Corporate Social Responsibility

Views and Analysis

On this page

• European Community President Calls for Better Ethics
• Setting a Global Standard for the Economy and Integrity - OECD
• Capitalism at the Crossroads Says Boston College Ethics Leader
• Oxfam Reports On Complex Central America Mining Industry Challenges
• Dutch Perspective: Industry Standards Integral to Company’s Success in CSR
• Novartis Foundation's Persepctive on CSR in Public Health
• Transatlantic Perceptions of Corporate Social Responsibility
• Spielberg Quits Olympics on Human Rights Grounds
• Prize Winning Ideas Show Promise for Ethical Innovation in the Finance Industry
• Oxfam Says Drug Companies Have Made Little Progress Toward Universal Access
• CSR Implementation Strategy in China's ICT Industry
• Patent Law Decision Highlights Key Ethical Conundrum
• Challenges of CSR in Kenya and Zambia: Ways to Move Forward
  
  Read more articles on the next page...
  

* * *

Barosso: "We need a new culture of ethcis and responsibility."

The President of the European Community joins the rising number of statesmen to call for better ethics

In the current exceptional circumstances, corporate social responsibility is even more crucial than ever, said European Commission President José Manuel Barroso speaking at CSR Europe's General Assembly in Brussels on 11 June 2009. Full speech.

Barroso said: "The crisis resulted, in part at least, from a failure by some businesses to understand their broader ethical responsibilities. Now all businesses must rise to the challenge." Calling for a "new culture of ethics and responsibility", Barroso stressed the importance of re-building trust in business.

"This is essential - not just to restore the brand image of particular enterprises but to restore people's faith in the market economy itself. People still want markets - but they want markets with a conscience."

Looking ahead to the UN climate change conference in Copenhagen, Barroso also encouraged companies to take advantage of the long-term business opportunities created by the shift to the low carbon economy in Europe.
Barroso spoke at the closing session of CSR Europe's annual General Assembly. This year, the event brought together more than 100 participants from CSR Europe's member companies, national partner organisations and stakeholder organisations to reflect on the future of responsible business.

Posted 06/25/2009

* * *

Setting A Global Standard For The World's Economy & Integrity in the 21st Century

Angel Gurría, OECD Secretary-General Speaks Out

In a speech at the OECD, the Secretary-General stressed that, "This is a unique opportunity to raise the paramount importance of integrity and ethics in the world economy. To build a stronger and cleaner global economy we need to think of the key elements of integrity and ethics. Progress in this area is the one essential ingredient to restore confidence in globalisation. He argued that there is a need for a Global Standard on integrity, propriety and transparency in business and a Charter on global sustainable activity."

Excerpts from the speech:
We are living the worst economic crisis of our lives. It is also the most global crisis ever. The size and complexity of the problem are linked to its remarkable global synchronisation. In all previous crises there was always a strong country or group of countries to bail us out. Today, all the major economic engines are affected.
 
There were many causes for this synchronised “power cut”, including massive regulatory, supervisory, corporate governance and risk management failures. There are also questions regarding honesty, propriety and transparency in the conduct of business. These issues may not be the direct cause of the crisis, but they are perceived to be closely linked to it, as multipliers of its effects and potential obstacles to its rapid solution. 

Efforts to improve the framework within which business, markets and governments should operate to achieve a stronger, cleaner and fairer world economy have been revamped by the G20 Summit in London. Leaders have not only supported discussion on a Global Charter for sustainable economic activity. They have also acknowledged the efforts in the G8 to prepare a set of common principles and standards on propriety, integrity and transparency of international and financial activity. That is, to prepare a Global Standard for the 21st Century. 
Politically, the two initiatives have been recognised as reciprocally reinforcing global milestones. Technically, they have converged in a transparent and constructive process. They can restore confidence and avoid a recurrence of the present crisis. They can avoid a backlash against open markets, and against globalisation. They deserve all our attention.

If leaders want to go this way, the OECD is ready to help. Over the last 15 years, together with Member countries and many other players in the global economy, the OECD has developed a dense, far reaching and comprehensive set of policy rules. Whether legally binding, in the form of “soft law” or as recommendations, they provide best practices for policy makers in designing and carrying out sound policies and they also offer guidelines for the conduct of private sector business. This body of provisions exists in separate, individual “niches”, but we must now bring them together in a systematic and coherent way for easy use and effective guidance. We must also provide strong political support so that their adoption is generalised, and an effective monitoring system so that their implementation is assured.

The reach of this Standard can certainly be subject to discussion, as well as the approach to make it an attractive instrument for a large number of countries and the private sector. I offer the rich experience of the OECD, but others around the table have also much to contribute. Below are some of the OECD’s core rules and principles to ensure the integrity of the international business environment:

These could be the building blocks of the “Global Standard”.

Posted 05/13/2009

* * *

Corporate Citizenship Meets the Financial Meltdown: Threat or Opportunity?

