Sustainablog

This blog will cover some news items related to Sustainability: Corporate Social Responsibility, Stewardship, Environmental management, etc.

18.8.04

European News: German government threatens new laws on corporate governance

European News: German government threatens new laws on corporate
governance
9 August 2004
EC Newsdesk

The German government has threatened new laws on corporate governance in
response to a slow voluntary take up of a new code by the largest
companies.
Horst Köhler, the German federal president, said at the weekend that
executives of large listed companies should publish their individual pay.

He was also clear about his views on overly high rates of pay for German
executives. Köhler told the Bild Sonntag weekly: “Executive directors of
all exchange-listed companies should be open. One could start with the Dax
companies.”

He said: “Of course, income inequality is here to stay. But I expect role
models to behave responsibly.”

According to reports, only nine of the 30 companies in the Dax 30 index -
Germany's biggest companies by market capitalization - comply fully with
the code's provisions on executive pay.

The German justice minister, Brigitte Zypries, has set a deadline of
mid-2005 for voluntary acceptance of the code. Indications are that if
companies do not increase their disclosures dramatically, legislation may
well be put into place to force them to do so.

German companies are proving resistant to the new recommendations.
Nikolous von Bomhard, Munich Re CEO, told the Financial Times: “The whole
idea is constitutionally dubious. We're not changing anything. In some
countries, people have their salary tattooed on their foreheads. Germany
is not one of those countries.”

The European Commission seems to agree with the German government on the
issue of executive pay.

Indications are that it wants to encourage salary transparency across the
region via voluntary - or regulatory - initiatives.

The political act of shopping: Ethical shopping has been slow to take off in New Zealand, where price takes precedence over issues of conscience.

The political act of shopping
The Dominion Post, 10 August 2004 - Ethical shopping has been slow to take
off in New Zealand, where price takes precedence over issues of
conscience.
The consumer is king. He is free to choose between a 250-gram bar of
branded chocolate at $ 1.95 and a 200g organically grown Fair Trade treat
at $ 5.80.
The first choice spares his wallet or will buy him three times the amount.
The other promotes environmental good practice, improves the livelihood
and wellbeing of producers and fosters development opportunities.
Yet when faced with the choice, there isn't much question which shelf he
will reach for.
In sharp contrast to shoppers in Europe and the United States, Kiwis still
mainly prefer brands to ethically manufactured and traded products.
While they are among the world's most alert about the uncertainties of
genetically engineered foods and nuclear issues, New Zealanders' awareness
of ethical shopping alternatives is clearly behind other developed
countries, Greens co-leader Rod Donald says.
"Shopping is a political act. Consumers have a lot of power, which they
can choose to exercise or ignore."
In Britain, ethical shopping is worth hundreds of millions of dollars
annually. Fair Trade-certified products accounted for more than $ 291
million in sales last year, or nearly $ 5 a head.
Adding up all ethical consumer practices, from using public transport to
buying second-hand goods and free-range eggs, one study estimates the
value of the market at $ 58 billion.
In New Zealand, the certified Fair Trade market is worth about $ 2.2
million, or 55 cents a head. Socially responsible investment practices lag
far behind Europe and the US, where more than 11 per cent of all
investment funds apply some form of sustainable investment principles.
"The market has a huge potential. Consumers haven't yet realised that they
