Corporate Social Responsibility
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42 countries commit to new, tougher standards of corporate behavior
the OECD's press release noted that at the OECD’s 50 anniversary meeting in Paris, Ministers from OECD and developing economies agreed new guidelines to promote more responsible business conduct by multinational enterprises, and a second set of guidance to limit the use of conflict minerals.
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(also see Awards - as Publish What You Pay is lauded for its work in this area)
Revenue Watch Institute reported on December 15, 2010:
In releasing draft rules for enforcing transparency provisions mandated by U.S. financial reforms, the Securities and Exchange Commission (SEC) today outlined important initial steps for oil, gas and mining companies to make public the payments made to the U.S. or foreign governments, the Revenue Watch Institute said.
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Sweeping US financial reform legislation includes key provisions that will compel US oil, gas and mining companies to publicly report foreign payments.
Refunded (Note 1)
Note 1 - These refunds relate to indirect taxes previously paid on invoices from suppliers, which the Group is entitled to recover. There is therefore no net loss to the governments from these refunds.1The taxes presented in this section represent all the taxes Rio Tinto paid in 2008. The taxes presented in the section: "Economic contribution" represent the corporate income tax charged to the income statement and therefore does not include all of the different types of taxes paid during the year.
Rio Tinto, the global mining company, has taken an important step towards transparency by voluntarily disclosing, for the first time, the total tax and royalty payments that it makes to 13 of the countries where it operates, Publish What You Pay (PWYP) said.
Publish What You Pay is a global civil society coalition with over 300 member groups who work together for greater transparency in the oil, gas and mining industries. Revenue transparency is a crucial first step towards insuring that revenues from these industries are used properly to reduce poverty, not wasted or lost to corruption.
In an online supplement to its 2008 annual report, Rio Tinto has published its total tax and royalty payments to each of 13 countries where these payments totalled USD $10 million or more. In the 2007 supplement the company only disclosed this data by continent, not by country.
“We welcome this progressive step which shows recognition that more openness serves the enlightened-self interest of big corporations,” said Radhika Sarin, Publish What You Pay International Coordinator. “We would encourage Rio Tinto to go further next year and break down the different types of payments to each country, so that citizens of these countries can have a full picture of financial transfers to their governments by the company.”
In addition to these 13 countries, Rio Tinto also has investments in other countries – including Argentina, Ghana, Guinea and Zimbabwe – but did not break down the value of its payments to each of these countries in the 2008 supplement. Publish What You Pay urges Rio Tinto to disclose its payments to all the countries where it has investments, on a per-country basis.
Rio Tinto joins a small number of major oil and mining companies, such as Norway’s StatoilHydro, Canada’s Talisman Energy and US-based Newmont Mining Corporation, which disclose information about revenue payments that they make to governments on a per-country basis. Unfortunately, many of the biggest extractive companies do not publish such data, claiming obstacles such as “contract confidentiality”, a nebulous concept that is often cited as a reason for keeping payments secret.
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Companies are performing better on labor and environmental issues, but lagging on human rights and anti-corruption. Global economic crisis poses opportunities and responsibilities.
“Restoring confidence and trust in markets will require a shift to long-term sustainable value creation, and corporate responsibility must be an instrument towards this end. Now is the time to build on the advances made over the past ten years by companies in the Global Compact and bring this discipline to the mainstream. Georg Kell, Executive Director, UN Global Compact Office.
This 2008 Annual Review shows that corporate responsibility has evolved and become a truly global phenomenon, says the United Nations. UN’s Global Compact is designed to promote global corporate citizenship based on 10 core principles concerned with human rights, labor, the environment, and anti-corruption, environment, involves over 5,000 business participants in 135 countries. Members must demonstrate a commitment to environmental, social and governance (ESG) issues. The Global Compact was forced to remove 404 companies from the initiative last year for failure to communicate progress – bringing the total number of delisted companies to 800 by the end of 2008.
Based on an implementation survey the Global Compact ranked the overall level of corporate responsibility performance of participants, using a scale from “beginner” to “advanced”. The results show that the Global Compact engages with a wide variety of companies – with only 8% identified as advanced performers and the vast majority ranked in the beginner to intermediate range. The span of corporate expertise on Global Compact issues translates into a wide range of implementation – from minimal to robust – on policies and actions to advance the Ten Principles. Despite this diversity, it is evident that, overall, companies are implementing key policies on labor and the environment to a considerably greater extent than policies on human rights and anti-corruption.
Despite high levels of awareness and inclusion of human rights in overall corporate codes, only a minority of companies are taking key steps to ensure that human rights are respected, including developing complaint mechanisms, conducting risk and impact assessments and engaging in multi-stakeholder dialogue.
According to the 2008 participant survey, the labor principles enjoy the highest overall rate of policy implementation compared to the three other principle areas, but guidance on actions to support these policies is still needed. Participants report challenges linked to the supply chain, particularly in relation to child and forced labor.
The Global Compact said the private sector has began to embrace a broader environmental sustainability imperative based on the present and potential impacts of climate change and other environmental challenges – chief among them the growing crisis in fresh-water availability and water pollution. Survey results for this Annual Review reveal a decidedly mixed picture with respect to overall environmental management by Global Compact participants – including significant differences between large and small businesses. For example, approximately half of respondents do not have systems in place to measure or track environmental performance. The gap widens when looking at company size – with less than one-third of SMEs having such systems in place, in sharp contrast to 84% of companies with over 50,000 employees. In addition, survey responses suggest that companies – large and small – are missing opportunities in areas such as eco-design, life-cycle assessment and technology management, and are instead engaging in risk-oriented actions, such as impact assessments. On a positive note, approximately half of the largest corporations indicate involvement in Clean Development Mechanism projects and emissions trading under the UN climate change convention (Kyoto Protocol) – a higher than anticipated figure that suggests climate change is gaining priority.
The integration of 10th principle into the corporate responsibility agenda in 2004 sent a signal worldwide that business shares responsibility for eliminating corruption. While progress has been made in the intervening years, respondents to our 2008 survey identify anti-corruption as the most difficult of the Global Compact issue areas to implement. A majority of surveyed companies do include aspects of corruption within overall corporate codes of conduct, yet only a minority are taking necessary steps to tackle the issue, including recording instances of corruption, having sanction systems in place to deal with breaches and establishing hotlines for anonymous reporting of corrupt practices.
Less than 2 in 10 survey respondents require suppliers to have anti-corruption policies. The Global Compact, in collaboration with a broad alliance of business participants and other stakeholders, intensified efforts to address implementation gaps in 2008. A first step was to bolster our Global Compact Working Group on Anti-Corruption by ensuring it included expertise from all regions and company sizes. Then, to better understand key anti-corruption challenges and develop methods for addressing them, the reconstituted Working Group identified priority workstreams, including: reporting, supply chain, tools and resources, and public-private partnerships. Work in seven key areas will be carried out by sub-groups in 2009, with the end-goal of helping companies improve overall performance in the complex area of anti-corruption.n.
Few companies comprehensively report on the 10th principle in their annual Communication on Progress. When they do report, most state the existence of policies to combat corruption, but explanation of actual implementation tends to be weak. The goal of the task force on reporting is to help mainstream reporting by companies on anti-corruption efforts in financial and/or sustainability reports.
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Recordkeeping Principles Uncover The Foundation Of Compliance
ARMA International - a not-for-profit professional association and authority on managing records and information – releases key compliance principles
The Generally Accepted Recordkeeping PrinciplesSM
Records are the foundation of compliance and the key to success for organizations of any size and in any industry. Litigation and compliance professionals are becoming painfully aware of the need to manage information at an organizational level in order to mitigate risk during the legal discovery process. In short, credible records sustain defense in law.
The needs of business can be fulfilled only if recordkeeping is an objective activity, fully insulated from individual and organizational influence or bias. To achieve this transparency, organizations must adhere to objective records and information management standards and principles, regardless of the type of organization, type of activity, or the type, format, or media of the records themselves. Without adherence to these standards and principles, organizations will have poorly run operations, legal compliance failures, and – potentially – a mask for improper or illegal activities.
