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CHEVRON'S SHAREHOLDERS CALLED TO DEMAND GREATER FOREIGN OIL DEAL TRANSPARENCY
OXFAM AMERICA SUBMITS RESOLUTION IN LINE WITH THE BROAD STRATEGY OF PUBLISH WHAT YOU PAY FOR OPENING THE BOOKS ON DEALS BETWEEN MAJOR OIL COMPANIES AND OVERSEAS GOVERNMENTS IN LINE WITH THE EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIAVE.
International aid agency Oxfam America filed a shareholder resolution today with Chevron calling on the California-based oil company to adopt a comprehensive policy of publicly disclosing payments made to governments where the company operates.
The resolution, filed on International Human Rights Day, aims to promote the rights of citizens in oil-rich countries by providing them with vital information about revenues coming into their countries. Co-filers on this resolution include Newground Social Investment, Robert Brooke Zevin Associates, Inc., and likely several other Chevron shareholders.
In 2008, Chevron paid more than $40 billion in taxes to governments around the world. Managed properly, oil revenues can contribute to economic growth and poverty reduction in countries where Chevron and other companies operate. However, history has shown that oil company payments to governments as well as government receipts are often kept secret, leading to embezzlement, corruption, and revenue misappropriation by host governments, which, in many cases, has prevented oil revenues from contributing to economic development in these countries.
“Natural resource revenues are too often squandered through corruption, internal conflict, and weak governance,” said Raymond C. Offenheiser, president of Oxfam America. “Citizens of resource-rich developing countries need adequate information to hold their governments accountable for using natural resource revenues for essential services like health and education. Chevron should maintain its position as an industry leader on this issue by practicing the highest degree of disclosure of payments to host governments to help make this possible.”
Chevron plays a leading role in the global Extractive Industries Transparency Initiative (EITI), a voluntary program designed to increase transparency of payments by oil, gas, and mining companies to governments where resources are extracted. EITI is recognized as an important step toward improving revenue transparency, but a voluntary initiative has limited effect and does not cover all countries where Chevron invests, including Angola, Chad, and Cambodia.
“While Chevron has endorsed the concept of revenue transparency with programs like EITI, it does not fully disclose payments to governments on a country-by-country basis. A policy for disclosing this information in all of Chevron’s countries of operation will help ensure that the company’s – and the shareholders’ – investments contribute to increased economic development and political stability in developing nations,” said Offenheiser. “We hope that other Chevron investors will join us in supporting this proposal.”
Oxfam’s proposal presents an opportunity for Chevron to take a leadership role as the US Congress contemplates legislation that would legally require all oil, gas, and mining companies registered with the Securities and Exchange Commission (SEC) to disclose payments made to host governments. This includes European companies, such as Shell and BP, as well as many companies in emerging markets such as China, India and Brazil. The Energy Security through Transparency Act of 2009 was introduced with bipartisan Senate support in September and is expected to be considered for a vote in 2010.
“This legislation hopes to address the lack of transparency in the oil, gas, and mining industry that often goes hand-in-hand with government corruption and violent conflict. The resulting instability poses a long-term threat to company investments and higher energy prices for consumers. By recognizing the value of transparency, Chevron can help elevate the industry and foster accountability in nations where secrecy has undermined development, democracy, and human rights,” said Offenheiser.
Posted 12/14/2009
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"Third Sector" in the UK Moves Ahead With Review of Ethics Codes
Lindsay Driscoll to chair good governance code steering group
Reporting on Third Sector Online, John Plummer wrote that former UK Charity Commission legal commissioner, Lady Driscoll, will oversee this broad-based project. His article reads:
Former Charity Commission legal commissioner Lindsay Driscoll has been appointed chair of the steering group for the code of practice on good governance.
The code is designed to provide charities with an easy-to-use practical guide to governance.
The steering group that oversees its development includes representatives from the NCVO, chief executives body Acevo, Charity Trustee Networks and the Institute of Chartered Secretaries and Administrators.
Driscoll, a consultant at solicitors Bates Wells & Braithwaite whose previous roles include head of legal and governance at the NCVO, said the code needed to "further reflect the diversity of the sector and the increasing need for strong and accountable governance".
A statement from the steering group said: "Feedback from the code's users tells us that the overarching principles work, but people would find it easier to use if there was more distinction between the principles and the way they are put into practice in each organisation.
"The principles need to be accessible and flexible enough to respond to the needs of different parts of the sector. Clearly, all this is going to require extra resources, and the steering group is currently looking at various funding opportunities."
Posted 04/14/2009
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Launch of Second Annual Essay Competition Honors Ethics in Finance
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The second annual competition for the Robin Cosgrove Prize has been launched, in memory of an innovator who understood the importance of ethics in the finance industry. Robin Cosgrove was a young investment banker who died at an early age and now, his family has created a global essay competition for young people with innovative ideas in finance.
EthicsWorld highlighted the winning essays from last year, both of which were chosen from among a competitive international group. The winners of the 2006-7 Robin Cosgrove Prize were jointly Ms Clare Payne of Macquarie Bank in Australia who wrote on the theme “Ethics or Bust : Beyond Compliance” and Mr Jonathan Wisebrod of Villari in Singapore who wrote about “Social Impact Ratings.”
To see summaries of last year’s essays, please click here.
The Robin Cosgrove Prize for Innovative Ideas for Ethics in Finance is open to young people, aged 35 years or younger, throughout the world who are invited to submit creative papers setting out analyses, projects or proposals for innovative ways to promote ethics in finance and banking, especially in emerging markets.
The management of the Prize is under the supervision of the Observatoire de la Finance/International Finance Observatory, which is a Swiss not-for-profit foundation based in Geneva. The Observatoire, working in cooperation with Dr Carol Cosgrove-Sacks, Robin’s mother and a former director in the United Nations in Geneva, has set up a distinguished international Jury to evaluate the papers submitted for the Prize. The Jury will allocate the prize money of USD20,000.
Applicants are invited to submit their papers electronically by March 31, 2009. For more details on this competition, please visit the Robin Cosgrove Prize website.
