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


Corporate Citizenship Reporting Playing Larger Role in Global Companies' Strategies

Corporate Citizenship Reporting Playing Larger Role in Global Companies' Strategies, 1 September 2005 - Successful global companies are integrating the reporting of their corporate citizenship activities into their firms' basic business missions, according to a new report from The Conference Board.

The companies that have best adapted their businesses report that setting goals, measuring performance, and assessing the degree of compliance are vital to the successful implementation of citizenship initiatives.

The report describes how five of the most successful companies' reporting practices have been integrated into their firms:

  • BP -- offers a detailed discussion of the impact of this energy company's fuels and other products on the environment.
  • HP -- employs its technology expertise to pursue "e-inclusion" initiatives to bridge the digital divide not just in the U.S. but also in less developed countries.
  • Novo Nordisk -- evaluates the impact of the fight against diabetes and its other healthcare programs on the health of people worldwide.
  • Procter & Gamble -- conducts a product life cycle assessment to ensure that its consumer products are manufactured, used, and disposed of in a responsible manner.
  • UPS -- strives to realize operational efficiencies in the transportation and logistics services that it provides to customers, while minimizing the company's impact on the environment.
While these companies are from different industries, there are some common themes that run through their practices on corporate citizenship reporting:
  • Citizenship values are reflected in the discussion of each company's core values. Because they are so central to the firm's mission, these values are highly integrated into the firm's operations and are given heavy weight in corporate governance.
  • Each company makes extensive use of internal audits, internal and external benchmarking, and continuous improvement metrics (such as a Balanced Scorecard) to continually raise the bar on its citizenship performance. There is a high degree of transparency in the setting of targets and detailed reporting on the degree of attainment of targets in communicating with stakeholders.
  • The companies have incorporated widely recognized standards into their reporting and assessment efforts, including the Global Reporting Initiative, the AccountAbility 1000 standards, ISO 14001 on environmental impact, the United Nations' Universal Declaration of Human Rights, and the International Labor Organization's Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy.
  • Companies are increasingly making use of independent auditors (such as major accounting firms or NGOs) to monitor and report on their performance with regard to these standards.
"Looking to the future, the biggest growth area is likely to be in applying best practices in corporate citizenship reporting across the 'extended enterprise,'" says Amy Kao, author of the report and a consultant in global corporate citizenship at The Conference Board. "Increasingly, companies believe that they will be evaluated not just on their own performance but on their ability to ensure that their suppliers also adhere to acceptable standards of corporate citizenship."


Handset Sales Surge

Handset Sales Surge

Published: August 31, 2005
(After September 08, 2005, this article will only be available to
eStat Database subscribers.)

Mobile phone handset makers rang up impressive sales in the second quarter.

According to a new report from Gartner, worldwide mobile phone sales totaled 190.5 million units in the second quarter, up 21.6% from a year earlier. It was the second strongest quarter for handset sales on record, topped only by the fourth quarter of 2004, when worldwide sales surpassed 195.3 million units.

"All the regions recorded growth this quarter, apart from Japan," said Carolina Milanesi, a Gartner analyst based in Egham, UK, explaining the continued surge in sales. "The sales in the mature markets of Western Europe and North America were driven primarily by sales of phones as replacements for older models and, to a lesser extent, by first-time buyers. In the emerging markets growth was boosted by an uptake in new connections as consumers took advantage of falling average selling prices of mobile phones."

Nokia and Motorola strengthened their position in the marketplace, as the two companies accounted for 49.8% of worldwide mobile phone sales in the second quarter of 2005. In fact, Nokia's market share grew 2.3% to reach 31.9%.

"The strength of the world's mobile phone market in the second quarter of 2005 reinforces Gartner's view that it will reach 780 million units by the end of the year," said Ms. Milanesi.

Motorola was the second best-selling vendor in Western Europe, a significant improvement over last year, when Motorola finished as the number five vendor in the market. In North America, Motorola was the market leader with a 33.5% share, while it was the number two vendor in Latin America with 31.9% of sales.

