Ethical Corporation magazine - November 2013
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The Accenture CEO survey found that while CEOs remain committed to sustainability, they feel constrained by market pressures in demonstrating the business value of sustainability initiatives. 83% of CEOs believe governments need to do more to incentivize sustainability. The report identifies a group of "transformational leaders" who frame sustainability as a driver of innovation and growth, partner across their value chains, and measure the value of sustainability in new ways beyond cost reductions.
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Ethical Corporation • November 2013
Analysis: Extractive Industries Transparency Initiative
A number of companies that promote
themselves as green business leaders
have had their commitment to
sustainability brought into question
by signing a letter to President Obama
calling for the approval of the controversial Keystone XL pipeline. The
October letter, signed by 168 chief
executives, emphasises the need to
boost economic recovery and
enhance US competitiveness, and
says environmental concerns could
“be managed”. Signatories include
the leaders of GE, Siemens and
PricewaterhouseCoopers, which
compiles the Carbon Disclosure
Project’s indexes. Critics say the letter
demonstrates business hypocrisy
when it comes to reducing emissions
and combating global warming. The
Keystone XL pipeline would transport
emissions-intensive oil from Canada’s
tar sands to the Texas Gulf coast.
EITI digs in
By Jerri-Lynn Scofield
Ten years on from its launch, the EITI has
developed its standard and is expanding
its membership
BMW
BMW has been taken aback by
demand for its first electric car, the i3,
which will start to be delivered in
Europe in November. About 8,000
of the cars have been reserved by
customers, exceeding the firm’s
expectations. The i3 will sell for about
£30,000, and BMW is seeking to
Sparking a revolution
soothe “range anxiety,” or concerns
that electric vehicles will too quickly
run out of power, by offering
customers the option of a back-up
conventional vehicle that can be used
for longer journeys. BMW chief financial officer Friedrich Eichiner says: “If
demand holds, and that’s what it is
looking like, we will have to invest
more.” Electric cars look set to roll out
on an ever greater scale: Volkswagen
has outlined plans to offer as many
as 40 models of electric vehicles.
arlier this year, the Extractive Industries
Transparency Initiative took a major leap
forward with the adoption of a stricter new
standard at its biennial conference in Australia.
“[This] is an illustration that multistate
corporate governance need not be a feeble
lowest common denominator effort, but can
reflect real leadership in taking policy where it
hasn’t been before,” says Jonas Moberg, head US to join the party
In addition to the four EU countries that have
of the EITI’s secretariat in Oslo.
When EITI was launched 10 years ago, both announced intentions to join EITI, the US has
governments and companies resisted disclosing revealed similar plans, and is expected to
even basic information. “With the new EITI submit its EITI application early in 2014.
standard, the consensus as to what
should be disclosed has broadened
significantly,” says Moberg.
The new standard requires
going beyond merely looking at
fiscal data – such as corporate tax
and other payments – to look in
detail at the licensing application,
beneficial ownership, and specific
contractual provisions that apply to
resource extraction.
Although “any country with a
significant resource extraction
sector could benefit from implementing the EITI standard”,
Moberg says, initially, the EITI was
aimed at developing countries with EITI brings benefits beyond simply transparency
a large dependency on resource
extraction.
The EITI’s focus on transparency and
“Now, there’s been a shift to middle and disclosure has also stimulated tightened
higher income countries also implementing accounting disclosure requirements in both
the EITI standard,” says Moberg, with the UK the EU and the US for companies involved in
and France announcing intentions to join the resource extraction, requiring them to report
EITI at the meeting in Australia, and Italy and payments to government officials in third
Germany following at the G8 Summit in June. countries. (The US requirements are
Forty-one countries are presently imple- temporarily in limbo, following an adverse
court decision in July.)
menting the EITI standard.
Although the new US rules don’t make
EITI itself has no authority to enforce its
standard by taking domestic or international such payments themselves any more per se
legal action against countries that fail to meet illegal than they already are under existing US
their EITI commitments. But it can determine law, inaccurate disclosure of such payments
its membership – an authority it has used to could trigger US securities law liability, and
enforce compliance.
possibly prompt private lawsuits by investors.
“EITI delisted Equatorial Guinea in 2009, And the increased transparency will also alert
São Tomé and Príncipe in 2009, and Gabon in the media and civil society groups in countries
2013. Currently, the EITI has suspended the where such payments are made.
E
Electric avenue
Central African Republic, DR Congo, Madagascar and Sierra Leone, and each of these
countries could face delisting, if remedial
measures are not taken,” says Anders
Kråkenes, EITI communications manager. São
Tomé and Príncipe responded to EITI censure
and the island nation has been readmitted to
the organisation.
“What is always hard to get people’s heads
around is that EITI started as a quasi multilateral response to NGO campaigning,” says
Moberg. “The early hope was that it would
result in a voluntary corporate social responsibility code. But it’s gone much further. The
EITI instead evolved into a standard implemented by governments.”
HUNTSTOCK
Practise what you
preach?
7
EthicsWatch](https://image.slidesharecdn.com/2013-novextract-131115104428-phpapp02/85/Ethical-Corporation-magazine-November-2013-6-320.jpg)
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8 EthicsWatch
Ethical Corporation • November 2013
Cottoning on
By Eric Marx
Russia’s heavy-handed treatment of
activists protesting against Arctic drilling
looks to have set the tone for this new
battleground
hen it comes to taking on the fossil fuel
industry, what does direct action look like?
If you’re Greenpeace, the obvious answer is
to try to interrupt major oil operations in the
Arctic – where an estimated quarter of the
world’s oil and gas reserves are thought to
reside. The global conservation organisation has
consistently called for a sanctuary around the
north pole and a ban on oil
drilling in the Arctic, but only in
the past two years did it launch a
more confrontational approach
involving the illegal boarding of
offshore oil rigs.
