table of contentslifeworth.com/2006review/pdfs/tippingframes-2006review.pdf · spread of social...

Table of CONTENTS

� TippingFrames|WorldReview�006

I. Sponsors 3

II. ForewordbyMichaelPowell 5

III. IntroductionbyJemBendell 7

IV. WorldReview�006:FirstQuarter a. Foodfight 15 b. Fairfight 19 c. That’sjustnotfair! �� d. IncrediblyIndia �4 e. Fizzyfight 26

V. WorldReview�006:SecondQuarter a. Trialsandtribulations 29 b. Pragmaticrights? 3� c. Notbankingoncorruption 36 d. Atighteningweb? 39

VI. WorldReview�006:ThirdQuarter a. Who’sleadingHu? 43 b. Deathofagreensalesman? 47 c. Reframingfinance 49 d. NGOsaren’tGod,AEIreports 51 e. Transparencymatters 5� f. ConsumingTruths 53 g. Tamingthemessenger 55

VII. WorldReview�006:FourthQuarter a. Capitalism’sRisingStar? 59 b. UnderstandingtheBoom 61 c. CompetitiveOpenness? 63 d. AvoidingOligarchy? 65 e. ARacetoWhere? 67 f. ADifferentPath? 68 g. Moderndayslavery 70

TippingFrames|WorldReview�006 3

OurSPONSORSThe2006LifeworthannualreviewofcorporateresponsibilityissponsoredbyGriffithUni-versity,GreenleafPublishingandtheICCSR.

Thisfreepublicationcombinesthequarterlyreviewsofthepremiereacademicpublicationinthefield,theJournalofCorporateCitizenship.Itprovidesyouwithinternationalanalysisofthemaintrendsof�006, insights intothefuture,aswellassomeproposalsforfutureworkoncorporateresponsibility.

Lifeworthpublishesthisresourcetopromotemoreinformedconsiderationandpracticeofcorporateresponsibility,toencouragesystemicchangetowardssustainabledevelopment.Thereviewiseditoriallyindependentandthesponsorsdidnotinfluenceitscontent.

ThisisthesixthAnnualReview.Youcanaccessthisandpreviousreviewsatwww.lifeworth.net.Visitwww.lifeworth.comforinformationonresearch,strategy,policy,coachingandca-reersinthisfield.

WrittenbyJemBendell(AdjunctAssociateProfessor,GriffithBusinessSchool,Australia;Founder, Lifeworth,Switzerland)withShilpaShah for the first quarter, JonathanCohen(Principal,StakeholderConsulting;Author,BusinessWatch*)forthesecondandthirdquar-ters,andLalaRimando(BusinessEditor,Newsbreak,Philippines)forthefourthquarter.

Contents©GreenleafPublishing,apartfromtheintroduction©JemBendell,�006.Docu-mentandwebsitedesignbySamBaja(www.sambaja.net)

YoucanstayuptodatewithstrategicanalysisofcorporateresponsiblitynewsandviewswiththeJournalofCorporateCitizenship.ThisacademicjournalispublishedeveryquarterbyGreenleafPublishinginassociationwithWarwickUniversity’sCorporateCitizenshipandtheNewAcademyofBusiness.SubscriptionratesfororganizationsareUK150/US$250foroneyear(fourissues)andforindividualsUK75/US$125.

Formoreinformation:Tel :+44(0)1142823475Email :[email protected] :www.greenleaf-publishing.com

Thedominantparadigmforbusinesssuccessischangingtorecognisetheabso-lute necessity of social and environmentalsustainabilityintandemwithfinancialviabil-ity. No longer is it enough to focussolelyand simply on the bottom line defined interms of profitability but business successrequiresmanagementofenvironmentalim-pacts and emissions as well as ensuringemployeewellbeing.Notonlyare‘Genera-tion Y’ employees demanding this but theenvironment itself is focussing our minds.Climate change, global warming, wide-spreaddroughts, andencroaching desertsarejustpartofthechanginglandscapewith-inwhichbusinesshas tooperate. So tooaretheratherdifferentvaluesofmanyofouremployeeswhowanttobeassuredthatourbusinessesarenotjustexploitingtheworldwelivein,butrefreshingandsustainingit.

Businessschoolswhichhavethere-sponsibilityofeducatingourfuturebusinessleadersneedtoaddressactivelythechang-ingcontextofdoingbusiness. It is incum-bent upon us to ensure that our studentsareawareoftheissuesassociatedwiththeparadigmshift that isoccurring,knowwhythis is important and how they can makea difference. Griffith Business School inQueensland, Australia, is one businessschoolthathasmadeacommitmenttofol-low this path, acknowledging that it is nolongerenoughtoensurethatbusinesseth-icsaretaught,importantthoughthatis,butthat we broaden our attention to includeconsideration of how to manage responsi-blytheenvironmentalandsocialimpactsofdoingbusiness.Students,youngbusinessleadersamongouralumniandevenentre-preneursseethisasanimportantpartoftheeducationweprovideandoftheresearchweundertake.Thecognitiveframesaroundthebusinessdisciplinesarechanging,andourcurriculum, research and community out-reachneeds to reflect thatchange. Whilewebelieveitisimportant,ourconstituenciesandstakeholdersareincreasinglydemand-

ingitofus.

Asaconsequence,GriffithBusinessSchool iscurrentlyactivelyengaged in theprocess of embedding principles of busi-nesssustainabilityandcorporateresponsi-bilityintoitscurriculumbothundergraduateandgraduate. This isnotasimplematterasitinvolvesworkingwithacademicfacultytochangetheirapproachandmindset,edu-cating them in the importanceandcritical-ityofthisnewdirection,andassistingthemwith resources and appropriate teachingmaterials.Businessschoolsarealsoaboutresearchandthedisseminationofresearchfindingssowearealsodevelopingresearchinthisareaalongwithpartnersfromindus-try and commerce. We are also reachingoutintothebusinesscommunitywithase-riesofseminarsandworkshopsaroundthethemeofsustainability.

Andthenitisimportantthatweprac-ticewhatwepreach!Sowearelookingatallourprocesses,resourceutilizationandso


By Michael PowellProViceChancellor(Business)GriffithUniversityFOREWORD

6 TippingFrames|WorldReview�006

forthtoensurethatourownenvironmentalfootprintisminimised,thatourresourceus-ageiscarefullymanagedandthatourpoli-ciesensurethatourpeopleareabletobal-ance,orblend, theirworkingandpersonallives.

Thisisanexcitingjourneyforabusi-ness school, and we are not alone in tak-ingit.GriffithBusinessSchoolisapartnerin the Globally Responsible LeadershipInitiative of the European Foundation forManagement Development (EFMD) that issupportedbytheUNGlobalCompact.Ourpartnersinthisinitiativeareotherbusinessschools and universities, and anumber ofbusinessesfromacrosstheglobe.Togetherwe recognise the importance of educatingresponsiblebusinessleadersforthefuture.And we believe that the recent reports onglobalwarmingandclimatechangehasledtopublicconcernreachinga“tippingpoint”where educators and industrialists alikehavetopayattentiontothenewparadigmfordoingbusinessinourchangingworld.

FOREWORD


By Jem BendellAdjunctAssociateProfessor,GriffithBusinessSchool,AustraliaFounder,Lifeworth,Switzerland

TIPPINGFRAMESINTRODUCTION Almostadecadeago,astheIndone-siantropicalforestswereburningoutofcon-trol,Iwrotethatclimatechangehadmovedfrom theory to reality.1 But whose reality?Sincethenwe’vehadadecadeofbusiness-as-usual, with carbon emissions boomingintandemwitheconomicgrowthacrosstheglobalSouthandsteadilyclimbing inmostoftheNorth.

Butrecentlysomethinghaschanged.Friendsnowsaytome,“soit’strue,thecli-mate ischanging”and“it’sbig,everyone’stalkingaboutit,”andsomeevensay“it’sbe-causeofus”. As theemphasisonclimateattheOscarsillustrated,carbonisthenewblack.GlobalWarmingusedtobeanerdyissueofscientificinterestandenvironmen-tal concern. Now it is a personal issue, ofpoliticalinterestandhumanitarianconcern.What made this happen? What made Cli-mateChangereacha ‘tippingpoint’ tobe-comehotgossip,evenincountrieslikeIndiawhere some might assume other mattersaremorepressing?

The phrase ‘tipping point’ refersto that dramatic moment when somethingunique becomes common. Popularised byMalcolmGladwell’sbestsellingbookof thesamename,itisusedtodescribethepointwhentherateatwhichaprocessproceedsincreases dramatically. Gladwell identi-fies three characteristics of people whohave disproportionate influence over thespreadofsocialphenomena.‘Connectors’,havewideanddiversesocialcircles,beingthe hubs of social networks. ‘Mavens’ areknowledgeablepeople,whoareparticularlyawareofinnovationsandadoptnewthingsandideas.‘Salesmen’arecharismaticpeo-plethathelpmarketanideatothemasses.The implication is that social change re-

1 BendellJ.(ed.),(1999)GreenerManagementInternation-al,specialissue‘Business-NGORelationsandSustainableDevelopment’,Issue24,GreenleafPublishing:Sheffield,UKhttp://www.greenleaf-publishing.com/greenleaf/journaldetail.kmod?productid=85&keycontentid=8

quiresinvolvementofpeoplewithamixtureof thesecharacteristics.But tounderstandhowconcernforclimatechangetippedintothe mainstream, at least in the West, weneed to lookat thechangingnatureof theconcept,dailyexperiences,andthemecha-nisms of communication. The growing hu-manfaceofclimatechange,people’sexpe-rienceofchangestotheirweather,andtheentertainmentmedia’sengagement in this,haveallbeenkey.Thefirstandlastoftheseare instructive for thoseofus interested insocialchange.

Climate Tipping

First, climatechange has begunto be understoodas a humanitarianemergency. Stud-ies are showinghow increasingdroughts, floods,forestfires,storms,

erosion and sea rise, are destroying livesandlivelihoods.�Anothersidetothehumanfaceofclimatechangeistheeconomicim-pact, which has been predicted at poten-tially�0%of theglobaleconomy. “ClimateChange is the greatest market failure theworldhaseverseen”,writeseconomistDa-vidStern.Theenvironment isnow too im-portant to be left to conservationists. Thismarksachangeinwhatcognitivescientistsmight call the ‘cognitive frame’ of climatechange,whereby the termbecomesasso-ciatedwithhuman,and thuspersonalandmoral,concepts.GeorgeLakoff’sbestsell-ingbook“Don’tThinkofanElephant”popu-larizedthetheoryofcognitiveframes.Lakoffuses the term “tax relief”employedby theUS Bush Administration, to illustrate howwords have various concepts associatedwiththem.“Theword“relief”hasaconcep-

2 Seehttp://www.christianaid.org.uk/climatechange/index.htm


INTRODUCTION

tualframeassociatedwithit.Inordertogivesomeonerelief,therehastobeanafflictionand an afflicted party -- somebody who’sharmed by this affliction -- and a reliever,somebodywho gives relief to the afflictedpartyortakesawaytheharmorpain.Thatreliever is a hero.And if someone tries tostopthepersongivingrelieffromdoingso,they’reabadguy...Theywanttokeeptheaf-flictionongoing.Sowhenyouuseonlyoneword,“relief,”allofthatinformationiscalledup. That is a simple conceptual frame.3”Variousotherintellectualtraditions,suchascriticaldiscourseanalysis,studythepowerof language in shaping our sense of whatexistsandwhatispossible.‘Discourses’areaseriesofinterlockingcognitiveframesthatconstruct our worldview. By making linksbacktotheneuroscienceof thebrain,andusingsimpleexamples,cognitivescientistshavebeenabletopopularizetheinsightthat‘languageispower’morethansociologists.

Mediated Truths

The second reason why climatechange has tipped is the involvement ofmassentertainmentmedia. Iused to thinkthatmassmediawasimportantforcommu-nicatingwith,well,themasses.Notso.Themassmediaisimportantforcommunicatingwith powerful minorities. The demands onthemodernprofessionalinanylineofworkaresuchthat tobesuccessfulwebecomehighlyspecializedandoverlybusy.Ouroc-cupation becomes our preoccupation.Andboydowehavetoread,read,readtomain-tainourspecialism.Consequently informa-tion doesn’t penetrate very deeply if notcomingfromsourcesweassumecontributeto our specialism, such as a trade maga-zine, business section, or top academicjournal.Wemightscanthenewsbutit’syetanothertiringstory,thatdoesn’treachusatadeeperlevel.Buteveryonehastorelaxatsomepoint.Asteacherswilltellyou,wealllearnbetterwhenwearerelaxed.So,elitescanbereachedinmovietheatres.Another

3 InsideThe Frame, 2004,AlterNet, http://www.alternet.org/story/17574/

reasonforthepowerofourculturallifeisthewayitprovides‘socialproof’foranissue:ifeveryone’stalkingaboutit,itmustbeimpor-tant.4Anequally‘InconvenientTruth’isthatAlGorehasprobablydonemoreforclimatechange awareness with his Oscar-winningfilmthathedidduring8yearsasVicePresi-dent.

WhetherworkinginNGOs,universi-tiesorgovernment, it is important to learnhowframestip.Watchinghowthealternativefuelmarketboomedin�006,andcontinuestodosoin�007,alsosuggeststhatframe-tippingisimportantforfinancialanalyststounderstand. One lesson is the importanceof frames rather than facts. “Conventionalframesareprettymuchfixed in theneuralstructuresofourbrains”saysLakoff.“Inor-derforafacttobecomprehended, itmustfittherelevantframes.Ifthefactscontradictthe frames, the frames, being fixed in thebrain,willbekeptandthefactsignored.”Hesums thisupas “Frames trump facts.” Im-plication:don’tjustpumpoutyourstoryandevidence,butchangetheframing,andlookoutforwherepeoplearedoingthis.Anotherlesson is reaching people in their leisuretime, and the importance of cultural phe-nomenainopeningpeople’smindstothingsthey would otherwise consider peripheral.Thisrelatestoathirdlesson,theimportanceofcrossingworlds,and thepointsof inter-connectionbetweendifferentrealmsofworkandlife.AsGladwellexplains, it isthroughpeopleconnectingdifferentsocialnetworksthatideasspreadrapidly.

4 Cialdini,R.(1993)Influence:Scienceandpractice(3rdedn),NewYork:HarperCollins

Social proof, also knownas informational social influence,isapsychologicalphenomenonwhichoccursinambiguoussocial situationswhenpeopleareunable todetermine theappropriatemodeofbehavior.Making theassumption thatsurroundingpeoplepossessmoreknowledgeaboutthesitu-ation,theywilldeemthebehaviorofothersasappropriateormoreinformed.http://en.wikipedia.org/wiki/Social_proof

Some frames are deeper than oth-ers,inthesensethatachangeinthemhascascadingimplicationsforarangeofotherassumptionsandbeliefs.Climatechangeis‘deep’inthissense,asrecognizingitasrealand urgent means we are challenged toquestion our assumptions about currentformsofeconomicdevelopmentbeing‘prog-ress’. Hence ‘tipping frames’ not only de-scribestheprocessofanalteredframego-ingmainstream,butalsothoseframesthat,oncealtered,leadtootherframesinsocietyreaching a tipping point.Those of us whoseektoservesystemictransformationsforabetterworld,asdescribed in theLifeworthReview of last year, need to better under-standthisprocessoftippingframes.Figure1.

A Crucible for Tipping Frames

The range of activities relating tocorporateresponsibilityformasiteforframetipping,forthreereasons.Theybringdiffer-ent professions and knowledge networkstogether thatwouldotherwise rarelymeet.Thisincludesthethreesectorsofbusiness,governmentandcivilsociety.Itincludesthedifferent fields of public concern, such asenvironment, health, poverty and humanrights,aswellasthosewithalocalandaninternational focus. They are also focusedon framing issues, as the diverse actors

seektofindanewsharedlanguageinvolv-ing terms like ‘partnering’, ‘socialentrepre-neurship’and‘extra-financialissues’.Iprevi-ouslyarguedthatthemostsignificantframetotipinthisfieldistheconceptofwhatitistobeaprofessionalbusinessperson.Thatused to mean leaving troublesome valuesat home but now its coming to mean thehighestexpressionofyourvaluesatwork.5Thisrelatestoabroadermovementtowardswhatcouldbecalled“work-lifeblending”.

Work-Life Blending

There is a cognitive frame around‘work’whichmeansitisseparatefrom‘life’.Thishasthedualeffectofmakingitdifficulttoassimilateinformationfromlifeintoone’swork,andmakingusthinkthattobe‘profes-sional’weshouldleavealotofour‘life’ex-perienceandinterestsathome.Anewtrendischanging that.Reportssuggestyoungerbusinessleadersandentrepreneursarenotonlywantingmorework-lifebalancebutalso‘work-lifeblending’,i.e.bringingtheirwholepersonalitytowork.

Various factors are driving this.Technologies are enabling home-workingwhichleadstotheblurringofworkandlife.Theyarealsoallowingmoreentrepreneur-ialself-employmentorside-employment,asthetransactioncostsofoperatingaloneandconnecting with a global market are dra-matically reduced. Demands for creativityfromknowledgebasedindustriesareinspir-ingmorepeopletoworkoutsideinnovation-sappingcorporateofficeenvironments.Thesearchformoremeaninginonesworkisafactorinthisblending,aswellasresult(Fig-ure�).

5 See:BarricadesandBoardrooms(Bendell,�004)www.globalpolicy.org/ngos/advocacy/protest/general/2004/0607rooms.pdf

TippingFrames|WorldReview2006 9

INTRODUCTION


INTRODUCTION

Balanceisastateofequipoise;equaldistribution of weight or amount. Work-lifebalance suggests “work” on one side andeverythingotherthanwork,ontheother.Sstheyareseparatesomethingcan’tbeboth“work”and“life”at thesametime.Howev-er,blending is tomix inseparably together.Whereas balance is the counterpoising ofseparate things,blending is the integrationof those things.6 Work-life blending is keytotippingtheframeofthenatureof‘work’.IthasenabledmetowritethisReviewinamorepersonalandwide-rangingstylethantheusualacademic,UNorcorporateoutletsIcanuse.Bloggingoften involvesawork-lifeblend,includingmyown(www.jembend-ell.com).

Thisblendingrelatesalsotothethirdreasonwhycorporateresponsibilityeventsand networks are a site of frame tipping.They bring together people who have aninterest in thestateof theworld, andwhotherefore have a strong social connection.Suchpeopleoftenmeetintheirleisuretime,asillustratedbythegrowthofvibrantsocial-professionalnetworksofpeopleconnectingoncorporateresponsibilityaroundtheworld.Fromtheoneoftheearliestsocialnetworkson this topic,CSRChicks,whichnowhasthousandsofmembers, to “CSRGeneva”,

6 http://managetochange.typepad.com/main/2006/09/blending_or_bal.html

launchedinmid�006andalreadywithover�00 members who attend breakfasts, din-ners and after-work drinks themed on dif-ferent aspects of corporate responsibility,thisareaisextremelysocial.Thisreinforcesthe ideaofourprofessionnotbeingsepa-ratefromoursenseofselfandallowsdis-cussionsup,downandacrosshierarchies.Itprovides‘socialproof’topeoplethattheyarepartofamovementthatseesanddoesbusinessdifferently.

Changing Frames in 2006

Changes in basic assumptionsabout thenatureandpurposeof businessandworkwillhavemajorknockoneffectsforthebehaviourofconsumers,staff,inves-tors and regulators. The review discussesvariousexamplesofwherecognitiveframesin business, finance, accounting could betipping:thatcertainassumptionsaboutwhatthosefieldsare,whattheyinvolve,andwhatit means to be professional within them ischanging, in ways that have wide implica-tions.

Changesinthediscoursearoundthefinancialservicessectorareparticularlyim-portant. In thesection ‘ReframingFinance’we describe how a plethora of initiativessuch as The Marathon Club, EnhancedAnalytics Initiative(EAI)andUNPrinciplesforResponsibleInvestment(UNPRI)areto-getherhelpingreshapewhatfinanceprofes-sionals understand as being material andrelevanttoonesfiduciaryduty.

Also important is theemergenceofapositiveconnotationtotheenvironmentalchallenge of consumption. In the section‘ConsumingTruths’wedescribehowfindingnew pathways for social development thataresufficientlyresource-lighttobepossibleforamajorityoftheworld’spopulationoverthelongterm,ratherthantheminorityofafew generations of middle- to upper-classconsumers,isapro-poorvision.Inthesec-tions ‘Who’s Leading Hu’ and ‘A DifferentPath’wedescribehownewvisionsofsus-tainable development are arising in China


INTRODUCTION

andIndia.Withtheright leadership,devel-opmentneednotdependonriskssuchascheapoil,inequalitiessuchaspoorpayandconditions,andthedisruptionofruralcom-munities’ livelihoods. As Rajesh Sehgal,SeniorLaw&PolicyOfficeratWWF-Indiaexplains, “Indian companies can becomeleadingexportersofandinvestorsinsustain-ablegoodsandservices,whilstemergingaskeyactorsinpromotingaproactiveinterna-tionalsustainabledevelopmentagenda.”

Whether this will lead to a tippingpoint in the way Asian nations generallyviewandpursue ‘development’ iscurrentlyunknown. A counter process of reframinghasbeenunderwayforsometime,withtheshift to individualismandmaterialismmostclearly illustrated in�006by theeconomicboom inVietnam,described in thesection‘Capitalism’sRisingStar’.Theenvironmen-tal and social strains of economic boomsacrossAsiacouldbringthingstoagrindinghalt,aswarnedbyMiraKamdarinherbook‘Planet India’.7 The implications forcorpo-ratecitizenshiparethatcompaniesandin-vestorsneedtoassesshowtheyarehelp-ing or hindering the right frameworks andincentivesforinnovationanddeliveryofthebusinessmodelsneededinaresource-con-strainedfuture.Ratherthandoingbusinessas usual, with some social and environ-mental improvements, the scale, urgencyand depth of the sustainability challengerequires companies to engage with otheractorsinsocietytopromotegovernanceforsustainability.

In the recentpastprogressivepeo-ple in business, government and civil so-ciety have been uncomfortable about theethicsof ‘socialengineering’publicvalues.Thisisbecauseitseemstogoagainstthespirit of recognizing people’s dignity asequal people, which underlies democracyandhumanrights.That isahugemistake.Weareallsociallyconditioned.Everyyear

7 Planet India: How the Fastest Growing Democracy IsTransformingAmericaandtheWorld(Hardcover)byMiraKamdar(2007http://www.amazon.com/Planet-India-Fastest-Democracy-Transforming/dp/0743296850

billions are spent on marketing advertise-ments,publicrelationsandlobbying.Thisisdone to influencepeople to spendmoney.In doing so they feed frames such as de-sire, status and materialism. It is becausewehave leftcompellingmasscommunica-tionstoinstitutionsthatpursuenarrowself-interests that we have the public attitudesweseetoday.Thechallengeistohelpmakepeopleconsciousofthesocialconditioningprocesses,toreducethosethataredamag-ing,andtopromotethosethatarebeneficialtopeoplewithintheircommunities.Conse-quentlysomeorganizations,suchasWWF,havebeencallingoncompaniesto‘talkthewalk’,byusing theircommunications func-tionsofadvertising,publicrelations, lobby-ing and investor relations to articulate thetypeofeconomyandsocietyweneed,andtheinnovationsinpublicpolicyweneedtogetthere.

From Environmentalism to Societal Growth

Likemanyestablishedorganisationsin the environmental movement WWF issomewhat beset by its history.As GeorgeLakoff, explains, “environmentalists haveadoptedasetofframesthatdoesn’treflectthe vital importance of the environment toeverythingonEarth.Theterm“theenviron-ment” suggests that this is an area of lifeseparate from other areas of life like theeconomyandjobs,orhealth,orforeignpol-icy. By not linking it to everyday issues, itsoundslikeaseparatecategory,andalux-uryindifficulttimes.Wilderness:aplaceforthoseinBirkenstockstogohiking.”Environ-mentimplieswhatisaroundusnotwhatwearepartof.Words likeprotectionandcon-servationaretheoppositeofpositivewordslike freedomand change. What is neededisapositivevision forpeopleandsociety:“prosperity,security,guilt-freeluxury,health,a sense of progress and meaningful hopethatthefuturewillbebetterthanthepast.”8ThecominglaunchofOnePlanetLivingin

8 Alex Steffen,Why Framing isWorldchanging,April 1,2005,http://www.worldchanging.com/archives/002459.html


INTRODUCTION

the UK in �007, is one example of an at-temptbyamainstreamenvironmentalgrouptorisetothischallenge.9

Lakoff’sanalysissuggestsweshouldexaminesomeofthedeepestframesinso-ciety.Conceptssuchas ‘economicgrowth’arepowerfulinshapingthinking,policyandpractice.‘Economic’impliesefficientandim-portant,and‘growth’impliesgoodandnatu-ral. Much analysis suggests that a certainamount of decoupling of economic growthwithresourceconsumption ispossible,butnotentirely,andsoonlyasmallamountofeconomic growth will probably be sustain-able in the long term. The challenge is totherefore refocus on what we want fromeconomy, as a society. Terms like ‘greengrowth’ would not challenge but actuallyreinforce the dominance of the economicgrowthframe,asitimpliesgreeneconomicgrowth.Instead,weshouldarticulateanewvisionof ‘societalgrowth’ - the increase inwellbeing of all life affected by a society.Some of the deepest ideas in society areshown in Figure 3, with some of the keyframe-changesthatweneedtoworkontoenablethetransitiontoamorejustandsus-tainableworldshowninFigure4.