can make an enormous difference," Mr Donald says. Shoppers and investors
can exert heavy pressure on companies with unethical trading practices and
support Fair Trade suppliers as well.
Nicola Bota, 36, of Ashburton, is an eager supporter of fair trade issues.
She works with non-government organisations promoting trade education and
self-help in Third World countries, and and spends between $ 200 and $ 300
a year on products that are produced, traded and sold according to
environmental and social standards.
"I have this thing about helping. And I know what I spend in a Fair Trade
shop has an impact on the right people," she says.
Just back from India, where she spent a month teaching a group of 20 Tamil
women to spin and weave, she will return next summer to help her students
achieve export-quality products.
She hopes that within five years they will be selling to New Zealand,
making a profit that will carry them from self-help to self-sufficiency.
Consumer support can make a significant difference to Third World
countries in sectors as diverse as the sugar, coffee, cocoa, nuts,
cereals, textiles and carpet weaving trades.
For example, coffee prices, which rest at a 30-year low on international
markets, are keeping small producers deadlocked in poverty.
Geoff White, chief executive of Trade Aid, an organisation that aims at
sustainable development for disadvantaged producers, says consumers can
make an essential difference.
Small Latin American farmers selling to Fair Trade organisations reap an
annual income of about $ 2000, compared with $ 500 made by farmers dealing
with conventional importers. This can make the difference between having
to carry coffee bags on their backs or being able to afford a mule, Mr
White says.
"By understanding the effect of their purchases and what they should avoid
buying, [consumers] can make a huge difference in the world."
Conversely, examples of how consumer pressure can affect multinationals'
trade practices abound.
The much-decried banana industry has undergone heavy transformation in
recent years.
In 2001, US fresh fruit company Chiquita, worth $ 4.6 billion, agreed to
meet International Labour Organisation standards on freedom of association
and minimum labour standards in Latin America and became a member of the
British-based Ethical Trading Initiative.
On its website, the company affirms its adherence to "behaviour that is
ethical, legal, socially responsible" and its commitment to rainforest
protection.
Another example is coffee shop chain Starbucks.
Bowing to ethical caffeine lovers' preferences, the US multinational in
New Zealand and Australia buys about 5 per cent of its coffee through the
Fair Trade programme and heavily advertises doing so, even though the
system does not guarantee that the higher prices Starbucks pays make it
back to the farmer.
Not to be left out of the ethics trend, New Zealand's Parliament now
offers organically grown coffee. Supermarket chains throughout the country
are reacting to consumer concern by stocking up on Fair Trade-certified
coffee, Trade Aid's Mr White says.
Though consumer awareness is still low compared with Britain, the trend is
gathering pace, with Fair Trade products boasting a 15 per cent sales
increase during the past two years, he says.
"From $ 4.6 million at present, we are aiming to increase our sales to $
10 million in five years."
So are consumers slowly mending their ways? Mrs Bota likes to think so.
She has seen an increasing number of ethical shopping opportunities and
says the shops are becoming classier and more attractive to new categories
of clients. As consumer interest for Third World products widens,
conventional department stores such as Ballantyne's are expanding their
product range.
"The regular stores offer very similar products at higher prices. But then
again, paying more for some products in Fair Trade shops is not an issue.
The items are unique. And I know that the margins are improving people's
lives," she says.
Copyright 2004 Wellington Newspapers Limited