It is in the general interest of all organizations, and of society itself, to be fully aware of these principles and to manage records and information assets in accordance with them. the aim of its Principles is to foster general awareness of recordkeeping best practices to assist organizations in developing effective records systems and policies.
Each of the principles has an expanded description containing detailed information on how to ensure organizations are meeting the criteria for a sound information management program.
The eight Generally Accepted Recordkeeping PrinciplesSM are:
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EITI moves from start-up initiative to a global transparency standard.
Ethicsworld reports on:
EITI's Progress Report
The EITI Doha Conference
The Views of Global Witness
The Views of Publish What You Pay International
Financier/philanthropist George Soros told the Doha meeting that the countries implementing the EITI would have a competitive advantage in attracting greater investment in a global economy that has become highly risk-averse. The high standards of accounting and reporting inherent in the EITI are attractive to investors seeking to minimize risk by ensuring greater openness and a more level playing field in the business environment.
Peter Eigen, who co-founded Transparency international and is the Chairman of EITI has stated, “The principles of the EITI have stood up well to this scrutiny, and the support for the initiative from governments, companies and civil society organizations has expanded enormously. This period has therefore been one of transforming the EITI from a mere “initiative” into a standard being implemented by many resource-rich countries.”
“No single initiative is sufficient on its own,” said Bennett Freeman, Oxfam America/Oxfam International EITI board member. “Mandatory disclosure requirements will strengthen reporting and bring us closer to achieving a global standard for disclosure of natural resource revenues.”
EITI, established at a conference in Oslo, Norway, in October 2006, brings together oil and gas companies, governments of countries engaged in the extractive industries and civil society. The shared goal is to ensure that, through transparency, extractive industries lead to development and prosperity. In a report on its 2006-2008 work, EITI’s Board of Directors makes the following critical overarching points:
DOHA MEETING of EITI
Royal Dutch Shell CEO, Jeroen van der Veer, told the meeting EITI is in the interests of businesses who want to behave transparently and honestly.
Over 500 participants from 80 countries participate din the mid-February Doha EITI meeting. EITI’s Secretariat’s Summary noted that event “marked the EITI’s transformation from a start-up initiative to a global transparency standard.” Azerbaijan became the first country to achieve Compliant status. Reflecting a widespread conclusion at the Conference, the President of Liberia, Ellen Johnson- Sirleaf, highlighted in her opening statement that without strong political will in implementing countries, no EITI programme can be expected to succeed. In this spirit, participants agreed to redouble efforts to help implementing countries and ensure that the benefits of the EITI are recognised at the highest levels.
There was a general consensus at the conference among stakeholders that the current global economic downturn makes the EITI more important than ever. The steep reduction in international prices for oil, gas, metals and minerals translates into a sharp decline in government revenues in commodity dependent economies. The fundamental changes taking place in the international investment climate reinforce the need for transparency, as companies and investors have become increasingly risk-averse.
EITI Chairman Peter Eigen added, “The current financial and economic crisis is ultimately one of governance, or lack thereof. At times, smarter regulations and improved government oversight is clearly required. This is not, however, the only way to improve governance. I believe that all of the statements at our Global Conference and in the Progress Report 2007-2009 confirm that a multi-stakeholder coalition like ours can strengthen the governance fabric. Let us therefore make sure that we continue to ensure that natural resource extraction really does lead to benefits for the citizens to whom the resources after all belong. Let us also make sure that we learn from the impact of the EITI when seeking to address the broader challenges of good governance.”
CIVIL SOCIETY AND EITI
Supporting civil society organizations include: Catholic Agency for Overseas Development (CAFOD), GlobalWitness, Oxfam, Open Society Institute, PublishWhat You Pay Coalition
RevenueWatch Institute, Secours Catholique (Caritas France), Transparency International.
EITI has passed an important benchmark with Azerbaijan becoming the first EITI Compliant country at the biannual conference of the EITI in Qatar on 16-18 February 2009. As one of its earliest supporters, Global Witness believes the EITI must meet challenges between now and the next Conference in 2011 if it is to be a success in the struggle against corruption and poverty in the resource-rich countries of the world
EITI Compliance means that a country’s government has worked with the private sector and civil society groups to produce regular, audited reports of payments to the government by oil, gas and mining companies. This data enables citizens to monitor such payments, which have been corrupted or wasted in many countries in the past. Although EITI Compliance does not mean that a country is free from the risk of corruption, or that all areas of its oil or mining sectors are open to public scrutiny, it is a powerful signal to the world that the country is committed to openness.
The next year will be crucial for the success of the EITI because most of the other 24 EITI Candidate countries must also undergo Validation. One country making rapid progress is Liberia, a poor West African country still recovering from a devastating civil war. Liberia’s progress shows what can be done when the political will is there. As one of its earliest supporters, Global Witness believes the EITI must meet challenges between now and the next Conference in 2011 if it is to be a success in the struggle against corruption and poverty in the resource-rich countries of the world.
1. Civil society groups must be able to play a full and free part in EITI
Civil society groups are not just observers: they help to design, run and oversee the EITI and provide it with legitimacy. This formal, active role for civil society is what makes the EITI more than just a forum for worthy speeches about governance. Because civil society is so central to the EITI, any government that harasses, intimidates or censors its civil society activists is ensuring the failure of EITI in that country and undermining the work of other countries that implement it in good faith.
So all EITI stakeholders must take a strong and public stand against any government that harasses its own civil society activists, as has happened in Gabon recently. To retain the support of civil society groups, the Initiative must be able to defend its own principles.
2. The Validation process needs to be credible
In order to be awarded the status of EITI Compliant, as Azerbaijan has just done, a country must implement a series of steps towards greater transparency and have these actions checked by an independent third party called a Validator. Validation is the gold standard because it shows that a Candidate country has met the standards of the EITI. Without it, the EITI would be little different from the many well-meaning but ineffectual initiatives on governance that exist around the world. For this reason, Validation needs to be as objective and credible as possible. Any suggestion that a country has been given special treatment, for political or commercial reasons, would be fatal to the EITI’s credibility. It would also be deeply unfair to other Candidate countries which are making good-faith efforts to reach Compliance. So all EITI stakeholders must be ready to defend the objectivity of the Validation process, even if it produces results which are uncomfortable for some. This is the only way to protect the achievement of the EITI and give it value in the eyes of the world.
3. Countries that reach EITI Compliance must feel rewarded.
Reaching EITI Compliance will help countries to build trust with citizens, improve the efficiency of their extractive sectors and signal to the world their credibility as a destination for foreign investment and credit, at a time when both are scarce. However, these long-term benefits may not be visible at the point when a country achieves Compliance. So the international community must ensure in the short term that EITI Compliant countries receive the recognition that is due to them. This recognition needs to be nuanced by the fact that EITI Compliance is only one of many steps towards beating the Resource Curse. It does not mean, for example, that a country no longer faces any risk of corruption. And Compliance is not a once-only event but a process which ensures continuing transparency and public debate.
4. The United States, Canada, Australia and Britain should implement the EITI
The global financial crisis is creating a backlash against anything that looks like an attempt by rich countries to preach standards of governance to others which they do not apply themselves. The EITI has already been seen in this light in some quarters, with some justice, because almost all of the countries that implement it are in the developing world, while wealthy consumer countries can claim credit for supporting the EITI in various ways but do not have to implement it themselves. In fact, the EITI owes as much to the efforts of Nigeria and Azerbaijan as it does to many European countries that support the Initiative. Even so, this apparent disparity between developed and developing countries is damaging to the EITI and gives some countries a reason not to join the initiative. So the United States, Britain, Canada, Australia and other EITI Supporting countries with significant oil, gas or mining industries should follow Norway’s example and implement the EITI themselves. Future EITI Supporters should pledge to do the same.
These countries need to implement EITI to prove that it is not a global double standard. Whether or not they need the Initiative on economic grounds is beside the point, though recent revenue management scandals in the domestic oil industry of the United States show that they may in fact need it. Implementation would cost little for such countries and the reward for the global cause of transparency would be great.
