices, human rights, environmental sustainability and other ethical matters. Most of these social responsibility initiatives have their origins in Northern industrialised countries and have often been responses to pressure from consumers, the media and civil society organisations (eg trade unions, NGOs and church groups). In some cases, these activities have been developed by the private sector, while in others they have resulted from partnerships between business and other sectors.
Table 1.OPPOSING VIEWS OF CORPORATE RESPONSIBILITY
The Argument The CounterargumentBusiness has responsibilities that go beyond the production of goods and services, and profit-making. Business has impacts that go beyond simple marketplace transactions.
The role of business determines its responsibilities. Business has no social responsibility beyond compliance with the law.
Socially responsible business can help to solve important social and environmental problems, especially those that business have helped create.
Social (and environmental) police is the responsibility of government, not business. Business is not competent or empowered to undertake social (and environmental) responsibility initiatives.
Business has a broader constituency than shareholders alone.
Business can be socially responsible, but only within the limits of a prior contractual agreement with shareholders.
Business serves a wider range of human values that can be captured by
Business is responsible only to maximise profits and hence create
3 According to Noel M Tichy et al (1997), corporate global citizenship “is a mindset according to which managers (1) make decisions, design systems, and initiate programs according to prevailing moral principles; (2) encourage community-wide integration; and (3) build reputational capital wherever in the world they conduct business” (pp.38-39)
13
a sole focus on economic values. economic well-being.Business should cooperate with other sectors of society to promote sustainable development.
Groups in society should not encroach on each other’s provinces of behaviour.
Adapted from: RW Sexty (1995) Canadian Business and Society Prentice-Hall, Canada
Sustainability and Business
During the 1970s and 1980s, the corporate responsibility agenda was closely associated with the impact of business activities on the natural environment. The International Chamber of Commerce introduced the ICC Environmental guidelines for Industry in 1974. Although initially quite general, the guidelines were subsequently supplemented by sector-specific codes developed by various industry associations.4
The emergence of sustainable development as a new policy idea in the 1980s (Brundtland Commission) and the 1990s (the Rio Conference) began to broaden business responses to encompass environmental, economic and social initiatives. Brundtland saw sustainable development as a framework for the integration of policies for environmental protection and socio-economic development, and urged business to “accept a broad sense of social responsibility and to ensure an awareness of environmental considerations at all levels.” The presence and influence global corporate leaders in the Rio process was considerable. Furthermore Rio’s Agenda 21 noted the importance of “responsible entrepreneurship” in promoting sustainable development.
With sustainable development and sustainability increasingly being interpreted more holistically, business is being challenged to develop strategic and operational responses to ethical and social issues similar to well-established environmental initiatives (eg environmental management systems, life-cycle assessment, product stewardship, eco-efficiency etc).5 The London-based consultancy SustainAbility has become a global advocate for sustainability reporting and the idea of the triple bottom-line accounting (integrating economic prosperity, environmental quality and social justice)6. Despite such efforts to promote holistic sustainability 4 The ICC Guidelines were updated in 1981 and were eventually succeeded in 1991 by the Business Charter on Sustainable Development, which includes 16 principles of environmental management.5 The main international environmental management system standard is ISO 14001. The standard is “based on the principle of a register of environmental effects, including inputs, processes and outputs, and measurable continuous improvement based around an audit, monitoring and management system.” See McIntosh et al (1998), p.287. Life cycle assessment is the “overall process of assessing the life-cycle impacts associated with a system, function, product or service.” See Elkington (1997), p.396. Eco-efficiency refers to industrial processes that improve the efficiency with which environmental resources are used, including reductions in resource use and pollutant release.6 The Triple Bottom Line incorporates the Business Bottom Line of profitability, the Social Bottom Line concerning the nature of working conditions and the inter-relationship with local communities, and the Environmental Bottom Line which focuses on the environmental impact of corporate activities
14
initiatives in business, most corporate sustainability responses continue to concentrate upon the natural environment – pollution prevention, increased natural resource productivity and, in some cases, the restoration and expansion of ecosystems. Few corporate sustainability initiatives consider explicitly the social dimensions of business practice, including corporate responsibility for poverty eradication, social justice and human rights.
Human Rights and Business
The issue of human rights has long been a major concern for business. Most of the early impetus for the business response to human rights was driven by national legislation. In many countries , the nineteenth century saw the introduction of new laws to abolish slavery; to eliminate the worst abuses of child labour; and to improve health and safety in the workplace. In the twentieth century, citizen demands for human rights dominated the political landscape. Adopted by the United Nations General Assembly in 1948, the Universal Declaration on Human Rights is the best-known international human rights instrument. Although the Universal Declaration is not legally binding, it has now over time acquired the status of an international standard to guide the actions of “every individual and every organ of society” including business.7
International agreements on ‘human rights’ are primarily directed at member governments of UN or other multilateral agencies. Governments are expected to ensure that supportive national laws, regulations or other measures are introduced. To encourage voluntary business action on human rights, the Amnesty International UK Business Group has introduced a set of ‘Human Rights Guidelines for Companies’ to provide appropriate terms of reference to companies seeking to address human rights in the context of their operations. The guidelines are excerpted from the above-mentioned international protocols and are intended to assist companies in confronting situations of human rights violations or the potential for such violations. The guidelines include recommendations on implementation and monitoring. In addition to recommending that all companies adopt an explicit company policy on human rights including support for the Universal Declaration on Human Rights, the guidelines encourage companies to examine their different spheres of influence with regard to human rights both (Elkington 1997).
7 In addition to the Universal Declaration on Human Rights, various other international laws and principles specify minimum human rights standards in both the workplace and wider community, including the following among many others: Convention on the Rights of the Child (CRC); Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW); European Convention on Human Rights (ECHR); International Convention on the Elimination of All Forms of Racial Discrimination and various ILO conventions that promote international labour standards (minimum age, women’s employment, freedom of association, equality of opportunity, labour relations, occupational health and safety, wages etc).
15
in the workplace and in the communities in which they operate. The Amnesty Business Group also provides companies with information on the human rights situation in specific countries.8
Stakeholder Relationships and Partnerships
Business collaboration with other sectors of society on social, environmental and ethical issues is growing. In addition to more traditional business constituencies such as employees, shareholders, trade unions, regulators, suppliers and sub-contractors, business stakeholders and partners often now include local communities, NGOs, multilateral organisations, government aid agencies, religious organisations, the media, academic institutions, and various other internal and external interest groups. In order to balance competing interests in a rapidly changing world, businesses are developing new relationships with their stakeholders including formal partnerships.9
Some of these new business-stakeholder partnerships bring together businesses and non-commercial organisations (eg governments, NGOs and trade unions) to address a business concern (eg eliminating child labour or developing green products). If planned and implemented appropriately, such partnerships can offer both business and its partners useful tools to discuss and promote global corporate responsibility and sustainable development. For example, the Ethical Trading Initiative is a UK-based non-profit organisation that is based upon a strategic partnership between companies, the NGOs, trade unions and the Department for International Development. The ETI has two aims: to enourage companies to implement codes of conduct that embody internationally agreed labour standards and human rights in the workplace; and to encourage the use of best-practice monitoring and independent verification methods. ETI members have agreed to a ‘Base Code’ of labour practice that is based upon core ILO conventions. Member companies are expected to adopt6e the Base Code or a company-specific code that incorporates the Base Code. Sector-specific stakeholder partnerships that promote environmental, social and/or ethical standards are also active in the UK namely the Forest Stewardship Council, the Marine Stewardship Council and the Tea Sourcing Partnership.
8 Amnesty’s Business Group has recently collaborated with the Prince of Wales Business Leaders Forum to develop a human rights primer for managers. Shell International Petroleum Company produced its own management primer on business and human rights in 1998.9 The Prince of Wales Business Leaders Forum defines this new form of business-stakeholder partnership as “a cross-sector alliance in which individuals, groups or organisations agree to work together to fulfil an obligation or undertake a specific task; share the risks as well as the benefits; and review the relationship regularly, revising their agreement as necessary.” See Ros Tennyson (1998) Managing Partnerships, London: Prince of Wales Business Leaders Forum, p.126.
16
Corporate Accountability
Business is increasingly expected to demonstrate corporate responsibility and accountability through policy and action. As noted above, responsible companies are engaging stakeholders by becoming more open and transparent about their trading relationships and on-the-ground activities throughout the world. Responsible companies are also more inclined to make public reports on their environmental (and in some cases social) performance.
Some companies continue to argue that they have internal capacity to ensure effective implementation of their corporate responsibility policies and codes of conduct. Others have recognised the need for external independent verification of their on-the-ground social and environmental practices. Independent monitoring and verification may take many forms including the use of major international accounting firms (eg Price Waterhouse Coopers) and specialist environmental consultancies (eg Environmental Resources Management). New stakeholder partnerships such as those described above are essentially monitoring and accountability mechanisms to demonstrate corporate responsibility.
In recent years, social accounting and auditing have emerged as new methods of measuring the social impact of a company relative to its own goals and those of the company’s stakeholders. Much of the early work in this area was undertaken by the London-based New Economics Foundation (NEF) including social audits of The Body Shop International and Co-operative Retail Services.10 NEF was instrumental in the establishment of the Institute for Social and Ethical Accountability. Founded in 1996, the Institute is a professional body committed to strengthening the social responsibility and ethical behaviour of businesses and NGOs. In addition to promoting best practice in the field, the Institute has recently launched AccountAbility 1000 (AA 1000), a foundation process standard in social, ethical accounting, auding and reporting.
National and International Policy Responses
Although governmental and inter-governmental policy initiatives have historically played important roles in defining the environmental responsibilities of business, the broader global corporate responsibility agenda has been largely defined by business and civil society over the past decade. In recent years, however, the UK government and various inter-governmental bodies have begun to introduce national and international policy initiatives
10 Growing numbers of UK-based companies are publishing social reports. British Telecom’s 1999 Social Report was independently verified by Ashridge Centre for Business and Society. Both Shell and BP-Amoco now publish annual social reports.
17
that promote corporate responsibility. Some key examples are highlighted below:
United Nations The first major UN initiative in corporate responsibility is known as the UN Global Compact, an initiative that invites the private sector to embrace and enact a set of core values within their sphere of influence in the areas of labour standards, human rights and environmental practices. The global Compact promotes business-UN partnerships particularly with the International Labour Organisation (ILO), UN Environment Programme (UNEP) and the Office of the High Commissioner for Human Rights. All three agencies are also developing their own corporate responsibility initiatives.
European Union (EU) Richard Howitt, Labour Member of the European Parliament for Norfolk, Suffolk and Essex, has played a key role in promoting EU standards for European enterprises operating in developing countries. In January 1999, the European Parliament adopted Mr Howitt’s resolution calling for a European Code of Conduct for Multinationals. The code would cover areas such as minimum standards for human rights, treatment of minorities and working conditions. There may also be provisions for the establishment of an independent monitoring system. In July 2001 European Commission issued the Green Paper ‘Promoting a European framework for corporate social responsibility’ inviting debate and comment.
Foreign & Commonwealth Office (FCO), UK The Foreign Secretary announced in November 1998 the Government’s intention “to ensure that responsible (corporate) behaviour goes hand I hand with competitive advantage.” To this end, the FCO established the Global Citizenship Unit in 1999 to advise and support British firms in applying the principles of corporate citizenship whilst doing business in third countries. Other aims of the unit are to act as a central office of information and advice on corporate citizenship and to develop FCO policy in this area with input from business and the NGO community. The ultimate aim of the unit is to bring a corporate citizenship perspective into relevant areas of FCO activity.
Department for International Development (DFID), UKClare Short, Secretary of State, has been a vocal advocate of corporate responsibility and the role of business in development. DFID established the Business Partnerships Unit in 1998 to advise and to provide information on business partnership initiatives. In 1999, DFID’s Social Development Division launched the Resource
18
Centre on the Social Dimensions of Business Practice to develop the capacity, approaches, resources and methods to advise businesses, bilateral and multilateral agencies, and civil society organisations on socially responsible business practices. At the international policy level, DFID has taken an active role in ILO initiatives related to corporate responsibility, including the new convention on child labour.
Department for Trade and Industry (DTI), UKThe DTI has taken an active role on matters of corporate responsibility and corporate governance. The Minister of State for E-Commerce and Competitiveness Douglas Alexander (MP) is also responsible for Corporate social responsibility and social enterprise. DTI is currently overseeing the company law review, which includes consideration of stakeholding, and other corporate responsibility matters. DTI has also supported the independent “Committee of Inquiry: A New Vision for Business’, a multi-stakeholder process designed to assist UK and European policymakers’ frame appropriate policies to promote corporate responsibility and best practice.
Department for Education and Employment (DfEE), UKIn late 1999, the DfEE, with DTI support, commissioned the Management Charter Initiative’s Management and Enterprise Training Organisation to undertake a study to determine the practical value of ethical management codes. The study identified factors of success and failure for codes in the UK, and recommended how the DfEE and DTI can proceed in this area. The study’s main conclusion is that there is merit in moving towards formal ‘market testing’ of the potential for a national code. This would include the identification of components of a code that might be tailored for individual organisations and individual managers.
Department for Work and Pensions, UKIn December 1998, the government published the pensions green paper - "A New Contract for Welfare: Partnership in Pensions". It provided for an amendment to the 1995 Pensions Act that would encourage occupational pension fund trustees to be aware of the full range of factors that might affect the value of their investments. In mid-2000, the new regulation took effect requiring trustees to declare in their annual statement of investment principles "the extent [if at all] to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments; and their policy [if any] directing the exercise of rights [including voting rights] attaching to investments."
19
Altered Images:
20
Understanding and Encouraging Corporate Responsibility in South Asia
Altered ImagesThe 2001 state of corporate responsibility in India poll
By Ritu Kumar, David F Murphy, Viraal BalsariPublished by TERI India
© Tata Energy Research InstituteISBN 81-85419-90-6
Copies available from:
Tata Energy Research Institute Telephone 4682100 or 468211Darbari Seth Block Email: [email protected] Habitat Centre Fax: 4682144 or 4682145Lodhi Road Website: www.teriin.orgNew Delhi 110003 City Code 11, Country Code 91India
TERI-Europe and New Academy of Business are currently working with various partners on a new initiative to understand and encourage corporate responsibility across South Asia – in Bangladesh, India and Sri Lanka. The vision is to contribute to a positive change towards business practices and attitudes that support sustainable development and poverty eradication in the region. The focus is on expanding the knowledge base of corporate practices in South Asia relating to working conditions within factories; living conditions in surrounding communities; environmental protection; and corporate accountability and transparency. The aim is to produce useful information and tools (such as training materials) for South Asian companies and civil society groups, especially the more vulnerable income groups in the three countries.
The report presents the results of the initiative’s first activity – a poll that explored the perceptions and expectations of workers, company executives, and the general public towards the social, economic and environmental responsibilities of the companies operating in India.
21
1. Understanding corporate responsibility
The struggle to define the boundaries of corporate responsibility for social and environmental matters has deep roots in the history of business. From the beginning of the Industrial Revolution, those within and outside the business world have battled over the very notion and extent of corporate responsibility. Over this time, four different ‘models’ have emerged, all of which can be found in India today.
Table 1. The four models of corporate responsibilityModel Focus ChampionsEthical Voluntary commitment by
companies to public welfareMK Gandhi
Statist State ownership and legal requirements determine corporate responsibilities
Jawaharlal Nehru
Liberal Corporate responsibilities limited to private owners (shareholders)
Milton Friedman
Stakeholder Companies respond to the needs of the stakeholders – customers, employees, communities etc
R Edward Freeman
The essence of the stakeholder model was captured by David Wheeler and Maria Sillanpaa as follows:
“The long term value of a company rests primarily on: the knowledge, abilities and commitment of its employees: and its relationships with investors, customers and other stakeholders. Loyal relationships are increasingly dependent upon how a company is perceived to crate ‘added value’ beyond the commercial transaction. Added value embraces issues like quality, service, care for people and the natural environment and integrity. It is our belief that the future of the development of loyal, inclusive stakeholder relationships will become one of the most important determinants of commercial viability and business successes.”
Wheeler and Sillanpaa (1997)
With companies facing increasing scrutiny in the global economy, the corporate responsibility agenda now encompasses a wide range of issues including provision of quality, safe products at fair prices, ethical business practices, fair employment policies and environmental protection. Companies are expected to perform according to a ‘triple bottom line’ of economic, social and environmental performance. There is also a greater demand for accountability and transparency to society, for example through reportage and stakeholder dialogue.
22
The poll focused on four dimensions of corporate responsibility, namely, worker health and safety, community relations, environmental sustainability and accountability to stakeholders.2. Corporate responsibility in India: a snapshot
The poll was designed to capture the perceptions and expectations of three sets of stakeholders: general public, workers (skilled, semi-skilled, unskilled, including trade union members and others) and corporate executives (heads of labour/industrial relations, welfare departments, manufacturing and production etc).
A total of 1212 persons were polled in 5 cities: Chennai, Kolkata, Mumbai, New Delhi and Tiruppur.
Key questions asked:
Global and national concerns: what do Indians care about? What role should companies play in society? What are the predominant factors influencing Indian opinion
about companies? Which sectors are the most socially responsible? Who do Indians trust to work in the best interest of society? Which are the most responsible companies in India? Is there evidence of child labour and/or gender discrimination in
the workplace? What source of information on company practices do Indians
trust most? Are there regional differences in consumer sensitivity to socially
responsible production?
With privatisation and globalisation the philanthropic and statist models are gradually being complemented by the stakeholder model in India. For this to be successful, corporate responsibility must become an integral part of business strategy. Despite some encouraging signs, the poll revealed a number of areas where more progress is needed, the key conclusions being:
High expectations from companies are not yet matched by judgements about corporate responsibility
More trust is placed in the media and non-governmental organisations than in industry
A greater role for non-governmental organisations
Gender discrimination is a real issue in the workplace
Workers and the management have sharply diverging perceptions of working conditions
23
24
Extracts from websites
Please note there is some copyright material in this section, and permission is required to reproduce
25
26
From The Financial Times, March 2002
4-part series on Corporate Social Responsibility© The Financial Times Limited 1995-2002
Part 1: Inside Track: does caring boost the bottom line?By Alison Maitland and Michael SkapinkerFinancial Times, 6 March 2002
Part 1: Businesses are under increasing pressure to embrace community concerns. Are ethics and environmentalist just a PR exercise or can they help to improve profits?