Posted 6/12/08
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Environmental Groups Bring Formal Complaint Against Shell
Letter to government officials cites serious environmental and social violations at Shell’s refinery in Argentina
An audit report was released on a Shell refinery located just outside Buenos Aires by Argentina’s environmental agency that brings to light serious environmental and social violations committed there.
Local groups in Argentina, including Friends of the Earth Argentina and FOCO, filed an international complaint on May 29, 2008 to the governments of Argentina and the Netherlands citing serious environmental and social violations on the part of Shell CAPSA Dock Sud. The complaint refers to the audit report that was recently conducted by the National Environmental Authority. The audit found that:
- Shell did not have permission to extract from surrounding water sources, and the company is responsible for confirmed spills of dangerous waste.
- Shell was not compliant with the treatment of dangerous waste.
- Shell did not meet minimum environmental standards set by national law.
- Shell did not produce Environmental Impact Assessments, also required by international law.
The complaint makes the argument that Shell is also in violation of six OECD Guidelines for Multinational Enterprises. The local, national and international laws the complaint claims Shell has violated have taken their toll on the local population. Around 4,500 people live in Villa Inflamable, the area where the refinery is located. It has been confirmed by a number of reports cited in the complaint that this area is highly polluted and the people living there are at extremely high risk of health problems.
A news article from the Environmental News Services says “Shell initially denied the findings by the Argentine National Environmental Authority, but later, following the preventive closure and the multimillion dollar losses accrued each day from the company's inability to maintain the production line, capitulated, and signed an agreement to correct the violations and invest some US$80 million to improve its sub-standard environmental management.”
The complaint does point to the overwhelming presence of Shell in the area. Shell gives thousands of dollars through philanthropic donations and special programs to the communities in which it works. However, in the view of local Argentine groups, “Shell’s industrial activity results in many of the environmental problems facing Villa Inflamable and its investments in social philanthropy are insignificant when compared to the impact Shell’s industrial activity has on human life, in health and in the quality of the environment. It is clear that Shell has an enormous negative impact on the health of the residents of Villa Inflamable and on the poor quality of the environment that surrounds them, which surpasses any philanthropic activity that can be credited to the corporation.”
The comment is particularly poignant as Shell has just released this month its 2007 Sustainability Report. According to Shell’s Chief Executive Jeroen van der Veer, the company is committed to sustainable business practices: “For us that means helping meet the world’s growing energy needs in economically, environmentally and socially responsible ways. This includes both running our operations responsibly today and helping to build a responsible energy system for tomorrow,” according to his statement at the beginning of the report.
Shell’s report certainly covers many of the key areas of concern, such as worker safety, environmental standards, community development, and social impacts, to name a few. The report is even conveniently formatted on its own website which is very easy to navigate. However, no where in the report is there any mention of challenges that Shell faces which might allude to the refinery in Argentina.
Under the section entitled “Performance Data,” Shell has published tables on both its environmental and social performance since 1998. In almost every case, the numbers indicate progress.
Posted 6/2/08
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Progress in Curbing the HIV/AIDS Epidemic Finds Success in the Workplace
Two leading international, non-governmental organizations announced significant improvements in the creation of company-wide programs to help alleviate the worldwide HIV/AIDS epidemic. The Conference Board, a U.S.-based business membership and research organization, found that 82 percent of the 134 major international firms it surveyed have HIV/AIDS programs aimed at helping employees already suffering from the disease or at risk of infection. The Genevea-based International Labor Organization (ILO) reports a number of highly successful cases in countries where it has implemented project SHARE: Strategic HIVE/AIDS Responses in Enterprises.
The Conference Board: More companies worldwide are addressing HIV/AIDS
A full-length report was produced by The Conference Board as a follow-up to a 1997 initiative to form a strategic corporate response to the global HIV/AIDS epidemic. Currently, more than two-thirds of the companies have workers who have been affected by HIV/AIDS, with one-fifth of these firms anticipating a growing impact of this epidemic over the next three years. Sub-Saharan Africa was the region affected the most, while Asia, Latin America and Eastern Europe/Central Asia still remain at “high risk.”
The effects of HIV/AIDS inflicted employees have impacted companies significantly. Fewer skilled workers and managers, greater absenteeism and turnover, and higher healthcare and insurance costs reduce productivity and increase expenses. Corporate responses have been varied, according to the report. The Conference Board found companies focusing on education and prevention, to counseling and treatment. Companies in sub-Saharan Africa are the most likely to offer on-site treatment. Employee assistance programs continue to be the top overall initiative, and among companies with HIV/AIDS programs, education and training programs, resource and referral services, and HIV/AIDS counseling were the top initiatives.
The International Labor Organizations: Project SHARE becoming integrated at national level in many countries
The ILO report contains dozens of case studies where, through the help of its expertise, many companies in its pilot countries have successful implemented programs which have fundamentally changed the way employees think about HIV/AIDS. In 2000, the ILO set up a dedicated global program on HIV and adopted a code of practice on the subject.
The ILO views the workplace as a prime environment to implement HIV/AIDS programs because of the existing capacities for training, health policies and other set procedures. Due to a lack of awareness, a stigma was attached to many workers inflicted with HIV and many workplaces supported a policy of denying its existence. There was also a lack of knowledge about treatment and prevention. Now, programs that focus on these aspects have been successfully integrated at a national level. By using a combination of dialogue, training and facilitation methods, the SHARE program aims to increase the capacity of ILO’s traditional partners to design, implement and sustain their own workplace HIV/AIDS policies and programs.
SHARE programs started out in India, Belize, Benin, Cambodia, Ghana, Guyana, and Togo, which are now completely well established and becoming sustainable national programs. The program is now collaborating with a total of 650 workplaces, reaching almost a million workers in 24 countries. The full report details the number of customized solutions that have been successful to the individual needs of each workplace.
Overall strategies focus on behavior change, peer learning and targeted messaging. The programs involve the participation of ministries of labor, the business community at large and trade organizations, all crucial to the success of the program, the ILO states. Specific challenges have been to integrate HIV/AIDS education and training throughout the supply chain and into the informal economies. With the success of its previous programs, the ILO is now beginning new program in China where the epidemic is at a crucial stage.
