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UN Global Compact

Number of Expelled Companies Reaches 2,000 As Global Compact Strengthens Disclosure Framework

The United Nations Global Compact stated: - 2,048 companies from around the world have been expelled from the United Nations Global Compact for repeated failure to communicate on progress in integrating the initiative’s ten sustainability principles into their strategies and operations.

The number was reached following the recent expulsion of more than 200 companies at the end of a 2010 moratorium on expulsions in less developed countries, a short-term measure to explore solutions to a systemic lack of disclosure in certain markets.

The Global Compact requires participating businesses to communicate every year with stakeholders on their progress in integrating the ten principles. Companies that do not issue a Communication on Progress (COP) for two consecutive years face expulsion and must reapply for participation in the initiative.
 
“We are moving forward on transparency and disclosure through a dual, complementary approach,” said Jerome Lavigne-Delville, Head of Communication on Progress in the Global Compact Office. “On the one hand, we are driving a strict enforcement of our integrity measures to ensure that every business participant disclose information on its progress, every year. On the other, we are introducing a platform that provides incentives and recognition for businesses at all levels to make meaningful progress towards a comprehensive implementation of the principles in strategy and operations.”
 
In conjunction with the stronger enforcement of its COP policy, the Global Compact has introduced a differentiation framework to motivate companies at all levels to strive for greater integration of the principles. The framework, which will be officially launched in February of this year, categorizes business participants based on levels of progress disclosure.
 
As a long-term solution following the moratorium, the differentiation framework represents a new phase of in the Global Compact transparency and disclosure policy, designed not only to improve transparency among smaller and less experienced participants, but also to stimulate continuous progress and performance improvement among the more advanced companies.
 
“This is a significant move forward for the Global Compact,” said Georg Kell, Executive Director of the Global Compact. “It will provide deeper incentives at both ends of the performance spectrum, and help stakeholders critically assess the performance and progress of our companies."
 
As one of the main outcomes, differentiation will be critical to support investors and other stakeholders in the assessment of companies’ progress, using the COP as a platform to benchmark management systems against global best practices.

Following the recent expulsion, the total number of active business participants in the Global Compact stands at 6,066 companies in 132 countries. 
Posted January 27, 2011

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European project publishes Corporate Social Responsibility guidelines for the construction sector

from CSR Europe

guidelines

A European project on Building Responsible Competitiveness, co-funded by the European Commission, has published corporate social responsibility (CSR) guidelines for companies in the construction sector. The guidelines offer practical advice and best practice examples in four thematic areas as well as an in-depth analysis of the benefits of integrating CSR principles in day-to-day business.

CSR Europe reports:  The construction sector is the biggest sectoral employer and a major contributor to gross capital formation in Europe. Focusing on both the internal and external aspects of business performance, the CSR guidelines demonstrate how a strategic approach to corporate social responsibility can enhance the competitiveness of individual construction companies as well as the societies they operate in. 
Based on an analysis of 44 best practice case studies and a series of stakeholder workshops, the guidelines offer a starting point for integrating CSR into management systems, supplier relations and operational business. They focus on four thematic areas of key importance to the construction sector:

  1. Health and safety – Improving operational efficiency and employee wellbeing through better management of health and safety challenges
  2. Eco-compatibility – Developing environmentally sustainable products and processes and driving innovation in eco-compatible construction
  3. Supply chain management – Increasing transparency and enhancing the management of environmental and social issues throughout the supply chain
  4. Equal opportunities – Harnessing the business benefits of a diverse workforce

The guidelines were developed as part of an 18-month European project involving both large companies and SMEs from the construction sector as well as relevant stakeholders such as business organisations, trade unions and universities. The project was implemented by a consortium of partners from five European countries, namely Italy, Spain, Austria, Hungary and Portugal, and supported at the European level by CSR Europe. The project was co-funded by the European Commission (DG Enterprise and Industry).

Posted 25/06/2010


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A Resource Guide for Corporate Human Rights Reporting

Releazsed by the Global Reporting Initiative, the UN Global Compact and Realizing Rights/The Ethical Globalization Initiative.

The sponsoring organizations marked the 60th anniversary of the Universal Declaration on Human Rights with the collaborative project: “Human rights – A call to action” which aims to foster greater integration of human rights principles into corporate sustainability reporting. The objective of the project is to significantly improve companies’ understanding of how and why to publicly disclose policies and practice relating to human rights.

A working group of experts waqs brought together to shape greater consensus on what constitutes good human rights practice and measurement. 

The result is the new report - a Resource Guide - and the next step will be to develop a proposal for edits to the current version of the G3 Guidelines based on the report.

The project partners have also organized three multi-stakeholder workshops to date in Geneva, Buenos Aires and Seoul respectively. The workshop discussions informed the deliberations of the Working Group. 

The authors state on releasing the new Resource Guide that while a growing number of tools related to human rights and business provide useful guidance for companies, most do not provide detailed information on human rights reporting. This guide is intended to help companies begin a process of identifying human rights-relevant issues in their operations and to assist in translating these into meaningful and effective reporting. The document is divided into three sections: Section 1 provides an overview of the evolving 'human rights and business' field; Section 2 discusses human rights reporting and looks at some of the key challenges and debates in this area; and Section 3 looks at the practical aspects of human rights reporting and offers helpful information for companies, including on how to choose a reporting focus from within the broad range of human rights, and how to approach the complex subject of complicity in human rights abuses as part of reporting.

The Resource Guide is based on a review of 57 recent sustainability reports from companies representing a range of industry sectors, presents examples of encouraging trends in human rights reporting, as well as indications of key areas where there is room for improvement. The analysis was undertaken as part of a wider effort – Human Rights: A Call to Action – aimed at fostering improved understanding of how and why to publicly disclose policies and practice relating to human rights and how to embed this better understanding into global reporting standards.

Posted 11/11/2009

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A book review by Frank Vogl

 

THE SURPRISING SOLUTION:  Creating Possibility in a Swift and Severe World

By Bruce Piasecki
SourceBooks, Inc. 

The author of this new book argues that “the world today is more swift, more severe….and has never been more full of opportunity.” He underscores that “I intend this book to start a conversation about the powers and responsibilities of multinational corporations. This conversation will get more intense, louder, more nuanced, and more focused on specific companies’ behaviors over the next fifteen to thirty years. The basis of the conversation is this: I now believe the best path to that common goal of a better world resides in the rising role of large firms to develop better products.”

He points out that consumers have new sets of social expectations from corporations and his book seeks to offer approaches to companies to enable them to meet these expectations.  He argues that to flourish in the coming decades, companies must create innovative products that help solve the problems confronting customers in the 21st century.  In addition to long-term viability, this “social response product development,” will create other business benefits as well, including margin improvement, rapid cycle time, global market access, and product differentiation.  

And, the author points out that with greater transparency and access to information, the ways that individuals and institutions choose to invest is changing.  At the same time, traditional valuation models don’t take into account many of the factors – such as the launch of initiatives designed to reduce future liabilities and create new, unique business opportunities – that influence a company’s success or failure.  In his book, Piasecki describes how such organizations as the Calvert Group, Innovest, and even Standard and Poor’s are discovering ways to measure these intangibles.

There is much in this book that is likely to be of interest to business managers. But, as the current financial crisis has highlighted, an overly large reliance on the market to do the right thing can lead to a great deal of trouble. Many companies have become huge, as the author notes at some length, but are they adequately transparent, publicly accountable and imbued with the integrity values that can reassure the public at large? These are critical issues not fully addressed in this book, yet ones that are likely to preoccupy business and society to an increasing degree in coming years.

Posted 26/10/2009

 

 

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 Establishing and Implementing A Value Creation Framework
Report Urges New Approach to Valuing Businesses

For details on the new approach visit the European Alliance for CSR

CSR Europe reports:

For many years there have been inconclusive attempts to prove that improved environmental, social and governance (ESG) performance positively affects overall business performance.  Now a new report from a European research team proposes that companies and investors should focus instead on core elements of non-financial performance.

 The researchers say that these core elements of non-financial performance, which reflect wider ESG factors, make improved performance easier to isolate and identify. The research team led by the Doughty Centre for Corporate Responsibility at Cranfield School of Management brought together academics from SDA Bocconi School of Management in Milan and Vlerick Leuven Gent Management School in Belgium.

 The report – “Sustainable Value” – looks in detail at how ESG performance impact business success, how companies explain these linkages to investors, and how the investment community treats this data. It goes on to argue that growing sustainability pressures are likely to make these linkages more important in the future.

 The report also notes how the traditional focus on narrowly defined “shareholder-value” poses a set of obstacles to assessing the value of ESG activities due to factors such as:

         Limited or non-existent data suitable for cross-company comparison
         Lack of evidence for linking ESG performance with general performance
         Confusion of terminology and shifting definitions between actors
         Lack of incentives to present positive ESG impacts
         Disconnects between ESG specialists and Investor Relations experts within companies

To overcome these obstacles, the report proposes that value be redefined as ‘sustainable value; and sets out a ‘Value Creation Framework’ which can be used both by business and the investment community.