Many people have a ‘block’ whenit comes to the word ‘environment’, suchas some developmentalists from the glob-al South. To them, environment evokes a

9 http://www.wwf.org.uk/oneplanetliving/

frameof imperialistsprotectingwildlifeandwildernessat theexpenseofpoorpeople.It is important to keep ones audiences inmind when considering what frames needtobetipped.Havingsaidthat,thedeepestframethatneedstippingisourstoryofex-istence:whywearehereandourrelation-shiptoeverythingaroundus.ThinkerssuchasThomasBerry10andErvinLazlo11pointtoaworldviewwherewearenotseparatefrom‘nature’butawonderfulexpressionofnature’s,and theuniverse’s,abilityand in-tentiontoevolvethroughevergreatercom-plexity towards consciousnessof itself.Bybringingnewinsighttotheologyandtothenaturalsciences,respectively,theypointtoafuturewherehumanpurposecanbefreedfromthedogmasofreligiousinstitution.

Global Purpose

Thepowerofframes,andtheneedto work on deep frame change, poses achallenge to thoseorganizationswemightassume are working towards the publicinterest. - namely nonprofits, charities or

10 The Great Work: OurWay into the Future, ThomasBerry, 2000, http://www.randomhouse.com/catalog/display.pperl?isbn=9780609804995

11 Scienceand theAkashicField:An IntegralTheoryofEverything (Paperback)byErvinLaszlo (2005)http://www.amazon.com/Science-Akashic-Field-Integral-Everything/dp/1594770425


INTRODUCTION

nongovernmentalorganizations(NGOs).Inmost cases their strategies and work pro-grammes are failing the meet the depth,scale and urgency of the challenges wefacetoday.Duetoconcernsaboutupsettingexisting donors, and misplaced notions ofprofessionalism such as the idea an NGOshouldsticknarrowly to thetextof itsmis-sionratherthanthevaluesfromwhichitde-rivesandgetsanimation today,and that itshoulduselinearmodelsforrelatingactiontoimpacttojustifyitsbudgetingratherthanrecognizinghowsystemicchangemightre-quirenewmodesofevaluation,mostNGOsonly work on tipping frames in minor andmarginalways.AsIarguedinmyreportfortheUNonNGOaccountability,internationalcivilsocietyorganizationsmustnotapeoldnotionsofbusinessprofessionalism,butde-velopvisionsofexcellence thatareappro-priatetotheirwork,andcometoagreaterunderstandingof theircommonglobalpur-pose, in order to combine their efforts fordeeperchange.12

The new philanthropy from the 30-somethingdotcombillionairesmightshakethis charity mentality from mainstreamNGOs, if they chose to engage. So if youareoutthere,Pierre,Jeff,Sergey,Larry,Da-vidorJerry...wearewaiting.

Watchingdevelopmentsincorporateresponsibilityduring�006suggeststhatpeo-ple’sdeepestassumptionsaboutbothbusi-nessandworkcouldbechanging incitiesaroundtheworld,withmajorimplicationsforfuturecompetitiveness.Amoresubtleshiftthanthewidelyreportedgrowthinentrepre-neurialismacrossAsia,itisnonethelesssig-nificant.Itisashifttowardsmoralmarkets.Althoughmoreresearch isrequiredonthenatureof thisshift, itseemstobeenabledbytheblendingworkandlife,businessandpublic purpose, news and entertainment.Although important, it is not the dominanttrend in many parts of the world, such as

12 Debating NGO Accountability, 2006, Jem Bendell,UN-NGLS. http://www.un-ngls.org/site/article.php3?id_ar-ticle=�0�

therapidlyemergingnations.Ifwewanttoendpovertyandprotecttheplanetwehavetomake it thedecisive trend.Althoughwecan’t legislate forpersonalmorals,wecanlegislate to create market frameworks andincentivesthatsupportmoralbehaviour.

Ifthereisasilverliningtothecloudsofclimatechange,itmightbeinthewayitwakesusuptoourmoralresponsibilitiesaspartoflifeonEarth.

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FOOD FIGHTFirst Quarter 2006

ByJemBendellandShilpaShah

Food is oneof the most basicnecessitiesoflife.In�006 an estimated800 million peopleare suffering fromunder-nourishmentandmorethan5mil-lion children will dieasaresultofunder-nutrition. The 33rdAnnual Session ofthe UN’s StandingCommitteeonNutri-tionconvenedinGe-neva in March to consider the problem ofmalnutrition.For thefirst time thisnetworkofgovernments,UNagenciesandnon-gov-ernmental organisations focused on ‘over-nutrition’ as well as under-nutrition. Theirconcludingstatementnotedthat‘Childhoodobesity isbecominga recognizedproblemeven in low income countries. More thana billion adults worldwide are overweight,of which 300 million are obese.’1 Obesityincreases the likelihood of succumbing tonon-communicablediseasessuchasdiabe-tes,heartdiseaseandcancer.Thesecon-tributeabout47%oftheburdenofdiseasearoundtheworld.�300,000peoplearere-portedly eating themselves to death everyyear in the United States.3What is new ishow it isaproblem in lower-incomecoun-tries.Withone in threemenoverweightorobese,andoneintwowomen,obesitylev-elsinSouthAfricaarenowthesameasin

1 www.unsystem.org/scn/Publications/AnnualMeeting/SCN33/33rd_session_participants_statement.htm

� InternationalAssociationfortheStudyofObesity,‘Globalobesityepidemicputtingbrakesoneconomicdevelopment’,press release, 2004; www.globalnews.idf.org/2004/11/obe-sity_epidemi.html.

3 US Food and DrugAdministration, ‘Overweight, obesitythreatenUShealthgains,FDAConsumermagazine,March/April2002;www.fda.gov/fdac/features/2002/202_fat.html.

the US.4 China already has 90 millionobese people, with �00 million predict-ed within a decade.5 Professor Philip James,chairofan InternationalObesityTaskForce,says ‘childhoodandadoles-centoverweightandobesityalreadypres-ent massive problems ... in many otherpartsof thedevelopingworld,whicharealreadyonthefasttracktoamassiveex-plosionintype�diabetes.Theeconomicburden from this will act as a brake ondevelopment,whichdependsonhavingahealthyandproductivepopulation.6

The reasons for this explosion inobesityincludephysicalactivityandfoodin-take.Migrationintocitiesisresultinginless-activelifestyles,whilegrowingconsumptionofprocessed foods is leading tohigher in-takeofsalt,sugarandfat.Todaysupermar-kets share over 50% of global food sales,andprocessedfoodsalesnowaccountforaboutthree-quartersofthetotalworldfoodsales.7This market is being consolidatedin thehandsof fewercompanies,with thelargest50accountingforalmost30%oftheglobalpackagedfoodretailsales.8 This isnot a phenomenon limited to the industri-alisedworld.InChina,forexample,foodin-dustrysalestookofffromunder100billionyuan(€9.2billion)in1991towellover400billionyuan(€37billion)justtenyearslater.9

4 AniaLichtarowicz,‘S.Africans“asfatasAmericans”’,BBC,19October2004;news.bbc.co.uk/2/hi/africa/3964693.stm.

5 ‘ObeseChinesenowtotal90mln,tohit200mlninade-cade’,ChinaView,18June2005;news.xinhuanet.com/eng-lish/2005-06/18/content_3101580.htm.

6 USFoodandDrugAdministration,op.cit.

7 USDA/Economic Research Department, NewDirectionsinGlobalFoodMarkets (2005);www.ers.usda.gov/publica-tions/aib794/aib794b.pdf.

8Euromonitor,�004.

9 ‘First Chr Hansen food colour plant in China opens’,DairyReporter.com, 19 January 2005; www.dairyreporter.com/productnews/news.asp?id=57427.

Around the world, corpora-tions increasingly comprisethe food chain. From themaxim‘wearewhatweeat’,whether we are fat or thin,healthy or sick, hungry orwell nourished, hyperactiveor lethargic, corporationsareinvolvedinshapingwhatandwhowearemore thaneverbefore.

Such power com-mands attention. Civil soci-etyhasoftenquestionedtheroleofcorporationsinharm-ing our nutrition. Chemicalflavoursand fast-food fats,madcowsandbaby-milk marketing—the issues may dif-feraroundtheworldbutacommonconcernhasbeen theuseandabuseof thepowerthatcorporationshavetodayandthevary-ingindependenceofpublicinstitutionsfromthat power. In the past three years atten-tionontheroleofcompaniesintheobesitypandemichasgrown.Companies involvedintheproductionandmarketingofproductscontaininghighlevelsofsugarandfathavebeencriticisedforcomplicityinthepandem-ic. Legal challenges against fast food andfizzydrinkcompaniesledFortunemagazineto ask, ‘Is fat the next tobacco?’ 10Popularmediaalsopickedupontheissue,highlightsincluding thefilmSuperSizeMe, inwhichthedocumentarymakerMorgan Spurlock wreckedhisbodybyeatingnothingbutMc-Donald’sfastfoodforamonth;andcelebritychefJamieOliver’sTVseriesonschooldin-nersintheUK.Theresponsefromthefoodindustry was mixed. The sugar industry’stradeassociationslobbiedhardattheWorldHealthAssemblytopreventanyagreementbetween governments on adopting newregulationstoreducesugarcontent.11Manycorporaterepresentativesarguedthat food

10 RogerParloff,‘Isfatthenexttobacco?ForBigFood,thesupersizingofAmericaisbecomingabigheadache’,Fortune,jcgi.pathfinder.com/fortune/articles/0,15114,409670,00.html.

11 ‘WHO attacks US sugar lobby’, BBC, 22 April 2003;news.bbc.co.uk/1/hi/world/americas/2966187.stm.

consumption is a question ofindividual choiceand respon-sibility, and that, as multiplefactors lead to obesity, spe-cificfoodproductsshouldnotbesingledout for regulationsonsalt,sugarorfatcontent.

Afocusonpersonalrespon-sibility led to responses suchas obesity reports on pupilsby their schools.12 However,the argument that a principleof personal choice and re-sponsibility should determinepolicy responses was some-whathollowinrelationtochil-

dren bombarded by advertising. Both the‘cognitiveframes’ofbothrightandleft—the‘strict father’ and ‘nurturing parent’ mind-setsdescribedbyGeorgeLakoff13—haveaspecial place for intervening on thebehalfof children’s well-being. No surprise, then,that since �005 a major shift in percep-tions in NorthAmerica and Europe seemstohaveoccurred,withtheroleofthemassmedia and food companies in influencingchildren’sconsumptionchoicescomingintofocus. In France the government bannedvendingmachinesfromschools,andtheUKgovernmentannouncednewstringentrulesonfoodsoldinschoolstobeintroduceddur-ing�006.The food industryalsobegan torespond in more positive ways. Drinks gi-ants Cadbury Schweppes, Coca-Cola andPepsiCoagreedadealwith theWilliamJ.

12 ‘US pupils get obesity reports’, BBC, 12August 2003;news.bbc.co.uk/1/hi/education/3143991.stm.

13 GeorgeLakoff,Don’tThinkofanElephant.KnowYourValuesandFrametheDebate:TheEssentialGuideforPro-gressives(WhiteRiverJct,VT:ChelseaGreen,�004).


FOODFIGHT FirstQuarter�006

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Civil societyhasoftenquestionedtheroleofcorporationsinharmingournutrition.



ClintonFoundationandtheAmericanHeartAssociation (AHA) so that only unsweet-ened juice, water and low-fat milks willbe sold in elementary and middle schoolsacross the US, with diet drinks allowed inhighschools.14Thevoluntaryactionofthesecompaniesmaybepartlyexplainedbyade-siretoappearasresponsibleadult-typeor-ganisationscaringforthewell-beingofchil-dren, and therefore reducing the extent ofsocial concern and regulatory interventionmorebroadlyintermsofthemarketingandsaleofproducts tochildren, thecontentofproductsthemselvesandtheirconsumptionbythewiderpopulationofadults.However,asschoolsarenodes,or‘connectorpoints’insociety,soit isprobablethatmorefami-lieswillbediscussingobesityandfastfoodandsothepotentialforideasandpracticestochangeisthere.

Rather than being defensive, foodcompaniescouldmobilisetheirmarketposi-tioninsupportofnutritiongoals.Therearenow numerous examples of corporationsbecominginvolvedinfood-andnutrition-re-latedwork,includingpartnershipsaimedatdeliveringfood,fortifyingfood,andadvocat-inghealthyeating.The ‘Moving theWorld’partnershipbetweenTNT,anexpressdeliv-eryandlogisticsservicesfirm,andtheWorldFood Programme (WFP) was launchedin�00�,with theaimofsupportingWFP’sfight against world hunger through knowl-edgetransfer,on-the-groundlogisticalsup-portandadvocacywork.TNT’sin-kindandfinancial commitments (more than US$12millionin�005)havegenerated�7projectsinsome60countries,mostrecentlyalsointsunami-affectedareasofSouth-EastAsia.Notbeinga foodcompany itself,TNThasless internal issues to consider in relationtofood.Somefoodcompanieshave,how-ever, alsobegunaddressing these issues,illustrated by their participation in the new‘Healthy Eating and Active Living GlobalPartnership’ (HEAL).This initiativeaimsatfacilitating business action as ‘part of the

14 ‘DealwillslimUSschooldrinks’,BBC,3May2006;news.bbc.co.uk/1/hi/world/americas/4970044.stm.

solutiontothemassiveincreaseinchroniclifestyle-related diseases around the worldlinked to obesity, poor diets and a lack ofphysical activity’.15 In March they co-pub-lishedareportprofilingcompaniesthatarebeginning to takehealth issuesmoreseri-ously and the business benefits of doingso.16

Yetprogressissufficientneitherforpublic health nor for managing strategicthreats and opportunities facing the foodindustry, according to a report publishedin the same month by Ethical InvestmentResearch Services (EIRIS). ‘Our researchrevealed little evidence of obesity-relatedimprovement targetsandkeyperformanceindicators from the multinational food andbeverage firms we analysed’, said reportauthorandEIRISresearchanalystHeleenBulckens. ‘Food and drink producers arewakinguptothebusinessrisksassociatedwith obesity, but significant challenges re-main.’17

Thosechallengesaresystemic.Morevoluntaryactionfromcompaniesinsupport-ing changes in behaviour, and improvingthe nutritional content of their products, isneeded and welcome. However, complex

15 www.iblf.org/activities/heal.jsp

16 IBLFandWBCSD,TheBusinessofHealth:TheHealthofBusiness.BuildingtheCaseforHealth,SafetyandWellness(2006);www.iblf.org/resources/general.jsp?id=123744.

17 AnthonyFletcher,‘Foodindustrynotresponsivetoobe-sity, claims report’, Food Navigator, 6 March 2006; www.foodnavigator.com/news/ng.asp?n=66217-kraft-cadbury-coca-cola.

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that personal choice and respon-sibilityshoulddeterminepolicyre-sponses was somewhat hollow inrelation tochildrenbombardedbyadvertising.

argument


social, economic and cultural factors influ-encepeople’snutritionandphysicalactivity.Toachievewidespreadpublichealthbene-fits,andrelatedbenefitsforeconomicactiv-ity,willrequireanopenassessmentandtrialofarangeofpublicpolicytoolstoinfluencepatterns of food production and consump-tion. Itwouldbesensibleforcompaniestostartplanningnowforthishealthierfuture.



FAIR FIGHTFirst Quarter 2006


Not only are food and drink impor-tantforwhattheycontainbutalsothewaythey are produced. Controversy over thelaunchofNestlé’s first product certifiedas‘Fairtrade’ in theUK inOctober�005con-tinued into�006.Theassociationbetweenthe company awarded the ‘most blatantcaseof corporate irresponsibility’ awardatthePublicEyeawardsinDavosinJanuary�00518andthegreenandblueFairtradela-belraisedimportantquestionsaboutthefu-tureofthefairtrademovement.

Theresponsestotheintroductionof‘NescaféPartners’Blend’,aFairtradebrandbyoneoftheworld’sfourlargestcoffeeroast-ers,wereamixedbag.SomecampaigningNGOs were sceptical of the Fairtrade cer-tification of one product out of over 8,500Nestlébrands,affectingtheworkingcondi-tionsofonlyasmallringfencedproportionofthe threemillioncoffee farmersdependentontheSwissfoodgiant:theWorldDevelop-mentMovement,basedinLondon,argued,‘ifNestléreallybelievesinFairtradecoffeeit will alter its business practices, lobbyingstrategies and radically overhaul its busi-nesstoensurethatallcoffeefarmersgetafairreturnfortheirefforts’.19

It was argued that Nestléis using the Fairtrade label as a shield todeflect criticism about its contribution tothe suppression of world coffee prices (asflagged up byOxfam in 2002)�0 its labourstandards and its aggressive manner ofmarketing baby-milk substitutes in low-in-comecountries.

18 ‘And thewinner is ...’,Center forMediaandDe-mocracy(1February2005);www.prwatch.org/node/3240.

19 World Development Movement, ‘Statement byWDMonNestléFAIRTRADEPartners’BlendCoffee’,pressrelease, 7 October 2005; www.wdm.org.uk/news/presrel/current/nestle.htm.

�0 Oxfam, ‘Mugged: Poverty in Your Coffee Cup’(2002), www.oxfam.org.uk/what_we_do/issues/trade/mugged_coffee.htm.

However, Harriet Lamb,DirectoroftheFairTradeFoundation, which isresponsible for award-ing the Fairtrade label intheUK,wasenthusiasticabout the development,declaring‘thisisaturningpoint for us and for thecoffee growers’.21 Ethi-calCorporationcolumnistMallen BakerarguedthatNestlé had been ‘unfairlyroasted’��by thesecriticsand that a breakthroughoftheFairtradelabel intothemainstreamshouldbewelcomedbyall.

TheFairtradelabel isacertificationawardedtoproductswhoseproductionandform of trade adheres to standards set bythe Fairtrade Labelling Organisation Inter-national (FLO-I), an umbrella organisationwhich supports licensing of products forsale in 19 countries including theUS, Ja-panandanumber inEurope.Certificationrequiresthatproducersintegratearangeofenvironmental,labourrightsandcommunitydevelopment interests,andthat thosewhopurchase from such producers offer moresupportive and stable contracts at pricesusuallyabovemarketrates.��Producersofcoffee,tea,sugar,bananasandotherprod-uctsinlow-incomecountriesaregivenasta-ble,sustainablepricefortheirproductsandinvestment into community developmentprogrammes.TheFairtrade labelalsoactsas a signal of ‘ethical’ credentials to con-sumersonsupermarketshelves;bothendsof the supply chain are addressed by thismovement,whichhasattractedthesupport

21 Fairtrade,‘PressstatementonlaunchofNescafépartners’ Blend’, 7 October 2005; www.fairtrade. org.uk/pr071005.htm.

�� Mallen Baker, ‘Nestlé: unfairly roasted overFairtrade’,EthicalCorporation,7November2005;www.ethi-calcorp.com/content.asp?ContentID=3963.

�0 TippingFrames|WorldReview�006

FAIRFIGHT FirstQuarter�006

‘theallureofthemainstreamis largely illu-sory.Tributariesdonot change its course;theydisappearintoit.’29Whetherandhowtoengage powerful actors in social systems,and to focus on incremental but tangiblechangeormoretransformativebutoftenun-likelychange,hasbeenacentraldilemmaforsocialactorsthroughouthistory,andde-bates around the fair trade movement areonerecentillustration.

Themorebroadyourview,themorecomplicatedandchallengingthisbecomes.OverValentine’sDay�006,thoseromanticsgivingtheirwell-informed,‘ethically’mindedsweethearts Fairtrade roses from Kenyamay well have been rebuked for not con-sideringtheenvironmentaldamagecausedby thecut-flower industryaround theLakeNaivashaarea.TheintroductionofFairtradecertificationhasseenincreasestoworkers’wages and an expansion of businesses,but local ecosystems and water suppliesare being put under severe strain by theincreased production and the migration ofworkers from northern parts of Kenya, at-tracted by the higher wages.30 In addition,sweethearts may have turned their nosesupattheamountofpollutioncausedbyfly-ingflowersinfromanothercontinent,giventhegrowingimpactsofclimatechange.

The growth in popularity of ‘fairertrade’initiatives,suchasEquitrade31choco-latefromMadagascarandJustChangeteafrom India,3� which market themselves asprovidingbetter,morestableconditionsthantheFairtradebrandforonlysmallandmedi-

29 DavidRansom,‘Fairtradeforsale’,NewInterna-tionalist 377 (April 2005); www.newint.org/issue377/essay.htm.

30 Jeevan Vasagar, ‘How Kenya is caught on thethornsofBritain’s loveaffairwith the rose:Risingdemandfor flowers leads to trade-off between economy and envi-ronment’,TheGuardian,13February2006;www.guardian.co.uk/frontpage/story/0,,1708492,00.html.

31 ChocolateTradingCo.,‘Equitably-TradedChoco-late: 100% Pure Malagasy’; www.chocolatetradingco.com/special.asp?ID=17.

3� StanThekaekara,‘LinkingHands’,TheGuardian,8 March 2006; society.guardian.co.uk/societyguardian/sto-ry/0,,1725463,00.html.

ofbusinessandcampaigningNGOsalike.

While Fairtrade products make uponly a tiny percentage of their respectivemarkets, recent years have seen a stronggrowthintheirpopularity.InEurope,thenetretail value of sales of Fairtrade products�3inover79,000outlets,including50super-marketchains,grewto€660millionin2005,achievinganincreaseof154%onsalesattheturnofthecentury.�4Over5millionpro-ducersand their families inLatinAmerica,AsiaandAfricaaresaid tohavebenefitedfromFairtrade relationships�5—thenumberofcertifiedproducersisgrowingrapidly,in-creasingby�5% in theyear�005alone.�6ThegreenandblueFairtradelogoissuedbytheFLO-Iisnowrecognisedby50%oftheadultpopulationintheUK.�7

‘Fairtrade Fortnight’, an annualawareness-raisingeventintheUKinMarchwasmarredthisyearbypublicitysurround-ingtheNestlécontroversyandalsobynewsthatMcDonald’s,anothercommontargetofconsumer boycotts, is now publicising thesales of Fairtrade coffee in 650 US east-coaststores.�8Theissueisoneoftrust;in-formedconsumersandactivistswhohavesupportedthegrowthofthefairtrademove-mentand theFairtradebrand feel that themovementisbeingco-optedbythosepow-erfulcompanies that itseeks tochallenge.New Internationalist magazine argued that

�3 Seewww.fairtrade.org.uk/suppliers_become_a_li-censee.htm#principles.

�4 FLO, IFAT,NEWS!andEFTA, ‘FairTrade inEu-rope �005: Facts and Figures on Fair Trade in �5 Euro-peanCountries’ (2006);www.ifat.org/downloads/marketing/FairTradeinEurope�005.pdf.

�5 FLO,IFAT,NEWS!andEFTA,‘TowardsacoherentFairTradePolicy:FairTradedemandstoEuropeandecisionmakers’ (April 2005);www.ifat.org/downloads/advocacy/To-wardsaCoherentEUFairTradePolicyApril%�0�005.pdf.

�6 Fairtrade Labelling Organisations International,‘DeliveringOpportunities:AnnualReport2004/2005’;www.fairtrade.net/sites/news/FLO_AR_2004_05.pdf.

�7 www.fairtrade.org.uk/pr270505.htm

�8 TransFair USA, ‘TransFair USA Joins Oxfam inWelcomingMcDonald’sRolloutofFairTradeCertifiedCof-fee’,pressrelease;CSRwire,31October2005;www.csrwire.com/article.cgi/4622.html.


FAIRFIGHT FirstQuarter�006

umproducers,reflectsthegrowingmistrustmanyconsumersfeeltowardsFairtrade.

But alternatives to Fairtrade havenot all been welcomed in this way. Theplethora of copycat ‘fairly traded’ brandsandstandardssupportedbybigbusiness—such as Kraft’s ‘Sustainable Development’coffeebrand,produced inconjunctionwiththeRainforestAlliance initiative—springingupon supermarket shelves in theUSandEuropehavealsoledtoconcernovercon-fusion between different ‘ethical’ products.Theseotherbrandsmaynotmeetthestan-dardssetbytheFLO-Iorupholdelementsof empowerment that the Fairtrade brandseeks in relationships with producers, butare competing with Fairtrade products toproducethebrightesthalotoattractconsum-ers. This echoes the banana disputes be-tweentheRainforestAllianceandFairtrademovementduringthe1990s,whichalsore-volvedaroundthedilemmaofwhetheronestepforward,abetterbanana,washelpingorhinderingaleapforwardtowardsasus-tainableandresponsibleone.

The question of governmental in-volvementinregulationofthe‘ethical’mar-kethasarisen, inorder tostandardise thecertificationprocessandreduceconflictbe-tween the numerous emerging standards.In France, Fairtrade products are certifiedwiththeMaxHavelaarlabel,butanumberofprivatecertificationprocesseshavealsoemergedoverthepastfewyears.Asystemof definition and qualification of Fairtradeproducts is expected to be introduced by

the French government in �006,33 aiming tostandardise the meaning of ‘Fairtrade’ and re-duceconsumerconfusion.Thismovehasbeenopposed by Max Havelaar as regulation wouldmean the lowering of ‘fairness’ standards andwould also detract from the awareness-raisingandlobbyingaspectofFairtrade.