Mobile phone sales in North America totaled nearly 35.5 million units in the second quarter of 2005, an increase of 9.4% from the second quarter of 2004. Gartner analysts said this was a new record of unit sales for a second quarter in the region. Meanwhile, Latin America had an impressive quarter with mobile phone sales of 25.6 million units, an increase of 50%. Growth was fueled by strong sales in Brazil and Mexico.

In Western Europe, mobile phone sales reached 37.4 million units, a 9.9% increase. Combined sales in Eastern Europe, the Middle East and Africa grew by 37%, as mobile phone sales rose to 33.6 million units. Markets in Russia, Poland, Ukraine, Turkey and Nigeria attracted more subscribers and boosted the aggregate total.

After staging a slight recovery in the first quarter of 2005, mobile phone sales in Japan reached 10 million units for the quarter, down from 10.6 million units in the second quarter of 2004. Excluding Japan, Asia/Pacific sales reached more than 48 million units, up 27.5%. The healthy performance was mainly due to strong demand for handsets in emerging markets such as China, India, Bangladesh and Vietnam.

"The Asia-Pacific region is the largest regional wireless market in the world, but it also the primary growth engine for the wireless industry," said eMarketer's Noah Elkin. "China is home to an enormous and still-expanding user population that dwarfs subscriber bases elsewhere in the world. Steep growth lies ahead for India as well, and by the end of the decade it will develop into a major force in the region in its own right."

For more information on mobile markets around the world, consult eMarketer's recently published reports Asia-Pacific Wireless, Latin America Wireless and China Wireless. You can also sign up to receive a notification when the eMarketer report on the North American wireless market is published in September.


Tackling water pollution at its source: Weyerhaeuser

Tackling water pollution at its source: Weyerhaeuser

The process of making pulp and paper requires large volumes of water. In the pulping process, water and chemicals are used to cook wood chips until a slurry of pulp is formed. The pulp is rinsed and further treated, ultimately creating a solution that is 99 percent water and one percent cellulose fiber. This solution passes over a series of screens, rollers and dryers to remove the water and form a continuous sheet of cellulose fiber or paper. Treated water is then returned to the environment.

Since 1980, Weyerhaeuser has reduced the amount of water required to produce a ton of cellulose fiber or paper by 59 percent — from 25,900 gallons to 10,600 gallons. Also, in Weyerhaeuser’s wood products mills, water use per ton of production has declined by nearly 25 percent since 1999. Reducing water use is only part of the challenge – the company also aims to reduce pollution in the water it discharges to the environment.

The company’s philosophy of working to continually reduce the impact of its manufacturing activities on the environment has prompted Weyerhaeuser to prevent or reduce pollution by focusing on the source rather than end-of-pipe remedies. Examples include:

  • Reusing 98% of the chemicals used for making pulp and paper;
  • Increasing operational efficiency;
  • Eliminating the use of some chemicals.
Over the past decade, releases of dioxin have been of particular concern to customers, shareholders and the environmental community. The term “dioxin” is often used to describe 2,3,7,8-tetrachlorinated dibenzodioxin (TCDD). TCDD is one of 17 similar chlorinated compounds that form the class of dioxins and dioxin-like compounds. Of these compounds, TCDD is the most toxic and, therefore, of most concern. Dioxins are byproducts of bleaching processes that use elemental chlorine to whiten pulp. Because Weyerhaeuser has eliminated the use of elemental chlorine bleaching at all of its mills, its releases of the dioxin compound TCDD in wastewater have been virtually eliminated. Discharges of adsorbable organic halides have also decreased more than 90 percent since 1990.

Some of Weyerhaeuser’s mills use advanced technologies, such as oxygen delignification systems (which remove lignin, a chemical that binds wood fibers together) and extended delignification systems, that further reduce the amount of bleaching chemicals used. As a result of these and other improvements, the concentration of dioxins in treated mill wastewater across the company’s operations has dropped to non-detectable levels.

Further information

Why mandatory reporting has fallen from the EU agenda: Is the pullback on mandatory disclosure symptomatic of a wider reform agenda?

Why mandatory reporting has fallen from the EU agenda

Is the pullback on mandatory disclosure symptomatic of a wider reform agenda?
Barroso: growth = sustainable development?
Barroso: growth = sustainable development?