“We are at a crossroad for capitalism and corporate citizenship,” says Bradley K. Googins, Ph.D., Executive Director, Boston College Center for Corporate Citizenship

In monitoring conversations with companies around the globe, those who are leading the corporate citizenship or sustainability space are understandably nervous about potential negative implications going ahead. It was only a very few months ago that things could not have been rosier, and there finally seemed to be a significant breakthrough in the Sisyphean task of the past decade. Even the Economist in January admitted it might have been too harsh in viewing the corporate responsibility movement as a flash in the pan.

But how quickly things can change. A whole new meaning of climate change has been introduced into the public dialogue. Instead of a focus on the environment, a very different and much more powerful climate change conversation has been thrust upon us, one that may in fact be reshaping capitalism as we know it. Despite the shock and awe of the financial meltdown, viewed from another angle these developments might in fact serve as a great opportunity for corporate citizenship.

It is clear the failure of an unregulated financial system that almost brought the house down will no doubt be followed by aggressive legislation and regulation as an antidote to calm the fears. Already there have been discussions by congressional leaders and others about using this new window to mandate new measures to address climate change, implement safeguards for food, toys and prescription drugs from China, and expand health care insurance mandates. This sudden jolt to our business and to our society and the destructive trail it is leaving can be seen as a damning indictment of business holding onto an excessive free market model and not listening to the growing voices of other stakeholders that have been getting stronger over the past few years. The rise of the green consumer, social investing and the incipient wave of new expectations from millennial employees have been largely ignored or not taken seriously. Even Bill Gates’ call for a creative capitalism to address the cracks that are beginning to appear in the foundation was not widely embraced.

A crossroad for capitalism and corporate citizenship

So here we are at a crossroad for capitalism and corporate citizenship. The trust in a self-regulating system has been lost and the role of lobbying by the business community has been put in a very different light. However, equally dangerous might be a swing of the pendulum too far toward regulation and mandates. We know already that regulations can serve as a disastrous drag on innovation and markets. No one can comply themselves to excellence, whether in a particular business or in a company’s citizenship.

Whatever solutions that are brought forward cannot preserve the current laissez faire system, nor can they result in overregulation that could kill the entrepreneurial spirit that has brought so much prosperity around the world. Gates’ call at Davos for a new form of capitalism in effect recognizes this bind, and serves as a clarion call for a new approach where the issues of all stakeholders can be factored into a more inclusive and transparent process. This new approach will also understand and address the flaws of the current model that not only overlooked but perhaps inadvertently exacerbated key issues of inequality, poverty and environmental degradation.

So where do we go from here?

At the very least it is time for a very active dialogue in the business community, and between the business community and those of government and civil society. The events of the past few weeks are humbling reminders that we need to broaden the dialogue, consider alternative forms of capitalism and together develop a new vision and consensus for our society. This will require a new leadership with a more active vision and voice. The Chambers of Commerce and many of the K Street operations cannot continue to represent the narrow self interests of business. This is an old and decrepit form of engagement that has to be transformed if business is going to regain any semblance of trust from its stakeholders.

Business has to find a new form of engagement with society. It needs to create a new form of global capitalism that reflects blended values with a new respect for the role of government in providing a stronger oversight that its citizens can trust will ensure their interests are protected.  At the same time those in the corporate citizenship arena have to widen their lens to guarantee that the real issues of citizenship - trust, authenticity, genuine engagement of stakeholders and an integrated and accountable citizenship - are baked into the very core of business.

Restoring faith to damaged and disillusioned employees, customers, suppliers and communities is an extremely difficult and challenging task. Just look at the crisis of the sexual abuse scandals that shook the Catholic Church to understand just how difficult turning this around will be. Whatever mechanisms we ultimately employ, we know they will have to be guided by active leadership, and infused with basic virtues such as humility, authenticity and accountability. We are presented with a great opportunity not only for corporate citizenship to deepen its value and contribution to the business, but for business to increase the value of capitalism to realize its potential to create a just and sustainable world.

Posted 11/17/2008

* * *

OXFAM Calls for Balance - Warns of Rapid Business Development Dangers

Research Report on Metals Mining and Sustainable Development
in Central America

From the report --- The mythology and romance of mining

"Many mining industry advocates see no need to analyze the economics of a mineral development proposal. They present mineral deposits as concentrated wealth that would be irrational not to develop. These advocates believe the development of such mineral deposits will provide an intense, long-lasting infusion of export earnings and assure economic development that extends over many decades, even over a century. As evidence, mining advocates claim that the experiences of now-wealthy, developed countries such as the US, Canada, and Australia demonstrate the pivotal, long-term role mining can play in generating wealth. Advocates also highlight more contemporary mining success stories from developing countries like Chile and Botswana. From this point of view, being critical or even skeptical of mining proposals is anti-economic, a form of economic irrationality."

A summary of the research report from OXFAM:

Despite its long history in Central America, mining has never played a significant role in the economies of Guatemala, Honduras, and El Salvador. Even if all the resources of these nations were developed, revenue from minerals would amount to only a small fraction of their broadly diversified economies.

What the mining industry could contribute to these countries must be balanced with the full scope of its costs. From a financial perspective, mining has some drawbacks. Meanwhile, large-scale open-pit mining poses environmental risks ranging from acid mine drainage to tailings dam leaks.