Similarly, regulation of the increasinglypopular market for organic food produce hasraisedconcernsabouttheloweringofstandardsofcertification.TheSoilAssociation,oneof thecertificationbodiesoforganicproduceintheUK,arguedthat,asdemandfororganicproducecon-tinuestoincrease,‘productintegrityispotentiallythreatenedbydilutionofstandardsworld-wide’.34TheEuropeanCommissionannouncednewEU-wideregulationsgoverning thecertificationandlabellingoforganicproduceinDecember�005,which will ‘allow a certain amount of flexibility’in production methods.35 Friends of the Earth(UK) have taken issue with the inclusion of aclausethatallowsproductsthatcontainasmallpercentageofgeneticallymodifiedorganismstobe labelled as organic, arguing that economicconcernsarebeingprioritisedaheadofhumanhealthandprotectionoftheenvironment.36

In January the Just Change (India) Producer

33 See Fair Trade Organisation, ‘Almost Famous: FairTradeProducts’,11July2005;BusinessinDevelopmentNetwork,www.businessindevelopment.nl/article-1012.6845.html.

34 Soil Association, ‘Certification Equivalence’,5 December 2005; www.soilassociation.org/web/sa/s aweb . n s f / 8 48d689047cb466780256a6b00298980 /289589ffa17a49ab802570ce005ca208!OpenDocument.

35 European Commission, ‘Organic Food: NewRegulation will improve clarity for consumers and farm-ers’, press release, 21 December 2005; europa.eu. int / rapid/pressReleasesAct ion.do?reference=IP/05/1679&format=HTML&aged=0&language=EN&guiLanguage=en.

36 Friendsof theEarth, ‘EUCommissionallowsGMcon-taminationoforganicfarming’,pressrelease,22December2005;www.foe.co.uk/resource/press_releases/eu_commission_allows_gm_co_22122005.html.

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Supporters of thefairtrademovementandtheFairtradebrandfeelthatthemovementisbeingco-optedbythosepowerfulcom-paniesthattheyseektochal-lenge.

�� TippingFrames|WorldReview�006

Company Ltdwas launchedin Tamil Nadu,India.The com-pany is thebrainchild ofStan and MariT h e k a e k a r a ,who have beenworkingwiththe

Adivasi (‘original inhabitants’ or tribal peo-ple)communitiesoftheNilgiriHillsinIndiasincethe1980s.ItisthelateststepforJustChange,anorganisationpromotingalterna-tivetradingmechanismsthatwillbenefitpoorcommunities inbothhigh-and low-incomecountries.‘Wetrytoachievethisbydirectlylinking poor communities andencouragingthemtotradeamongthemselves,’explainedStan ThekaekaratoJCC.

Thekaekarafoundthat,inspiteofthesuccessfulleapfromlabourerstoproducers,theAdivasishehasworkedwithfoundtheywerecatapultedfromalocalwageeconomyinto a global market economy that is ex-tremelyvulnerable,duetothemarketforcesdetermining thepriceof theirproduce.Forinstance, tea prices at the producer levelhave dropped to nearly half of what theywerefouryearsago.‘Ithasbecomeevidentovertheyearsthatthestrategyforpovertyreductionbasedonthetraditionalapproachofgainingcontroloverassetscannolonger,on its own, guarantee success,’ explainsThekaekara,whoisalsoatrusteeofOxfamGBandVisitingFellowatOxfordUniversity.‘Webelievethatlackofpowerandcontrolinmarketscontributessignificantly topovertyallovertheglobe.’

Thelaunchofthecompanyisthere-sultofconnectionmade in1994when theThekaekaras spent a month in the UK re-searchingcommunitywork.IntheUK,Stan

THAT’S JUST NOT FAIR!First Quarter 2006


andMarifoundlargenumbersoflong-termunemployed people almost completely de-pendentonsocialwelfare,livinginpocketsof extreme deprivation. In spite of govern-mentinvestmentsintotheseareas,thecon-ditionofthesecommunitiesdidnotimprovesignificantly.TheNewEconomicsFounda-tion(NEF)arguedthatthesituationinthesedeprivedareasofBritainissomewhatsimi-lartothoseoftheAdivasisinIndia,totheex-tentthat,despitepublicinvestments,muchofthemoneyleaksoutofthelocaleconomyintolargenationalandglobaleconomies.37

The Thekaekaras also noticed thatpoorBritons like their tea,andpaya rela-tivelyhighprice.AsthetribalgroupsinIndiagrowtea,sotheythoughtofmakingadirectlinktothebenefitofbothpoorcommunities,by establishing a co-operative of produc-ersandconsumers.Tradingbeganwiththehelpof theMatsonNeighbourhoodProject(MNP)inGloucester,whowereworkingwiththeresidentsofacouncilestate.TheAdiva-sisofGudalursendtheirteadirectlytotheresidentsofMatson,whopackageandsellitbothtotheirowncommunityandtootherlocalcustomerssuchastheCouncil.

This initiative is prototyping a newway of doing business. By sharing theownershipof thevaluechain,and therebyspreadingtheriskalongthatchain,thecon-sumersandproducersinvolvedaregaininggreater control of their participation in themarketeconomy.Producerscanretainown-ershipovertheirproductallalongthemar-ketchainandcanthereforebenefitfromthefinalretailvalueoftheproduct.Consumerscanworkdirectlywithproducerstoestablishapricefor theproduct that isbasedondi-rectcommunicationandhopefullyprinciples

37 BernieWardandJulieLewis,PluggingtheLeaks(London: NEF, 2002; www.neweconomics.org/gen/z_sys_publicationdetail.aspx?pid=125).

TippingFrames|WorldReview�006 �3

THAT’SJUSTNOTFAIR! FirstQuarter�006

ofequity,ratherthanfluctuatingandspecu-lativemarkets.

Itisaprototypeofanewapproachtobothbusinessandsocialchange.Ifcommu-nitiesacrosstheglobecouldlinkuptotradedirectlywitheachother, theycould formasocialchainwhichcouldbeapowerfulforcefor economic, social and political change.‘Peopleneedtobelieve inthemselvesandin their capacity to take control over theirowneconomy,’statestheJustChangeweb-site.38Their work recognises the problemsandpotentialofdisadvantagedpeopleandcommunitiesnomatterwhethertheyliveinhotorcold,richorpoorcountries.Assuchithintstowardsanewapproachtointerna-tionaldevelopmentwork,aswellasadiffer-entformoftrade.

Three broad concepts of more re-sponsibletradeareemerging.‘Ethicaltrade’describes the work of large companies,suchasthoseinvolvedinthe‘EthicalTrad-ing Initiative’, which focuses on improvingworkplaceconditions,butdoesnotyetad-dresspowerrelationsandrevenuedistribu-tioninvaluechains.‘Fairtrade’includesthesame concern for better workplace condi-tions, but also addresses the buyer–sup-plier relationship, as described above. Asthe consumer is asked to pay a premium,there isanelementofcharity to fair trade.TheJustChangeinitiativedoesnotinvolveapremium.Infact,thepricespaidbypoorconsumers can be lower than the marketprice,assavingsaremadethroughcuttingoutthemiddlemanandthepaymentofsur-plus to distant shareholders. The principleissolidarity,notcharity.Assuch,thissmallinitiative suggests a new form of solidaritytradingcouldemergeasanewparadigmforpeopleinterestedinworkingontradeforso-cialgoals.Wecouldcallit‘JustTrade’.Thepowerofnaming it thusmayarisebypro-vokingustoquestionwhatwehavehithertoassumediseither‘ethical’or‘fair’intheareaoftrade.

38 w w w . j u s t c h a n g e i n d i a . c o m / f r a m e s .asp?file=concept.htm&head=Concept

Just Change is the latest exampleof the forms of innovation possible as in-formationandcommunicationtechnologiesspread further for cheaper. Business-to-business(B�B)andpeer-to-peer(P�P)ap-plications may become sideshows to newcommunity-to-community (C�C) collabora-tioninshaping‘Globalisation2.0’byflatten-ingpowerhierarchiesonourplanet.39Ourglobalvillagemaybecreatingitselfavirtualvillagemarket.Ifsuccessful,intheyearstocomethebestteaintheWestmaybefoundonpoorcouncilestates,nothigh-classca-fes.

The emergence of Indian business

39 Theconceptof‘Globalisation�.0’isreferredtoinT.Friedman,TheWorldIsFlat:ABriefHistoryoftheTwenty-firstCentury(NewYork:Farrar,Straus&Giroux,2005).

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Three broad concepts

ofmoreresponsibletradeareemerging:Ethicaltrade,Fairtrade,andJustChange.’


INCREDIBLYINDIAFirst Quarter 2006


asaconfident,powerfulcompetitoron theplayingfieldofglobalcommercewascon-firmed by the prominence of Indian com-paniesandcultureatthe�006WorldEco-nomicForum inDavos inJanuary.FareedZakaria reported in Newsweek40 that ‘nocountryhascapturedtheimaginationoftheconferenceanddominatedtheconversationas India in�006’.Theomnipresentslogan‘Incredibly India: the Biggest DemocracyforGlobalInvestors’attemptedtowhisktheredcarpetfrombeneathChina’sfeet,asthepresenceoftheIndianbusinesspeopleandBollywood music and dancers dominatedtheconferencesandsocialevents.

SubsequentstatevisitstoIndiabyUSpresi-dentGeorgeBush,France’s JacquesChirac, Australia’sJohn Howard andSaudiArabia’sKingAbdullah to talkbusiness in Feb-ruary and March2006 confirmedIndia’s‘star’status.BritishForeignSec-retary Jack Straw

affirmedtheincreaseoftradewithIndiaasapriority for theUK in�006 inakeygov-ernmentwhitepaperlaunchedinMarch.41ItisbeingcourtedbyAmerica,forthepivotalrole itcouldplay innegatingChina’s likelydominanceinfuturedecades.

India’swell-educatedlaboursurplus,its booming internal markets and carrotsdangledtobusinesssuchastaxbreaks,tar-iffreliefsandexemptionsfromcertainlabour

40 FareedZakaria,‘IndiaRising’,Newsweek,6March2006;www.msnbc.msn.com/id/11571348/site/newsweek.

41 ‘India a global player: Jack Straw’, Times of In-dia, 30 March 2006; timesofindia.indiatimes.com/article-show/1470074.cms.

and environmental regulations in ‘specialeconomic zones’ across the country worktoattractforeigninvestors,justaspromisesofexoticspices,glitteringcolourandnoisyadventure entice tourists from all over theworld.Tesco,4�whichcontrolsof30%oftheUKgrocerymarket, isoneofthelatestbignamestobelookingtoexpandintotheIn-dianmarket.

Althoughhometooverabillionpeo-ple,India’s‘corporatewelfare’effortstoat-tractinvestmenthavebuilteconomicwealthon a narrow base, largely in New Delhi,Mumbai and the IT centre of Bangalore.Lookingbeyond theboomof foreign inter-estin�006,whichisunderpinnedbynewsofstrongeconomicgrowthof7.5%in�005,therestofIndiatellsadifferenttale.

Inacountryasvastanddiverseasthis,where17majorlanguages,22,000dia-lectsandalltheworld’smajorreligionsarerepresented,itisthewelfareandstandardoflivingofthe75%ofthepopulationthatliveinruralareasthatarereflectedinIndia’slowpositionof127outof177countries in the�005 United Nations Human DevelopmentIndex.43Over300millionpeopleinIndialiveonlessthanadollaraday.Waterscarcityisconsideredthemostpressingenvironmen-talissuefollowedbyairpollutionandlossofbiodiversity.Fourteenpercentofthepopu-lationstilldonothavesustainableaccesstosuitablewatersourceand�0%areunder-nourished.44Casteandgendercontinuetoplayasignificantrole indeterminingsocialstatusandlifestyle.

4� ‘Bharti,Tescoplanongrocerychain’,TimesofIn-dia,21March2006;economictimes.indiatimes.com/article-show/1457629.cms.

43 ‘Human Development Index’; hdr.undp.org/re-ports/global/2005.

44 ‘HumanDevelopment Index.CountrySheets: In-dia’;hdr.undp.org/statistics/data/countries.cfm?c=IND.


INCREDIBLYINDIA FirstQuarter�006

TheinfrastructureforgovernmentinIndiaisstretchedover�8states,eachwithitsowngovernancestructureandeachtypi-cally burdened with a history of corruptioncasesandacultureof inefficiency.Recenthigh-profileeffortsbythegovernmenttoad-dresswidersocialproblemsincludeananti-poverty deal, launched in February �006,whichaimstoprovideincomefor60millionrural households45 and a joint programmeimplemented with assistance from the UStoincreaseeffortstoeliminatechildlabour,announced in March.46 However, the an-nual total thegovernment spendsonpub-lichealthamountsto200rupees,orUS$4percapita.Abustlingcivil-societysectorat-tempts to fill the gap; for example, SEWA(Self Employed Women’s Association),47a trade union-based national organisationoriginating in Gujarat, continues to roll outhealth, education and food security pro-grammesassistingsomeofthepoorestru-ralcommunities.

As the prominence of Indian busi-ness has sky-rocketed, a parallel spotlighthas been focused on corporate social re-sponsibility (CSR) issues in the country.The perception of the role of corporationsin social concerns is said to be undergo-ingashiftawayfromthetraditionalideasofphilanthropy—inspiredbymodern interpre-tations of religious philosophies promotingcollectiveresponsibilityandthecompassionandleadershipshownbyMahatmaGandhi,GuruNanak,MotherTeresaandothers,set-tingupseparate‘foundations’48toaddressparticular health or education needs hasbeen a time-honoured premise of Indianbusiness.

45 ‘Indialaunchesanti-povertydeal’,BBC,�Febru-ary2006;news.bbc.co.uk/2/hi/south_asia/4671328.stm.

46 ‘Three-Fold Increase In Central Alloca-tion For Elimination Of Child Labour’, News @ In-dlaw.com, 16 March 2006; www.indlawnews.com/1F7F7C8ED30ECDE28D98165C05100005.

47 www.sewa.org

48 E.g.ModicareFoundation,www.modicarefounda-tion.org; Azim Premji Foundation, www.azimpremjifounda-tion.org.

ButtheprominenceofactivistssuchasauthorArundhati RoyandAmitSrivas-tavaofthecampaigngroupIndiaResourceCenterhasgrowninrecentyearsalongwithanawakeningtothenegativesocialanden-

vironmental impactsof the business op-erations courted bytheir government’s‘corporate welfare’programmes. EventhelatestmainstreamBollywood block-buster Rang De Ba-santi49 delivered aninspirationalmessageencouraging activ-ism against power-

ful corporate interests and corrupt politicalcollusion, albeit through song and choreo-grapheddance.

ThefutureofcorporateresponsibilityinIndiamustinvolveawidevarietyofpar-ticipants, from the high-altitude executivesinDavostothe low-casteentrepreneurs inGudalur.

Just as The Hindu newspaper de-

49 www.rangdebasanti.net


FIZZY FIGHTFirst Quarter 2006


clared ‘corporations collectively can makeIndiaabetterplaceforeverycitizen’inMarch�006,50campaignersworkingtoexposetheharmful impactsofCoca-Cola’soperationsonlocalcommunitiesinanumberofIndianstateshadbeensteppingupeffortsinIndiaand abroad. Over the past four years, is-suesofgroundwaterdepletionandcontami-nationandhighpesticidelevelsinproductshavebubbledtothesurface,leadingtotheclosureofaCoca-ColaplantinPlachimada,Kerala,inMarch�004andmakingthesoft-drinks giant’s name synonymous with thenotionofcorporateirresponsibilityinhouse-holdsacrossthecountry.

The release of Coca-Cola’s firstcorporate responsibility review in the UKinJanuaryanditsentryintotheUnitedNa-tionsGlobalCompactinitiativeweremarredby a series of high-profile actions againsttheworld’s largest brand name in the firstquarterof�006.

WhileCoca-Cola’sreportstatedthatthecompanyis‘puttingcorporateresponsi-bilityattheheartofourbusinessstrategy’,51Coca-Cola: The Alternative Report,5� pro-duced by London-based campaign groupWaronWant,focusedondroughtsandcon-taminated water supplies in Indian statesincluding Rajasthan, Uttar Pradesh andKerala,allegedtobecausedbyCoca-Colaplantsthere.

Thecompanywasnominated for a‘Public Eye’ award at the World EconomicForuminDavosforenvironmentalirrespon-sibility53 in January, just as the University

50 Prabhudev Konana, ‘Towards corporate socialresponsibility’, The Hindu, 9 March 2006; www.thehindu.com/2006/03/09/stories/2006030905431000.htm.

51 Coco-Cola,‘CorporateResponsibilityReview’;cit-izenship.coca-cola.co.uk/corporate_responsibility/cr_review.asp.

5� WaronWant,Coca-Cola:TheAlternativeReport(2006);www.waronwant.org/downloads/cocacola.pdf.

53 www.publiceye.ch/en/p10387.html

ofMichiganaddeditsnametothegrowinglistofUScollegesboycottingallCoca-Colaproducts. In February, court proceedingswere brought against the Indian franchiseofthecompanyinrelationtothesuspiciousdeath of the chairman of a village councilopposing a new plant in Tamil Nadu.54 InMarch, a long-standing campaign in theUKdemanding that theserviceprovider tothe National Union of Students boycott allCoca-Colaproductsinuniversitiescametoa head as a motion for a full boycott wasproposedattheannualgeneralmeetingoftheunion.55

And, perhaps more worryingly forCoca-Cola,apopularIndiantelevisionyogaguru has declared that their drinks shouldbeused forcleaning toilets,notdrinking.56SwamiRamdev,whohasbroughtyogaintothehomesofmillionsofIndiansinIndiaandabroad, referred to thehigh sugar contentandthecontroversyregardinghighlevelsofpesticidesfoundinthesoftdrinks. Coca-Cola’scounter-argumentsthatlackofrainisthemaincauseofgroundwa-

54 ‘India:policeinvestigatedeathofCoca-Colabot-tlingplantopponent’,EnvironmentNewsService,�Febru-ary2006;www.ens-newswire.com/ens/feb2006/2006-02-02-03.asp.

55 Coca-Cola,‘LatestonStudentEngagement’,citi-zenship.coca-cola.co.uk/latest/index.asp;NationalUnionofStudents, ‘Motion on Coke passed at NUS Conference inMarch2006’,www.nussl.co.uk/Files/E&E%20-%20CokeMo-tion.pdf.

56 SiddharthSrivastava,‘Indianswamitakesthefizzout of Coke’, Asia Times, 28 January 2006; www.atimes.com/atimes/South_Asia/HA28Df03.html.

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The key opportunity forIndiaisthecreationofahome-grown,meaningful,systemicformofCSRthataddresseslocalissues.


FIZZYFIGHT FirstQuarter�006

terdepletion57havebeenacceptedbysomegovernmentandcourtofficials,butthecom-pany’sreputationwithmarketsathomeandabroad will need to be rebuilt. In terms ofcorporatescandalsinIndia,Coca-Cola’sin-famyacrosstheworldhasbecomesecondonlytothecampaigntoholdUnionCarbide(nowincorporatedintoDowChemicals)ac-countable for the chemical explosion at aUnion Carbide factory in Bhopal in 1984,which killed �0,000 Bhopal residents andaffectedthehealthofafurther100,000.58

In comparison, the Tata group, ahome-grownconglomerateof93companiesthatmakeeverythingfromcarsandsteeltosoftwareandconsultingsystems,areoftenquotedasexamplesofbestpracticeofCSRin India,due to theirself-proclamation that‘an implicit sense of ethical business con-ducthasbeen thecornerstoneof theTatawayinthecorporategovernancesphere’.59In2005,itsrevenuegrewfrom$17billionto$24billion.

But, in January 2006, 12 Adivasisin the northern state of Orissa were killedas they protested against being displacedfromtheirland,whichhadbeensoldtoTataSteel.60

Anex-employeeofCoca-ColaIndia,who worked as a CSR executive, states,‘CSR is a distant dream in India ... CSRis more an “extra activity” that has to besqueezed in to “look good”.61The key op-portunity for Indianow—aswithother low-income countries—is not the numbers ofcompanies talking about CSR and blindly

57 Coca-Cola, ‘Corporate Responsibility Review’(2005): Environment Section, page 28; citizenship.coca-cola.co.uk/pdf/cr_environment_section.pdf.

58 www.bhopal.net

59 www.tata.com/0_our_commitment/corporate_governance/index.htm

60 Mark Dummett, ‘Battle over Indian steel mills’,BBC, 26 February 2006; news.bbc.co.uk/2/hi/south_asia/4686638.stm.

61 Personal communication with Shilpa Shah, 16March�006.

replicating the current ‘add-on’ WesternmodelfocusingonpublicrelationsasCoca-Colahas tried todo, but the creationof ahome-grown,meaningful,systemic formofCSRthataddresseslocalissues,challeng-esprejudiceandassertsIndia’spositionasa leading player in the global economy ofthefuture.

AtaLondonconferenceaboutthefutureofCSRacrosstheworldinMarch�006,Jane

Nelson,formeradvisortoUNSecretary-Gener-alKofiAnnan,warned,‘If India and Chinadon’t get it right thenit doesn’t really matterwhatwedo in the restof the world.6� Whileher comment shouldnotmeanweignorethefactthatsomanyinthe

West have got it wrong already, it reflectstherealisationthatthesetwoverydifferent,vast countries housing nearly half of theworld’s population will shape the contoursof theeconomicandpolitical landscape incomingdecades.

GiventhescaleofthechallengesinIndia,thecorporateresponsibilityagendainIndiamustbeasystemicone.Therefore itmustworktostrengthengovernanceinthecountry,notsidesteppingofficialprocessescitingtheircorruptandover-bureaucraticna-tureinjustification.Itmustaddresstheim-pactsofsmallandmedium-sizedbusiness-esinsteadofgivingspecialconcessionstoforeign multinational interests,while givingIndia the confidence to stand up to globalneoliberal processes that will not work forthebenefitofthemajorityofitspeople—asattemptedinthemakingofcheapergenericantiretroviraldrugsforHIVandAidssuffer-ers,whichwaseventuallyin�005overruledbytheintellectualpropertyprotectionagree-mentspropelledbytheWorldTradeOrgani-

6� ‘China and India will shape the future of CSR’,edie.net, 13March 2006;www.edie.net/news/news_ story.asp?id=11178&channel=0.


FIZZYFIGHT FirstQuarter�006

sation.63

India’s unique social patchwork offamilies,communities,NGOsandsmallandmedium-sizedenterprisesmeansthatsuchaCSRmodelwillhavetolookbeyondjusttheurbanareas,toincorporatetheconcernsof local communities with historical ties toland,villagecouncils(panchyats)andgrass-roots civil-society organisations as well asanunderstandingofhowcaste,religionandgenderinequalitieshavepervadedthroughsocietytoreplicatepowerdifferentialsoverthedecades.

63 AbidAslam,‘India’sclampdownongenericdrugsimperils world’s poor, say advocates’, Common DreamsNews Center, 23 March 2005; www.commondreams.org/headlines05/0323-04.htm.


TRIALS & TRIBULATIONSSecond Quarter 2006

ByJemBendellandJonathanCohen

Sometimes complex issues aremore easily understood in the negative—what they are not. Non-profit or non-gov-ernmental, forexample.Whenconsideringthe phrase ‘corporate social responsibility’(CSR), the inverse, or corporate social ir-responsibility,helps illuminate itsmeaning.This is particularly true in relation to whatthehistorybooksmaycallthe9/11ofCSR:Enron.InMay�006,ajuryofeightwomenandfourmeninHouston,Texas,didwhatalloftheregulators,investors,analysts,banks,boards, legal advisors and market checksandbalancescouldnot—concretelyconvictEnron’s leadersofhistoric failuresandhu-manlosses.Enron’semblematicemascula-tionembodiedtheturn-of-the-centurycorpo-rationgonebad,andcatapultedthefieldofCSRontothepopularcultureradarofNorthAmerica.

Thestark trajectoryofEnronstoodout astheiconicembodimentandpublicfaceofallthat CSR seeks to be the antidote to, de-spite competition from a veritable goldenageofrecentcorporatescandalsthathaveoccurredprimarilyintheUS:

WorldCom (the biggest bankruptcy—$11billionaccountingfraud)1GlobalCrossing(thesixthlargestbank-ruptcyinUShistory)�

Adelphia($2.3billioninhiddendebt)3RoyalAhold ($1.23billion restatement

1 JenniferBayotandRobenFarzad,‘FormerWorld-ComExecutiveSentencedto5Years inPrison’,NewYorkTimes,11August2005.

� GretchenHyman,‘WinnickExitsGlobalCrossing’,ISPNews,2January2003;www.isp-planet.com/news/2003/global_crossing_030102.html.

3 DeanStarkman,‘RigasesGivenPrisonTerms:For-merAdelphiaExecutivesSentencedforConspiracy,Fraud’,WashingtonPost,21June2005;www.washingtonpost.com/wp-dyn/content/article/ 2005/06/20/AR2005062000440_pf.html.