The risky strategy has helped
attract attention to dangerous
Arctic energy exploration. In late
September Greenpeace drew the
full fury of the Russian state on
30 activists, after two of their
party scaled Gazprom’s new oil
platform Prirazlomnaya.
While the Greenpeace vessel The new normal for activists?
Arctic Sunrise sat in international
waters, Russian coastguard officers forcibly significant decline in output from its convenboarded and seized control of the ship, tional reserves and so must turn to oil
arresting the entire crew, initially on a charge prospecting in the icy waters north of the
of piracy. While the original charges have been Arctic Circle.
scaled back, all 30 remained in custody seemFor this reason, “Greenpeace sees
ingly facing lengthy jail terms in late October [Gazprom’s oil platform Prirazlomnaya] as the
thin edge of the wedge”, says Anthea Pitt,
as Ethical Corporation went to press.
executive editor of Petroleum Economist
magazine. “If it comes off, then it’s almost open
‘Blatant intimidation’
“The Russian authorities are trying to scare season for the entire Arctic.”
Gazprom’s giant $4bn Prirazlomnaya
people who stand up to the oil industry in the
Arctic, but this blatant intimidation will not platform could supply oil directly to the global
succeed,” Greenpeace International executive market by early 2014 and, in the process, help
director Kumi Naidoo said following the arrests. solidify Russia’s position as a global energy
Naidoo subsequently offered himself as leader.
“Ignoring this case will only embolden
security for the so-called Arctic 30 – 28 Greenpeace activists and two freelance journalists – Russian authorities further,” warns Cooper.
“What specific governments and the interwriting in a letter mailed to the Russian president, Vladimir Putin, of his willingness to national community, in general, need to focus
“share” their fate. Human rights organisations on is not whether they support what Greenin Russia see the Greenpeace arrests as one peace did at the Prirazlomnaya oil rig, but the
more sign of a Russian Federation bent on fact that the Greenpeace activists were
unarmed protesters whose actions do not
stifling any kind of democratic dissent.
“Since Putin came back to power things warrant such grotesque criminal charges.”
W
Concern about forced labour in the
cotton fields of Uzbekistan is
prompting an increasing number of
brands to refuse to buy cotton from
the country, according to campaign
ISTOCK
Testing the waters
have gone from bad to worse,” says Sergei
Nikitin, Amnesty International’s Moscow
office director. “Here we have peaceful, nonviolent actions from a well-known
organisation which identified itself.”
The arrest of the Arctic 30 through the use
of disproportionate sanctions is essentially an
international version of the Pussy Riot case,
says Tanya Cooper, Russia researcher at
Human Rights Watch.
“This is a message to show Greenpeace how
high the stakes are for their environmental
activism,” says Cooper.
Energy analysts say the Greenpeace action
may have struck a nerve with the Russian state
at a time when it is particularly vulnerable:
heavily dependent on oil and gas revenues to
finance government operations, it faces a
An opaque supply chain
IGOR PODGORNY/GREENPEACE
Analysis: Arctic 30
group the Responsible Sourcing
Network (RSN). In the run-up to this
year’s cotton harvest, Ikea, Marks
Spencer and Canadian sportswear
label Lululemon athletica joined 133
other signatories in a pledge against
forced labour. As we have reported in
Ethical Corporation, each year in
Uzbekistan, under a “quasi-feudal”
system, state employees, students and
even young schoolchildren must help
out with the harvest or face punishment. Uzbekistan has this year, for
the first time, allowed International
Labour Organization inspectors to
observe the harvest, though it is
“difficult for citizens to speak openly
with ILO monitors”, RSN says. Most
Uzbek cotton goes to Bangladesh and
China, making it hard to assess the
effect of the brands’ boycott.
100 pledges
A worker-safety accord committed to
improving conditions in the factories
of Bangladesh reached a 100-brand
milestone in October. The three
signatories that took the Bangladesh
Accord on Fire and Building Safety
past its century are Woolworths
Australia, Germany’s Gebra, which
makes safety warning products, and
international trader Wünsche Group.
The accord was established by international unions IndustriALL and UNI
in the wake of the April 2013 Rana
Plaza factory collapse, which killed
more than 1,000 textile workers. By
signing the accord, brands pledge to
make funds available for factory
safety upgrades, and that workers
will continue to be paid while renovations are taking place.](https://image.slidesharecdn.com/2013-novextract-131115104428-phpapp02/85/Ethical-Corporation-magazine-November-2013-7-320.jpg)
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Ethical Corporation • November 2013
EthicsWatch
9
On track
Analysis: child labour
Too many children
still at work
By Judy Kuszewski
A new report claims good progress on
child labour, but warns against complacency
new report from the International Labour
Organization’s International Programme
on the Elimination of Child Labour (IPEC)
shows a steep decline in child workers worldwide during the period 2008-2012. The report
is the latest in IPEC’s periodic surveys that aim
to measure trends in child labour, towards the
ILO target to eliminate the worst forms of child
labour by 2016.
The report identifies 168 million children
engaged in child labour worldwide, down
from 215 million in 2008, and 245 million in
2000. More than half are involved in hazardous
work, considered one of the worst forms of
child labour. While Asia and the Pacific regions
report the highest absolute numbers of child
labourers, the highest rate of child labour per
capita remains in sub-Saharan Africa.
A
Well reputed
YONGYUAN/ISTOCK
Companies with better reputations
for corporate responsibility are much
more likely to be recommended by
their customers than laggards,
according to the 2013 CSR RepTrack
100 study, carried out by US-based
consultancy the Reputation Institute. The RepTrack survey, covering
55,000 consumers globally, found
that 73% would recommend companies perceived to be “delivering on
corporate social responsibility”, but
Social value engine
only 17% would recommend companies seen to be “poorly delivering”.