The moment he walked into the public meeting at the Richmond Theatre I west London, Sir John Egan knew he was in trouble. There were hundreds of people waiting to tell him they did not want BAA, the company he headed, to build a fifth terminal at Heathrow airport.
Worryingly, they were not professional agitators. They looked like the people next door – which they were. “These are ordinary people, our neighbours.” Sir John told
his managers the next day. “They’re not promoting an environmental or political cause; they’re just upset by the noise and the traffic.”
A little later Sir John flew to an international conference in Budapest where the keynote speaker was Des Wilson, a former chairman of Friends of the Earth and one of the UK’s most prominent radical campaigners.
Mr Wilson reminded the tourist executives that their business
27
was selling clean beaches, oceans and lakes. “You should not have to be pressured into environmental responsibility. You should be the leaders,” he said. Shortly afterwards, Sir John recruited him to become BAA’s public affairs director.
They were an unlikely couple. Sir John, former head of Jaguar cars, was a committed Thatcherite and a leading member of the British business establishment. Mr Wilson left his New Zealand school at 15, arrived in London four years later and, after a series of odd jobs, became a campaigner for the homeless, for lead-free petrol and for the Liberal Democratic party.
Sir John was looking for someone who could speak to environmental campaigners and local opponents of the terminal on their own terms. He succeeded. BAA got permission to build its terminal after a four-year public inquiry, the longest in UK history. Mr Wilson encouraged BAA's airport managers to get to know the local community campaigners and to attempt to incorporate their concerns into expansion plans before submitting them for planning approval.
Sir John and Mr Wilson have used their experience to write a book (Private Business… Public Battleground: the Case for 21st-Century Stakeholder Companies) arguing the case for corporate social responsibility, advising
companies to engage with those who are not on the shareholders' register.
The idea has its opponents. David Henderson, former head of economics and statistics at the Organisation for Economic Co-operation and Development, argued at a debate sponsored by the London Business School and The Economist last week that CSR was misguided and dangerous.
Consulting a wide range of stakeholders and complying with new monitoring and accounting systems raised costs for companies and their customers, he said. Companies that engaged in CSR claimed they were protecting their reputation and enhancing profits by responding to society's expectations. "But you have to ask whether these expectations are well founded and reasonable," he said.
Imagine, Mr Henderson said, that it became the widely held view that senior managers should do five hours' yoga in their working day and that their progress should be monitored and reported. "Perhaps companies would have to go down that path," he said. "But you would hope that some companies would say: 'This doesn't make sense.'"
There are many other executives who profess a belief in CSR - but only because their public relations department has told them to do so. Sir John
28
and Mr Wilson recall being invited by a well regarded company to make a presentation on stakeholder engagement to the board. The finance director spent the meeting checking some figures. One of the leading directors left to make a telephone call. Another repeatedly looked at his watch.
So what is the business case for CSR? There have been many studies purporting to prove that it improves profits but they are not entirely convincing. Craig Smith, associate professor of marketing and ethics at London Business School, has identified 80 studies. Of these, 42 demonstrated a positive impact, 19 found no link, 15 produced mixed results and only four showed a negative impact.
There were problems with the methodology, he said. Such studies tended to focus on companies that were large, successful and admired anyway. They often relied on what companies said about themselves. They often failed to compare like with like: it was meaningless to compare a company's environmental performance with, say, its record on equal opportunities.
There are companies that have managed to turn a commitment to CSR into financial success. Gwyneth Brock, corporate affairs manager for the UK's Co-operative Bank, said the bank's
policy of ethical investment had helped to turn it from loss to profit and to bring a nearly fivefold increase in customer deposits in 10 years. An independent cost-benefit analysis last year estimated that the bank's environmental and ethical policies accounted for between 15 per cent and 18 per cent of its pre-tax profits. But it has not worked for everyone. Body Shop became famous for its ethical approach but has ultimately not prospered as a business.
The most obvious answer to the question of why companies should care about the wider community is that it is a way of protecting themselves against potential risk. Just as companies keep an eye on which competitors are working on a cheaper or more attractive product, so they should try to keep tabs on which organisations are planning campaigns that might damage their business.
The most famous illustration of the damage that can be done was the Brent Spar affair in the mid-1990s, when Shell suffered a consumer boycott over its decision to dispose of an oil platform by sinking it at sea. The company had researched the issue thoroughly and had decided that disposal at sea was the most environmentally responsible option. Greenpeace and many members of the public, particularly in Germany, saw it
29
differently. Shell was forced to back down.
Kate Fish, vice-president for public policy at Monsanto, which also fell foul of the campaigners, has spent hours thinking about where companies go wrong. What was so worrying about Shell running into trouble was that it had such highly developed systems for thinking about the future, she recalls. No company had done more to develop the idea of scenario planning. "They had the science on their side but Greenpeace talked about values," Ms Fish says. "What Shell ran up against was: you don't litter. You don't throw your old car into a lake."
It is not enough for companies to persuade themselves that they have right on their side. They need to know enough about campaigning organisations to know whether they are going to agree. Many managers object to this, even if they are reluctant to say so
publicly: what right, they ask, do these unelected and unaccountable organisations have, to tell companies what they should be doing?
Their frustration is understandable but pointless. It is the customers, equally unelected and unaccountable, who decide whether companies prosper or fail - and the customers trust pressure groups. A recent survey by Edelman, the public relations consultancy, found Europeans trusted campaigning organisations substantially more than companies. In the US, trust for campaigning organisations is approaching that for business. The campaigns work when they attract public support. A business that refuses to think about why consumers follow Greenpeace rather than Shell is failing its shareholders just as much as one that prefers not to consider why people buy Nokia's phones rather than Ericsson's.
30
From The Financial Times, March 2002
4-part series on Corporate Social Responsibility© The Financial Times Limited 1995-2002
Part 2: Inside Track: why Nike has broken into a sweatBy Michael SkapinkerFinancial Times, 7 March 2002
Part 2: The sports equipment maker has been a target for anti-sweatshop campaigners. It has responded with self-criticism, writes Michael Skapinker
Making Nike trainers is "tedious, hard and doesn't offer a wonderful future". The workers in factories that make Nike products are harassed by their superiors who show scant regard for the rules on overtime. Nike knows far too little about what happens in the factories. Its monitoring system does not work well enough.
Who says so? Nike does. The self-criticisms are all contained in the sporting goods company's first "corporate responsibility report", published in October. Nike
says it has already done much to address the charges levelled at it by anti-sweatshop campaigners, although Maria Eitel, the company's vice-president for corporate responsibility, does not expect people to accept that. "I'm the last person you're going to believe about what Nike has done," she says.
Nike's experience provides a vivid illustration of the perils facing companies that believe they can ignore the efforts of campaigning organisations. The first lesson from Nike's experience is that once
31
campaigners decide to latch on to a company, they can use the internet to spread the word rapidly.
For example, last year Jonah Peretti, a graduate student at the Massachusetts Institute of Technology, responded to Nike's offer to personalise customers' trainers by asking for the word "sweatshop" to be printed on the side. When Nike refused, Mr Peretti e-mailed the company saying: "Thank you for the time and energy you have spent on my request. I have decided to order the shoes with a different ID, but I would like to make one small request. Could you please send me a colour snapshot of the 10-year-old Vietnamese girl who makes my shoes?" His e-mail exchange with Nike was flashed around the world.
The second Nike lesson is that being accused of malpractice has a damaging effect on employee morale. The company does not own any factories. Its goods are manufactured by subcontractors. Nike's own staff are designers and marketers and they do not enjoy the campaigns against their company. "They were going to barbecues and people would say: 'How can you work for Nike?'" says Ms Eitel, a one-time White House aide. "I don't know if we were losing employees but it sure as hell didn't help in attracting them."
Monitoring what is happening in the factories is not easy for
Nike, or for other manufacturers of clothing and shoes. The company's products are made in more than 700 factories in 50 countries. Malpractices have been documented in several of them.
One notorious example, mentioned in Nike's corporate responsibility report, was in Pakistan, where village children were found to be hand-stitching footballs. Nike describes this as "by far our worst experience and biggest mistake". The company reacted by restricting the manufacturing of the balls to one contractor, Saga Sports, which agreed not to hire workers aged under 18.
Nike has been dogged by allegations of using child labour elsewhere, too. The company's instructions to its contractors are that workers making clothing or equipment should be at least 16 and that no one under 18 should be involved in making shoes. Nike says its policy is that any contractor found employing workers younger than that must remove them from the workplace, send them to school while continuing to pay their wages and agree to rehire them after they have reached the Nike minimum age.
After a BBC documentary in 2000 accused Nike of using child labour in Cambodia, the company reviewed all 3,800 workers' records and
32
interviewed those it suspected were under age. Cambodian birth records were never very reliable and many were erased during the Khmer Rouge massacres. Nike admits that even after reviewing its Cambodian factories, "there was no absolute assurance we had got it right".
Nike decided to find a partner in the non-corporate world to help it monitor what was happening in its subcontractors' factories. In 1999, it gave a Dollars 7.7m grant to the International Youth Foundation (IYF) to establish an organisation called the Global Alliance for Workers and Communities. (The IYF, which aims to improve the lives of young people, is chaired by David Bell, chairman of the Financial Times.) Gap, the clothing company that has also been heavily criticised by anti-sweatshop campaigners, has also joined the Global Alliance, as has the World Bank.
Although set up with Nike money, the Global Alliance has not been a soft touch. Last year it published a report on nine Indonesian factories that make Nike products. The Alliance said it had found instances of verbal abuse and sexual harassment in all nine factories. "Verbal abuse was the most marked, with 30 per cent of the workers having personally experienced and 56 per cent having observed the problem. An average of 7 per cent of workers reported
receiving unwelcome sexual comments and 3 per cent reported being physically abused," the report said.
Nike admitted it had no idea of the scale of the problem. "The image that was created of the factories was that they were dark," Ms Eitel says. "In fact they were bright. It's what happens underneath." The maltreatment of the largely female workforce making Nike products is difficult to deal with, she says. "An issue like sexual harassment is highly complex. In the factories, you can have one culture managing another. You can have Koreans or Taiwanese managing in Vietnam."
Nike's response has been to increase its training. "We do a lot of training of our own people, factory managers and supervisors," Ms Eitel says. "We are trying to train workers in their rights, so that they understand their rights and when they're being inappropriately treated."
Ms Eitel says the best way of persuading factory owners to treat their workers properly is to demonstrate the financial benefits: improved productivity, reduced labour turnover and less sick leave. "One factory owner in Thailand said he had (initially) done it because it was what Nike wanted but he thought it was a bunch of baloney." Those attitudes have begun to change. "The factory managers are telling us that as they
33
increase their work around social responsibility, they are seeing improvements."
She says there have been business benefits for Nike, too, apart from helping deflect criticism. By dealing with problems in the factories, the company now has a better understanding of its supply chain.The critics are still unimpressed. Oxfam Community Aid Abroad, the Australian-based organisation that closely monitors Nike, alleges that the company has "consistently moved production of its sneakers to wherever wages are lowest and workers' human rights are most brutally oppressed". It says most of Nike's Indonesian workers who are parents are forced by their financial circumstances to live apart from their children. Nike's factory monitoring programme "looks good on paper but . . . in practice achieves very little",
says the organisation, which is part of Oxfam International.
Ms Eitel says that when she visits factories manufacturing goods for as many as 27 companies, she wonders why Nike has been singled out. "Everything you're wearing right now, where did these things come from? They came from thousands of factories around the world. I've seen some factories, not Nike factories, where I felt ill and had to leave. They were truly sweatshops in the classic sense."
Campaigners such as Oxfam say they chose to target Nike because it had the largest profit margins and could afford to pay more, because it led the push into low-wage countries with poor human rights records and because it was the market leader. Success may be attractive to shareholders, but it means companies have to be even more alert to the threat of bad publicity.
34
From The Financial Times, March 2002
4-part series on Corporate Social Responsibility© The Financial Times Limited 1995-2002
Part 3: Inside Track: How Monsanto got bruised in a food fightBy Michael Skapinker Financial Times, 8 March 2002
Part 3: The group’s genetically modified crops were welcomed in the US. It was unprepared for the reaction in Europe, says Michael Skapinker
When Monsanto brought its genetically modified food to Europe, Greenpeace was waiting. How did the US company respond? "We sent over our American scientists and lawyers," Kate Fish, Monsanto's vice-president for public policy, says witheringly.
In a speech to a conference on corporate citizenship in New York last month, Ms Fish mercilessly dissected her company's failure in the 1990s to deal with European fears
about genetically modified foods. Monsanto's executives had become so caught up in the work done in their laboratories that they barely knew how to talk to non-scientists.
"For a company that believes in science, it's very difficult. When the Prince of Wales started talking about interfering with the realms of God, we weren't equipped to deal with that," she told the conference.
35
Ms Fish was no stranger to environmentalism. In 1989 she founded EarthWays, an environmental group. Her first contact with Monsanto came soon afterwards, when it approached her about supporting Earth Day, which she was organising in St Louis, Missouri, the company's home town.
Monsanto's work on genetically modified foods - which, the company said, would lower pesticide use, increase crop yields and promote more efficient land use - appeared perfectly aligned with her belief in sustainable development.
She joined Monsanto's external advisory council in 1990 and when the company offered her a job in 1996, it seemed the perfect way to pursue her ideals. "I had a sense of being employed doing something I wanted to do that could have some effect in the world," she says.
Monsanto's promotion of genetically modified food enjoyed great success in the US. The products won regulatory approval and the amount of land under cultivation for such crops expanded rapidly. Taking the products to Europe seemed the natural next step. It did not occur to Ms Fish and her colleagues that European environmentalists would be anything other than enthusiastic. "When I was an environmentalist and first
started looking at these products, I thought this was exciting stuff. When you spend time in the labs, you get comfortable with it. It doesn't seem so scary," she says.
Some Monsanto staff in Europe warned that genetically modified foods might not enjoy the easy ride they had had in the US. They were ignored. "We heard the signals coming from Europe. Our people in Europe were saying: 'There are some issues here.' But they weren't loud enough. They were perceived as fringe signals. Until it starts to hurt, they're very hard to hear."
The introduction of genetically modified foods into Europe was a fiasco. The environmental movement's campaign against them won huge public support. Supermarkets promised to banish such foods from their shelves. Crop trials were sabotaged. European governments imposed a moratorium on approval of genetically modified crops, which has been in force for more than three years.
This has given Ms Fish and Monsanto - which is now a subsidiary of Pharmacia, the pharmaceuticals group - plenty of time to consider the lessons. The first lesson is that what works in the US does not necessarily work anywhere else.
Americans, Ms Fish says, trust their regulators. Europeans do not - for good reason.
36
Monsanto was attempting to introduce its products following the BSE (mad cow disease) crisis, where government assurances that beef was safe had turned out to be false.
Monsanto also appeared to be imposing genetically modified foods on Europe without consultation. "You don't alter people's food without asking them first. It was as if their babies were being attacked," Ms Fish says. "There was a sense of outrage because it didn't appear that people had a choice. I think the whole industry didn't spend the time dealing with the consumer issues, talking about the technology. When consumers first heard about it, it was from Greenpeace, it wasn't from the industry."
Is there any chance that, if Monsanto had spent more time listening and consulting, European consumers would have been willing to give genetically modified foods a try? "It's so hard to say," Ms Fish says. "Certainly, we could have done it differently."
Monsanto realises that winning Europe round will take years. In 2000, Hendrik Verfaillie, Monsanto's chief executive, announced a "pledge" not to use genes from humans or animals in products intended for food or animal feed. Monsanto said it would never sell a product into which a known allergen had been introduced. Addressing an issue that has caused
particular concern, it also promised "not to pursue technologies that result in sterile seeds".
Ms Fish now spends much of her time in Brussels. Mr Verfaillie believes the way forward is for Monsanto to attempt to find common ground with its critics rather than confront them. It has been holding meetings with European environmental groups. "I can't give you names but we went to our most outspoken critics," he says.
Did he find these campaigners reasonable? "It was absolutely amazing. We obviously had significant disagreements on certain points but they were very willing to engage. We may not agree with everything they say but they have a point of view that reflects at least a part of society. It's very difficult to get the most extreme critics to agree to anything but the middle-of-the-road organisations have as their objective improving the environment."
Mr Verfaillie and Ms Fish are trying to convince those organisations that they and Monsanto have a common interest. Using genetically modified crops to reduce pesticide use is a line Monsanto continues to pursue. In Brazil, Mr Verfaillie says, planting of such crops has reduced leakage of pesticides into rivers. Increasing crop yields around the world would
37
mean fewer forests and wetlands being taken over by agricultural production.
Monsanto is also talking to European farmers. "How do we build and align what we're offering with the needs of European agriculture?" Ms Fish asks. "Agriculture in the UK is very efficient but farmers' income is low. The UK's got one of the highest uses of pesticide in Europe, much higher than the US. Only the Netherlands' is higher."
Mr Verfaillie sees signs that European public opinion is starting to turn. "We do market research. We're still not where we need to be. But we see consumers in the UK and (the Netherlands) have gone from 20 per cent saying they would consume (GM) products to over 50 per cent," he says.
The European Commission last year warned that the moratorium on approving new varieties of genetically modified crops were damaging the European Union's attempt to become the world's most dynamic economy. "Europe cannot afford to miss the
opportunity that these new sciences and technologies offer," the Commission said. "Biotechnology research efforts could and should be used to develop new GM varieties to improve yields and enable cultivation by small-scale and poor farmers." It added that Europe risked losing more scientists to the US.