Rich countries need to show that their other actions support the EITI Principles, rather than contradict them. Britain, for example, played midwife to the EITI but has dealt a damaging blow to its own standing by failing to enforce its own laws against corruption. In the United States, President Obama has committed to creating a more open and transparent government and we hope that implementation of EITI will be a part of that effort.
5. The EITI will need to evolve
At the moment, the core of the EITI is the publication, auditing and oversight of payments to countries from extractive companies. All EITI stakeholders believe that revenue transparency is vital to combat the Resource Curse but few believe it is sufficient because there are many other areas to address, from the award of oil, gas or mining rights, to the management and spending of revenues, to the flow of resource wealth through the global banking system. Global Witness believes that for now, the core of the EITI at the international level should remain transparency of revenue flows. It is more important at the moment to show that the EITI can achieve its current purpose, than to broaden that purpose.
That said, the EITI should rapidly adopt as standard the practice of ‘disaggregated reporting’, meaning that reports published in each country should include a breakdown of payments to the government on a company-by-company basis. This is the approach adopted by such EITI Candidate countries as Nigeria, Ghana and Mongolia. It is far more transparent than ‘aggregated reporting’, an approach favoured by some oil companies which lumps together all the payments from different companies, as if they were a single entity, before the data is published.
Over time, EITI will need to evolve beyond its current remit. Some countries have already chosen to broaden their implementation of the EITI to other aspects of the oil, gas or mining sectors, or other resources such as timber, or to trace revenue flows to sub-national levels of government. This versatility and national ownership of EITI is one of its great strengths. As the practice of EITI evolves in different countries, the international rules of the EITI should evolve too.
Global Witness, as its part in this debate, has drawn up some ideas on making the award of oil, gas or mining rights to companies more transparent, which will be published in a report during 2009. The many stakeholders of the EITI will meet again at its next Conference in two years’ time. The test of our work will be whether by that time we all have ensured that the EITI meets these five challenges.
In a statement on February 17, 2009, PWYP stated, “The Extractive Industries Transparency Initiative (EITI) needs to redouble its efforts to protect civil society activists and ensure that civil society is an equal partner in efforts to achieve transparency in natural resource revenue management.”
(excerpts from the PWYP statement)
Speaking at the fourth EITI Global Conference in Doha, Qatar, the PWYP International Coordinator Radhika Sarin said: “Without civil society, there is no EITI. We are concerned that civil society is not being given a fair hearing in many countries while harassment and intimidation of transparency activists have occurred all too often in others, most recently in Gabon. We are very disappointed by the news that Marc Ona, the Coordinator of PWYP Gabon, remains under a travel ban placed on him by the Gabonese authorities and is therefore unable to participate in this conference.”
Mr Ona and another member of PWYP Gabon were arrested on 31 December 2008 along with three other anti-corruption activists and journalists. They were provisionally released on 12 January 2009 but face prosecution on unfounded charges in what appears to be an attempt to intimidate and silence anti-corruption advocates.
“The EITI Chairman has expressed his concern about the arrests to Gabon’s President El Hadj Omar Bongo Ondimba, which is positive. But we need the EITI to adopt a clear and public zero-tolerance policy for any attempts to stop civil society groups from operating freely,” Ms Sarin said.
Christian Mounzeo, president of Rencontre pour la Paix et les Droits de l’Homme, a human rights organisation in the Republic of Congo, called on the EITI to help equip members of civil society with the tools and information they need to make the initiative work. “As local watchdogs of the EITI in our countries, we deserve better access to information and greater protection from harassment, intimidation, false accusations and reprisals as a result of our work. It is central to the credibility of the EITI’s international standing that civil society activists are able to work freely and without fear of interference or threats.”
Slow implementation of EITI is a concern, rules must be respected
PWYP fully supports the implementation of the EITI but is concerned by its slow pace in many countries. Most of the current EITI Candidate countries are due to undergo validation, a third-party check to ensure they are meeting the rules of the initiative, by March 2010. “Rules are critical for the integrity of the EITI and we need to be rigorous about applying them over the coming year as countries approach validation,” said Gavin Hayman, campaigns director of the UK-based anti-corruption watchdog Global Witness.
PWYP welcomes the news that Azerbaijan has become the first country to undergo validation and achieve EITI Compliant country status. “This is a significant milestone and shows that the EITI standard is achievable,” said Ingilab Ahmadov, director of the Public Finance Monitoring Centre in Azerbaijan. “We also welcome the establishment of a permanent Multi-Stakeholder Group in Azerbaijan, which we have sorely lacked in the past. This is a positive achievement that has been the direct result of the validation process, and we expect to see a stronger and more robust multi-stakeholder process take root over the next few months.”
EITI is a start but complementary measures are needed
Heeding the alarming statistic that only 26 out of more than 50 resource-rich countries have thus far volunteered to implement the EITI, PWYP calls on the EITI and all its stakeholders to support complementary measures, such as stock market listing requirements and international accounting standards, that will strengthen and advance the agenda of resource revenue transparency.
Soon to be introduced in the United States Congress, the Extractive Industries Transparency Disclosure Act (EITDA) is proposed legislation which would require all companies registered with the U.S. Securities and Exchange Commission to publish how much they pay each government for oil, gas and minerals. The EITDA would include American and foreign companies, and would apply to the vast majority of major extractive companies, including 90% of the major internationally operating oil companies.
Furthermore, the International Accounting Standard Board’s task force on extractives, has included the proposals put forward by PWYP for country-specific disclosure of extractive company payments in its deliberations and will soon be presenting its recommendations for a new financial reporting standard for extractive activities.
“No single initiative is sufficient on its own,” said Bennett Freeman, Oxfam America/Oxfam International board member. “Mandatory disclosure requirements will strengthen reporting and bring us closer to achieving a global standard for disclosure of natural resource revenues.”
“The EITI is entering a crucial period, during which the validation process will be under great scrutiny. Civil society should be allowed to play its rightful part, from commitment through to full implementation,” Ms Sarin said. “Natural resource revenue transparency, achieved through a combination of voluntary and mandatory measures, is key to achieving poverty reduction, economic growth and development. PWYP calls on all stakeholders to support this multi-faceted approach.”
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The number of standards are proliferating at the global, regional and national levels. The latest standards are captured now in a single palce by this not-for-profit organization. The major international and regional standards are highlighted here. Please visit the Corporate Library for its full array of standards from across the world.
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"Report focuses on the why’s and how’s of director oversight," says Bruce F. Freed, CPA Executive Director
New CPA report - Taking Initiative: How Corporate Contributions to Ballot Measures Pose a Risk and Why Directors Must Oversee Company Political Spending,
In the wake of one of the most divisive ballot measure battles in American history, CPA has completed a comprehensive study of how corporate bankrolling of initiatives can distort the democratic process and expose companies and their shareholders to significant risk. It calls for meaningful, knowledgeable oversight of political spending by company directors.
The report shows how politicians and political operatives aggressively solicit corporate funds to pay for increasingly expensive initiative campaigns – campaigns designed to agitate the electorate on the most controversial of issues, such as the anti-gay marriage measure that passed in California on November 4. Taking Initiative exposes the inner working of the initiative industry and reveals how political operatives manipulate the initiative process to benefit a particular candidate.
“As California’s recent experience shows,the initiative is a particularly insidious problem of campaign finance,” said Bruce F. Freed, executive director of the Center for Political Accountability. “The courts and federal election officials have allowed corporate contributions to initiatives to remain virtually unregulated. Corporations can easily hide hefty donations that support aggressive, and often deceptive, political advertising. All of this makes it critical that directors conduct serious oversight of company political spending.”
To illustrate this point, Taking Initiative takes as a case study California’s disastrous special election of 2005, in which a group of four initiatives, supported by California Gov. Arnold Schwarzenegger, went down in defeat. Early on, the special election itself, and the four ballot measures in particular, were deemed political losers by press and polls alike. Yet, corporations gave generously to support them. Little evidence points to director oversight of this corporate political activity, or any concern that it be backed by a solid business rationale. Other case studies in the report - involving initiatives in California and Arizona - show how corporations, including Target, Wal-Mart, Gap Inc. and ExxonMobil, risked their reputations by funding controversial initiative campaigns.
