Sustainablog

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

2.9.04

Sydney Morning Herald: Special Supplement on CSR

Looking after the small end of town
Duncan Hughes.
443 words
28 August 2004
The Sydney Morning Herald
First
4
English
© 2004 Copyright John Fairfax Holdings Limited. www.smh.com.au Not
available for re-distribution.
SPECIAL REPORT CORPORATE RESPONSIBILITY INDEX
A big bank is helping families save for the future, writes Duncan Hughes.
Learning the ABC of saving could help 12-year-old Mitchell Walmsley
achieve his dream of going to a school where he can be with his friends
and study computers and software, his key to a brighter future.
His mum, Lauren, of Seaford, Victoria, has taken advantage of a matched
savings program offered by Australia and New Zealand Banking Group to
build the cash pile needed to get Mitchell into the right school and
course - and keep him there.
But to get the money, she has to undergo some courses herself on personal
finance and saving being run by the bank in conjunction with the
Brotherhood of St Laurence, a joint project aimed at helping people on low
incomes.
ANZ's Community Partnership Accounts Program helps families build savings
for educational purposes through a savings scheme in which ANZ will match
every dollar saved by individuals or families with two additional dollars.
Savings account holders must agree to the education program and have a
guardian angel who can offer them guidance and support if the stress of
saving - or temptation to spend the nest egg - becomes too much.
"It has been great. I've learned the difference between needs and wants
and how to prioritise," says Lauren, a single mother on welfare who has
another son, Jarrad, aged 2 1/2. She has taken on part-time work,
delivering catalogues and assembling nuts and bolts in her home, to earn
an additional $50 a fortnight, of which $20 goes into the account that she
hopes will eventually build
to $1500.
The money is to be spent on the expenses Mitchell will face next year when
he starts secondary school, such as books, special course fees, sporting
equipment and camps.
Lauren says the budget is vital to ensure he gets into the right course
and has an opportunity to make friends.
Patricia Toohey, head of group community relations for ANZ, says the
project has drawn on a range of staff skills and helped the bank's
understanding of financial literacy.
Participants are learning a savings habit and showing how change can
happen through a family, Ms Toohey said.
Cath Scarth, general manager, community services division for the
Brotherhood of St Laurence, says more than 95 per cent have successfully
completed the project.
"The main aim is to develop a savings habit," Scarth says.
The pilot program has been run in two Victorian cities and one in NSW.

WHEEL OF FORTUNE
Stephen Bartholomeusz.
868 words
28 August 2004
The Sydney Morning Herald
First
3
English
© 2004 Copyright John Fairfax Holdings Limited. www.smh.com.au Not
available for re-distribution.
SPECIAL REPORT CORPORATE RESPONSIBILITY INDEX
Ethical investment offers a bewildering array of choices - and a
significant level of risk - for conscientious investors, writes Stephen
Bartholomeusz.
The notion of ethical or socially responsible investing no doubt makes
some investors feel good.
While it might be good for the conscience, it is unlikely that it will
make them any richer than they might otherwise have been. Indeed, it is
likely that it won't.
Attempts to assess the relative performance of ethical investment funds
are frustrated by both their relatively short history and the reality that
there is no single model for funds that claim to be ethical.
Each fund uses a different screen - whether it be negative or positive -
to weed out companies considered to be involved in harmful and unethical
activities.
Some will invest in best practice companies in sectors considered harmful,
say, to the environment. Others avoid the sector entirely. Some will
invest in a Coles Myer; others will steer clear because it sells liquor.
Overseas, some funds will invest in companies whose ethics they are
uncomfortable with but whose practices they wish to change.
Despite the absence of a standard gauge for ethical investments, the
proliferation of these funds and a mushrooming industry to analyse and
advise on them suggests there is growing demand from investors who want to
salve their conscience while still making money.
While there is a paucity of academic literature and analysis by the
investment consulting houses of the investment characteristics of the
funds, what data there is suggests that the ethical investment funds are
different and perform differently to conventional funds.
That is logical. If certain companies and sectors are excluded, the
managers will have a narrower choice of investments.
In particular, exclusion of the "sin" industries such as alcohol, tobacco
and gambling, and environmentally sensitive cyclical industries such as
resources, chemicals and building materials, create a smaller universe of
available stocks with quite a different profile to the overall market.
That is especially the case in a small market dominated by large stocks -
the banks, Telstra and News Corp in particular - as Australia's is.
The experience overseas and here suggests that the performance of ethical
or socially responsible funds has a high correlation with small companies
funds.
That would tend to give them higher tracking errors - a greater likelihood
of either outperforming or underperforming the broader market - and
therefore a higher level of relative risk than conventional funds. That is
consistent with their more limited potential for diversification and the
likelihood that the most significant exclusions involve
large-capitalisation stocks.
It would also indicate that ethical funds, as a group, are likely to have
a "growth" bias to them - they will perform quite well when growth
managers are doing well but underperform when value is in fashion. Over
the long term, value managers produce superior returns.
Recent research from Mercer Investment Consulting suggests that local
ethical investment managers running Australian share funds have performed
broadly in line with the overall market in the 2 1/2 years to June, but
failed to match active managers. Mercer says that the ethical funds
underperformed their own managers' traditional funds by an average of 1.5
per cent a year.
Those managers investing in overseas shares underperformed both the market
and average managers by a sizeable degree. The managers under performed
the global MSCI World index by 1.9 per cent, the average manager by 3.1
per cent and their own traditional overseas share funds by 1.4 per cent.
Smaller companies tend to outperform companies with large market
capitalisations in the early stages of market upturns, hence the
relatively strong performance of ethical funds in recent years. More
recently, however, their overall underweight positions in resource stocks
would have hurt their returns.
The basic conclusion one could reach, even in the absence of much hard
data, is that by limiting the range of stocks in which they can invest and
by excluding some of the big cyclical sectors, the funds as a group are
taking higher-risk exposures which aren't fully compensated for with
higher long-term returns.
It is worth noting that there is a significant variance in returns among
the ethical funds - the Australian shares managers surveyed by Mercer
generated performance that ranged from 1.8 per cent to 17.8 per cent a
year over the 2 1/2 years - which presumably relates to the different
ethical screens used.
It is unclear whether there is a correlation between the returns and the
level of the ethical conviction applied to the screening process - whether
the returns relate to the degree to which ethical considerations are
compromised and the funds' investment universe is restricted - although
one suspects there would be over the longer haul.
The ethical investment funds sector is a relatively minor element of the
wider funds management sector and one driven as much by the niche
marketing strategies of the fund managers as any sense of social
responsibility.
For investors, however, it would appear that principle - bringing ethical
consideration to bear on the business of making money - does have some
cost.