European ministers were unmoved, insisting last year that the moratorium could not be lifted until new rules on labelling and tracing genetically modified ingredients were in place. This could take another three years. Greenpeace's website continues to insist: "Genetic scientists are altering life itself - artificially modifying genes to produce plants and animals which could never have evolved naturally." It warns that such ingredients are still "sneaking into the food chain through animal feed".
Monsanto has admitted its mistakes in failing to take these fears seriously. It is likely to be living with them for a long time.
38
39
From The Financial Times, March 2002
4-part series on Corporate Social Responsibility© The Financial Times Limited 1995-2002
Part 4: Inside Track: Bitter taste of success, StarbucksBy Alison Maitland Financial Times, 11 March 2002
PART IV: Starbucks has become a target for environmental pressure groups partly because its socially responsible image makes it an easy target, writes Alison Maitland:
Ronnie Cummins, director of the US Organic Consumers Association, is frank about why he directs protests against Starbucks, the coffee chain, rather than giant coffee buyers such as Nestle, Procter & Gamble and Kraft Foods.
"We target them because they're the only big coffee company in the world that pretends to be socially responsible," he says. "It's better to start with them. Kraft is never going to do anything. When you're the grassroots with limited resources, you have to pick your targets carefully."
It is a telling insight into the risks facing companies that link their brands to socially responsible behaviour. The
fast-growing speciality coffee chain claims social responsibility has been part of its "heart and soul" since Howard Schultz founded Il Giornale, the company that became today's Starbucks, in 1985. In 1991 it began supporting Care, an international relief organisation, and became the first privately owned US company to offer a stock option programme that included part-time employees.
40
The company, which has been listed on Nasdaq since 1992 and reported revenues of Dollars 2.6bn last year, has never experienced public relations setbacks on the scale of Nike or Monsanto.
But its success has bred disquiet. It has been accused of driving out independent cafes as it has expanded from fewer than 700 outlets in 1995 to 5,200 now. With its logo popping up across the world from China to the Gulf states, it has joined McDonald's as a favourite target of anti-globalisation protestors.
It seems no coincidence that the Starbucks board decided to make more play of its diverse CSR activities in 1999, the year when violent demonstrations disrupted the World Trade Organisation talks in its home city of Seattle. Last year it appointed a senior vice-president for CSR and last month published its first annual CSR report "to communicate the way we do business".
These initiatives do not wash with Mr Cummins. One of his organisation's demands is for Starbucks to make its coffee using milk that is certified free of the growth hormone rBST. Although this hormone has US Food and Drug Administration approval, Mr Cummins believes there are potential health risks.
Some might dismiss this concern as mere froth on a Starbucks Frappuccino. But the
Organic Consumers Association is also attacking Starbucks on an issue with wider resonance: fair wages for coffee farmers. At the end of last month it called a week of action against the company to press the case for producers facing a 30-year low in coffee prices.It is not enough, apparently, for Starbucks to say that it pays its growers a premium price - about Dollars 1.20 a pound against a world price of less than 50 cents - that it is forging long-term, direct contracts with farmers, or that it invests in clinics, schools and credit schemes in growers' communities.
Mr Cummins asks: why should people take such statements at face value? To prove it is doing what it says, Starbucks should submit to third- party verification, available only via the Fairtrade movement, which guarantees growers a premium wage.
Dennis Stefanacci, brought in from the non-profit healthcare sector to head Starbucks' CSR activities, views such protests with apparent equanimity. "Sometimes there are things we don't think about," he says. "Activists play a vital and vibrant role in our continued growth and evaluation of who we are as a company."
The demands, such as those of the OCA on milk, are sometimes unreasonable, he says. Virtually all the milk from herds that have been injected
41
and those that have not is combined before sale. In any case, Starbucks offers organic milk as an alternative, though at a premium.
On the issue of fair treatment for coffee growers, he argues that Starbucks is already leading the way. Last November, in partnership with another external pressure group, Conservation International, it announced the industry's first coffee purchasing guidelines. These are designed to ensure that the beans Starbucks buys are produced to environmental, labour, economic and quality standards checked by independent third-party auditors, as well as by Starbucks. The incentive for suppliers who choose to meet the criteria in six trial sites will be premiums of up to 10 cents a pound and preference in the purchasing chain.
Does Starbucks' desire for its suppliers "to demonstrate the same values as we do" not impose additional costs on struggling farmers in developing countries? "We're already paying them a premium price," replies Mr Stefanacci. "We're not taking advantage of a small farmer who can't make ends meet."
Glenn Prickett, executive director of Conservation International's Centre for Environmental Leadership in Business, says the programme will also protect biodiversity by offering farmers good enough
prices to prevent them clearing forests where "shade grown" coffee is cultivated with minimal use of agro-chemicals.
Starbucks acknowledges that this is just a small step and that it cannot change the global supply/demand equation alone. Its total purchases account for about 1 per cent of world coffee supply - and all coffee shop purchases together account for only about 5 per cent. The rest is bought by multinational consumer groups such as P&G and Kraft, majority-owned by Philip Morris. Last year, Starbucks committed itself to buying 1m pounds of Fairtrade certified coffee - but that amounts to just 1 per cent of its overall purchases.
Yet the business case for Starbucks to give equal weight to corporate citizenship and quality coffee is unassailable, says Mr Stefanacci. "Doing well and doing good are not opposites, they're companions."
External surveys show that 75-80 per cent of consumers are likely to reward companies for being "good corporate citizens" and that 20 per cent will punish those that are not. Internal surveys show an important reason for employees staying longer with the company is its CSR record. When the turnover rate of "baristas", or bartenders, is reduced by a percentage point a year, that adds Dollars 100,000 to the bottom line.
42
The big growth in socially responsible investment funds shows that investors are also interested in the long-term viability of companies, Mr Stefanacci says. "Our investment in long-term contracts for farmers helps ensure that."Mr Stefanacci accepts that the public is currently having to take much on trust about Starbucks and its suppliers and he promises that next year the CSR report will be externally audited.
The Organic Consumers Association dismisses Starbucks' work with groups
such as Conservation International as "greenwash" - environmental public relations that allows a company to escape wider criticism. But Mr Cummins admits the coffee chain has gone some way to meet activists' demands.
Companies that show environmental leadership, such as BP and Starbucks, will always attract greater scrutiny, says Mr Prickett at Conservation International. The tactics of pressure groups may differ, he says. "But we're all after the same goal, which is an improvement in the quality of the environment and in the life of the coffee growers."
43
UN’s Global Compact
"A COMPACT FOR THE NEW CENTURY"
At the World Economic Forum, Davos, on 31 January 1999, UN Secretary-General Kofi A. Annan challenged world business leaders to "embrace and enact", both in their individual corporate practices and by supporting appropriate public policies, the following universally agreed values and principles:
1. The Universal Declaration of Human RightsThe Secretary-General asked world business to:
a) support and respect the protection of international human rights within their sphere of influence; and
b) make sure their own corporations are not complicit in human right abuses.
2. The International Labour Organization's Declaration on fundamental principles and rights at work
The Secretary-General asked world business to uphold:a) freedom of association and the effective recognition of the right to collective bargaining;
b) the elimination of all forms of forced and compulsory labour;
c) the effective abolition of child labour;
d) the elimination of discrimination in respect of employment and occupation.
3. The Rio Declaration of the UN Conference on Environment and Development (1992)The Secretary-General asked world business to:
a) support a precautionary approach to environmental challenges;
b) undertake initiatives to promote greater environmental responsibility;
c) encourage the development and diffusion of environmentally friendly technologies.
44
The United Nations is pleased to announce the creation of a new website for interacting with the business community, www.un.org/partners.
UN SECRETARY-GENERAL PROPOSES GLOBAL COMPACT ON HUMAN RIGHTS, LABOUR, ENVIRONMENT, IN ADDRESS TO WORLD ECONOMIC FORUM IN DAVOS – 31 January 1999
I am delighted to join you again at the World Economic Forum. This is my third visit in just over two years as Secretary-General of the United Nations.
On my previous visits, I told you of my hopes for a creative partnership between the United Nations and the private sector. I made the point that the everyday work of the United Nations -- whether in peacekeeping, setting technical standards, protecting intellectual property or providing much-needed assistance to developing countries -- helps to expand opportunities for business around the world. And I stated quite frankly that, without your know-how and your resources, many of the objectives of the United Nations would remain elusive.
Today, I am pleased to acknowledge that, in the past two years, our relationship has taken great strides. We have shown through cooperative ventures -- both at the policy level and on the ground -- that the goals of the United Nations and those of business can, indeed, be mutually supportive.
This year, I want to challenge you to join me in taking our relationship to a still higher level. I propose that you, the business leaders gathered in Davos, and we, the United Nations, initiate a global compact of shared values and principles, which will give a human face to the global market.Globalization is a fact of life. But I believe we have underestimated its fragility. The problem is this. The spread of markets outpaces the ability of societies and their political systems to adjust to them, let alone to guide the course they take. History teaches us that such an imbalance between the economic, social and political realms can never be sustained for very long.
The industrialized countries learned that lesson in their bitter and costly encounter with the Great Depression. In order to restore social harmony and political stability, they adopted social safety nets and other measures, designed to limit economic volatility and compensate the victims of market failures. That consensus made possible successive moves towards liberalization, which brought about the long post-war period of expansion.
45
Our challenge today is to devise a similar compact on the global scale, to underpin the new global economy. If we succeed in that, we would lay the foundation for an age of global prosperity, comparable to that enjoyed by the industrialized countries in the decades after the Second World War. Specifically, I call on you -- individually through your firms, and collectively through your business associations -- to embrace, support and enact a set of core values in the areas of human rights, labour standards, and environmental practices.
Why those three? In the first place, because they are the areas where you, as businessmen and women, can make a real difference. Secondly, they are the areas in which universal values have already been defined by international agreements, including the Universal Declaration, the International Labour Organization's Declaration on fundamental principles and rights at work, and the Rio Declaration of the United Nations Conference on Environment and Development in 1992. Finally, I chose these three areas because they are the ones where I fear that, if we do not act, there may be a threat to the open global market, and especially to the multilateral trade regime.
There is enormous pressure from various interest groups to load the trade regime and investment agreements with restrictions aimed at reaching adequate standards in the three areas I have just mentioned. These are legitimate concerns. But restrictions on trade and impediments to investment flows are not the means to use when tackling them. Instead, we should find a way to achieve our proclaimed standards by other means. And that is precisely what the compact I am proposing to you is meant to do.
Essentially there are two ways we can do this. One is through the international policy arena. You can encourage States to give us, the multilateral institutions of which they are all members, the resources and the authority we need to do our job.
The United Nations as a whole promotes peace and development, which are prerequisites for successfully meeting social and environmental goals alike. And the International Labour Organization, the United Nations High Commissioner for Human Rights and the United Nations Environmental Programme strive to improve labour conditions, human rights and environmental quality. We hope, in the future, to count you as our allies in these endeavours.
The second way you can promote these values is by tackling them directly, by taking action in your own corporate sphere. Many of you are big investors, employers and producers in dozens of different countries across the world. That power brings with it great opportunities -- and great responsibilities. You can uphold human
46
rights and decent labour and environmental standards directly, by your own conduct of your own business.
Indeed, you can use these universal values as the cement binding together your global corporations, since they are values people all over the world will recognize as their own. You can make sure that in your own corporate practices you uphold and respect human rights; and that you are not yourselves complicit in human rights abuses.
Don't wait for every country to introduce laws protecting freedom of association and the right to collective bargaining. You can at least make sure your own employees, and those of your subcontractors, enjoy those rights. You can at least make sure that you yourselves are not employing under-age children or forced labour, either directly or indirectly. And you can make sure that, in your own hiring and firing policies, you do not discriminate on grounds of race, creed, gender or ethnic origin.
You can also support a precautionary approach to environmental challenges. You can undertake initiatives to promote greater environmental responsibility. And you can encourage the development and diffusion of environmentally friendly technologies.
That, ladies and gentlemen, is what I am asking of you. But what, you may be asking yourselves, am I offering in exchange? Indeed, I believe the United Nations system does have something to offer.
The United Nations agencies -- the United Nations High Commissioner for Human Rights, the International Labour Organization (ILO), the United Nations Environment Programme (UNEP) -- all stand ready to assist you, if you need help, in incorporating these agreed values and principles into your mission statements and corporate practices. And we are ready to facilitate a dialogue between you and other social groups, to help find viable solutions to the genuine concerns that they have raised.In doing so, you may find it useful to interact with us through our newly created website, www.un.org/partners, which offers "one-stop shopping" for corporations interested in the United Nations. More important, perhaps, is what we can do in the political arena, to help make the case for and maintain an environment which favours trade and open markets.I believe what I am proposing to you is a genuine compact, because neither side of it can succeed without the other. Without your active commitment and support, there is a danger that universal values will remain little more than fine words -- documents whose anniversaries we can celebrate and make speeches about, but with limited impact on the lives of ordinary people. And unless those values are really seen to be taking hold, I fear we may find it
47
increasingly difficult to make a persuasive case for the open global market.
National markets are held together by shared values. In the face of economic transition and insecurity, people know that if the worst comes to the worst, they can rely on the expectation that certain minimum standards will prevail. But in the global market, people do not yet have that confidence. Until they do have it, the global economy will be fragile and vulnerable -- vulnerable to backlash from all the "isms" of our post-cold-war world: protectionism; populism, nationalism, ethnic chauvinism, fanaticism and terrorism.
What all those "isms" have in common is that they exploit the insecurity and misery of people who feel threatened or victimized by the global market. The more wretched and insecure people there are, the more those "isms" will continue to gain ground. What we have to do is find a way of embedding the global market in a network of shared values. I hope I have suggested some practical ways for us to set about doing just that.
Let us remember that the global markets and the multilateral trading system we have today did not come about by accident. They are the result of enlightened policy choices made by governments since 1945. If we want to maintain them in the new century, all of us -- governments, corporations, nongovernmental organizations, international organizations -- have to make the right choices now.
We have to choose between a global market driven only by calculations of short-term profit, and one which has a human face. Between a world which condemns a quarter of the human race to starvation and squalor, and one which offers everyone at least a chance of prosperity, in a healthy environment. Between a selfish free-for-all in which we ignore the fate of the losers, and a future in which the strong and the successful accept their responsibilities, showing global vision and leadership.
I am sure you will make the right choice.
48
49
Extract from website
European UnionPromoting a European framework for
corporate social responsibilityGreen Paper
© European Communities, 2001
Executive Summary
An increasing number of European companies are promoting their corporate social responsibility strategies as a response to a variety of social, environmental and economic pressures. They aim to send a signal to the various stakeholders with whom they interact: employees, shareholders, investors, consumers, public authorities and non-governmental organisations (NGOs0. In doing so, companies are investing in their future and they expect that the voluntary commitment they adopt will help to increase their profitability.
As early as 1993, the appeal to European business of President Delors to take part in the fight against social exclusion resulted in a strong mobilisation and in the development of European business networks. In March 2000 the European Council in Lisbon made a special appeal to companies’ sense of social responsibility regarding best practices for lifelong learning, work organisation, equal opportunities, social inclusion and sustainable development.
By stating their social responsibility and voluntarily taking on commitments which go beyond common regulatory and conventional requirements, which they would have to respect in any case, companies endeavour to raise the standards of social development, environmental protection and respect of fundamental rights and embrace an open governance, reconciling interests of various stakeholders in an overall approach of quality and sustainability. While recognising the importance of all these aspects, this paper focuses mainly on companies’ responsibilities in the social field.
This action leads to the development of new partnerships and new spheres for existing relationships within the company regarding social dialogue, skills acquisition, equal opportunities, anticipation and management of change, at the local or national level with reference to the reinforcement of economic and social cohesion and health protection, and more generally on a global level, concerning environmental protection and respect of fundamental rights.
50
The corporate social responsibility concept is mainly driven by large companies, even though socially responsible practices exist in all types of enterprises, public and private, including small- and medium-sized (SMEs) and cooperatives.
The European Union is concerned with corporate social responsibility as it can be a positive contribution to the strategic goal decided in Lisbon: ‘to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.’
This Green Paper aims to launch a wide debate on how the European Union could promote corporate social responsibility at both the European and international level, in particular on how to make the most of existing experiences, to encourage the development of innovative practices, to bring greater transparency and to increase the reliability of evaluation and validation. It suggests an approach based on the deepening of partnerships in which all actors have an active role to play.
1. IntroductionMany factors are driving the move towards corporate social responsibility:
new concerns and expectations from citizens, consumers, public authorities and investors in the context of globalisation and large scale industrial change;
social criteria are increasingly influencing the investment decisions of individuals and institutions both as consumers and as investors;
increased concern about the damage caused by economic activity to the environment
transparency of business activities brought about by the media and modern information and communication technologies
Business and CSRCompanies are increasingly becoming aware that corporate social responsibility can be of direct economic value. Where corporate social responsibility is a process by which companies manage their relationships with a variety of stakeholders who can have a real influence on their licence to operate, the business case becomes apparent. Thus, it should be treated as an investment, not a cost, much like quality management.
51
The political contextAt the European level:
The Lisbon European Council made a special appeal to companies’ sense of responsibility regarding best practices on lifelong learning, work organisation, equal opportunities, social inclusion and sustainable development; to achieve the Lisbon goal of a dynamic, competitive and cohesive knowledge-based economy.
The Commission’s European Social Agenda emphasised the role of CSR in addressing the employment and social consequences of economic and market integration and in adapting working conditions to the new economy.
The European Summit in Nice invited the Commission to involve companies in a partnership with the social partners, NGOs, local authorities and bodies that manage social services, so as to strengthen their social responsibility.
The Commission’s communication on sustainable development, supported at the Goteborg European Council, emphasised the importance of corporate social responsibility: ‘Public policy also has a key role in encouraging a greater sense of corporate social responsibility and in establishing a framework to ensure that businesses integrate environmental and social considerations into their activities… Business should be encouraged to take a proactive approach to sustainable development in their operations both within the EU and elsewhere.’