Posted 4/18/08
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Lessons for Companies Supporting African Aid Projects: Making Them Effective
Many companies are supporting aid projects in Africa and other poor nations as part of their corporate social responsibility programs, but often the money is poorly used. The Wharton Business School recently sponsored a panel discussion on how innovative aid projects are achieving success in Africa.
When it came to defining effectiveness in this context the panelists all seemed to agree that Western-backed aid partnerships have the same goal -- to solve problems up to a level where Africans can ultimately implement and run things by themselves, whether that involves training more African-born health care workers and software entrepreneurs or handing over control of the schooling for children of AIDS-ravaged families
The following excerpts from an article published on the Knowledge@Wharton website contains lessons for companies looking to successfully invest in aid projects.
Reprinted with permission from Knowledge@Wharton - the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
Not long ago, an unnamed global corporation decided that it wanted to help children in the southern African nation of Namibia -- and so it spent millions to donate scores of new computers and television sets for the classrooms in a particular region of this poverty-plagued, mostly rural nation. Jonathan Johnnidis, who recently spent time in rural Namibia working to improve healthcare with a non-governmental agency (NGO) called WorldTeach, had information the large corporate benefactor apparently did not -- that there is no electricity grid in that region.
Johnnidis drew a sharp contrast between that misguided project and another, more successful partnership between Namibia and the government of Germany, which was once colonial ruler of the African nation and now is helping to build miles of new roadways there.
"It was one of the best investments," said Johnnidis. Germany "didn't provide money for drugs and it didn't provide money for computers. They just built roads."
A Wharton Business School panel, entitled "New Partnerships in Business and Leadership Development," was focused on how a relatively new breed of philanthropic NGOs -- not just WorldTeach but newer, high-profile ones like the Bill and Melinda Gates Foundation and the Mo Ibrahim Foundation created by a Sudanese mobile-phone billionaire -- are bridging the gaps between cash-strapped governments and traditional Western relief funds.
According to the five panelists, one way the new NGOs are achieving this is by placing more people like Johnnidis directly in the areas that need the most help, and by better identifying the initiatives that can make a difference right away.
Donors "pour money into countries that don't have the infrastructure to support everything the initiative plans to do," said Brian Anderson, who raises funds for a program in his native South Africa called MaAfrika Tikkun, which seeks to help children in AIDS-ravaged families. "What is critical is to create structure, to create systems, to create ecosystems."
Throughout the Wharton panel discussion, a constant theme was finding new ways to put the considerable human capital of Africa to work.
One of the most intriguing concepts was outlined by Jern Lyseggen, a Norwegian entrepreneur who recently founded a global business-to-business search engine called Meltwater News, which has a substantial presence in Africa. Through his start-up company, Lyseggen also helped to found the Meltwater Entrepreneurial School of Technology in Accra, Ghana. Its goal is to train young Africans to develop and market commercial software. "The reason we chose commercial software is that you don't need the infrastructure," Lyseggen said. "You just need a few hundred dollars and a computer. If you get the right people and a computer, they can come up with all of these marvelous ideas."
Several panelists noted that the reason NGOs are thriving outside of governmental channels is that they operate relatively freely, outside the entrenched system of corruption. That corruption has led to the squandering of a significant portion of development and relief money. Chris Odindo, CEO of International Development and Policy Corp., a global social enterprise venture, told the audience of his frustration when he learned, while playing squash with the minister of an African nation, of hundreds of thousands of dollars of aid money that was unspent.
There has also been a modern so-called "brain drain" as some of Africa's best-educated have departed the continent to work and raise families in the more stable environment of the West. Odindo suggested that African nations take steps to encourage those of African descent who now live elsewhere to return -- even if just for a week or two at a time -- and assist in the redevelopment of the continent. He noted that Kenya already has such a program, allowing and encouraging Western physicians and health care professionals of Kenyan heritage to work in local hospitals.
Posted 11/30/07
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UNIDO Initiative Aims to Develop CSR Awareness Among European SMEs
Developing CSR among SMEs is essential to sustainability, says the United Nations Industrial Development Organization (UNIDO)
The August 2007 edition of the Responsible Business Initiative in Serbia newsletter contains two articles on corporate social responsibility (CSR) and Small to Medium Enterprises: the first highlights European trends, while the second concentrates on new developments in Serbia.
European Trends
According to this UNIDO publication, CSR continues to be seen in many European countries as a strategy for larger multinationals, rather than for smaller, domestic companies. A key theme in an article called “European SME’s Good Practice” is the different stages at which companies in different countries address CSR. Finland and Norway were two of the first countries, back in the 1960s, where firms started to address CSR, including ethical issues. In Austria, the issue became more prominent in the 1970s and 80s, while in Poland, for example, companies have only recently begun to adopt CSR principles.
UNIDO asserts that with respect to SMEs, the implementation of substantive CSR programs in most European companies is significantly lower than in multinationals. Data shows a large variance of SME engagement in CSR activities. A study found that 83% of Finnish SMEs are engaged in CSR, whereas 46% of Spanish SMEs conduct such activities. Generally, the northern and central European countries show the highest percentages of SMEs involved in external social activities, contrary to southern countries as well as France and the United Kingdom.
The article offers some reasons for why this may be the case. In countries with a high level of legal legislation, the incentive to “do what’s right” may be lower for SMEs with limited capabilities. In addition, some companies just lack awareness or understanding of the concept. Data from the United Kingdom in 2006 shows that 71% of the SMEs are uncomfortable with the use of the term CSR, because they see it as too difficult to understand and relate the word “corporate” with issues for large companies only.
According to a survey by the European Commission back in 2001, the majority of CSR activities by EU companies mainly involved donations that support sport; culture; and health and welfare initiatives. The notion of more “sophisticated” strategies of CSR, those that go beyond philanthropy, were less developed.
UNIDO Developments in Serbia
UNIDO is undertaking a program in this area in Serbia. UNIDO Officer Kai Bethke explained the importance of fostering CSR among SMEs where awareness is low. “One needs to recall that about 90% out of all companies that exist around the globe can be classified as small and medium businesses…the reason why more and more institutions active in the field of CSR started to shift their focus towards SMEs has to do with their strength in number on the one hand, and their importance for the economic development of any country on the other.” He believes the CSR movement will not be sustainable unless SMEs get on board.