The companies with the world’s best
reputations, according to the study,
are Microsoft, Disney, BMW and
Google. “Companies must recognise
that creating social value is a prerequisite to creating business value. That
makes monitoring and quantifying
the returns on CR essential,” the
Reputation Institute says.
not be met as evidence of this danger.
Gerard Oonk of the Stop Child Labour
Campaign coalition warns: “It’s not clear what
specific plans individual countries have to
speed up progress, and whether ILO is able to
MYOUSSEF/ISTOCKPHOTO
Zurich-headquartered Credit Suisse
has launched what it says is the
world’s first stock market tracking
index to follow the performance of
companies with lesbian, gay, bisexual
and transgender (LGBT) friendly
policies. The index follows US companies that score high on the Human
Rights Campaign’s Corporate Equality
Index, which benchmarks corporate
policies and practices on LGBT
employees. Companies tracked by the
index include Apple, Johnson
Johnson, Pfizer and Wells Fargo.
Timothy O’Hara, Credit Suisse global
head of equities, says: “Wall Street,
and Credit Suisse in particular, has
a strong track record of providing
leadership and support for LGBTrelated issues.”
Devil in the detail
While the improvements in numbers are
heartening, the picture is considerably more
complex in the detail. The report is transparent
on the fact that gaps remain in the data,
citing “eastern Europe, central Asia, the
Pacific, developed countries and several Asian
countries” as having missing or incomplete
data.
However, IPEC’s senior statistician Yacouba
Diallo says the picture is getting better. “Our
current data coverage is an improvement on
our previous estimate. We cover 53% of the
population of children aged 5-17, compared to
[previously] around 44%. This is based on 75
national data sets.”
Are the data gaps not cause for concern,
then? Diallo explains: “There are gaps in
certain regions, but that doesn’t mean we have
no data – just not enough to provide an
estimate for these regions. For this kind of
exercise, we aren’t able to provide statistics
because of our sample size in these regions.”
NGOs and the ILO alike express concern
over the potential for complacency that could
undermine the progress recently made, and
cite the fact that the 2016 target for the elimination of the worst forms of child labour will
A burden not to be borne
monitor it. The Dutch government, for
example, are working on a global risk analysis
of where the risk is in which industries. They
will then use this to focus on where the risk is
greatest, cooperate with NGOs and unions,
and use their own influence in specific sectors
where the risk is highest.”
The ILO’s Benjamin Smith explains that,
while the focus of the report is on policy
makers, there are clear actions private sector
employers can take to continue and accelerate
the trends in reduction in child labour.
“Companies can have a clear policy of no tolerance of child labour in their operations and
supply chain, then do their due diligence on
children’s rights. Most child labour, by vast
margins, occurs in the informal economy.
Therefore, we need to work towards formalising those parts of supply chains to get at the
root causes of child labour.”
And with 168 million instances of child
labour, there is still a lot to do.](https://image.slidesharecdn.com/2013-novextract-131115104428-phpapp02/85/Ethical-Corporation-magazine-November-2013-8-320.jpg)
Ethical Corporation magazine - November 2013
- 1. ECM November_Layout 1 05/11/2013 17:33 Page 1 Sustainable business in Europe Continent of contrasts Climate change IPCC's final warning (again) Forest offsetting REDD hot solution? November 2013 www.ethicalcorp.com The executive whistle When to blow, and how to do it
- 2. ECM November_Layout 1 05/11/2013 17:34 Page 2 rt C10 % po e E 10 ur re ot Qu ave g yo s sin to howca S on Get your report in the hands of the stakeholders it was written for! Stand out from the crowd – promote your Corporate Responsibility and Sustainability report with our new CR Report Showcase This is your chance to get your report infront of all your key stakeholders. On a daily basis your partners, suppliers, clients, colleagues, NGOs, academics, governance and press, visit Ethical Corporation. We will make sure you get the maximum exposure that your report deserves. § List your report NOW! Get in touch: +44 (0) 20 7375 7244 | aaron.jackson@ethicalcorp.com
- 3. ECM November_Layout 1 05/11/2013 17:34 Page 3 Ethical Corporation • November 2013 Contents Contents 5 From the editor EthicsWatch 6 Accenture CEO survey Look for the value 7 Extractive sector transparency EITI tightens up 8 Arctic activism Russia gets heavy 9 Child labour ILO seeks more data 10 Mallen Baker Electric dreams Briefing: Europe p26 Is REDD the offsetting answer? p37 How to be strong 24 Cheat sheet Reports and research, distilled and analysed 32 BrandWatch Power to the people, from Ikea 12 Un-common market 14 Corporate reputation recovery 18 EU red tape that works? 26 Emissions and deforestation REDD alert 21 Spit and Polish 30 NGOwatch Russia’s in the Antarctic too Strategy and management 34 IPCC’s new report Same old same old? 37 The GlobalEthicist How to blow the whistle 39 Global Compact 100 A credible new ethical index 31 Peter Knight We can’t share everything 43 China column Paul French is back in Burma Review 44 Report: Merck 45 Report: City of Warsaw 46 New books 47 Academic news COVER IMAGE: ISTOCKPHOTO 48 People on the move p11 Europe's great and the (not-so) good p34 More bad news 50 Toby Webb Risky business 3
- 4. ECM November_Layout 1 05/11/2013 17:34 Page 5 Ethical Corporation • November 2013 From the editor Welcome to the November 2013 issue he reputation of business in Europe has seemingly never been lower, as the continent’s economy continues to only slowly recover from the financial crisis and its after effects. This is particularly so in the continent’s southern states, where unemployment remains very high. Certainly there is a public and media appetite to weed out the corporate bad guys, as the scandals on company tax policies, executive pay levels, and everything else have demonstrated. Any observer of the European Union would be unsurprised to learn that the European commission in Brussels has, as for many things, released guidance and regulations regarding corporate responsibility. Unlike some other commission activity, however, reaction to these regulations has been largely positive. There is much to be said for standardising the approach on these businesscritical matters for companies that have operations across the EU. Some companies, of course, have seen the opportunity in regaining trust through developing more sustainable business models, as our briefing, from p11, demonstrates. Elsewhere in this issue, from p34, we focus on what the recent report from the Intergovernmental Panel on Climate Change really means for business. It’s sadly very tempting to say ‘here we go again’, and certainly a lot of what the IPCC says now is merely confirming what the panel has always said. There is a pressing need for companies to look beyond the next few years and to really think about what increased global temperatures will mean for them and their supply chains. Even if we manage to keep the world’s climate within the 2C increase that scientists regard as the maximum safe limit, companies will be operating in a far more uncertain world. In our strategy and management section, the latest from our GlobalEthicist columnist focuses on the difficult situation a toplevel executive whistleblower can find him or herself in, and what T the options