The current debate surrounding mining in the region, especially in El Salvador, reveals a dangerous misunderstanding of the potential costs and benefits of aggressive development. The World Bank and other institutions have conducted research that indicates that resource development often has a minimal impact on poverty alleviation efforts. Mining communities throughout the world know firsthand that those closest to mining development get hit the hardest.

If mining is to realize any of its promise, it must be done with the full sanction and support of local communities. The mining industry must respect local communities’ right to free, prior, and informed consent. Furthermore, it must integrate tightly into local economies and allow for cooperative decision-making on a continuing basis. If these circumstances do not exist, communities have grounds to reject mining projects—because the costs will likely outweigh the benefits.

Posted 8/11/08

Back To Top

* * *

Lessons from the Dutch Telecom Industry – Industry Standards Integral to Company’s Success in CSR

The success of corporate social responsibility within a company depends not only on the program itself but also on the industry standards, according to a column published by the CSR Center, a globally-focused resource for those interested in academic CSR-related knowledge.  Jan van der Kaaij and Kevin Zuidhof, the authors of the column, are Dutch founders of consulting firms involved in strategic communications and social responsibility.  They use the example of the telecom industry in the Netherlands to emphasize how companies in other industries can use CSR to boost competition. 

Van der Kaajj and Zuidhof argue that the mobile telecom industry has more advanced CSR activities than its counterpart, the fixed telecom industry.  They give examples of companies in the mobile industry that regularly partner with NGOs and whose top management is heavily involved in the company’s community investment work.  The fixed telecom industry is much less active, the authors argue, with many companies that do not publicly report on any CSR-related activities. 

There could be several reasons for this difference, the authors argue.  First, the mobile industry is younger and therefore has a more modern and fresh perspective to doing business.  Secondly, they argue the mobile industry has been forced into a more defensive position simply based on recent challenges posed in the marketplace.  Finally, the authors also say there is a difference in the market value of CSR in each respective industry. 

Based on the authors’ prediction that future convergence of the two industries will be a strong possibility, the fixed telecom industry will be challenged to better integrate CSR into their business strategies in order to remain competitive, the authors argue.  Their message for this industry, as well as others, is to be aware of the importance of emerging CSR trends within an industry when planning business strategy so that CSR can work toward the comparative advantage of the company.

To read the full article, please visit the CSR Center website.

Posted 6/23/08

Back To Top
 

* * *

Novartis Foundation Contends Improvement in Access to Medicine Should Be Based on Fair Division of Roles

President and CEO of Novartis Foundation has written an essay outlining a realistic corporate approach to the global public health challenge

Pharmaceutical companies have had a long history of tense relationships with many civil society organizations due in large part to disagreements over what defines the industry’s responsibilities.  As public health continues to be a major challenge in all countries, many people expect pharmaceutical companies to be taking an active role.  Access to medicine is still highly disparate across regions, socio-economic classes and genders.  In the not so recent past, many organizations, such as Oxfam, have criticized the pharmaceutical industry for not doing more to help the poorest people who are often the most in need. 

To address the controversy over this issue, Dr. Klaus M. Leisinger, President and CEO of the Novartis Foundation for Sustainable Development, wrote a comprehensive essay answering some the criticisms leveled in the past.  Dr. Leisinger’s main argument is for the fair distribution of responsibilities across all entities involved and increased cooperation among relevant parties in order to find solutions.  He believes some of the demands placed on companies are “unrealistic.”  Many of the good deeds done by companies go overlooked, and it has been difficult to overcome a general negative perception.  In response to this, the essay breaks down the roles of the many “duty bearers” and encourages each to live up to them. 

With regard to corporations, Dr. Leisinger states in no uncertain terms that their primary role is produce innovative medicines that will help sick people “in a profitable way.”  He argues for the protection of intellectual property rights and vigorous pursuit of research and development, all of which he argues will increase this primary duty.  He proposes a hierarchy of responsibilities for corporations.  According to him, “successful pharmaceutical companies contribute to the respect, protection and fulfillment of the right to health, first and foremost, in the context of normal core competence business activities.”  Based on this principle, there are activities that companies must do, ought to do, and can do. 

The "Must" Dimension

Conducting research and development, bringing innovative and effective products to the market, and by providing goods and services that meet customers’ needs at competitive prices – all in a legitimate way.  Legitimacy is defined as compliance with all laws and regulations concerning healthy workplaces, environmental protections, and the safety and efficacy of products and services. 

The "Ought To" Dimension

Responding to broader public expectations that go beyond the legal minimum.  These activities could include applying to higher standards, such as fair labor conditions and wages, when local laws are insufficient; providing free or heavily subsidized facilities for diagnosis, treatment, and psych-social care of workers; or offering free training opportunities using company capabilities.  Adjusting pricing on a case-by-case basis should be a choice and remain discretionary. 

The "Can" Dimension

Dr. Leisinger describes this mainly in terms of corporate philanthropy.  It is “purely voluntary, guided only by business’ desire to engage in social activities that are not mandated, not required by law, and not generally expected of business in the ethical sense.”