According to European commissioner Vladimir Spidla, the issue of mandatory reporting will not appear in the next EU communication on corporate social responsibility. Ask the business lobby groups, and they will say it should never have been on the agenda in the first place. Others might suggest that the issue has been dropped in response to the European Commission’s communication earlier this year on the Lisbon agenda’s progress – or lack thereof.

For civil society groups, which have lobbied hard for some form of reporting baseline, confirmation that mandatory reporting is apparently dead in the water will be a major disappointment.

To an extent, the debate surrounding corporate social responsibility reporting is a microcosm of the larger debate dividing the European Commission: whether economic growth should be given higher priority than social and environmental issues.

The arguments underpinning the Lisbon agenda have a similar ring to the old arguments trotted out by industry on corporate social responsibility reporting. Namely, regulation places too great a burden on the private sector – it stifles performance and undermines competitiveness by diverting resources from core business activities. And while European Commission president José Manuel Barroso argues that growth, unfettered by regulation, will deliver on the remaining two pillars of social cohesion and environment, the private sector argues that business, unfettered by regulation, will deliver on corporate social responsibility.

A questionable theory

Before examining this parallel further, it is useful to take stock of the recent shift of focus within the Lisbon agenda. The Lisbon declaration clearly states that economic growth should not take place at the expense of social cohesion, nor should it be the cause of environmental damage. This suggests that growth is inherently at odds with social cohesion and the environment. Yet Barroso now contends not only that growth should take centre-stage; he also suggests that growth itself will enable sustainable development and social inclusion.

A working paper published by the European Network of Economic Policy Research Institutes in response to the commission’s April communication on the Lisbon agenda rejects this idea. The authors demonstrate that a reduction of emissions at higher stages of development is not an automatic process – often because governments turn a blind eye to local problems in order to attract business and investment.

The paper also demonstrates that a trade-off exists between economic growth and social inclusion in that higher employment levels translate into greater inequalities in wealth distribution and income.

Prominent actors in the environment debate, such as the European Environment Agency and the European Trade Union Confederation, argue that a pro-growth agenda that takes precedence over the environment will be to the detriment of sustainable development goals. This is because higher production is usually associated with an accelerated depletion of scarce resources, more local pollution, and higher greenhouse gas emissions.

For the greater good?

Jacqueline McGlade, director of the EEA, says that rather than threatening jobs and growth, over the past decade environmental regulation has led to a more efficient use of finite resources; has stimulated innovation; and has made companies aware of potential constraints on resources, enabling these companies to develop longer-term strategies. Arguably, this has both stimulated job creation within new markets and protected future jobs.

On the basis of these arguments critics are saying that Barroso’s hypothesis is fundamentally flawed. So where does this leave corporate social responsibility in terms of legislation?

At the micro-economic level, McGlade challenges the private sector on the grounds that, by using public goods such as land, air and water, all companies should at some stage be asked to report back on how that public good is being used.

From an economic perspective, as long as public goods continue to have a limited opportunity cost, insofar as companies are not taxed or monitored and fined for non-compliance with baseline environmental and social standards, then it does not make financial sense for a company to behave otherwise.

But Paul Hohnen, a former Australian diplomat at the Organisation for Economic Co-operation and Development in Paris, who is now an independent consultant, says that on the contrary, market expectation of disclosure from the financial sector, the media and NGOs means that reporting is perceived by highly visible players as being mandatory.

Can ‘good will’ go the distance?

Governments in general have often argued that the check and balance provided by NGOs and the media is enough. At present, the OECD Guidelines for Multinational Companies is one of the few reporting instruments that supply a mechanism for holding companies to account. But OECD Watch, a coalition of NGOs, put to test the complaints mechanism of the OECD Guidelines with less than satisfactory results. A report compiled by OECD Watch revealed that of the 32 complaints that were brought forward in recent years, only two cases resulted in an agreed joint statement of outcome between the complainant and the multinational.

Mark Kenber, a policy director at the Climate Group, a coalition of organisations committed to the reduction of greenhouse gas emissions, says that while voluntary initiatives have proven useful to a point, they do not provide the necessary drive for the level of innovation, technology shifts and productivity gains that legislation has been proven to deliver.