The CSR debate is with the reflection of the Commission on the White Paper on governance in the European Union. As CSR contributes significantly to a favourable climate towards entrepreneurship, it is also linked to the Commission’s objective of creating an entrepreneurial, innovative and open Europe - ‘Enterprise Europe’.
In Denmark, the Minister for Social Affairs launched the campaign “Our common concern – the social responsibility of the corporate sector” in 1994, and set up the Copenhagen Centre in 1998.
In UK, a Minister for corporate social responsibility was appointed in March 2000. An interdepartmental group has been established to improve coordination of activity to promote corporate social responsibility across the government.
At the international level, the European Union’s approach reflects and is integrated in the broader context of various international initiatives such as
52
UN Global Compact (2000) ILO’s Tripartite Declaration of Principles concerning Multinational
Enterprises and Social Policy (1977/2000) Organisation for Economic Cooperation and Development (OECD)
Guidelines for Multinational Enterprises (2000) Core ILO labour standards (freedom of association, abolition of
forced labour, non-discrimination and elimination of child labour)
2. What is corporate social responsibility?Most definitions of CSR describe it as a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.
Being socially responsible means not only fulfilling legal expectations, but also going beyond compliance and investing ‘more’ into human capital, the environment and the relations with stakeholders. The experience with investment in environmentally responsible technologies and business practice suggests that going beyond legal compliance can contribute to a company’s competitiveness. Going beyond basic legal obligations in the social area, for example, training, working conditions, management-employee relations, can also have a direct impact on productivity. It opens a way of managing change and of reconciling social development with improved competitiveness.
The economic impact can be broken down into direct and indirect effects.
*Positive direct results may, for example, derive from a better working environment, which leads to a more committed and productive workforce or from efficient use of natural resources.
*Indirect effects result from the growing attention of consumers and investors, which will increase opportunities in the market. Inversely, there can be a negative impact on the company’s reputation due to criticism of business practices. This can affect the core assets of a company, such as its brands and image.
2.1 Corporate Social Responsibility: the internal dimensionWithin the company, socially responsible practices involve employees and relates to issues such as investing in human capital, health and safety and managing change, while environmentally responsible practices relate mainly to the management of natural resources used in the production.
2.1.1 Human resources management: to attract and retain skilled workers. Relevant measures could include lifelong
53
learning, empowerment of employees, better information flow, better balance between work, family and leisure, greater work force diversity, equal pay and career prospects for women, profit-sharing and share ownership schemes, and concern for employability as well as job security. Active follow-up and management of employees who are off work due to disabilities or injuries have also been shown to result in cost-saving.
2.1.2 Health and safety at work: this was traditionally approached mainly by means of legislation and enforcement measures. However, the trend of outsourcing work to contractor and suppliers makes companies more dependent on the safety and health performance of their contractors, especially those who are working within their own premises. The focus on occupational health and safety performance and qualities of products and services is increasing, there is also an increasing demand for measuring, documenting and communicating these qualities in the marketing materials. These criteria are being included to varying degrees into existing certification schemes and labelling schemes for products and equipment.
The Dutch safety contractors checklist (SCC) aims at evaluating and certifying occupational safety and health management systems of contractor companies offering their services to the petrochemical and chemical industry.
The Danish IKA procurement provides guidelines to define the requirements in tenders for cleaning agents.
2.1.3 Adaptation to change: Year 2000 saw more mergers and acquisitions than any other year in history. Widespread restructuring raises concerns for all the employees and other stakeholders as it may involve a serious economic, social or political crisis in a community. When done in a socially responsible manner it means to balance and take into consideration the interests and concerns of all those who are affected by the changes and decisions. In practice, the process is as important as the substance to the success of restructuring, and should involve seeking the participation and involvement of those affected through open information and consultation. The process should seek to safeguard employees’ rights and enable them to undergo vocational retraining etc. Companies should take up their share of responsibility to ensure the employability of their staff.
2.1.4 Management of environmental impacts and natural resources: In general, reducing the consumption of resources
54
or reducing polluting emissions and waste can reduce environmental impact. It can also be good for the business by reducing energy and waste disposal bills and lowering input and de-pollution costs. Individual companies have found that less use can lead to increased profitability and competitiveness.
A good example of an approach is Integrated Product Policy (IPP). IPP considers products’ impacts throughout their life cycle, and involves business and other stakeholders in dialogue to find the most cost-effective approach. It can be a strong existing framework for promotion of corporate social responsibility.
European Community’s Eco-Management an dAudit Scheme (EMAS) ISO 19000 also facilitates CSR. This encourages companies voluntarily to set up site or company-wide environmental management and audit systems that promote continuous environmental performance improvements. The environmental statement is public and is validated by accredited environmental verifiers.
The European Eco-Efficiency Initiative (EEEI), an initiative of the World Business Council for Sustainable Development and the European Partners for the Environment in partnership with the European Commission, aims to integrate eco-efficiency throughout European business, and in EU industrial and economic policies. (http://www.wbcsd.ch/eurint/eeei.htm)
2.2 Corporate Social Responsibility: the external dimensionCSR extends beyond the doors o the company into the local community and involves a wide range of stakeholders in addition to employees and shareholders: business partners and suppliers, customers, public authorities and NGOs representing local communities, as well as the environment. Rapid globalisation has encouraged discussion of the role and development of global governance: the development of voluntary CSR practices can be seen as contributing to this.
2.2.1 Local communities: Companies contribute to their communities, especially to local communities by providing jobs, wages and benefits and tax revenues. On the other hand, companies depend on the health, stability and prosperity of the communities in which they operate. The reputation of a company at its location, its image as an employer an producer, but also as an actor in the local scene, certainly influences its competitiveness.
Companies also interact with the local physical environment: some rely on a clean environment for their production of offering of
55
services; some can be responsible for a number of polluting activities, such as noise, light, water pollution, air emissions, contamination of soil, waste disposal.
Many companies become involved in community causes and activities, thus developing positive relations and accumulating social capital.
2.2.2 Business partners, suppliers and consumers: By working closely with business partners, companies can reduce complexity and costs and increase quality. Companies should be aware that social performance can be affected as a result of the practices of their partners and suppliers throughout the whole supply chain. This is particularly the case for large companies that outsource part of their production and services, and thus acquire additional corporate social responsibility with regard to their suppliers and their staff, bearing in mind that sometimes economic welfare of these suppliers depend primarily or entirely on one large company.
Companies are expected to provide products and services which consumers need and want, in an efficient, ethical and environmentally-aware manner. Companies that focus on customers are expected to be more profitable. Applying the principle of design for all (making products and services usable by as many people as possible including disabled consumers) is an important example of corporate social responsibility.
2.2.3 Human rights: CSR has a strong human rights dimension, particularly in relation to international operations and global supply chains. This is recognised in several international instruments. Human rights are a very complex issue presenting political, legal and moral dilemmas. Companies face challenging questions such as, how to identify where their areas of responsibility lie as distinct from those of governments, how to monitor whether their business partners are complying with their core values, and how to approach and operate in countries where human rights violations are widespread.
A key innovation of the Cotonou Agreement is the recognition of the fight against corruption as a ‘fundamental element’ and an explicit reference to corruption as a major development problem to be addressed. Serious cases of corruption ‘including of bribery leading to such corruption’ could constitute grounds for suspension of cooperation.
Under increasing pressure from NGOs and consumer groups, companies and sectors are increasingly adopting codes of conduct
56
covering working conditions, human rights and environmental aspects, in particular those of their subcontractors and suppliers. They do so for various reasons, notably to improve their corporate image and reduce the risk of negative consumer reaction. Codes of conduct and other voluntary initiatives are not an alternative to national and international law, but complement these and promote higher standards for those who subscribe to them.
The Confederation of Danish Industries has launched a set of guidelines for industry on human rights, inviting companies to pursue the same level of social responsibility in their new host country as in their home country.
In 1998, Eurocommerce adopted a recommendation on social buying conditions covering child, forced and prison labour.
The impact of a company’s activities on the human rights of its workers and local communities extends beyond issues of labour rights. For example, in insecure situations where companies work with state security forces with a record of human rights abuses.
The UK government, in cooperation with the US, convened a working group of leading corporations in the oil, gas and mining industries, together with human rights NGOs. The result was the December 2000 adoption of voluntary principles on security and human rights for companies in the extractive and energy sectors.
On 15 January 1999, the European Parliament adopted a Resolution on ‘EU standards for European enterprises operating in developing countries: towards a European code of conduct’ calling for a European code of conduct which would contribute to a greater standardisation of voluntary codes of conduct based on international standards and the establishment of a European monitoring platform, including provisions on compliant procedures and remedial action.
2.2.4 Global environmental concerns: Through the transboundary effect of many business-related environmental problems, and their consumption of resources from across the world, companies are also actors in the global environment. They can encourage better environmental performance throughout their supply chain within the IPP approach. The debate on the role of business in achieving sustainable development is gaining importance on the global stage. The UN’s Global Compact initiative seeks to make business a partner in achieving social and environmental improvements globally. OECD guidelines for multinational enterprises also promote sustainable development. European Commission’s communication ‘Ten years after Rio – preparing for the World Summit on Sustainable Development – COM2001 53) contains
57
further details on how business can contribute to global sustainable development.
3. A holistic approach towards corporate social responsibility:
While companies increasingly recognise their social responsibility, many of them have yet to adopt management practices that reflect it. Training and retraining in order to acquire the necessary skills and competence are required. Stakeholders, particularly employees, consumers and investors, can play a role – in their own interest or on behalf of other stakeholders in areas such as working conditions, the environment or human rights – in prompting companies to adopt socially responsible practices.
3.1 Social responsibility integrated management: Traditional models of organisation behaviour, strategic management and even business ethics do not always give sufficient preparation for managing companies in a socially responsible manner. The mission statements, code of conduct, reasons for company’s existence, core values, and responsibilities towards stakeholders need to be translated from strategies to action plans and day-to-day decisions. This involves practices such as adding a socially or environmental dimension in plans and budgets and evaluating corporate performance in these areas, creating ‘community advisory committees’ carrying out social or environmental audits and setting up continuing education programmes. Currently, most training programmes cover only a limited part of what is meant by CSR.
CSR Europe and the Copenhagen Centre have launched a programme with the aim to bring the business and academic community together to identify and address the training needs of the business sector on corporate social responsibility so as to introduce and diversify courses on corporate social responsibility at all levels of study. http://www.csreurope.org/csr_europe/Activities/programmes/Universities/universities.htm
3.2 Social responsibility reporting and auditing: Many multinational companies are now issuing social responsibility reports. While environmental, health and safety reports are common, reports tackling issues such as human rights and child labour are not. In order for these reports to be useful, a global consensus needs to evolve on the type of information to be disclosed, the reporting format to be used, and the reliability of the evaluation and audit procedure. Increasingly, public initiatives are supporting the development of social and environmental reporting.
The Commission’s recommendation on the recognition, measurement and disclosure of environmental issues in the annual accounts and annual reports of companies, adopted on 30 May
58
2001, is expected to contribute information with regard to environmental issues in the EU. http://europa.eu.int/comm/intrnal_mrket/en/company/accunt/news/01-814/htm
The Danish social index is a self-assessment tool developed by the Ministry of Social Affairs for measuring the degree to which a company lives up to its social responsibilities. Where the social index is shown as a number between 0 and 100 it makes it easy to communicate to the employees and external stakeholders jut how socially responsible the company is.
In addition, a variety of organisations are developing standards for social accounting, reporting and auditing. These standards pursue varied approaches from process to performance standards, from voluntary to mandatory standards, from single issue to multiple issues standards, and only a handful cover the full spectrum of corporate social responsibility issues.
In response to the diversity of codes of conduct, Social Accountability International (SAI) has developed a standard for labour conditions and a system for independently verifying factories’ compliance. The standard, Social Accountability 8000 (SA8000) and its verification system draw from established business strategies for ensuring quality (such as those used for ISO 9000) and add several elements that international human rights experts have identified as being essential to social auditing. http://www.cepaa.org/introduction.htm
Verification by independent third parties of the information published in social responsibility reports is also needed to avoid criticism that the reports are public relations schemes without substance. The involvement of stakeholders, including trade unions and NGOs, could improve the quality of verification.
3.3 Quality in work: Employees are major stakeholders of companies. In addition, implementing CSR needs commitment from the top management, but also innovative thinking and, thus, new skills and closer involvement of the employees and their representatives in a two-way dialogue that can structure permanent feed-back and adjustment. Workers’ representatives need to be consulted extensively on policies, plans and measures. Various instruments can help improve information and transparency about best practice in the area of human resources management.
The ’50 best companies to work for in the UK’ survey, sponsored by both the Department of Trade and Industry (DTI) and Learndirect, a unit of the University for Industry (UFI) shows that small family-run enterprises can be as socially responsible as hi-tech multinational companies.
59
At the invitation of the European Council in Lisbon, which stressed the importance of investing in people, the Commission is exploring ways to introduce a European award for particularly progressive companies, in order to give higher priority to lifelong learning as a basic component of the European social model. Similar prizes will recognise companies, which have developed good practice to promote gender equality or provide opportunities for people with disabilities.
3.4 Social and eco-labelsAs a response to European consumers care about the health and safety of workers, respect for human rights throughout company operations and the chain of suppliers, safeguarding the environment and reduction in emissions of green house gases, a growing number of social labels have originated from either individual manufacturers or industrial sectors, NGOs and governments.
The European eco-label deals with the environmental performance of particular products. The number of companies with eco-labelled products is increasing rapidly http://www.eropa.eu.int/comm/environment/ecolabel/
The downside is that the growing numbers of social label schemes in Europe may be detrimental to their effectiveness as confusion may arise from among consumers, from the conflicting diversity of criteria used and lack of clarity of meaning among various labels.
Fair trade Labelling Organisations International is an umbrella organisation set up to coordinate national fair trade initiatives, run the monitoring programmes more efficiently, and introduce a single international fair trade label.
There is a need for debate regarding the value and desirability of public actions aimed at making social and eco-labels more effective. Examples of such actions include support for education and awareness-raising around labour conditions issues, promotion of best practice through sponsorship of company awards, facilitation of the development of multi-stakeholder partnerships, development of standards in social labelling, and use of public procurement and fiscal incentives in promoting labelled products.
3.5 Socially responsible investmentSRI has experienced a strong surge in popularity among mainstream investors. SRI funds invest in companies complying with specific social and environmental criteria. Criteria can be negative, thus excluding tobacco, alcohol and armament industries. Criteria can also be positive, including socially and environmentally proactive companies. Another important option for investors is to engage in shareholder activism to induce company management to adopt socially responsible practices.
60
In May 2000, the European Commission organised the First European Conference on Triple Bottom Line Investing in Europe in Lisbon. http://europa.eu.int/comm/employment_social/social/csr/csr_conf_lisbon.htm
Since July 2000, the UK ‘Trustee Act’ requires all pension fund trustees to disclose their policies on socially responsible investing.
However, there is a need for further standardisation, harmonisation and transparency in tools and metrics used by screening agencies.
4. The Consultation ProcessThe Green Paper invited public authorities at all levels, including international organisations, enterprises from SMEs to multinational enterprises (MNEs), social partners, NGOs, other stakeholders and all interested individuals, to express their views on how to build a partnership for the development of a new framework for the promotion of corporate social responsibility, taking account of the interests of both business and stakeholders. Written comments were invited by 31 December 2001. Email to: [email protected]
The main questions the Green Paper asked to address were:
The Role for the EC: What could the European Union do to promote the development of corporate social responsibility at European and international level?
Companies and CSR: What is the role of CSR in corporate business strategies? What are the driving forces, best practice ways to implement, best ways to build links between the social and environmental dimensions of CSR, and best means to promote further knowledge about the business case for CSR and its value-added?
Main actors and stakeholders: What are the best ways to establish and develop a process of structured dialogue between companies and their various stakeholders? What should be the respective roles of the main actors?
Evaluation and Effectiveness: what are the best means to develop, evaluate and ensure the effectiveness and reliability of corporate social responsibility instruments such as codes of conduct, social reporting and auditing, social and eco-labels, socially responsible investing?
Actions to support CSR: what actions are most appropriate to promote and support CSR, and what levels are the most appropriate to implement such actions? Actions such as support for training,
61
building skills and competencies, dissemination and exchange of information, setting standards, benchmarking, monitoring, accounting, auditing and reporting, medium term social policy analysis and research and analysis of the role of the legal framework.
62
CONCEPTS as used in the EU Green Paper
Cause-based or community investing: supporting a particular cause or activity by financing it through investment. Unlike making a donation, cause-based investors require that the original investment can be returned by either repayment (for loans) or trading (for shares).
Code of Conduct: a formal statement of the values and business practices of a company and sometimes its suppliers. A code is a statement of minimum standards together with a pledge by the company to observe them and to require its contractors, subcontractors, suppliers and licensees to observe them. It may be a sophisticated document, which requires compliance with articulated standards and have a complicated enforcement mechanism.
Corporate citizenship: the management of the totality of relationships between a company and its host communities, locally, nationally and globally.
Corporate governance: a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. (OECD Code – 1999)
Eco-efficiency: the concept that improving the way in which it uses resources can reduce environmental damage and reduce costs.
Eco-audit: the application of non-financial, environmental criteria to investment decision.
Environmental impact assessment: analysis of the impact of a business project or operation on the environment.
Ethical audit: the application of non-financial, ethical criteria to investment decision.
Ethical screening: inclusion or exclusion of stocks and shares in investment portfolios on ethical, social or environmental grounds.
Ethical trade: aims to ensure that conditions within mainstream production chains meet basic minimum standards and to eradicate the most exploitative forms of labour such as child and
63
forced labour and ‘sweatshops’. Labelling criteria are generally base don core ILO conventions.
Fair trade: defines itself as an alternative approach to conventional international trade. It is a trading partnership that promotes a sustainable development for excluded and disadvantaged producers. It seeks to do this by providing better trading conditions, awareness-raising and campaigning. The criteria for fair trade marked products differ between products but cover issues such as guaranteed prices, prepayment and direct payment to growers or their cooperatives.