These are the realistic expectations that society should have for businesses, according the essay.  Benchmarking best practices, Dr. Leisinger argues, is a healthy way of boosting competition, but idealistic standards should not be mandated. 

Much of the responsibility for equal access to health care remains with the state, which Dr. Leisinger calls the “primary duty bearers.”  He argues there are many factors that contribute to insufficient access to medicine, all of which cannot be solved by corporations alone.  The state has the primary responsibility to its citizens for providing proper capacity for delivery of medication and sufficient health facilities.  He cites a recent World Health Organization report that views the “failure of health systems” at the center of the resulting human crisis.  Governments have a responsibility to devote a reasonable portion of their budget to healthcare, and if topped with appropriate development assistance, would be enough to provide adequate primary health care.  Just as corporate fraud and misbehavior cannot be accepted in the private sector, poor governance and corruption cannot be accepted in the public sector.

Posted 4/18/08

Back To Top

* * *

Transatlantic Perceptions of Corporate Social Responsibility

Business representatives from Europe and America discuss how they view the CSR landscape

A recent conference at the Business Civil Leadership Center, the global citizenship arm of the U.S. Chamber of Commerce, brought together numerous American corporate representatives and representatives from the American Chambers of Commerce across Europe.  There is little doubt that the term corporate social responsibility has entered the business mainstream, but there are still different opinions on exactly what it means.  Business leaders from Europe and America gathered together to express their own perceptions of how their companies view CSR initiatives and to share their experiences. 

Three general trends emerged from the discussions, mainly answering the questions – what motivates CSR projects? What activities constitute best practice? and Are Americans and Europeans moving toward consensus? 

All the speakers lamented how negative public perceptions of big business have become.  In both Europe and North America, consumers are expecting more of companies than ever before, and with high-speed information networks, companies are more highly scrutinized as well.  A representative from an American office at Coca-Cola described it as a “credibility crisis.”  Most agreed that consumers are increasingly less tolerant of “spin.”  Even if a company gets it wrong, consumers are looking for the truth – not verbose speeches that attempt to turn it around. 

In this context, from both sides of the Atlantic, it was agreed that CSR should not be done on the basis of gaining publicity.  One representative from Proctor & Gamble even expressed a strategic tendency to stay out of the limelight for fear of having to weather a bigger media storm when something inevitably goes wrong.  A representative from Daimler with a European background stressed the importance of strategically tying CSR initiatives to business goals.  It was suggested that Europe has a stronger tradition of merging CSR and business practices as mutual goals, whereas the United States has had a more vibrant tradition of philanthropy, which has only more recently broadened. 

An American representative mentioned how many U.S. companies want to know the nuts and bolts of how a project will be carried out, whereas European companies are willing to be more “aspirational.”  This is a point he encouraged both sides to be aware of when cooperating on future projects.

Europe was also described as having had more success integrating environmental issues into their business practices.  There is a trend in European businesses to use the term “sustainability” rather than CSR, which reflects more strongly the environmental component.  European consumers are also more sensitive to organic labeling, a trend in the United States that has been slower to catch on, one European representative mentioned.  This may also reflect the difference in the U.S. tendency to be more concerned with risk mitigation and Europe with overall business strategy.  The U.S. government is also less involved in regulatory activities, which could also have an effect on the types of activities American companies chose versus European companies.

On the whole, leaders on both sides agreed CSR should be grounded in business strategy, but there was more hesitation to admit that the U.S. and Europe are moving toward a universal approach.  Given the regional and sector differences between the two continents, many said it was difficult to imagine a common framework.  The regulatory environments in the U.S. and the UK are different, as well as consumer preferences.  Despite the contrasts, however, there was more enthusiasm for increased transatlantic cooperation.

Posted 4/11/08

Back To Top

* * *

Conscience Drives Steven Spielberg To Quit As Artistic Advisor To The Beijing Olympics

Concerns over Dafur and China's relations with Sudan, plus human rights pressures, lead movie director Steven Spielberg to make the business decision to withdraw as artistic advisor to the Beijing Olympics.

February 13, 2008 statement by Oscar award-winning movie director Steven Spielberg:

"After careful consideration, I have decided to formally announce the end of my involvement as one of the overseas artistic advisors to the opening and closing ceremonies of the Beijing Olympic Games. 

In anticipation that this day might one day come, I left unsigned the Beijing Organizing Committee for the Olympic Games contract presented to me nearly a year ago.  Since that time, I have made repeated efforts to encourage the Chinese government to use its unique influence to bring safety and stability to the Darfur region of Sudan.  Although some progress has been made along the way, most notably, the passage of United Nations Security Council Resolution 1769, the situation in Darfur continues to worsen and the violence continues to accelerate. 

With this in mind, I find that my conscience will not allow me to continue with business as usual.  At this point, my time and energy must be spent not on Olympic ceremonies, but on doing all I can to help bring an end to the unspeakable crimes against humanity that continue to be committed in Darfur.   Sudan’s government bears the bulk of the responsibility for these on-going crimes but the international community, and particularly China, should be doing more to end the continuing human suffering there.  China’s economic, military and diplomatic ties to the government of Sudan continue to provide it with the opportunity and obligation to press for change.  The situation has never been more precarious – and while China’s representatives have conveyed to me that they are working to end the terrible tragedy in Darfur, the grim realities of the suffering continue unabated. 