are to get out of the situation. Clearly an employee at any level in a company can find themselves uncomfortable – on an ethical, moral or personal basis – with the actions of others. Responsible organisations have strict codes of conduct in such circumstances, with clear guidance for employees including communication channels through which they can make their concerns known. But when you are near the top of a company, or even at the top like the former Olympus chief executive Michael Woodford, your options become, inevitably, more limited. See how you can extricate yourself from p37. The executive whistle When to blow, and how to do it Also this month we have all our usual columnists and story analysis, plus reviews of reports from Merck and the City of Warsaw, which is the self-proclaimed first report to follow the new GR4 guidelines. Ethical Corporation will be back in early December with our usual review of the year and our preview for 2014. If there’s anything you think we should include, please get in touch. n Sustainable business in Europe Continent of contrasts Climate change IPCC's final warning (again) Forest offsetting REDD hot solution? November 2013 www.ethicalcorp.com Ian Welsh Editor Contributors: Rob Bailes, Mallen Baker, Oliver Balch, Andrea Bonime-Blanc, Aleksandra Dobkowski-Joy, Jon Entine, Paul French, Stephen Gardner, Nadine Hawa, Phoebe Hayes, Peter Knight, Judy Kuszewski, Claire Manuel, Eric Marx, Jerri-Lynn Scofield, Toby Webb Publisher: Toby Webb toby.webb@ethicalcorp.com Editor: Ian Welsh ian.welsh@ethicalcorp.com Contributing editor: Mallen Baker Sub editors: Sarah Burton, Gareth Overton Business Intelligence for Sustainability People on the move 7-9 Fashion St, London E1 6PX UK Subscriptions: +44 (0) 20 7375 7575 Editorial: +44 (0) 20 7375 7213 ISSN 1758-1575 52 Advertising and sales: Oliver Bamford Design: Alex Chilton Design moves@ethicalcorp.com oliver.bamford@ethicalcorp.com | +44 (0) 20 7375 7518 info@alex-chilton.co.uk | +44 (0) 20 7042 6340 Subscriptions subs@ethicalcorp.com | +44 (0) 20 7375 7575 Corporate subscription packages from £495 Ethical Corporation is printed by Four Way Print Ltd on Green Coat plus paper, which comprises 80% recycled and 20% Forest Stewardship Council certified source material. 5
- 5. ECM November_Layout 1 05/11/2013 17:34 Page 6 6 EthicsWatch Ethical Corporation • November 2013 EthicsWatch Get off my land impact, says the report. “What we heard from CEOs is that they are struggling to make the case that links sustainability with business value. Although they haven’t lost faith with markets, they believe that governments are going to have to intervene to set the right market conditions to ensure that the right kind of outcomes are rewarded,” says Peter Lacy, Accenture’s managing director of strategy and sustainability in Asia-Pacific, and lead author of the CEO study. Analysis: CEO survey Bosses seek sustainability value By Rob Bailes Company bosses feel constrained by market expectations, but transformational leaders are emerging ustainability remains firmly on the business leader ’s agenda, but chief executives are increasingly finding themselves constrained by market expectations and unable to quantify and harness the business value of sustainability. JUPITER IMAGES S Sustainability still isn’t everyone’s cup of tea This was the prevailing view that emerged from a new UN Global Compact-Accenture study of more than 1,000 global CEOs from 27 industries and 103 countries. The third Global Compact CEO Study claims to be the largest piece of research into the views of chief executives on sustainability to date. It finds that while CEOs remain convinced that sustainability can be a driver of growth and innovation, businesses are struggling to deliver the business case at scale. An inability to make the connection between sustainability and business value is seen as a critical factor in blocking further progress to embedding sustainability. And 83% of CEOs believe that an increase in government intervention – by way of providing an enabling environment for the private sector – is integral to advancing sustainability. Government intervention can help move sustainability beyond incremental advances to a collective and transformative Transformational leaders Of unique interest to this year’s study, Lacy says, was the identification of an emerging group of transformational leaders. These are CEOs of companies that demonstrate both sustainability leadership and traditional high business performance, and they are framing sustainability in very different ways from other companies. “They are companies that are able to monetise sustainability through their top line,” Lacy says. “They are able to drive a sustainability innovation agenda that is very clearly and tangibly linked to value and that’s where they are able to convince the customer and consumer that this all makes sense.” What attributes do transformational leaders possess? The report identifies several emerging themes that are enabling transformational leaders to achieve both value creation and sustainability impact. One strong theme is the ability to move beyond reactive and incremental responses to external pressures in favour of a deeper understanding of sustainability as a driver of innovation, differentiation and growth. These businesses are converting sustainability to advantage and value creation. Another major point of differentiation, says Lacy, is the commitment of these companies to engage in partnerships and collaboration throughout the value chain. They recognise the value of external collaboration in helping the business to achieve its sustainability goals. Last, but not least, transformational leaders are measuring the value of sustainability to the company. These companies are quantifying the impact of their initiatives and sustainable business models to the company, as well as tracking their impact on local communities. RSOKOLOFF/ISTOCKPHOTO What bosses think, the EITI pushes on, the Arctic 30 and child labour Greenpeace is hoping to obstruct hydraulic fracturing, or fracking, for shale gas in the UK by encouraging use of trespass laws. Greenpeace campaigner Anna Jones says: “Under English law, if you own land, your rights extend to all the ground Anti-fracking action intensifies beneath it. If someone drills under your home without permission, it is trespass.” Fracking companies would have to obtain explicit consent from all landowners, Greenpeace says. Evidence for the claim comes from a legal case involving businessman Mohammed al-Fayad, former owner of Harrods, who in 2010 won compensation for trespass from an oil company that drilled without permission under his Surrey estate. The UK Department of Energy and Climate Change says that oil and gas developers can negotiate access rights with landowners. Food for thought Hard on the heels of revelations from retail giant Tesco about the amount of supermarket food wasted in the UK, the European commission in Brussels is considering European Union food waste reduction targets. The emphasis would be on cutting waste from the distribution and post-retail stages of the food supply chain, the commission says, meaning most pressure to achieve cuts could fall on supermarkets and consumers. The commission’s proposals could be published by the end of the year. Meanwhile, an October report from the non-profit Waste Resources Action Programme (Wrap) found that waste from the production of food in the UK outweighed waste arising from its distribution and consumption. In 2011, 4.3m tonnes of food was wasted, but 3.9m tonnes of that is “manufacturing waste”, Wrap says.