Human rights: Human rights are based on the recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family as the foundation of freedom, justice and peace in the world. They are defined in the Universal Declaration of Human Rights (1948). At the European level, Article 6 of the Treaty on European Union reaffirms that the European Union ‘is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States’. In addition the European Convention of Human Rights adopted by the Council of Europe is legally binding in all Member Sates. Moreover, the European Charter of Fundamental Rights adopted in Nice in December 2000 is the instrument inspiring respect for fundamental rights by the European institutions and the Member States where they act under Union Law.
Monitoring: the process of regularly collecting information to check performance against certain criteria.
Responsible entrepreneurship: a concept put forward by the United Nations which recognises the business role for the accomplishment of sustainable development and that companies can manage their operations in such a way as to enhance economic growth and increase competitiveness whilst ensuring environmental protection and promoting social responsibility.
Shareholder influence: seeking to improve a company’s ethical, social and/or environmental behaviour as a shareholder by mans of dialogue, pressure, support for responsible management and voting at Annual General Meetings.
Social audit: the systematic evaluation of an organisation’s social impact in relation to standards and expectations.
Social capital: the stock of shared meaning and trust in a given community. Social capital is a prerequisite for cooperation and
64
organised human behaviour, including business. Social capital can be transformed, consumed or replenished, just as financial capital.
Social impact assessment: systematic analysis of the impact of a business project or operation on the social and cultural situation of affected communities.
Social label: words and symbols on products which seek to influence the purchasing decisions of consumers by providing an assurance about the social and ethical impact of business process on other stakeholders.
Social report: a document communicating the findings of a social impact assessment.
Stakeholder: an individual, community or organisation that affects, or is affected by, the operations of a company. Stakeholders may be internal (for example, employees) or external (for example, customers, suppliers, shareholders, financiers, the local community)
Standard: a widely agreed set of procedures, practices and specifications.
Triple bottom line: the idea that the overall performance of a company should be measured based on its combined contribution to economic prosperity, environmental quality and social capital.
Verification: certification by an external auditor of the validity, meaningfulness and completeness of an organisation’s records, reports or statements.
65
66
Extract from the website
The Millennium Poll on Corporate Social ResponsibilityBy Environics International Ltd, Canada
In cooperation with The Prince of Wales Business Leaders Forum and The Conference Board
http://www.environics.net/eil
Email: [email protected]
Results of the largest survey ever of global public opinion on the changing role of companies - executive briefing
Interviews with over 25,000 average citizens across 23 countries11 on 6 continents, done with cooperating organisations12 and corporate sponsors13
Why a poll on the changing expectations of companies?Economic globalism, political transition and technological transformation are making rapid and fundamental changes in society. Business has merged as the principal engine of growth and development in the new world order. This is changing the perceived roles and responsibilities of the state, civil society and companies. In this context, society’s expectations of corporate behaviour are evolving quickly. Business leaders need to understand society’s fast rising expectations of the role of companies n areas previously seen as responsibilities of the state. Since much of what has come to be called corporate social responsibility has to do with public attitudes and perceptions, Environics International Ltd launched the Millennium Poll on CSR to provide companies with a reliable global measure of society’s expectations of them.
Highlights of the Poll - Citizens in 13 of 23 countries their country should focus more on
social and environmental goals than on economic goals in the first decade of the new Millennium.
In forming impressions of companies, people around the world focus on corporate citizenship ahead of either brand reputation or financial factors
Two in three citizens want companies to go beyond their historical role of making a profit, paying taxes, employing people
11 Argentina, Australia, Canada, China, Dom. Republic, Germany, Great Britain, India, Indonesia, Italy, Japan, Kazakhstan, Malaysia, Mexico, Nigeria, Poland, Russia, South Africa, Spain, Turkey, United States, Uruguay, Venezuala12 The Prince of Wales Business Leaders Forum, and The Conference Board13 Pricewaterhouse Coopers, BP Amoco, Bell
67
and obeying all laws; they want companies to contribute to broader societal goals as well.
Actively contributing to charities and community projects doesn’t nearly satisfy people’s expectations of corporate social responsibility – there are ten areas of social accountability rated higher by citizens in all countries on all continents
Fully half the population in countries surveyed are paying attention to the social behaviour of companies
Over one in five consumers report either rewarding or punishing companies in the past year based on their perceived social performance, and almost as many again have considered doing so.
Opinion leader analysis indicates that public pressure on companies to play broader roles in society will likely increase significantly over the next few years.
Corporate responsibility in the 21st century
The poll findings suggest that major companies in the 21st century will be expected to do all of the following:
demonstrate their commitment to society’s values and their contribution to society’s social, environmental and economic goals through actions.
Fully insulate society from the negative impacts of company operations and its products and services.
Share benefits of company activities with key stakeholders as well as with shareholders.
Demonstrate that the company can make more money by doing the right thing, in some cases by reinventing its business strategy. This “doing well by doing good” will reassure stakeholders that the new behaviour will outlast good intentions.
CSR is fast becoming a global expectation that requires a comprehensive corporate response. The only effective response is to go beyond treating it as an “add-on” and to make it a core business value and strategy that is integrated into all aspects of the company from research and development, through sourcing raw materials and producing its products, to the use and disposal of its products. The finds suggest that CSR is likely to become a new pillar of performance and accountability of successful companies.
68
Extract
Global Corporate Citizenship: The Leadership ChallengeFor CEOs and Boards
© 2002 World Economic Forum and The Prince of Wales International Business Leaders Forum
A Joint Statement
Chief Executive Officers of 36 global companies of different countries and industry sectors, with a wide diversity, issued a joined statement of a task force of World Economic Forum CEOs, and recommended a Framework of Action to develop a strategy for managing their company’s impact on society and its relationships with society. They acknowledged that CSR is not an ‘add-on’ but fundamental to core business operations, and that business leaders needed to take action adapted to their own circumstances.
The CEOs were concerned that though globalisation, political transition and technical innovation had created new opportunities for improving the living standards of millions of people, yet there are many people still facing high levels of inequality, insecurity and uncertainty, and face new sources of conflict, environmental decline and lack of opportunity.
The first commitment they made was to do business in a manner that obeys the law, produces safe and cost effective products and services, creates jobs and wealth, supports training and technology cooperation and reflects international standards and values in areas such as the environment, ethics, labour and human rights.
The second commitment was to identify and work with key stakeholders, which include employees, customers, shareholders, together with host communities and governments an civil society organisations.
The third commitment was to take on direct responsibility for implementing the ‘Framework for Action’ in four ways: first, provide leadership. Second, define what corporate citizenship means for their own company. Third, make it happen, and fourth, be transparent about it.
A Framework for Action
69
1. Provide leadership: set the strategic direction for corporate citizenship in your company and engage in the wider debate on globalisation and the role of business in development.
How? a) By being role models and champions by communicating and behaving in a manner consistent with the company’s stated principles, values and purpose, at platforms such as: meetings with investors through corporate publications regular meetings with employees interaction with trade, industry and business associations non-executive roles on other company boards media interviews daily actions, that ‘walk the talk’
b) By promoting the ‘business case’ internally: advocate in a persuasive manner the costs of ‘getting it wrong’ in terms of economic, social and environmental performance, and the business and societal benefits of ‘getting it right’
c) By engaging with the financial sector, ie major institutional investors, bankers and insurers, in a proactive manner on issues relatd to company’s social and environmental risks, innovations and business opportunities.
d) By actively debating on globalisation and the role of business in development: with practical examples and experience of business contribution to development, and how different roles and responsibilities of governments, business and civil society help to make globalisation work for more people and countries.
2. Define what it means for your company - define the key issues, stakeholders and spheres of influence which are elevant for corporate citizenship in your company
How? Firstly, set the boundaries of your company’s role and responsibility, vis-à-vis government’s and other actors through dialogue and negotiation. In most cases global corporate citizenship will include elements of: good corporate governance and ethics, for example, compliance
with the law, regulations and international standards, ethical conduct policies, prevention of bribery and corruption
responsibility for people, for example, that employees, suppliers and buyers are safe and not put at risk; human and labour rights which include equal opportunities, non-discriminati, prevention of child labour,fredom of association and fair wages within own company and along supply chains.
70
Responsibility for environmental impact:, for example, adopting clean and eco-efficient production processing, sharing technologies and engaging in global challenges of climate change and biodiversity protection
Broader contribution to development of communities, for example, building local business linkages, increasing access to essential products and services for poorer communities, such as credit, water, energy, medicines, education and information technology.
Secondly, agree on company’s sphere of influence. This includes core business operations, with a primary focus on core activities in the workplace, marketplace and along the supply chain, consultation with community leaders, trade and industry business associations, and thus support innovative approaches; and in the public policy realm, where transparency and alignment with other corporate activities is important.
Thirdly, identify key stakeholders, ie those who contribute to the success of the corporation and those who are affected by it. These include investors, customers, employees, trade unions, local communities, civil society organisations, research and academic institutions, the media and government bodies, and international bodies such as the UN system.
3. Make it happen: develop and implement appropriate policies and procedurs, and engage in dialogue and partnership with key stakeholders to embed corporate citizenship in the way people carry out and are supported in their daily work.
How?Put corporate citizenship on the board agenda; establish internal performance communication, incentive and measurement systems by involving senior executives; engage in dialogue and partnership with managers at all levels; encourage innovation and creativity through incentives, support and networking; and build the next generation of business leaders, by ensuring that corporate citizenship forms an integral part of mentoring and coaching initiatives and executive development programmes. Business leaders can influence the teaching and research of corporate citizenship in business schools and act as role models for business students.
4. Be transparent about it: build confidence by communicating consistently with different stakeholders about the company’s principles, policies and practices in a transparent manner, within the bounds of commercial confidentiality.
How?Agree what and how to measure; develop a graduated programme for external reporting; and be realistic. Expectations can be
71
manage by agreeing on clear strategies, timetables or roadmaps for implementing the company’s evolving commitments to corporate citizenship.
The case for action
First, an individual business case: it is increasingly in the shareholders’ interests for a company to have a clear purpose and set of values, not just a matter of public relations and avoiding negative publicity.
Second, a broader case, that business prospers in societies that are prosperous. Business leaders have a direct interest in the process of globalisation continuing and extending its benefits to more people around the world.
Business leaders cannot afford to ignore the wider social, economic and environmental impact of their activities, both positive and negative. Nor can they ignore the wider challenges faced by governments in terms of investing in human development, infrastructure and institutions, both national and international, that help to create a sound enabling environment and healthy societies. By supporting governments, inter-governmental organisations and civil society in creating such an enabling environment and building such societies, business will prosper over the longer term.
Examples of ‘collective leadership’
The Global Compact which brings together several hundred companies, with some of the world’s leading trade union bodies, human rights and environmental organisations in a global learning forum.www.unglobalcompact.org
The Global Business Council on HIV/AIDS To foster greater private sector engagement in the global battle against HIV/AIDS, tuberculosis and malaria, it brings together businesses, NGOs, civil society and academic institutions in a partnership focusing on corporate best practices, resource gaps, partnership opportunities, philanthropy and the role of business in advocacy.www.businessfightsaids.org
The Global Alliance for Vaccines and Immunisation A coalition of governments, the WHO, Unicef and the World Bank; philanthropic foundations, IFPMA an technical and research institutes.www.vaccinealliance.org
72
Initiatives to overcome the digital divideThe G8 Digital Opportunity Task Forcewww.dotforce.orgUN’s multi-stakeholder ICT Task Forcewww.unicttaskforce.orgWorld Economic Forum’s Global Digital Divide Initiativewww.weforum.org/digitaldivideDigital Partnershipwww.iblf.org/digitalpartnershipNetAidwww.netaid.org
Investing in sustainable developmentThis has been an area of increased CEO leadership. The International Chamber of Commercewww.iccwbo.orgWorld Business Council for Sustainable Developmentwww.wbcsd.orgBusiness Action for Sustainable Developmentwww.basd-action.net
Promoting good corporate governance examples includeThe International Corporate Governance Networkwww.icgn.orgTransparency International to tackle corruptionwww.transparency.orgGlobal Reporting Initiative, to promote sustainability reportingwww.globalreporting.org
At the sector level, the World Business Council for Sustainable Development and UNEP (www.uneptie.org ) promote sector-based initiatives. Examples include E7 network of electricity companieswww.E7.orgthe International Hotels Environment Initiativewww.ihei.orgthe Global Mining Initiativewww.globalmining
Examples in national development include:Philippine Business for Social Progress www.pbsp.org.phNational Business Initiative in South Africa www.nbi.org.zaBusiness in the Community in the UK www.bitc.org.ukLandcare in Australia www.landcaraustralia.com.au
For tomorrow’s leaders, the World Economic Forum’s Global Leaders for Tomorrow, and AIESEC, the world;s largest student-run organisation to promot sustainable development and corporate citizenship www.aiesec.orgSome business shools have started to invst in research and teaching, supported by CEOs www.aspeninstitute.org/isib
Also, see
73
CSREurope – www.csreurope.orgThe Conference Board www.conference-board.orgThe International Chamber of Commerce www.iccbo.orgWorld Economic Forum www.weforum.org/corporatecitizenshipSustainAbility – www.sustainability.comMhcinternational – www.mhcinternational.comThe Prince of Wales Business Leaders Forum www.iblf.org
74
75
Extract
Corporate Social Responsibility in the IT Industry
© Citizens Online, October 2001
Authors: Professor Paul Foley, Director of the International Electronic Commerce Research Centre and professor of electronic commerce at De Montfort Graduate Business School, Leicester, UK. He has acted as adviser to the OECD, Cabinet Office, DTI and several blue chip companies in developing internet policies and opportunities. Paul is also visiting professor of electronic commerce at the University of South Africa, and Internet editor of the European Business Review.
Dr Chanaka Jayawardhena is the Barclays Research Fellow in Marketing at Loughbourough University Business School, UK. Actively involved in research and consultancy on the internet, new technology and marketing in the UK, he has published on internet payment systems, internet banking services and forecasting internet growth.
Key issues
Less than 25% of IT companies have a clear strategy for corporate social responsibility
Three quarters of IT companies recognise that the environment in which they operate has changed since the advent of the Internet, but few have changed their attitude to CSR as a result.
Only one in six IT companies support Internet access initiatives for the disadvantaged.
Most IT companies are scathing about the low level of charitable contributions14 made by industry as a whole and the IT sector in particular
Most IT companies consider charitable contributions to be a prime target for spending cuts if there is a downturn in turnover and profits.
14 in this report, ‘charitable contribution’ does not relate just to donations to charities but to all those activities which companies support either with money or in kind for which there is nod direct profit motive,
76
The advent of Internet is having a profound effect on the way we do business, communicate and organise our lives. Fr those with access and the necessary skills and motivations, the internet is opening up new and exciting opportunities. But for others, without help, the Internet will amplify social inequalities. Commentators are predicting that without public-private assistance, the Internet will continue to foster a digital divide.
This report investigated attitudes and activities of the IT sector to issues surrounding the digital divide. It also examines the extent to which this relatively new industrial sector has embraced the need to accept corporate social responsibility.
Rapid advances in communications technology, globalisation and the growing influence of the consumer and civil society, have raised the importance of corporate social responsibility in many businesses. Many now recognise that they have responsibilities that go far beyond simple compliance with the law.
Directors and senior managers from 220 businesses were interviewed to find their views about corporate social responsibility and the contribution their businesses make in addressing issues concerning the digital divide and for other environmental, social, arts, community and sporting activities. The businesses ranged in size from two employees to 20,000: he sample of companies interviewed was drawn to be representative of larger IT businesses with more than 50 employees.
Overview of results
The businesses interviewed had made charitable contributions of at least Pds.591,000 in the last year. In general, larger businesses contribute more than their smaller counterparts, but several smaller businesses had made major contributions. For example, two small businesses (with 65 and 80 employees) contributed more than Pds.20,000 and a business with only 20 employees donated over Pds.10,000.
Company size may be influential in determining attitudes to CSR, or the level of contributions. However, amongst those businesses not currently contributing, the group least likely to make contributions kin the future were those companies with between 101 and 200 employees.
Forty-two per cent of businesses had increased their level of corporate contributions during the last two years: 38 per cent expect contributions to increase in the next two years. A lack of available funds was thought to be the largest barrier to increasing contributions.
77
Rather worryingly, amidst the current downturn in turnover and profits amongst many IT businesses, most interviewees felt that in times of declining profitability, charitable contributions were one of the first targets for spending cuts.
Interviews acknowledged the growing impact of the Internet on society, but for most (72 per cent) this had little impact on their corporate social responsibility strategies. Indeed, only 15 per cent of IT businesses are currently involved in Internet access projects with local community groups and only four are supporting projects to help households or individuals to have Internet access from home. This is surprising since contributions I this area could bring a higher level of direct benefits to the IT businesses than involvement in other environmental, social, arts, community and sporting activities.
One reason for this lack of focus on activities closely related to IT businesses’ products and services was probably the poorly developed strategies for corporate social responsibility. The majority (73 per cent) make contributions to charities and other organisations on an ad hoc basis. Only in the largest businesses, with more than 1000 employees, have corporate policies been clearly developed, and central units or departments established to develop and administer policy.
The primary reason for making charitable contributions identified by nearly all businesses was to benefit society. Businesses making larger contributions, particularly those contributing more than Pds.5000 highlighted altruistic benefits such as the merits of ‘giving something back to the community or society’. Many felt that making contributions was most beneficial in increasing the business’s profile and reputation at the local level and contributions rarely gained publicity at the national level.
Several businesses had adopted policies to promote employee participation I charitable activities. These businesses were attempting to encourage greater corporate social responsibility throughout their business. A few noted that this created significant benefits to employees and the business through the development of employee skills and experience and the enhancement of staff morale. Some expressed their desire to involve more employees in corporate social responsibility activities in the future.
Few businesses could cite any disadvantages from making charitable contributions. Indeed, 58 per cent suggested there were ‘no disadvantages’.