This has been a very difficult decision for me, as I have cherished the relationships with my Chinese counterparts, in particular, the noted director Zhang Yimou, who is a close personal friend.  I have learned a great deal from working with him and all the other creative artists along the way.  There is little that is more rewarding than to collaborate with those who bring vision and imagination to a challenging artistic task.  And I greatly appreciated the spirit in which we worked together - a spirit that embodied genuine friendship and respect. 

For me, the Olympic Games represent an ideal of brotherhood designed to bridge cultural and political divides.  I am committed to building bridges between peoples and I saw, and continue to see, the Beijing Games as an opportunity to help ease some of the tensions in the world. 

China has much to offer the world and I have no doubt that its international contributions will grow in the years ahead.  With growing influence, however, also comes growing responsibilities.  As China welcomes the world to Beijing for the 2008 Olympic Games, I hope to be among those in attendance; and it is also my great hope that, with renewed and intensified efforts from China, there will be peace and security in Darfur at last."

Back To Top

* * *

Prize Winning Ideas Show Promise for Ethical Innovation in the Finance Industry

Young authors provide recommendations for establishing an ethical culture and how to move SRI into the mainstream

The authors of the following two papers received top honors for their change-making ideas from the creators of the Robin Cosgrove Prize (See EthicsWorld News for NGOs for more details on the prize). 

The competition called for participants to submit papers that propose a plan for specific ethical dilemmas in the finance industry.  Three winners were ultimately chosen, but we include here an overview of the top two winning papers.  The complete papers of the seven short-listed nominees can be found on the Robin Cosgrove Prize website.

Clare Payne, Associate Director at the Integrity Office of Macquarie Bank, Australia

“Ethics or Bust: Beyond Compliance and Good Marketing” (download .pdf to read full paper)

Ms. Payne addresses the numerous ethical challenges the finance industry currently faces.  She asserts there is an inherent difficulty in this complex industry. Finance companies rely on measurable outcomes and therefore have trouble judging their own ethical performance, an area that is simply difficult to quantify.  She believes the finance industry is currently failing to meet society’s expectations, and she proposes several ideas of how the industry may reform itself. 

She begins with the notion that legislation is not enough.  Companies must have a strong ethical foundation as the condition under which the financial system can ultimately exist, she argues.  This will require companies to devise ethical initiatives that start with senior management and the CEO.  Her other recommendations include the creation of an independent “ethics body,” jointly funded by companies within the industry, which would advise board members; adopting an attitude that ethical behavior is just as important as profit generation and business development with financial incentive and disincentives to match; and providing ethical forums within companies where all staff members can engage with upper management about the ethical problems they face.

Jonathan M. Wisebrod, Director for Villari, Singapore

“Social Impact Ratings: How to Make Responsible Investment Appealing” (download .pdf to read full paper)

Mr. Wisebrod believes in the importance of incorporating social impact factors into mainstream investing.  He describes the myriad types of methods different firms use to come up with quantitative ways of measuring the social impact of a company.  The problem he sees is that since methods still widely vary, the use of social impact ratings is less reliable and less effective.  In his paper, Mr. Wisebrod argues for the creation of industry-wide standards, which could be voluntarily adopted by firms that determine social impact ratings.

There are a number of reasons why social impact ratings are useful, he argues, beyond the traditional use of risk and return factors.  Funds that overweight companies with higher ethical impact scores and underweight companies with lower ethical impact scores often perform better.  A portfolio with a higher social impact rating can help single out the best portfolio with relatively equal risk/return characteristics. 

Considering the potential benefit of social impact ratings, Mr. Wisebrod believes a widespread, standardized rating system, using the UNEP Finance Initiative and the UN Global Compact as a starting point, could leverage those benefits.  These agreed-upon rules of determining social impact ratings could become the baseline for compliance, he argues, with other firms developing more nuanced and sophisticated techniques down the line.

Posted 1/22/08

Back To Top

* * *

Oxfam Says Drug Companies Have Made Little Progress Toward Universal Access

Preoccupation with short-term success is inhibiting real innovation, report says

Oxfam has identified two reasons why drug companies have been more reluctant to adopt more robust business models that would make universal access to medicine a core component.  According to the report, companies are pursuing strategies more relevant to boosting their own reputations, which fall short of more sustainable strategies that could have a real impact.  In addition, companies seem to be responding to recent, relatively poor financial performance in the industry.  A reduction in profits has zapped companies’ motivations for adopting systematic tiered-pricing for developing countries.  Another result is staunch inflexibility on intellectual property protection provisions, as outlined in the TRIPS Agreement, which keep drug prices high.