 A number of organisations have expressed strong interest in collaboration on implementation of the Value Creation Framework and / or providing access for follow-up research opportunities. Consequently, the report explores how collaboration might evolve over the next 1-2 years, creating a critical mass of pioneer companies and investors using the Value Creation Framework to explain risks associated with not embedding sustainability, and the opportunities potentially accruing to businesses from doing so; and how this can be factored into investor valuation models.

 In view of this, the report asserts that corporate CEOs whose companies have already started to embed CR and sustainability and are seeing improved ESG performance, should be engaged to champion such linkages and results. Further, there needs to be a change in the mindset of the mainstream investment community. This requires investor training and changes to how investors (individually and institutionally) are measured and incentivised / rewarded, as well as a change in time-frames from a fixation with quarterly earnings to a more sustainable model.

 This is the final report from a two-year research project funded by the Corporate Founding Partners of EABIS (European Academy for Business in Society): IBM, Johnson & Johnson, Microsoft, Shell and Unilever; with additional support from Lloyds Banking Group and Telecom Italia who have also led the European Alliance for CSR Laboratory. 

Posted 10/09/2009

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New Report for The Forest Dialogue (TFD) Urges Industry To Tackle Conflicts With Indigenous Peoples

World Business Council for Sustainable Development (WBCSD)

The Report by the International Institute for Environment and Development Provides Examples of Good Corporate Practice

Conflict between companies that profit from forests and local people who depend on them could be tackled by industry-led approaches but too few companies use them, says a report released today by The Forests Dialogue (TFD).  The report, written for TFD, an international group of forest experts from business, environmental, academic and human rights groups, by the International Institute for Environment and Development, urges companies to take the lead in resolving existing conflicts and preventing new ones from arising.

Conflict in the forest sector is common and can range from wars of words to serious acts of violence. It most often follows disputes over rights to land and resources but can also arise over conservation priorities, pollution, and access to benefits from the sector.

"Most companies in the forest sector have no formal systems to address conflict, despite there being clear ethical and business cases for doing so,” says Emma Wilson, a senior researcher at IIED and author of the report.

“Forest certification schemes often require companies to have systems for local stakeholders to raise grievances, but very few companies are certified and those that are tend to have systems that are ad hoc or in their early pilot stages.”

The report calls for more industry-wide sharing of experience and knowledge, and the development of broadly applicable means of resolving conflicts."Sustainable companies invest for the long term, so they have a broader perspective than the average company on who their major stakeholders are and a deeper interest in understanding and accommodating local expectations and concerns,” says TFD co-leader James Griffiths, who heads the sustainable forestry programme at the World Business Council for Sustainable Development (WBCSD).

Good Corporate Examples

The paper offers examples of tools and approaches that are being employed by companies and non-industry players working closely with companies to address conflict-related issues. These include efforts by Aracruz Cellulose in Brazil to build dialogue with local indigenous groups in order to address a long-running dispute over land rights; the experience of APRIL in Indonesia in developing a land dispute resolution protocol based on the principles of FPIC; and the corporate strategies and tools employed by major companies such as Stora Enso, Mondi and Weyerhaueser.

New information and communications technologies are being used to overcome some of the obstacles (such as non-literacy) to community participation. An example of such innovation is the use of hand-held global positioning systems (GPS) to enable Pygmies in the Congo Basin to identify and protect critical forest resources before logging takes place.

Two broad approaches emerged from the survey. These are termed: (1) rights-based approaches – favoured by non-industry respondents – which focus primarily on helping communities to identify and defend their rights to land and resources; and (2) stakeholder management systems – favoured by companies as part of their overall management systems.

In practice, there is considerable overlap between the two approaches. The paper concludes that methods and tools related to both types of approach are still evolving in the forest sector. For example, while grievance mechanisms for local communities to channel (and resolve) their concerns are required by certification initiatives, there is little evidence of broad adoption of formal grievance mechanisms. Company complaints procedures appear to be largely ad hoc, or in their early pilot stages.

Respondents also identified the need for more dialogue and capacity building around rights-based approaches, particularly in relation to putting FPIC into practice. Respondents noted the importance of companies consulting stakeholders from an early stage of any forestry development: expectations and uncertainties are managed more effectively through honest dialogue than by suppressing information. Industry respondents expressed the need for guidance on how to conduct and mediate dialogue with local communities. Dialogue processes need to feed directly into company decision-making in order to be meaningful. Good practice sees companies embedding conflict avoidance and resolution in day-to-day business practice.

Posted 07/08/2009

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Nestlé launches major initiatives in nutrition, water and rural development

“We believe that to have long-term business success you must simultaneously create value for shareholders and for the public. At Nestlé, we call this Creating Shared Value, and it is the fundamental principle behind the way we conduct business at Nestlé," says Nestlé Chairman Peter Brabeck-Letmathe.

Nestlé announced a series of new initiatives:-

  • an expanded education program focused on nutrition, health and wellness for school age children around the world;
  • a research and development centre in Africa; and,
  • a new Nestlé Prize in Creating Shared Value, awarded every other year to foster innovative approaches to solve problems of nutrition, water and rural development. 


Nestlé intends to double the number of countries in which it has nutrition and physical activity education projects by the end of 2011, bringing such schemes to over 100 countries where it operates. The company said this program addresses some of the world’s most complex challenges today – both malnutrition and increasing obesity rates, particularly among school-age children. Nestlé currently supports education programs that reach over 10 million children.

Secondly, Nestlé said the opening of the Abidjan Research & Development Centre in Côte d’Ivoire demonstrates a corporate commitment to rural development in Africa. The R&D Centre’s new research programs will help to increase agricultural productivity and the safety of foods by developing and improving local crops - such as manioc, corn, millet, coffee and cocoa - and cereal-based products in the West African region. The R&D Centre will also build on Nestlé’s experience in tree propagation.

Nestlé noted that the Nestlé Prize in Creating Shared Value provides financial support of up to CHF 500,000 (US$ 461,000) to individuals, NGOs, or small enterprises offering innovative solutions to nutritional deficiencies, access to clean water, or progress in rural development. Nestlé will award the prize every two years.

Posted 05/4/-2009

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Board Directors Must Focus On Key Societal Demands

A landmark corporate governance report from the Center for Economic Development – Rebuilding Corporate Leadership:
How Directors Can Link Long-Term Performance with Public Goals

CED is non-profit, non-partisan business led public policy organization. CED is dedicated to policy research on the major economic and social issues of our time and the implementation of its recommendations by the public and private sectors. Membership is made up of some 200 senior corporate executives and university leaders who lead CED’s research and outreach efforts.

The report is the product of a corporate governance committee that has been chaired by William H. Donaldson, former Chairman of the U.S. Securities and Exchange Commission. To read his statement on the February 18, 2009 rlaunch of the report please go to CED statement.

The CED Report argues that aligning the interests of the corporation and its shareholders with the long-term interests of society will generate vibrant and successful entities that will help to regain the public's trust. It highlights the dangers of corporations being driven by the quest for short-term results. It emphasizes that corporate leaders should understand it is in their self interest to engage responsibly with the society around them. They must find an appropriate balance between generating short-term profits and building for the future, because sustainable profits come only from long-term investment and strategy.

CED’s central conclusion is that corporate boards and the leaders they select must integrate relevant societal concerns, such as environmental and human rights considerations, into corporate strategy to strengthen long-term competitiveness and the sustainability of both the corporation and the society in which it exists. A successful framework requires that societal and business leaders view and treat each other as partners, not adversaries. Their actions and public communications should recognize their interdependence and shared goals.

Summary of Recommendations

• The board of directors has ultimate responsibility for the performance of the corporation. Directors have an obligation to act as stewards of the corporation’s long-term economic health. They should widen the purview of their deliberations to give weight to societal issues that impact the firm’s longer-term performance.

• Our basic recommendation with regard to societal issues is not a “one-size-fi ts-all” solution. As each corporation is unique, each will have unique societal issues that may impact its performance. These should be the board’s concern. Our recommendation is simply that boards should play an active role in encouraging company management to evaluate the options available and to decide explicitly what it ought to do, based on sound business grounds that incorporate a longer-term view. Once a decision has been made and justified, the board should monitor implementation and continue to evaluate the company’s strategy on the basis of longterm costs and long-term benefits.

• Directors regularly should consider how the company plans, manages, and communicates its interaction with society. The board should insist that management report regularly to it and to the public on non-financial performance, including social performance.  To institutionalize the process, the board may want to establish a special committee or empower its governance committee to take responsibility for oversight. That committee should report to the full board and appear regularly on its agenda.