Bethke also observes that in Serbia, many companies still relate the concept of CSR to large-scale philanthropic investments, donations or sponsorships. “It is obvious that those activities are far beyond the reach for many smaller companies that are frequently faced with financial or human resource constraints. As a consequence, we often face a situation where SMEs take up a rather skeptical position when it comes to CSR.”
The solution to this problem is to redefine the concept of CSR as it relates to smaller businesses, he says. Some progress is being made. As a country in the process of stabilization and potential accession to the EU, there is more pressure for the business community to commit to CSR, both through direct supply chain relationships, as well as through the development of legislation and international standardization and certification.
One tool UNIDO is adopting is the “Triple Bottom Line.” Beyond the financial bottom line, UNIDO is pressing businesses to disclose and report on the social bottom line and the environmental bottom line. Bethke says the importance of this strategy has to be communicated to all employees of the company for CSR to really work. “We have often experienced a lack of institutional know-how and capacity to convince and support companies to implement CSR practices in their business operations.” Another strategy will address this problem by training and licensing a pool of experts in various countries who can then reach out to SMEs that require assistance. Other international networks will be tapped and conferences held to draw on existing expertise, which will strengthen CSR on a more sustainable level.
Posted 9/27/07
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Turning Conflict Into Cooperation:
A Case Study in Successful Corporate-NGO Engagement
Too often the interactions between social and environmental advocacy NGOs and the corporations they are campaigning fall into predictable patterns of hostility which often only solidify disagreements and accomplish few lasting changes. Ten years ago, however, the Rainforest Action Network launched an intensive consumer boycott of several Mitsubishi companies leading to significant changes in the way the Japanese giant and many of its partners do business. That engagement provides critical lessons for both activist NGOs and corporations.
In the following article, reproduced with permission from the Fall 2006 issue of the Stanford Social Innovation Review authors Peter Asmus, Hank Cauley & Katherine Maroney describe these lessons:
"
Turning Conflict Into Cooperation"
By Peter Asmus, Hank Cauley & Katherine Maroney
Stanford Social Innovation Review, Fall 2006
To view in .pdf format
Ten years ago, top executives at three Mitsubishi companies were suddenly faced with a consumer boycott by Rainforest Action Network (RAN), an activist NGO that was willing to wage a protracted war against the corporation’s brand in order to get it to change its business practices. Instead of fighting RAN, the companies did exactly the opposite of what most of its lawyers, public relations experts, and crisis professionals advised them at the time: They sat down and engaged in a dialogue with the group’s leaders.
After many fits and starts, the dialogue between RAN and Mitsubishi resulted in several significant achievements. It created a precedent-setting agreement that helped drive sustainable forestry practices at some 400 companies, a new system for measuring corporate environmental and social impacts, and some close personal friendships between former foes, which continue to this day. No laws were enacted in the process, no regulations promulgated, and no lawsuits filed. Yet the impacts of that early engagement continue to multiply even today.
The tactics that RAN employed – dubbed “stakeholder engagement” and “market campaigns” – have become standard operating practice at many NGOs. Instead of trying to get governments to enact laws, these NGOs target companies that they believe have negative social and environmental impacts with public campaigns that place the company’s brand at risk.
Often, these tactics have made significant contributions to changing company behavior. Home Depot’s commitment to avoid sourcing products from endangered forests is one example. Other successes have occurred outside forestry, like Nike’s creation of a code of business conduct for its suppliers, and Citibank’s adoption of the Equator Principles to guide its lending practices.
The changes that individual companies have embarked on have, on occasion, spread beyond the trendsetters to include large numbers of firms. The forestry industry has undergone the most change of any sector, but even here much remains to be done. Later in the article, we take a close look at how these types of campaigns have impacted six different sectors – forestry, finance, mining, apparel, chemicals, and oil and natural gas (1) – as well as some of the lessons that can be learned from these experiences. But first, we return to RAN’s campaign against Mitsubishi.
RAN Targets Mitsubishi
RAN’s global campaign against Japanese giant Mitsubishi started innocuously enough. In January 1993, Tachi Kiuchi, then chairman and CEO of Mitsubishi Electric America, began receiving a steady stream of letters from elementary school students, asking him why his company was destroying the world’s rain forests. The letters puzzled him. Mitsubishi Electric didn’t own any forests, and it used very little paper. How could it be impacting the rain forest?
From his headquarters in Torrance, Calif., Kiuchi called Richard Recchia, then COO of Mitsubishi Motors’ U.S. sales arm, whose headquarters was just down the street. His company, it turned out, was also the target of a rain forest campaign. Protesters were locking themselves inside Mitsubishi automobiles at car shows around the country, drawing publicity for their cause.
The force behind the actions was the San Francisco group Rainforest Action Network. According to RAN founder and current board president Randall Hayes, RAN’s real target was a third company, Mitsubishi Corp., a Japanese trading company responsible for perhaps 3 percent of the world’s trade in tropical timber.
To understand why RAN targeted all of the Mitsubishi companies, including those that had no operations in the rain forest, requires a brief step back into history. “General MacArthur broke up the [Mitsubishi] companies after World War II,” explains Jim Brumm, general counsel for Mitsubishi Corp. and an influential member of the corporate board. “Each Mitsubishi company retained the right to use the same name, but they could not be subsidiaries. Because of this, we at Mitsubishi Corp. view Mitsubishi Electric and Mitsubishi Motors as our clients.” But “the general public doesn’t realize that the Mitsubishi companies are all separate and distinct businesses,” Brumm says. The public’s inability to distinguish between the various companies bearing the Mitsubishi name, and the fact that the companies often work together to protect the name, gave RAN a strategic opportunity to apply pressure.