The Oxfam report cites that only 15 percent of the world’s population consumes 90 percent of the world’s pharmaceuticals.  Developing countries rely most heavily on generic competition to bring the price of medicine down.  The current 20-year patent protection provision for new and inventive drugs stymies competition, thereby keeping prices high.  Despite the numerous drug donation initiatives that some companies have implemented and an increase in R&D for key global diseases, there is a real lack of investment in diseases relevant to the developing world, according to the report.  Oxfam believes that governments are primarily responsible for ensuring quality public health and universal access, but pharmaceutical companies can still have a “profound impact” – both positive and negative – in this process.

Companies’ performance is evaluated in the report in three crucial areas – pricing, R&D, and patent protection.

Pricing

No support for a global tiered-pricing system.  Some companies are now offering lower prices on selected drugs, specifically for high-profile diseases, but not one company was willing to support a systematic lowering of prices for developing countries.  Overall, companies lack a clear policy for setting prices.

Overly simplistic market segmentation.  Oxfam initially recommended lowering prices based on different segments of developing country markets, a strategy adopted, although simplistically, by a few companies.  Oxfam cites that Novartis, Elly Lilly and Johnson & Johnson have divided the market into two segments for pricing purposes – the high and middle-income population and the poor population.  Only GlaxoSmithKline is working on a more nuanced approach that would use tier-pricing models within and between countries.

Higher transparency regarding the price of specific drugs.  Companies have made progress in transparent reporting for drug prices, but less in pricing for different sectors.  This secrecy makes it difficult to verify what constitutes a “non-profit” or “at cost” price.

Too much focus on “access programs.”  Many companies are implementing programs to donate drugs, which are often called access programs, according to the report.  However, Oxfam states that donated medicines reach only a small group and have an overall smaller impact.  It cites the use of these initiatives as evidence that companies are really concerned with their reputations rather than more sustainable business strategies. 

Research and Development (R&D)

More companies involved in R&D.  All companies are now reporting their total expenditure on R&D as a percentage of sales in their annual reports.  Companies are increasingly involved in R&D through global public private initiatives, which has also fuelled a debate about whether or not products developed from these partnerships should be patented.  According to the report, companies still do not break down the costs that go into R&D, and they do not publish the targeted expenditure for R&D for diseases relevant to developing countries.

Increased R&D portfolios on infectious diseases.  There is certainly progress in this area, but Oxfam believes more diseases relevant to developing countries should be added to have a major impact.

Patents

Unwavering attitude toward patent protection.  Oxfam found that many companies still believe that stricter levels of intellectual property protection are necessary for innovation.  However, Oxfam cites that the World Health Organization finds no evidence to support this argument.

Abuse of patenting. Some companies are applying “frivolous” patents to extend the patent terms beyond 20 years, according to the report. 

Statements do not match actions. Most companies that Oxfam interviews verbally supported a flexible stance toward the TRIPS Agreement, which outlines provisions for patent protection, but Oxfam found companies’ actions clearly do not match this attitude.  It states that Merck, Johnson & Johnson, and Pfizer are all lobbying for stricter, more explicit patent provisions, which Oxfam calls “TRIPS-plus.”

Oxfam argues that in order to stay competitive in the pharmaceutical industry, companies must adopt a new business model to address these lingering shortcomings.  Satisfying the populations in the developing world will require strong leadership and a long-term perspective, Oxfam states.  There is increasing pressure from society and investors to do so.  If companies continue the status quo, Oxfam warns, they will risk missing out on “new, innovative business models that meet their needs for boosting profitability.”

Posted 1/2/08

Back To Top

* * *

CSR Implementation Strategy in China’s ICT Industry

This report, compiled by Foreign Investment Advisory Service (FIAS), part of The World Bank Group, and Business for Social Responsibility, contains recommendations and a description of a pilot project that will be implemented and tested in Shenzen, where many information and communication technology (ICT) exporters are located.

Many news stories recently coming out of China are littered with evidence that the Chinese are both tightening controls on media and realizing the crisis taking place in sub-standard safety control mechanisms (See EthicsWorld News for headlines). This kind of news makes foreign companies less likely to hire Chinese contractors or import Chinese products. The same attitude applies to the ICT sector, of which China is the largest exporter in the world. FIAS has taken the initiative to cultivate corporate social responsibility standards in the Chinese province Shenzen, which is already taking steps toward improvement in this area, in hopes that the project will expand to other regions.

More and more companies are demanding that their Chinese suppliers improve their social and environmental standards, and the need to do so is becoming more important in Shenzen. There is a heightened awareness of the benefits of CSR, but problems exist. The main issues are excessive overtime for workers and lack of management to oversee health, safety and ethics standards. FIAS has designed a pilot program to be implemented in Shenzen which will foster greater collaboration between the public and private sectors to improve long-term sustainability in the ICT sector.

The project will test strategies in both the management systems and in worker engagement. Implementation will be based on the following recommendations:

Suppliers – they are often not convinced of the business case for CSR or do not understand the concept enough to be interested.

• Conduct proper cost-benefit analyses
• Implement management and performance measurement systems
• Improve worker-management communication
• Take ownership of improvements and implement CSR with own suppliers.
  
  

Customers – they should focus on creating standard industry codes that apply to their own activities as well as suppliers, which focus on improvement, not just compliance.