• Directors should recognize the value of corporate communication with shareholders and the public on issues that bear on the company’s reputation and brand value, even when such communication may not be required by regulation or fit neatly into financial disclosure formats. Boards that have a non-executive chair or lead director may want to consider a communications role for that person on such issues and topics.

• Directors should promote honesty in reporting not only on financial results and other nonfinancial aspects of their company’s operations, but also on the risks, opportunities and results of its social interactions. Such reporting should show how the company evaluates the long-term impact of potential costs and benefits. But aside from mandated environmental and labor reporting to government regulatory agencies, corporate “sustainability” reporting should remain within the purview and at the discretion of individual companies (as they exercise their responsibility for honest and full communication with shareholders). Directors should use their authority to help their companies find a firm-specific way to communicate effectively with shareholders and the public—through the regular annual report to shareholders, in a separate public report, or in some other way.

• The CEO is mainly responsible for carrying out the board’s directions. When choosing a CEO, the board’s selection committee should be mindful of the role that person will play in setting the tone and direction of the company with regard to ethics, integrity, and engagement with shareholders and other interested parties. Boards should tie a portion of CEO and senior management’s performance compensation to metrics based on the corporation’s performance on such concerns.

The report noted that failure of corporations to adopt an approach based on substance, not image, which recognizes their interdependence with the societies around them will further increase public cynicism toward business, erode society’s already diminished trust in, and support of, corporations and their leadership, and invite more burdensome regulation.

Posted 02/23/2009

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Saudi Arabia and Accountability Establish :

The Saudi Arabian Responsible Competitiveness Index (SARCI)

AccountAbility said that SARCI is "the most in-depth assessment of responsible business practices undertaken in the Kingdom." The SARCI partners are the Saudi Arabian General Investment Authority (SAGIA), the King Khalid Foundation, AccountAbility, Tamkeen, Al-Eqtesadyah and the Corprorate Responsibility Initiative at Mossavar-Rahmani Center for Business and Goverment, Harvard Kennedy School.  

The core of the Saudi Responsible Competitiveness Index is an annual assessment of leading businesses in Saudi Arabia. Eligible businesses are large or small, public or private, Saudi or foreign, from any sector. Businesses which chose to participate have had an in-depth discussion of their performance with trained analysts, based on AccountAbility's global competitiveness index.

The Index and the awards were launched on 25 January in Riyadh, Saudi Arabia. Rewarding the top ranking companies, King Khalid Foundation presents the King Khalid Responsible Competitiveness Awards. The three companies presented with this award during the opening ceremony which opened under the patronage of the custodian of the Two Holy Mosques HM King Abdullah bin Abdulaziz are:

National Commercial Bank, Al Fanar Company, Zamil Industrial.

The initiative is supported by the King Khalid Foundation through their Responsible Competitiveness Award (KKRCA) to be offered to the best 3 performing companies that adopt most efficient programs meant to support sustainable development including social, economic and environmental programs.

The Responsible Competitiveness Index is designed to build performance. The framework assesses performance against drivers of responsible competitiveness. Companies win recognition for demonstrating good performance across 28 different areas, including making smart philanthropic investments; creating policies to attract, develop and retain a talented and diverse workforce; and managing their supply chains to support local businesses and better environmental and social conditions. 40 companies responded to the open-invitation.

Posted 02/03-2009

 

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Global Reporting Initiative (GRI) and International Council on Mining and Metals (ICMM) Open Prospective Reporting Guidelines for Puiblic Comment

The GRI and the ICMM have been developing social responsibility reporting guidelines for the sector and are now seeking wide industry comments. The sector is constantly at the center of controversy when it comes to governance and social responsibility. The new draft guidelines are a supplement to currently used ones under the GRI.

The comment period opened on January 28 and will close on April 29, 2009. In light of changes in the reporting landscape (particularly the migration to the GRI G3 Guidelines which includes indicator protocols) and to incorporate practical lessons of reporting experience, GRI and ICMM said they decided to collaborate to progress the Mining & Metals Sector Supplement Pilot version to a Final version. The Supplement is being developed by a multi-stakeholder Working Group with industry and stakeholder representation from across the globe, including:

Ambatovy Nickel and Cobalt Project, Anglo American, BHP Billiton, Centre for Human Rights and Environment, European Nickel PLC, First Peoples Worldwide, Flora & fauna International, Goldman Sachs, International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM), International Union for the Conservation of Nature (IUCN), National Union of Mine Workers South Africa, Newmont Mining, Rio Tinto, Standardlife Investments, Teck Cominco, Vale and World Bank.

The Final version of the Sector Supplement is likely to be released in the second half of 2009.

The Mining & Metals Sector Supplement consists of exploration, feasibility, construction, mining and metal processing (including metal fabrication and recycling), and closure. In terms of Overreaching Policies and Management Systems, the Supplement calls for highlighting materials stewardship activities.  In addition, thirteen supplementary indicators, as well as commentary to the GRI guidelines, have been developed to address economic, environmental and social aspects of Mining & Metals companies.

Posted 02/02/2009

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Models for Corporate Citizenship

Boston College Center for Corporate Citizenship identifies Five company models most common to manage role in society

Boston College Center for Corporate Citizenship asserts in a new report that managing a company’s role in society is becoming a formal part of corporate structure and management practice, with many companies internalizing the function into corporate departments and cross functional teams.

The report "Structure and Strategies, Profile of the Practice 2008: Managing Corporate Citizenship" is based on survey data from 330 global corporations, most based in North America. In addition to organizational structure, the research focused on how companies manage multiple and sometimes conflicting responsibilities to its many stakeholders (examples are provided for KPMG, Boeing and UPS).

"Boston College Center Executive Director Bradley K. Googins, Ph.D. "The picture emerging suggests companies will continue to formalize the corporate citizenship functions, although most still do it in a manner very idiosyncratic to the firm."

In examining the management systems associated with corporate citizenship, the Boston College researchers contend the field is in an early stage. They find it is still struggling with agreement on definitions and terms and has not yet reached consensus on what should be included within its boundaries. The research findings regarding management systems include:

  • Corporate citizenship is not strongly linked to strategy or business plans in most companies
  • Top management identifies corporate citizenship as important but in most companies does not exercise significant leadership on the issue
  • Employees are seen as the most influential stakeholders for citizenship but inside the company are seen as the least informed
  • Boards of directors are just beginning to focus on corporate citizenship issues
  • Measurement and use of measures of corporate citizenship are weak
  • Minimal training is being done at every level on the relevance of citizenship to the success of the business


These management trends from this survey mirror the findings of the Center's 2007 State of Corporate Citizenship in the United States that found substantial gaps in the practice of citizenship.

While the survey reveals much about what is lacking in the management of corporate citizenship, it also gives some indications of what management structure and strategies are associated with higher performing citizenship. Higher level leadership, cross-functional teamwork and dedicated department management are attributes seen in companies that have demonstrated strong performance.

Definitive answers on the "best" way for individual companies to manage corporate citizenship remain to be found. But going forward, this report offers food for thought on emerging questions about what path corporate citizenship will follow as more companies embed citizenship responsibilities into their formal organization.

Posted 02/05/2009

 

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Environment and Supply Chain Management -- A Focus on Brazil and the Approaches of

ArcelorMittal

A case study from the World Business Council for Sustainable Development

 AcelorMittal, one of the world's largest steel companies, has embedded sustainability principles into its general contracts, and set out clear expectations in the areas of safety, health, social dialogue, and environment. It also requires suppliers to comply with all the relevant laws and regulations.

In Brazil , public support for corporate responsibility is very high and some of its domestic corporate responsibility organizations – like Instituto Ethos – are genuine role models for how business' involvement in communities can be encouraged. However, even in Brazil it can be challenging to persuade the managers of small- and medium-sized enterprises (SMEs) to introduce sustainability into their management processes. Given the company's Brazilian operations' track record of spreading concepts of sustainability throughout the supply chain, ArcelorMittal could see there was an opportunity to help SMEs, particularly those in its own supply chain, to adopt some of the same principles.

Targets

ArcelorMittal Brazil has had a supplier engagement program since 2004, focusing in particular on sustainability and corporate responsibility. The success of the scheme inspired Instituto Ethos to work with the Inter-American Development Bank to create their own “TEAR” program in 2006.

“Tear” is the Portuguese word for “loom”, and the scheme aims to weave closer links between major companies and the firms in their supply chains, to help them improve their sustainability performance, develop better commercial relationships, reduce costs, and open up new markets and new product opportunities.
TEAR operates in seven key sectors of the Brazilian economy, with one flagship company in each sector: sugar and alcohol, civil construction, electric power, mining, oil and gas, retail, and steelmaking. ArcelorMittal Brazil is the sector champion for steel.