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and$1.1billionsettlement)4AIG($2.3billionrestatement)5HealthSouth($1.4billioninfalseearn-ings)6

Fannie Mae (Over $10 billion in ac-countingerrors)7

Will theconvictionofKenLay(whodiedinJuly�006aroundthreemonthsbe-fore his sentencing to a likely 30 years injail)—former chairman and founder, on sixcountsincludingconspiracy,wirefraudandsecuritiesfraudandfourcounts inasepa-rate bank-fraud trial—as well as JeffreySkilling—formerCEO,on18countsofcon-spiracyandfraudandone(of10)countsofinsider trading8 —make a difference? Willtheconvictionsbeadeterrent?

Ken Lay and Jef-frey Skilling werenot the first corpo-rate executives tobe convicted, norwilltheybethelast.Onthefaceofit,thecollapse of Enronhasnothadmuchofanimpactonexecu-tive compensation.However,perhapsabelated recognition

byboardsoftheirfiduciaryresponsibilities,

4 GregoryCrouch,‘AholdtoPay$1.1BilliontoSet-tleFraudSuits’,NewYorkTimes,29November2005.

5 en.wikipedia.org/wiki/American_International_Group

6 en.wikipedia.org/wiki/HealthSouth

7 MatthewBorghese, ‘ReportonFannieMae’sAc-countingProblemsReadyforRelease’,AllHeadlineNews,16May2006;www.allheadlinenews.com/articles/7003599932.

8 Carolyn Said, ‘The Enron Verdict: From WhiteCollars toPrisonBlues’,SanFranciscoChronicle,�6May2006;www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/05/26/BUGL3J�D3B33.DTL.

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TRIALS&TRIBULATIONS SecondQuarter�006

andasurgeincorporategovernanceshare-holder resolution successes in the �006annualmeetingproxyseason9,will start tolessenaCEO’sabilitytorunacompanyintotheground.

Five years after the introduction ofthesignatureUSreactiontolossoftrustinthemarket—theSarbanes–Oxleylegislationto strengthen transparency, accountabilityandimprovedcorporategovernance—itre-mainsunpopularwithbusiness in termsofitscostand thequalityofauditing.Linger-ingimplicationsofthereactiontoEnronen-compass potential mergers between stockexchangesintheUSandabroad.

So,giventhelimitsofregulatoryandlegalmoves,doesCSRhavearoletoplayin avoiding future Enrons? We should re-member that Enron had staff in charge ofcorporate responsibility. It issued a corpo-rateresponsibilityreport.Itlied.

Investorsinparticularhaveaninter-est inspotting futureEnrons,andassuchcouldbekeyenforcersofbetter corporategovernance.ThenewmainstreamofCSR,typifiedby stakeholderdialoguesandsus-tainability reporting,doesnotappear tobesufficient toempower these investors, giv-entheirrelianceonself-declarationsaboutcorporateintentionsandmanagementsys-tems,andauditsfromfirmswithacommer-cialinterestinbeingregardedbytheirclientsasbothreasonableandaffordable.Conse-quently,bothresponsibleinvestorsandthewiderpublicfaceacredibilityriddleofwhomtobelievewhentheymake judgementsonthesocialperformanceofcompanies.Threeareasareimportantinsolvingthisriddle:thetypeofinformationself-declaredbycompa-nies,thetypeofauditorsinvolved,andinfor-mationgatheredfromothersources.

Thefirstareawheretheinformation

9 BrookeA.Masters, ‘ShareholdersFlexMuscles:ProxyMeasuresPushingCorporateAccountabilityGainSup-port’,WashingtonPost,17June2006;www.washingtonpost.com/wp-dyn/content/article/2006/06/16/AR2006061601860.html.

flow to investors could be improved is theproduction of more quantitative indicatorsof social and environmental performancerather than corporate intentions and man-agement systems. Requirements could in-cludeguidelinesfortheproductionofbasicquantitative indicators such as pollutionrecords, average wages paid to differenttypesofemployee (including in thesupplychain), non-compliance notices issued bylaw enforcement agencies, pending courtcases, court rulings, out-of-court settle-ments, admonitions or investigations fromintergovernmentalbodies,recognisedtradeunionsintheworkplace,collectivebargain-ing agreements, multi-enterprise codesendorsed, certifications received, politicaldonations, memberships of trade associa-tions,andpayments to lobbygroups.Withsuchinformation,companiesmightbeableto be indexed on the basis of their actualimpacts on society rather than on the ap-pearance of their management systems.Thelimitedamountofinformationprovidedinthiswayraisesquestionsnotonlyofcom-paniesandtheirauditors,butoftheabilityofthestakeholderstheyengagewithtomovebeyondissueidentificationforthematerialityofnon-financialreportingtothetypeofdatarequiredaboutthoseissues.Someoftheseperformance indicatorswouldbemoredif-ficulttocompileandauditthanothers,withstatisticsonwagelevelsbeingmucheasierthanmappingtheoftenopaqueandadhocnatureoflobbying,orassessingitscontent.Theusefulnessof theseperformance indi-catorswillstilldependontheprofessional-ism of the auditors. Initiatives such as theInternational Standard on Assurance En-gagements(ISAE)3000,developedbytheInternationalAuditingandAssuranceStan-dardsBoard(IAASB),andtheAA1000As-surance Standard (AA1000AS), launchedbyAccountAbility,helpensurebetterprac-tice,withthelatterincludingattentiontotheauditors’ capacity to deal with the stake-holder-determined issues in extra-financial


TRIALS&TRIBULATIONS SecondQuarter�006

reports.10However,self-disclosureverifiedby contracted auditors provides a contextwithinwhichconflictsofinterestcanunder-mineeffectivedisclosure.Acomprehensivesolutiontocredibleinformationoncompanyperformancemustincludesystemsforgath-eringandprocessinginformationandopin-ionfromsociety,unmediatedbythecompa-niesinvolved

The thirdarea forsolving thecred-ibilityriddleinvolvesgeneratingreliableandrelevant data from sources other than thecompanies themselves. The problem hereis how to combine opinions from diversestakeholdersondifferentpublic issuesintoone framework, something that the SwissinvestmentanalystfirmCovalencehasbeendevelopingsince2001.11ItsdirectorAntoineMach told JCC that ‘the corporate reputa-tionthatmatters,andismaterialtovalue,isnottheoneinthemindsofmanagementbut

within the web of stakeholders, with somestakeholders connected to more strandsthan others’. Covalence maps corporate,media and stakeholder views across 45criteriaofbusinesscontributions tohumandevelopment,basedonaninternationalle-galframework,tocreateatrackable‘ethicalquote’ for each company. Another systemof investment analysis that includes thisbroader view isTotalCorporateResponsi-

10 Weusetheterm‘extra-financial’ratherthan‘non-financial’ to refer to social, environmental andgovernanceissuesasthisbetterreflectsthepotentialfinancialmaterialityoftheseissues,despitenotbeingincludedinnormalfinan-cialaccountsandreports.

11 www.covalence.ch

bility(TCR),developedbyFrankDixonandusedbyInnovestStrategicValueAdvisors.Italsofocusesonsomequantitativeindica-tors of performance, as described above.The notable aspect of TCR is its systemsapproach,whichconsidershowacompanyaffectsthesocietalsystemsitexistswithin,througharangeofactivitiessuchaslobby-ing and advertising. This approach is im-portant in three ways. First, if we assumethatexternalperformanceisanindicatorofinternal performance, then it helps inves-torsavoidcorruptinternalpracticessuchasthosethatbecamethenormatEnron.Sec-ond, it helps investorsdeterminehowwellprepared companies are for future socialand environmental change. Third, it sup-ports companies in promoting changes inmarketdemandandregulatoryframeworksthatwillsustainvaluecreationoverthelongterm,acrossthewholeeconomy.

The key issue for investors is howtoshiftinvestmentsawayfromfirmswithahigh likelihoodof internal unethical behav-iour.TCRseekstodrivesystemchangebyrewardingfirmsthataremoreproactivethanpeers in seeking to promote, rather thanblock, change at a systemic level. Firmsworking for system changes that hold allcompaniesmoreresponsiblereceivehigherTCRratings,withahoped-forrise instockpriceasaresultinanefforttocreatearacetothetopofthemarket.12

12 Frank Dixon, ‘Strategic Thinking’, GreenBiz,January 2005; www.greenbiz.com/news/columns_ third.cfm?NewsID=�7578.

riddleinvolvesgeneratingreliableandrelevantdatafromsourcesotherthanthecompaniesthemselves.

Solving the credibility

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3� TippingFrames|WorldReview�006

PRAGMATICRIGHTSSecond Quarter 2006


The weaknesses of CSR gover-nancethatledtothecollapseofEnronandtheadventofSarbanes–OxleylegislationintheUShas implications for thechallengesofCSRgovernanceatthegloballevel.TheprimaryglobaldialogueandreferencepointforbusinessandhumanrightsconcernstheSpecial Representative of the UN Secre-tary-GeneralontheIssueofHumanRightsandTransnational Corporations and OtherBusinessEnterprises (SRSG).The Interim

Report issued inFebruary�006bytheSRSG, Harvard Uni-versity Professor ofInternational AffairsandformerUNAssis-tant Secretary-Gen-eral John Ruggie,provoked a flurry ofreactions and stake-holderengagement.

TheSRSGofferedhopeforblazingnew ground in standards concerning busi-ness and human rights, andmore specifi-callyclarificationoftermssuchas‘businessspheresofactivityandinfluence’bystatingthat itsfinalreportwillgobeyondrestatingwhathastakenplacetodateandcontain‘nor-mativejudgments’.13Inadditiontostrength-eningthebodyofstandards,afulloverviewofexistingstandardsandtoolsandsupportforthemosteffectivewouldmovethefieldahead in its applicationon theground.Anaddition to this mix, a new Human RightsGuide forBusiness,was launched inJune�006bytheBusinessLeadersInitiativeonHuman Rights, the United Nations GlobalCompactOfficeand theOfficeof theUnit-edNationsHighCommissioner forHuman

13 JohnRuggie,‘InterimReportoftheSpecialRep-resentativeoftheSecretary-GeneralontheIssueofHumanRightsandTransnationalCorporationsandOtherBusinessEnterprises’,UNDoc.E/CN.4/2006/97 (2006);www1.umn.edu/humanrts/business/RuggieReport2006.html.

Rights.14

AmnestyInternational(AI)calledontheSRSGtoaddresstheresponsibilitiesofcompanies to protect human rights whentheyareinhoststatesthatareunwillingorunabletodoso.Interestingly,bothAIandtheInternationalChamberofCommerce (ICC)calledforclarificationoftheterms‘complic-ity’and‘sphereofinfluence’asusedinthebusinessandhumanrightscontext.15

The ICC’s response to theSRSG’smandate commented that ‘the state is theduty-bearer in protecting and promotinghuman rights’ and, in its favoured mono-lithic monotone of theomnipotent voice ofall enterprise, that ‘Business does not be-lievethereisaneedforanewinternationalframework.’16

The SRSG’s Interim Report notedthat ‘it may be desirable in some circum-stances for corporations to become directbearers of international human rights obli-gations,especiallywherehostgovernmentscannot or will not enforce their obligationsandwheretheclassicalinternationalhumanrightsregime,therefore,cannotpossiblybeexpectedtofunctionasintended’.17

Aletterissuedbyover100NGOsinMayinresponsetotheInterimReportcalled

14 Global Compact, ‘New Human Rights Guide forBusiness’, 6 June 2006; www.unglobalcompact.org/News-AndEvents/news_archives/2006_06_06.html.

15 Amnesty International US, ‘UN Norms for Busi-ness:TakingCorporateResponsibility forHumanRightstotheNextLevel!’,16September2005;www.amnestyusa.org/business/un_norms.html; Letter to John Ruggie from GuySebban, Secretary-General, ICC, and Antonio Peñalosa,Secretary-General,IOE,14October2005;www.iccwbo.org/uploadedFiles/ICC/policy/business_in_society/ pages/ICC-IOE_Letter_John_Ruggie.pdf.

16 Ibid.

17 Ruggie,op.cit.


PRAGMATICRIGHTS SecondQuarter�006

on theSRSG to take intoaccount theUNNorms on the Responsibilities ofTransna-tionalCorporationsandOtherBusinessEn-terpriseswithRegard toHumanRights,orsimplytheUNNormsforshort.18TheSRSG,however,hadcriticisedtheUNNormsintheInterimReportinunusuallystarklanguage.Criticisms levelled include ‘exaggerated le-gal claims’, by taking ‘existing state-basedhuman rights instruments and simply as-serting that many of their provisions nowarebindingoncorporationsaswell.Butthatassertion itselfhas littleauthoritativebasisin international law—hard, soft, or other-wise.’Ruggiewentontosaythat‘Allexist-inginstrumentsspecificallyaimedatholdingcorporations to international human rightsstandards...areofavoluntarynature.Rel-evantinstrumentsthatdohaveinternationallegalforce...imposeobligationsonstates,notcompanies.’Thiscritiquedoesnotevenencompass the most volatile elements ofthe UN Norms—to monitor corporationsand provide for payment of reparations tovictims.Further, theSRSGcites ‘theflawsof the Norms’ as ‘a distraction from ratherthanabasis formoving theSRSG’sman-dateforward’.19

Approvedon13August2003,bytheUNSub-CommissiononthePromotionandProtectionofHumanRights,theUNNormscompiled a laundry list of the key humanrightsdocumentsrelatedtobusinessunderoneroof,whichservedtofocusthediscus-siongreatly.�0Subsequently,theUNCom-mission on Human Rights decided not tomoveaheadwiththedocument.Byvirtueofthisdecisionandthesheerlackofgovern-mental support, the SRSG stated that the

18 LettertoJohnRuggiefromAmnestyInternationalet al., 18 May 2006; www.amnestyusa.org/business/docu-ment.do?id=engior50003�006.

19 Ruggie,op.cit.

�0 ‘Norms on the Responsibilities of TransnationalCorporationsandOtherBusinessEnterpriseswithRegardto Human Rights’, UN Doc. E/CN.4/Sub.2/2003/12/Rev.2(2003); www1.umn.edu/humanrts/links/norms-Aug2003.html.

UNNormsdidnotpossesslegalstanding.21A former high-ranking official with knowl-edge of the process commented that theSRSG’s statement ‘was theembalmingoilofsomething thatwasalreadydead in thecoffin’.

A lead in drafting the UN Norms,Professor David Weissbrodt, argues thattheSRSG’scritiqueof theNormswas ‘in-spiredifnotcopiedword-for-wordfromtheadvocacy of the International Chamber ofCommerce (ICC)and the InternationalOr-ganization of Employers (IOE)’ and ‘reliesonthetendentiousandhighlybiasedviewsof lawyers employed by’ those organisa-tionsand‘ignorestheconsiderablepositivecommentary that theNormshavegenerat-ed’.HecriticisestheSRSGforexaggeratingthe potential power of the Norms, remind-ingus that they ‘donot constitutea treatyand therefore cannot bind either states orcorporations in thesameway that treatiesarebinding if theyareratified’.Weissbrodtexplains that ‘theNormsprincipally reflect,restate, and refer to existing internationalstandards,butapplythemnotonly togov-ernments but directly to businesses. TheNormsare consistentwith theprogressivedevelopment of international law in apply-ingstandardsnotonlytostates,butalsotoindividuals, armed opposition groups, andothernon-stateactors.’��Inthissense,the

21 Ruggie,op.cit.

�� D. Weissbrodt, ‘UN Perspectives on “BusinessandHumanitarianandHumanRightsObligations”’,presen-tationatpaneloftheAmericanSocietyofInternationalLaw,30March�006.

specificallyaimedatholdingcorporationstointernationalhumanrightsstandardsareofavoluntarynature.

All existing instruments

“

“



Normsseektomoveforwardthebasiccon-ceptandapplicationof international law inlinewithrecentdevelopmentsonnon-stateactors,ashighlightedbytheestablishmentoftheInternationalCriminalCourt.Ruggie’sapproachrejectsthatdevelopment.

Despitethis,theUNNormsarestillbreathing, in two respects: the issues lieat the heart of the SRSG’s mandate, andNGOscontinuetousetheUNNormsasacampaigningandlearningtool,whileconsul-tantsareusingitinworkwithcompanies.

Human rights impact assessmentstandardsareanotherareathattheSRSGcitedashavingconsiderableimpactontheability of companies to meet their humanrightsobligationsatbothnationalandproj-ect levels,butwhichare inneedofdevel-opment.Unfortunately, thebroad scopeoftheSRSG’smandate—anentirelyunfundedmandate—meansthatthistaskwillbelefttootherstocarryout.�3

TheSRSGdeclaresinthefinalpara-graphof the InterimReport ‘anunflinchingcommitment to theprincipleofstrengthen-ingthepromotionandprotectionofhumanrights as it relates to business, coupledwithapragmaticattachmenttowhatworksbest’.�4Asaschoolofphilosophy,pragma-tism suggests that beliefs qualify as validor not, even ‘true’ or ‘false’, depending onhow helpful they are in accomplishing thebeliever’sgoals.Thusitisonlythroughtheirusefulnessthattheoriesandbeliefsacquiremeaningandvalidity.Evenwhen the termisusedinamorecolloquialway,itoftenre-flectsthistypeofworld-view.�5Manyhumanrights are widely seen, and legally recog-nised, as inalienable principles which arethereforeabsolute,notawardedbyhumanpower, not transferable to another power,

�3 LetterfromJohnRuggietoAmnestyInternationaletal.,22May2006;www.reports-and-materials.org/Ruggie-response-to-joint-NGO-letter-��-May-�006.pdf.

�4 Ruggie,op.cit.

�5 Hilary Putnam, Pragmatism: An Open Question(Oxford,UK:BlackwellPublishers,1995).

andincapableofrepudiation.�6

Theidea,whichisheldbyAmnestyInternational,thatrightsshouldneverberel-ativetocircumstancesitsuneasilywiththeconceptofpragmatism.‘Weareconcernedthat the approach of “principled pragma-tism”towhichyoureferinyourreportmaylead tounderestimating theneed forbind-ing legal principles and guidelines as wellasthestateofapplicableinternationallaw’,

said Amnesty’s di-rector Irene Khan inalettertoProfes-sorRuggieinApril.�7Theypointedoutthelimited evidence ofsuccessfromvolun-tary initiatives andthe problem of pro-viding mechanisms

ofredressbasedonvoluntarybenevolencefrom powerful actors. It is also worth re-memberingthat,whentheNormswereorig-inally launched,ProfessorWeissbrodtalsoclaimedpragmatismindefenceofcriticismsfromNGOsthattheydidnotgofarenough.Perhaps if there is ever to be ‘principledpragmatism’, it will require incorporating aset of absolute values which counterposethe relativist and opportunistic dimensionstopragmatistphilosophy.Otherwise,claimsto pragmatism may mask how our viewshavebeenshapedbyacquiescencetothosepowerrelationsthatsustainourprivilege.Ifitdid,thenthesuccessfulacceptanceofourideaswouldmerelymakeustheintellectualtotalitariansofourtime.

Apotentialareaofcommonthoughtlies in thedesirebybusinessgroupssuchas the ICC, IOE and Business for Social

�6 JeremyWaldron(ed.),TheoriesofRights(Oxford,UK:OxfordUniversityPress,1984).

�7 Letter from Irene Khan, Secretary-General,Am-nestyInternational,toJohnRuggie,27April2006;www.am-nestyusa.org/escr/document.do?id=ENGIOR500022006.



Responsibility,�8 as well as human rightsgroups, formorestableoperatingenviron-ments with better governance and rule oflaw.Thefactremainsthatthelackofeffec-tive global governance mechanisms, cou-pled with national governments that haveprovenwoeful inpreventingorholdingac-countablecorporate involvement inhumanrights abuses, has resulted in a void thatneedstobefilled.

One step in that direction occurredwhen the new UN Human Rights Councilconveneditsfirstmeetingon19June2006.ThenewandimprovedbodywilltakeuptheSRSGreportandserveasakeyglobalin-stitution for dealing with business and hu-manrights.Itwillnowmeetthroughouttheyear and has a mechanism to take up ur-gentcrises.All192UNmemberstateswillnowhavetheirhumanrightsrecordexam-ined,resourcespermitting.Thereal testofthe new UN Human Rights Council, muchlike the challenge more broadly for busi-nessandhumanrightsstandards,willbeinitsability toholdaccountable ‘anyCouncilmemberwhocommitsgrossandsystematicviolations of human rights’ and ‘have theirrightsofmembershipsuspendedbyatwo-thirdsmajorityoftheGeneralAssembly’.29

�8 AronCramer, ‘Business forSocialResponsibilityCommentary: InterimReportof theSpecialRepresentativeon Business and Human Rights’, March 2006; www.bsr.org/meta/BSR_Ruggie-Interim-Report_BSR-Comments_�00603.pdf.

29 UnitedNations,‘NewHumanRightsCouncilCon-venesFirstSessioninGeneva,19June’,pressrelease,15June 2006; www.un.org/News/Press/docs/2006/hrc2.doc.htm.


NOT BANKING ONCORRUPTIONSecond Quarter 2006


In what may be ahoped-for multilat-eral race to the top,the World Bank de-clared a new, com-prehensive, ‘long-term’ anti-corruptionstrategyinApril�006to leverage loansand technical as-sistance todevelop-

ingcountriesandthroughpartnershipswithstakeholders.30TheBankhasidentifiedcor-ruptionasamongthegreatestobstaclestoeconomicandsocialdevelopmentbylimitingopportunities,creatinginefficienciesandim-pedingthedeliveryofservices,forexample;andWorldBankpresidentPaul Wolfowitzreportedlyseescorruptionashissignatureissue.31 Previously, individual loans weresuspended in response to allegations ofcorruption incountriessuchas India,Ban-gladeshandUzbekistan;however,Wolfow-itzhasacknowledgedsuchacase-by-caseapproach ‘by itselfdoesn’tdelivereffectiveresultsforthepoor’.3�Todoso,‘theBankwillcontinuetoworkcloselywithCivilSoci-etytoprovidechecksandbalancesandpro-moteaccountabilityintheirgovernments’.33

TheextractiveindustrypresentsthegreatestchallengetotheWorldBankincar-

30 World Bank, ‘World Bank Announces StrategytoCombatCorruption’,PressReleaseNo.2006/358/EXC,11 April 2006; web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20884956~menuPK:34463~pagePK:34370~piPK:34424~theSitePK:4607,00.html.

31 World Bank, ‘Anticorruption’; web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPUBLICSECTORAND-GOVERNANCE/EXTANTICORRUPTION/0, ,menuPK:384461~pagePK:149018~piPK:149093~theSitePK:384455,00.html.

3� PaulBlustein, ‘WorldBankStrategyTargetsCor-ruption: Plan Aims to Clean Up Bribe-Taking Countries’,WashingtonPost,12April2006;www.washingtonpost.com/wp-dyn/content/article/2006/04/11/AR2006041101403.html.

33 WorldBank,‘WorldBankAnnouncesStrategy...’.

ryingout thenewlong-termanti-corruptionstrategy. In an effort to determine existingpatterns in order to inform the design ofgovernance instruments, the UN SRSG’sInterim Report surveyed 65 instances ofallegedcorporatehumanrightsabusesre-centlyreportedbyNGOs,whichwereseenas ‘unlikely to be a representative sampleof all situations, but of the worst’. Unsur-prisingly, the extractive sector—oil, gas,and mining—constituted two-thirds of thesample of reported abuses, and ‘accountfor most allegations of the worst abuses,including complicity in crimes against hu-manity; large-scalecorruption;violationsoflaborrights;andabroadarrayofabusesinrelationtolocalcommunities,especiallyin-digenouspeople’.34

Moving fromwhathadbeen ‘anadhoc,lowvisibilityapproachtowardsinstanc-esoffraudandcorruptioninmembercoun-tries, Bank-financed projects, and amongstaff’, the Bank now seeks to assume ‘aclear leadershiproleamongmultilateral in-stitutions’.35 In addition to a slew of otherorganisations,theBankanditsprivate-sec-torfinancingarm,theInternationalFinanceCorporation, have supported industry-wideefforts toaddress theseriouschallengeofcorruption in extractive industry practices,suchastheExtractiveIndustriesTranspar-ency Initiative (EITI), which works toward‘improvedgovernanceinresource-richcoun-triesthroughthefullpublicationandverifica-tionofcompanypaymentsandgovernmentrevenuesfromoil,gasandmining’.36

TheBank’smostdirectimpactinthis

34 Ruggie,op.cit.

35 F.Leautier,D.PetkoskiandM.Jarvis, ‘Develop-mentOutreach’,Editorial,WorldBankInstitute,EmbargoedCopy,17September2006.

36 www.eitransparency.org/section/abouteiti


NOTBANKINGONCORRUPTION SecondQuarter�006

area will be in its own loan portfolio. ‘Theproportionofnewprojectswithaccountabil-ity/anti-corruptioncomponentsjumpedfrom0.4%inthe1995–96fiscalyearstoanaver-ageof5%inthe2004–05fiscalyears’,andallBankCountryAssistanceStrategiesarenowrequiredtoaddressgovernanceissues,accordingtotheWorldBankInstitute.37TheChad–CameroonOilPipelineProjectdem-onstrates the challenges the World Bankand its Department of Institutional Integ-rityfaceinfightingcorruptioninitsexistingprojects.InwhatwastoutedasthelargestprivateinvestmentinAfrica,the$3.7billiondollarChad–Cameroonoilproject,whichis

managedbyaconsortiumofExxon,Chev-ronandPetronas,standsasalitmustestforWorldBankanti-corruptionsuccesstostartathome.38

A‘decidingfactor’intheWorldBank’ssupportfortheChad–CameroonOilPipelineProject was Chad’s 1999 Petroleum Rev-enueManagementLawwhichrequiredthebulkofdirectrevenuetobeusedforpovertyreductioninagreed-to‘prioritysectors’,suchashealth,educationandruraldevelopment,aswellasaFutureGenerationsFund,toen-surefinancialsavingsonceoilreservesareexhausted.InDecember�005,theNationalAssemblyofChadamendedthePetroleum

37 F.Leautieretal.,op.cit.

38 CEE Bankwatch Network, Friends of the EarthInternational, Center for Environment and Developmentand Environmental Defense, ‘Banks and Exxon CelebrateChad–CameroonPipeline:InternationalOrganisationsSup-port Chadian Day of Mourning’, press release, 9 October2003;www.foei.org/media/2003/1009.html.