• Provide clear incentives to suppliers
• Align internal procurement practices with CSR expectations
• Adapt a monitoring model that focuses on improvement, not just compliance.
  
  

Government – it should create an enabling environment in which it could take on a number of roles.

• Mandate improvements primarily for migrant workers
• Facilitate CSR engagement
• Partner with the private sector, ILO and IFC
• Endorse company best practice
  
  

Local NGOs – they should collaborate more with the private sector acting as both a watchdog and an educator. The local Shenzen Electronic Industries Association could also play a stronger role educating their members on CSR issues.

To view the report in full, click here to see .pdf version.

Posted 8/17/07

Back To Top

* * *

Indian Court Rejects Novartis Patent Law Claims – Decision Highlights
Key Ethical Conundrum

Pharmaceutical companies, such as Novartis of Switzerland, claim that vast expenses involved in research and development need to be reclaimed when it comes to determining the selling prices for new drugs. But, advocates of the poor, especially in poor countries, assert that the result is that the drugs are too expensive and that locally made cheap generics are the way to go. The Novartis case in India highlights the issue.

Drugs group Novartis lost a legal case in India on August 7, 2007, which challenged the country's patent law. The Guardian reported that the high court in Chennai rejected Novartis's challenge to Indian law that denies patents for minor improvements to established drugs. Other treatments will not get a patent and will therefore be open to cheaper generic competition.

Glivec, Novartis's treatment for chronic myeloid leukemia, was launched globally in 2001 but was not given a patent in India. The Guardian noted that campaigners say the treatment is a new form of an old drug that was invented in 1993, but Novartis maintains the drug is the only Glivec that exists. The Swiss pharmaceuticals company challenged the Indian law, saying it did not comply with World Trade Organisation rules. The high court dismissed Novartis's challenge and deferred to the WTO to resolve the issue of whether it complies with its rules. Novartis has stated that, “Through the Glivec International Patient Assistance Program (GIPAP), Novartis provides Glivec free of charge to 99% of patients in India and prescribed the medicine for as long as they need it.”

The NGO View

“The landmark decision by the High Court in Chennai to uphold India's Patents Act, in the face of the challenge by Swiss pharmaceutical company Novartis, is a major victory for patients' access to affordable medicines in developing countries,” according to a statement on August 6, 2007 by the international medical humanitarian organization Doctors Without Borders/Médecins Sans Frontières (MSF).

"This is a huge relief for millions of patients and doctors in developing countries who depend on affordable medicines from India," said Dr. Tido von Schoen-Angerer, Director of the MSF Campaign for Access to Essential Medicines. "The Court's decision now makes Indian patents on the medicines that we desperately need less likely. We call upon multinational drug companies and wealthy countries to leave the Indian Patents Act alone and stop pushing for ever stricter patent regimes in developing countries."

MSF said that India only began giving patents on medicines to comply with WTO rules, but it designed its law with safeguards so that patents can only be granted for real innovations. This means that companies seeking a patent for modifications to a molecule already invented, in order to extend ever further their monopolies on existing drugs, would be unsuccessful in India. It is this aspect of the law that Novartis was seeking to have removed. A ruling in favor of the company would have drastically restricted the production of affordable medicines in India that are crucial for the treatment of diseases throughout the developing world.

MSF noted that developing country governments and international agencies like UNICEF and the Clinton Foundation rely heavily on importing affordable drugs from India, and 84% of the antiretrovirals that MSF prescribes to its patients worldwide come from Indian generic companies. India must be allowed to remain the 'pharmacy of the developing world.’

According to MSF, nearly half a million people worldwide voiced their concern about the impact Novartis's case could have on access to medicines in the developing world. Among them were the Indian Health Minister Anbumani Ramadoss, Archbishop Desmond Tutu, Global Fund Director Michel Kazatchkine, members from the European Parliament and the US Congress, former Swiss President Ruth Dreifuss, former UN Special Envoy for AIDS in Africa Stephen Lewis, German Development Minister Heidemarie Wieczorek-Zeul, Norwegian Development Minister Erik Solheim, as well as authors John Le Carré and Naomi Klein. An MSF petition urging Novartis to drop the case gathered over 420,000 signatures.

The Corporate Perspective

Novartis said the Indian court’s decision “will have long-term negative consequences for research and development into better medicines for patients in India and abroad.”

"We disagree with this ruling, however we likely will not appeal to the Supreme Court. We await the full decision to better understand the Court's position," said Ranjit Shahani, Vice-Chairman and Managing Director, Novartis India Limited. "Our actions advanced this essential debate in India; now local and international leaders in both industry and academia recognize the inadequacies of Section 3(d) and are raising serious concerns about the deficiencies of the Indian patent system."

Novartis brought this case forward because it firmly believes this was the right thing to do for patients. Effective patent systems ensure incentives are in place that stimulate long-term research and development efforts critical for medical progress.

"It is clear there are inadequacies in Indian patent law that will have negative consequences for patients and public health in India," said Paul Herrling, Ph.D., Head of Corporate Research at Novartis. "Medical progress occurs through incremental innovation. If Indian patent law does not recognize these important advances, patients will be denied new and better medicines."