Activities

Over the last two years ArcelorMittal has been working with 15 companies in its supply chain, helping them to incorporate social and environmental standards into their business practices. During that time there were a number of separate phases of work, ranging from analyzing the sustainability issues for each business, to developing action plans, to communication and reporting. Like the other sector champions chosen by Instituto Ethos, ArcelorMittal used a number of their tools and corporate social responsibility indicators, such as SWOT (strengths, weaknesses, opportunities, threats) analyses and sustainability and stakeholder matrices, to help implement new processes and measure progress.

In each case the emphasis was on making a clear link between sustainability and commercial priorities. ArcelorMittal also took part in two regional seminars, where companies from all seven sectors had the chance to share expertise and knowledge.

Results

The steelmaking sector of TEAR achieved the best results overall. In particular, all 15 companies in the group developed their own codes of ethics and 11 created new initiatives to save energy, water and paper.
All 15 companies made real improvements in their production or management processes, and they all gained new clients. The steelmaking sector was also responsible for a quarter of all the new commitments made as part of TEAR during the course of the two years. Across the whole program 73% of the companies involved have started separating their waste, 67% have new processes to reduce their environmental impact, 53% have developed a new product or service with a specific social or environmental feature, and 67% now train their employees on sustainability issues.

The TEAR program promoted a closer relationship between ArcelorMittal and its suppliers, a relationship built on trust and credibility. The improvement in the suppliers' management, through strengthened sustainability processes, created positive impacts for ArcelorMittal as it gained commercial partners who are more engaged with sustainability issues. Since the whole process was developed together, the dialogue between ArcelorMittal and its suppliers became much better, creating a robust partnership between both groups.

Lessons learned


The program has been a real success. Many smaller companies who thought that sustainability was too complex and expensive for businesses their size now see it as an important investment in their future profitability.
93% of the companies that took part say that incorporating corporate responsibility into their business practices has helped improve their relationships with their largest customers, and 87% believe it has improved their relationships with other firms in their own supply chain. The key lesson here is that leadership from the top is crucial, and the involvement of two or three senior managers has made all the difference.

Posted 1/09/2009

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Corporate Responsibility and the Humanitarian Crisis in the Democratic Republic of the Congo

Global Witness is calling on companies trading in minerals from eastern Democratic Republic of Congo to ensure that any minerals they buy neither finance armed groups or military units, nor contribute to human rights abuses at any point along the supply chain. If such guarantees cannot be provided, companies should refuse to buy the minerals.

Oxfam Sets the Scene. Global Witness Makes Key Recommendations


Oxfam America reported form Goma on November 13, 2008, that “Incidents of forced labor, rape, and widespread brutality have increased since the latest outbreak of fighting as armed men from all sides prey upon those who have sought 'sanctuary' from the fighting in North Kivu. In camps across North Kivu women have been raped while searching for food and firewood and forced into doing humiliating tasks at gunpoint. Children, separated from their families, are recruited into armed groups.

"People have told us that they feel like they are the living dead and that their lives no longer have any value. The world needs to show them that that is not true, by redoubling their efforts to secure a ceasefire and by providing immediate additional support to the UN peacekeepers. It is clear that hundreds of thousands of people in eastern Congo are not getting the protection they desperately need," said Juliette Prodhan, head of Oxfam in the Democratic Republic of Congo.

Global Witness Calls on Business - Recommendations on due diligence for buyers and companies trading in minerals from eastern Democratic Republic of Congo and for their home governments

Global Witness stresses that governments should hold to account companies registered in their country who knowingly trade in minerals benefiting the warring parties in eastern DRC and/or who fail to carry out careful due diligence as to the origin of their supplies. The leading NGO’s main recommendations are to companies themselves.

Global Witness says that the economic dimension of the brutal conflict which has been tearing eastern Congo apart for the last ten years has not received enough attention. Buyers and companies have continued to buy and trade in minerals benefiting the warring parties, with no regard for the impact of their trade on the violence. A number of recent cases, including a statement by the British government that UK-based mineral trading company Afrimex had breached the OECD Guidelines for Multinational Enterprises, make it clear that companies sourcing minerals from eastern Congo should be exercising enhanced due diligence. They should be ensuring that any commodities that they buy neither finance armed groups or military units, nor involve or contribute to human rights abuses at any point along the supply chain.

The provinces of North and South Kivu, in eastern Democratic Republic of Congo (DRC), are rich in minerals, in particular cassiterite (tin ore), gold, coltan and wolframite. The desire to gain or maintain control of these mines has been a central motivating factor for all the main warring parties since 1998. Ten years on, rebel groups as well as units and commanders of the Congolese national army continue to enrich themselves directly from the mineral trade and are able to access international markets. Some of these groups dig for minerals themselves; others force the civilian population to work for them; others impose ‘taxes’ which they extort in the form of minerals or cash, at the mines, along the roads or at border crossings. The profits they make enable them to keep fighting, exacting an unbearable toll on the civilian population.

Global Witness is addressing the following recommendations to buyers, traders and other companies who buy or handle minerals originating from North and South Kivu and to the governments of these companies’ home states.

Recommendations to Congolese and foreign buyers and companies - These steps should be implemented at every stage of the supply chain, including by:

- individuals who buy from the mines at the local level in North and South Kivu
- négociants and other middlemen who buy from these individuals
- comptoirs and other traders and exporters in towns such as Goma and Bukavu
- importers in neighbouring and other countries
- companies treating and processing the minerals
- foreign and multinational manufacturing and retail companies

1. Exercise stringent due diligence regarding their mineral supplies: find out exactly where the minerals were produced (not only the broad geographical area, but the precise location and mine), by whom they were produced and under what conditions.

2. Refuse to buy minerals where the above information is not available, or where there are indications that the minerals are likely to have passed through the hands of armed groups or army units or benefited them in other ways.

3. Be able to demonstrate, with credible written evidence, the exact origin of their mineral supplies, the routes they have taken and the identity of intermediaries / third parties who have handled them.

4. Do not accept oral or vague assurances from suppliers as to the origin of minerals and whose territory they passed through. Carry out spot checks to verify the sources and the accuracy of suppliers’ assurances.

5. Federations and associations of traders and comptoirs and other trade bodies should adopt an explicit policy not to buy or handle minerals which are likely to benefit any of the warring parties in eastern DRC. They should require their members to carry out the above due diligence steps systematically, for every purchase and transaction, and to demonstrate precisely where all their supplies come from. Trade federations and associations should set up mechanisms for monitoring and checking whether their members are complying with these requirements.

Posted 11/17/2008

 

 

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Global Investors Urge 9000 CEOs to Join UN Global Compact

The PRI group of influential international investors affiliated with the United Nations is now calling on Chief Executive Officers of approximately 9000 companies to commit to the UN Global Compact and its ten principles.

According to the sponsoring organization, the group of investors manage more than US$4 trillion in assets and are collectively writing to companies in the MSCI World, FTSE All-World and IFC Emerging Markets Indices to ask them to sign the UN Global Compact, or explain any decision not to join the Compact.

The group, which formed in 2005 to develop in 2005 to set Principles for Responsible Investment (PRI) include investors based in the US, Europe, Australia and emerging markets.  

"This is an unprecedented move by institutional investors", said Georg Kell, Executive Director of the UN Global Compact. "Amid the current financial crisis, this underscores the importance of universal principles and the long-term management of environmental, social and governance issues. We applaud this effort, which represents the largest recruitment drive ever undertaken with respect to the UN Global Compact."

Donald MacDonald, Chair of the PRI initiative and Trustee of the BT Pension Scheme said,
“Institutional investors in general are looking for investments that offer good, long-term returns, especially in a financial climate currently marked by uncertainty. We believe investee companies that take account of environmental, social and governance issues are more likely to offer these returns. As current and potential shareholders in these companies we want to urge them to take action on these major issues.

“The UN Global Compact is an extremely important tool for helping companies to achieve long-term business success while also fulfilling society’s expectation that they should operate responsibly. It provides companies with a framework of widely accepted standards to use in their management of environmental, social and governance (ESG) issues. Participation in the UN Global Compact sends a strong signal to investors that companies are both alert to the business implications of ESG issues, and taking active steps to incorporate them in their strategy and risk management.”

Posted 11/04/2008

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Report Calls Values-Driven Model Best Approach to Mix Business and the Environment

In the midst of a public policy flux, a new paper by the Business Roundtable Institute of Corporate Ethics advocates a values-driven business strategy that results in credible environmental actions

A paper produced by the Business Roundtable Institute of Corporate Ethics (ICE) examines how best to unite business, ethics and the environment as demands for environmental stewardship are increasing.  The paper represents the views of The Business Roundtable, an association of chief executive officers of leading corporations, and academics from America’s leading business schools.  “Environment, Ethics and Business” is one paper in a series, which ICE states are meant to unite rigorous academic research with recommendations for practical actions.