78
Some examples of employee involvement and participation:
Through sponsored marathons or other events, such as summer balls or fetes: this developed employee skills and experience, enhanced staff morale, and created a culture of well-being within the business.
Company to match any charitable contribution raised by an employee, and in effect doubles the amount donated. This has created a culture that actively encourages charitable activities amongst the workforce.
Some encourage staff to undertake voluntary work charities and other groups. This is not limited to financial contributions; several also enable employees to undertake activities ‘in work time’. This type of support builds employee morale an creates a culture that is beneficial to the business and the society at large.
In some businesses, employees have much greater involvement in identifying and making decisions about charitable contributions. One company had wider employee involvement – every morning the company provides employees with a free breakfast. Staff agreed to forego breakfast for a week, and the monetary value of all breakfasts was donated to charity. Widespread employee support was received in a company for a custard pie-throwing event: company directors were the victims!
Another company has an interesting policy that involves employees in ‘owning’ charitable projects. A committee has been appointed to evaluate projects proposed by employees and to oversee the administration of projects. If the committee selects a project, the employee that proposed it takes responsibility for the project. They found that this ensures tight control of funding, enhances employee morale through the allocation of added responsibility, through the ‘receipt’ of funding to support the employee’s ideas, and through the satisfaction they receive from successfully completing the project.
Several companies noted that employee involvement in such activities and contributions in partnership with the business enhanced employee satisfaction through the knowledge that their contribution, and the company they work for, had actively assisted disadvantaged groups or other charitable organisations.
The company whose employees ‘own’ charitable projects views this as an essential component of their corporate social responsibility policies, because it develops the concept of a ‘good citizen’ which is one component of the corporate goal. Several businesses believed that, despite easy IT access, they did not publicise charitable
79
contributions sufficiently within the company. Most expressed their desire to involve their employees more in future.
Foreign & Commonwealth Office, UKGlobal Citizenship Unit
Email: [email protected]
Http://www.fco.gov.uk/news/keythemepage.asp/Pageid=298
Corporate Citizenship: Helping make globalisation work
Increasingly business leaders have concluded that they need directly to address public concerns on the relationship between business and such issues as the environment, human rights and corruption to ensure their companies’ long term prosperity. Some have decided that by taking a lead in these areas they may gain a competitive advantage. Others see it more as a necessary requirement to continue global operations in the future. Either way they consider it worth making the effort to develop and maintain the right relationships in the communities and environments in which they operate, while working in partnership with key long term partners for tangible mutual benefit.
At the same time governments, NGOs and others in civil society recognise the positive contribution that business can make in a global context and are increasingly willing to forge partnerships with business to find solutions to shared problems.
UK’s Foreign & Commonwealth Office strongly supports these efforts and believes it has a role in promoting corporate citizenship as a means to helping secure the future prosperity and global presence of UK business. It also fits well with other key FCO globalisation objectives – to support peace and stability, enhance the quality of life world-wide and build respect for British values. The Global Citizenship Unit coordinates FCO’s efforts in this field.
What do we mean by Corporate Citizenship?There is no single accepted definition of ‘Corporate Citizenship’. Indeed the term is often used alongside others such as ‘Corporate Responsibility’ and ‘Corporate Social Responsibility’. But in essence, a company pursuing this approach does three key things:
1. it recognises that its activities have a wider impact on the society in which it operates; and that developments in society in turn impact on its ability to pursue its business successfully;
2. in response, it actively manages the economic, social environmental and human rights impact of its activities across
80
the world, basing these on principles which reflect international values, reaping benefits both for its own operations and reputation, as well as for the communities in which it operates; and
3. and it seeks to achieve these benefits by working closely with other groups and organisations – local communities, civil society, other business and home and host governments.
Particularly in developing countries, companies may need to devote considerable attention to local capacity building in order to ensure a favourable business environment. This might for example involve help to improving education or healthcare systems in order to increase the availability of skilled, healthy workers.
Corporate citizenship is about making sure you have the right relationships in the community and environment in which you operate, while working in partnership with key players for tangible mutual benefit.
Most experts would agree that corporate citizenship is distinct from charitable donations. This is because to be successful the approach needs to be fully integrated in a company’s activities. That said, companies which include corporate citizenship principles within their core values may well see charitable donations as part of their business model.
Four main ways in which corporate citizenship helps business1. By reducing risk. For example, operating in a way which
maximises the benefits to the local community will minimise the risks of losses r disruption from social unrest. Similarly, strong internal rules and procedures to minimise the risk of environmental pollution will reduce the risk of damage to the company’s brands and reputation. Ultimately such reductions in risk ought to be reflected in lower average financing costs for the company.
2. By enhancing brand value. Positive publicity for corporate citizenship initiatives can help strengthen a company’s brand image as well as establish market leadership, and so improve its general level of profitability.
3. By opening doors and creating goodwill with host governments or in the local community. Firms wishing to enter or expand new markets may find it easier to develop local contacts if they have first established a local reputation through corporate citizenship initiatives.
4. And, by improving staff efficiency and morale. Projects which benefit local communities which tend to strengthen the
81
commitment of local employees and, especially in developing countries, may make them more efficient (by strengthening the education system for instance). And a reputation for responsible behaviour will help a company attract and retain the best people wherever it is.
82
Department of Trade and Industry, UK
www.societyandbusiness.gov.uk/
Statement from the MinisterWe are engaged in work to support the development of Corporate Social Responsibility because we believe CSR can bring together two key pillars of this Government’s agenda – building a strong economy and a strong society. Businesses can play a powerful constructive role in the communities in which they operate. Most obviously they do this by bringing investment and jobs to communities. Alongside this they can bring fresh sources of ideas, resources and expertise to addressing the problems which society faces. They also depend on the support of the community for custom and dedicated employees. Through businesses engagement in the community they can strengthen their competitive position – by creating stronger links with consumers and employees. By making the most of these less tangible resources, businesses can create an edge over competitors in the market place.
I look forward to working with the business community on this agenda over the coming months. Douglas Alexander MPMinister of State for e-Commerce and Competitiveness
How Businesses BenefitBusinesses have found clear benefits from social and environmental involvement. Companies which take these issues seriously not only achieve benefits to society; they can also enhance their reputation, improve competitiveness, and strengthen their risk management.
These benefits do not happen just as a matter of course. Businesses find they need to plan, manage and measure what they do. The very best results usually occur when the involvement has natural links with the company’s core business.
This means that different companies may well adopt very different types of involvement - while still getting real benefits.
The case studies gathered on this site show just how diverse company activities can be for businesses of all sizes. They also demonstrate just how significant the benefits can be and how much the companies concerned value them.
83
Case Studies: two examples, for more, see the DTI website
Building Customer Loyalty
British Telecom
Social reputation has a direct effect on customer loyalty - and on turnover. If that effect could be quantified at just one per cent, BT’s latest community initiative would have won them £150m.
Since privatisation, a commitment to social responsibility has been built into the BT’s mission statement. Today, the UK’s largest telecommunications company has a reputation for community involvement and environmental stewardship. BT’s biggest community programme is FutureTalk in Education, designed to improve young people’s communications skills.
The initiative arose partly from the findings of MORI research, which revealed that 84 per cent of those surveyed could be better communicators, and that only 38 per cent had ever had relevant training. The research also revealed that 86 per cent thought schools ought to be doing more to help children become good communicators.
As communication is clearly BT’s core business, they recognised they could have long-term influence on children - their future customers.
FutureTalk is based on a drama, storytelling and poetry roadshow, which visits 3500 schools across the UK and involves around a million children. The live performances are delivered in English, Welsh and Gaelic, and are supported by on-line information and activities at www.bt.com/futuretalk/education.
For young people, a foundation in good communication skills is a foundation for life. The Prince’s Trust maintains that a lack of communication skills is one cause of long-term unemployment for young people. BT’s FutureTalk has helped step up the debate on communications skills.
Through their work on the project, BT has also uncovered a huge market for effective information and communication technologies (ICT) materials. The company’s social policy team is now building a new programme to tap that market.
Business benefits The project achieves enormous media coverage - including
‘priceless’ coverage on programmes such as Eastenders.
84
BT’s community activities get around 600 media mentions a month, or 40 million ‘opportunities to see’. At times, this is nearly 20 per cent of all BT’s media coverage - and all of it positive.
In 1999-2000, public satisfaction with BT on social responsibility stood at 62 per cent, putting BT among the top companies.
A good reputation leads to customer and staff loyalty. Contact:
Relationships for Future Success
AssiDomän
They’re relatively small, but their profile’s growing. Box-makers AssiDomän have reaped unexpected benefits from their work with schools - including a national reputation and a boost for staff morale.
AssiDomän employs around 80 people - most of whom live within five miles of its Welsh site. In fact, the company has been a feature of the local community for more than 30 years.
Their involvement in a scheme coordinated by the Education Business Partnership and Caerphilly Groundwork Trust started four years ago, when the company assessed its environmental impact for the ISO 14001 standard. Schoolchildren were invited to visit the site to see the various stages in the lifecycle of a product.
Encouraged by the excitement and interest of the children, the company saw the benefits of strengthening their ties with the local community even after they had achieved the standard.
So, for the last three years, they have been welcoming children and teachers into the factory and developing learning packs with local schools.
Teachers are using their own experience of AssiDomän’s manufacturing processes to put together classroom materials that bring the curriculum to life. So far, learning packs are
85
helping children relate maths lessons to real-life scenarios. And, in the future, packs will also cover other parts of the curriculum, such as design.
Schools report that pupils - and teachers - are more enthusiastic about their lessons, and the scheme has helped create closer relationships with other parts of the community too.
Business benefits The company’s profile has soared with regular coverage in
the local press.
Nationally, they’ve attracted attention too. The company was invited to talk to the House of Commons about the project - giving them unique access to decision-makers.
Staff morale has increased - many are keen for the company to be contributing to the community.
Many of the children are related to employees - and some may work for AssiDomän in the future.
In 2000, AssiDomän was awarded the Investors in Young People award by Business in the Community.
Contact:[email protected]
86
Amnesty International UK Business Group
Peter FrankentalBusiness Group Project ManagerEmail: [email protected]
http://www.amnesty.org.uk/business
All contents copyright © Amnesty International, unless otherwise marked.
Objectives of the Amnesty International Business Group are to encourage companies:
to be aware of the human rights impact of all aspects of their operations;
to use their legitimate influence in support of human rights in all countries in which they operate
To give effect to the Universal Declaration of Human Rights To include a specific commitment to human rights in their
statements of business principles and codes of conduct; To make their human rights policies explicit, ensuring that these
are integrated across all functions, monitored and audited.
Why do human rights matter to business?
The Challenge: the global economy offers unprecedented opportunities to business. Transnational companies are investing in and sourcing from an ever-increasing number of emerging markets. These opportunities bring with them serious threats to business – operating in conflict zones, under regimes with a weak rule of law where human rights are violated, where corruption is rife. Human rights violations destabilise the investment climate. At stake are employee safety, company assets, project viability and corporate reputation.
As the influence of global companies grows in the world economy, and as their impact on the societies in which they work deepens, it is becoming evident that their licence to operate and their reputation depend on their acceptability to society a large. Respect for human rights is at the core of this acceptability. Without a firm commitment to upholding international human rights standards, companies are exposing themselves to risk. A framework of international standards exists in the Universal Declaration of Human Rights and core labour standards of the International Labour Organisation which can help companies shape their human rights principles and practice.
87
The Response: Responsible companies have long understood a duty of care towards their employees. More recently, they have accepted that the bounds of their responsibility should be extended to embrace protection of the environment. Today, civil conflict and human rights violations present them with new challenges and dilemmas for which few have shown themselves prepared, but which, ignored or badly handled, have proved hugely damaging to reputation.
This reality requires companies to recognise that their ability to continue to provide goods and services and to create financial wealth will depend on their acceptability to an international society which increasingly regards protection of human rights as a condition of the corporate licence to operate.
“Twenty years ago few companies had environmental policies. Today the environment is unquestionably a mainstream business issue. So it should be with human rights. Having a strong human rights policy and a sound implementation strategy is about risk management and reputation assurance. Human rights is a bottom-line issue.”
- Mary Robinson, UN High Commissioner for Human Rights, April 2000
Business and Human Rights: a geography of corporate risk – Amnesty International and the Prince of Wales International Business Leaders Forum have collaborated to produce a series of seven detailed world maps, which depict where human rights abuses and violations exist and where leading North American and European multinational companies are at risk of being associated with them. The maps cover the extractive, food and beverages, pharmaceutical and chemical, infrastructure and utilities, heavy manufacturing and defence, and IT Hardware and telecommunications sectors.
The purpose of this series of maps is to illustrate where companies are most vulnerable to the cost and reputational damage associated with human rights violations. The extent to which a particular company is exposed to risk depends on where the company operates and the types of activity I which it engages. Many transnational corporations operate in countries with repressive administrations where the rule of law is weak, where the independence of the judiciary is questionable, and where arbitrary arrest, detention, torture and extra-judicial executions occur. The government may ban free trade union activity and deny its citizens
88
freedom of association. Factory workers in plants from which companies source their products may be subject to inhuman and degrading working conditions. Companies may be operating in areas of conflict or may be seen by certain ethnic groups to be violating ancestral lands or traditional knowledge. The government, to whom a company is paying taxes and resource rents, may be skewing state expenditure in favour of the military and national security, and away from health and education, or in favour of one ethnic group to the detriment of others. Companies may also find themselves in environments where bribery and corruption permeate society and where they are seen to condone fraudulent distributions of wealth. Each of these situations crates risks which, if mishandled, may lead to litigation, extortion, lost production, sabotage, higher security costs and increased insurance premiums. Other consequences may include restricted access to capital, difficulty in recruiting or retaining the best staff, and above all, reputational damage.
The main conclusion to be drawn from this mapping is that, in the absence of transparent and properly enforced human rights policies, significant costs and damage to corporate reputation may be incurred.
“The United Nations does not ask or expect business to assume the responsibilities of government. It does ask business to act in a responisble way in their sphere of activities…”- Mary Robinson, UN High Commissioner for Human Rights,
BP Annual Lecture, The British Museum, November 2001
89
90
Business in the Community
http://www.bitc.org.uk/
Business in the Community is one of the largest and longest established corporate social responsibility organisations in the world. Year 2002 is Business in the Community’s 20th anniversary – the ideal opportunity to reflect on and synthesise what BITC has learned as it sets its agenda moving forward.
Business in the Community is a unique movement of companies across the UK committed to continually improving their positive impact on society, with a core membership of 700 companies.
Business in the Community’s Awards for Excellence are the most prestigious awards in corporate social responsibility in the UK.
The website shows how to build a successful business by:
improving your environmental impact marketing with a cause investing in a diverse workplace building healthy communities
You can search the website to understand Corporate Social Responsibility through case studies business impact resources the business case company reporting
See the website for news and updates, such as
CommunityMark launched in Brighton, where Business in the Community has been with the Brighton and Hove business Community Partnership, Sussex Enterprise and the Small Business Service on the development of the mark. It was launched by Douglas Alexander, Minister of State for E-Commerce and Competitiveness.
The Opportunity Now campaign’s latest research, sponsored by BT Wholesale, Lattice Group and the Department of Trade and Industry, explores the factors that keep women at low levels in organisations: the so-called sticky floor and cement ceiling.
91
92
Ethical Trading Initiative
http://www.ethicaltrade.org
© 1998 – 2002 Ethical Trading InitiativeAll rights reserved
The ETI is an alliance of companies, non-governmental organisations (NGOs), and trade union organisations committed to working together to identify and promote ethical trade – good practice in the implementation of a code of conduct for good labour standards, including the monitoring and independent verification of the observance of ethics code provisions, as standards for ethical sourcing.
Members, including multinational/transnational companies and corporations are committed to business ethics and corporate responsibility, promotion of worker rights and human rights in general. In employment, ethical business includes working towards the ending of child labour, forced labour, and sweatshops, looking at health and safety, labour conditions and labour rights.
What is ethical sourcing?
Ethical sourcing establishes a company’s responsibility for labour and human rights practices in its supply chain. In doing so, it aims to ensure the rights and improve the conditions of workers through good supply chain management. Specifically, it refers to a company taking responsibility to work with its suppliers to implement internationally accepted labour standards in the workplace. Ethical sourcing is important to companies for the following reasons:
because widespread abuses of labour rights occur… whilst physical working conditions in some workplaces are abysmal
because not all suppliers can be relied upon to implement international labour standards even when they are enshrined in national law
because some workers are made ‘invisible’ when the employment relationship is disguised by such terms as sub-contractor, supplier etc
and, because in many low-income countries governments lack the capacity or desire to inspect workplaces… so there may be little effective policing. Voluntary initiatives, in collaboration with local trade unions and other non-business organisations, may therefore be an important means of ensuring workers’ rights are respected.
Is ethical sourcing a result of consumer pressure?
93
The ETI was originally very much a response to the concerns of ordinary people who want to see the dream of ethical sourcing turned into reality. Now the driving forces behind ethical sourcing are more complex. Many people, from consumers and investors to trades unions in the North and South, and managers within major companies, want to see improvements made to the lives of many of the people who work hard making the goods we all consume. The ETI complements initiatives by individual companies, by the ethical and socially responsible investment movements, by civil society and by governments to meet this demand by providing mechanisms for bringing about real and lasting change.
Does ethical sourcing mean higher prices?
The simple answer is that we don’t know what impact ethical sourcing will have on retail prices. Researchers are studying the cost implications of meeting international standards, but there is still much we do not know. Suppliers of the big retailers are worried that ethical sourcing will squeeze their profit margins, but again there isn’t any hard evidence. Even if we look at the experiences of other similar initiatives such as forest certification, fair-trade and organic certification it is hard to draw conclusions. ETI is planning to explore these issues further in 2002, and will put the findings on its website as they emerge.
Is ethical sourcing the same as fair-trade?
ETI’s members include organisations from the fair-trade movement. But ethical sourcing and fair-trade are different.