Climate Change: Industry Analysts Call Business 'Far Ahead' Of Bush Administration

Climate Change: Industry Analysts Call Business 'Far Ahead' Of Bush
Administration
Greenwire, 12 August 2004 - Many businesses are going beyond federal
regulations and recommended voluntary measures to prepare for climate
change and a "carbon-constrained world," Business Week reports.
While the Bush administration has rejected the Kyoto Protocol and
mandatory limits on carbon dioxide emissions, an increasing number of
companies have adopted their own policies for CO2 reductions. In fact,
many businesses are "far ahead of Congress and the White House." And in
many cases, the voluntary measures help reap economic rewards, industry
officials said.
In the late 1990s, American Electric Power Co. proposed limiting CO2
emissions at its coal-fired plants. "We felt it was inevitable that we
were going to live in a carbon-constrained world," said Dale Heydlauff,
senior vice president of environmental affairs at AEP. AEP has
experimented with a test CO2 storage well in West Virginia. "The science
debate goes on," said AEP Chief Executive Officer Michael Morris. "But we
know enough to move now."
Environmentalists have praised Morris for talking about the issue, but
they point out that AEP is fighting a federal lawsuit alleging the company
did not install proper pollution controls at 11 of its plants in Indiana,
Ohio, West Virginia and Virginia. The New Source Review trial, in the U.S.
District Court for the Southern District of Ohio, is set for January 2005
(Greenwire, June 23).
DuPont, which has cut greenhouse gas emissions by 65 percent since 1990,
said it has saved millions of dollars as a result. And BP officials say
the company's carbon trading scheme has caused the company to closely
inventory its emissions and reduce CO2 by 10 percent, resulting in savings
of $650 million over three years.
"It's impossible to find a company that has acted and has not found
benefits," said Michael Northrop, co-creator of industry and government
coalition group Climate Group. "The ones who have been at it for a while
are finding they can do more than is asked for in Kyoto, and are achieving
all kinds of benefits."
Domestic companies not participating in voluntary GHG reduction measures
have said they would take action if there were a stable government policy
in place, such as the one the United Kingdom recently adopted that calls
for a 60 percent CO2 emissions reduction by 2050. "Give us a date, tell
use how much we need to cut, give us the flexibility to meet the goals,
and we'll get it done," said Wayne Burnetti, CEO of Xcel Energy Inc.
Still, the Bush administration has said new anti-pollution technologies
are too expensive. "No nation will mortgage its growth and prosperity to
cut greenhouse gas emissions," said Energy Secretary Spencer Abraham.
Instead of mandating cuts, the administration has promoted voluntary
measures and has allocated funding for new technologies research. "If we
are successful in developing carbon sequestration and cars that run on
hydrogen fuel cells, that solves most of the problem with global warming,"
Abraham said. "We may disagree on targets, but no one is going to reach
any targets if we don't make these investments"
Copyright 2004 Environment and Energy Publishing, LLC
Greenwire