The problem stated in the beginning of the paper is that within the corporate community, ethics and the environment are too often seen as barriers to profit.  Now that environmental concerns have become mainstream, ICE believes the consequences for ignoring scientific research, or banking on the opinion that the research is wrong, would be too costly – both economically and socially.  The authors admit that research on climate change is conflicting and the factors involved are extremely complex, from which the consequence has been a gridlock in public policy.  Most attempts so far to solve the problem have resulted in increased regulation, the paper states.  ICE believes this mindset curtails business’ ability to be innovative in solving real problems and inevitably carries unforeseen consequences. Due to these challenges, ICE attempts to outline the different approaches the business community could take to combine business, ethics and the environment, but each present their own problems. ICE ultimately argues that what is needed is a values-based approach that integrates environmental stewardship with sound business strategy.

  • Cost/Benefit Mindset - The problem with this traditional business approach, according to ICE, is that it only focuses on the economic costs and benefits of a decision.   Innovation is also overlooked.  The paper cites examples of companies that have taken environmental action are actually saving money.

  • Constraint Mindset - ICE describes this perspective as have the sole objective of creating and sustaining economic value, with ethics and the environment as side projects.  In short, ICE believes business is capable of more.

  • Sustainable Development Mindset – Based on a concept promoted in the early 1990s, the object for business is to “do more with less” and “constrain all growth” for the benefit of the environment.  ICE sees this mindset as inherently at odds with the intent of commerce and which ultimately leads to a regulatory mindset.  ICE argues for a more decentralized approach.

  • Greenwashing Mindset – In an attempt to not be left behind, many companies are beginning to exaggerate trivial environmental changes to their products as a way of marketing their brand, the paper states.  ICE warns that this type of strategy is discrediting those companies that are making valid efforts.  The problem ICE points to is that this mindset is not value-driven.

The alternative approach which ICE advocates is a business strategy driven by values.  According to ICE, “There is a revolution afoot in business; it is a revolution with “values” at its core. Sparked by the never-ending quest for competitive advantage and the recognition of the roles of values and quality, business today is turning to values. Standards have been raised.”  Companies that define themselves based on their own unique values are creating a competitive advantage that is profit-making.  Companies such as IBM, Merck and Patagonia are cited as positive examples.

ICE admits there are no easy solutions, but lays out what it calls “shades of green,” or development stages of a company’s strategy.  They include the following:

Light Green Principle: Creates and sustains competitive advantage by ensuring your company is in compliance with the law.
Market Green Principle: Creates and sustains competitive advantage by paying attention to the environmental preferences of customers.
Stakeholder Green Principle: Create and sustain competitive advantage by responding to the environmental preferences of stakeholders.
Dark Green Principle: Create and sustain value in a way that sustains and cares for the Earth.

 

To read the full paper, please visit the Business Roundtable Institute for Corporate Ethics website.

Posted 6/20/08

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Coca Cola Case Study – Best Practices in Water Management

The Coca-Cola Company announced in 2007 its pledge to become “water neutral.”  It is the first, and at this time, the only company undertaking a water management initiative with such an ambitious goal.  Part of what makes water management so complex is the difficulty in obtaining quantifiable data for how much water is used, where it is being drawn from, and for what purpose across many different locations.  In addition, water usage data is highly diverse across different localities.  Coca-Cola was able to design a program that combined local solutions with company-wide communications strategies in order to reach its goal of becoming “water neutral.”

Defining water neutrality

Business for Social Responsibility (BSR), a nonprofit global business association in the U.S., produced a report on how Coca-Cola has revolutionized water management inside a corporate structure and how it has applied the relatively new concept of water neutrality.  According to BSR, a working group of six leading organizations in sustainable development came together do determine a proper definition of the term water neutrality.  Three criteria the group put forth are:

  • Defining, measuring, and reporting one’s “water footprint.”

  • Taking all action that is “reasonably possible” to reduce the existing operational water footprint.

  • Reconciling the residual water footprint (amount remaining after a company does as much as possible to reduce footprint) by making a “reasonable investment” in establishing or supporting projects that focus on the sustainable and equitable use of water.”

So far, this has become the accepted definition, but many areas still need clarification and further research, BSR states. 

Coca-Cola’s integrated strategy

Given the complexities of designing a true water stewardship program, Coca-Cola decided to focus on local solutions.  The company met with a wide number of expert groups from NGOs to universities to truly understand all the issues surrounding water use.  The team at Coca-Cola developed a plant-level, comprehensive water risk assessment to quantify water risks and to inform strategic responses.  In addition to this bottom-up approach, Coca-Cola released its “Manifesto for Growth” which communicated from the top its commitment to water management.  According to the BSR report, the Coca-Cola risk assessment was composed of 300 questions in multiple languages to hundreds of bottling plants to capture information across six categories.  This information was fed into an internal risk model and the data was shared at a two-day workshop with members throughout the Coca-Cola system. 

In order to integrate its strategy across all levels of the company, Coca-Cola took the following steps:

  • Plant performance (water use efficiency, water quality, wastewater treatment)

  • Watershed protection (source protections, disaster response)

  • Sustainable communities (helping enable access to clean drinking water)

  • Global awareness and action (helping mobilize the international community to drive global awareness and action to address water challenges)

Use of water management tools

Water management tools were also created in order for data to be stored in a central system from all plants which could then be shared across the Coca-Cola system.  Bottlers can benchmark their operations against other bottlers and find ways that comparable facilities are handling their water resource management practices.  In addition, regular “Top to Top” meetings are held where top bottling partners converge to maintain system-wide alignment of critical issues and share best practices. 

Outreach

The company’s outside activities involve partnerships with international and local organizations to bring safe water and/or sanitation to communities in need through nearly 120 programs in 49 countries, according to BSR.  Coca-Cola also helped launch the CEO Water Mandate and the Global Water Challenge, both designed to help companies better manage water use in their direct operations and throughout their supply chains. 

Read the full report from BSR.  

Posted 3/27/08

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Key Business Leaders Issue ' Leadership Challenge' at 2008 World Economic Forum

Committee encourages peers to do more to improve public governance internationally

At the 2008 World Economic Forum, a group of global business leaders issued a “leadership challenge” to their peers to implement, as part of their corporate social responsibility strategies, programs to strengthen public sector governance.  In partnership with Business for Social Responsibility (BSR), the Global Corporate Citizenship Initiative (GCCI) Advisory Committee provided the business case for why companies should be more involved in strengthening public sector governance and created a framework for doing so.

From the Committee’s perspective, great strides have been made in the areas of corporate social responsibility, but business can have a larger, more systemic impact by partnering with governments and civil society organizations to create enabling environments in countries where business currently struggles.  The initiative outlines a number of reasons why public governance projects benefit business:

  • Weak governance interferes with economic, social and environmental progress.  Conversely, countries where effective governance exists provide an environment where innovation and risk taking are more likely to thrive.

  • Social expectations are a heavier burden on companies operating under weak governance.

  • Better governance provides a more open global economy, which directly benefits the business community.

When laying out the framework, the Committee stressed the importance that businesses cannot and should not go it alone.  Forging partnerships with governments and civil society organizations is crucial.  The report mentioned several principles by which businesses should approach public governance projects – transparency, dialogue, respect for the unique role of public institutions, and recognition of the central value of working with civil society organizations. 

The actual framework itself was built on a Leadership Initiative that was established by the World Economic Forum in 2002.  The report includes a recommended plan of action based on four steps, each of which is explained in more detail in the report.

Businesses must…

1. Provide leadership
2. Define what public sector governance means for each individual company
3. Make it happen
4. Be transparent

The Committee members believe public governance should be central to all corporate citizenship programs. The individual members have made a commitment in the statement to annually report their progress on this issue, as well as the barriers to and opportunities for success.

Download the full report here.

Posted 2/1/08

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British MPs Say Businesses Can Do More in Combating HIV/AIDS

Select businesses have made progress in instituting workplace programs in Africa which others can learn from

Three British members of parliament went to South Africa in September 2007 on behalf of Business Action for Africa (BAA) in order to see firsthand how businesses operating in South Africa are addressing HIV/AIDS and how the private sector can play a more effective role in this area.  BAA produced a report containing key findings and recommendations for businesses, the British government, and the governments of developing countries. The project was financed by SABMiller, Anglo American, Merck and Co. and Standard Chartered, all of whom are instituting robust workplace programs to combat the disease.

Key Findings

Although there is definite role for the private sector in the fight against HIV/AIDS, it is not always clear where the role of business ends and where the state picks up. 

Employees at SAB Ltd and Anglo American are among the fortunate minority who have access to voluntary counseling and testing at the workplace and who receive free anti-retroviral treatment for as long as they need it.  There has been significant progress on removing the stigma of living with HIV/AIDS, but more progress need to be made on extending testing and treatment.

Between the participating companies, certain challenges were evident.  A prevention policy focused solely on awareness-raising was not enough.  Changing behavior is still a big challenge and an area that could use more research.  Finally, more partnerships should be developed between business and other NGOs as well as government.