RevenueManagementLawandbroadenedthe definition of priority sectors to include,amongotherareas,territorialadministrationandsecurity,increasedfrom13.5%to30%theshareofrevenuethatcanbeallocatedto non-priority sectors that are not subjecttooversightandcontrol,eliminatedtheFu-ture Generations Fund and transferred its$36 million into the general budget. TheWorld Bank, in turn, viewed the changesasabreachofcontract,andon6January�006 suspended new loans and grants toChad.39

The Chadian government was re-portedtohaveusedthefirst$4.5millionofthesigningbonus that it received fromtheoil companies to purchase arms.40 NGOswarned the World Bank against financingtheprojectbeforehandandsaidthatitsas-sessmentofthesituationinChad,‘notoriousforitscorruptionandhumanrightsabuses’,was based on unrealistic assumptions.41TheWorldBank’sstakeholderengagementwithcivilsocietyneedstotakeintogreateraccountsuchconcernsinfutureprojects.

Subsequently, the World Bank andtheGovernmentofChad ‘signedamemo-randumofunderstandingunderwhichChadcommitted70percentof itsbudgetspend-ingtopovertyreductionprograms,providedforastabilizationfund’foraftertheoilrunsout,andmadeanewpledgeofsupportforthe independent oil revenue oversight au-thority.4�TheBankwontheroundandwillresume loan disbursements in education,health,communitydevelopment,HIV/AIDS,agriculture,electricity,waterandinfrastruc-

39 WorldBank,‘QuestionsandAnswers’,web.world-bank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/EXTREGINI/EXTCHADCAMPIPELINE/0, ,contentMDK:20531903~menuPK:1104029~pagePK:64168445~piPK:64168309~theSitePK:843238,00.html.

40 Ibid.

41 CEEBankwatchNetworketal.,op.cit.

4� World Bank, ‘World Bank, Govt of Chad SignMemorandum of Understanding on Poverty Reduction’,NewsReleaseNo.2007/19/EXC,14July2006;web.world-bank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/CHADEXTN/0, ,contentMDK:20994138~menuPK:349881~pagePK:141137~piPK:141127~theSitePK:349862,00.html.

“

“

presentsthegreatestchallengetotheWorldBankincarryingoutthenewlong-termanticorruptionstrategy.

The extractive industry


NOTBANKINGONCORRUPTION SecondQuarter�006

ture.43BankpresidentWolfowitztoutedtheMOUasavictory,saying‘TheChadianau-thoritieshavecommittedtoensuringthatalloilrevenues,notjusttheroyalties,arespenton health and education and other basicneedsofthepoor’.44Thecorporateconsor-tiumhas stayed largelyout of viewduringtheongoingsaga;however,itisunlikelythatExxon,ChevronandPetronaswillsuccess-fully beable tomaintainanostrich stancethroughthelifeofthehigh-pricedproject.

Another importantexampleofhigh-levelcollaboration tocombatcorruption in-volving corporations is the formation of anewcoalitioninvolvingtheWorldEconomicForum,theUnitedNationsGlobalCompact,the International Chamber of CommerceandTransparencyInternational,45thelatterofwhichestablishedtheBusinessPrinciplesforCounteringBribery.46

If access to the internet superhigh-

43 World Bank, ‘World Bank, Chad Reach InterimAgreement on Funding, Oil Revenue Management’, PressReleaseNo.2006/383/AFR,26April2006;web.worldbank.org/WBSITE/EXTERNAL/NEWS/0, ,contentMDK:20903775~pagePK:34370~piPK:34424~theSitePK:4607,00.html.

44 World Bank, ‘World Bank, Govt of Chad SignMemorandum...’.

45 World Economic Forum, ‘Key Coalition FormedtoFightPrivateSectorCorruptiononAnti-corruptionDay’,9December2005;www.weforum.org/en/media/Latest%20Press%20Releases/PRESSRELEASES88.

46 Transparency International, ‘Business PrinciplesforCounteringBribery’;www.transparency.org/global_priori-ties/private_sector/business_principles.


A TIGHTENING WEB?Second Quarter 2006


way was the first generation of the digitaldividebetweentheglobalNorthandSouth,andaccesstocontentviahigh-speedcon-nection is the second, then impedimentsto the dissemination of content, whetherthrough government censorship or corpo-ratepay-for-playdemandsthatresultindif-ferentlevelsofaccess,isthethirdgenera-tion(3G)ofthedivide.

Structure has won a round againstfunction,withtheownersandcontrollersofthe internet highway pipeline, whether theChinesegovernmentonanationalbasisorinternet network operators on a businessbasis, holding swayover the lordsof con-tentsuchasYahoo,GoogleorMicrosoft.

Critical Congressional hearings inWashington,DCinthefirsthalfof2006fo-cusedaspotlightoncorporatecomplicityincensorshipinChina.Googlefaredworseinsomepartsof themedia than its competi-torsYahooandMicrosoftbecauseofanap-parentviolationofbrandidentityembodiedin their slogan ‘Don’t Be Evil’. Google co-founderSergeyBrinpubliclyacknowledgedinJunethatthedominantinternetcompanycompromiseditsprinciplesbyaccommodat-ing Chinese censorship demands.47 ‘Wefeltthatperhapswecouldcompromiseourprinciplesbutprovideultimatelymoreinfor-mation for theChineseandbeamoreef-fectiveserviceandperhapsmakemoreofadifference’,MrBrintoldreporters.‘Perhaps,now, the principled approach makes moresense.’48 Microsoft responded to the pres-sureandtooksmallstepsinconnectionwith

47 ‘Google“CompromisedPrinciples”inChina,Found-erAdmits’,SouthChinaMorningPost,7June�006,asre-printedatasiamedia.ucla.edu/article.asp?parentid=47255.

48 Catherine Elsworth, ‘We may pull plug onour censored Chinese website, says Google’, The Tele-graph, 8 June 2006; www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/06/08/wgoogle08.xml&sSheet=/news/2006/06/08/ixnews.html.

itstestimonybeforeCongress,announcinganewpolicyconcerningresponsestogov-ernmental requests for removal of contentand user access. Critics pointed out thatnewpolicydoesnotstopthecompanyfromassistinggovernmentsincensoringandre-movingaccesstoblogs,or inproviding in-formationonspecificusers.49MicrosoftandYahoohadpreviouslysaid ina jointstate-ment‘theylackedtheleverageontheirowntoinfluenceworldgovernments’.50

The implications of such behaviourbylarge,powerfulcompaniescastsashad-owbeyondwhatmaytypicallybeconsideredcorporatecitizenship.Forexample,theWallStreetJournalcalledhypocriticalclaimsbycompaniesthatmoreforcefulresistancetohumanrightsviolationsbyChinaisnotpos-sible because the country’s market is toobig to ignore while at the same time ‘pro-testingChina’sfailuretoprotectintellectualproperty’.‘[TheChinesegovernment]mightcensor information that is vital to conduct-ingbusinessthere.’Whatifthegovernmentdoesn’twant to letpeopleknow thebank-ingsystem isweak?’saidArvindGanesanofHumanRightsWatch.‘Todayit’spoliticalcensorship.Tomorrow, it’s central-bank re-serves.’51

Anotheraspectof the3Gdigitaldi-vide, pay-for-play demands for tiers of ac-cess, speaks toa lessclear-cut,butmorefar-reaching, potential impact. The short-termissuemaybetelecommunicationcom-

49 AmnestyInternationalUSA,‘CensorshipinChina:PublicPressureIncreases’;www.amnestyusa.org/business/pressure.html.

50 ‘Net firms criticised over China’, BBCNews, 15February 2006; news.bbc.co.uk/2/hi/technology/4699242.stm.

51 Jesse Eisinger, ‘Blocking Data at China’s WhimPoses Risky Dynamic for Tech Firms’, 3May 2006; for asummarygo towww.business-humanrights.org/Categories/Individualcompanies/Y/Yahoo?&batch_start=31.


ATIGHTENINGWEB? SecondQuarter�006

paniescharginghigherpricestocompaniessuchasGoogleandeBay—whichgeneratethemostdisseminationofdata-intensiveap-plicationssuchasmoviesandvideogamesandinternettraffic—torecoupthebillionsofdollarsneededtoupgradetheirnetworkstohandletheincreaseinsuchtraffic.Thelon-ger-term issue may be whether economicactivityanddemocraticdebateareavailableatthesamelevelforthosewithaccess.5�

In fact, steps in this direction were

takenbyAOLtochargelargemassemailersforanew‘Goodmail’certifiedemailservicewhichbypassesspamfiltersandoffersguar-anteeddeliverydirectlyintoAOLcustomers’inboxes.53 Acoalitionwithover500mem-bers,DearAOL.com,calledthenewservice‘athreattothefreeandopeninternet’,anddescribed ‘pay-to-send’emailas tollboothson the currently open internet which de-mand‘protectionmoneyatthegatesoftheircustomers’computers’andconstituteataxonemailand‘tieredservicesanddozensofmiddlemanfeesforeverysimpleactofcom-munication’.CoalitionmembersincludetheAFL–CIO,ConsumersFederationofAmer-ica,ComputerProfessionalsforSocialRe-sponsibility, Craig Newmark (Craig’s List),DefendersofWildlife,DemocraticNational

5� JeffryBartash,‘Internet-freedombackersstruggleon’, MarketWatch, 14 June 2006; www.marketwatchcom/News/Story/Story.aspx?guid=%7B628F4552-D5F4-43FD-91DE-7FF28CCA9C49%7D&siteid=google.

53 ElectronicFrontierFoundation, ‘AOLStartsPay-to-SendEmailShakedown’,9May2006;www.eff.org/news/archives/2006_05.php#004653.

Committee,Friendsof theEarth,MoveOn,OxfamAmericaandWorkingAssets.54

The role of technology in enablingparticipation in democratic discourse, or‘accessibledemocracy’,wasalsoraisedatGoogle’s�006annualmeetingbyAmnestyInternational,whichhas issued reportscit-ingadramaticriseinthenumberofpeopledetained or sentenced—and in cases tor-tured—for internet-related offences in Chi-na.55Addingtotheglareofthespotlight,theNGOReportersWithoutBordersreleasedareport which labelled Yahoo as the ‘WorstSearch Censor in China’.56 China hassigned the International Covenant on CivilandPoliticalRights (ICCPR),which statesinArticle 19 that everyone shall have theright to hold opinionswithout interference;that everyone shall have the right to free-domofexpression;andthatthisrightshallincludefreedomtoseek,receiveandimpartinformation and ideas of all kinds, regard-lessoffrontiers,eitherorally,inwritingorinprint,intheformofart,orthroughanyothermediaofhis[orher]choice.57

Technology corporations have de-fendedtheirpracticesinastrikinglysimilarmanner, as embodied by Microsoft: ‘InthecaseofChina,webelieve thatdespite thecircumstances, the Internet has alreadytransformedtheeconomic,culturalandpo-litical landscape of China.’58 This reflectsthe ‘e-vangelical’ approach of the internetgeneration,whichbelievestheinternetisaninherentlypositiveforceintheworld.How-

54 www.dearaol.com

55 AmnestyInternationalUSA,CensorshipinChina:Overview’,www.amnestyusa.org/business/censorship.html.

56 Reporters Without Borders, ‘Test of Filtering bySohuandSinaSearchEnginesFollowingUpgrade’,��June2006;www.rsf.org/article.php3?id_article=18015.

57 AmnestyInternationalUSA,CensorshipinChina:Business Standards in China’; www.amnestyusa.org/busi-ness/standards.html.

58 ‘Response to Business and Human Rights Re-sourceCentreRegardingAmnestyInternationalItem:“Fight-ingforHumanRightsinCyberspace”’,16May2006;www.reports-and-materials.org/Microsoft-response-re-Amnesty-action-on-China-censorship-16-May-2006.doc.

If access to the internet

superhighwaywasthefirstgenera-tionofthedigitaldivide,andaccesstocontentisthesecond,thenim-pedimentstothedisseminationofcontent,isthethirdgeneration(3G)ofthedivide.

“

“


ATIGHTENINGWEB? SecondQuarter�006

ever,itdoesnotreflecttheemphasisonun-bridled freemarketsandfreelyassociatingindividualswhichtypifiedtheearlydot.com-mers.Whiledot.cominvestorsremainsup-portive of business co-operation with, andfacilitationof,governmentcurbsonhumanrights, the positive promise of the internetmaybebroken.

Corporate social responsibility is now an established agenda for large compa-nies, with a new profession emerging that engages in the social and environ-mental contribution of business. How has this agenda emerged over time? What were the key events and actors? How has this new 'movement' of com-mitted individuals been taking shape around the globe?

Insights into these questions come from a review of the first half of the 'Noughties' decade. Published in 2008 as a hard copy, "The Corporate Responsibility Movement" compiles Lifeworth's Annual Reviews of Corporate Responsibility from 2001 to 2005. Introduced with a brief overview by the lead author of those reviews, Dr Jem Bendell, an Associate Professor of Manage-ment with Griffith Business School, and Visiting Fellow of the UN Research Institute for Social Development and the International Centre for Corporate Social Responsibility at the University of Nottingham. It is a useful resource for business libraries, recording some of the key events and issues during this historic period in the development of the corporation.

THE CORPORATERESPONSIBILITYMOVEMENT

Five Years of Global Corporate Social Responsibility Analysis from Lifeworth 2001-2005.

By Jem Bendell, and research colleagues

Over 350 pages, 85 Euros plus P&P.Available from March 2008Order from http://stores.lulu.com/lifeworth

Hard copies of annual reviews from subsequent years are also available, including:

Tipping Frames: Lifeworth Annual of Corporate Responsibility 2006 (Bendell et al, 2007). 65 Euros plus P&P.

The Global Step Change: Lifeworth Annual of Corporate Responsibility 2007 (Bendell et al, 2008). 65 Euros plus P&P.

The Lifeworth Reviews have provided “some of the most insightful commentary on emerging trends in the field… identifying implications for the future of business in society."

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Professor Jeremy Moon, Director, International Centre for Corporate Social Responsibility, University of Nottingham.


WHO’S LEADING HU?Third Quarter 2006


Will endemic corruption, increas-ing wealth gaps, and the immense scaleof environmental and health degradationfromChina’sindustrialrevolution,leadtoin-creasedsocialunrestandanevengreatermediacrackdown?Orwill thewakingeco-nomicgiantleapfrogmistakesmadeduringtheWest’sindustrialrevolution?And,inan-sweringthisconundrum,willcorporateciti-zenshipplayarole?1

Some think so. InAugust a ‘ChinaCSRMap’waslaunched,‘topromoteCSRinChina throughacentralizedplatform forthedisseminationofinformationonorgani-zationswithCSRactivitiesthere’.Althoughconsiderable discussion and activitiesaround CSR exist in China, it is often dif-ficult tofindconcrete informationonwhichorganisations are undertaking what activi-ties.Inadditiontobusiness,itinvolvesaca-demicinstitutions,serviceproviders,mediaand online resource providers. To furtheraccessibility,itisbilingual.ChinaCSRMapis a collaboration between Deutsche Ge-sellschaft für Technische Zusammenarbeit(GTZ),SynTaoandTranstech.�

Corporate citizenship appears toberelevanttoChinesecompaniesandso-ciety for threemain reasons: the influenceofWesternmarkets; theglobalaspirationsof some Chinese companies; and the so-calleddevelopmenttrajectory.

First, there isWesternmarket influ-ence. The social and environmental con-cerns of Western companies have beeninfluencingconstruction,manufacturingandhuman resource practices in China, albeittoa limitedandquestionableextent.EvenJapanesecompaniesandthosefromother

1 www.lifeworth.com/2005review/q2.1.html

2 www.chinacsrmap.org/E_index.asp

non-WesterncountriesarenowrequestingenvironmentalimprovementsfromsuppliersinChina.Thus,tocompeteincertainexportmarkets, Chinese companies will need topay attention to how these markets adoptandpractisegreaterresponsibility.DoingsowillfacilitateChina’snavigationthroughtheroughseasofglobalcompetition.

Recent signs indicate potentialstrains on future growth, partly fuelled byglobaltrade.Chinahasbeenpostinganav-erageannualgrossdomesticproduct(GDP)growth rateof9.4% for thepast26years,followingDengXaioping’sFourModernisa-tionseconomicreforms.3ButChina’srank-ing in theWorldEconomicForum’sGlobalCompetitiveness Index (GCI) fell to 54 in�006from48ayearago.‘Themostworri-somedevelopmentisamarkeddropinthequalityoftheinstitutionalenvironment,’thereportsaid.Theculprit:the‘steepfall’—from60 to 80—in how the Chinese institutionsfared in the �006 ranking. These institu-tions,spanningbothpublicandprivate,hadpoorresultsinalltheIndex’s15institutionalindicators.4GCImeasuresthesetofinstitu-tions,policiesandfactorsthatset thesus-tainablecurrentandmedium-termlevelsofeconomicprosperity.

As if sensing the need for change,on�5September�006ChenLiangyu,atopChineseCommunistPartyofficialinShang-hai,wasbootedoutoftheparty’stoplead-ershipcouncil, thePolitburo.MrChenwas‘themost senior official tobe sacked’ in a

3 UNDPChinaHumanDevelopmentReport2005;www.undp.org.cn/modules.php?op=modload&name=News&file=article&catid=13&topic=40&sid=236&mode=thread&order=0&thold=0.

4 ‘Switzerland, Finland and Sweden take the leadintherankingsoftheWorldEconomicForum’sGlobalCom-petitivenessIndex,butUSdrops’,WorldEconomicForum;www.weforum.org/en/media/Latest%20Press%20Releases/GCRpressrelease06.


WHO’SLEADINGHU? ThirdQuarter�006

decade, or since incumbent President HuJintaobecamepartysecretaryin�00�.Thegovernment launchedan investigation thatcentredonthemisuseofat leastone-thirdofthe10billionyuan($1.2billion)pensionfundtomakeillegalloansandinvestmentsinrealestateandotherinfrastructuredeals.5Coincidentally, on the day of Mr Chen’sdownfall,China’sauditor-in-chief disclosedthat‘anunnamedcompanydefrauded$140millionfromChinesebanksandspentnearly$40milliononbribes’.6

To comply with international normsand to increase their competitiveness ontheworldstage,Worldwatch,anNGO,sug-gested this: ‘Chinese private enterpriseswould be wise to integrate CSR from thebeginning.’7Theglobalaspirationsofsome

Chinese companiesareasecondreasonwhy corporate citi-zenship is relevantto China. Chinesepremiere Hu Jintaohimself highlightedthe goal of havinga prominent role inglobal markets wor-thyofagreatpower.The Lenovo pur-chaseofIBMandat-tempted takeoverof

Unocalby theChinaNationalOffshoreOilCompany(CNOOC)issettingatrendthat,accordingtoJackZhai,headofglobalcor-poratefinanceatDeutscheBankinBeijing,‘will continue’.8 Besides mere ambitions,Chinesecompaniesareexpandingabroad

5 ‘TopChinaleaderfiredforgraft’,BBCNews;news.bbc.co.uk/2/hi/asia-pacific/5376858.stm.

6 Minxin Pei, ‘The Tide of Corruption ThreateningChina’s Prosperity’, Financial Times, 27 September 2006;www.carnegieendowment.org/publications/index.cfm?fa=view&id=18734&prog=zch.

7 ZijunLi, ‘LackofCorporateSocialResponsibilitybehindRecentChinaAccidents’,Worldwatch,12December2005;www.worldwatch.org/node/3859.

8 SimonZadek,‘China’sRoutetoBusinessRespon-sibility’,openDemocracy,30November2005;www.opende-mocracy.net/democracy-china/china_business_3076.jsp.

becauseofmarketrealities:constantprice-cuttingathomemakesentrytoforeignmar-ketsvital.Thinmarginsabroadmakeupforeventhinnermarginsathome.9

Butwillgoingglobalmeangoingeth-ical?IfChinesecompaniesseektobecomeglobal players or own global brands, theywillneedtopaymoreattentiontothevaluesandaspirationsofproducersandconsumersintheirtargetcountries,especiallythoseintheWest.AccordingtoAccountAbilityCEOSimon Zadek: ‘Going global means be-

ingmoreresponsible.Wemayjustbeonthecuspofan accountability revolu-tion in Chinese business,or at least that part thatneeds to be credible ininternational markets, astheyseektomoveupthechain towards the high-value-addedopportunities

thatcomewithcontrolofglobalbrands.’10 But, if Chinese companies targetcountrieswhereconsumerdemandsforre-sponsibilityarenotasstrongasintheWest,thereliestheproblem.RecentChinesefor-eigndirect investmentand foreignacquisi-tionshavebeeninAsia11andAfrica.Inbothcontinents, the general concept of CSRamonglocalplayers isstill largelyequatedto philanthropy. These countries, includ-ingitsneighboringeconomicpowerJapan,haveembracedthetradeopportunitieswithChina whose robust growth and growingprosperity has enabled them to diversifytheirexportmarketsandbecome less reli-antonexportstotheUS.Thestallingoftheworld trade talks has even led to a fasterproliferation of bilateral and regional free-

9 Tom Miller, ‘Working Up the Value Chain’, AsiaTimesOnline,23November2006;www.atimes.com/atimes/China_Business/HK23Cb01.html.

10 Zadek,op.cit.

11 DanielH.Rosen, ‘Chinaand theChangingEco-nomicGeographyofAsia:TrendsinTradeandInvestmentFlows, Examples and Observations on Implications’, July2005;www.aei.org/docLib/20050721_Rosen.pdf.



tradeagreements.12

This has made NGO campaign-ers increasingly concerned about Beijing’smodelof‘internationaldevelopment’,asex-emplifiedby thecountry’s relationshipwithAngola.13 In �004, Angola’s government,batteredbyalongcivilwar,wasnegotiatinganewloanwiththeInternationalMonetaryFund(IMF) for its reconstruction.The IMF,awareofAngola’slonghistoryofcorruptionand poor governance since independencefromPortuguesecolonialrulein1975,waskeentoincludemeasurestocutcorruptionand tighten the country’s economic man-agement.TotheIMFofficial’ssurprise,theAngolagovernmentsuddenlybrokeoffne-gotiations. The Angolans had received acounter-proposalfromChina’sexport-creditagency, Exim Bank: a $2 billion loan thatcamewithminimalratesofinterest,agener-ouspaybackperiod,andnoneoftheIMF’s‘conditionalities’.ThegovernmentinLuandachoseChina’soffer.

Unlike many Western companies,Chinese companies with global ambitionsalready serve important markets, includ-ing its own domestic market of more thana billion Chinese and where margins aresqueezedtotheirlimits.Adoptingexpensiveabove-compliancestrategiesonsocialandenvironmentalissueshavemadethemwaryofbecominguncompetitiveathomeandinothermarketstheycurrentlyserve.Justassomefactorieshavedifferent labourcodesfordifferentproductionlinesinthesamefac-tory,dependingonwhichbrandtheproduc-tion line is for, global Chinese companiesmightseektoaligntheCSRcredentialsofparticular products with the markets beingserved, rather than raise their standardsglobally.Oddly, thismightprovidenew im-petusforethical labellingwithinthosesec-

12 ShobhanaChandraandMatthewBenjamin,‘Glob-al tradenolongerhostagetoUSconsumers’,bilaterls.org,27 September 2006; www.bilaterals.org/article.php3?id_ar-ticle=6079.

13 BenSchiller,‘TheChinaModel’,openDemocracy,20 December 2005; www.opendemocracy.net/democracy-china/china_development_3136.jsp.

torsthathavebeenresistanttoituntilnow.Theimpactonhowcompaniesdotheirbusi-nessinChina,however,mightbelimitedtothesizeoftheethicalmarketintheWest.

The third reasonwhycorporate re-sponsibilitymayberelevanttoChinaisbe-cause of its development trajectory. If the(questionable) assumption that the Westhas established a development trajectorythatChina isfollowingandmodelling, thenjustasthevoluntaryresponsibilitiesofbusi-ness towardssocietyand theenvironmenthavegrownintheWest,thenthesamecanbeexpected inChina.Yet thisassertion isbasedonmanyassumptionsaboutthelim-ited role of government to actually deliverchangesincorporatepracticethroughregu-lation,aswellastheabilityofavibrantcivilsocietytopushforchangesnotdemandedbygovernment.Onbothcounts, thesitua-tion appears quite different. The interven-tionistapproachoftheChinesegovernmentcouldleadtosignificantrapiddevelopmentsin regulations and investment for a sus-tainability transition; yet at the same timethesamephilosophydoesnot leavemuchscope for civil-society activism that coulddrivevoluntarycorporateaction.