Health and safety: lessons from Dow, Dole and Dupont

Health and safety: lessons from Dow, Dole and Dupont
Ethical Corporation, 9 August 2004 - David Liss looks at how 3 companies
have worked on their health and safety performance to increase standards.

“The price of greatness is responsibility.” Many of the world’s most
successful companies agree with Winston Churchill. They are assuming
greater degrees of responsibility as they incorporate health and safety
standards into their business models.
In the best companies values associated with health and safety are
integrated as a bottom line consideration and are used to measure the
overall success of the company.
For many companies, health and safety practices are defined largely in the
absence of effective enforcement or policing mechanisms by government
regulatory agencies.
In the US and elsewhere government enforcement agencies are becoming
ineffective.
The Occupational Safety and Health Administration is the primary
enforcement agency for health and safety standards in the US.
When Ronald Reagan was elected US president in 1980, OSHA staff and
resources were already stretched. Its 1,300 inspectors were responsible
for the safety of five million workplaces across the country.
At that time a typical workplace could expect an OSHA inspection once
every eight years. During the course of the Reagan administration OSHA
funding was cut by 20%.
Today US employment stands at 111 million workers in more than seven
million work sites. Currently there are 1,123 inspectors responsible for
enforcing health and safety standards across the nation. During the fiscal
year 2002 there were 37,493 inspections. By default, compliance is carried
out more and more on trust and in conjunction with state health and safety
organisations.
Some businesses have learned from the mistakes of their past; others have
reacted to the disasters of competitors or business peers, with or without
the scrutiny or enforcement activities of government. An increase of focus
by the investment community, greater scrutiny by the media and more
stringent international legal standards are collectively having an impact
on corporate practices.
Companies across the globe are becoming aware that they must walk the talk
on providing effective, actionable and measurable health and safety
standards. There are consequences for not providing adequate safeguards to
protect the environment and to protect your workers and there are
consequences for actions that are inconsistent with stated policies.
International standards
Increasingly, companies are joining international standards organisations
to receive certification and third-party evaluation of their adherence to
improving health and safety standards. The public must decide whether to
believe that these organisations are guarantors of improved standards and
practices to compliment government efforts or just another way for
companies feebly to demonstrate that they are walking the talk.
The three largest international standards organisations are ISO, the
American Chemistry Council’s Responsible Care programme and SA 8000,
social accountability standards from the non-governmental organisation
Social Accountability International.
Participating companies may use both internal and external auditors to
track performance and adherence to their respective standards. There are
also organisations such as SGS, an auditing company accredited by ISO and
SA8000, to carry out audits to certify their respective standards.
Much like a parent’s raising a potentially unruly child, these membership
organisations largely use a positive reinforcement approach to coax
companies into implementing steadily improving global standards. All
parties stress that the required third-party audits demand continuous
performance improvements in order for corporations to maintain their
certification.
The punishments for non-compliance are oriented more towards not awarding
certification than levying fines or revoking a company’s membership. At
the same time the embarrassment factor and negative publicity associated
with a non-renewal of certification must be considered.
Arguably any member company wants to establish and maintain their
certification; otherwise they would not have joined these certifying
bodies. Developing and implementing global management systems requires
significant resources of staff, technology and time for any company.
What the best companies do
Dow Chemical, Dole Food Company and Dupont Chemical understand that there
is a legacy of ill will from their past behaviour and want to separate
their past performance from current activity and future efforts. These
companies are not perfect, but there is a lot to learn from their actions.
Terminology related to workplace health and safety practices varies in
different organisations but the objective is the same: to develop and
implement a management structure with incentives, influence, verifiable
metrics and an independent audit structure to improve worker safety and to
reduce workplace related injury, illness and death.
The most effective programmes start with a desire to improve on a
company’s past record, and have a business vision for the future, specific
goals, and a mission embraced by a corporation’s leaders on what it means
to be successful and how all employees should behave.
The most effective programmes strive to remove fear as an enforcement tool
in the workplace.
Dow Chemical has learned from the legacy of the chemical industry where
property, people and environments have been contaminated by poor health
and safety standards. According to Samuel L. Smolik, vice-president for
environment, health and safety, “Dow has taken the position that to be
successful in the long term the company must be the premier company in
terms of its concerns for sustaining the health of its people, the safety
of its products and the health of the environment.”
Smolik says: “At Dow everything starts at the top with the commitment of
leadership for corporate values articulated with a strong sense of
integrity. Once leadership sets the expectation that they mean business,
people will respond.”
“Regardless of the process and structure used by a company, businesses
must start with a corporate policy for all their operations throughout the
world with effective standards that force accountability. They don’t have
to be complex. They must be strong enough to make the corporation walk the
talk, demonstrate to employees and the public that you are serious, that
you have clear expectations for continuous improvement and that you ensure
enforcement in an environment without fear.”
Dupont Chemical has established a goal of zero injuries, illnesses and
incidents for all its 79,000 employees and contractors in 140 facilities
in 70 countries. “Two hundred years ago our founder said that all injuries
are preventable,” says Karen Rittenhouse, director of sustainable
development for Dupont.
“This is not a policy on a piece of paper but it is a constantly growing
perception that leadership consistently acts to demonstrate a commitment
by the leaders of the company to enforce and act on policy.”
At Dupont all cases where injuries result in lost work time must be
reported to the chief executive within 24 hours.
Building a global infrastructure for safety – setting a global standard
Effective organisations build a global infrastructure of policies, people
and technology to ensure that their staff comply with global standards and
practices. They know how to define what success is and what failure means.