RAN is the ultimate market campaign NGO. Rather than advocating laws, like the Sierra Club, or suing companies, like the Natural Resources Defense Council, RAN concentrates on direct action in the social and economic marketplace. If it can discredit the names or disrupt the business activities of the companies it targets, it believes that it can devastate the profits from rain forest destruction. The problem that RAN faced is that most consumers have never heard of most of the tropical timber harvesters. And even if it had, most of the companies do not sell directly to the public, making a consumer boycott difficult.
That’s why RAN picked Mitsubishi. It had a recognizable name, and the various companies it owned or that bore the Mitsubishi name sold numerous products to consumers. Mitsubishi Corp was one of several companies that shared small and roughly equal portions of the tropical timber trade. If RAN could target consumers of autos and electronics, thought Hayes, perhaps those companies could exert pressure on Mitsubishi Corp. to change its timber practices. And if Mitsubishi changed, maybe the rest of the industry would, too.
Starting a Dialogue
The initial reaction from executives at Mitsubishi Electric and Mitsubishi Motors was defensive. They considered the boycott illegitimate. Why should they respond to what they considered a lie – RAN’s assertion that the companies were tightly connected?
But Kiuchi soon decided that fairness wasn’t the issue, and took a different approach. “The companies are separate, but nobody knows this except us,” he says. “I decided it was better to do something about the problem, rather than worry so much about the name confusion.”
Still, no one at Mitsubishi wanted to sit down with RAN. “The perception at the time was that RAN was too radical to deal with,” acknowledges Hayes. The conventional wisdom, codified in public relations manuals for dealing with groups like his, was to “isolate the radicals” by working with “mainstream” groups.
As RAN’s rhetoric increased, Recchia decided to meet the people behind the attack on his company. He met with Michael Marx, the head of RAN’s Mitsubishi boycott, but initial meeting did not go well. According to Recchia, it degenerated into an angry exchange, as both sides gathered up everything they felt was unfair about the other’s actions and “got it off their chests.”
So Kiuchi and Recchia regrouped and took a different approach. They called for a meeting with Brumm and his colleagues at Mitsubishi Corp., to encourage them to do something about the RAN boycott and the issues it raised. To prepare, Kiuchi visited the rain forests of Borneo, Malaysia, one of the sites in RAN’s campaign, and learned firsthand about the issues.
In June 1993, six months after the first letters protesting Mitsubishi’s practices began arriving, Brumm, Kiuchi, Recchia, and their colleagues at Mitsubishi met privately for a day. They brought in two experts to advise them. One was the prestigious public relations firm Hill & Knowlton. It advised the companies that RAN was a fringe group whose radical actions were having little, if any, impact on the general public. Rather than acknowledging RAN directly, the companies should conduct a low-key campaign to bolster their environmental image among the media and opinion leaders, the firm recommended.
The other expert was Global Futures, a nonprofit consultancy that had orchestrated several unusual alliances between environmental activists and major corporations. Bill Shireman, president and CEO of Global Futures, advised the Mitsubishi companies to take a more proactive approach by evaluating their environmental performance, engaging with stakeholders to earn their trust, and choosing a set of actions that could both protect the environment and build their reputations. Recchia convinced the three Mitsubishi companies to retain Global Futures to develop a strategic plan.
Moving to Direct Engagement
Implementing the first part of the plan – putting together an inventory of Mitsubishi’s environmental assets – was relatively easy. Implementing the second part of the plan – engaging directly with environmental stakeholders – proved to be more difficult. The three companies still saw no point in direct engagements with RAN, whose founder had said that he wanted to “take down a multinational.”
Instead, the companies started with indirect engagements. Kiuchi hit the speaking circuit, giving a keynote address at Ecotech, a major environmental conference with a positive, pro-technologym theme. Meanwhile, Shireman met informally with Marx and others at RAN to find opportunities for productive dialogue. These contacts eventually broke down perceptions that RAN was incapable of reasoned dialogue, and later led to direct meetings between RAN and Mitsubishi.
To implement the third part of the plan – being proactive on forest protection – a third party was brought in who was respected by both Mitsubishi and RAN: Amory Lovins, the energyefficiency guru who heads the Rocky Mountain Institute. After lengthy planning sessions between Shireman, Lovins, and the three Mitsubishi executives, two new organizations were formed: the Systems Group on Forestry and Future 500.
The Systems Group on Forestry would develop potential solutions to forest destruction, as well as systematic steps companies could take to leverage their market positions to protect forests. Future 500 would convene corporate and environmental stakeholders to consider other systemic and market-based actions for sustainability, and to develop tools and processes for more effective engagements between them. The three Mitsubishi companies were the first members of both organizations.
The Systems Group held three meetings but never produced a promised final report. It did, however, have several positive effects. The meetings educated corporate leaders about forestry issues, and it developed relationships among the many stakeholders. Hayes and Brumm became close friends, a relationship that would later lead to other initiatives.
Other relationships blossomed as well. Recchia and Marx discovered a common passion for fly-fishing. Their most productive meeting occurred during a one-on-one fly-fishing expedition. Global Futures facilitated direct discussions between all three companies and RAN. The first meeting was exceedingly positive, with all sides finding more areas of agreement than they expected. The second meeting was mostly negative, as all sides retrenched. By the third meeting, realism finally began to prevail, as the companies and activists realized what might be achieved if they set their minds to it.
Striking an Accord
As they came to understand RAN better, Kiuchi and Recchia grew increasingly convinced that direct engagement could end the boycott. Mitsubishi Corp., however, was unconvinced. During the summer of 1996, in a tumultuous meeting in Tokyo between top executives from the three companies, Mitsubishi Corp. broke off direct discussions with RAN and dropped out of its partnerships with Mitsubishi Electric and Mitsubishi Motors.
Freed from Mitsubishi Corp.’s more conservative approach, Kiuchi and Recchia asked Shireman to work toward a formal agreement with RAN. The agreement was based on the belief that even though Mitsubishi Electric and Mitsubishi Motors did not buy large quantities of timber and paper products, their sheer size and links into global supply chains might generate an impact far beyond the companies themselves. Signed in February 1998, the agreement stipulated that Mitsubishi Electric and Mitsubishi Motors would, among other things:
• Phase out purchase of paper or timber from old-growth sources by 1998.