Taking Initiative also demonstrates how corporations’ unchecked spending on initiatives presents a problem not only for voters but for corporations and their shareholders. A CPA survey has determined that corporate directors typically exercise scant oversight over their companies’ political contributions, allowing managers to lend support to initiatives that may have little bearing on a company’s business mission or may even undercut a company’s values.
CPA noted in a press release that since its founding in 2003, it has encouraged companies to take careful measure of their political spending and to ensure that their spending is backed by a strong business rationale, overseen by corporate directors and disclosed to shareholders and the public. “When a corporation discloses its spending, it sends a clear message that it carefully considers and oversees its political activity,” Freed said. “Freewheeling corporate spending on initiatives is proof that corporations need to better police their own political activities.”
Careful political spending will help companies avoid putting shareholder value at risk, as has been the case with too may corporations recently. Freddie Mac, for example, paid $3.8 million, the largest fine ever levied by the Federal Election Commission in 2006, for underwriting illegal fundraisers for Congressional candidates. And the chairman and a top executive of Veco, a multinational oil services company which has since been acquired by CH2M Hill, pleaded guilty in May 2007 to political corruption charges that included using company money to fund employees’ individual campaign contributions.
Taking Initiative provides a blueprint for corporations that want to establish or strengthen oversight of their political spending. It shows how directors are responsible for this oversight and must enlist senior managers and outside auditors to assure that political expenditures are made to advance the company mission. And it lays out how directors should go about conducting independent and knowledgeable oversight of their company’s political contributions.
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The Danish parliament recently passed a law that makes it mandatory for the 1,100 biggest companies in the country to report on their work with CSR. However, it is still up to the company to decide if or how they want to work with CSR. Denmark’s Deputy Prime Minister Lene Espersen is quoted in an official press release as stating, “Many Danish companies are good at working with CSR. However, often they don’t tell the outside world about their efforts. I hope that this law will strengthen the knowledge abroad that Denmark is capable of creating responsible growth. In a globalised world facing a financial crisis and climate changes, CSR becomes an even more important competitive parameter.”
The law requires companies to report their CSR policies or socially responsible investments; how such policies are implemented in practice, and; the results obtained as well as managements’ expectations for the future with regard to CSR/SRI. In addition, companies are asked to provide information on what results have been obtained so far and managements expectations for the future with regard to CSR/SRI.
While the implementation of programs is still voluntary, companies must now publicly explain their positions. must state information to that effect explicitly. The new reporting requirement will take effect from 2010. More specific guidelines on how to report the required information will be issued.
Companies can choose to give the information in the annual report itself, in an addendum to the annual report or on the company’s website. If the information is not given in the annual report itself, the report has to say where you can find the information (e.g. on the company’s website). Regardless how companies choose to give the information an auditor must verify that the information on CSR/SRI is in accordance with the
financial information given in the annual report.
Georg Kell, executive director, UN Global Compact noted in a press release that, “By asking for the disclosure of non-financial performance, this bill will make an important contribution to enhance private sector responsibility. It is my hope that this bill will become a model for others to follow.”
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International Labor Migration: A Responsible Role for Business
Business for Social Responsibility
Ninety million people migrate for work globally every year and an increasing percentage of those workers are moving between emerging economies, rather than to industrialized nations. Otherwise known as South-South labor migrants, these workers are filling jobs in manufacturing, agriculture, construction and service industries in countries like Malaysia, the United Arab Emirates, Jordan and Egypt. Migrant workers provide a cost-effective and hardworking labor force in labor-intensive industries, but they are also vulnerable, isolated and often heavily indebted. Reports of abuse, forced labor and human trafficking are increasingly common.
Overall, current regulation in emerging economies largely fails to adequately protect foreign contract workers. As a result, migrant workers have become akin to other sourced commodities, with a premium on price over rights and protections. Systemic change is required to create the conditions under which labor migrants can safely move from one emerging country to another, contributing to the economic growth of both their origin and destination countries as well as their own personal livelihoods.
International companies1 are largely unaware of violations against migrant workers and the shortfalls in regulatory protections. As the drivers of the global demand for labor, businesses are in a unique position to affect sustained change through improved standards in their supply chains and enhanced engagement with policymakers and other key stakeholders.
BSR proposes a three-step process for companies to engage on labor migration:
Gain a more complete understanding of the use of migrant labor within your supply chains, including migrant workers’ countries of origin, recruitment process and terms of employment. Conduct a risk assessment of your supply chains examining the use of migrant labor within them:
--- Research the number of migrant workers in your supply chains and their origins
and destinations through conversations with suppliers and field research.
--- Determine the level of protections in place for migrant workers in policies and
implementation: – By government and regional bodies; Under existing codes of conduct. Develop policies that help ensure the protection of migrant workers in your supply chains and engage directly with your contractors on training and verification.
--- Adjust your code of conduct to include specific protections for migrant workers.
--- Train suppliers on management issues related to migrant workers and support their efforts to ensure fair treatment.
--- Include migrant worker issues in your auditing activities.
--- Tie purchasing decisions to ethical treatment of migrant workers. Actively engage with relevant stakeholders to influence the key systemic issues leading to the continued vulnerability of migrant workers.
--- Work with Government to improve laws and dispute resolution processes and to enhance protection of migrant workers. Support the development and proper enforcement of bilateral agreements focused on migrant worker protection.
--- Engage with Civil Society and Organized Labor to reduce risks in the recruitment
process, and to utilize and bolster existing networks and programs for enhanced migrant worker preparation and protection once they arrive in the destination country.
--- Participate in International Dialogues and Taskforces to develop international
consensus and efforts on how best to address South-South labor migration.
BSR has identified a series of business-relevant trends common in current South-South labor migration, which will be discussed and paired with recommendations for companies in line with the framework described above:
Key stakeholders are engaged in proactive activities that companies can take advantage of and contribute to:
Stakeholders include governments, international organizations, local civil society and
organized labor. Their activities include:
--- Dialogues and taskforces
--- Bilateral and regional engagement
--- Communication channels for migrant workers to report maltreatment and dispute resolution assistance
--- International network building
--- Community outreach and support
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Jobs that contribute to a sustainable environment are prevalent worldwide, according to a new report, but have the potential to make a much larger impact on the “greening” of the global economy. The United Nations Environment Program has launched the Green Jobs Initiative in conjunction with the International Labor Organization, the International Organization of Employers and the International Trade Union Confederation. A new report outlines the challenges to the Initiative which aims to make a full transition to a global green economy. Instead of simply defining a green job as one that contributes a sustainable environment, the report puts equal emphasis on the “decency” of that work. The Initiative therefore has two aims: averting environmental degradation and including the over a billion people who are currently outside the formal economic and social networks.
The “dual challenge,” according to the report, is that “climate change itself, adaptation to it and efforts to arrest it by reducing emissions have far-reaching implications for economic and social development, for production and consumption patters and thus for employment, incomes and poverty reduction.” The goal of the Initiative is to tackle both in tandem.
Some current challenges need to be faced, the report says. Progress toward creating new jobs is going too slow, many of the new jobs are not going to those who need them most, and creating decent work in some industries is particularly difficult. A total transition to a green economy will mean many will win, but some may lose out. The report acknowledges that specific, quantitative information is urgently needed but remains unavailable for enterprises and workers who will be adversely affected. Finally, unsustainable business practices are still prevalent and often remain more profitable. More advocacy and policy measure will need to be taken to realize the full benefits of a global green economy.
Assessing Green Jobs Worldwide
Not all green jobs qualify as decent work. By recognizing this reality, the report attempts to assess the current state of green jobs and where more work needs to be done. Data was collected for the global workforce in six different sectors which already have a significant number of green jobs.
RENEWABLE ENERGY SUPPLY – More than 2.3 million green jobs have been created worldwide. They include jobs in the wind power industry, the solar power industry, and solar thermal industry. Half of these reported jobs are in emerging and developing economies.
ENERGY EFFICIENCY (CONSTRUCTION) – Some 2 million green jobs based on improving energy efficiency already exist in the United States and in certain European countries. Buildings count for less of this total and are also responsible for 30-40 percent of all energy use, greenhouse gas emissions and waste generation. According to the report, could represent a future source of many more green jobs.