Ethical sourcing tries to ensure that decent minimum labour standards are met in the production of the whole range of a company’s products. By contrast fair-trade is primarily concerned with the trading relationship, especially those involving small producers in the South. Fair-trade ensures that producers are paid a decent price that at least covers the true costs of production, despite often serious fluctuations in the world commodity prices.
Many consumers will always be prepared to buy special fair-trade products, while expecting that mainstream products are safely and decently produced.
What does ethical sourcing tell me about the environment?
Ethical sourcing is about labour and human rights conditions. Although it may be part of a company’s wider corporate responsibility strategy, by itself it says nothing about a company’s environmental performance, governance or community engagement.
94
See the website about ETI’s activities, membership, resources, publications, and links to other organisations
95
International NGO Training & Research Centre
http://www.intrac.org/
INTRAC provides support to organisations involved in international development. INTRAC’s goal is to improve the performance of Non-Governmental Organisations (NGOs) by exploring relevant policy issues and by strengthening NGO management and organisational effectiveness. Work areas include:
Civil Society Strengthening Programmes: in Central Asia, Eastern Europe and Malawi
Linking Programme: aimed at strengthening the capacities of NGO Support Organisations
Research: on policies and issues affecting the NGO sector
Training: in project and programme management methods, organisational and institutional development
Consultancy services: including in-house training and project and programme evaluation
Publications: INTRAC’s findings are published in books and occasional papers.
Ontrac is INTRAC’s free newsletter addressing NGO policy, management and organisational issues.
INTRAC’s programme of ‘Institutional Development of Civil Society in Central Asia’ promotes the development of civil society, by working at different levels affecting the environment within which civil society organisations have to function. In supporting institutional development, the programme goes beyond simply improving the performance of individual organisations. It focuses on what they do collectively in and for society. INTRAC aims at strengthening interactions within civil society as a way of reinforcing the position of civil society orgnaisations towards other institutional systems. INTRAC is working at these multiple levels using several strategies and methodologies in combination, or selectively where appropriate. Contact [email protected] or [email protected]
96
The Prince of Wales International Business Leaders Forum
http://www.iblf.org
The Prince of Wales International Business Leaders Forum is an international charity which was founded in 1990 to promote socially responsible business practices that benefit business and society, and which help to achieve socially, economically and environmentally sustainable development. The Forum works at the very highest levels in 60 of the world’s leading multinational companies, and is active in some 30 emerging and transition economies.
The website has two aims: first, to be a gateway to the broad topic of corporate social responsibility, and second, to provide a comprehensive introduction to the work of the Forum itself. The Forum’s work can only be seen in the context of the evolving and dynamic field of a theme which now actively involves companies, multilateral institutions, governments, NGOs, media, educational establishments and – directly or indirectly – the world at large.
In ten years, the political and economic face of the world has changed dramatically. Over three billion people in 100 of the world’s 180 countries have newly come under the twin pillars of democracy and market economy. Market forces, and the world of business, have been the motor for much of this globalisation and growth. Yet fundamental social problems persist, and others have been newly created. While multinational companies have moved into new markets and generated greater profits even than national economies, much of the world barely subsists, with over three billion people surviving on less than $2 a day. The business sector – in triangular partnership with the public sector and that of ‘civil society’ must have the will, and the capacity, to act responsibly ‘at home’ and in the new and existing markets. At latest estimates, some 50,000 companies are operating at multinational levels, and only a small portion are seriously engaged in fulfilling the expectations which come under the banner of ‘corporate social responsibility’ or CSR. CSR is concerned with the very fundamentals of business: how it adds value to society as well as to its shareholders; how it acts as a partner in development; how it is accountable socially, environmentally and financially; and how it fulfils its responsibilities as a corporate citizen.
“The Business Leaders Forum is in a unique position to help business leaders use their skills, resources and creativity to help turn the world problems into opportunities, and o respond to very real needs in ways that make greater provision for future generations.”
97
- HRH The Prince of Wales
SustainAbility Ltd
Http://www.sustainability.com/home.asp
Established in 1987, and now based in London and New York, SustainAbility specialise in business strategy and sustainable development. From the outset, a hybrid company: part award-winning strategic management consultancy, part world-class think-tank, and part energetic public-interest-group.
The website offers information on what is sustainable development? what is the triple bottom line? SustainAbility’s research programmes Articles from key thinkers in the field Links to other sustainable development organisations
Virtual SustainAbility: using the internet to implement the triple bottomline
Engaging Stakeholders Reports: Good News & Bad: The Media, Corporate Social Responsibility and Sustainable Development – The media sector – broadly defined – could become the dominant industry of the 21st century. No other industry will so powerfully influence how people and politicians think about corporate social responsibility and sustainable development priorities. This report is the fourth sector report in the Engaging Stakeholders series. It involved interviewing over 50 people actively involved in this field as well as researching books, reports, websites and covering the media sector and associated issues. The aim has been to produce a report that can be read and digested fairly quickly. It includes a list of Centres of Excellence in Ethical Media.
The Power to Change: is your Board on board? Integrating sustainable business practice.
Buried Treasure: evidence for the business case.
Emerging Economies: is there a business case for sustainability in emerging economies?
98
Centre for Tomorrow’s Company
Http://www.tomorrowscompany.com/© the Centre for Tomorrow’s Company
The Centre for Tomorrow’s Company is a think-tank and catalyst, researching and stimulating the development of a new agenda for business.
We represent a practical vision of sustainable business which makes sense to shareholders and to society. Our purpose is to explore, with business, the fundamentals of success and to develop throughout business better ways of sustaining success.
Developing mutually beneficial relationships is key to our work. Our work helps make sense of change. It stimulates and takes a fresh look at the ways success is measured. The Centre for Tomorrow’s Company is helping set agendas by new approaches to governance, measurement, reporting and leadership amongst other areas.
What are tomorrow’s companies?
Tomorrow’s companies operate in all areas of business and industry. We are united by the shared belief that companies who know what they stand for, and who develop positive relationships with their stakeholders, have the key to success. Profit and the creation of long-term value for investors remain crucial, but in tomorrow’s economy, we need to find new ways o generate these returns. We believe that understanding stakeholder needs and incorporating them into business strategy is central to this quest. We call this an inclusive approach.
Applying an inclusive approach requires clear leadership and continual measurement of the progress of key relationships. There is no set formula. Each company has to find its own way forward. Our experience is that the new ideas, the awareness of changing needs, and the enhancement of reputation critically depend upon communication with specific stakeholder groups.
Working Together
The Centre for Tomorrow’s Company works with many different organisations around many different issues. For example, our team regularly undertakes speaking engagements with corporate conferences and trade groups and are no strangers to the international stage. Our research based and practical projects engage not only our members but also a wide variety of partners form government, academia and commerce.
99
Corporate Citizenship Unit, Warwick Business School
http://www.users.wbs.warwick.ac.uk/ccu
The Corporate Citizenship Unit (CCU) aims to become a globally recognised centre of excellence in the area of research and teaching in corporate citizenship. We will reach this aim by bringing together diverse people from business, government, and civil society organisations to examine changes in the relationship between corporations, states and communities.
We recognise that the role, scope and purpose of business is changing rapidly as the global economy develops. Management priorities and business responsibilities are under scrutiny as never before.CCU incorporates the Mining and Energy Research Network (MERN) led by Professor Alyson Warhurst with a research focus on the environmental, social and economic impacts of development projects within the mining and energy sectors, and their implications for public policy and corporate strategy.
About CCUThe study of corporate citizenship is multidisciplinary and cross-cutting, covering issues such as: community investment, human rights, corporate governance, environmental policy and practice, social and environmental reporting, social auditing, stakeholder consultation and responsible supply chain management. The new economy and the new relationship between corporations, states and communities demand a fresh approach. Through its activities, the Corporate Citizenship Unit offers insight, understanding and learning in the complexities of managing in the new world of corporate responsibility.Our Annual Conference is attended by delegates from industry; government; academia and NGO groups. Other events include a regular seminar series and modules on Corporate Citizenship on MBA, MPA and Executive programmes.
Corporate Citizenship ConferenceThe Annual Corporate Citizenship Conference is attended by delegates from industry, government, civil society organisations and academia.Sustainable Development and the Role of Business in Poverty Elimination
7th October 2002, Scarman House, University of Warwick.
100
This year's conference will feature the Warwick Debate: "Does Business have a Role to Play in Poverty Elimination?"
For further information, please contactDeborah Webb or Emma Peak+44 (0)24 7657 [email protected]
Education & TrainingThe Corporate Citizenship Unit is committed to offering courses at all levels: Undergraduate / Graduate / and Executive Programmes
T he Unit also provides in-house professional development training programmes. For more details contact Alyson Warhurst.
UndergraduateCritical Issues in Management courses are taught across Warwick's business and management undergraduate programme.
Graduate30/40 hour optional courses on Corporate Strategy and Citizenship are taught as part of Warwick's full-time, evening, modular and distance learning MBA programmes and on Warwick's Masters in Public Administration. Corporate Citizenship is now a compulsory session on all Warwick's MBA and MPA programmes.
Executive ProgrammesCorporate Strategy and Citizenship presentations on Warwick's Executive Programmes:
Social Accountability Auditing
Social and ethical accountability auditing is increasingly being adopted by organisations, both large and small, who recognise that stakeholder consultation and collaboration are key to future success. A social audit enables an organisation to appraise its stakeholder relationships and identify both how these may be developed and how they can inform strategic planning.The Warwick course leads to a professional qualification based on AccountAbility 1000 (AA 1000) and incorporating elements of ILO conventions, SA8000, Universal Declaration of Human Rights, Global Reporting Initiative, Investors in People, ISO 14001, EMAS, CERES principles and the ICC Business Charter for Sustainable Development. These 40 hour courses for
101
professionals are run in partnership with Warwick's Executive Programmes and Accountability, the Institute for Social & Ethical Accountability.Master ClassOne day programmes for senior executives on corporate citizenship
The next Master Class will be held on April 26th 2002 following the Ethical Corporation Europe Conference at the Millennium
CORPORATE CITIZENSHIP
This module enables you to understand the relationship between business, government and civil society. It focuses on the role, scope and purpose of business in a global economy, particularly in relation to the development of partnerships with the state and civil society.
Understanding and managing the concept of the corporation as a citizen has become a strategic priority. Of the world's 100 largest economies, 50 are businesses. The relationship between business, government, and civil society is under close scrutiny. Being able to gauge the economic, social, and environmental impacts and responsibilities of the organisation is essential.
The module draws on historical understandings of the relationship between corporations, the state and civil society. It also incorporates new initiatives that are being tested around the world. It uses lectures, case studies, readings and participant presentations.
The module covers issues including: Corporate citizenship Globalisation & corporate citizenship Global corporate citizenship & global governance Business, power & responsibility Human rights & business Business & the environment: The sustainability challenge Corporate accountability Climate change & financial institutions Corporate accountability Social partnerships Corruption, fraud, transparency & international initiatives Human rights: A template for business Creating societal value: Business in the 21st century.
By the end of this module you will have: The ability to map stakeholders
102
An understanding of stakeholder dialogue, consultation, and reporting
An understanding of the use of social, ethical, and environmental auditing
The ability to express a corporation’s social and environmental responsibilities.
103
Institute for Business Ethics
http://www.ibe.org.uk/
Contact at [email protected]
The aims of the Institute are to emphasise the essentially ethical nature of wealth creation, to encourage the highest standards of behaviour by companies and to publicise the best ethical practices.
IBE holds consultations and conferences, publishes research and identifies effective actions which business organisations can take. We offer practical advice to companies wishing to establish and implement effective ethical policies. We also represent responsible business opinion to the media and in the continuing public debate.
Practical Solutions
Business must be seen to behave responsibly so as to earn the trust of its stakeholders. Society is increasingly concerned and there is growing involvement with business ethics in political and academic circles.
Business must be seen fully to share these concerns. There is a need to promote practical solutions which combine social responsibility with efficient operations. Otherwise business can find itself fighting constant rearguard actions against well-meaning but inappropriate solutions proposed by people not directly involved.
Outline of the content of a code of business practice and ethics
Preface or Introduction (signed by the Chairman or Chief Executive, or both)Start with a sentence on the purpose of the Statement – mention the values that are important to the top management in the conduct of the business such as integrity, responsibility and reputation. Describe the leadership commitment in maintaining high standards both within the organisation and in its dealings with others. Set out the role of the company in the community and end with a personal endorsement of the code and the expectation that the standard set out in it will be maintained by all involved in the organisation.
Key areas to include:
A. The Purpose and Values of the Business – the service which is being provided, a group of products or a set of services – financial objectives and the business’ role in society as the company sees it.
104
B. Employees – how the business values employees. The company’s policies on: working conditions, recruitment, development and training, rewards, health, safety and security, equal opportunities, retirement, redundancy, discrimination and harassment. Use of company assets by employees.
C. Customer Relations – the importance of customer satisfaction and good faith in all agreements, quality, fair pricing and after-sales services.
D. Shareholders or other providers of money – the protection of investment made in the company and proper ‘return’ on money lent. A commitment to accurate and timely communication on achievements and prospects.
E. Suppliers – prompt settling of bills. Cooperation to achieve quality and efficiency. No bribery or excess hospitality accepted or given.
F. Society or the wider community – compliance with the spirit of laws as well as the letter. The company’s obligations to protect and preserve the environment. The involvement of the company its staff in local affairs. The corporate policy on giving to education and charities.
G. Implementation – the process by which the code is issued and used. Means to obtain advice. Code review procedures. Training programme.
EIGHT steps for a company wishing to develop its own corporate ethics programme:
1. Find a champion – Unless a senior person – hopefully the CEA – is prepared to drive the introduction of a business ethics policy, the chances of it being a useful tool are not high.
2. Get endorsement from the Chairman and the Board – corporate values and ethics are matters of governance. The board must be enthusiastic not only about having such a policy but also about receiving regular reports on its operation.
3. Find out what bothers people – merely endorsing a standard code or copying that of another will not suffice. It is important to find out on what topics employees require guidance.
105
4. Pick a well-tested model – use a framework which addresses issues as they affect different constituents or shareholders of the company. The usual ones re: shareholders, employees, customers, suppliers and local/national community. Some might even include competitors.
5. Produce a company code of conduct – this should be distributed in a booklet form or via company intranet. Existing policies, for example, on giving and receiving gifts or the private use of company software, can be incorporated. Guidance on how the code works should also be included.
6. Try it out first – the code needs piloting, perhaps with a sample of employees drawn from all levels and different locations. An external party such as the Institute of Business Ethics will comment on drafts.
7. Issue the code and make it known – publish and send the code to all employees, suppliers and others. State publicly that the company ahs a code and implementation programme that covers the whole company. Put it in your website and send it to joint venture and other partners.
8. Make it work – practical examples of the code in action should be introduced in all company internal (and external) training programmes as well as induction courses. Managers should sign off on the code regularly and a review mechanism should be established. A code ‘master’ needs to be appointed.
Having a code of ethics with an implementation programme is the minimum requirement for reputation management. It is a kind of prevention medicine: without such a programme a corporation is vulnerable simply because it has neglected to take business ethics seriously.
TWELVE steps for implementing a Code of Business Ethics
1. Integration – produce a strategy for integrating the code into the running of the business at the time that it is issued.
2. Endorsement – make sure that the code is endorsed by the Chairman and CEO.
3. Circulation – send the code to all employees in a readable and portable form and give to all employees joining the
106
company.
4. Breaches – include a short section on how an employee can react if he or she is faced with a potential breach of the code or is in doubt about a course of action involving an ethical choice.
5. Personal Response – give all staff the personal opportunity to respond to the content of the code.
6. Affirmation – have a procedure for managers and supervisors regularly to state that they and their staff understand and apply the provisions of the code and raise matters not covered by it.
7. Regular Review – have a procedure for regular review and updating of the code.
8. Contracts – consider making adherence to the code obligatory by including reference to it in all contracts of employment and linking it with disciplinary procedures.
9. Training – ask those responsible for company training programmes at all levels to include issues raised by the code in their programmes.
10. Translation – see that the code is translated for use in overseas subsidiaries or other places where English is not the principal language.
11. Distribution – make copies of the code available to business partners (suppliers, customers etc) and expect their compliance.
12. Annual Report – reproduce or insert a copy of the code in the Annual Report so that shareholders and a wider public know about the company’s position on ethical matters.
The above is taken from:
1998 32 pages, ISBN 0 9524020 6 8, Price Pds.15.00Written by Martin Le Jeune and Simon Webley, this ives the latest survey on the use of codes. It includes valuable case studies, from Lloyds SB, C&A and Standard Chartered.
107
Institute for Social & Ethical Accountability
http://www.accountbility.org.uk/aboutus/default.asp
Email: [email protected]
The Institute for Social and Ethical AccountAbility (AccountAbility) is the pre-eminent international professional body supporting organisational accountability and sustainable performance. Core products, services and activities delivered to its individual and organisational members include:
Connecting accountability practitioners across the world through on-site workshops and guidance, regular seminars and conferences on practical issues of accountability management as well as a leading quarterly journal on current topics
Developing practical tools and standards, including AA1000 (and its revision AA1000 Series), the leading management system for professionals in the field.
Groundbreaking research and programmes on key corporate and social challenges. Current projects address a range of issues, including sustainability; stakeholder engagement; innovation and corporate citizenship; and labour standards.
Supporting structured professional development, including access to AA1000 Series based training series that provide an introduction to issues of social and ethical accounting, auditing and reporting, and sustainability management. Individuals can be certified to the AA1000S standard.
The accountability challenge
Accountability is an essential element of any pathway towards sustainable development. Securing meaningful accountability requires innovative approaches to social and environmental challenges tht often go beyond necessary compliance with the rule of law.
For organisations, this means responding to the interests of their many stakeholders, including those with little or no authority, but great need. This is true for all organisations, from large corporations to governments and small community groups.
Meaningful accountability is hard to achieve. Organisations are faced with many pressures. Stakeholders’ demands are high, and often conflict with each other. There are no simple, automated ways to handle effectively the risks and opportunities embedded
108
within these demands. Organisations have no alternative but to engage with stakeholders, build relationships underpinned by shared values and interests, and demonstrate practical responsiveness to reasonable, practical expectations.