• Achieve a 75 percent reduction in paper use by 1999.
• Phase out of all wood products by 2002.
• Commit Mitsubishi Motors to offer “carbon offsets” tied to sales of its Montero LS, proceeds from which would fund forest reserves.
• Commit Mitsubishi Motors to lobby President Clinton’s administration to reduce carbon emissions. Mitsubishi Motors would be the first major car company to do so.
• Fund forest reserves to protect natural resources and indigenous communities.
• Establish a comprehensive system of eco-accounting to measure the net value created by a company, after accounting for social and environmental
externalities.
The agreement was risky for all sides. The companies had to trust that RAN would not besiege them with additional demands after they signed. RAN had to demonstrate to its activist base that the agreement was worthwhile even though it did not directly require the company to change its logging practices. Both sides had to overcome internal factions determined never to strike an agreement with the enemy.
What Was Accomplished
One of the most powerful portions of the agreement turned out to be the phaseout of old-growth paper and timber purchases. Because neither company purchased many old-growth products, this step was relatively easy and inexpensive for the Mitsubishi companies to adhere to – though one timber company reportedly cancelled a contract with Mitsubishi Electric over it.
But the ripple effect was tremendous. Once the two Mitsubishi companies made their commitment, hundreds of other companies followed suit. The combined buying power of all these companies created a healthy and growing market for sustainable timber, and set the stage for several later agreements.
“It was really the first agreement between corporate entities and an NGO that took a systems approach,” says Hayes. “This was one of the first times issues of supply chain management were addressed.”
The other clause that spread beyond the two Mitsubishi companies was the eco-accounting commitment. To implement it, Future 500 developed a tool for Mitsubishi Electric and Mitsubishi Motors that consolidated several existing systems for measuring corporate social and environmental performance. The tool evolved into a process now known as Global Citizenship 360, which has been adopted by Coca-Cola, General Motors, and a dozen other large corporations.
The most controversial clause committed Mitsubishi Motors to be the first auto company to buy carbon credits for a line of its automobiles and to fund forest reserves operated by indigenous communities. The company has never implemented the clause, nor has RAN ever pressed it to do so. Some RAN leaders object to Mitsubishi funding the program because they feel it undermines the credibility of the organization, even if the funds do not actually go to RAN. Others hope the clause will eventually be followed, once the now-struggling auto company regains its financial footing.
But what about Mitsubishi Corp., which was not party to any formal agreements with RAN? “The truth is, we ended up getting what we wanted from Mitsubishi Corp., even though we never engaged in a formal agreement with the company,” says Hayes.
Under the leadership of Brumm, Mitsubishi Corp. ultimately went through an internal process to change its approach to buying timber. And because of the forestry issue, Brumm started investigating other environmenta concerns. “It opened my eyes and challenged my attitude. What exactly are we doing at Mitsubishi Corp. about the environment? We really should accept some responsibility – at least in principle – on how and where we cut trees,” Brumm says.
Mitsubishi Corp. ended up committing to a certification program developed by the Forest Stewardship Council (FSC), the gold standard of certification programs for sustainable wood products. There is not yet an adequate supply of FSC-certified timber and paper products for the firm to fill all of its orders, but that is its first product choice for customers. Mitsubishi Corp. is certified to ISO 14000, the environmental management standard, and performed its first sustainability report in 1999.
Brumm and Hayes have even become friends and colleagues. “I continued to converse with Randy. He was on the board of Forest Trends and eventually asked me to join,” Brumm says. “I was made a Forest Trends fellow two years ago. Even though Randy and I didn’t agree on things, we stayed in touch. My views on the environment have changed, they have evolved.”
According to Hayes, one of the most enduring lessons from the experience with working with each of the Mitsubishi companies is “seeing the influence of individual people – leaders – in these sorts of circumstances.” The commitment of the chief executive to the success of the process is vital. On the other hand, support for sustainability can’t stop at the executive suite. One weakness of the Mitsubishi- RAN agreements was that support for it waned after the departure of Kiuchi and Recchia from their companies. “The older leaders and managers who might have understood why the agreements were made in the first place are now often gone,” laments Hayes. “These are the folks who could explain to a new generation of employees why these agreements should be implemented with integrity.”
Perhaps the biggest impact of the protracted engagement between RAN and Mitsubishi was to advance two important trends in corporate-stakeholder relations. The first is market campaigns – initiatives like RAN’s initial boycott of Mitsubishi. The second is stakeholder engagements – the approach Mitsubishi employed to resolve its conflict with RAN. Hayes believes these two trends have helped revitalize the social change movement, even with the lack of leadership from government. “We learned that you do not have to deal with corrupt government agencies or Congress, who are bought off by the big corporate money. We activists can go directly to the corporations to get the behavior changes that we want.”
Why Market Campaigns Work
Market campaigns have emerged as a force for promoting environmental conservation and social justice for three principal reasons. First, the growing power of NGOs today is based on the public’s belief that they are more likely to act in society’s best interest than a private corporation. A 2005 poll conducted by GlobeScan (formerly Environics) for the World Economic Forum shows that the trust/mistrust gap between NGOs and multinational companies is almost 40 percent. (See graph, left.) (See .pdf format above for graph)
The second reason that market campaigns work is that governments around the world are retreating from direct regulation of environmental and social problems in favor of market-oriented approaches. As a consequence, these issues are being increasingly left to the private sector.
The third reason for the growing influence of NGOs is the increased vulnerability of companies to market pressures as a consequence of governments’ retreat from its traditional regulatory role. A company that is free to operate in the market is also susceptible to these same market forces when they are employed by NGOs to force the company to change its behavior and policies. A company that builds a strong brand is susceptible to change when forces are brought to bear that undermine the brand and what it represents.
A variety of factors influence how much a market campaign succeeds in moving a single company, a group of companies, or, ideally, a whole sector toward fundamental improvements in their operating practices, such as whether:
• Material business value has been placed at risk, and the company’s brand has been undermined.
• Company senior management is committed to change and responds with positive actions.
• There is an internal champion who is either a senior executive or who has the support of senior management.
• A cross section of NGOs acts in concert to push and pull the company toward the goal.