TRANSPORTATION – Around 5 million jobs account for railway work in China, India and the European Union alone, the report states, and millions more in public transport worldwide. As opposed to automobile production, public transport systems offer lower emission and more green jobs.
BASIC INDUSTRIES AND RECYCLING – Fewer than 300,000 jobs worldwide in iron, steel and aluminum can be considered green. The report states that this industry is particularly difficult to transform and the best option is to increase green jobs in recycling. Recycling in all its forms accounts provides 12 million jobs in Brazil, China and the U.S. (the only three countries where reliable data was available). Certainly many more recycling jobs exist around the world, but many cannot be considered green because they cause both pollution and health hazards.
AGRICULTURE – As the largest employer in the world, there are 1.3 billion farmers and agricultural workers worldwide, but many do not constitute decent work nor would they be considered green. This industry is in a unique position as it is particularly vulnerable to climate change and also a major contributor to it. A major policy-driven effort will be needed to make major advancements in agriculture, where the advantages for green and decent work are “considerable and the environmental benefits could be enormous.”
FORESTS – Although specific data is scarce, some 40 million jobs and 60 million livelihoods or indigenous peoples can be considered sustainable and green. Given the significant role forests play in producing renewable raw material, acting as pools of biodiversity, and as regulators of water flows and other environmental services, forests will be play an increasingly important role in the future, the report states.
The main argument in the report is that the successful transition to a global green economy will ultimately depend on the quality of green jobs. This is particularly true in the recycling, construction and biofuels industries.
There is great potential in employer-driven initiatives to green individual workplace, which would require very little new technology. People in jobs at all levels could see the content of those jobs change, with new performance and skills requirements, according to the report. The gains would be quick and cost little. On the other hand, the report warns that not everyone will win in the transition. New jobs will be created while others are discarded; but on balance, “available studies of labor market dynamics for both sectors and entire economies suggest that there will be more jobs in green economies.”
Future Steps Proposed in the Report
Assessing the potential for green jobs and monitoring progress. Opportunities for green jobs vary from country to country and sector to sector. Detailed assessments and monitoring will be key in getting started.
Closing the skills gap. A serious lack of capacity is hindering progress in some industries which rely on new materials and new technology. New training programs for “green-collar” workers will be important.
Greening of the workplace. Labor management initiatives resulting in greener workplaces is a low-cost initiative that can also achieve quick results.
Political resolve. The report finds that markets have thrived and transformation has advanced most where there has been strong and consistent political support. Stable political resolve will depend on a transformation that is equitable between and within countries.
Scaling up investment. Clean technology development is creating new business opportunities and larger, more established companies are realizing the potential. Investors from the U.S. and Europe pledged $10 billion for green investments from 2008-2010. This is just the start.
Financing green jobs. Funding for research and development for new technology will be crucial. Little progress is being made in generating sufficient investment in those developing countries where the benefits of clean development are most needed. Finance and resource allocation must be key initiatives both within and between countries.
Towards coherent policies. The best approaches to coherent policies must include an equal emphasis on the economy, the environment and society, the report states.
Involving social partners. Dialogue between key players – workers, employers and governments – working toward fair policies is essential in order to make the transition to a green economy sustainable.
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The Ethical Trading Initiative (ETI) has launched a series of new guidance tools to help retailers and buyers become more aware of their ethical business practices. The Initiative, started in the UK, has been producing materials for its members over the past 10 years.
The following are a list of guidelines for buyers:
Know your suppliers – cut out the middle man and where possible, develop long-term, direct relationships with your suppliers. This will help you build the trust and leverage you need to help make sustained improvements to workers’ conditions.
Incentivise your suppliers. Make sure compliance with labour standards is built into your contracts with your suppliers, so they know you mean business. Reward them for their efforts with repeat orders.
Get your buyers to ‘think worker’. Educate your buyers about the impact of their decisions on workers, and make sure they include ethical criteria alongside cost and quality when selecting suppliers.
Improve production planning. Deciding to change an entire line after production has already started can mean workers are forced to work excessive hours in their efforts to complete orders on time. Give suppliers clear and predictable lead times, making it easier for them to ensure their employees work predictable and reasonable hours.
Look at the price you pay your suppliers. At the very least, make sure that it allows your suppliers to pay their workers a wage that they can afford to live on.
ETI also provides essential elements of an ethical supply chain:
Commitment. The company must provide evidence that it’s paying a lot more than lip service to ethical trade. How much money they spend on ethical trade and how many staff work on it are key signs of real commitment.
Checks in place. Knowing what’s happening on the ground is a key step for companies towards behaving responsibly. If they don’t know what and where the problems are, how are they going to fix them? The company must have a credible system for assessing workers’ conditions.
Corrective action. It’s not enough to just find out where the problems are. Retailers need to agree with their suppliers what improvements to workers’ conditions are necessary and when they should be made, and should follow up with them to make sure agreed improvements happen.
Capacity building. Retailers must make sure that their staff and suppliers get adequate training and support.
Core business. Making sure companies integrate their ethical principles into core business decisions – like the prices they pay their suppliers, and the lead times given to them to complete orders – is key to achieving widespread change for workers. This often where companies fall down.
Collaboration. The only way for retailers to really make a difference is by working with each other – as well as with organisations that either represent and/or have specialised knowledge of workers’ issues such as trade unions and charities, for example as part of the Ethical Trading Initiative.
In addition to these newly revised tips, the group has produced the ETI Workbook. According to ETI, the workbook helps companies tackle the many complex questions involved in ethical trade and is packed with practical tips, case studies, tools and resources. It covers such issues as auditing, codes of ethics, ethical sourcing, employee relations and partnering with other groups to maximize programs. The information in the book was gathered from ETI member companies; working groups composed of corporate, trade union, and NGO members; and ETI organized events. The manual is far-reaching and can be ordered from the ETI website.
Another new initiative focuses specifically on the consumer. The Ethical Pest Initiative encourages consumers to be more aware of the products they are buying in the retail industry and the companies that make them. The Ethical Pest initiative is being spearheaded by Tara Scott and Stacey Dooley, two of the six young people whose experiences working in the garment industry in India were filmed as part of the BBC series Blood, Sweat and T-shirts.
ETI offers 10 questions consumers can find out about retailers regarding their ethical trading policy, as well as other helpful tips which can be found on the ETI website.
Do you have a code of conduct, and does it include the workers’ rights outlined in the ETI Base Code – including the right to join trade unions?
|How much of your supply chain is covered by your code of labour practice? Does it include particularly vulnerable workers, like homeworkers?|
What are you doing to make sure your suppliers understand the importance of treating workers fairly?
What are you doing to make sure the workers who are making your clothes understand their rights?
Is there senior management – at board level - responsibility for your code of labour practice?
How many staff do you have working on ethical trade in your company?
|How do you check what progress your suppliers are making on implementing your code?|
What practical support do you give your suppliers to help them understand how they can improve their practices?
|Sometimes garment suppliers face unreasonable pressure to change clothing designs at the last minute – sometimes even after production has started – and workers can often end up working excessive hours as a result. How do you prevent this from happening?|
Does the price you pay your suppliers for your garments allow them to pay their workers a wage they can afford to live on?
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The UK Anti-Corruption Forum has produced an anti-corruption manual for professional associations belonging to the infrastructure, construction and engineering sectors. The manual encourages professional organizations to create procedures and regulations with a consistent approach which will help prevent corruption in their member companies.
According to the Forum, the guide has three purposes:
Although each organization may develop different approaches to preventing corruption, the Forum recommends all anti-corruption rules should include at least the following:
The Forum includes a list of activities that should be considered corruption behavior with grounds for investigation and penalty.
Disciplinary action by IC&E professional bodies should be swift and fair. Furthermore, the Forum encourages that In glaring criminal cases, these organizations should bypass criminal authorities who refuse to prosecute.