In Good Company
LEON GETTLER.
720 words
28 August 2004
The Sydney Morning Herald
First
1
English
© 2004 Copyright John Fairfax Holdings Limited. www.smh.com.au Not
available for re-distribution.
SPECIAL REPORT CORPORATE RESPONSIBILITY INDEX
Some Australian companies are taking corporate responsibility seriously,
but for others the talk has yet to translate into action, writes LEON
GETTLER.
Westpac has topped a list of Australian companies with the greatest social
awareness. The Corporate Responsibility Index, published today in The
Sydney Morning Herald and The Age, places Australia's fourth-biggest bank
ahead of other companies in the voluntary survey, with a score of 98.24
per cent.
Westpac's responses showed it had measures in place to address global
warming, working with the community, workplace diversity and what the
banking industry calls, "financial inclusion", the provision of financial
services and products for low-income people.
In these areas, Westpac scored 100 per cent. It also scored perfect or
near perfect scores in the strategy, integration, management, performance
and impact, and assurance categories.
Westpac's overall score was well ahead of its peers in the financial
sector - ANZ, Insurance Australia Group and Suncorp. Other companies that
scored highly were BP (97.98), Rio Tinto (93.31), BHP Billiton (92.77),
Toyota (88.06), Cadbury Schweppes (86.92), Holden (86.33), Ford (85.79),
Telstra (85.49), Boral (84.91) and Lion Nathan (82.42). The overall
average score of the 26 companies participating in the inaugural
Australian Corporate Responsibility Index was 77 per cent, which suggests
corporate social responsibility is on corporate radar screens but that
many companies are still struggling to show that they have systems and
management in place to turn the rhetoric into reality.
The index results, gathered by the St James Ethics Centre and verified by
Ernst & Young, aim to rank companies according to their impact on society
and the environment. This is done by looking into each company's
operations, products and services and through relationships with
stakeholders, including employees, suppliers, shareholders and
communities.
The survey is a voluntary self-assessment based on 111 questions that
range from general positions on corporate social responsibility to
specific attitudes towards environmental and social impact issues. Of the
companies that completed the index, almost half scored below average.
Built around a web-based assessment tool, the CRI compares the systems and
performances of companies within and across industry sectors. Its main
focus
areas are strategy, integration, management practice, performance and
impact,
and assurance.
Companies at the top of the index are found to have the following
characteristics: they have incorporated the rhetoric of their corporate
values and commitments into the way the organisation is managed; they can
measure and report how this works in practice; they can demonstrate they
are taking action to reduce any negative impacts of their products and
services and maximise their positive qualities.
The index shows that while all the companies were embracing social
responsibility, many were not incorporating it into the business.
All of the companies that took part in the study scored well in the area
of corporate values. Many had put together strategies that covered areas
such as community, environment, human rights, occupational health and
safety, employee issues, suppliers, customers. Many had incorporated
corporate responsibility into their business risk evaluation processes or
had appointed someone on the board to have responsibility for these areas.

The average score in this section was an impressive 86 per cent.
But the gaps started opening up in the integration section, in which
companies were asked questions about what they actually did to organise,
manage and disseminate these values through their operations.
Did they have codes of ethics? Were bribes prohibited? Did they ask
stakeholders whether the company had lived up to its values? Did
stakeholders have input in shaping the company's views and responses
towards key issues? Were people given bonuses for integrating social
responsibility programs? Was it incorporated into the training of staff
and managers?
The average here fell away to 75 per cent. Westpac and BP were equal top
at 97 per cent, but others scored as low as 35 per cent.
The gaps between the organisations became even bigger when they were asked
to show how they managed the issues, how they went about measuring and
assessing whether the programs and policies were working and about the
role third parties played in auditing progress on social responsibility.

A hard place
Simon Longstaff. Dr Simon Longstaff is executive director of St James
Ethics Centre.
787 words
28 August 2004
The Sydney Morning Herald
First
3
English
© 2004 Copyright John Fairfax Holdings Limited. www.smh.com.au Not
available for re-distribution.
SPECIAL REPORT CORPORATE RESPONSIBILITY INDEX
Top 10 in management practices
The management practice section of the index assesses the integration of
corporate social responsibility in the community, marketplace, environment
and workplace. This section looks at key issues for business, the
objectives and targets set to manage these issues and how it communicates,
implements and monitors its policies objectives and targets.
Community relates to the interface between business and society, which can
be positively or negatively
affected by a project, product or investment on a local or global level.
Environment is the world's ecosystems and natural resources and is
affected directly and indirectly by a
company's operation, products and services.
Being responsible means safeguarding both the systems and resources for
future generations. Responsibility in the
marketplace is maintaining the highest standards of business practice when
developing, purchasing, selling and
marketing products and services. Workplace responsibility is the creation
of a working environment that upholds
personal and employment rights.

Marketplace
BP
Westpac
Ford
Shell
Toyota
Lion Nathan
Telstra
Holden
Cadbury Schweppes
BHP Billiton

Workplace
BP
Westpac
Lion Nathan
Rio Tinto
Minter Ellison
Telstra
ANZ
Ford
Boral
Coles Myer

Community
Westpac
Vodafone Group
Telstra
BP
BHP Billiton
ANZ
Queensland Rail
Toyota
Rio Tinto
Minter Ellison

Environment
BP
Toyota
Ford
P&O
Westpac
BHP Billiton
Shell
Telecom NZ
Telstra
Rio Tinto
The James Hardie asbestos scandal has brought companies' ethical
obligations into focus, writes Simon Longstaff.
On assuming the chair of building products group James Hardie, Meredith
Hellicar offered a sincere expression of regret that the company had
underfunded the foundation that it had established to compensate victims
of asbestos-related diseases.
Yet, in expressing her regrets, Hellicar went on to make the point that
company directors have always to act with an eye to the interests of
shareholders. "The fact of the matter is we can't wish away our legal and
fiduciary duties. As much as we would like to, in many respects, at the
end of the day we're custodians on behalf of the shareholders. We have
obligations to our shareholders. I think that perhaps that's been
forgotten in all of this."
In making this observation, Hellicar highlighted that many company
directors, and their advisers, operate in an environment of what might be
called "structural irresponsibility". Conventional wisdom is that their
job is simply to act always to increase the wealth of shareholders,
providing only that the means they employ are lawful.
Additional ethical considerations are thought to be optional extras, good
to consider, just as long as they don't get in the way of achieving the
primary goal. This helps to explain the tone of regret and frustration
that can be heard in Hellicar's comments.
She seems to be saying: "We know what it would be right to do, but we
can't. Our duty to our shareholders comes before any other consideration
that we might hold in mind as individuals."
The same kind of structure seems to bind the approach taken by many
professional advisers. Their refrain is that if it's lawful and in line
with the instructions of clients, then it's OK.
Thus, the foundations of structural irresponsibility are laid. The legal
obligation of directors, advisers and so on conspire to bring about a
collective washing of the hands when it comes to broader ethical
obligations of one human being to another.
Perhaps more than most, those who sit on the board of James Hardie will
know the details of the truly terrible deaths suffered by the victims of
diseases such as mesothelioma. As human beings they cannot help but be
moved by their plight. Yet, as company directors we are told that none of
this can be taken into account, unless it coincides with the interests of
shareholders.
The James Hardie case raises a host of fundamental issues that deserve
serious consideration. They include the need for a comprehensive review of
the legal privilege of limited liability - not in order that it be
repealed but, rather, that we might recalibrate our ethical understanding
of what this privilege entails.
More immediately, we should test the assumption that shareholders are
mono-dimensional wealth seekers who care relatively little about the means
by which they are enriched.
Most importantly, we need to review any laws that effectively limit
company directors taking into account ethical considerations that any
moderately decent person would acknowledge as important.
Far from being at odds with the interests of shareholders, I believe that
ethically mature and responsive companies (and the people who are their
underlying reality) will flourish.