- 6. ECM November_Layout 1 05/11/2013 17:34 Page 7 Ethical Corporation • November 2013 Analysis: Extractive Industries Transparency Initiative A number of companies that promote themselves as green business leaders have had their commitment to sustainability brought into question by signing a letter to President Obama calling for the approval of the controversial Keystone XL pipeline. The October letter, signed by 168 chief executives, emphasises the need to boost economic recovery and enhance US competitiveness, and says environmental concerns could “be managed”. Signatories include the leaders of GE, Siemens and PricewaterhouseCoopers, which compiles the Carbon Disclosure Project’s indexes. Critics say the letter demonstrates business hypocrisy when it comes to reducing emissions and combating global warming. The Keystone XL pipeline would transport emissions-intensive oil from Canada’s tar sands to the Texas Gulf coast. EITI digs in By Jerri-Lynn Scofield Ten years on from its launch, the EITI has developed its standard and is expanding its membership BMW BMW has been taken aback by demand for its first electric car, the i3, which will start to be delivered in Europe in November. About 8,000 of the cars have been reserved by customers, exceeding the firm’s expectations. The i3 will sell for about £30,000, and BMW is seeking to Sparking a revolution soothe “range anxiety,” or concerns that electric vehicles will too quickly run out of power, by offering customers the option of a back-up conventional vehicle that can be used for longer journeys. BMW chief financial officer Friedrich Eichiner says: “If demand holds, and that’s what it is looking like, we will have to invest more.” Electric cars look set to roll out on an ever greater scale: Volkswagen has outlined plans to offer as many as 40 models of electric vehicles. arlier this year, the Extractive Industries Transparency Initiative took a major leap forward with the adoption of a stricter new standard at its biennial conference in Australia. “[This] is an illustration that multistate corporate governance need not be a feeble lowest common denominator effort, but can reflect real leadership in taking policy where it hasn’t been before,” says Jonas Moberg, head US to join the party In addition to the four EU countries that have of the EITI’s secretariat in Oslo. When EITI was launched 10 years ago, both announced intentions to join EITI, the US has governments and companies resisted disclosing revealed similar plans, and is expected to even basic information. “With the new EITI submit its EITI application early in 2014. standard, the consensus as to what should be disclosed has broadened significantly,” says Moberg. The new standard requires going beyond merely looking at fiscal data – such as corporate tax and other payments – to look in detail at the licensing application, beneficial ownership, and specific contractual provisions that apply to resource extraction. Although “any country with a significant resource extraction sector could benefit from implementing the EITI standard”, Moberg says, initially, the EITI was aimed at developing countries with EITI brings benefits beyond simply transparency a large dependency on resource extraction. The EITI’s focus on transparency and “Now, there’s been a shift to middle and disclosure has also stimulated tightened higher income countries also implementing accounting disclosure requirements in both the EITI standard,” says Moberg, with the UK the EU and the US for companies involved in and France announcing intentions to join the resource extraction, requiring them to report EITI at the meeting in Australia, and Italy and payments to government officials in third Germany following at the G8 Summit in June. countries. (The US requirements are Forty-one countries are presently imple- temporarily in limbo, following an adverse court decision in July.) menting the EITI standard. Although the new US rules don’t make EITI itself has no authority to enforce its standard by taking domestic or international such payments themselves any more per se legal action against countries that fail to meet illegal than they already are under existing US their EITI commitments. But it can determine law, inaccurate disclosure of such payments its membership – an authority it has used to could trigger US securities law liability, and enforce compliance. possibly prompt private lawsuits by investors. “EITI delisted Equatorial Guinea in 2009, And the increased transparency will also alert São Tomé and Príncipe in 2009, and Gabon in the media and civil society groups in countries 2013. Currently, the EITI has suspended the where such payments are made. E Electric avenue Central African Republic, DR Congo, Madagascar and Sierra Leone, and each of these countries could face delisting, if remedial measures are not taken,” says Anders Kråkenes, EITI communications manager. São Tomé and Príncipe responded to EITI censure and the island nation has been readmitted to the organisation. “What is always hard to get people’s heads around is that EITI started as a quasi multilateral response to NGO campaigning,” says Moberg. “The early hope was that it would result in a voluntary corporate social responsibility code. But it’s gone much further. The EITI instead evolved into a standard implemented by governments.” HUNTSTOCK Practise what you preach? 7 EthicsWatch