The Forum states both the need for severe disciplinary action, when necessary, and fair investigations. Regarding the specifics of disciplinary actions, the Forum states that if the possible sanction will be expulsion or suspension from the professional body, or any other sanction that is likely to materially affect the livelihood of the member, the appropriate standard of proof should be “beyond reasonable doubt”. However, for a lesser penalty, the professional body’s procedures may allow a decision based on “balance of probability”. Where there has been a criminal conviction in a properly constituted court of law, the professional body may choose to regard this is as adequate proof of the activity in question without need of further investigation. This is outlined in more detail in the full guide.
Additionally, the Forum emphasizes that in the case of a company that has been found to have committed criminal offenses, it may be appropriate for the professional body to take its own disciplinary action if it believes the criminal proceedings are likely to be unduly delayed or prolonged by the criminal authorities in the relevant country. The professional body should also override the criminal authorities’ decision not to prosecute in cases where the evidence against a company is particularly strong.
The professional body should also take responsibility for raising awareness about its own rules prohibiting corrupt activities, the Forum states. The organization should publish the conduct which it regards as corrupt and the likely disciplinary and criminal sanctions which would be a result of these activities.
UK Anti-Corruption Forum
The UK Anti-Corruption Forum is an alliance of UK business associations, professional institutions, civil society organisations and companies with interests in the domestic and international infrastructure, construction and engineering sectors. The purpose of the Forum is to promote industry-led actions which can help to eliminate corruption. The members of the Forum believe that corruption can only be eliminated if governments, banks, business and professional associations, and companies working in these sectors co-operate in the development and implementation of effective anti-corruption actions.
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The Global Reporting Initiative’s (GRI) “G3 Sustainability Reporting Guidelines” are widely used as a standard for companies developing their corporate social responsibility (CSR) reports, but a new survey from the Netherlands-based global network shows that reporting is still far from standard. GRI, along with the Roberts Environmental Center (REC) at Claremont McKenna College in California, focused in this report on how companies are reporting on human rights specifically. The findings show that even if companies declare that they follow GRI’s G3 Guidelines, many reports are not providing full disclosure, as GRI standards dictate.
Corporate reporting on human rights is a relatively recent activity. The concepts of what activities constitute human rights and how these activities should be presented in a report still vary from company to company, despite GRI’s attempt to standardize the process.
Global Reporting Initiative Human Rights Performance Indicators
Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening.
Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken.
Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.
|Total number of incidents of discrimination and actions taken.|
Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights.
Operations identified as having significant risk for incidents of child labor, and measures taken to contribute to the elimination of child labor
Operations identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of forced or compulsory labor.
Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations.
Total number of incidents of violations involving rights of indigenous people and actions taken.
In order to level the playing field, so that readers can gain a more accurate perception of how a company fulfills its human rights obligations, GRI developed the “G3 Human Rights Performance Indicators.” They are composed of nine different topic areas, and there is a detailed explanation as to how companies should address each in terms of company policy, action and performance. With these guidelines in mind, GRI and REC set out to assess 100 different company reports from corporations listed in the Fortune Global 500. Their evaluation criteria included 1) the organizational structure of reporting; 2) what topics constituted human rights; and 3) the kinds of information reported.
In addition, these organizations wanted to know how in-depth human rights reporting is across global corporations. They evaluated the “presence, absence, or statement of non-relevance; for fully, partially or not meeting the requirements of the specific G3 Performance Indicators; for depth of reported information and for presence of performance information, both quantitative and otherwise.”
The following are a few highlights from the report under the main criteria categories:
NUMBER OF G3 AND NON-G3 REPORTERS MEETING SPECIFIC G3 PERFORMANCE INDICATORS
Source: Global Reporting Initiative's "Sustainability Reporting in Human Rights"
To read the full report, please visit the GRI website.
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Two new reports focus on this complex and core corporate social responsibility issue.
Amnesty International emphasizes that the Cambodian government should be protecting their citizens, but instead it stands by as local populations are forcibly evicted without due process. Here, and elsewhere, corporations are coming under increasing pressures to contribute to improvements in the communities where they work. Caroline Rees writes in an article for Ethical Corporation that companies need to establish effective mechanisms for grievance processes.
Government Failure - Forced Evictions in Cambodia Without Due Process
“Forced eviction is becoming one of the most widespread and systematic human rights abuses affecting Cambodians.”
– Amnesty International
Despite the Cambodian government’s claims to be “pro-poor” and its acceptance of numerous United Nations principles and conventions, Amnesty International reports in Rights Razed: Forced Evictions in Cambodia that well over 30,000 Cambodians have been displaced due to forced evictions in the last five years. Based on field visits conducted between March 2006 and June 2007, Amnesty International found Cambodians were forced, sometimes violently, to leave their homes “without consultations, due process of law, legal or other protection, and with no consideration of adequate alternatives.” These people were then relocated to barren land with little access to clean water and effective health clinics.
Forced evictions target the poor because they have little knowledge of their rights, limited access to NGOs who could seek redress, and are the least likely to be able to represent themselves. Indigenous peoples are particularly vulnerable. Amnesty International reports that Prime Minister Hu Sen has called for an end to these abuses, but government officials have not demonstrated the political will to change legislation or enforce existing laws.
The UN has already established a comprehensive set of guidelines regarding the rights of indigenous peoples, the right to land, and the right to an adequate standard of living, which Amnesty International outlines in detail in the report. The group advocates that government officials strongly enforce these principles, to which Cambodia has already agreed and that they better incorporate the principles into existing laws. It also recommends a complete moratorium of forced evictions until these reforms take place.
Corporate Diplomacy – Establishing An Effective Grievance Process
“Companies with complex structures, operations and supply chains can expect to face disputes over their impacts on communities and other stakeholders, however good their policies, monitoring and auditing systems.”
– Caroline Rees, fellow at the Corporate Social Responsibility Initiative at Harvard University
Corporate activities are bringing companies in closer contact with local communities, which means disputes between the groups will likely rise. The question for companies is how to resolve these disputes effectively.
According to Ms. Rees, courts are one strategy of resolving these disputes, but often create deep rifts between the two groups who have to continue working with each other, and legal costs are expensive. Rees continues to discuss how grievance processes can be most effective in practice, based on principles devised by the Harvard University’s Corporate Social Responsibility Initiative.
“A mechanism must carry legitimacy and trust, in part by involving all stakeholder groups in its design and oversight; it must provide ease of access to its potential end-users as well as predictability of process and transparency of outcome; and the processes it offers must be seen to be fair to all and empowering of those who are most vulnerable.
The type of process also matters. Many companies create an avenue for aggrieved parties to raise their concerns – via a complaints box, hotline or liaison officer – but then, after investigation, make a unilateral decision on the response. The principles therefore highlight the need for mechanisms at the operational level to focus on engagement and dialogue, with adjudication roles left to external bodies.
The principles are supported by accompanying guidance and explanation. They do not prescribe a uniform model, but offer scope to design systems that suit the sector, culture, scale and context in question.”
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2 New Reports
► INSTITUTE OF BUSINESS ETHICS
► TRANSPARENCY INTERNATIONAL
The Institute of Business Ethics notes that its recent briefing explores what business ethics means for small to medium-sized business enterprises and how they can introduce and support high standards of business practice. Why think about business ethics?
The report, issued in December 2007, noted:
Few directors of small and medium sized enterprises (SMEs) will deny the importance of good, trusting relationships with customers, employees, suppliers and the community. The success of their company depends on it.
Also, due to requirements higher up supply chains, smaller firms are increasingly asked about their social and environmental credentials during tendering processes with large corporations.
SME owners and managers will also recognise the importance of trust and ethics in business when on the ‘receiving end’ of unethical business practice; for example, when suppliers deliberately do not meet agreed terms and conditions.
Owners and managers can often encounter ethical challenges. Examples include:
• Do I meet a deadline with my customer and ship out products even though I know there is a possibility they might be faulty, or do I openly discuss my difficulties with the customer?
• How do I ensure that my employees do their work properly and do the right thing?
• How do I deal with my employees’ desire to balance their work obligations with their personal ones?
• How do I respond when securing an important contract seems to require the payment of a
• Do I delay payment to suppliers and the Inland Revenue when my cash-flow is currently limited?