Priorities worlds apart
Leon Gettler
377 words
28 August 2004
The Sydney Morning Herald
First
3
English
© 2004 Copyright John Fairfax Holdings Limited. www.smh.com.au Not
available for re-distribution.
SPECIAL REPORT CORPORATE RESPONSIBILITY INDEX
Like British companies, Australian businesses are still grappling with the
meaning of corporate social responsibility.
When comparing the results of the Corporate Responsibility Index in
Australia with those of the British version, the data shows one stark
difference in the way the two markets addressed these issues: British
companies were more likely to focus on the environment, while their
Australian counterparts were much more concerned with the community.
At face value, British companies appeared to be much more inclined to
espouse being virtuous.
Companies in Britain scored an average 91 per cent when it came to
articulating what their values were, compared with an average score of 86
per cent in Australia.
But when it came to integrating, managing, measuring and auditing their
performance in these areas, the average scores in Britain were only
marginally ahead.
Only 26 Australian companies participated in the Corporate Social
Responsibility Index, compared with 139 in Britain. A broader
cross-section of Australian businesses might have produced a different
statistical result.
But there was a big difference in what employers on either side of the
world regarded as socially responsible.
Under the systems used here and in Britain, companies have to choose at
least four core social impact or environmentally related areas in which
they had participated. They were also asked to nominate another two areas
that could be either environmental or social, or both. This meant they had
to provide data on six areas they were measuring, performing and reporting
on.
In Britain, 74 per cent chose solely environmental areas rather than
social ones but in Australia only 27 per cent focused exclusively on the
environment. Australian companies were more intent on working with the
community.
The difference might reflect that environmental issues are heavily
regulated in Britain as they are throughout the European Union.
For Australian companies, the focus included access to justice, addressing
homelessness, alcohol misuse, community investment, economic development,
employee assistance and development programs, financial inclusion and
literacy, flexible working conditions, human rights, work life balance,
workplace diversity and workplace satisfaction.
In contrast, British employers were only interested in community
investment, economic development, employee development and workplace
diversity.

History lessons
Leon Gettler
691 words
28 August 2004
The Sydney Morning Herald
First
4
English
© 2004 Copyright John Fairfax Holdings Limited. www.smh.com.au Not
available for re-distribution.
SPECIAL REPORT CORPORATE RESPONSIBILITY INDEX
Greed, it seems, is no longer good. But can big corporations adapt to this
strange new world? As Leon Gettler reports, they may have little choice.
Does virtue pay? Can companies do well by doing good? Does ethical
investment deliver in a compromised world?
The answers might be far from clear but with more organisations focusing
on maintaining or restoring reputation, a sub-industry of indices aiming
to either measure the stuff or provide benchmarks for socially responsible
investment funds is emerging.
One of the key issues, however, is that different techniques inevitably
throw up different results and data that is often contested.
The most high-profile and prestigious is the Dow Jones Sustainability
Index in New York and there is the FTSE4Good Index in London, which
excludes tainted industries such as tobacco, alcohol and armaments and
selects only those that can demonstrate commitment to the environment,
human rights and stakeholders.
Both indices have their critics and have come under fire for a variety of
reasons, from selectivity to relying too heavily on companies'
self-assessment.
Australia does not have an index with similar clout, although exponents of
ethical investment believe it is only a matter of time before one is
established here as part of a worldwide trend which will result in
companies taking corporate social responsibility more seriously.
The controversy has not been confined to the indices alone. In Australia,
for example, there has been an almighty stoush over reputation
measurement. The Business Council of Australia and the Institute of Public
Affairs have led the charge against the Good Reputation Index, now
RepuTex, which was published in The Sydney Morning Herald and The Age.
It was criticised on several grounds: conflicts of interest; companies
that refused to participate being given an initial zero rating, with the
rankings displayed in the country's most prominent newspapers; the use of
partisan judges like Greenpeace and the ACTU.
RepuTex's chief executive, Laurel Grossman, has said since that RepuTex
was a work in progress and criticisms about conflicts of interest had been
addressed early on.
For their part, The Sydney Morning Herald and The Age no longer publish
the Good Reputation Index.
Regardless of the controversies, the issue of corporate social
responsibility seems to be gathering momentum. Earlier this year, a World
Economic Forum survey found that most corporations expected mainstream
investors to place more focus on corporate citizenship. Emerging issues
include climate change and managing social and environmental risks down
the supply chain, from labour conditions in contractors' factories in
developing countries to providing access to HIV/AIDS treatments for
employees, subcontractors and families.
Insurance companies have also been leading the charge. According to Swiss
Re of Zurich, economic losses due to natural disasters are doubling every
10 years and if the trend continues, it could result in up to $US40
billion ($55.1 billion) of claims annually, close to a World Trade Centre
attack a year.
In light of the threat of lawsuits against alleged emitters of greenhouse
gas, Swiss Re has been mailing questionnaires to its clients about
potential government regulations over greenhouse gas emissions.
Swiss Re's competitor, Munich Re, is asking clients the same questions and
has flagged that it might deny cover where it considers not enough is
being done.
Insurance Australia Group has also been developing strategies to minimise
human contribution to climate change, a potentially serious problem here,
where most population growth occurs within three kilometres of the coast.
During the past 15 years in NSW, IAG has paid out $1.35 billion in
weather-related home and motor insurance claims. The gigantic hailstorm
that hit Sydney in 1999 - an event that coincided with warmer-than-normal
sea surface temperatures off the NSW coast - was responsible for 25 per
cent of the money it paid out in claims over that period.
As Sam Mostyn, IAG group executive for culture and reputation, said
earlier this year: "Insurance companies should be at the forefront of
managing in a sustainable way because of the business we are in."

Socially acceptable
Leon Gettler.
752 words
28 August 2004
The Sydney Morning Herald
First
2
English
© 2004 Copyright John Fairfax Holdings Limited. www.smh.com.au Not
available for re-distribution.
How the companies compare SPECIAL REPORT CORPORATE RESPONSIBILITY INDEX
CORPORATE RESPONSIBILITY INDEX RESULTS 2004 (Table not available on
database)
Accurate measurement of business's impact on society has never been more
important, writes Leon Gettler.
Companies are fighting reputation wars to vie for the hearts, minds and
dollars of consumers.
Witness the way search engine Google has promised in its initial public
offering that it will not "be evil" and that it will "make the world a
better place". "We believe strongly that, in the long term, we will be
better served as share-holders and in all other ways by a company that
does good things for the world, even if we forgo some short-term gains,"
Google's registration form with the US Securities and Exchange Commission
proclaims.
Not long ago, promises such as that would have been unthinkable. That's
the power of reputation in today's market.
Locally, it's a phenomenon that has seen James Hardie back down after
consumer boycotts and threats of fraud charges over the asbestos scandal.
These are the forces that have turned intangibles such as brands and
reputation into issues that are seen as more valuable than tangible assets
such as plant and equipment.
Another driving force is that today's brands operate in a global market
that affects many people, from unions to environmental groups and
activists, who might never even buy. All this has given rise to the
"triple bottom line" movement, where companies are measured on how well
they perform on societal, environmental and economic grounds.
According to the triple bottom liners, this is as important as the share
price.
Reputation management is complex stuff. In the past it has been difficult
to measure and protect. What makes reputation even more complicated is
that damaged reputations can hurt a brand, but a strong brand does not
necessarily protect a reputation.
This was what McDonald's discovered after the documentary Super Size Me
was released in Australia. The film depicted Morgan Spurlock's descent
into ill health after he resolved to eat nothing but McDonald's for a
month. It broke box office records, grossing the highest opening weekend
takings for a documentary in Australian history.
After initially trying to ignore the film, McDonald's went on the attack
with an ad campaign that featured its Australian chief executive, Guy
Russo, accusing Spurlock of distorting the facts.
The reputation of corporations has become a community issue because, with
the demise of the church, the job-for-life and the fragmentation of the
family and communities, the corporate world now defines our values.
As Swedish management writers Jonas Ridderstrale and Kjell Nordstrom claim
in their latest book, Karaoke Capitalism: Managing For Mankind (Prentice
Hall, 2004): "Societies are measured by the buildings
they create. The Greeks left the Acropolis behind. The Romans gave us the
Colosseum. Modern times bring us the shopping mall."
The question is whether corporations are up to the job.
Fresh from the bucketing they received last year over accounting tricks,
enormous salaries and low-priced options, the bosses of the world's
biggest companies laid it on the line when they gathered at this year's
World Economic Forum in Davos, Switzerland, saying that brand reputation
was now even more important than profits.
Reputation goes hand in hand with corporate social responsibility (CSR)
and that's where the problem starts: many corporations don't know what CSR
means and if they manage to work it out, they have to try to understand
how it's relevant.
Their take on CSR seems to vary from annual report to annual report. For
some, it's about sustainability, for others it's about the company's
impact on society and its relationship with the community. Others just
talk about it in terms of philanthropy.
No surprise that Ernst & Young found 71 per cent of companies said they
had CSR strategies, or were developing them, but only 9 per cent said they
understood how it was relevant to their business.
What is clear, however, is that reputation is not about PR spin.
Christine James-Brown, the chief executive of United Way International,
the international arm of one of the world's biggest charities, says
companies need to recognise that workforce practices, environmental
management and social responsibilities are all connected. "Treating
employees well, treating the community well, not neglecting the
environment, all those things are core," she said.