Overall, there are relatively few companies that have workplace programs designed to combat HIV/AIDS.  One of the greatest challenges is to support Small to Medium Enterprises in initiating workplace intervention.  There is much more businesses could be doing in this area.

Next Steps

  1. Work with the Global Business Coalition to determine standards of good practice and to devise a code of conduct for companies.

  2. Identify business coalitions which will truly pursue new partnerships with businesses who want to implement workplace programs.

  3. Engage other international parliamentarians on the issue of the business role in fighting HIV/AIDS in countries where there is an existing or threatening health crisis.

Recommendations to Key Groups

Businesses operating in high prevalence countries should:

  • Implement robust occupational health schemes which include proper provision for HIV/AIDS prevention, testing and access to treatment.

  • Work within their sphere of influence to ensure that suppliers and distributors also have workplace programs in place.

  • Share good practice more effectively.

The British government should:

  • Forge closer partnerships with the private sector in HIV/AIDS policy development and implementation to ensure that all available resources are optimized.

  • Encourage British companies and their subsidiaries in high-prevalence countries robust workplace intervention programs.

  • Fund and support pro-active business associations that provide a platform for sharing good practice and initiate partnerships with key stakeholders.

  • Strongly support governments in high prevalence countries in developing and implementing national strategic plans to combat HIV/AIDS and encourage them to foster closer cooperation with the private sector.

  • Pursue inter-parliamentary dialogue with developing countries faced with escalating infection rates as well as those with extensive experience of addressing the pandemic.

Developing country governments and the donor community should:

  • Acknowledge business as a crucial partner to government, NGOs and donors in the fight against AIDS, and work together to find the best ways to optimize available resources.

  • Look beyond traditional perceptions of business as providers of money for programs and build relationships based on strategic partnership.


Download the full report.

Posted 12/12/07


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Anglo American CEO Sets High Goals for Mining Industry   

In the keynote speech at the Business for Social Responsibility Conference, Cynthia Carroll, CEO of Anglo American, discusses challenges that the extractive industry faces and how Anglo American confronts them.  Safety, benefit sharing, and going beyond philanthropy and compliance are some of the key issues discussed.

The following are excerpts from ‘Reflections on Corporate Responsibility from the Extractive Sector’:

"Mr. Chairman, it is a great pleasure to speak to this distinguished audience. The attendance today is a strong indication of the importance of corporate responsibility for today’s business leaders.

Today I will start by telling you a little about Anglo American. Then I will talk about some of the challenges facing the mining sector and, finally, offer some thoughts about the role of business in development.

I am the first outsider and the first woman in 90 years to lead the company. And I have come to the role with some different perspectives.

Firstly, I was struck by how a well-intentioned and highly-motivated organization had failed to get a grip on safety. Certainly our safety record had been improving over the years but, particularly in South Africa, there has been an attitude that since mining is dangerous, we will always have fatalities and injuries no matter what we do. I simply cannot accept this.

Certainly, there are some big challenges in running deep mining operations in South Africa, with our employees speaking ten or eleven different languages. But people are beginning to believe and to sign-up to the vision of Anglo as a leader in safety.

The mining industry has had a poor record of employing women and this must change. I have met some very impressive women at our operations - driving 240-ton trucks at an open pit mine in Chile or leading teams underground at mines in South Africa and Australia, as well as in technical and professional roles. But, at only 10% of the workforce, there are simply too few of them. At a time when the mining sector is facing a major skills shortage, reaching out to the other 50% of the population is not politically correct, it is pragmatically and morally simply the right thing to do. So, not only will Anglo lead in safety and health, it will also be a leader in diversity.

Mining and Sustainable Development

Having shed our non-core businesses we are now in an expansionary mode. To this end, we have recently acquired three significant projects in Brazil, Peru and Alaska. Of these, both Michiquillay in Peru and Pebble in Alaska depend upon convincing local people that we are to be trusted not to adversely impact their environment or their livelihoods. Indeed if we cannot provide that assurance we will not earn or deserve their trust – or our license to operate. Rightly, neither project will proceed without clearing rigorous regulatory processes and gaining public acceptance. So when it comes to winning trust, a commitment to the highest standards of corporate responsibility should, I believe, be a real source of competitive advantage.

Our corporate objective is not only to generate attractive returns for our shareholders but also to create a positive legacy for the countries and communities where we work.

I would draw your attention to the contribution which copper mining has made to the transformation of Chile into South America’s most successful economy. Between 1990 and 2003 foreign direct investment in mining was $15.5 billion. Over that period poverty fell from 39% to 21% of the population and have continued to fall. Thus we can safely say that in significant part because of mining, Chile’s poverty levels have more than halved in 15 years. And the region where mining is strongest now has the highest level of educational attainment and the lowest proportion of the population living in poverty.

The extractive sector is the antithesis of footloose capitalism. It will typically take more than a decade from discovering an ore body to mining it. Thus, we have a strong interest in the stability and prosperity of the societies where we operate. The sustainability challenge for a mining company is to ensure that over the lifetime of an operation – which may stretch to between 50 and 100 years - we enhance the social, human and manufactured resources of our local communities and, to an extent, the countries where we operate. I strongly believe that mining can contribute to wider development and poverty alleviation in the countries and communities where we work.

In developed societies much of a company’s sustainability obligations are met through being a good employer and paying taxes for governments to reinvest in health, education and infrastructure. In those countries, however, which lack fundamental governmental capacities, companies must often play a more active role…So for us, corporate responsibility goes beyond paying our taxes. Hence, our close involvement in the Extractive Industries Transparency Initiative, or EITI, where we work with donors, host governments, NGOs, and other companies in support of good governance. In those countries which implement EITI, resource companies declare what they pay to the government and the government declares what it has received; providing an opportunity to compare both sides of the ledger. This transparency is intended to guard against embezzlement, increase accountability and to lead to a wider debate about the use to which these time-limited revenues are put. It is not a silver bullet for dealing with all corruption but it is beginning to produce some worthwhile results.

Key challenges for the mining sector

Moreover, since it is accidents of geology which determine the location of economically viable mineral deposits, mining and oil companies often have little choice but to work in challenging environments. Of course we have countries and areas where we will choose not to operate, because of issues like corruption or human rights abuses. But in less extreme cases, minerals may be found in fragile societies or environments or they may be in weak governance zones. Factors such as these dictate that we must be clear about what upholding our core business principles and international standards requires us to do.

My second set of issues relate to benefit sharing. Traditionally, mining has been labor intensive - so when a mine was built it offered a triangle of benefits: profits for the operator, revenue for the government and jobs for local people. But times have changed. One side of the triangle has shrunk. Not only has mining become more capital intensive; the skills needed to do the available jobs may not be readily available in subsistence economies or remote communities. This context, coupled with greater assertiveness on the part of many communities vis a vis their own governments, is leading to demands for new models of benefit sharing. For many indigenous communities in North America, for example, this takes the form of equity participation. This is also a model we have also used in some black economic empowerment transactions in South Africa.

But, in addition – and I think that this goes to the heart of an understanding of corporate responsibility as going beyond philanthropy – mining companies are having to understand how best to leverage their core businesses to create better development outcomes. This may involve, for example, local enterprise initiatives linked to the supply chain; pre-employment training; local human and institutional capacity building; or designing infrastructure – like roads or water supplies - so that it will also create benefits for local people.

A third set of issues relates to energy security and climate change. Mining is both a major energy user and a producer of coal. In operations across the world we face issues of energy security as host countries struggle to align their electricity production capacity with the strong economic growth of recent years. Given this demand for energy, coal will inevitably continue to play a major role. The fundamental challenge is to harness its energy but to reduce its impact on the climate through clean coal initiatives. Business must be a key partner in addressing how to deliver growth in a carbon constrained world and we look to governments to provide clear rules as soon as possible to facilitate investment.

My fourth set of issues relates to improving the management of the macro-economic challenges of a high dependence on mineral resources. There is a phenomenon, known as the ‘resource curse’, whereby resource rich countries sometimes fare worse in terms of economic growth and human development than those without such endowments. Countries like Chile – the world’s leading copper producer – or Botswana – the producer of the world’s best diamonds are outstanding success stories. They show that there is nothing inevitable about the ‘resource curse’. The problem is not the existence of resources but of poor national governance.

So my fifth and final set of issues for the mining sector relates to the relevance of sustainable development and corporate responsibility in an era of resource nationalism.
‘Resource nationalism’ comes in different shapes and sizes. It may range from nationalization through to unilaterally changing previously agreed fiscal arrangements or imposing additional industrial policy requirements. The phenomenon reflects the fact that at a time of constrained supply and strong demand, the governments of mineral rich countries feel that their negotiating hand is stronger and they – not always unreasonably - want a bigger share of the value being created. It is, however, important for governments to remember that whilst there may be a boom today the commodities business is a long term one and cyclical in nature and that it is important to maintain investor confidence.