- 7. ECM November_Layout 1 05/11/2013 17:34 Page 8 8 EthicsWatch Ethical Corporation • November 2013 Cottoning on By Eric Marx Russia’s heavy-handed treatment of activists protesting against Arctic drilling looks to have set the tone for this new battleground hen it comes to taking on the fossil fuel industry, what does direct action look like? If you’re Greenpeace, the obvious answer is to try to interrupt major oil operations in the Arctic – where an estimated quarter of the world’s oil and gas reserves are thought to reside. The global conservation organisation has consistently called for a sanctuary around the north pole and a ban on oil drilling in the Arctic, but only in the past two years did it launch a more confrontational approach involving the illegal boarding of offshore oil rigs. The risky strategy has helped attract attention to dangerous Arctic energy exploration. In late September Greenpeace drew the full fury of the Russian state on 30 activists, after two of their party scaled Gazprom’s new oil platform Prirazlomnaya. While the Greenpeace vessel The new normal for activists? Arctic Sunrise sat in international waters, Russian coastguard officers forcibly significant decline in output from its convenboarded and seized control of the ship, tional reserves and so must turn to oil arresting the entire crew, initially on a charge prospecting in the icy waters north of the of piracy. While the original charges have been Arctic Circle. scaled back, all 30 remained in custody seemFor this reason, “Greenpeace sees ingly facing lengthy jail terms in late October [Gazprom’s oil platform Prirazlomnaya] as the thin edge of the wedge”, says Anthea Pitt, as Ethical Corporation went to press. executive editor of Petroleum Economist magazine. “If it comes off, then it’s almost open ‘Blatant intimidation’ “The Russian authorities are trying to scare season for the entire Arctic.” Gazprom’s giant $4bn Prirazlomnaya people who stand up to the oil industry in the Arctic, but this blatant intimidation will not platform could supply oil directly to the global succeed,” Greenpeace International executive market by early 2014 and, in the process, help director Kumi Naidoo said following the arrests. solidify Russia’s position as a global energy Naidoo subsequently offered himself as leader. “Ignoring this case will only embolden security for the so-called Arctic 30 – 28 Greenpeace activists and two freelance journalists – Russian authorities further,” warns Cooper. “What specific governments and the interwriting in a letter mailed to the Russian president, Vladimir Putin, of his willingness to national community, in general, need to focus “share” their fate. Human rights organisations on is not whether they support what Greenin Russia see the Greenpeace arrests as one peace did at the Prirazlomnaya oil rig, but the more sign of a Russian Federation bent on fact that the Greenpeace activists were unarmed protesters whose actions do not stifling any kind of democratic dissent. “Since Putin came back to power things warrant such grotesque criminal charges.” W Concern about forced labour in the cotton fields of Uzbekistan is prompting an increasing number of brands to refuse to buy cotton from the country, according to campaign ISTOCK Testing the waters have gone from bad to worse,” says Sergei Nikitin, Amnesty International’s Moscow office director. “Here we have peaceful, nonviolent actions from a well-known organisation which identified itself.” The arrest of the Arctic 30 through the use of disproportionate sanctions is essentially an international version of the Pussy Riot case, says Tanya Cooper, Russia researcher at Human Rights Watch. “This is a message to show Greenpeace how high the stakes are for their environmental activism,” says Cooper. Energy analysts say the Greenpeace action may have struck a nerve with the Russian state at a time when it is particularly vulnerable: heavily dependent on oil and gas revenues to finance government operations, it faces a An opaque supply chain IGOR PODGORNY/GREENPEACE Analysis: Arctic 30 group the Responsible Sourcing Network (RSN). In the run-up to this year’s cotton harvest, Ikea, Marks Spencer and Canadian sportswear label Lululemon athletica joined 133 other signatories in a pledge against forced labour. As we have reported in Ethical Corporation, each year in Uzbekistan, under a “quasi-feudal” system, state employees, students and even young schoolchildren must help out with the harvest or face punishment. Uzbekistan has this year, for the first time, allowed International Labour Organization inspectors to observe the harvest, though it is “difficult for citizens to speak openly with ILO monitors”, RSN says. Most Uzbek cotton goes to Bangladesh and China, making it hard to assess the effect of the brands’ boycott. 100 pledges A worker-safety accord committed to improving conditions in the factories of Bangladesh reached a 100-brand milestone in October. The three signatories that took the Bangladesh Accord on Fire and Building Safety past its century are Woolworths Australia, Germany’s Gebra, which makes safety warning products, and international trader Wünsche Group. The accord was established by international unions IndustriALL and UNI in the wake of the April 2013 Rana Plaza factory collapse, which killed more than 1,000 textile workers. By signing the accord, brands pledge to make funds available for factory safety upgrades, and that workers will continue to be paid while renovations are taking place.