Measure of commitment
Liza Maimone Liza Maimone is director of environment and sustainability
services, Ernst & Young, Melbourne.
420 words
28 August 2004
The Sydney Morning Herald
First
2
English
© 2004 Copyright John Fairfax Holdings Limited. www.smh.com.au Not
available for re-distribution.
How the companies compare SPECIAL REPORT CORPORATE RESPONSIBILITY INDEX
Liza Maimone explains how the index was compiled.
The Corporate Responsibility Index is a self-assessment tool. Participants
select responses from the index survey which they consider best describe
their corporate social responsibility approach and performance.
Companies need to complete a minimum of 64 questions out of 111 and
provide evidence that shows the validity of their responses.
The questions are arranged in four overall sections that explore corporate
social responsibility across their entire business from the board level to
on-the-ground results. The sections are: Strategy, Integration, Management
Practice and Performance, and Impact.
The tool focuses on challenges in the areas of environment, workplace,
marketplace (such as supply chain and customers) and community.
Companies from a variety of industries participated in the index, from
finance to manufacturing to extractive industries. To accommodate the
differences between participants and industry sectors, the tool is
flexible, enabling participants to tailor certain sections of the index
survey to their particular business challenges.
For example, in relation to social impacts - product safety, occupational
health and safety, human rights in the supply chain, diversity in the
workplace, community investment - participants must answer two of five
questions, but are able to choose those most relevant to their business.
Ernst & Young's role was to examine the survey responses and supporting
evidence for every company participating on the basis of their Australian
operations only. The validation team was drawn from Ernst & Young's
environment and sustainability services units in Sydney and Melbourne.
The extensive validation process included site visits, follow-up
discussions and requests for information from all participants, and took
two months to complete.
It resulted in some changes to participants' responses, mainly to promote
consistency in interpretation of the survey questions among participants.
Once the responses were finalised, company ratings were generated by the
online survey tool. The St James Ethics Centre then collated the results
and provided individual feedback reports to each participant.
Participants were very co-operative throughout, understanding the
importance of the validation process to the comparability and credibility
of the results. The survey process was a significant time commitment for
companies. The value for participants is in the rigour of the process,
giving them confidence that the feedback they receive is a true reflection
of their progress in corporate social responsibility.

Management: CSR ? substance over PR: Compliance and philanthropy, which had gained companies' goodwill in the past, are no longer enough. [Malaysia]

Management: CSR ? substance over PR
By Chin Kwai Fatt
1,176 words
9 August 2004
The Edge Malaysia
English
(c) 2004 The Edge Communications Sdn Bhd
The corporate world is still searching for definitive proof that corporate
responsibility pays. Indeed, corporate social responsibility or CSR is not
just a catch?phrase anymore ? there are many companies all over the globe
that have shown best practice in this area. Some loudly and justifiably
trumpet their corporate citizenship efforts, while others quietly go about
their business, happy simply to know they are minimising negative impact
on the world.
Many businesses, regardless of size, provide cash and volunteer time or
goods and services to their local communities. Whatever the level of
involvement, few companies can escape the growing pressure to show some
degree of commitment to social responsibility. Corporate citizenship is as
equally important as competitiveness and governance these days, forming a
triad of pressures that the organisation feels will shape business
leaders' agendas, and enhance their ability to raise their business
performance.
Compliance and philanthropy, which had gained companies' goodwill in the
past, are no longer enough.
For a little more than a decade, companies have tried to meet increasing
consumer and investor demand for them to "do the right thing" through
corporate citizenship efforts. However, with executives closely watching
the bottom line, many now want to know if their efforts are paying off.
Whether it's corporate citizenship, CSR, sustainability or any number of
other names by which these efforts have come to be known, companies are
asking: "Does sustainability correlate with financial performance?"
At a recent two?day conference on CSR, Deputy Prime Minister Datuk Seri
Najib Tun Razak said, "Effective adoption of CSR has the twin effects of
improving both short?term and long?term corporate performance. Companies
that have embraced CSR have found real and significant competitive
advantages in the form of improved financial performance, enhanced brand
image and reputation, an increased ability to attract and retain quality
workforce, more effective risk management, reduced long?term cost and
attractiveness to increasingly sophisticated institutional investors."
CSR makes good business sense and leading companies around the world base
much of their strategy and direction on it. While there are many
descriptions of what CSR is all about, I would like to focus on the
concept of "sustainability" ? borrowed from the world of sustainable
development. Used in this context, it means adding economic, environmental
and social value through a company's core business functions. This is
another way of saying, doing business with our future generation's
interests at heart ? building a better and superior world for them.
It is becoming clear that it may not be entirely up to the corporations,
large or small, whether or not they want to act responsibly and adopt
sustainable practices. The pressure to change is already there, with
society's expectations of companies to evolve quickly. What was previously
seen as the exclusive role of the state is now changing quickly, with the
corporate world expected to take on more responsibility. Increasingly
today, corporations are finding that they have to take into account public
attitudes and perceptions when deciding on a course of action.
In a Millennium Poll on Corporate Social Responsibility conducted by
Environics International Ltd in cooperation with The Prince of Wales
Business Leaders Forum and The Conference Board, interviews with over
25,000 average citizens across 23 countries and six continents reveal
that, in forming impressions of companies, people focus on corporate
citizenship ahead of either brand reputation or financial factors. Two in
three citizens want companies to go beyond their historical role of making
profit, paying taxes, employing people and obeying laws; they want
companies to contribute to broader societal goals as well. Interestingly,
over one in five consumers report either rewarding or punishing companies
in the past year based on their perceived social performance.
What this tells us is that both corporate reputation and sales are at risk
when consumers and other stakeholders have negative perceptions of a
company's behaviour. It's no longer about "nice to do". CSR is likely to
become a new pillar of performance and accountability of successful
companies the world over. Consumers are becoming more aware and critical
of how corporations run their business and chief executive officers have
to sit up and take serious note.
In the era of CSR, businesses need to take a stance and look at
sustainability seriously ? to preserve wealth as well as the propensity
for progress for the generations to come. Companies will have to find the
balance between its self?interest and what is in the world's interest.
My own firm seeks to find that balance. Besides participating in various
charity sponsorship programmes, we have also developed specific programmes
as part of our CSR journey. We are in the third year of our Community
Outreach Programme which has received tremendous response. Members of our
staff, particularly the young, volunteer in two?week blocks to tutor
underprivileged children and provide administrative assistance at selected
children's homes. It is most heartening that they have taken up the
challenge to sacrifice that most valuable of all commodities ? time.
More recently, we initiated the New Straits Times
Press?PricewaterhouseCoopers Young Humanitarian Award with a media
partner, aimed at bringing national attention and recognition to young
Malaysians for outstanding public service and who have gone beyond the
normal call of duty to perform selfless deeds of a humanitarian nature. We
also hope the award will serve as an impetus to encourage selfless deeds
among Malaysia's young. Both initiatives are purposefully aimed at the
young as we seek to do our CSR bit by instilling wholesome values in our
future ? the nation's young.
It is important to note that CSR is not the sole domain of large
enterprises, multinationals and government?linked companies. All companies
and individuals have a role to play in making our world a better one to
live in. So, how do companies in Malaysia start on the CSR path? First is
the understanding that you are part of a much larger system. We are not
alone nor are we separate. The actions of a company can affect the larger
system and vice versa. Secondly, knowing and believing that we can make a
difference and taking a stand to operate in a sustainable manner.
It is becoming more widely recognised that sustainability is a value?added
factor. The positive correlation between sustainability and financial
performance will provide an enormous boost to the sustainable investment
sector. Thus, companies need to proactively integrate their CSR strategy
into their business operations. The premise of CSR has to be based on
content and performance, as opposed to faÇade management. Most companies
often "knee?jerk" to pressures defensively, as opposed to having their own
affirmative CSR strategies. This can risk becoming a PR spin?management
game.
The reality is that CSR efforts require some degree of investment by
companies, whether in implementing a programme, changing a policy or even
in taking the extra step to publish a report making their CSR strategies
known.
Chin Kwai Fatt is the managing director of PricewaterhouseCoopers Malaysia