A driver of the demands for higher taxes or penal measures against mining in some countries has been the impression that we don’t ‘give enough back’ to society. In some cases this is a clear misperception but one which underlines the importance of communicating better what we contribute to the places where we operate.

Business and Development

Much of my address today has been concerned with the development challenges of the extractive sector and how Anglo American and some of our peer group have been seeking to respond.

Mr. Chairman, business has to be an integral part of addressing the big challenges facing society – whether they be climate change or the unacceptable proportion of the world’s population that exist on less than a dollar a day. There are many people whose agenda is to portray business as the root of our problems. We must be robust and prepared to argue our corner in response. But, if we wish business to be seen to be part of the solution then we need to bring our creativity to bear in improving the lot of those around us.

In our sector, that is what Anglo American is seeking to do. We have a lot to do in improving our own performance in relation to safety and diversity. But we have also have a strong sense that business is not only about the bottom line. We have the rare privilege of being able to lead and to innovate in areas like HIV/AIDS, the creation of new businesses, and community development. We have the ability to open the way to many positive opportunities for the communities where we do business.

The English poet, John Donne, observed that ‘no man is an island entire unto himself’. The same is true of business; we cannot succeed if the societies where we work fall apart. It is a uniquely exciting time to be in business – rarely have we had such scope to make a difference in improving the lives of so many people throughout the world. Clearly the desire to make that difference is what unites us all here today. Thank you."

Posted 11/5/07

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Dubai Ethics Centre Taking Root In Otherwise Vulnerable Region

Article from Policy Innovations

Merck Pharmaceuticals has undertaken the project of establishing an ethics center in the United Arab Emirates “to raise the level of awareness, and encourage standards of good practice in organizational ethics, corporate responsibility and governance through the provision of research, training, standard certification and advisory work for the Dubai Chamber of Commerce and Industry members and stakeholders,” according to its own mission. Ken Stier has written an article for Policy Innovations, entitled "Merck's Dubai Ethics Center," on how the center is fostering debate in the region.  The following are excerpts from his article.

Merck Sponsors Ethics Center in Middle East

A study, commissioned by Merck and conducted by the Boston College Center for Corporate Citizenship, found that within a fairly short time [since 2005] the Dubai Ethics Centre "had clearly impressed a cross-section of government, military and business thought leaders on the importance of codifying and enforcing 'workplace ethics.'" At the same time, the study noted, although only a handful of companies had made "any attempts at real organizational change, the newly receptive mindset was meaningful in a culture where the concept never before existed."

The Centre has forced government and business leaders to take note of global expectations, particularly regarding the corporate social responsibility agenda, of which minimizing corruption is a part. As a whole, the Middle East ranks as one of the most corrupt regions in the world, according to Transparency International, which also found the UAE to be the least corrupt among the lot.

Many of those most actively inculcating ethics in their business practices are the local subsidiaries of multinational firms. And although the Centre was also intended to be a regional model, it remains unique.

Putting Corporate Social Responsibility on the Table

A recent assessment of the Centre's efforts highlights the glaring gap between the rhetoric of corporate social responsibility and the reality of most business practices.

"Companies are becoming familiar with the term 'corporate responsibility' and they recognize the need to be saying the right things in this rapidly developing, highly competitive international marketplace [and] yet their actions, if not the words, prove that they remain unconvinced or unclear of the business case for corporate responsibility and the benefits successful CR management could bring to them in terms of mitigating risk and identifying opportunities," concluded the DERC-commissioned report.

Despite this gap and problems of measurement, there are bound to be some collateral benefits to discussing ethical standards, just as there is an osmotic influence on local business from the increased presence of foreign companies operating under global expectations. The Centre's early training efforts, now expanded from an original focus on the health care profession, resulted in the adoption of new ethical codes by various organizations, including the country's air force.

"It is very difficult assess the [Centre's] impact on a wide scale because there are so many components working at the same time," said Nidal Fakhoury, Merck's regional general Manager based in Dubai. At the same time, he believes that DERC did help bring about "tremendous improvements" in the health care sector in the last few years.

Filling the Ethics Gap

Many local businesses are loath to spend money on ethical staff training, especially those businesses with a large expatriate staff and high turnover. As a consequence, this kind of training is more regularly pursued by the local subsidiaries of multinational firms. Even in more basic matters, such as worker health and safety, DERC interview research has shown there is a "lack of wide understanding" about these issues beyond basic compliance. Workers themselves are inadequately informed about elementary safety issues.

DERC researchers have found that conflicts of interest on corporate boards are the "single biggest governance-related concern." They seem inevitable in small countries with a close-knit business community. The lack of financial transparency and auditing integrity is another pressing issue. "Several interviewees said it was quite easy to 'shop around' for an auditor that would give the company's management the financial audit result they desired, independent of whether or not it reflected the firm's financial reality," a DERC research report revealed. Deceptive advertising was identified as the "biggest ethics-related misconduct," with a majority of interviewees advocating consumer protection laws to assist legitimate businesses.

UN Development Reports Spark Further Debate in the Region

The region's key health challenge is the shockingly high maternal mortality rates, according to the UNDP's Arab Development Reports. In more than half of the Arab countries, 75 mothers die per 100,000 live births, and in a third of the countries that figure is more than 200. In only two countries (UAE and Kuwait) are the levels considered low by international standards—below five.

The UNDP reports also examine the intractability of corruption in the region, noting that it is an inherent part of many of the region's political systems, especially where "law and customs decree that the land and its resources belong to the ruler."

UNDP findings have led to intense debate and even polarization among Arab elites about the "right way to reform"—top-down (from the state) or bottom-up (through civil society)—and which values reform should seek to instill, "traditional values, including religious ones, or modern, democratic and secular values along Western lines."

DERC has had to finesse this dilemma and the Boston College case study notes that the "the Centre was careful not to overtly impose Western standards on its audiences, but rather strove to achieve a delicate duality in messages: 'Find your own values and live by the standards you set. But also be cognizant of what Western partners expect of you.'"

Visit the Dubai Ethics Centre website.

Posted 10/16/07

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Business Needs to Develop Effective CSR Approaches in the Face of Global Water Crises

Business for Social Responsibility (BSR), in cooperation with The Pacific Institute, based in California, have published “At the Crest of A Wave: A Proactive Approach to Corporate Water Strategy.” The report was written by Linda Hwang, Sissel Waage, Ph.D., and Emma Stewart, Ph.D., of BSR’s Research & Development team and Jason Morrison, Peter H. Gleick, Ph.D., and Mari Morikawa of the Pacific Institute.

According to this report, in the next two to five years, companies will need to adapt to availability concerns such as water stress and flooding; quality concerns, including increasingly contaminated surface and groundwater; and access concerns, specifically competition (real or perceived) with other water users. As a result, a thoughtful water strategy will prove an essential mechanism for managing medium-term business risks and opportunities. In being proactive, corporate leaders will not only anticipate the future, but will shape it while gaining advantage in some of the key, and most water-constrained, markets worldwide.
 
The authors state that,  “There are no simple solutions to our water uncertainties, but there is tremendous potential for a multi-faceted approach that combines efficiency and conservation measures, innovation at the process and product level, and investments in natural systems that replenish and purify water long into the future.”

The urgency of action is based on the core predictions made by the United Nations, whose data shows that two-thirds of the world’s population will be living in water stressed regions by 2025. Additionally, one-third of the world’s population will not have access to enough water to meet basic needs. Water shortages are likely to put more pressure on people already living in water stressed regions.  Although people in the Third World will be most affected, a lack of freshwater is already an economic constraint for people living in China, commercial centers in Australia, and the western parts of the United States. 
 
The conclusion of the new report is that sophisticated and sustainable approaches to the use of water by corporations have to be both a core component of their social responsibility strategies and an essential part of their sound business approaches. 

The authors of the study assert that, “for the past few decades, corporate decision-makers have generally assumed that water trends do not pose a threat to business continuity, reputation, product margins or growth markets. Circumstances, however, are changing. Businesses will increasingly find themselves grappling with water constraints in various sourcing, production, and retail sites around the world. Indeed, for some sectors, an availability of reliable, high-quality water may determine the nature and location of billions of dollars of investment. Sustainable access to safe water is likely to affect corporate behavior, goodwill, and profits.”

The study states that water trends that are re-shaping the business context include:

  • Increasing and inequitable demands
  • Ongoing over-appropriation
  • Intensifying environmental impacts
  • Declining water quality
  • Climate change and its effect on water
  • Emerging role of the public in water policy
  • Growing debate over the role of markets in delivering water

The report concludes:

  • A strategic water plan will position a company over the longer term to more readily forecast change and respond to challenges.
  • A strategic water plan will position a company over the longer term to more readily forecast change and respond to challenges.
  • If executed fully and communicated appropriately, it will help companies avoid being viewed as competitors with community water users.
  • If inclusive of employee ideas and new technologies, it will save money and help inspire neighboring communities to also steward water resources.
  • If enhanced over time, it will challenge existing processes and practices and replace them with better alternatives, thereby increasing productivity and reducing pressure on water supplies.
  • If built into organizational incentives, it will enable the company to manage water as a key material resource while protecting its social, cultural, environmental and economic values.
  • If built into conversations with key stakeholders, it will help to avoid surprise critiques or media exposés.
  • And if included in public policy advocacy strategies, it can help to predict future costs, entitlements, and access rights.