- 8. ECM November_Layout 1 05/11/2013 17:34 Page 9 Ethical Corporation • November 2013 EthicsWatch 9 On track Analysis: child labour Too many children still at work By Judy Kuszewski A new report claims good progress on child labour, but warns against complacency new report from the International Labour Organization’s International Programme on the Elimination of Child Labour (IPEC) shows a steep decline in child workers worldwide during the period 2008-2012. The report is the latest in IPEC’s periodic surveys that aim to measure trends in child labour, towards the ILO target to eliminate the worst forms of child labour by 2016. The report identifies 168 million children engaged in child labour worldwide, down from 215 million in 2008, and 245 million in 2000. More than half are involved in hazardous work, considered one of the worst forms of child labour. While Asia and the Pacific regions report the highest absolute numbers of child labourers, the highest rate of child labour per capita remains in sub-Saharan Africa. A Well reputed YONGYUAN/ISTOCK Companies with better reputations for corporate responsibility are much more likely to be recommended by their customers than laggards, according to the 2013 CSR RepTrack 100 study, carried out by US-based consultancy the Reputation Institute. The RepTrack survey, covering 55,000 consumers globally, found that 73% would recommend companies perceived to be “delivering on corporate social responsibility”, but Social value engine only 17% would recommend companies seen to be “poorly delivering”. The companies with the world’s best reputations, according to the study, are Microsoft, Disney, BMW and Google. “Companies must recognise that creating social value is a prerequisite to creating business value. That makes monitoring and quantifying the returns on CR essential,” the Reputation Institute says. not be met as evidence of this danger. Gerard Oonk of the Stop Child Labour Campaign coalition warns: “It’s not clear what specific plans individual countries have to speed up progress, and whether ILO is able to MYOUSSEF/ISTOCKPHOTO Zurich-headquartered Credit Suisse has launched what it says is the world’s first stock market tracking index to follow the performance of companies with lesbian, gay, bisexual and transgender (LGBT) friendly policies. The index follows US companies that score high on the Human Rights Campaign’s Corporate Equality Index, which benchmarks corporate policies and practices on LGBT employees. Companies tracked by the index include Apple, Johnson Johnson, Pfizer and Wells Fargo. Timothy O’Hara, Credit Suisse global head of equities, says: “Wall Street, and Credit Suisse in particular, has a strong track record of providing leadership and support for LGBTrelated issues.” Devil in the detail While the improvements in numbers are heartening, the picture is considerably more complex in the detail. The report is transparent on the fact that gaps remain in the data, citing “eastern Europe, central Asia, the Pacific, developed countries and several Asian countries” as having missing or incomplete data. However, IPEC’s senior statistician Yacouba Diallo says the picture is getting better. “Our current data coverage is an improvement on our previous estimate. We cover 53% of the population of children aged 5-17, compared to [previously] around 44%. This is based on 75 national data sets.” Are the data gaps not cause for concern, then? Diallo explains: “There are gaps in certain regions, but that doesn’t mean we have no data – just not enough to provide an estimate for these regions. For this kind of exercise, we aren’t able to provide statistics because of our sample size in these regions.” NGOs and the ILO alike express concern over the potential for complacency that could undermine the progress recently made, and cite the fact that the 2016 target for the elimination of the worst forms of child labour will A burden not to be borne monitor it. The Dutch government, for example, are working on a global risk analysis of where the risk is in which industries. They will then use this to focus on where the risk is greatest, cooperate with NGOs and unions, and use their own influence in specific sectors where the risk is highest.” The ILO’s Benjamin Smith explains that, while the focus of the report is on policy makers, there are clear actions private sector employers can take to continue and accelerate the trends in reduction in child labour. “Companies can have a clear policy of no tolerance of child labour in their operations and supply chain, then do their due diligence on children’s rights. Most child labour, by vast margins, occurs in the informal economy. Therefore, we need to work towards formalising those parts of supply chains to get at the root causes of child labour.” And with 168 million instances of child labour, there is still a lot to do.
- 9. ECM November_Layout 1 05/11/2013 17:34 Page 10 10 Columnist: Mallen Baker ISTOCK Ethical Corporation • November 2013 Energy supply Lack of leadership will lose the argument As the public debate over high energy prices intensifies, we need strong leadership to build consensus for climate change action, says Mallen Baker hatever else it is, Facebook is a forum for the expression of opinions by whatever cross-section you’ve managed to gather as friends through your life. For some reason, I’ve managed quite a large cross-section. But I’m not sure it would end well if they all found themselves in the same room as each other. There is one thing, though, that many of them seem firmly agreed upon right now. It’s that the energy companies – especially in the UK – are ripping us all off in the name of blatant greed. And the truth is that environmental charges have been widely accepted by many as the secondary villain of the piece. The inherent contradiction in attitudes has always been there, of course. On the one hand we recognise that in order to waste less energy, it needs to cost more. And, whether we like it or not, the state of global energy supply can be expected to deliver more expensive energy in any case as we come towards the end of the fossil fuel era. But at the same time, we have a widespread attitude of entitlement by the public to cheap energy, just as we do cheap food. These were always in contradiction, but now we’re seeing that as the pressure increases – and we should expect to see pressures continue to increase – it will lead to the withdrawal of public support for green measures that are perceived to be to blame. We have almost zero perception that there are big structural challenges in how energy is provided worldwide. We have no sense of outside events, some of which are outside our control and have major consequences on our choices. W Rather, if energy prices go up it’s because someone is to blame. Politicians are to blame for not building more power stations a few years ago. Energy company chiefs are to blame for being greedy. And environmentalists are to blame for persuading the government to levy green charges to put everyone’s bills up. Unfortunately, the news media loves nothing better than to point the finger of blame at someone – and politicians and CEOs are top of the list because the majority of citizens will gratefully line up to demonise them. But the more substantial point is that this climate of public consensus completely changes the parameters of what may be possible. In order to take the radical steps to combat climate change we need a consensus for action. We need the consent of citizens – and companies need the consent of customers – or else it just won’t work. The energy blame game has blown that consent out of the water. Green policies have become labelled in the public mind as an expensive luxury. A nice-to-have that not only could but should be abandoned if times get tough. Corporate buck-passing In the absence of any clear analysis as to why the environmental situation is one of the causes for times getting tough – and likely to make those times tougher still in the future – it makes perfect sense. The leadership of the energy companies hasn’t helped much by queuing up to point the finger at eco-charges in a desperate attempt to deflect criticism from themselves. This approach fails to reframe the discussion as being one about Transparency can pile on the pressure for change Green policies have become labelled in the public mind as an expensive luxury COLUMNIST: MALLEN BAKER necessary choices and consequences, and simply enters the blame game discussion on its own terms. And it’s doomed to failure. If playing the blame game, the chief executives of major utilities will never win the hearts and minds of the general population. We need to see real leadership. As demonstrated by great historical leaders such as Gandhi and Mandela, real leadership steps outside the tribal logic of a specific position, and uses its authority to make the necessary changes informed by the bigger picture – taking its constituency to a place it wouldn’t naturally have gone on its own. Energy company leaders should start by improving the transparency of their own processes to answer the charges of profiteering – and face down the investors that want to see above-average returns from every type of business everywhere. And they need to use that momentum then to pose a far-reaching challenge to our cosy consensus that business as usual equals cheap energy and if we don’t get it, then someone in power must be to blame. I’m not holding my breath. But in the absence of that kind of leadership, I fear we’ll be reaping the consequences in the form of weak political will and token environmental measures for the next couple of decades. n Mallen Baker is a contributing editor to Ethical Corporation and managing director of Daisywheel Interactive.