Management: A case for CSR reporting?
By Phang Oy Cheng
1,338 words
16 August 2004
The Edge Malaysia
English
(c) 2004 The Edge Communications Sdn Bhd
As Malaysian companies are expanding further afield, it becomes necessary
to understand environmental, health and safety global trends which are
increasingly affecting how businesses operate in a global playing field.
The unprecedented internationalisation of production and finance
throughout the world, known as globalisation, led by multinational
corporations, has bound the world in complex webs of production,
consumption and finance. As the chief beneficiaries of globalisation,
these companies have been vilified as the cause of the growing inequality
and environmental decline that have accompanied globalisation. Yet at the
same time, they have been lauded as crusaders of progress and for
spreading technology and investment throughout the globe.
The activities of MNCs have profoundly reshaped global economy. In the
1990s, foreign direct investment became the primary source of capital to
developing countries, far outstripping public sources such as the World
Bank and foreign aid.
Although developing countries receive only about a quarter of global
investment, FDI brings with it large local economic, social and
environmental impacts. In poor countries, foreign companies ? or even one
big MNC ? might be the largest single business in the whole country.
This has resulted in many developing economies being entirely dependant on
MNCs for jobs and the foreign currency needed to pay off foreign
creditors, which means the countries have little leverage over the terms
of corporate investments.
Lack of global standards
The global environmental and human rights dilemmas faced by MNCs stem
fundamentally from regulatory failures. While markets and investment
opportunities span borders, there are no binding global industry standards
as the environmental and social regulation of industry remains largely
national.
Moreover, many host countries in the developing world lack technical
capacities, physical and institutional infrastructure and, often,
political will to provide environmental and social oversight of
businesses. Fundamental civil and political rights are not protected in
many developing countries, muting the role of legal action and public
protest in exposing and redressing regulatory gaps.
One factor that keeps national environmental, labour and human rights
standards from rising is competition for MNC investment. In the absence of
global corporate standards, competition for MNC investment keeps national
standards unchanged in view of latest developments.
Lacking global and, often, national regulatory oversight, MNCs become
rule-makers. Many simply follow local practice, no matter how inadequate.
Some set universal, company-wide standards, usually pegged to the highest
or an average of home country standards, while others still adopt a third
approach by embracing corporate social responsibility (CSR), a commitment
to "best practice".
In broad terms, CSR as a business management model has two components: 1)
redefining the company mission to include benefits to stakeholders and
society; and, more importantly, 2) operationalising the new mission via
management, auditing and reporting systems.
Yet very often, companies find that a commitment to CSR brings changes to
the company's mission, forcing a review of its policies and operations in
terms of public purpose and private gain. When adopted completely, the CSR
mission commits the company to the pursuit of a triple bottom line:
financial, social and environmental. Central to a CSR mission is the
recognition that not only shareholders but also a wide circle of
stakeholders, including workers, investors, consumers and local
communities, are affected by company decisions and operations.
Bearing in mind the changes that would be wrought onto a company embracing
CSR, the question is, why do companies do it? Some argue that the embrace
of CSR is not only (or primarily) about "doing the right thing", but that
it is good for business.
The business case for taking a voluntary approach to CSR seems to suggest
that good environmental and social performance generates tangible
financial benefits, which can be captured by companies and investors.
Benefits arise either because consumers, investors and workers prefer and
reward a responsible company, or because acting responsibly reduces
production costs and improves products.
However, statistical studies seeking to prove the business case for CSR
have yielded mixed results. Also bear in mind that many of these studies
have focused on company performance in the US and little quantitative data
is available about overseas performance.
The most telling evidence about the business case, however, is the low
rate of uptake. Only a few, highly visible, blue-chip companies sensitive
to consumer pressure, and "green" companies that have built their
reputations on eco- or ethical behaviour, have embraced CSR.
A 1999 study by KPMG showed that of a total sample of 1,100
multinationals, less than a quarter produced an environmental or EHS
public report. In the US, the rate of reporting from 1996 to 1999 dropped
from 44% to 30%. At the same time, independently verified reports rose
from 15% of the companies in 1996 to 18% in 1999. In the UK, less than a
third of the top 350 corporations responded to the Prime Minister's call
to report on their environmental impacts by December 2001.
One reason for the low rate of uptake may be the lack of methodologies to
quantify intangible assets like reputation, as well as more tangible costs
involved in environmental and social externalities.
Despite this, there are still very compelling reasons for companies to
adopt CSR:
? The growing interest in CSR issues has motivated entities, such as the
United Nations, the Organisation for Economic Cooperation and Development
and assessment organisations in Europe and North America, to establish and
enhance standards that will serve as a benchmark for multinational
corporate behaviour, and to strengthen mechanisms evaluating that
behaviour;
? Some non-governmental organisations and developing countries have voiced
concerns that globalisation is widening the gap between rich and poor,
preventing the disadvantaged from enjoying the benefits of technological
advances and development. They also claim that globalisation leads to
environmental degradation. These concerns are fuelling opposition to the
MNCs' goals of free trade, a liberalised investment environment and a
globalised economy. Some developing countries and NGOs have expressed
strong dissatisfaction with the WTO's promotion of globalisation;
? Socially responsible investment is attracting attention as a way to
indicate approval for socially responsible behaviour. When deciding on
where to place their money, investors consider not only profit potential
but also companies' commitment to social responsibility. SRI was first
practised by religious groups that invested in companies having the same
values, but today, it has spread to a wide range of investors, who
consider such factors as ethical behaviour and social responsibility
(exhibited through environmental conservation, community relations and so
on). SRI is becoming more prevalent not only because of its good
performance, but also because of its influence towards corporate
behaviour. It represents a significant change in the relationship between
consumer-investors and corporations; and
? Some countries in Europe have amended legislation to promote greater CSR
and SRI. In the UK, the amended Pension Act (enacted in July 2000)
encourages the investment of many pension funds along SRI lines. This
initiative was followed in France, with enactment of legislation reforming
employee savings schemes and the Pension Reserve Fund Law, in February and
June 2001, respectively. In August 2001, the Australian government passed
the Financial Services Reform Act to achieve similar goals. Again in
France, an administrative ordinance was published in the official gazette
in February 2002, requiring listed companies to disclose information on
the social and environmental effects of their activities in their annual
reports. Finally, in May last year, the UK Department of Trade and
Industry and Forum for the Future hosted a workshop for business, NGOs,
academics and government to debate the links between competitiveness,
productivity and the increasingly important role of intangible assets, as
well as sustainability and CSR. The broad conclusion, with some
qualification, was that sustainability makes a positive contribution to
business success. The key was to look at CSR as an investment in a
strategic asset or distinctive capability, rather than an expense.
Something worth bearing in mind for Malaysian companies.
Phang Oy Cheng is the founder of Green Edge Consult Sdn Bhd, which
specialises in environmental, health and safety consulting and corporate
social responsibility