• External market campaign activities are complemented by internal coach- ing by an NGO or other trusted outsider.
• The new operating standard is sustainable in the marketplace.
• Socially superior products are available for consumers that want to exercise a choice.
Types of NGOs
NGOs come in all shapes and sizes. One way to divide them is between market campaigners and implementation groups. Market campaigners help get issues on the corporate agenda and create urgency around an issue, often by attacking the company’s brand. Implementation groups often work as intermediaries between market campaigners and companies, either by working inside companies to help direct and coach change, or by helping define solutions such as standards of performance. The two types of NGOs, although occasionally in competition, quite often complement one another in driving change.
Another way to segment NGOs is by organizations’ interpretations of the concept of sustainability. This axis stretches from a strict protectionist interpretation of sustainability (the wilderness standard) to a fully integrated approach involving social, economic, and environmental considerations. Within the realm of forestry, for example, many grassroots organizations advocate strictly protecting a landscape from any type of use. Other organizations, such as Ducks Unlimited, approach landscape use as part of a system of human and environmental concerns.
A third way to segment the NGO community is by an organization’s willingness to use public pressure to accomplish its goals. Along this axis, groups meither use public pressure routinely orm avoid its use in the hopes of working out msolutions outside of the public’s eye. RAN is an example of an NGO that has mused public pressure very effectively in campaigning for the protection of forests around the world.
The best way to understand these differentiations is to map them on a matrix. The chart above depicts where NGOs in the forestry sector fall on the dimensions of public pressure use and notions of sustainability (see .pdf version for graph).
The interplay between different types of NGOs is an important driving force in whether change took place. However, the position of an NGO within this segmentation is not static. It can shift according to the specific issue being addressed. The World Wildlife Fund (WWF, or the World Wide Fund for Nature as it is called outside the U.S.), for example, is a member of the implementation group on many forestry issues, but takes a market campaigner stance on toxic chemical issues in Europe.
Evolution of Market Campaigns
Market campaigns change over time. The diagram above shows the path that most campaigns undergo as they evolve. It provides a description of the important characteristics that define each stage of development. And it plots the stage of development of North American companies in six industries.
The nascent stage captures market campaign projects that are new or whose market impact has been little to none. The interplay of market campaigners and implementation groups in this stage is such that campaigners look to implementation groups for research and options for improvement. At the same time, implementation groups look to campaigners to get the issue on the radar screen and to show that value is at stake for given companies. The recent campaign against the use of PVC in children’s toys, healthcare, construction, and packaging is also an example of a campaign that is still in its early stage of development. Campaigns in the oil and gas sector have been around for many years but have not been effective, which is why they are still in the nascent stage.
The catalytic stage refers to when market campaigns are beginning to inspire industrial reactions, typically by one or more industry leaders. During this stage, campaigners have gotten a company’s attention by demonstrating that they can affect the value of the company’s brand, and implementation groups begin presenting options to the targeted company. The mining sector is in the catalytic stage. Leading mining companies such as Rio Tinto and BHP Billiton have begun to work with NGOs to develop environmental and social performance standards. (2) The apparel industry is also at this stage. A few leading brands, such as Nike, have reacted to the market campaigns, but the industry as a whole is not responding.
The growth stage is when a market campaign really begins to have an impact. During this stage, even companies that have not been the targets of specific campaigns begin to address the issues. Implementation groups rely on campaigners to “keep the heat,” while campaigners look to the implementation groups to help with the “how” in implementing change. Market campaigns in the finance sector, which appear to have moved quickly through the first two stages, are at the beginning of the growth stage as financial institutions of their own accord are responding to market campaign messages. The forestry sector is the furthest along in changing an entire industry. Yet even here, changes are still far from being embedded and irreversible.
We assume that a mature stage will occur, but given the fact that no campaign has yet reached this point, we will leave it up to future analyses to define this stage in more detail.
Future Challenges
Both NGOs and companies have learned from targeting and being targeted for questionable practices. For market campaigns to continue to be effective, the following outstanding issues need to be addressed:
• Change in industry takes a long time and therefore support for market campaigns over the long term is essential. For example, approximately $500,000 has been spent in the mining sector over the last 10 years toward the development of operations principles. This is a relatively small amount of funding over a long period of time, and progress is only slowly becoming apparent.
• There is presently little financial reward for companies that choose to do the right thing. To continue the momentum that has been achieved, it is important to demonstrate that companies that have adopted socially responsible practices also win in the marketplace.
• It is uncertain to what extent a market campaigner NGO can transition into a implementation group NGO. Numerous companies have said that the issue of trust makes it difficult for an NGO to play a dual role. If this is true, it means that coordination between different types of NGOs and long-term funding of both is critical.
• People are translating market campaigns into widespread sector changes, but a broader set of stakeholders will be necessary to take campaigns to the mature stage, where changes are permanent and irreversible. A model for this is the agreement around the Great Bear Rainforest involving all types of NGOs, First Nations, and them provincial government of British Columbia.
Market campaigns have become more sophisticated and effective, emerging as a critical method for driving companies to change their behavior. As effective as these campaigns have become, they have not yet achieved their final goal of changing entire industries. To achieve real and sustained progress, strategies that incorporate a diverse group of sector stakeholders and that offer both punishment and reward will prove to be the most successful.
Ten Lessons for NGOs Waging Corporate Pressure Campaigns
1. Focus the campaign on a company with a valuable brand. Find ways to harness the influence the company has over its business partners to create change throughout the company’s supply chain.
2. Expect both sides to express pent-up frustrations during the first meetings. Listen and learn from the process, and don’t let it deter you from holding future meetings.
3. Use a combination of carrots and sticks when pressuring a company. A sticks-only approach may close the door to dialogue and block opportunities for progress.
4. Partnerships between NGOs in the same niche frequently fail. The chances of success increase when NGOs bring unique strengths and have clearly defined roles.
5. Be prepared for the fact that engagements often veer between extremes of optimism and pessimism in the early stages, before taking a realistic course.