Unlike other WTO member countries, India has a unique provision in its patent law, Section 3(d). This provision excludes important developments in the form of incremental innovation, and ignores the importance of side effects, ultimately denying patients in India new and better medicines. During the India Trade Policy Review in late May 2007, the WTO urged India to strengthen its intellectual property rights system. It commended India for taking steps to align its national standards with international requirements but added that "effective implementation of IPR-related legislation would be in the interest of India itself."

Novartis originally filed the appeal in India because the Indian patent office rejected the Glivec patent application. "Because the patent rejection was based on Section 3(d), we challenged this specific provision in India," said Shahani. "We had hoped to resolve this question on Section 3(d) locally in order to receive a patent for Glivec."

Still at issue is why a patent for Glivec - granted in nearly 40 countries, including Russia, Taiwan and China - was denied in India in 2006. The Glivec patent appeal will be decided separately by the newly-operational Intellectual Property Appellate Board (IPAB). At present, Novartis is petitioning the High Court for a new technical member because the current technical member is the former Controller General of the Indian Patent Office, responsible for the original rejection of the Glivec patent.

"We expect the appellate board to conduct an independent and impartial review of our appeal and ensure transparency of the decision-making process," said Shahani.

The company underscored that, “Improving access to medicine is an integral component of the Novartis business strategy and global social responsibility commitment. The Group's access-to-medicine projects reached over 33 million patients worldwide in 2006, with contributions totaling USD 755 million.”

Novartis Media Relations

E-mail: media.relations@novartis.com

Posted 8/7/07

Back To Top

* * *

Challenges of CSR in Kenya and Zambia: Ways to Move Forward

Zambia and Kenya are two countries with significant development challenges and would very likely benefit from stronger Corporate Social Responsibility (CSR) initiatives. This study, released by the International Institute for Environment and Development, examines the current CSR challenges in Zambia and Kenya and discusses new strategies to further encourage private sector contributions to local communities.

In a comparative context, the concept of CSR is a fairly recent revelation in Zambia and Kenya. There does exist a strong commitment on the part of businesses to give back to the community; however, more substantial activities such as ensuring safe labor environments, producing products responsibly, and other safety standards are not well developed.

Companies in both countries are involved in activities they may call CSR but in reality, are more philanthropic in nature. Companies in Kenya donate heavily to organizations that foster better health care, education, and food security. Zambian companies also tend to donate to health and education, and orphanages are the primary recipients of aid. This philanthropic attitude is illustrated in one Zambian company’s mission statement, which reads in part “to recognise that we owe our success to the people of Zambia and that it is our responsibility to give back to the community in appreciation of their continued support.”

The HIV/AIDS crisis in both countries has been recognized by businesses as a major area where CSR activities can thrive. With organizations such as the Zambia Business Coalition of HIV/AIDS, businesses are recognizing how they can use their roles to further connect with society.

Joblessness is also a major problem in both countries. Therefore, a tradeoff has emerged between efficient job creation and quality job creation. Most jobs connected to international labor markets have external regulations to which they must comply, but producers who sell to the domestic market are less likely to enforce labor and environmental standards. In general, these companies are less likely to adopt business standards unless they see a clear business case that supports it. Workplace ethics still leaves much room for improvement and where CSR activities could really thrive.

In order for CSR to really deliver in these two countries, and Africa as a whole, the authors of the study propose several strategies:

Tackling capacity constraints. Currently, there is a general lack of capacity among the public sector to pressure companies to adopt labor and environmental reform measures. Civil society organizations exist but must become much stronger in order to make progress on the issue. Investing in these organizations would go a long way in encouraging responsible business activities.

Strengthening the business case. Many companies have few incentives to adopt labor and environmental standards. Compounding the issue, many consumers cannot pay a premium price for responsibly produced goods. Therefore, it is important to nurture existing socially-oriented companies by providing monetary incentives, such as allowing preferential access to capital. In addition, helping these companies grow would provide a role model for other businesses.

Localising the CSR agenda. In the past, the CSR agenda has been criticized for being insensitive towards local business priorities. This is precisely why it is important to adapt CSR to local needs. It is necessary to find the appropriate language for discussing CSR activities and to support dialogue between different actors within the private sector as a way of building trust and mutual understanding. The East African Business Summit hold annual meetings that adopts resolutions on CSR topics. This is an example of how businesses can engage with local civil society entities. However, the authors were careful to warn that when designing strategies for promoting CSR, one cannot fall into the trap of relying on a “one size fits all” attitude.

Together actions in these three areas – to tackle capacity constraints, to strengthen the case for responsible business practices in Zambia and Kenya, and to foster ‘localised’ CSR agendas – offer considerable potential to enhance the contribution of business to sustainable development in Zambia and Kenya.

To view the study in full, click here for the .pdf version.

The International Institute of Environment and Development is a London based international policy research institute that provides expertise in achieving sustainable development at local, national, and global levels. To learn more, visit the IIED website.

Posted 7/24/07

Back To Top