Business ethics codes arrive: it is nearly impossible to determine whether ethics training really changes the way people behave.

Business ethics codes arrive
MATI WAGNER
Business Ethics Center of Jerusalem
1,403 words
27 August 2004
The Jerusalem Post
Daily
14
English
Copyright (c) 2004 Bell & Howell Information and Learning Company. All
rights reserved.
Amartya Sen, Nobel laureate in economics, likens business ethics to
oxygen: We take an interest only when it's absent.
Sen's metaphor was on my mind as I took part this week in a seminar on
corporate codes of ethics, sponsored by the Business Ethics Center of
Jerusalem (BEC).
As I listened to the lectures, it seemed to me that Sen's oxygen imagery
also captured the amorphous, unmoored quality of business ethics.
After learning that most business ethicists teaching in universities steer
clear of telling their students what is right and what is wrong - which is
considered preaching - I realized that business ethics was resting on
pretty slippery ground.
An Oxford philosopher who teaches the elective course of business ethics
to MBA students at Hebrew University said he spends most of his classes
trying to define the ethical together with his students, though it is an
undefined field lying outside the legal domain.
Then, I learnt, it is nearly impossible to determine whether ethics
training really changes the way people behave.
While it is easy to understand that hard work, thrift, reliability and
honesty are good traits, no opinion survey will tell you how many people
have the strength of character to uphold these values.
According to Dr. Mark Schwartz, from York University's Schulich School of
Business, there is no conclusive evidence that corporate codes of ethics
make people behave more ethically.
Schwartz says he reached this conclusion after 57 in- depth interviews
with employees, managers and ethics officers of four large North American
companies. (The findings were published in the Journal of Business
Ethics.)
And if corporate codes of ethics are introduced, but not taken seriously
or are not accompanied by comprehensive training programs, he says, they
could do more harm than good.
"If employees see management completely disregard the company's code of
ethics or treat it cynically, employees will do the same or worse," says
Danny Milo, director of the Jerusalem Center of Ethics, who is preparing a
code of ethics and an ethics training program for Bank Leumi.
THE QUESTION then arises that if teaching business ethics does not
necessarily improve behavior (assuming agreement has been reached that a
particular type of behavior is ethical) what is the purpose of it? Why is
it being taught to MBA students and employees who are only interested in
maximizing profits?
The answer lies in Amartya Sen's metaphor. Ethical behavior is like oxygen
to business. Without basic trust it is impossible to conduct business. And
trust is based on mutual ethical behavior. For instance, two diamond
merchants can seal a multi-million dollar deal without contracts, lawyers
or litigation, just with a handshake and a "mazal ubracha."
In his book Trust, Francis Fukuyama points out that ethical behavior is
part of a person's culture. People are educated to follow their society's
moral rules in family life, from their friends and neighbors and at
school. By belonging to a community and taking part in the moral life of
that community one learns the shared language of good and evil.
"Although it is possible to affirm an ethical code as a matter of
carefully considered rational choice, comparing one's own ethical code
against available alternatives, the vast majority of the world's people do
not do so," says Fukuyama.
According to Fukuyama, ethical codes should be transferred implicitly.
They do not have to be made a part of the business school curriculum.
Nevertheless, over the past 30 years business ethics as a discipline has
grown rapidly. In the 1970s, most of the universities that taught business
ethics were sectarian, such as the Jesuit Santa Clara University.
But by the 1980s, Wharton, Harvard, Yale, Bentley and tens of other US
universities had all added them to their curriculum, as had European
universities such as the London Business School.
TODAY, CORPORATE business codes are prevalent in most Western countries.
In the US, 78 percent of firms have them, which Schwartz thinks is a
conservative figure. In Britain, India and Canada the number is about the
same. More than half of German and Belgium firms also have them.
In Japan, 37% of firms have ethical codes.
In Israel, besides Israel Aircraft Industries and some banks, very few
firms have a business code. But the Israel Securities Authority is pushing
legislation that would force every publicly traded company to adopt a code
or explain why they have not. If the legislation passes, there will be an
explosion of ethical codes and ethics officers here, also.
Dr. Rabbi Asher Meir, the BEC's research director, explains why the
teaching of business ethics and the adoption of corporate ethical codes
have become so common.
"Once ethical practices were part of a person's upbringing. It was taken
for granted. The founders of large corporations took ethics seriously.
Woolworth's, JC Penney's, Hershey's and Marks and Spencer all emphasized
the importance of moral behavior in the workplace.
"But in the past few decades, moral relativism and the decline of religion
have made corporate ethical codes necessary. People no longer receive
moral or religious training as part of their education.
"Also, the workplace was much more culturally homogenous. People came from
similar backgrounds and there were far fewer multinational firms. So
people shared similar values."
Meir, who has a PhD in economics from MIT and was ordained by the Israeli
Rabbinate, was a member of the Council of Economic Advisors during the
Reagan administration. In addition to his work at BEC he teaches economics
at the Jerusalem College of Technology (Machon Lev), which has about 2,000
Orthodox students taking undergraduate degrees in business and technology.

About 18 years ago, at the age of 25, he embraced Orthodox Judaism. In a
sense Meir is himself a product of his ethics- deficient generation.
Through rational choice he carefully compared ethical codes and chose to
uphold the Jewish faith.
For the past three years he has been using Talmudic and rabbinical sources
to answer questions of public finance and business ethics at the BEC. He
began writing on the topic seven years ago.
UNLIKE THE philosopher from Oxford, Meir's ethics are anchored firmly in
Halacha and he has no problem defining what is right and what is wrong.
But he admits that religious people are just as likely to be overcome by
raw selfishness as the secular.
"The difference is that the religious are more likely to create elaborate
excuses to justify their transgressions. The secular will be more likely
to just shrug it off," he says.
"If someone Orthodox smokes cigarettes, he'll provide you with an
extensive set of halachic arguments proving it is permitted. A secular
person won't feel he has to make excuses."
Business ethicists agree that business codes and ethics programs are at
best signposts. They help people in the workplace be aware of ethical
issues. But they must be embedded in an ethical corporate culture and they
have to be willingly embraced.
"I've been invited to businesses where I've seen it's doomed from the
start," says BEC's Rosenstein. "There is no way this company will adopt a
code of ethics. Corporate culture is rotten or management is cynical.
There is no way they can be helped."
Rosenstein, who has been involved with the field of business ethics for 14
years, is filled with enthusiasm about the subject.
Asked why he decided to dedicate a large portion of his life to the study
and promotion of business ethics, he says: "When I was very young - it was
my first real job - I was working for Nigerians who exported European cars
to their country.
"One day the Nigerians told me our company had won a tender to sell
medical equipment to Nigeria. 'I didn't know we sold medical equipment,' I
said. 'Of course we do,' they said, 'you can go pick up the equipment at
this address; it cost 8,000.' 'But the tender is for 24,000,' I said. 'Oh,
the rest of the money is for our Mercedes Benz,' they replied.
"I realized that if I remained at that company I would end up a different
person. I left and went back to university."