China imposed broad new restric-tionson10September2006onthedistribu-tionofforeignnewsinthecountry,beefingupstateregulationsonthenewsmedia.Un-dernewrules thatweresaid to takeeffectimmediately,thestate-runNewChinaNewsAgencysaid itwouldbecome thede factogatekeeper for foreign news reports, pho-tographs and graphics entering China. To

“

“

Will the waking economicgiantleapfrogmis-takesmadeduringtheWest’sindustrialrevolution?Whatrolewillcorporatecitizenshipplay?



censorcontentthatendangers‘nationalse-curity’, theagencyannounced itsnewroleandrule in itsowndispatch.AschronicledbyaNewYorkTimesarticle,‘PresidentHuJintao has intensified a crackdown on allkindsofnewsmedia in recentmonths,ar-restingandharassingjournalists,tighteningregulationofWebsitesandonline forums,hiringtensofthousandsofpeopletoscreenand block Web content deemed offensiveand firing editors of state-run publicationsthatresistofficialcontrols.’14

Yet it isexactlysuchdiscourseandinformationflowthat isessential forcorpo-rate responsibility. Western-based compa-niessuchasNewsInternationalandYahoo!havebeencriticisedforagreeingtorestric-tive media regulations in order to accesstheChinesemarket.Thesedefythebasicsofcorporateresponsibility,likesocialaudit-ing,whichrequiresactiveparticipationandownership of standard setting, monitoring,verificationandcorrectiveactionimplemen-tationbyindependentrepresentativesoftheworkersthemselves.Withoutchangeinthesocialand legalcontext inChina, itwillbedifficultforcompaniestoresponsiblysourcefromChina.15

14 www.nytimes.com/2006/09/11/world/asia/11china.html

15 LifeworthAnnualReview�005.

Still,thewordsofChinesebusinessleadersshouldbe taken intoaccountasaguideto indigenousdrivingforcesforCSRversus Western models. Wu Mao, ChiefEconomist of the Shougang Steel Group,oneofthetopfivesteelcompaniesinChina,said,‘CSRwillnotbepromotedinChinaby‘lecturing’or‘teaching’.Rather,foreigncom-paniesandNGOsshouldsharetheirexperi-encesinordertopromoteCSRinaChineseway.’16

Similarly,ChenYing,DeputyDirec-tor of the China Enterprise Confederation(CEC), is on record as saying that corpo-rates and foreign NGOs have demandedtoo much on too many issues in China.‘Rather than tellingChinawhat todo, theyshouldlettheChinesegovernment,compa-niesandsocialorganisationsdeveloptheirown ideas. CEC plans to provide trainingtoencouragemoreChineseenterprises totakeupCSRpracticesand join theGlobalCompact.’17

16 CSRAsiaWeekly,Vol.1Week49 (7December2005): p. 7; www.csr-asia.com/upload/ csrasiaweeklyvol-1week49.pdf.

17 Ibid.

“

“

in China by ‘lecturing’ or ‘teaching’. Rather, foreign companies and NGOs should share their experiences in order to promote CSR in a Chinese way.’

CSR will not be promoted


DEATH OF A GREEN SALESMANThird Quarter 2006


BP and Wal-mart have moved totheoppositeendsof thecorporatecitizen-shipspectrum.Wal-MarthasattractedNGOs into its orbit, as exemplified by theNGOEnvironmentalDefense relocating itsproject manager to Bentonville, Arkansas,home of the giant retailer’s headquarters.Theenvironmentalgrouphassetupshopinthecompany’s‘backyard’toworkongreeninitiatives.18Wal-Martalsohiredformercrit-icandSierraClubpresidentAdamWerbachto teach company floor employeeshow toconsume less in their everyday lives, eathealthy food,andbuycompactfluorescentlightbulbs.Indeed,theso-called‘greening’ofWal-Marthassoprofoundlychangedthecompany’s reputation thataprominentac-tivistNGOdecidednottocampaignagainstWal-Martbecausetheynolongermakeanattractivetarget.19

Meanwhile, BP, a heretofore CSRleader,hasdrawnthescornofpublicopin-ionoverawidespreadseriesofawfulgaffes.Itsrecordincludesthefollowing:

September 2005TheUSOccupationalSafetyandHealthAd-ministrationfinedBPProductsNorthAmeri-camorethan$21millionfollowinganexplo-sionatitsTexasCityplantthatclaimedthelives of 15workers and injuredmore than170others.�0

March 2006BP’s Exploration Alaska subsidiary spilledmorethan�00,000gallonsofcrudeoilnear

18 ‘Green group moving into Wal-Mart’s backyard’,12July2006;msnbc.msn.com/id/13828326/from/ET.

19 Conversationwiththeauthor,August�006.

�0 US Department of Labor Occupational SafetyandHealthAdministration, ‘OSHAfinesBPProductsNorthAmericamore than$21million followingTexasCityexplo-sion’, 22 September 2005; www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=NEWS_RELEASES&p_id=11589.

PrudhoeBay, the largestNorthSlopespillever.21

April 2006USLaborDepartmentfinedBP$2.4millionforsafetyviolationsatitsOhiorefinery.��

June 2006TheUSCommodityFuturesTradingCom-missionbringschargesofpricefixing.�3

August 2006BP shuts down the largest oil field in theUnitedStates,PrudhoeBay,andits400,000barrels a day of production, due to poormaintenance.�4

September 2006BPexecutivesgetexcoriatedbyelectedof-ficialsandapologiseduringanappearancebeforeaCongressionalCommitteehearingunderoath,withonetakingthe5thAmend-mentagainstself-incrimination.�5

How much rope does a companywithahistoricallyacclaimedrecordoncor-porate responsibility receive when theymake mistakes? Specifically, how muchleewaydoesBPgetforitsatrociousrecentrecord because of its groundbreaking roleasthefirstoilcompanytopubliclyacknowl-edge theexistence of global warming andtheroleoffossilfuelsasacause?

21 Daren Fonda, ‘Is BP really that green?’,Time, 29 June 2006; www.time.com/time/business/arti-cle/0,8599,1209454,00.html.

�� Ibid.

�3 Ibid.

�4 StevenMufson, ‘Pipelineclosuresendsoil high-er’,WashingtonPost,8August2006;www.washingtonpost.com/wp-dyn/content/article/2006/08/07/AR2006080700131.html.

�5 Steven Mufson, ‘BP executives rebuked in Hillappearance’, Washington Post, 8 September 2006; www.washingtonpost.com/wp-dyn/content/article/2006/09/07/AR2006090700524.html?sub=AR.


DEATHOFAGREENSALESMAN ThirdQuarter�006

BP has come a long way from thedaysintherun-uptothe1997KyotoClimateChangeConference.Thiswasthefirstmulti-stakeholdereventorganisedbytheUNAs-sociationofUSANGOprogramme,togetherwithbusiness,theClinton–Goreadministra-tion,andtheUnitedNations.TheUShadnottakenaleadershiproleatthatpoint,butBPwasoutinfront,havingpubliclyabandonedtheGlobalClimateCoalition,agroupofin-fluentialoilcompaniescampaigningagainstthe validity of climate change. During thequestion-and-answersession that followedthe presentations a radical-left NGO rep-resentative commented, ‘I never thoughtIwouldsay this,butBP’sposition ismoreprogressive than the US government’s.’HowBPwill regain that faithover timewillmakeitatestcaseofhowcompanieswhostartedwell,butfaltered,canfinishtheracevictoriously.


At the end of august near Zurich,Switzerland, institutional investors, assetmanagers and listed companies gatheredattheSwissReCentreforGlobalDialoguetosharethoughtsonhowtopromotemorelong-term approaches to financial perfor-mance.�6 The speeches generally empha-sisedthechallengethatshort-termisminfi-nancialmarketsisnothelpfulforcompanieswantingtoplanforlong-termvaluecreation,incorporatingattentiontovaluearisingfromsustainability.However,thedialoguedidnotprogress far in identifying mechanisms forpromotinglong-termapproaches,especiallythosethatmightbesignificantenoughtoturnthetideofshort-termismthathasbeenfilledinrecentyearsbythegrowthofshort-sellingtechniquesbyhedgefunds.Thechallengewas summed up well by David Russell,speaking to theFinancialTimes(FT): ‘Theinvestmentprocessinthelast�0yearshasgenerally gravitated towards shorter termand relative returns. Pension funds havelong-term liabilities tomanage.’Thesenioradviser on responsible investment at theUniversities Superannuation Scheme didnotmincewords,adding,‘Wecannolongerrely on short-term relative investment pro-cesses when we have liabilities stretchingoutfordecades.’�7

A number of initiatives seek to ad-dressthischallenge.TheMarathonClubisagroupofinvestorslookingatwaystoen-courage investment for the longterm.�8 InAugust,itreleasedasummaryofinvestors’responses to its discussion paper on howto promote long-term long-only investing.‘There iswiderecognition thata long termapproach requires a more comprehensive

�6 www.sustainability-zurich.org

�7 MikeScott,‘Investorsstarttoappreciatethevalueofalong-termview’,FinancialTimes,9May2006.

�8 www.marathonclub.co.uk

and in depth understanding of investmentissuesbytrustees,promptingsomerespon-dents to suggest the need to develop ap-propriategovernancestructuresanddefinefurther the scope of trustee education.’29Trusteeawarenesswasidentifiedasakeyleverforchange.

The importance of two other initia-tives, previewed in the World Review ofJCC 19, began to be recognised in 2006.Reportingonenvironmental,socialandgov-ernance (ESG) issues grew as a result ofthetheEnhancedAnalyticsInitiative(EAI),whichcommits itsmembers,whichincludeBNPParibas,USS,InvestecandHermes,tospend5%oftheirbrokeragefeeswithfirmsthatfocusonextra-financialindicators. InJuly,theFTreportedonthesignif-icanceofthenewUNPrinciplesforRespon-sibleInvestment(UNPRI).Theseprinciplesarebackedbyinvestorsresponsibleformorethan$4trillion-worthofassets,orabout10%ofglobalcapital.UNPRIalsocommitsigna-toriestointegrateESG,orextra-financial,is-suesintoconventionalinvestmentanalysis;to become active, responsible owners bypromotinggoodcorporatepracticeintheseareas;and to report transparentlyonwhatactions have been taken in this area.Theinitiative promisesto generate a globalimpactfortheGlobalCompact, which iswhere it’s now locat-edwithintheUNsys-tem.Paul Clements-Hunt of the UnitedNations EnvironmentProgramme FinanceInitiative (UNEP-FI),

29 ‘Marathon club reports on industry response tolongterm,longonlyinvestingconsultationpaper’,pressre-lease,�August�006.

REFRAMING FINANCEThird Quarter 2006



REFRAMINGFINANCE ThirdQuarter�006

which conceived the UNPRI, told the FTthat‘thesignatoriesknowtheyhavetoshowthatPRIwillchangethings.Itshowsthein-vestmentcommunity that these issuesaremainstream.’30

What is noteworthy about theseprinciplesistheyrecognisethatESGissueshaveaneffectonthelong-termperformanceofcompanies.‘Forthebestpartof�5years,thesefactorshavebeenanichepartofSRI[socially responsible investing],’ said MarcFox,amemberoftheESGResearchteamatGoldmanSachs.AsESGissuesenterthemainstreamof investing, therehasbeenasubtle change in terminology, reflected inthearticles and press releases. No longerreferred to as ‘non-financial’ issues,ESGsare now described as ‘extra-financial’, tohighlightboththeirmaterialityandtheirad-ditionalitytothenorm.Thustheconceptualframesoffinanceandinvestmentmightbemoving towards the whole-systems theoryofvalueandvaluationthatwasdescribedinJCC19.

But what of the practical implica-tions? How does one create a truly long-termmandate?EmmaHowardBoyd,HeadofSociallyResponsibleInvestmentatJupi-terAssetManagement,put forwardasug-gestion:‘Youhavetolookatotherwaysofincentivising fund managers.’31 Translating

30 Scott,op.cit.

31 Ibid.

thediagnosisofsystemiccontradictionsintoproposalsforspecificchangesinrulesandnormstoincentivisedifferentpracticesfromfinance professionals is the central chal-lenge.

“

“

infinancialmarketsisnothelpfulforcompanieswant-ingtoplanforlong-termvaluecreation,incorporat-ingattentiontovaluearis-ingfromsustainability.Anumberofinitiativesseektoaddressthischallenge.

Short-termism


NGO’s AREN’T GOD,AEI REPORTSThird Quarter 2006


Noteveryonewashappyabout thetrends toward reframing finance in 2006.CertainlynotascholarattheAmericanEn-terpriseInstitute(AEI),AdamLerrick,whoinAugustwrote in theFT that ‘vigilantenon-governmental organisations have becomethedefactoregulatorsoftheflowoffinancetothedevelopingworld.’3�Hisargumentisthat NGO influence on Western banks ismaking it more costly for entrepreneurs inemergingmarketstoaccesscapital.Claimssuch as ‘not a single dollar of multilateralfunds is disbursed without NGO blessing’or that there isa ‘fiatbyself-anointedreg-ulators from rich nations’ make governingprivate finance seem so extreme and farfrom the truth that the argument could beignored.

Butthreekeyissuesarise.First,thatfinancial institutions (FIs) need to demon-stratehowtheirapproachtoextra-financialissuescanbeasmuchaboutinnovatingnewfinancing for sustainable development intheGlobalSouthasitisaboutriskmanage-ment.Hence,theworkofinitiativessuchasNewVenturesandVantagePointarekey.33Second,thatNGOsneedtobeclearabouthowtheirengagementwithFIsisameansof enabling economic democracy, and en-sure they give voice to and are more ac-countabletoSouthernconstituencies.Third,thatprofessionalsinNGOsandFIsneedtodevelop a moral counter-frame to the oneput forward by organisations such as theAEI. Phrases such as ‘NGO blessing’ and‘self-anointed regulators’ play to the fram-ing thatGeorgeLakoffdescribesas ‘StrictFatherGod’,wherebypeoplearerewardedthroughsuccessinafreemarketgovernedby electoral representative ‘democracy’:

3� AdamLerrick,‘GoodIntentionsattheExpenseofthePoor’,FinancialTimes,1August2006.

33 www.new-ventures.organdwww.vantagep.org

working hard for yourself, and doing whatyou are told.34 Consequently, this framingsuggests people should not develop theirownideasaboutrightsandwrongsorseeknon-governmental means to pursue them.AEIissayingtous,implicitly,thatNGOsareplayingGod,andbecausetheyareonlyhu-manareclearlygettingitwrong.Whatmightanalternativemoralframebe?PerhapsthataSpirit,aGodoradeeplynaturalqualityisworkingthroughuswhenwetakeresponsi-bility for thesituationsofothersaswellasourselves. Imagine new ways of pursuingthat.A‘SharedSpirit’frame,perhaps?

34 GeorgeLakoff,Don’tThinkofanElephant.KnowYour Values and Frame the Debate: The Essential GuideforProgressives(WhiteRiverJunction,VT:ChelseaGreen,�004).


TRANSPARENC Y MATTERSThird Quarter 2006


August saw the conclusion of theconsultation period of the European Com-mission’s Green Paper on the EuropeanTransparency Initiative. The consultationengagedstakeholdersonaspectsoftrans-parencyintheEuropeanUnion,suchaslob-byinganddisclosureofdataabouttherecipi-entsofvariousEUcountries.35Siim Kallas,

vicepresidentoftheEuropean Commis-sion, said that self-imposed, voluntarycodesdonotgo farenough, particularlygiventheirimpactonlegislation.36 KallasdidnotspareNGOsfrom his criticism,

decryingthefactthatover€2billionperyeararechannelled through them,with littleat-tention paid to how the funds are spent.37TheAllianceforLobbyingTransparencyandEthicsRegulation,acoalitionof80NGOs,has welcomed the transparency initiative.At the same time, some NGOs, such asFriendsoftheEarthEurope,whoselargestdonoristheEU,claimedthat‘theattentionon NGOs is simply a distraction from themuchmorepressingissueofcorporateac-countability.’38

If the sincerest form of flattery isimitation, then NGOs should be honouredbybusiness frontgroups that tradeon theNGOcredibilityofgrass-rootsorganisations(whichiswhytheyhavebeendubbed‘As-troturforganisations’,asinfakegrass).OneexamplecanbefoundpopulatingeditorialsinpaperssuchastheNewYorkDailyNews,

35 ec.europa.eu/comm/eti/index.htm

36 EurActiv,7November2006;www.euractiv.com.

37 Washington Times, 3 August 2006; www.wash-times.com.

38 EurActiv,27October2006;www.euractiv.com.

withheadlinessuchas ‘Deep-FriedHyste-ria’on29September2006concerninggov-ernmental efforts to reduce obesity. Therewere also full-page newspaper ads, suchas ‘Hype’,whichwarned readers that theyhave ‘been force-fedasteadydietofobe-sitymythsbythe“foodpolice,”triallawyers,andevenourowngovernment.’39Thespon-sor,theCenterforConsumerFreedom,isa‘nonprofitorganizationdedicatedtoprotect-ingconsumerchoicesandpromotingcom-monsense’.Thegroupwasfoundedabout12 years ago with tobacco-company andrestaurantmoneytofightsmokingcurbsinrestaurants.TheCenteranditsadsarethebrainchildofaWashington lobbyist for therestaurantindustry.40

Giventhegrowinguseofnon-profitorganisations as vehicles for lobbying andadvocacybyvested interests, the issueofhow progressive organisations can definethemselves and protect their reputationsandrolegrowsevermoreimportant.

39 www.nydailynews.com

40 RichardBerman,‘Deep-FriedHysteria’,CenterforConsumerFreedom,29September2006;www.consumer-freedom.com/oped_detail.cfm/oped/407.


CONSUMINGTRUTHSThird Quarter 2006


As�006progresseditbecameclearthat the challenge of climate change wasonce again rising in public consciousnessinmanypartsoftheworld.Thesuccessofthe filmAn Inconvenient Truth highlightedwidepubliccuriosityandconcernastowhatishappeningtoourweather.41Theclimatechallenge is a consumption challenge: topromote human well-being while reducingtheoveralldemandforcarbonfuels,eitherdirectlyorasembodiedinthevariousprod-uctsandservicesweuse.

The international policy agenda onsustainable consumption (SC) continuestobe toutedasoneof themost importantout there, but real action remains lacking.TheUNEP/UNDESAprocess,theso-calledMarrakeshprocess,continuestohavehigh-levelmeetingsonSC—forexample,ahigh-level meeting in Istanbul in August and aroundtable in Mumbai in September. Butactionandenthusiasmarelackinginthesemeetings.Governmentshavenotsetasidebudgets for this, thereareno internationalperformancetargets,top-levelministersarenotroutinelyinvolved,andthereisnoformalmechanismforreportingattheinternationallevel. In fact, the Marrakesh process wasnot itself mandated at the JohannesburgSummit on sustainable development, andisjustanaspectofwhatwasmandated—avaguelyconceived‘TenYearFrameworkofProgrammes’.At the time of writing, closeto thehalfwaypointof the ten-year frame-work of programmes, the internationalpolicyprocesshasyieldednotmuchmorethanafew‘taskforces’—smallgovernment-fundedcommittees,focusingonaspectsofthesustainableconsumptionchallenge,butnotguaranteedtofindanythingnew.Over-all, thereishardlymuchenthusiasmtoactproactively.

41 www.climatecrisis.net

Inlightofthisappar-ent impasse,anewEU-funded projectSCORE (Sustain-able Consump-tion Research Ex-change), brainchildof Dutch engineerArnold Tukker,was developed.4�Hosted by and in

collaboration with the newly minted UNEPCollaborating Centre on Sustainable Con-sumption and Production (CSCP) in Wup-pertal,Germany,SCORE isaiming topro-vide a needed injection of urgency on thesustainable consumption agenda. A keytaskwillbetohelppolicy-makers,businessandthepublicunderstandhowsustainableconsumptionneednotbeanegativecost-raising fun-reducing burden, but can be apositive, opportunities-laden pathway tosustainabledevelopment.

Previously the UNEP ConsumptionOpportunities report sought to frame sus-tainable consumption in these terms.43 Itemphasised that most action on sustain-able consumption has focused on impactreduction, involving pollution reduction,conservationofsinglestocksofresources,and preservation of ecosystems and spe-cies.Although important, the UNEP reportemphasised that with the growing burdenof consumption levels worldwide such im-pact reduction is not sufficient, and actualdemandreductionisrequired.Itpointedoutthisdidnotmeanareductioninhumanutil-ity, but a reduction in the actual resource

4� www.score-network.organdwww.scp-centre.org

43 J. Manoochehri, Consumption Opportunities.Strategies forChange:AReport forDecision-makers (Ge-neva: UNEP, 2001; www.sustainableconsumption.net/co_op.pdf).


CONSUMINGTRUTHS ThirdQuarter�006

through-flow of economies. Rather thanput the emphasis on the consumer, as somany are prone to do, UNEP recognisedthat ‘systemic demand’ needs reduction,whichmeansconsideringindustryresourcewastageandthelackofservicesolutionstoprovideforhumanneeds.Thusitarguedformoreefficientconsumption,involvingfewerresourcesforthesameproduct,increasing-lydifferentconsumption,involvingswitchingto ways of meeting human need throughservicesnotproducts, andconscious con-sumption,whichimpliescollectiveeffortstopromotewiderconsiderationofwhetherourconsumption of certain resource-intensiveproducts actually delivers significant well-beinganyway.

As awareness of the environmen-tal imperative grows, the challenge will befor businesses to findwaysof succeedingwithin economies that must reduce theirresource through-flow. More responsibleproducts-as-usual will not be sufficient forfuturesuccess.The ‘dematerialisation’andoptimisationofconsumptionpatternswillbekey.

ArnoldTukkerofSCORE isamongthe leading experts who have joined theeditorialboardofthenewConsumptionOp-portunities Project, which will promote theUNEPsustainableconsumptionframeworkdescribedabove.44Theauthorofthisorigi-nalConsumptionOpportunities framework,JohnManoochehri,toldJCCthat:

44 www.sustainableconsumption.net

the Marrakesh process has given us a stadi-um, and the governmental mandates, weak as they are, provide a partial audience. May-be Consumption Opportunities can clarify what games are actually being played, and what the winning stakes are, and networks like SCORE can provide both coaching and even produce star players. But it remains a question of whether governments and busi-ness actually do take up the opportunities on offer, whether they really want to play.

The game may really begin if theconsumption challenge can be framed intermsofcreatingpathwaysforsocialdevel-opment that are sufficiently resource-lighttobepossible foramajorityof theworld’spopulation over the long term, rather thantheminorityofafewgenerationsofmiddle-toupper-classconsumers.“

“

More responsible products-as-usual willnotbesufficientforfuturesuccess.The‘dematerialisa-tion’andoptimisationofcon-sumptionpatternswillbekey.


TAMING THEMESSENGERThird Quarter 2006


Media’s critical role in defining cor-porate responsibility as one that extendsbeyond the borders of a Western compa-ny’sheadquartershaslongbeenenshrinedsince the exposition of sweatshop opera-tionsamongAsianmanufacturerscontract-edbymajorbrands.Besidesgarmentsandsportshoes,thesameconcepthasseepedthroughotherindustries,suchasdiamonds,miningandforestproducts,amongothers.

While sweatshop stories have be-come a dime a dozen, in August the bignews was the story ofAsia’s largest elec-tronicscontractmanufacturer,Taiwan-basedHong Hai Precision Industry Co., whichsuedmainlandChinesejournalistsforalleg-edly‘damagingitsreputation’.45Itcamewithadifferenttwist:thesuittooktheheatoffthemanufacturerand itsclients,which includeglobalbrandsApple,Hewlett-Packard,Dell,SonyandNokia.Apple’s famous iPodwastoutedasanothersweatshopicon.46

Bringingjournaliststocourtisacivicright of corporations, but it is also consid-eredaspartofcorporatemanoeuvrings todivertattentionortoharassmessengersofbad news. In this case, the ‘messengers’involved a writer and editor of Shanghai-based newspaper, China Business News,whichpublishedinJuneastoryaboutsub-standardworkingconditionsandlowpayinthefactoryofFoxconn,asubsidiaryofHongHai in mainland China. To be sure,Applesentauditorstothefactoryandfoundthat,other thanoccasionalbreachingofApple’sacceptableCodeofConductlimitof60hoursand one day off per week, especially dur-

45 ‘Journalists sued over iPod story’, China Eco-nomic Net, 29 August 2006; en.ce.cn/Business/Enter-prise/200608/29/t20060829_8338445.shtml.