- 10. ECM November_Layout 1 05/11/2013 17:34 Page 11 Briefing: Europe 12 Regional differences 14 Bottom-up sustainability 18 Brussels takes charge 21 Poland: growing confidence
- 11. ECM November_Layout 1 05/11/2013 17:34 Page 12 12 Briefing: Europe FUSE Ethical Corporation • November 2013 Introduction Continent of contrasts By Stephen Gardner There is no such thing as a common European approach to sustainable business or European companies, sustainability and corporate responsibility can look very different depending on where they are viewed from. For German companies, for example, the emphasis is on contributing to the maintenance of the social market economy by conforming to exacting environmental standards and seeking agreement on working conditions with workers’ councils and unions. In Scandinavia, it is more about equality, transparency and innovation – for example, phasing out hazardous chemicals and fair representation of women in boardrooms. In France, sustainability often comes in the forms of diktats from above, for example as strict nonfinancial disclosure requirements or a moratorium on hydraulic fracturing, or fracking. Agenda-setting by the French government arguably has the sideeffect of turning many French companies into grudging box tickers. In southern Europe, companies are often close to their communities, but do little on the environment or on social issues such as gender discrimination. In the UK, the interests of shareholders predominate, and corporate responsibility is seen as worthwhile as long as it contributes to long-term sustainability and shareholder value. In eastern Europe, meanwhile, there is a desire to ride the wave of market forces in order to catch up with the west, and a suspicion of anything “social” that might sound like a communist-style imposed obligation. André Martinuzzi, head of the Institute for Managing Sustainability at Vienna University of Economics and Business, says that in the east, F corporate responsibility is often “seen as a form of philanthropy, while in western European countries it has a much stronger strategic meaning, for example to create new markets as well as to increase eco-efficiency”. Nevertheless, ideas about corporate responsibility are spreading in the east, often imported by western companies. Diverse contexts Varied attitudes towards corporate responsibility and sustainability are to a great extent a consequence of the differing frameworks within which companies operate in different parts of Europe. Broadly speaking, countries in northern and western Europe expect more of their companies than their southern and eastern European counterparts do. This can be seen in the application of environmental standards. In principle, companies in the European Union are subject to harmonised environmental rules, wherever they are located, but in practice implementation is done differently across the union, resulting in many variations. Countries such as Denmark and Sweden may go beyond EU regulated minimums, whereas countries such as Italy struggle to fully enforce the environmental regulations that are handed down from Brussels. Social welfare safety nets also vary significantly. According to the EU statistical office, Eurostat, people in eastern and southern Europe tend to be more “at risk of poverty and social exclusion” than those in the west and north. In Austria, the “at risk” rate is 16.9%, in the Netherlands 15.7%, and in Countries in northern and western Europe expect more of their companies than their southern and eastern counterparts
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- 13. EC – Subscription Sample Pack No Discount_Layout 1 16/01/2013 11:59 Page 20 w e no th e ll t ib r a igh cr ve ns bs sco R i Su d di t CS s an late Current subscribing companies include: • Abbott • FTSE • Novartis • ABN Amro • GlaxoSmithKline • Old Mutual • Accenture • Harvard Business School • PricewaterhouseCoopers • Adidas Group • Hill Knowlton • Prudential • Alliance Boots • HSBC • Royal Bank of Scotland • BAE Systems • IKEA • SABMiller • Barclays Bank • InterfaceFlor • Shell • BNY Mellon • International Post Corporation • Singapore Management University • Campbells Soup Company • JCPenney • The Body Shop • Cable and Wireless Communications • John Lewis • The Walt Disney Company • Citi • Kimberly Clark • Toyota • Coca-Cola Enterprises • KPMG • UNICEF • Danone • Kraft Foods • Unilever • Diageo • Levi Strauss Company • United Nations Library • Dell • Marks and Spencer • Virgin Media • E.ON • McDonald’s • Weber Shandwick • Edelman • Monsanto • Walmart Stores • First Solar • Nestlé • WWF Here’s what a few of our current subscribers have to say... “Ethical Corporation is a valuable and comprehensive resource on the global state of affairs in corporate responsibility” – Dave Stangis, Vice President, Corporate Social Responsibility, Campbell Soup Company “Ethical Corporation magazine is one of the most valuable resources of business information on sustainability” – Joaquim Croca, Head of Corporate Responsibility Performance Reporting, Vodafone Group “Ethical Corporation bring together the best in business to make a difference” – Jeff Swartz, Former CEO, Timberland “Ethical Corporation is an excellent tool for gathering stakeholder intelligence for Toyota’s CSR Risk monitoring system” – Stefan Crets, General Manager, CSR, Toyota Motor Europe “The essential source of critical analysis on corporate responsibility” – Richard Ellis, Group Head of CSR, Alliance Boots