Dow Chemical organises environment health and safety standards globally,
with global functions, policies and practices. There is an area leader and
a “responsible care leader” in every company facility. This person
determines how to implement global standards on a local basis. There is an
environmental health and safety leader in each region and an environmental
health and safety director in each of the eight Dow global business units.
Safety is a condition of employment at Dupont. All employees must accept
and apply all safety standards to maintain their employment. All employees
know that that the goal for accident rates is zero. Managers get paid
based on their performance against this objective. People understand that
they can get sacked for willingly violating safety standards.
“These standards are very well communicated. When any senior memo is sent
out, it starts with a safety message. This is very important. It helps to
build the experience of felt leadership,” says Rittenhouse. The company
investigates and communicates all incidents to understand why they
happened and to communicate globally the incident and ways to prevent
similar ones from happening throughout the company. At the front gate of
every site is the number of days that site has been without injuries.
As an ISO and SA certified corporation, Dole Food has to keep full
documentation and records on all incidents. A cause must be determined for
each accident. The report also must detail what corrective actions will be
taken to avoid such incidents in the future. In most divisions the company
keeps statistics on health and safety incidents to see whether there has
been an improvement.
Metrics – the measure of success
“Metrics must be set in place. If you don’t measure performance you can’t
improve,” says Smolik. The injury and illness rate for employees and
contractors at Dow is now a quarter of what it was during 1994, the base
year for measurement of health and safety standards for the company.
Smolik emphasises the bigger picture, in that companies must also consider
the employees that haven’t been hurt. He says: “Employee health and
wellness with the goal of an injury-free workplace are the best
illustrations of a company’s values.”
Metrics tools - management systems
Dow has developed and implemented a global computerised management
operating system (known as ODMS) that on the company’s intranet. The
system incorporates certain but not all ISO requirements into a management
structure with continuously scheduled checks, balances and audits to
develop expectations for continuous improvements in performance and to
ensure compliance with corporate standards and designated third-party
standards. Included in the system structure are online “compliance task
tracking tools”, where staff can enter information on compliance with Dow
standards and measure performance.
“This system is where we store requirements and expectations, and where we
set new expectations for corporate performance. This system tells us where
our shortcomings are in order to focus training. We use a ‘plan, do, and
act’ cycle. This system helps us to determine and roll out training
education, self-assessments and performance audits to make sure Dow
facilities are in compliance,” says Smolik.
Eliminate fear from the workplace
Where problems occur, a root cause analysis is conducted to determine what
caused the problem and to determine the necessary corrective action. These
steps are taken in conjunction with the onsite supervisor or the
“responsible care leader” at each facility; they are the responsible
party. Metrics on performance and independent auditing are kept and
reported in ODMS.
“At the point of data analysis, the behaviour of management is critical.
How leaders respond to data sets the tone of organisation. If the tone of
their reaction is to punish and not to understand, this creates a culture
where people hide things,” says Smolik.
“What companies need to do is to create an environment that leverages
learning to correct problems for the future and to increase expectations
for future performance. Things happen. It is every person’s responsibility
to make sure that the company is in compliance with standards. Everyone
wants to be safe, healthy, and work for a company that does the right
thing.”
Extending standards and education to third parties and independent
contractors
Dole Food Company is the world’s largest producer and marketer of fresh
fruit, fresh vegetables and fresh-cut flowers. The company does business
in more than 90 countries and employs about 33,000 full-time permanent
employees and 24,000 full-time seasonal or temporary employees, worldwide.
For Dole, health and safety concerns are related mainly to pesticides.
Most health and safety problems come from improper use of pesticides and
improper training and use of protective wear. Dole has adopted the ISO
14001 environmental standards certification.
Much effort goes into ensuring the ISO 14001 certification for banana and
pineapple operations, which include both Dole-owned facilities and
independent growers and contractors. The approach is to bring independent
growers to the same performance level as company farms.
If Dole management detects a problem with a contractor, its first
responsibility is to help bring the contractor into compliance. If there
is no commitment to take corrective action by the independent grower, Dole
can break the agreement with that grower. Allowing a single partner to
fail in compliance with an international standard adhered to by the
company puts Dole at risk of losing its global certification.
Some tasks present greater difficulties than others. Aerial spraying, for
example, could be a burdensome proposition for a family grower in Ecuador.
Dole would in many instances contract with an external and specialised
company to apply the pesticide products, sharing the cost with the
independent grower.
Communication through training
“The key issue is to communicate through training,” says Sylvain
Cuperlier, manager of the markets strategy and communication department
for Dole Europe. Last year Dole trained more than 50,000 people worldwide
out of 57,000 total employees. The numbers included Dole employees,
independent growers and the people who work for them.
“Sometimes language is a problem, or people can’t read. Some people don’t
want to wear gloves. We have to make them aware of the risks and danger of
not using protective equipment and explain why they need to wear
protective equipment.”
Dole considers it its responsibility to fix problems; the company will
only sanction a grower if they don’t want to implement or comply with
health and safety measures. Part of the training for staff includes the
responsibility to note problems and work with the onsite health and safety
coordinator. Workers know that they must inform auditors when they
identify problems.
At Dupont all practices must be communicated in the local language in ways
that local people will understand. Rittenhouse relates the story of one
manufacturing facility in a remote area of the world, where people came to
work barefoot. The company gave the workers safety shoes to wear to work.
All the workers then sold the shoes. Dupont staff gave the workers another
pair and said if they sold the shoes they would be fired. All employees
kept and wore their shoes.
Are you walking the talk?
It all comes down to determining an enforceable standard and communicating
consistently across a company. Clearly understandable metrics must be
developed and enforced across the entirety of a business wherever it
operates in the world. There will always be mistakes; there will always be
failures; there will always be accidents and injury to people and to the
environment. Unfortunately there will always be fallible human beings
running companies.
But effective infrastructures for health and safety standards can be built
and continually improved with or without the threat of government
enforcement. If the price of greatness is responsibility then every
company, and every employee, must help pay this price.