AA1000 is an accountability standard designed to address this challenge – to improve accountability and performance with a process of learning through stakeholder engagement.
AA1000 (1999)
AccountAbility’s AA1000 Framework was developed to address the need for organisations to integrate their stakeholder engagement processes into daily activities. The Framework provides guidance to users on how to establish a systematic stakeholder engagement process that generates the indicators, targets, and reporting systems needed to ensure its effectiveness in impacting on decisions, activities and overall organisational performance.
The two key principles underpinning AA1000 are stakeholder engagement and embedding. The building blocks of the framework are planning, accounting and auditing and reporting.
AA1000 has been taken up by a wide range of organisations since its launch in November 1999. Its focus on stakeholder engagement process has proved effective for many organisations that view this element as the key to enhanced performance. As a result, AA1000 has been complementary to related guidelines focused on, for example, sustainability reporting.
AA1000
Assessor & Verifier
Adopter & Reporter
Awards Developer
General Public
Standards Developer
Investment Analyst
Trainer
Consultant
109
New Academy of Business
http://www.new-academy.ac.uk/unv.htm
The New Academy of Business is an independent business school and a registered UK charity. Established in 1995, its purpose is “to create learning experiences which challenge and support enterprise, aspiring to a more just and sustainable future.” The New Academy focuses on the social, ethical and environmental dimensions of business practice, engaging individuals and organisations through a family of learning methodologies called ‘action research’. In action research, processes are devised to enable ‘theory and talk’ to be ‘put into practice’. Work is done – in both personal and group settings – to bring the ‘theories’ and actual practices of participants closer together. The New Academy works with entrepreneurs, educators, managers, activists, policy makers and other agents of change.
The major activities of the New Academy are : Teaching - joint MSc with Bath University in Responsibility and
Business Practice and MBA modules at other universities. Research - including collaborative research and working with
organisations like the ILO and UN Volunteers Organisational Learning - including the Innovation Network for
Socially Responsible Business. ELearning - to extend the impact and reach of the vision.
MSC IN RESPONSIBILITY & BUSINESS PRACTICE
In 1997 the New Academy of Business, in partnership with the Centre for Action Research at the Management School, Bath University, launched a new type of post-experience management education. This course utilises eight intensive residential workshops over two years, to address the challenges currently facing enterprises as they seek to integrate successful business practice with a concern for social, environmental and ethical issues. It looks at the complex relationship between business decisions and their impact on local and world communities and economies, on the environment and on the workplace itself. This is a challenging programme, aimed at managers, consultants and others who are ready to ask searching questions about how modern business is carried out, and what the consequences and alternatives might be. Participants will:
Gain knowledge of current thinking on sustainable business, accountability, human rights and active corporate citizenship
Hear from managers in leading edge organisations, who are developing new, values-aware business practices
Carry out action-experiments in their own workplaces, and develop skills in disciplined action learning
110
Develop their capacities as informed and self-aware individuals and as contributors to organisational change.
ResearchNAB’s research programme aims to foster learning in businesses, communities and other organisations in order to create a just, sustainable and enterprising world. We seek to conduct research in a way that values and honours the lived experience of individuals. We want to find ways of enabling people to explore, understand and transform business in our inter-connected world. We endeavour to use a methodology and approach based on action research, which seeks to:
produce knowledge that is useful to the people involved – relevant, practical knowledge;
empower those involved, as they construct and use this knowledge
The following are some examples of our current and recent research projects:
Enhancing Business-Community Relations: Action research project with the United Nations Volunteers and UNDP that aims to promote corporate citizenship practices and voluntary action in seven countries including Ghana, Nigeria and South Africa. Ongoing to February 2003.
Corporate Responsibility in South Asia: Action research project in collaboration with TERI-Europe and partner organisations in Bangladesh, India and Sri Lanka. Funded by the UK Department for International Development (DfID). Ongoing to early 2003.
Gender, Codes of Conduct and Social Auditing: Funded by DfID, this project explores concerns about how effectively corporate codes and social auditing respond to the needs of marginalised stakeholders, such as women workers in the South, through two case studies in the Nicaraguan banana and textile sectors. Ongoing to April 2002.
E-LEARNING
During the course of 2002-3, the New Academy will be introducing a range of innovative educational products, including a series of on-line learning courses. We are currently developing courses on Business & Human Rights, Corporate Citizenship and Climate Change. The first of these will be launched in May this year.
111
An Introduction to Business and Human Rights Available from May 2002Legal experts have started to look at the relevance of international human rights law to companies and the possibilities of legal enforcement. Pressure from shareholders, customers and campaigning groups is forcing human rights onto the agenda of many business leaders and their managers. New Academy is responding to this by providing Business and Human Rights – An Introduction. This online course will give an appreciation of human rights, the relationship to business and the steps that leading companies are taking to incorporate human rights into their business practice.
SHORT COURSESIn addition to online learning, the New Academy of Business also provides short courses delivered in person or through a combination of online learning and face-to-face teaching.
Business and Human Rights in Practice: 19-21 June & 24 July 2002, London, UK2—4 October & 13 November, London, UK
Business and Human Rights In Practice is offered in association with the Amnesty International UK Business Group. The course aims to develop the capacity of companies to implement their human rights commitments. It is a hands-on practitioner’s course comprising of three elements: on-line, three-day workshop and workplace project.
Innovation in Communication - Creating value through responsible marketing and communication: Series 1: May-September 2002, Stockholm, SwedenSeries 2: September-December 2002, Stockholm, Sweden
For those in the marketing and communications industries ready to ask searching questions about how their industry impacts on society’s current challenges and the environment and their responsibility to do something about it. A series of eight half-day workshops exploring the current issues, examining the industry’s responsibility, identifying the creative and business opportunities and pioneering new practices.
Life’s Balance: One day or two half days, Tailor-madeConventional approaches to work-life balance often focus on organisational perspectives, with an emphasis on balancing time spent at work against all the other things that make up a life. Life’s Balance adopts a framework within which individuals can identify
112
their needs, then explore ways of meeting them that create personal and enduring satisfaction and well-being.
For further information on any of these activities please contact:
New Academy of Business17 – 19 Clare StreetBristol BS1 1XA UKTel 00 44 117 925 2006 Fax 0044 117 925 2007Email: [email protected] Website: www.new-academy.ac.uk
113
New Economics Foundation
http://www.neweconomics.org
The New Economics Foundation is the radical think tank. It is unique in bringing together the ideas, people, resources and influence to challenge business-as-usual. We create practical and enterprising solutions to the social, environmental and economic challenges facing the local, regional, national and global economies.
We are committed to fresh thinking, so please be in touch.
NEF has made a number of areas of action research and policy work a priority:
Participative Democracy Local Economic Renewal Reshaping the Global Economy, that includes Corporate
Accountability
Corporate Accountability
Aim: to build corporate accountability and influence corporate behaviour. Through effective research advocacy and consultancy, the programme aims to change for the better, the impact of corporations on society.
The New Economics Foundation has been working for several years to develop new and creative ways to balance the negative effects of the free market with the potentially harmful impacts on the environment, economic and social arenas. While new technologies and global corporations gain greater power, the ability of national governments to set appropriate standards is undermined. As a result, current government approaches to corporate accountability are entirely voluntary and place the impetus on the private sector to be good corporate citizens.
As part of a new three-year programme of work, NEF aims to challenge the assumption that voluntary approaches are sufficient for long-term sustainability and in doing so, will seek to provide alternative solutions to bridge the accountability gap between business and the public. The Corporate Accountability Programme is working to ensure that the private sector does take actions that are socially, environmentally and economically responsible.
114
In an earlier phase of work, we have:
Developed methods for social accounting and auditing and helped establish the Institute for Social and Ethical Accountability
Joined the Steering Committee of the Global Reporting Initiative, the global body responsible for social auditing standards
Assisted large multinationals score the quality of their social reports
Carried out social audits for national companies
Researched the relationship between social performance and financial performance.
The new programme, funded by the Joseph Rowntree Charitable Trust, includes several areas of work:
In November 2000, NEF released the groundbreaking publication, Corporate Spin - The troubled teenage years of social reporting providing the first critical analysis of social accounting and reporting. In spite of earlier hype, NEF found that only five per cent of Dow Jones 500 and FTSE 350 companies actually issue a social report. Furthermore an examination of published reports revealed that there is no demonstrable link between social reporting and improved social performance. The conclusion of the report calls for a five-point rescue plan, consisting of in-depth research on the links between social reporting and performance; simpler social audits; stakeholder governance of corporations; scrutiny by NGO's, governments and journalists and mandatory social and environmental reporting.
Benchmarking Study. We are now developing a large project that will investigate the relationship between corporate social reporting, and social performance.
The Ethical Explorer. In partnership with Poptel, NEF is developing a web-based simpler social audit aimed at the co-operative, voluntary and SME sectors. The software aims to overcome some of the barriers to increased uptake of social auditing and reporting, including affordability and lack of human resources.
CORE Campaign - Campaign for Corporate Responsibility aims to challenge the voluntary approaches that now prevail. In co-operation with other NGOs, Research Institutes, Consumers Groups and Trade Unions, NEF is leading research into both existing and forthcoming corporate legislation, including the Company Law Review and the OECD Guidelines on Multinational Enterprise. The work will demonstrate the weaknesses of voluntary approaches to
115
social and environmental management and, as a result, call for widespread public debate on the issue of corporate social responsibility and more effective frameworks to ensure corporate accountability within the UK and on an International level. Specific actions, such as calling for mandatory social and environmental reporting of all companies, will be defined over the coming months.
Mergerwatch. This new bi-monthly e-letter, focussing on Mergers and Acquisitions analyses the social, environmental and regulatory implications of current merger activity, and provides a synopsis of recent news. To sign up to the latest edition, email [email protected].
Other areas of work include consultancy for leading corporations, governments, multi-lateral institutions and NGOs on such issues as sustainability, the social impacts of corporate economic activity and policy development for ethical business performance.
For further information, contact Deborah Doane, Head, Corporate Accountability Programme. [email protected]
116
Business for Social Responsibility
http://www.bsr.org/
Business for Social Responsibility is a global non-profit organisation that helps companies achieve commercial success in ways that respect ethical values, people, communities and the environment. BSR provides both member and non-member companies with advisory services, information resources an cross-sector opportunities to network, collaborate and solve challenging business issues.
IntroductionWhile there is no single, commonly accepted definition of corporate social responsibility , or CSR, it generally refers to business decision-making linked to ethical values, compliance with legal requirements, and respect for people, communities and the environment. For this report, CSR is defined as operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business.
CSR is seen by leadership companies as more than a collection of discrete practices or occasional gestures, or initiatives motivated by marketing, public relations or other business benefits. Rather, it is viewed as a comprehensive set of policies, practices and programmes that are integrated throughout business operations, and decision-making processes that are supported and rewarded by top management.
Over the past decade, a growing number of companies have recognised the business benefits of CSR policies and practices. Their experiences are bolstered by a growing body of empirical studies which demonstrate that CSR has a positive impact on business economic performance, and is not harmful to shareholder value. Companies also have been encouraged to adopt or expand CSR efforts as the result of pressures from customers, suppliers, employees, communities, investors, activist organisations and other stakeholders. As a result, CSR has grown dramatically in recent years, with companies of all sizes and sectors developing innovative strategies.
Leadership Examples: chosen as illustrative examples, they are intended to represent innovation, higher than average commitment, unusual industry practice or a comprehensive approach to this issue.
The Co-operative Bank plc has a long history as one of the most innovative banks in the United Kingdom, and more recently
117
it has gained a reputation as a leader in corporate social responsibility. Among other programmes and practices, the company is recognised for its (1) strong ethical investment policy statement; (2) social auditing practices; and (3) ethical marketing strategies. The bank’s 14-point ethical investment policy outlines the company’s position on socially responsible investing, including its decisions not to finance weapons deals to oppressive governments, and not to invest in companies involved in tobacco, the fur trade, animal testing or exploitative factory farming. The company has also been a pioneer in the area of stakeholder relations and social reporting, producing a “Partnership Report” each year since 1997 that measure impact and identify improvements the company could make in social responsibility areas such as customer satisfaction, ecological sustainability, workplace practices, community involvement and ethics. Through its ethical marketing campaign, Co-operative Bank advocates for various issues, such as the concept of fair trade and living wages, environmental protection, the acceptance of diversity and bans on the financing of landmines. (Small/Midsize Company, Financial Services, UK)
Natura Cosmeticos, based in Brazil, is recognised as a leader in corporate responsibility in Latin America for its commitment to the communities in which it operates, for creating an empowering workplace, and for its support of human rights issues locally. The company’s mission statement details its dedication to promoting “well being/being well” through its cosmetic business, and Natura has a separate department specifically charged with creating, identifying and developing social responsibility programmes. The company has a focus on creating partnerships with schools, government organisations, and on-profits to enhance the quality of children’s lives and the public education systems in the regions in which it operates. For example, the company has formed a partnership with the Abrinq Foundation for Child Rights that entails (1) mobilising its network of consultants and suppliers who spend volunteer time to design, produce and sell products, the sale of which goes to the partnership child labour programme (2) including an anti-child labour clause in its supplier agreements; (3) placing a child-friendly seal on its products; and (4) advocating with other companies around issues such as the Brazilian Child and Adolescent Bill of Rights. Natura’s employees, suppliers and consultants are provided with opportunities to perform volunteer community service, and the company makes its facilities, management expertise, and administrative capabilities available to numerous non-profit organisations. The company also demonstrates its commitment to environmental sustainability through its use of refillable packaging. (Large Company, Personal Care/Cosmetics, Brazil).
118
Xerox Corp, has established itself as a global leader in workplace, community and environmental practices. The company is regularly cited in lists of the “best places to work” for its strong record in motivating and supporting employees. Among the innovative programmes the company offers is the Life Cycle Assistance Programme, which funds employee work-family benefits in the area of child care, mortgage assistance, and extended household health care. Each employee is given a “virtual” $10,000, which they may draw upon anytime during their employment in $2000 annual increments. Another Xerox initiative, the Social Service Leave Programme, allows employees who have been with the company at least three years to apply for leave for one month to one year, to work with local community service programmes, with full pay and benefits. In the environmental arena, Xerox has worked to create “waste-free products form waste-free factories”, in which emissions and waste of all kinds are minimised or eliminated. Its Asset Recycle Management Programme, in which the company designs its copiers and other products so that they can be reclaimed, refurbished and reused at the end of their useful lives, has saved Xerox more than $50 million since 1991. (Large Company, Computer Hardware, United States).
Awards
Recent years have seen a growing number of awards given in the area of CSR. While a few awards, listed below, cover a wide spectrum of CSR-related topics, many more awards cover specific areas, such as environmental responsibility, workplace practices, ethics and community involvement.
Most Admired Companies lists are produced by a number of media outlets in various parts of the world, including Fortune in the US, Asian Business in Asia, and Management Today in the UK. Corporations are judged on several CSR qualities, including business innovation; the ability to attract, develop and keep talented people; quality of management; quality of products or services; reputation for ethics and honesty; use of corporate assets; as well as community and environmental responsibility.
Business Ethics Awards, given annually by Business Ethics magazine, to honour companies that demonstrate leadership in ethics and social responsibility. The awards vary annually and have included Environmental Excellence, Human Rights Initiatives, Employee Ownership, Small Company and General Excellence in Ethics.Business Ethics also compiles an annual list of “The 100 Best Corporate Citizens” honouring companies that serve four
119
stakeholder groups well: employees, customers, the community (which includes the environment) and stockholders. Social ratings based on data from Kinder, Lydenberg, Domini & Co, are combined with financial returns to reach an overall score. See website www.businss-ethics.com
Corporate Conscience Awards, given annually by the Council on Economic Priorities, are intended to “honour and bring to public attention companies that demonstrate a recognition, at the corporation’s highest executive levels, of a responsibility to respect the rights and promote the well-being of all stakeholders, whether employees, consumers or the community; and to uphold environmental stewardship.” Awards are given in the categories of Community Partnership, Employee Empowerment, Human Rights, Environmental Stewardship, Social Mission and Most Improved. See website www.cepnyc.org
Enterprise Awards for Best Business Practices, given annually by Arthur Andersen LLP. The awards aim to “identify and recognise companies whose business practices have led to great performances.
The Ron Brown Award for Corporate Leadership: given to “honour companies for the exemplary quality of their relationships with employees and communities” is administered by The Conference Board. Awarded by the US President at a White House ceremony, it is given to companies that have “demonstrated a deep commitment to innovative initiatives that not only empower employees and communities but also advance strategic business interests.” Se website www.ron-brown-award.org
The Henry Morrison Flagler Award, given by the Kenan Institute of Private Enterprise, recognises the significant and vital role that entrepreneurial leaders play in advancing private enterprise and improving our society. The award is made annually to an individual who has demonstrated exceptional entrepreneurial leadership through the creation of innovative and highly effective institutions that span the boundaries of business and society.
120
The Conference Board
http://www.conference-board.org
The Conference Board is global business membership and research group linking executives from different companies, industries and countries in its twofold mission to improve the business enterprise systems and enhance the contribution of business to society. Principal corporate citizenship activities include: research centres on global corporate governance and environment, health and safety; executive councils in contributions, global business conduct, business and education; and a unit on global corporate citizenship.
The Conference Board holds conferences, forums and seminars throughout the year on a wide range of current business and “business and society” issues including community and public issues, corporate ethics, global corporate citizenship, diversity, corporate reputation and image, communications, environmental health and safety, and performance excellence.
Publications of the Conference Board include ‘Across the Board’ a monthly magazine; research on consumer confidence and leading economic indicators of the US and other management research with titles including “Corporate Contributions” (annual survey), “Corporate Giving Strategies that Add Value”, “Corporate Volunteerism: How Families Make a Difference” etc.
The Conference Board administers the Ron Brown Award for Corporate Leadership, “honouring achievement in employee and community relations.”
121