1.9.04

The benefits of trading places: the corporate chief executive became the boss of the conservation campaign group for a day, and vice versa

Monday Jul 26 2004. All times are London Time.

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The benefits of trading places
Monte Hummel, head of the WWF conservation group in Canada, recently
swapped his environmentally friendly Toyota Prius to be chauffeur-driven
round Toronto in a Cadillac. Scott Hand, the usual occupant of the luxury
vehicle and chief executive of one of the world's largest mining
companies, was meanwhile discovering the low-emission delights of Mr
Hummel's hybrid petrol-electric car.
Their vehicular initiation was part of an unusual job exchange in which
the corporate chief executive became the boss of the conservation campaign
group for a day, and vice versa. Mr Hand, who heads Inco, the Canadian
nickel producer, spent his day meeting senior WWF staff, chairing a
discussion about no-go areas for mining, and learning about the financial
challenges facing the pressure group. Mr Hummel moved into Mr Hand's
15th-floor office near Toronto's financial district, kept a close eye on
the metal price and held an intense round of meetings about conservation
with senior officials and board members.
Rapprochement between business and campaigners has been a marked trend of
the past decade. Yet there are those on both sides who still see the other
as "the enemy". Was a job swap a step too far?
Mr Hummel has no qualms. "I have a history among my colleagues for putting
the other side's case to them," he says. "The better you understand the
other side's view, the better chance you have of advancing your own."
Mr Hand is equally sanguine. "Some people were probably surprised," he
says. "This obviously departs from the traditional roster of mining
company CEO activities. But I think people inside the company and those
who know us saw it as consistent with a number of things we've been doing
in recent years."
The exchange was one of two organised by Corporate Knights, a Canadian
magazine that focuses on corporate social responsibility. The other pair
to trade places were a "tree-cutter" and a "tree-hugger": Frank Dottori,
CEO of Tembec, the Canadian forestry company, and Beatrice Olivastri, head
of Friends of the Earth in Canada (see below).
The WWF-Inco job swap is a measure of how much has changed at Inco since
the 1970s, when environmentalists regarded the mining group as the epitome
of evil because of its high emissions of sulphur dioxide, a big
contributor to acid rain.
Inco redeemed itself in the late 1980s by dramatically reducing its
emissions, says Mr Hummel. "Mining and refining of nickel is fundamentally
a dirty business as far as Mother Nature is concerned. This is an
interesting example of a company that has taken a dirty business and is
trying to do it as best it can." Inco puts serious effort into consulting
indigenous people about sensitive developments and is funding programmes
for endangered species.
But the exchange also threw up bones of contention. The environmental
lobby has called for at least half of Canada's vast tract of boreal forest
- of pine, spruce, aspen, poplar and larch - to be protected from
industrial development. It wants protected zones to be permanently fixed,
but the mining industry says it must have flexibility.
"Any proposal to completely prevent development activities on 50 per cent
of the boreal would be hard for the mining sector to swallow," says Mr
Hand in a follow-up letter to Mr Hummel. "Only the good Lord really knows
where mineral deposits exist and mining companies must be able to explore
to find them."
Conservationists, on the other hand, argue that parkland cannot suddenly
be converted to mining. "Therein is the rub that makes it a rather
intractable issue for our two sectors," says Mr Hummel.
The veteran environmentalist nonetheless enjoyed his day as boss of Inco,
although he was surprised how closely employees watch fluctuations in the
price of nickel, the exchange rate and the company's shares. "I'd have a
little longer-term view," he says. It was probably coincidence, but the
nickel price dipped a little while he was there.
The two men have plenty in common, says Mr Hummel. "Our lifestyles in some
ways are depressingly similar. We're both used to 14-hour days. We both
get bleached under the fluorescent lights all day in downtown Toronto."
He was particularly struck by the commitment of the people he met with
responsibility for environmental issues at Inco. "I was surprised at the
strength of this feeling. I don't think the conservation community has a
monopoly on righteousness."
If business people sometimes dismiss campaigners as enthusiastic amateurs,
Mr Hand did not find any at WWF. "What impressed me most was the quality
and dedication of the people I met," he says. "The briefings I heard from
WWF staff were at the same level as what I'm used to hearing around the
boardroom table from the top people in our industry."
He believes it makes sense to engage with organisations that are
recognised as guardians of environmental and social values. But these
organisations must be pragmatic, like WWF. "For some purist environmental
NGOs, being a guardian simply means no mining at all - full stop - and
frankly I have a hard time knowing how to get past that into a meaningful
conversation."
Both men had advice for each other's organisations. But would they
recommend the experience to their peers? "You bet I would," says Mr
Hummel, who took part out of a sense of mischief but also to turn the
spotlight on to some serious issues. "Nature would be better off if we had
a few more of these exchanges. But they shouldn't become syrupy platitudes
about us sharing objectives and values. We don't have the same objectives
or the same values. There are fundamental differences. But that doesn't
mean our paths don't cross."
Mr Hand agrees that CEOs should trade places with campaigners, provided
this leads to something enduring. So far, busy diaries have got in the way
of his planned follow-up lunch with Mr Hummel. But he says: "I think you
should be prepared to look at this as part of a long-term relationship,
the start of a more meaningful and deeper engagement, and not just a
one-time diversion."
What did he make of Mr Hummel's mode of transport? "I really enjoyed
riding in Monte's Prius and thought it seemed like a very good car," he
says. "But I'm probably somewhat biased, since the Prius happens to be
powered by a battery that contains Inco nickel."
TRADITIONAL ENEMIES DECLARE CEASEFIRE
Wary of undermining her credibility as an environmentalist, Beatrice
Olivastri turned down the offer of a day as head of a mining company. But
she was so intrigued by the potential of forestry as a source of renewable
energy that she agreed to become CEO of Tembec, a Canadian timber company.

"Because of the role-playing, which is the risky part of this, I wanted to
have the exchange with a company and industry sector where I thought there
was some art of the possible," says the CEO of Friends of the Earth
Canada.
Ms Olivastri was thrown in at the deep end. Frank Dottori, head of Tembec,
arranged for her to take his place at the company's annual strategy
meeting, attended by senior managers from France, the US and Canada. Each
division reported on its environmental performance over the past year and
set out its capital expenditure and strategy for the coming year.
There was nervousness on both sides. She was conscious that her remarks
while acting as head of Tembec might be used out of context against her in
the future. Some managers were concerned about presenting critical
business information to the leader of a lobby group that has challenged
the company's performance.
"It was very open," she says. "There was no agreement about
confidentiality. Some honour is assumed, and hopefully earned."
Under Mr Dottori's leadership, the company has worked hard to gain its
green credentials. It is committed to having all its operations certified
as sustainable by the Forest Stewardship Council by the end of next year.
Managers' bonuses are directly linked to meeting environmental objectives.