46 ‘iPod City: Inside Apple’s iPod factories’, Ap-pleinsider, 12 June 2006; www.appleinsider.com/ article.php?id=1799.

ingpeakproductionperiods,thesweatshopclaimswereunfounded.HongHaiwentontoslap the journalists—not thepublication,asisusuallythecase—withaRMB30million(approximately£�million)libelsuitthatledtothefreezingofthejournalists’assets.Thestrategy backfired as progressive Chinesemediamadethisacaseof‘pressfreedom’versusthebigbadcorporation.Eventually,HongHaiwithdrewthelawsuit.47

Elsewhere inAsia,mediaorganisa-tionscontinuetobearthebruntwhenthereare stories about corporate and politicalwrongdoings.And,sincepoliticaleconomycontinues to rule the landscapewhere themediaorganisationsoperate, casesofha-rassmentabound.Forexample,thePhilip-pinesinSouth-EastAsiahasbeentoutedasthe‘secondmostdangerouscountrytobeajournalist’,nextonly to Iraq.48About47 lo-caljournalistshavebeenkilledsince2001,49mostofthembasedinprovinceswherethin-skinned political and business leaders stillbelieve retribution against unfriendly pressremainsunder thenational radar.After re-portingon themilitary’s role inanelectionfraud, editors of Newsbreak magazine, anindependent local publication, were senta funeral wreath and shadowed on theirway home, while their office phoneswerebugged.50 Advertisers also withdrew theirsupportforfearofpoliticalretributiontotheir

47 ‘TaiwanfirmdropsChinaiPodlibelcase’,Reuters,3 September 2006; www.boston.com/business/technology/articles/2006/09/03/taiwan_firm_drops_china_ipod_libel_case.

48 ‘Amnesty International alarmed over Philippinekillings’,SouthChinaMorningPost,26July2006;www.asia-media.ucla.edu/article.asp?parentid=49849.

49 Press Release, International Federation of Jour-nalists,11December2006.

50 Raissa Robles, ‘Arroyo under new media chal-lenge’,SouthChinaMorningPost,18November2006;www.asiamedia.ucla.edu/article.asp?parentid=57997.


TAMINGTHEMESSENGER ThirdQuarter�006

localbusinessoperations.51

Theforeignpress,supposedlyunaf-fectedbyeconomicandpoliticallimitationsof their local counterparts, is expected toprovide the big and unadulterated picture.ButtheexperienceofFarEasternEconom-icReview(FEER),anaffiliateofDowJonesfocusing on current events in South-EastAsiaandChina,hasbeeninstructive.InitsJuly/Augustissue,itpublishedaninterviewwithCheeSoonJuan,anopposition lead-er and vocal government critic.5� Slighted,top-governmentofficialsreinstatedamediacodethatrequiresforeignmediacompaniesto set up local office in Singapore, whichcould be sued whenever it publishes ar-ticlesunfavourabletolocalleaders.Fornotkowtowing,FEERwasbannedinSingaporestartingSeptember.

The real context of the ban, ac-cording tosourcesofReutersandAgenceFrance-Press, is the timing of the FEER

51 DiscussionswithNewsbreakeditors.

5� www.feer.com/articles1/2006/sing_banning/free/index.html

story.53InSeptember,SingaporewassettohosttheannualmeetingoftheInternationalMonetaryFund(IMF)andWorldBank(WB).Singapore’s officials did not want anyone‘makingembarrassingnoises’asthe16,000delegatesfromallovertheworldflockedtoSingapore.54 Interestingly, the World Bankhasbeenastaunchbelieverofanindepen-dentmediaasafactorineconomicdevelop-ment.55

WhileSingapore’sMinistryof Infor-mation stated confidently that Singapore‘will remain a good investment location ...[since it] offers a stable, pro-business en-vironment, and a safe, secure and vibrantplaceforforeignerstolive,workandplay’,MarkMobius,fundmanagerofTempleton’sUS$20 billion fund invested in emergingeconomies,affirmedthatinvestors‘valuedafreepressincountrieswheretheyputtheirmoney’.56

IfthesewatchdogsinAsiawerelim-itedintheirabilitytoholdtheirgovernmentand, in the same breath, the corporationsthatoperateinthesecountries,accountablefortheiractions,howcanAsiansappreciatethebiggergoalofcorporatecitizenship?

This was raised byjournalists who at-tended Newsbreak’sseminaron ‘CoveringCorporate Social Re-sponsibility’ held lastSeptember in SubicBay, the Philippines.According to Lala

53 SaraWebb, ‘Singapore’smediacontrols jarwithregional aims’, Reuters, 30August 2006; www.singapore-window.org/sw06/060830R1.HTM; and ‘Singapore tightensrulesonsomeforeignmedia’,Yahoo!News,4August2006;sg.news.yahoo.com/060804/1/42kk9.html.

54 Quote from RobyAlampay, executive director ofthe Bangkok-based watchdog SoutheastAsian PressAlli-ance;sg.news.yahoo.com/060804/1/42kk9.html.

55 World Bank, Free and Independent Media Em-power the Poor and Spur Development (Washington, DC:WorldBank,�00�).

56 Webb,op.cit.

“

“

If media watchdogs in Asia were limited intheirabilitytoholdtheirgovernmentand,inthesamebreath,thecorporationsthatoperateinthesecoun-tries,accountablefortheiractions,howcanAsiansappreciatethebiggergoalofcorporatecitizenship?”


TAMINGTHEMESSENGER ThirdQuarter�006

Rimando,businesseditorofNewsbreak,‘Itwasagoodopportunitytosharehowmediashouldreportonandcriticizethecompanies’design and implementation of their socialresponsibilityprograms.Butarethecompa-niesactuallyreadytowalktheirtalkandad-dressaccountabilityissuesonhowtheyruntheir core businesses?’ Exhibit one: WhenatankercarryingbunkerfuelownedbyPe-tron Corporation, an oil company ownedbythePhilippineandSaudiArabiagovern-ments, sank near a marine sanctuary incentralPhilippines,Petroninitiallyshunnedaccountabilityfortheeconomiccostsoftheoilspillalthoughitreadilyprovidedalitanyof its good works in various poor commu-nities.57JudgingbytheSeptemberconfer-enceofAsianForum,thebiggestgatheringofcorporatesocialresponsibilityadvocatesinAsia,mostAsiancompaniesarestillatthelevelofcommunityphilanthropyprojects.58

These dynamics—press freedomand the practice of corporate responsibil-ity—arecrucialnotonlyinhowAsiansdrafttheir future, but also in how the West as-serts its influence inAsia.After all,China,the region’s biggest and most influentialeconomy,hasbeengrowingitstradingandpoliticalstakeintheregioninrecentyears.59So, while Western countries assert theirinfluence inChina, theymightaswellalsoconsiderthosetowhomChinaturnsasal-ternativeeconomicpartners.

57 ‘Petron slips’, Newsbreak, 25 September 2006;www.newsbreak.com.ph/newsbreak/story.asp?ID=699.

58 CSRAsiaWeeklyVol.2Week39;www.csr-asia.com/upload/csrasiaweeklyvol2week39.pdf.

59 ‘BeijingkeentounlockASEANinvestmentdoors’,Asia Times Online, 2 November 2006; www.atimes.com/atimes/China_Business/HK02Cb01.html.

TARGETCHANGE!

As we become aware of the scale and urgency of social and envi-ronmental challenges so more of us are adopting specific targets for corporate performance on key issues.

An emphasis on purpose, perfor-mance and the pace of change is what distinguishes progressive executives from the usual discus-sions, glossy reports and charity involved in much corporate social responsibility (CSR) work today.

For corporations, responsible en-terprise starts by targeting change.

Launching soon, ResponsibleEnterprise.com is the place to keep up to date with new corporate targets for change.

You will be able to register the targets adopted by your organi-zation, or one you know about, on this directory.

Get Involved…

* to be included, email details of your social and environmental targets to enquiries at lifeworth.com

* stay up to date with the latest target announcements by joining Lifeworth’s bulletin (visit www.lifeworth.com)

“Responsible enterprise de-scribes innovative commercial activity that actively considers its social and environmental effects; it helps resolve social problems or promote sustainable development but the foremost purpose is commercial.” - The Lifeworth Annual Review of Cor-porate Responsibility 2007.

www.responsibleenterprise.com


CAPITALISM’S RISING STARFourth Quarter 2006

ByJemBendellandLalaRimando

Thered-hotChineseeconomymayremain the darling of global investors, butneighboringVietnamhasbeenincreasinglycreepingintothespotlight.Itssmallerecon-omyandpopulationmaynotrivalthegiantneighbor to itsnorth,butVietnam’s rateofgrowthandopennesstoWesternstandardsofdoingbusinessaremakingitanattractivedestinationforforeigndirectinvestment.

These came to lightwhenVietnamhosted the annual Asia-Pacific EconomicCooperation (APEC)summit inNovember.Vietnamstagedtheeventlikeitwasitsowncoming out party. Long considered one ofthe less relevant economies in the South-eastAsian block, the late-bloomer countrywelcomeddignitaries toHanoiwith freshlybuiltorrepavedroads,andevensomepor-celain-tiledstreets,allleadingtothespank-ing newUS$250million National Conven-tionCenter.1

Nevermindthecosts;thetwo-year-in-the-making facelift project achieved thedesired effect as the analysts and mediaorganizations covering the event churnedoutcoverstoriesorspecialfeatureshailingVietnamasthenewhotinvestmentdestina-tion.Sincethen,Vietnamhasbeenincreas-inglyintheglobalnews,afactnotlostinthecountry. Vietnam Chamber of CommerceandIndustrypresidentDr.VuTienLocnot-ed inDecember thatVietnamhashad themostnumberofmentionsontheworldme-diain2006,thesameyearthat10percentoftheFortuneTop500companiesarrivedinVietnam.“NeverhasVietnambeenthedes-tinationofasmanygreatgroups,businesscommunitiesand international investorsas

1 Karl D John, The new Vietnam welcomes theworld,AsiaTimesOnline,Nov16,2006http://www.atimes.com/atimes/Southeast_Asia/HK16Ae02.html

thisyear,”hesaid.�

Vietnam’sattractiontoforeigninves-torsisitsincredibleeconomicgrowth.Since�000,grossdomesticproduct(GDP)growthaveragedsevenpercent.Its�005increaseof8.4percentpositioneditasAsia’ssecondfastestgrowingeconomy,eclipsedonlybyChina’s10percent.Thankstotheboomingeconomy, the reported poverty rate in thepast decade has shrunk from 61 percentto only 19 percent, a feat not evenChinacanmatch.3Andinvestorshaveflockedtothebourse,boostingtheHoChiMinhStockIndexbyawhopping109percent in2006,makingVietnam’sequitymarketoneofthetentopperformingexchangesintheworld.4CreditSuissevicechairmanforAsia,JoseIsidroCamacho,summeditupwhenhetoldFortuneMagazine,“Vietnamhasarrived.”5

� Extracts from the presentation of Dr. Vu TienLoc,PresidentofVietnamChamberofCommerceand In-dustry,A Glimpse of Business Environment of Vietnam in2006,Dec20.2006http://vibforum.vcci.com.vn/news_detail.asp?news_id=8533

3 ClayChandler,VietnamisSurgingAhead,FortuneMagazine,Dec 11, 2006 http://money.cnn.com/magazines/fortune/fortune_archive/2006/12/11/8395481/index.htm

4 William Pesek, Booms, Busts and Bombs ThatColoredAsia’s2006,Bloomberg,Dec18,2006http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHPTluJX3nMc

5 Quote from Vietnam Vrooooom…, Fortune, Nov13,2006,http://money.cnn.com/magazines/fortune/fortune_archive/2006/12/11/8395481/index.htm

“

“

Where exactly Vietnam

hasarrivedat,andwhereit’sgoing,isthefocusofmuchofthisquarters’worldreview.

TARGETCHANGE!

As we become aware of the scale and urgency of social and envi-ronmental challenges so more of us are adopting specific targets for corporate performance on key issues.

An emphasis on purpose, perfor-mance and the pace of change is what distinguishes progressive executives from the usual discus-sions, glossy reports and charity involved in much corporate social responsibility (CSR) work today.

For corporations, responsible en-terprise starts by targeting change.

Launching soon, ResponsibleEnterprise.com is the place to keep up to date with new corporate targets for change.

You will be able to register the targets adopted by your organi-zation, or one you know about, on this directory.

Get Involved…

* to be included, email details of your social and environmental targets to enquiries at lifeworth.com

* stay up to date with the latest target announcements by joining Lifeworth’s bulletin (visit www.lifeworth.com)

“Responsible enterprise de-scribes innovative commercial activity that actively considers its social and environmental effects; it helps resolve social problems or promote sustainable development but the foremost purpose is commercial.” - The Lifeworth Annual Review of Cor-porate Responsibility 2007.

www.responsibleenterprise.com


CAPITALISM’SRISINGSTAR FourthQuarter�006

WhereexactlyVietnamhasarrivedat,andwhereit’sgoing,isthefocusofmuchof this quarters’ world review. In �006 thecountrycametoberegardedascapitalismsnewestRisingStar,andassuchitsymbol-izes the changes and challenges that willpaint the backdrop to the future sagas ofcorporate citizenship. We explore why thecountry’seconomyhasboomed,someofthepositivesocialaswellaseconomicimplica-tionsofitsopeninguptoforeigninfluence,thedangers of unequal formsof privatisa-tionandskyrocketingstockmarkets,beforeplacingthiseconomicandsocialchangeinthecontextofthecountry’snaturalenviron-ment,andthefuturesustainabilityofitsde-velopmenttrajectory.


UNDERSTANDING THE BOOMFourth Quarter 2006


Foreign investors started taking asecond look at Vietnam since its leadersheeded efforts of former US president BillClinton, who visited in �000 to normalizerelations with the former enemy. In �000,VietnamsignedabilateraltradeagreementwiththeUSandlaunchedthestockmarket.Thereafter,it introducednewlawssimplify-ingrequirementsforregisteringcompaniesand creating a level playing field for bothlocalandforeignplayers.6Thetimingwasperfect.Itemergedastheregionaldestina-tionofchoiceforWesternandJapanesein-vestors aiming to hedge their exposure toChina.

As China continues to gobble upaboutUS$72billioninforeigndirectinvest-ments (making it the largest ‘developing’country recipient of FDI),7 foreign inves-tors lured byAsia’s low labour costs haverealized that as political winds change inChina, theyneed to spread their businessrisks.VietnamhasbecomethefirstchoiceforJapanesefirmsoperating inChina thatwanttospreadtheirinvestmentexposuretoanothercountry.TheJapanesefirmsdoing

6 FreshfieldsBruckhausDeringer,BriefingonViet-namnewinvestmentlaw,March2006http://www.altassets.com/pdfs/freshfields_vietnam_14675.pdf

7 http://www.unctad.org/Templates/Webflyer.asp?docID=7456&intItemID=3971&lang=1

businessinVietnamincludesuchgiantsasToyotaMotor,Sony,CanonandHonda.

Vietnam’s labour is cheaper thanitsneighboursandevenChina.Shortagesinavailable factoryhands insomeregionsofChinahavebeendrivingupcoststothepoint thata factoryworker in theMainlandcan earn up to five times the US$50 permonth thatVietnameseworkers in foreign-ownedfactoriesreceive.8 Inaddition, landischeaper,withthemostexpensivelandforfactoriesfetchingabouthalfofwhattheydoinChina’spriciestareas,andshippingfromindustrialcapitalHoChiMinhCityischeap-erthanfromThailandorIndonesia.9

Neverthelessthereisthepotentialforeconomiccultureclash.TheexperienceofDutchbankABNAmro,whichhasabranchin Hanoi, was revealing. In November, itenteredintoaUS$4.5millionsettlementtoendadisputeovera transactionwitha lo-calstate-ownedbank(and,notincidentally,getfourstaffmembersoutofjail).Initssuit,the state-owned Incombank had blamedthefourABNAmrotradersforthelossesitincurred when they executed speculativeforeigncurrency tradesonbehalfofan In-combankemployeewhowaslaterfoundtobe unauthorized to enter into such deals.Causinglossestoastateenterpriseisase-riouscriminaloffenceinVietnam,10andthearrests of the four traders has sent a chillthroughotherforeignbanksoperatinginthecountry,raisingconcernsabouttherisksofdealingwith state financial institutionsand

8 Karl D John, Japan smitten by Vietnam, AsiaTimesOnline,June15,2006http://www.atimes.com/atimes/Japan/HF15Dh01.html

9 Frederik Balfour, Good Morning, Vietnam, Busi-nessweek,March13,2006(http://www.businessweek.com/magazine/content/06_11/b3975068.htm)

10 BillHeyton,ABNAmromakesVietnamsettlement,BBCNews, Nov 27, 2006, http://news.bbc.co.uk/2/hi/busi-ness/6188646.stm

“

“

Foreign investors luredbyAsia’slowlabourcostshaverealizedthataspoliticalwindschangeinChina,theyneedtospreadtheirbusinessrisks.


UNDERSTANDINGTHEBOOM FourthQuarter�006

other state agencies. Compounding therisksisthefactthatforeignexchangetrad-ing – a routine transaction elsewhere – isnotyetgovernedbyinternational-consistentstandardsinVietnam.


COMPETITIVE OPENNESS?Fourth Quarter 2006


Asfaraslow-costandlow-valuela-bourisconcerned,studieshaveshownthatVietnamisbetteratattractingsociallycon-scious investments thanChinabecauseofthelatter’sreportedfrequentviolationsofla-bourstandards.ThisisariskthatfootwearindustryexpertshavecitedinexplainingwhyinternationalfootwearcompaniesoperatinginChinawould look foralternativeproduc-tionsites.11 Vietnam’sapparently strongerlabour rights regime–bornof itsunion in-dependenceandassertiveness–positionsitwellinthiscontest.12

With six percent the population ofChina’s, Vietnam is more dependent ontheoutsideworld,bothpoliticallyandeco-nomically. Therefore, Vietnamese leadersaremorelikelytobesensitivetoprevailinginternational labour rights norms than theChinese. Worker’s rights issues were oneofthecontentiousitemsonVietnam’squestforaWTOmembership.But,withtheissuecleared, Vietnam’s accession to the tradebodyisexpectedbysometofacilitatetradeand capital flows, further pushing its com-petitiveness.

According to a US Congress-com-missioned �00� report, the strong anti-sweatshopmovement,plusVietnam’squesttoclinchthegoodgracesoftheUSasitwasworkingforWTOaccreditation,pushedthegovernmentandthetradeunionstoengageindialoguesonmeetinginternationalnormsfor labour.13 In the process, Vietnam’s la-

11 Corporate Social Responsibility in Vietnam: Theathleticshoeindustryandlabor issues,aproposedprojectin �003 to be administered by a World Bank team, whichincludesNigelTwose,AmyLuinstra,,ZibaCranmer

12 Mark Manyin, Vietnam’s Labor Rights Regime:AnAssessment, for theUSCongress, updatedMarch14,2002, http://digital.library.unt.edu/govdocs/crs//data/2002/upl-meta-crs-3540/RL30896_2002Mar14.pdf?PHPSESSID=25a9753dad36b5962c9469f7043f2d8e

13 Ibid

bourstandardswereupgraded,anunusualexampleofapotential contradiction to thetendencyofdevelopingcountriestopartici-pate ina race to thebottomof social andenvironmentalstandards.

In fact, according to the report, theVietnamese government and trade unionopenly urged their factories to apply forSA8000,acertificationof labourstandardsrecognizedbyWesternclients.TheChineseGovernment,ontheotherhand,hasalwaysconsideredanyreferencetoitslabourstan-dardsasoutside intervention in its internalaffairs.Sincecriticismsoflabourstandardsare subsumed under criticisms of humanrights violations, the Chinese Governmenthasbeensensitivetoandadamantagainstanymentionofthisissue.14

For a variety of structural and his-torical reasons, the Vietnamese Commu-nistPartyhasnottakenontheauthoritarianshape of its Chinese counterpart. China’sleaders are more sensitive to permittingunion independence since it had to dealwith the socially challenging and regime-threatening experiences like the Tianan-men protest movement in 1989. Asser-tiveness among China’s union groups hasbeensquelchedaspartofthegovernment’scrackdownagainsttheprotests.15

However, although Vietnameseunionsandlabourerspossessgreaterfree-domstoadvocateforworkersandexpressgrievancesthantheirChinesecounterparts,stilllikeinChina,mostrightsandfreedomsstemnotfromthelaw,butfromthediscre-tionoftheCommunistParty.Inotherwords,labour freedomsand rights inVietnamarestillvulnerabletochangesinstatepolicy.

14 Ibid

15 Ibid


COMPETITIVEOPENNESS? FourthQuarter�006

That is not lost to the likes of USelectronics giant, Intel, which still was notdeterred fromtaking theplunge. In fact, inNovember,astheUSHouseofRepresenta-tivespreparedtovoteongrantingVietnampermanentnormal traderelations, thefinalstep in normalizing relations between thetwocountries,Intelseeminglymadeastate-mentinsupportofVietnambyannouncingitwouldincreaseitsinvestmentsinthebuild-ingofachipassemblyandtestingplant inHo Chi Minh City from US$300 million tomorethanUS$1billion.Thedeal,whichwillemploy some 4,000 workers, representsthebiggesteverUS-ledproject,16andwasa huge and timely vote of confidence forVietnam’s long-termpotential.A littlemorethanamonthlater,VietnamfinallyclincheditsWTOmembership inJanuary�007, theculminationofa12-yearprocess.

HavingconductedbusinessinsuchAsian countries as Malaysia and the Phil-ippines, Intel hired a Vietnamese countrymanager,PhuThan,toassistindealingwiththegovernment.InaninterviewwithFortuneMagazine,ThansharedthestrategyonhowIntelwonovertheofficialsbyofferingschol-arships,training30,000publicschoolteach-ers,andworked inclosecoordinationwiththeCommunistPartyintestingsoftwareforitse-governanceprogram.“Itmadecoordi-nation easier,”Than told Fortune.17 Whilethesearechargedagainstbudgets for the

16 Amy Kazmin, Vietnam boosted by Intel’s $1bnplanforplant,FinancialTimes,Nov13,2006http://search.ft.com/ftArticle?queryText=vietnam+apec&y=0&aje=true&x=0&id=061113000089

17 ClayChandler,HowIntelgotInsideVietnam,For-tuneMagazine,Nov13,2006

company’s philanthropic projects, Intel isnot reinventing the wheel. Microsoft madesimilareffortswhenitwasmakinginroadsinChinaintheearly1990s,longbeforeothermultinationalswereable to set up shop inthemainland.18

Whileitcanbearguedthatthesearemutually beneficial—the government getsthefreetraining,software,otherfreebies;In-telgetsthetaxincentives,thepermits,easyaccessto thebureaucrats—thesehighlightthe fact that transnationalcompanies,withalltheirresourcesandexperiences,willalsohelp train Vietnam’s bureaucracy, which isstilladjustingtotherhythmanddisciplineofamarket-basedeconomy.Whetherthepoli-cies that emerge from this close engage-ment,onissuessuchasintellectualpropertyprotection, taxation, regulation, and devel-opmentpriorities,areinthecitizens’longerterminterestsisopentodebate.Weakness-esincivilsociety,politicalpartiesandotheraspectsofgovernancemean that that thisdebatemaynotbeasopenandbalancedasonemighthopefor,especiallyinlightofenvironmentalconcerns,whichwereturntobelow.

18 RobertBuderiandGregoryHuang,Guanxi,theartof relationships, (Microsoft,China,andBillGates’sPlantoWintheRoadAhead),Simon&Schuster,�006

Vietnam is more dependent on the outside world, both politically and economically.

“

“


AVOIDING OLIGARCHY?Fourth Quarter 2006


At the very least, investors in hardassets, are in for a long haul. Vietnam’sboomingeconomy,however,isalsoattract-ingportfolioinvestorstoitsyoungstockandbondmarkets.Amongthoseactivelyinvest-ingareforeignmanagedfunds,liketheViet-nam Opportunity Fund, a US$560 millionclosed-endfundlistedontheLondonStockExchange, and the Dublin-listed US$200million-worthVietnamGrowthFund.Wedonot know of any funds considered as So-cially Responsible Investments that havedescended on the Vietnamese stock ex-change.

Thelocalequitymarketenteredtheradar of most international investors whenSpencerWhite,thechiefregionalstrategistfor Merrill Lynch, wrote a report in Febru-arythatbecametheoft-quotedconfirmationof the growth prospects of the listed localcompanies.WhitedescribedVietnamas“a10-yearbuy,”andurgedhisreadersto“buyequityexposurenow,foryourfund,foryour-self,orforyourchildren.”19

Thereare fears that thesemarketsarerisingforaneventualfall.Investorenthu-siasmhaspushedtotalmarketcapitalizationof the 106 listed shares toUS$9.2 billion,which considering a base of onlyUS$510millionayearearlier,translatestoawhop-ping 1,665 percent increase. The numberoflistedcompaniesgrewfrom30to106,ofwhich49newlistingsweretransactedinDe-cemberalone.�0Therehasbeenlimitedin-formationonearningsforthesenewlistingswhich used to belong wholly to the state.

19 FinancialTimes(�006)Investorsincreasinglyen-thusiasticforVietnam’sgrowthstory,May3rdhttp://search.ft.com/ftArticle?queryText=vietnam&y=0&aje=true&x=0&id=060503000559&page=15

�0 Amy Kazmin, In Beijing’s footsteps, FinancialTimes, Jan7, 2006http://search.ft.com/ftArticle?sortBy=gadatearticle&queryText=vietnam&y=0&aje=true&x=0&id=070107002226&page=14

Foryears,thesecompanieswereundernoobligationtopublishnoreverhadthedisci-plineforfinancialinformationdisclosure.Nowonderbuyersoftheirstockhadfewwaystogaugecompanyperformanceorwhetheran investment was sound.Although somewebsitestrackthepricesofpopularstocks,reliablemarketdataisnonexistent.Inotherwords,thereisnocertaintythatthecurrentprices are fair. Local investors, majority ofthemneophytes,dependmostlyongossipandhopethatwhatgoesupwillcontinuetogoup.21

Underlying this stock market boomhas been the sale of state assets, since�000.Asmanyas3,600state-ownedcom-panieshavebeenpartiallyprivatized.Com-panysharesweresoldtoemployees,man-agers, and the public who then sold themeither on-line or directly to families andfriends.RapidprivatisationinRussialedtoa‘grabwhatyoucan’cultureandthegen-erationofanewclassofbillionaireoligarchsthat moved money out of the country withdamagingimpactsonthenationseconomyandemployment.Thesocialdislocationandinjusticesthatfollowedneedstoberecalledwhenwereflecton thecurrentchanges inVietnam.Willthecountrymanageitstransi-tioninamoresociallyjustmanner?