6. Consider targeting the largest buyers of the product you are protesting, instead of just the largest sellers.
7. Find actions that a company can easily take, but which effect systemic change throughout the marketplace.
8. Look for, and be aware of, how sustainability initiatives can save a company money, drive needed change, and create a competitive advantage.
9. Once a company’s top executives and internal change agents commit to sustainability, their commitment will continue to drive improvements, even beyond the company.
10. Be wary of waging campaigns that demonize a company. These can leave a long legacy of negative feelings, making it difficult to rally your supporters around an agreement and to earn the trust of company.
PETER ASMUS is president of Pathfinder Communications. His articles on corporate social responsibility have appeared in Business Ethics, green@work, The Christian Science Monitor, and other publications.
HANK CAULEY is a senior officer in the environment program at the Pew Charitable Trusts. Before joining Pew in July of this year, Cauley was a partner at the sustainability management consulting firm Ecos Corp.
KATHARINE MARONEY is a partner at Ecos Corp. Before joining Ecos, Maroney was chief of staff to Congressman John Edward Porter (R-IL).
1 Cauley, H. & Maroney, K. “The Growing Influence of Market Campaigns in Driving Social and
Environmental Change,” Ecos Corporation (April 20, 2006).
2 Each of the sectors identified has some regional differences in regard to their state of evolution. Arguably, the mining sector is one where actions by leading companies in Australia have put the evolution of that sector at the top of the growth stage. We’ve chosen to concentrate on the North American nmining sector given the likely audience for this narticle and to highlight the potential for moving a nsector from one stage to the next.
Posted 10/18/06
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Human Rights Watch Calls For Binding International Agreements and Actions on Corporate Social Responsibility
Human Rights Watch World Report 2006
The Human Rights Watch World Report 2006 contains information on human rights developments in more than 60 countries in 2005. The new report includes an outstanding essay by Lisa Misol, researcher with the Business and Human Rights Program at Human Rights Watch.
Private Companies and the Public Interest
Why Corporations should Welcome Human Rights Rules By Lisa Misol
In this essay the author starts by stressing that, "For most corporations, having clear, consistent rules would be preferable to being subjected to unfair competition and a confusing mix of standards that provides little guidance to companies and little comfort for victims of human rights abuse.
This essay argues that enforceable global standards are desirable, inevitable, and, contrary to received wisdom, good for business."
The author provides an extensive and compelling analysis and, in so doing, highlights the roles that rogue companies play and why it is especially important that approaches be put in place that serve the overwhelming majority of corporations that strive to take a constructive approach to human rights. The following is the concluding key section of the essay:
The Way Forward
" Social responsibility is not the first issue for which corporations have begun to recognize the advantage of enforceable standards with broad reach. A similar dynamic emerged after the U.S. government’s adoption in 1977 of the Foreign Corrupt Practices Act, which made it illegal for companies operating in the United States to bribe foreign officials. The U.S. law was adopted in the wake of a domestic corporate scandal but, once in place, put U.S. companies at a competitive disadvantage because their foreign competitors remained free to continue securing business through bribery. In response, U.S. firms pressed for—and got—a multilateral treaty to even out the competitive environment.
" After years of complaints, the Organization for Economic Cooperation and Development (OECD) in 1997 adopted a treaty requiring all its member states to criminalize such bribery. The OECD’s thirty members account for some two-thirds of the world’s goods and services and 90 percent of global private capital flows. China remains outside the treaty, but as its companies increasingly operate overseas its exclusion will become legally less tenable.
" The OECD already has set out corporate social responsibility standards. Its Guidelines for Multinational Enterprises have been endorsed by a total of thirty-nine countries, including nine non-OECD members. The adhering countries are home to ninety-seven of the world’s top one hundred multinational companies. The OECD Guidelines are voluntary but do have an implementation process run by governments, and are widely used to judge corporate conduct. For example, a U.N. expert panel publicly chastised a number of Western companies operating in Congo for failing to comply with the OECD Guidelines. In addition, NGOs have lodged formal complaints against some of these companies under OECD procedures.
"OECD member countries, following on the anti-bribery effort, should move to make their CSR standards binding. They should adopt a treaty under which they agree to enact laws similar to the OECD Guidelines that would be enforceable under national criminal or civil codes, carrying penalties such as fines or, in extreme cases, imprisonment. Like anti-bribery laws, this national legislation would bind any company operating in that nation’s jurisdiction.
"In addition, the United Nations, which has already drafted non-binding norms on corporate conduct, might provide a forum to negotiate a universally applicable treaty. U.N. discussions on business and human rights have tended to be highly polarized, but a new approach may emerge. In 2005 the United Nations’ human rights body launched a two-year process to examine these issues. The Commission on Human Rights created a mandate for a high-level expert, appointed in July 2005 by the U.N. Secretary-General, to raise awareness of the human rights responsibilities of companies, look at the tough issues that have blocked progress to date, and map a way forward. An advantage of this U.N.-led process is that it is explicitly focused on human rights and brings together governments, companies, and concerned civil society groups from around the world.
"The U.N. mandate—if focused appropriately—has the potential to move beyond a purely voluntary approach toward effective human rights protection that combines elements of voluntarism with enforcement potential on core rights issues. It carries risks as well. Unless human rights are taken as the point of departure, the process could degenerate into a consensus around weak “standards” that are lower than those derived from human rights law and principles.
"Though any such agreements or treaties will take time, it is crucial to begin to move down that road. The next few years offer a valuable opportunity to break the current impasse on the corporate accountability debate. Already, many corporations are engaged with other stakeholders in various processes to debate and refine CSR standards. These companies are working on several fronts to develop CSR standards and widen their application within and across different industries.
"Given the momentum behind the CSR movement, the continuing proliferation of different standards, and the problem of an unequal playing field, it is clear that business has a vital interest in helping to define human rights norms. By doing so, it can help ensure that the resulting requirements are clear, practicable, and fair. Industry also has a direct stake in seeing that these requirements are applied to all companies, regardless of where they are based, and that they are effectively implemented and enforced. Ultimately, that means making the rules universal and mandatory.
Sometimes it pays to take the initiative. For hard-headed businesspeople, the smart move is to face up to global human rights standards early and make them work by making them stick."
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