During his day running FOE in Ottawa two weeks earlier, Mr Dottori had
caused surprise by proposing a carbon tax to raise funds for alternatives
to fossil fuel. "I believe they thought I was a little more radical than
they were, because they thought a tax wouldn't be particularly popular,"
he says. "That's true, but I thought the issue [of global warming]
warrants some fairly radical action."








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Competition Threatens Monsanto as Biotech Crop King


Competition Threatens Monsanto as Biotech Crop King

KANSAS CITY, Mo. - The golden stalks of corn and lush green soybean fields that shape the U.S. farm landscape would not normally be described as battlefields.

But that's what they are turning into as the world's biggest agricultural technology companies wage a fierce fight for market share of biotech corn, soybeans and other crops.

And it's about to get bloody.

Facilitated by a series of acquisitions and favorable court rulings, Dow AgroSciences, a subsidiary of Dow Chemical Co. and Syngenta Seeds, Inc., a unit of Swiss-based Syngenta, the world's biggest agrichemicals company, are leveling a direct challenge to Monsanto Co., the acknowledged king of biotech agriculture.

"Monsanto has had a monopoly," said David Brawner, owner of a Missouri-based arm of AgVenture Inc., an independent seed company. "But I don't believe they can continue to be the dominant force they have been."

POPULAR BUT PRICEY

St. Louis-based Monsanto currently holds sway over more than 80 percent of the market for biotech soybeans and corn in the United States.

Monsanto technology results in seeds genetically modified to resist certain destructive insects and tolerate weed-killing treatments. The seeds are popular with many U.S. farmers because they help them harvest a bigger crop and reduce chemical use. But Monsanto's fees - being raised this year by more than 25 percent on some products - are a sore spot.

"I'm glad to see Syngenta and Dow come into the market. Monsanto needs more competition," said Iowa farmer Gordon Wassenaar.

Monsanto has deflected previous challenges with lawsuits and patent disputes. But Syngenta and Dow both have court rulings in their favor now and say they are pushing into the market with full force.

"We're bringing superior technology to the market compared to what the competition has out there today," said Pete Siggelko, Dow AgriSciences vice president of plant genetics.

One of the first big challenges to Monsanto comes from a Dow corn seed dubbed "Herculex," named for Hercules, the mortal son of the god Zeus, who slays an evil giant in Greek mythology. Herculex corn resists an array of harmful insects and competes against a line of Monsanto corn products called YieldGard. Monsanto has argued that it owns the technology that confers the insect-resistance. But courts have sided with Dow and Dow plans to launch a biotech cotton in 2005, followed in 2006 with a Herculex corn that also protects against rootworm.

Syngenta is coming at Monsanto with more. With a series of acquisitions of seed and technology companies under its belt, Syngenta is poised to introduce a range of specialized corn seeds.

Its top weapon is a glyphosate-resistant corn seed that would compete directly with Monsanto's "Roundup Ready corn," a popular product that helps farmers control weeds and is one of Monsanto's key growth vehicles.

Monsanto has filed a patent infringement suit against its rival and it has told seed dealers they should destroy certain seed stocks that could help Syngenta's entry. But Syngenta said its seeds will be available for planting in the spring.

Syngenta is also planning to introduce corn that gives growers both glyphosate-resistance and protection against a destructive European corn borer pest, and it has a rootworm product in the works.

"We know we're late to the market; that is clear," said Syngenta product development manager Rob Wilde. "But we have a wonderful portfolio to create compelling offers."

ILLEGAL MONOPOLY ALLEGATIONS

Adding fuel to the fire, Syngenta filed a lawsuit in U.S. District Court in Delaware last month, claiming that Monsanto has obtained its market dominance illegally.

Monsanto defends its business practices and says Syngenta is infringing on Monsanto's patents. And Monsanto spokeswoman Lori Fisher said Monsanto does not fear the competition.

"We believe the established benefits of our products and the significant experience we have gives Monsanto a leadership advantage," she said.

The biotech seeds business is key to Monsanto's future financial strength, company officials say. Monsanto has watched its hold on the herbicide market diminish dramatically after its patent on glyphosate expired, and company officials and investors say future profits depend on seed sales. Indeed, the company's stock has risen more than 58 percent over the last year as seed profits have grown.

As the corporate battles wage, farmers watch with interest.

"We would love to see more companies be able to reach the marketplace with traits that have real broad appeal," said Nathan Danielson, the National Corn Growers Association's director of biotech and business development.

Story by Carey Gillam


31.8.04

How not to help those in need: Some activists want big water firms out of the developing world. Unfortunately, they may succeed

Third-world water and the private sector

How not to help those in need
Aug 26th 2004
From The Economist print edition


Some activists want big water firms out of the developing world.
Unfortunately, they may succeed


Panos




IN THE developed world, the stuff comes 24/7 from the tap. In poor
countries drinking water comes out of taps, communal standpipes, the
water-seller's cart, wells, boreholes, streams or puddles. It is apt to
come irregularly, at some times and places not at all. Then some people
die. Vastly more die in many poor countries from the nonexistence or
inadequacy of sewerage systems. Little wonder that water is a fiery topic.

In Bolivia in 2000 an issue of water supply led to riots and a state of
emergency. Why? Because a private-sector consortium including Bechtel, a
big American contractor, had been brought in to improve supplies to the
city of Cochabamba and charges were raised to pay for the investment. The
affair has become a classic among those nongovernmental organisations
(NGOs) and anti-capitalists who argue that water falls free from the sky,
is a basic human need and right, and so no one should profit from
supplying it. All of which is true, except the conclusion. Rain falls
free, but someone has to spend money and deploy skills in getting it to
the tap, and removing it in a sewer. The best organisation to do this may
well be a profit-driven water company. Most of those who rail about
Cochabamba do not also remind their listeners of the woeful failure of the
city's previous public-sector water supplier.
Such woes are common in the developing world. So is a shortage of capital.
No wonder the World Bank has long called for private-sector skills and
money to be brought in. A good many local authorities have agreed.
Governments and public agencies still finance nearly 90% of the poor
world's $15 billion annual investment in water and sewerage; but private
money pays for the rest. No wonder, either, that every so often the
private sector makes a mistake, as anyone can: this new water-main or
sewer is not built on time, or lack of rainfall means that a reservoir is
dry. At that point fresh torrents of abuse swill around the world's NGO
websites claiming proof, from one case of underperformance, that all
private-sector involvement in third-world water is wrong.

The companies agree
Well, a shock awaits those who believe this. The world's three biggest
water companies are coming to the same conclusion (see article) albeit for
different reasons. As their opponents complain, they are not interested
anyway in rural projects that can never show a profit. But now they are
shy of urban projects too: even if consumers paid up, as many do not, the
social, regulatory, political and currency risks are just too high. And
with an army of critics on the watch, they risk bad publicity in the rich
world as well. The result is likely to be a lot less private-sector
involvement in the future.
For the world's poor, this is bad news. Things have been improving, as a
new United Nations survey shows (see article). Yet a billion people still
have to drink unsafe water, 2.5 billion lack safe sanitation. Much remains
to be done. Can the private sector be kept at work? RWE Thames Water, one
of the three biggest water firms, aided by sensible NGOs, has ideas for
getting companies into modest schemes, short-term and simply as
technicians, not investors or bill-collectors, and aiming only to break
even. Wish them well. But if firms could be persuaded to remain directly
involved in big urban projects as well, the work would go much faster.
That may not be possible. But the army of critics could give a little help
by reflecting that sneers from rich countries do not pipe clean water in
poor ones.