To read an in-depth description of the recommended strategy, click here to view the .pdf.  

Posted 9/28/07

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The Guide to Human Rights Impact Assessment and Management

© 2007 International Business Leaders Forum and International Finance Corporation

For a number of years a variety of organizations have been developing assessment approaches for companies to use in a range of key corporate social responsibility areas, including human rights. The new “Road Testing Draft” that has been released by the International Business Leaders Forum and the International Finance Corporation (which worked on this with the UN Global Compact) references other works and highlights both the need for a corporate focus on this area, while also providing survey assessment approaches.

From a Foreword in the report: “The business case for human rights is an increasingly important part of the human rights and development dialogues, the understanding of business risk for firms, and the mainstreaming of environment, social and governance factors in investment analysis and firm valuation,” Rachel Kyte, Director, Environment and Social Development Department, International Finance Corporation.

The current guide is a draft and after further feedback the authors anticipate a final version being published in 2009. According to the report, the guide has three main objectives:

• Acknowledge that companies can and do contribute to protecting the rights of individuals – whether employees or workers, members of communities or customers – through the effective planning, implementation and ongoing management of business projects.
• Provide a process through which business managers, who are unlikely to be experts in the field of human rights, can oversee the identification, assessment and implementation of appropriate management responses to potential human rights challenges to new or evolving business projects, in order to strengthen their company’s contribution to human rights protection.
• Enable a company to address the risks for the business of potential allegations of human rights violations, the corporate social responsibility opportunities that active engagement on these issues present and the potential impact of its operations on the rights of individuals and communities.

The report points out that, “The evolving expectations of stakeholders on what constitutes responsible business practice are requiring companies to look beyond their immediate core operations and direct control. Increasingly, companies have to consider issues along their supply and distribution chains. The greater a company’s weight and influence – as an employer, taxpayer or consumer of local resources – the greater will be the expectations of stakeholders..”

The human rights impact assessment process permits a company to systematically identify, predict and respond to the potential human rights impacts of a business project, having regard to the following:

• The people – those whose rights may be impacted, as well as other interested stakeholders.
• The country and locality.
• The company’s policy and practices, and the business sector in which it operates.
• Business relationships within the project.
• The project’s time frame and lifecycle.

The framework within which a human rights impact assessment is carried out in a business project will address the following questions:

• Who are the people or groups whose rights may be impacted by the project?
• What is the nature of the impacts on their rights?
• How much control can the company exercise over its impacts and the responses to them?
• What alternatives are open to eliminate or otherwise respond to the human rights issues?

The individuals or groups with a valid vested interest in the project (its stakeholders) and in its impacts and its outcomes may include the following:

• Employees (including management) and other workers.
• Communities within which the operation is located.
• Customers.
• Suppliers and distributors.
• Investors and financiers.
• Business partners.
• National and local government organizations.
• Multilateral agencies and donors.
• Non-governmental organizations.

To read the guide in full, click here to view the .pdf version.

Posted 8/10/07

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Maintaining Transparency Within the Supply Chain

The following is a summary of an article from the Global Reporting Initiative that discusses the challenges of monitoring complex supply networks and offers suggestions for making this process more efficient and successful.

Companies face an ever-increasing challenge to make sure they are doing business responsibly. Not only do they have to routinely monitor their own internal practices, it is important they also monitor the work of their suppliers. Many companies are realizing there are ultimately limits on the extent to which audits of suppliers can be done. The structure of supply chains can be complicated. The article describes the supply chain not so much as a chain but as a pyramid. Direct suppliers in the first tier are connected to their suppliers in the second tier who are connected to others in additional tiers. Inevitably, the tiers get larger the further removed they are from the initial company, creating more of a pyramid effect. This structure clearly illustrates how challenging the process of monitoring suppliers can be.

In the past, sustainability in the supply chain has mainly been a top-down affair. Companies’ engagement with their direct suppliers tend to based on a mutually agreed upon code of ethics. The subjects interviewed for this article often cited that within their codes, there is reference to any combination of health and safety, human rights, labor, social rights, and environmental impacts. Many companies contractually bind their suppliers to sustainability measures, making the consequences for violations much more serious.

Some challenges with current efforts that many of the interviewees faced include:

Limited control: Companies can police their direct suppliers and sometimes even the tier beyond that, but cannot see the base of their supply “pyramid.”

Third party procurement: Importers often refuse insight into their supply chains because they compete with the companies themselves.

Too many codes: Suppliers are overwhelmed by various codes. Though roughly similar, their certification processes themselves are a burden.

Limited knowledge: Suppliers in developing countries are often simply unfamiliar with sustainability.

Supplier skepticism: Codes are seen as an attempt to set demands and externalize costs. This view is strengthened by occasions where there is a discrepancy in priorities between the companies’ departments.

The article argues reliance on codes is simply a reactive measure. To really tackle to issue, the process should be more integrated. Using incentives over regulation and partnership rather than policing supports companies as they move towards more transparent and sustainable supply chains. This is a process that can be implemented at all levels within the company and throughout the supply chain.

Some companies are adopting a more integrated, partnership approach where an improvement plan is devised to more actively engage the supplier. The company clarifies its needs to the supplier and supports the supplier in fulfilling its requirements through guidance. To make this relationship work, the article offers several suggestions:

Transparency is paramount. Sustainability reporting within the company is essential to gaining the trust of suppliers and consumers.

Delegate the work. Sustainability reporting can be an arduous process for the company on its own, so sharing the responsibility with all tiers of the supply chain can lessen that burden. This would also create the additional benefit of mutual understanding and awareness of partner needs.

Fully engage the supplier. Rather than being the subject that is asked to implement certain regulations, transparency through reporting can give the supplier the opportunity to demonstrate their contribution to sustainable management systems and potential increased efficiencies. This way, suppliers have a bigger stake in the process.

To read this article in full, click here for the .pdf version.

Posted 7/19/07

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Gap Inc. Joins Ceres Network of Companies

Company Credited for Tackling Labor & Factory Conditions

May 16, 2007: BOSTON – Citing the company’s focus on improving labor standards and factory conditions in its extensive supply chain, the Ceres board of directors today announced that is has approved apparel giant Gap Inc. as a Ceres company.

The San Francisco-based company is among several apparel and footwear manufacturers, including Nike, Timberland, and Eileen Fisher, that have joined Ceres, a leading coalition of investors, environmental groups and other public interest organizations working with companies to address environmental and social challenges. Gap is among more than 70 companies in the Ceres network, including 20 Fortune 500 companies.

“Gap’s focus and attention on improving working conditions and labor standards in their supply-chain is commendable in an industry where the bottom line so often compromises the welfare of its workers,” said Mindy S. Lubber, president of Ceres. “We look forward to working with Gap in the future to further integrate sustainability issues into their business practices.”

Gap issued its first corporate social responsibility (CSR) report in 2004. The 40-page report focused on the company’s programs to improve working conditions in approximately 3,000 factories around the world, including its factory approval process and factory monitoring protocols. The report also outlined the company’s community involvement programs and environmental issues such as energy consumption and waste reduction. Through discoveries of supply-chain infractions, Gap reported that it pulled its business from 136 factories and turned down bids from 100 others that failed to meet its labor standards. Gap plans to issue its next sustainability report in 2007.

“We are proud to be recognized as a Ceres company because our visions are so closely aligned,” said Dan Henkle, Senior Vice President of Social Responsibility at Gap Inc. “We’ve had considerable experience addressing labor issues in the supply chain, and we look forward to further evolving our CSR efforts by working with Ceres on our environmental strategy and program.”

Companies that join Ceres must commit to making the company’s sustainability mission or values publicly available, engage in stakeholder and shareholder discussions, disclose environmental and social commitments and results, and strive for continuous improvement. Ceres facilitates companies’ progress by convening stakeholder groups consisting of investors, non-governmental organizations, peer companies, and other participants suggested by the company.

About Ceres: Founded in 1989, Ceres is a leading network of investors, environmental groups, and other public interest organizations working with companies to address sustainability challenges such as global climate change. Ceres also directs the Investor Network on Climate Risk, comprised of more than 50 institutional investors who collectively manage $4 trillion in assets.

About Gap: Gap Inc. is an international specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Old Navy, Banana Republic and Forth & Towne brands. The company operates more than 3,000 retail stores in the United States, Canada, the United Kingdom, France, Ireland and Japan. In 2006 Gap employed over 150,000 people and earned revenues of $15.9 billion.

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