The answer may lie in the shiftingvalues of modern Vietnam.The country isnot just changing economically; it is alsochangingsocially,with traditionallyconser-vativeattitudesgraduallybreakingdown.Asa booming economy creates more middleclass, these people would eventually de-mand greater freedoms. And the youth—thoseaged�5andbelow,whoaccountforhalf of the population—enjoy the spoils ofeconomic freedomare, for the timebeing,

21 http://english.vietnamnet.vn/biz/2006/12/646427/


AVOIDINGOLIGARCHY? FourthQuarter�006

not questioning the reign and rule of theCommunist Party. As things are changingvery fast inVietnam, theCommunistPartywould have to continuously demonstratethat it could answer the questions to beposedbyanincreasinglycapitalistsociety.

The current officials who had livedthrough the wars and the hardships thatfollowed tend to adopt the “strict father”modelofGeorgeLakoff,�� which refers tothe tendency todiscipline “kids” or buildacontrolledmechanisminordertomoldthemtobecomeself-reliantandobedientadults.Thiscouldbegleaned fromhow freedomsofspeech,association,religionandtheme-diaareallstillsharplycurtailed.�3

But technology, specially the inter-net, has provided a venue for those whowant to wiggle out of these controls andexplorefreedomsthatthoseina“nurturingparent” system�4 would typically enjoy.Atsomepoint,therulingCommunistPartywillfaceachoiceaboutwhether thebestwaytodealwiththemistopursuegreateropen-nessorever-tightercontrol.

Theundergroundmovementofblog-gersandcitizen journalistsknownasFreeJournalists Association of Vietnam (FJAV)

�� GeorgeLakoff,Don’tThinkofanElephant.KnowYourValuesandFrametheDebate:TheEssentialGuideforProgressives,ChelseaGreen,�004

�3 ShawnCrispin, IncapitalistVietnam, it’s ‘repres-sionasusual,’AsiaTimesOnline,July6,2007,http://www.atimes.com/atimes/Southeast_Asia/HG06Ae03.html

�4 GeorgeLakoff,Don’tThinkofanElephant.KnowYourValuesandFrametheDebate:TheEssentialGuideforProgressives,ChelseaGreen,�004

hasstartedtoassertindependencebygath-ering and disseminating news which theypublish on their website. These are thestoriesthatwouldbetypicallycensoredbythegovernment,whichremainsaone-partystateandtypicallydoesnottolerateoppos-ingviews.Everysinglepublication inViet-nam,whetheritisanewspaperoramaga-zineaboutinteriordesignorgolf,hastoberegistered with a Communist party organi-sation.Predictably,manyoftheFJAVactiv-istshavebeeninterrogatedanddetained.�5

However, in a surprising effort toreach out to the techno-savvy citizens, inDecember former deputy prime minister,Vu Khoan, hosted the—and engaged inan—on-linechattodiscussexpectationsasfar as Vietnam’s accession to the WTO isconcerned.Itwasn’texactlyexcitingsinceitwasnotalivechat.Allquestionshadbeenscreenedandsentbeforehand,plusthedis-cussions stayedon safepolitical ground.�6Nonetheless,thefactthatithappenedatallshowsthatVietnam’scommunistrulersaretryingtodemonstratethattheyarelisteningtothepeople.

Howwillingorpreparedtheleadersare to go beyond mere lip service will befurther testedas foreign investors and thegrowingmiddleclass,wemayhope,contin-uetopushforaspectsofgoodgovernance,such as transparency and accountability,bothinpublicandprivatearena.

�5 Shawn W Crispin, In capitalist Vietnam, it’s ‘re-pressionasusual,’AsiaTimesOnline, July 6, 2006http://www.atimes.com/atimes/Southeast_Asia/HG06Ae03.html

�6 Ibid

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“

How willing the leaders aretogobeyondmerelipservicewillbetestedasforeigninvestorsandthegrowingmiddleclasspushforaspectsofgoodgovernance.


A RACE TO WHERE?Fourth Quarter 2006


IfVietnamisfollowingfastinthefoot-stepsofChina,thenitcouldusefullytakeabreathofitsincreasinglypollutedair,andas-sesswhereexactlyitisracingtowards.Thedropinpovertyisimpressive,andillustratessomesuccessofthecurrentdevelopments.Yet,howlastingisthattrendanddoesitre-vealenoughaboutpeoples’situation?Thequalityoflifeofthe300,000peoplenowliv-inginslumsofHoChiMinhcityalone,withpooraccesstosanitation,cleanairandwa-ter,mightearnwagesthatrankthemhigherthan the rural areas they left, but at whatcosttotheirhealthandwellbeing?Toooftentheconsumptiondemandsand investmentdecisions of Westerners and urban-elitesin Asia pressure people to abandon theircommunitiesandsothemovetourban-liv-ingcannotbeassumedasanexpressionoffreewill.

The World Bank reports that Viet-nam’s environment is under considerablestress fromrapideconomicgrowth,urban-izationandrisinghumanpressureonrela-tivelyscarcenaturalresources.“Whileithasgradually improved itsenvironmental regu-latoryframework,Vietnamhasvery limitedcapacity for implementation.Therefore, fu-ture rapid economic growth (an expecteddoublingofGDPinthenext10years)andsubstantialinvestmentsininfrastructuremaysignificantlythreatentheenvironmentalsus-tainability of the country’s development.”�7Thebank reportsonsignsof such threatsemerging,suchasdecliningratesofcatchperunitofeffortinthefisheriessector,withaquacultureactivitieshavingcausedasub-stantialdeclineinmangrovesandwetlandscrucial for spawning fish. Drought is nowbecomingaconcerninVietnam:bytheendof�006,levelsinmajorriverslikeSerepokandKrongAnahadfallenby30percentin

�7 Vietnam Environment, World Bank, http://web.worldbank.org,AccessedDec30th�006.

comparisontothepreviousyear.�8NguyenKhacHieu,aseniorofficialwithVietnam’sMinistryofNaturalResourcesand theEn-vironment, has commented that Vietnamcould be badly hit by climate change andsea-level rise.29 For the Vietnam environ-ment—and consequently the Vietnamesepeople—theforeigndollarspouringintothecountrymaybemoredestructiveinthelongrunthanthechemicalbombsdroppeddur-ingitswarwiththeUnitedStates.

�8 h t tp : / /www. thanhn iennews .com/soc ie ty /?catid=3&newsid=25690

29 h t tp : / /www. thanhn iennews .com/soc ie ty /?catid=3&newsid=�5006

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If Vietnam isfollowingfastinthefoot-stepsofChina,thenitcouldusefullytakeabreathofitsincreasinglypollutedair,andassesswhereexactlyitisracingtowards.


A DIFFERENT PATH?Fourth Quarter 2006


Withglobalconsumption levelsfivetimeswhattheywerejust50yearsago,thenatural world is buckling under the weightofdemand.Theimpacttollsofalltheseareclear:climatechaos,ecosystemstress,soillossanddegradation,groundwaterdeple-tion, and toxics accumulation are someheadlines.The global scientific consensuson climate change proves beyond doubtthattherearelimitstowhatouratmospherecan take, and what changes to our atmo-sphere that our nature, agriculture, watersupplies and cities can withstand.30 TheUK Government Review on the economicimpacts predicted a �0 percent reductionin Global GDP, which is equivalent to twoworldwarscombined.31Already,peoplearelosingtheir livesand livelihoodsduetocli-matechange.3�

Many may applaud the social ben-efits of Vietnam’s economic growth. Butshould the advancement of the economi-callypoorinthatcountrydependonputtingothersindanger,saytheBangladeshisandothers living in low-lying or water-stressedareas? Pollution and inefficient consump-tioniseveryone’sproblemandresponsibili-ty.OverhalfabillionmiddleclassAsiansareconsumingsignificantandgrowingamountsofresourceswithnegativeimpactsontheirown ruralandurbanenvironmentsaswellasabroad.Forexample, theIndianmiddleclasshavehighercarbonlifestylesthantheUKaverage.AsKalpanaSharmawroteinaleaderarticleintheHinduNewspaperinNo-vember:“Theargumentagainstputtingany

30 �007 Report of the UN Intergovernmental PanelonClimateChange:http://www.ipcc.ch/

31 Stern Review on the Economics of ClimateChange,2007,http://www.hm-treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternre-view_index.cfm

3� WorldHealth Organisation Climate Change Pro-gramme:http://www.who.int/globalchange/climate/en/

pressureoncountries like IndiaandChinaat the moment is that they were not re-sponsiblefortheproblem[ofglobalclimatechange], so they should not be bound toslowdownorchangethepatternofgrowth.While15yearsagothisargumenthadsomevalidity,todayweneedtore-examineit.”33

In addition, the article reflected onthe local impacts of current developmentpaths and economic growth. “Our currentpattern of development is already makingtheairinourcitiesunfittobreathe.Ourwa-tersourcesarepolluted,ourfieldsareladenwithchemicalsthat travel throughthefoodchain intoourbodies,andour forests, thelungsofthiscountry,aredisappearingfasterthananyefforttoplantmoretrees.Isthereanypointinrapideconomicgrowthifpeoplehavetodrink,eat,andbreathepoisons?Inthelongrunwedamagenotjusttheglobalenvironmentbutourselvestoo.”

The world physically has neitherenoughresources (particularlyenergy)norsinks (particularly theatmosphere) to sup-port or allow resource-heavy consumer-ist lifestyles for themajority.Consequentlythe type of ‘development’ being pursuedin Vietnam and elsewhere will neither lastnor be possible for everyone. This meansthatresource-heavydevelopmentpathsareactually elitist, and certainly not socialist.Recognisingthisturnstheexistingcognitiveframeofenvironmentalconcernonitshead:findingadifferentpathtosocietaldevelop-ment that isenvironmentallysustainable isa pro-poor and egalitarian concern, not amere preoccupation of the rich with post-materialistinterests.

The implication is that countries in

33 Should we care about global warming? KalpanaSharma,28November,2006,TheHindu,http://www.hindu.com/2006/11/28/stories/2006112803331000.htm


ADIFFERENTPATH? FourthQuarter�006

bothNorthandSouthcouldconsideradif-ferentdevelopmentpath.Rather thansee-ing the environment as something to con-sider after economic growth is booming,the Hindu newspaper recognised the im-portanceofsettingoutintherightdirectionfrom the start. “Logic would suggest thatit is better to start the process now ratherthan wait until it is too late. The country’seconomyneednotsufferiftherearefewerfossilfuelburningcarsontheroadandbet-terpublictransport.Theeconomyneednotbeaffectedifweusebuildingtechniquesforourgrowingcitiesthatarelessenergyinten-siverather thanfollowingtheWesternpat-ternofglass-frontedhighrisesthatrequireahugeamountofelectricitytokeepcoolorwarmasthecasemaybe.Andourenergyrequirementscanbemetifweworkharderto minimise transmission losses, introduceenergysavingatevery level,andpromotenon-pollutingformsofenergygeneration.”

Thechallengeistofindandpromoteresource-light forms of development. Withtherightleadership,developmentneednotdependonriskssuchascheapoil,inequali-tiessuchaspoorpayandconditions,andthe disruption of rural communities’ liveli-hoods. Money can be made through sus-tainable business. In December, the DelhiSchool of Economics in the University ofDelhi launched the report “Indian Compa-nies in the 21st Century: An OpportunityforInnovationthatcanSavethePlanet.”34

34 http://www.wwfindia.org/about_wwf/what_we_do/cel/trade/newpusb.cfm

RajeshSehgal,SeniorLaw&PolicyOfficeratWWF-India,explainedtotheJCCthatthisWWFreport“examinesthescopeforIndiancompaniestobecomeleadingexportersofandinvestorsinsustainablegoodsandser-vices,whilstemergingaskeyactorsinpro-motingaproactiveinternationalsustainabledevelopmentagenda.”

The implications for corporate citi-zenship are that companies and investorsneedtoassesshowtheyarehelpingorhin-dering theright frameworksand incentivesfor innovationanddeliveryof thebusinessmodels needed in a resource-constrainedfuture.Ratherthandoingbusinessasusu-al,withsomesocialandenvironmentalim-provements,thescale,urgencyanddepthofthesustainabilitychallengerequirescompa-niestoengagewithotheractorsinsocietytopromotegovernanceforsustainability.Ifthishappens,thentheneo-corporatistarrange-mentsincountrieslikeVietnammay,para-doxically, be beneficial in the change pro-cess.Otherwisetheywillmerelycompoundtheproblems.Ifso,ratherthancapitalism’srising star, Vietnam could be capitalism’ssupernova, a commercial stellar explosionproducinganextremelyluminouscloudthatbrieflyout-shines itsentirehostgalaxybe-forefadingfromview.Thosecountriescom-mitted to more sustainable and equitableforms of development may not twinkle sobright,yetwillmaintaintheirlight.

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Finding a different path tosocietaldevelopmentthatisenvi-ronmentallysustainableisapro-poorandegalitarianconcern,notamerepreoccupationoftherichwithpost-materialistinterests.


MODERN DAY SLAVERYFourth Quarter 2006


What Global Witness is to conflictdiamonds,35BloombergMarketsistomod-ern-day slavery: both publish investigativestories,withGlobalWitnessspecializingonresource-linked conflicts and corruption intrade systems, Bloomberg Markets featur-ing people who, and issues that,move fi-nancialmarkets.Also,theybothshareare-cord in tacklingsuchuncomfortable issuesasconflictdiamondsandmodernslavery.

While both topics have long beenunderstood within non-governmental orga-nization (NGO) circles, they have for themostpart remainedoutsideof thepublic’scognizance. That ignorance will possiblybeathingofthepastforconflictdiamonds,whichhasbeguntoenjoymainstreamcom-prehensionthankstothe�006blockbustermovie, “Blood Diamond.” For most of theworld’speople,however,theconceptofslav-ery is thoughtofasextinct,anunfortunateinstitutionthatfadedintonon-existencewithAbrahamLincoln’sGettysburgAddress.

Thatisnottosaythemediahasig-noredtheissue.SuchrespectedorgansasTheNewYorker36intheUS,TheGuardian37andBBC38intheUK,andFrontline39inIn-diahaveall runspecial reportsdocument-ingstoriesofindividualsforcedintoworking

35 Combating Conflict Diamonds, Global Witness,http://www.globalwitness.org/pages/en/conflict_diamonds.html

36 John Bowe, NOBODIES: Does slavery exist inAmerica?,TheNewYorker,April21,2003,http://www.sfal-liance.org/media/New-Yorker-4-03.pdf

37 FelicityLawrence,Migrantsinbondedlabourtrap,TheGuardian,March29,2004,http://www.guardian.co.uk/immigration/story/0,,1422657,00.html

38 Indepth:Slaveryinthe21stCentury,BBC,6June2006, http://news.bbc.co.uk/2/hi/in_depth/world/slavery/de-fault.stm

39 Harsh Mander, In bonded servitude, Frontline,January 18-23, 2003, http://www.hinduonnet.com/fline/fl2002/stories/20030131006710600.htm

conditionssosubstandard–andsolimitingasregardstheworker’sabilitytoleave–thatthetitle“slavery”wasappropriate.However,noneofthesestoriesgeneratedthelevelofpublicoutrageonemighthaveexpected,inpartbecausethereportsdepictedincidentsthat hadno connectionwithmost readers’lives.

WhatmadethecoverstoryofBloom-bergMarkets’sDecemberissue40(afollowuptoabreakingstoryofaffiliate,BloombergNews, in November) notably different wasthat it identified theglobal,Western-basedbrandsthatbenefitfromthisformoflabour.AuthorsMichaelSmithandDavidVoreacosincludedcommentsfrommultinationalcom-panies—such as automakers Ford MotorCo., General Motors Corp., Nissan MotorCo.andToyotaMotorCorp.,appliancemak-erWhirlpoolCorp.,andsinkandbathmakerKohlerCo.—afterestablishingthroughinter-viewsanddocumentsthatrawmaterialsfortheirmanufacturingoperationsintheUnitedStatescouldbetracedtosuppliersthatem-ployedslavelabourinBrazil.

By highlighting the nature of thesefirms’supplychains,Bloomberg influencedthemtoadoptamorerigourousapproach.Most of them eventually accepted respon-sibility forensuringthat theirbusinesspro-cesses are not tainted by slavery of anyform,atanyleveloftheirsupplychains.Inother words, the articles triggered a suc-cessfulmobilizationofmarketpower,whichprevious awareness campaigns, such asbooks, special reports, brochures, educa-tionalortrainingprogrammes,wereunabletoachieve.

40 Michael Smith and David Voreacos, The SecretWorld of Modern Slavery, Bloomberg Markets, Dec �006,http://www.bloomberg.com/news/marketsmag/modern_slav-ery1.html


MODERNDAYSLAVERY FourthQuarter�006

The fact that a financialmagazine,which is dedicated to issues that affectstakeholdersintheglobalfinancialmarkets,tookinterestindealingwiththetopicofslav-ery isa testament tohowhumanrights is-sues–ifeffectivelypublicised–canimpactacompany’sbottomline.It’salsoareminderthatdisregardingCorporateSocialRespon-sibility (CSR) concerns will be detrimentalnotonlytoacompany’sreputation,butalsotoitsfinancialhealth.

IntheBloombergMarketsreport,thejournalists joinedlabour inspectorsastheyraidedsomeof the1,000charcoal-makingcamps inBrazil’sAmazonbasin to investi-gate reports ofmen,women, and childrenbeing exploited to aid in the production ofcharcoal for companies that manufacturepigiron,akeyingredientinsteel-making.

Thestorygraphicallyshowedwork-erslivinginsqualidshackswithoutelectric-ityandplumbing,drinkingunsanitarywaterand receivingnopay.Mostof theworkerswere recruited from poverty-stricken prov-inces many miles and forests away anddesperatetofindwork.Thestorypresenteddamning evidence (supported by Brazilianinspectorsandcustomsdocuments)thatthecharcoaloriginatingfromthesecampswasroutinely purchased by brokers for sale tosteelmakersandfoundries,whosesemi-re-finedproductwasthenpurchasedbysomeoftheworld’slargestcompaniesthatmanu-facturecars,tractors,sinksandrefrigeratorsforU.S.consumption.

To Kevin Bales, president of theWashington–based NGO Free the Slavesargues “companies have an absolute obli-gation tounderstandwhat’s in theirsupplychainandreviewitfromamoralandahu-man standpoint”. Bales, who is also a so-ciologyprofessoratLondon’sRoehamptonUniversity, challengedcorporations tostepup to their responsibility of ensuring thesourceofproductstheybuyandsellisnottainted by slavery. He added: “Slavery istheftoflife.It’sjustaboutthemostprofoundloss of human dignity that you can have,

shortofmurder.”41

TheUN’sInternationalLabourOrga-nization (ILO)definesslaveryor forced la-bourasworkperformedinvoluntarilyunderthreatofpenalty,withscarceornocompen-sation.4�ILOaddsthatthepracticeoccurswhen“peoplearesubjected topsychologi-cal and/or physical coercion (the menaceof penalty) in order to perform some workor service which they would otherwise nothaveaccepted,ornothaveacceptedattheprevailingconditions(theinvoluntariness).”

Itnotesthathumantraffickingistheprocessbywhichpeopleendupinslavery.ItisdefinedbytheUnitedNationsConven-tionagainstTransnationalOrganizedCrimeas“therecruitment,transportation,transfer,harbouring or receipt of persons” by suchmeansas threat,useof forceorcoercion,abduction, fraud, deception, etc., “for thepurposeofexploitation”43

ILO stresses that modern slaverythrives because it is lucrative. ILO esti-matesthatglobalprofitsmadefromforcedlabourersexploitedbyprivateenterprisesoragentsreachUS$44.3billioneveryyear,ofwhichUS$31.6 billion aremade from traf-fickedvictims.Everyoneprofits,except forthe slave, of which there are estimated tobeover12millionpeople.Theseincludeatleast360,000inindustrialisedcountries,ofwhomatleast270,000havebeentraffickedintoforcedlabour.Approximately43percentofthesearetraffickedintosexualexploita-tion,3�percentintolabourexploitationandabout�5percentforamixofsexualandla-


4� Forced Labour and Human Trafficking, Estimat-ingtheProfits, InternationalLabourOffice,Geneva,March2005, http://www.ilo.org/dyn/declaris/DECLARATIONWEB.DOWNLOAD_BLOB?Var_DocumentID=5059

43 http://www.unodc.org/unodc/trafficking_conven-tion.html


bourreasons.44

Mostareenslavedunderasystemofdebtbondage,aswasthecaseoftheslavesin the Brazilian charcoal camps. Lured byrecruiters and then hired by camp ownerspromising steady-paying jobs, they foundthemselvestrappedinacycleofworkingofftheir debts from exorbitantly priced basicslike tools, soap, and food bought at com-pany stores.Many go months without payorseetheirwageswhittledtonothingfromthecostofevenwork-relateditemssuchastools,bootsandgloves.Lackofmoney,animpenetrablejungleandalongdistancetotravel to safety made it impossible for theslavestoleave.45

As soon as the Bloomberg NewsstorybrokeinNovember,thosewhoarein-volvedinthesupplychainstartedtoredeemthemselves, obviously fearful of backlash.Thecarcompanies,inparticular,almostim-mediatelydrewontheirpurchasingpowertoprodtheirfirst-tiersupplierstoforcealldown-streamvendorstoavoidforcedlabour.Themost concrete response was the move byGeneralMotors,Ford,DaimlerChryslerandHondatojointogetherundertheAutomotiveIndustryActionGrouptotraintheirsuppliersinhowtoavoidbuyingslave-mademateri-als.ThecarassociationengagedBusinessforSocialResponsibility,aSanFrancisco-

44 Forced Labour and Human Trafficking, Estimat-ingtheProfits, InternationalLabourOffice,Geneva,March2005, http://www.ilo.org/dyn/declaris/DECLARATIONWEB.DOWNLOAD_BLOB?Var_DocumentID=5059


basedorganizationthatpromotesgoodcor-poratepractices,todevelopthetrainingpro-grammewhich is set tocommenceby thesecond quarter of �007. Toyota, however,decidednotto jointhetrainingprogrammebecause it believes it can better resolveforcedlabourissuesonitsown.Itsdecisionledsometoquestionthecarmanufacturer’shigh-profilecampaignforenvironmental in-novationthroughitshybridcars.46

One of those that voiced concernabout Toyota’s perceived inaction was theInterfaith Center. Representing US$700million in investments it campaigns for im-provedsocialandenvironmentalstandards.BypubliclyquestioningToyota’sdecision,itjoinedgroupswithfinancialproducts,suchaspensionandmutualfunds,toasserttheirstakeintheissue.

Ideally, thefight to rid theplanetofslavery,wouldfocusglobalattentionnotonlyon thecarshowroomor thefinancialmar-kets,butonthebroadercontextsthatcreatethepotentialforslavery.Thekeyingredienttoaslave-drivenbusiness ispoverty.Withoverabillionpeoplescrapingbyonadollaraday,povertybreedsandfeedsthesupplyoflow-costlabourers.Thisisespeciallytruein developing countries whose economiesare export-dependent and have industriesthatarestillatthemercyofWesternretail-erswhoplacemorevalueonpricingthanoninstitutingethicsandhumanrightspractices.Unfortunately,evenincaseswheregovern-mentsandtheprivatesectorisresponsible,corruptioncanundothepositives.Itmattersiflawsareinplacebutenforcersturnablindeyeoraretakingbribes.

That is why policymakers, NGOs,andotherstakeholdersinboththedevelop-ingandindustrialisedworldshaveanimpor-tantroletoplay.Theymustdevelopstrate-giesthataddresstheeconomic,culturalandsocial conditions, which include illiteracy,

46 DavidVoreacosandMichaelSmith,AutomakersPledgeJointEffortWithSupplierstoFightSlavery,Dec11,2006,http://www.bloomberg.com/apps/news?pid=20601086&sid=aqs8kA0Qrpzw


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The cover story ofBloombergMarketsinDecemberidentifiedtheglobal,Western-basedbrands—suchasFord,GeneralMo-tors,Nissan,Toyota,WhirlpoolandKohlerCo.—thatbenefitfromslavery.



powerlessness, inadequate governance,and the lack of economic alternatives thatallowindividualstobeenslaved.Therearemechanisms already in place that can aidthisprocess.For instance, thecertificationsystemsenactedfor thediamond,forestry,garments, footwear, and coffee industries,among others, can play a role. Some arestillworksinprogress,buttheyareallstriv-ingtoaddresstheproblem. Twohundredyearsago,thetradingof slaves was banned by theUSand UK,ending a barbaric chapter of those coun-tries’histories.Now,asawarenessisraisedinourcollectiveconsciousnessthatslaveryhaspersistedandevolved,noexcusecanbemadefornottakingallnecessarystepstostampitoutforgood.

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