The desire to build trusting internal and external relationships, as well as growing pressures from wider society, should lead SME owners and managers to consider to what extent ethical values and principles guide their business behaviour. What does ‘doing the right thing’ mean?
Ethical Values in SMEs
SMEs are characterised by informal understandings and shared expectations among the workforce of how business is done. Any values and ethical principles will usually be implicit rather than formally expressed through ethics policies, codes and programmes that are familiar in large companies. The ethics of a small organisation is typically influenced by the owner manager or managing director. Through their very visible presence, their personal attitudes and behaviours will set the tone of the business and have the potential to signal to employees how seriously ethical behaviour is to be taken in the organisation.
SMEs are not typically able to devote as many resources to building an ethical workplace culture as larger organisations. However, there are advantages to having a somewhat more formal ethics policy in place. Firstly, it reinforces and makes explicit the values and principles that are part of the organisational culture, so allowing them to be communicated to stakeholders. Secondly, a policy will provide guidance and support to employees on how
they are expected to conduct their business. A policy will provide a context and the vocabulary for employees to raise any concerns they have with their supervisors or the directors. It will form a framework for management and staff to decide what is the “right
thing to do”.
How to develop and implement an ethics policy
Identify and define core values of the business
An effective ethics policy will be based on a set of values. Values may be thought of as agreed standards of behaviour, expressing beliefs about the ‘good’ and the ‘right’ in the context of the organisation; they are commonly derived from wider cultural and societal value systems. When identifying the organisation’s core values, it may help to think of some values as business values and others as ethical values, although the distinction can be blurred and business and ethical values are often interrelated.
Some benefits of making ethical values explicit
• Increased employee loyalty, higher commitment and morale as well as lower staff turnover
• Attraction of ‘high-quality’ staff
• Reputational benefits (customers and suppliers)
• More open and innovative culture
• Decreased cost of borrowing and insurance
• Generation of good-will in the communities in which the business operates
(please see the full report.)
Transparency International has published a new guide, released in late January 2008, designed specifically to help small and medium-sized enterprises (SMEs) develop policies and procedures to address bribery (this is based on an earlier guide for all enterprises): The Business Principles for Countering Bribery - Small and Medium Enterprise (SME) Edition.
The new guide provides a framework for companies to develop comprehensive anti-bribery programmes. Whilst many large companies have no-bribes policies all too few implement these policies effectively. TI encourages companies to consider using the Business Principles as a starting point for developing their own anti-bribery programmes or to benchmark existing ones. The development of the Business Principles for Countering Bribery, introduced in December 2002, was spearheaded by Transparency International in co-operation with Social Accountability International. The Business Principles are the product of a collaborative effort involving companies, academia, trade unions and non-governmental bodies.
More than 95% of the world’s business is carried out by small and medium-sized enterprises (SMEs). Small and medium sized enterprises may not have the same human and financial resources as larger companies but are just as vulnerable to the risks of bribery. SMEs also play a fundamental role in the supply chains of large international companies which increasingly are requiring anti-bribery commitments from their suppliers.
In addition to anti-bribery principles, the SME Edition includes practical guidance on how to develop an anti-bribery programme that is tailored to the size and resources of individual businesses and sample rules on gifts and entertainment.
Transparency International states that countering bribery makes good business sense for SMEs. It can help manage risk and build reputation, especially with customers. Practices that were once seen as an inevitable part of doing business in many parts of the world are becoming increasingly unacceptable. More stringent domestic laws and international conventions such as the 1999 OECD Anti-Bribery Convention and the United Nations Convention against Corruption are compelling companies to develop new anti-bribery policies or to review existing ones. The high-profile corporate scandals of recent years have made companies increasingly aware that corrupt practices pose serious and costly risks to their reputation and sustainability. This understanding, coupled with growing public expectation of accountability and probity in the corporate sector, are putting added pressure on companies to articulate and live up to more ethical business practices.
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The first coalition of global entities engaged in the process of designing or implementing carbon markets, called the International Carbon Action Partnership (ICAP), has been formally established. At a summit in Lisbon, Portugal on October 29, representatives from 11 countries, four U.S. states, British Columbia, and the European Commission, convened to set out several initiatives to promote the implementation of carbon markets through mandatory cap and trade systems, setting this strategy to combat climate change, which the U.S. administration has largely shunned, as an international priority.
According to the organization’s website, “Membership is open to all public authorities and governments that have established or are actively pursuing carbon markets through mandatory cap and trade systems as one approach for reducing greenhouse gas emissions.”
ICAP declared in a press release that it “will open lines of communication for sharing valuable information, such as research, effective policy initiatives, lessons learned and new developments.” Among its principles, ICAP recognizes the need for urgent action, well-developed policies will create economic growth, market-based solutions in the form of cap-and-trade are a key component to economic strategy, reducing greenhouse-gas emissions requires global cooperation, and that national and regional carbon markets offer significant potential for international climate policy.
Participating members include:
British Columbia, New Jersey, California, New York, European Commission, New Zealand, France, Norway, Germany, Netherlands, Greece, Portugal, Italy, Spain, Ireland, United Kingdom, and Maine
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By Allen L. White
Senior Advisor, BSR
Prepared April 2007
The following is an excerpt from a paper published by Business for Social Responsibility
In the midst of BHP Billiton’s assessment of the consequences of its massive and dramatically successful effort to reverse malaria in the region surrounding its aluminum smelter in Mozambique, the general manager of the smelter commented, “you can imagine, it was huge disaster. We could not deal with that level of absenteeism, and we would have had more fatalities. If we didn’t treat malaria we could not operate.”
Not long ago, such an intervention on the part of a private firm in a traditionally governmental function like public health was a rarity. Today, interventions are increasingly commonplace, both in instances where a business case is evident (as in Mozambique) and in instances where the economics are less than compelling but the moral high ground is unambiguous.
Examples of corporate activities that impinge upon public goods abound: pharmaceutical companies providing affordable HIV/AIDS drugs to battle the pandemic worldwide; beverage companies controversially extracting potable water resources in India; multinationals assuming control over public water supplies in Bolivia; and privatization of mass transit in the UK and roadways in India.
Amid the broad spectrum of public goods — public health, public education, public lands — the emergence of the corporation as an investor, advisor and partner has moved from the exceptional to the expected. By all indications, this trend will accelerate in the coming decades as societal expectations of business stretch the traditional boundaries of companies from purely profit-driven entities to organizations with an obligation to operate with an enduring commitment to the public interest.
Click here for the complete paper in pdf
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An agreement has been reached between the United Nations Global Compact, which is dedicated to stimulating global responsible corporate citizenship, and the Global Reporting Initiative (GRI), the leading international institution setting standards for corporate social responsibility.
The Global Compact now embraces more than 3,000 companies in over 100 countries who endorse and claim to actively promote the organization’s key social responsibility principles that embrace strengthening human and labor rights, protecting the environment, and promoting anti-corruption. Until now, however, the range of codes and values-statements and basic CSR standards accepted by all of these companies has ranged greatly. The Global Compact has announced that it will encourage its member companies to pursue the sustainability reporting approaches of the new GRI G3 Guidelines.
The two organizations, which explained their new relationship at the recent annual meeting of Business for Social Responsibility in New York (November, 2006), released a “draft publication” in October that explains how the two frameworks of these global organizations are going to work together and how companies can best take advantage of this cooperation. The two organizations are looking for feed-back on this initiative and plan a final version of their guidance publication in July 2007 at the next Global Compact Leaders Summit.
Behind this initiative lies an effort by the GRI to expand the universe of users of its standards and the goal of the Global Compact to assist its member companies as they comply with the its requirements on “Communication on Progress” (COP). The Global Compact is keenly aware that companies may want to join it for the prestige of an association with the United Nations, but then do nothing to demonstrate adherence to the core principles. Accordingly, reporting on COP is key.
Companies can provide COP reports in many forms, but over time it is likely that they will be encouraged increasingly to use the GRI’s G3 guidelines. According to the Global Compact, “The purpose of the COP requirement is not only to ensure and deepen the commitment of Compact participants and to safeguard the integrity of the initiative. It also aims to create a rich repository of corporate practices that serves as a basic for continuous performance improvement. For companies, it is a tool to excercise leadership, facilitate learning, stimulate dialogue and promote action.”
Georg Kell, Executive Director of the Global Compact, says, “Companies participating in both initiatives have long stressed the understanding that the GRI is a practical expression of the Global Compact.”
The two organizations assert that the value of sustainability reporting is not only found in the final product but also in the process. Leading companies are using the reporting processes as an internal management tool.
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“The FTSE4Good criteria signal that countering bribery is an important part of the corporate social responsibility agenda. If we are to achieve the Millennium Development Goals, then bribery must be tackled and the FTSE4Good criteria are an important contribution towards this aim.”
- Jeremy Brooks, Board Director of Transparency International
In this summary - details on the new bribery criteria, and background on the FTSE4Good Index.
FTSE Group (Financial Times Stock Exchange Group), the leading UK index provider, will launch, effective, July 1, 2006, a new set of criteria to counter bribery for its FTSE4Good Index - the leading socially responsible investing (SRI) index in the UK.
The criteria, which FTSE claimed in its February 22, 2006 press release is the most developed and transparent counter-bribery criteria in any CSR index. The new criteria take the Transparency International Business Principles for Countering Bribery as a starting point. Bribery is defined as “an offer or receipt of any gift, loan, fee, reward or other advantage to or from any person as an inducement to do something which is dishonest, illegal or a breach of trust in the conduct of the enterprise's business.”
The Countering Bribery criteria were developed on the basis of broad consultation over an 18-month period involving input from many stakeholders, including corporations, fund managers, government representatives, NGOs, business associations and private investors (see more detail below).
FTSE4Good has three goals:
FTSE4Good can be used in four ways:
The FTSE4Good Index is revised semi-annually through the scrutiny of annual reports and other publicly available material, questionnaires and the research of the Ethical Investment Research Service (EIRIS).
Before the introduction of the Countering Bribery Criteria, the FTSE4Good Index consisted of four other criteria sets: the Environmental Criteria, the Social & Stakeholder Criteria, the Human Rights Criteria, and the Supply Chain and Labour Standards Criteria.
The Bribery Criteria
“Operating in an open and transparent environment is essential for good business practice, both in the UK and abroad, and the launch of the FTSE4GOOD criteria is another strong step towards improving international business behaviour and combating bribery. Tackling bribery remains a key component of the UK Government’s efforts to improve governance and sustainable development.”
-Gareth Thomas, UK International Development Minister
The criteria will be implemented into the index series on a phased basis over two years, starting July 1, 2006. One key challenge is that an estimated 130 companies out of about 200 covered by FTSE that have been identified as having the highest level of exposure to potential bribery, may need to take actions to meet the new criteria, such as putting new policies and management systems in place to mitigate bribery risk. FTSE’s in-house Responsible Investment Unit will be working with companies to explain the criteria and what they have to do to meet it.
FTSE has established three levels of bribery risk (high, medium, or low) that are being analyzed in terms of three filters or screens: 1) its sector; 2) the country/countries it operates in; and, 3) its involvement in public contracts.
The countries determined to be at highest risk for bribery are based on the World Bank’s Governance Indicators and the Transparency International Corruption Perceptions Index.
Some of the sectors found to be at the highest risk for bribery were:
Oil and Gas Producers; Oil Equipment, Services, and Distribution; Chemicals; Industrial Metals; Mining; Construction and Materials; Aerospace and Defense; General Industrials; Electronic & Electrical Equipment; Industrial Engineering; Support Services; Electricity; Gas, Water & Multi-Utilities; Pharmaceuticals; Hotels; Fixed Line Telecommunications; Mobile Telecommunications; Software and Computer Services; Technology; Hardware & Equipment.
In order to be rated, a companies’ policy, management, and reporting is measured according to the following criteria:
- Prohibits giving and receiving bribes;
- Communicates policy to employees;
- Policy is publicly disclosed;
While these criteria make up the first stage of implementation, the FTSE4Good Committee intends to introduce further criteria for high-risk companies. These include:
On the policy level:
- board-level Commitment made public;
- tranparency of any political donations; and,
- policy applies to business partners.
On the systems level:
- sanctions process for breaches of policy;
- risk based-assessment or risk-led prioritization;
- communicate policy to business partners; and,
- appropriate systems for appointment and remuneration of business partners and intermediaries
For more information please visit: www.ftse.com/ftse4good
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On February 21, 2006 the International Finance Corporation, the private lending arm of the World Bank, adopted a new set of environmental and social standards. The standards, which replace the IFC's 1998 Safeguard Policies, build upon the environmental and social requirements that the IFC currently applies to private sector projects it finances in the developing world.
The new standards come after an extensive period of public comment and consultation with stakeholders, governments, NGOs, and other members of civil society on updating the safeguards. According to the IFC, this period was triggered both by the realization that the old safeguards had proved inadequate in complex project situations, and by the IFC’s transition to a new business model, which is based on the premise that long-term profitability and strong project outcomes are better secured by companies that manage all of their risks well.
The standards cover more areas than the old safeguards and give those already in place more force and specificity. For instance the standards now require firms to consider the impact projects will have on the wider community's health, safety, and security as well as establish a grievance mechanism for affected communities. The new standards also include a comprehensive approach to labor conditions, which addresses all four core labor standards of the International Labor Organization (forced labor, child labor nondiscrimination, and freedom of association and collective bargaining).
While the old safeguards put special emphasis on assessing the social impact programs have on vulnerable groups, for instance on concerns over involuntary settlement, Indigenous Peoples, and cultural heritage, the new standards add a reference to human rights. In particular, the standards tackle the difficult issues of adequate housing and security of tenure.
Furthermore, the standards adopt a new outcomes-based approach, which replaces a rules-based system with a principles-based one. According to the IFC, the outcomes-based approach hinges on three policies which it hopes will help clients identify and prepare for the risks intrinsic to their business: 1) developing a clear business model with concrete management systems for handling problems 2) outlining, with help from the community, clear desired outcomes and specific plans of action tailored to the specific project and 3) considering a diverse set of means and maintaining the flexibility that will enable clients to seize new opportunities.
The IFC is also adopting a new policy structure that more clearly defines and distinguishes between the roles of the IFC and its private sector clients, thereby increasing accountability. The Sustainability Policy outlines the IFC’s responsibilities to project outcomes and communities, while The Performance Standards describe those of its clients. These include clear requirements for public disclosure by clients both at the beginning, and throughout the course of, the project.
The Disclosure Policy identifies and expands on the IFC’s duties to publicly disclose information on its activities and governance. In particular, it creates a request-driven process and internal review mechanism that will enable the public to request and receive information and challenge decisions in an easier and more timely manner. Moreover, the IFC will now regularly post more key internal documents for public scrutiny such as its budget, business plans, minutes from Board meetings, and summaries of project impacts and successes.
Finally, three additional documents, while not IFC policy, will serve as advisory material for clients and IFC staff. These are guidance notes for adhering to the new standards, directions for completing environmental and social reviews, and technical guidance for addressing environment, health, and safety issues.
The Equator Principles are also expected to be updated in accordance with the new IFC standards. These are a set of environmental and social guidelines, based on IFC’s safeguards, that are now applied by 40 leading commercial financial institutions, which collectively represent some 80 percent of global project finance.
Please visit the IFC website for full report.
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Recent News - Pemex Joins UN Global Compact. Mexico's state oil company Pemex has signed the Global Compact. Pemex’s decision could have a major influence on other Mexican companies and represents a key step forward for the Global Compact, which currently claims to have 2,000 member corporations.
The Global Compact, managed by the United Nations, challenges corporations to strengthen global corporate citizenship by working together with UN agencies, labor and civil society to support its Ten Principles. The Global Compact is a direct initiative of the Secretary-General. It is a purely voluntary initiative with two objectives:
The Global Compact's ten principles in the areas of human rights, labor, the environment and anti-corruption enjoy universal consensus and are derived from:
The Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti-corruption:
Principle 10: Businesses should work against all forms of corruption, including extortion and bribery.
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