So what purpose does reporting serve and can a voluntary approach deliver on this purpose? Alyson Slater, a spokeswoman for the Global Reporting Initiative, a multi-stakeholder process to develop sustainability reporting guidelines, says corporate social responsibility reporting provides companies with a powerful internal management tool and a risk analysis framework. She says that if some form of reporting standard existed, governments could also use this information to gain a greater insight into sustainability issues and whether or not policies were working. But at present, the usefulness of reporting goes no further than that of a management and communications tool.

Slater suggests that while mandatory reporting has been scratched from the forthcoming commission communication on corporate social responsibility, this does not necessarily mean that the issue had been dropped definitively. On the contrary, she says that down the road some form of regulation within reporting is inevitable, pointing out that several key European nations, such as France, already have some degree of mandatory reporting.

But for now, the fact remains that the European Commission is stalling on introducing disclosure rules within the sphere of corporate social responsibility. The reasons for this are unclear. Some suggest that the raft of existing environmental and social regulations already in existence at both national and EU level have given rise to concerns of overlap. Others say it is because environmental and social issues simply are not high on anybody’s agenda; that elections are not won or lost on environmental and corporate behaviour issues. Another angle is that many companies have realised gains through corporate social responsibility and are happy with the status quo – any commotion is coming from the laggards, for whom compliance with social and environmental related regulation would prove costly.

Whether regulation is a good or a bad thing, one thing that most corporate reporters agree on is that corporate social responsibility reporting has been useful in enabling organisations to step back and assess how their actions affect their reputation, their labour environment and consumer perceptions. This in itself has conferred on these companies a competitive edge. With this in mind, companies and politicians might do well to remember that business introspection, however stimulated, can spur rather than hinder growth.

Useful links:

Times are changing for companies whose view of paying tax is that it is an element of corporate philanthropy they can do without

Taxing times

Times are changing for companies whose view of paying tax is that it is an element of corporate philanthropy they can do without, writes Mallen Baker
KPMG: under the tax spotlight
KPMG: under the tax spotlight

There has never been a shining business case for simply giving money away.

At least when you’re talking about corporate philanthropy you might expect that your employees will love you for it and your reputation will benefit. But what about when the process of giving carries another name – that of paying tax?

Without tax receipts, government in a civilised society is not possible. However, citizens expect within the law to be able to order their affairs to pay the least tax and historically this has been an accepted principle. The remarkable success of some companies in avoiding the payment of tax has shifted expectations to a new level and – business case or not – questions are now being raised about how much tax the responsible business should pay.

The focus has become sharper following the scrutiny and legal rumblings in the US over tax services provided there by KPMG, as well as the other main accounting bodies. There, the issue is one of illegality. Email evidence suggested a straightforward financial calculation by former employees of expected profits against likely levels of fines.

The line between what is legal and what is not is often a huge grey area, which a business has to navigate.

A responsible business is one that first and foremost makes a profit, and I can’t see any emerging business case for seeking to maximise your tax liability. If you go broke, you pay no taxes at all. If your profits plunge, the impact on savings and pension funds hardly supports the public good. And it is not as though most governments are themselves models of efficiency whose operations make the case that more tax equals more public benefit.

Hidden liabilities

None of that justifies the use of sophisticated tax avoidance to reduce liabilities beyond what is reasonable. Until now, not even those within the corporate social responsibility movement have pressed this point, faced with the hopeless business case attached to it. In recent times, however, other voices are beginning to be raised.

As the KPMG case shows, today’s tax advantage may be tomorrow’s hidden liability. Financial analysts are beginning to see that lack of transparency in tax means that a number of businesses are being seriously over-valued in the marketplace. Companies in this position may find themselves in the uncomfortable state of suffering significant re-valuations as they come under scrutiny.

It is a particular risk because it is the one area of corporate activity in which the legal authorities can be expected to take a keen interest – it mostly pays their wages, after all. The growth in tax havens has led to increased scrutiny by authorities, with agreements being formed between countries to investigate tax practices by multinationals.

This underlines one point – that in the developed world governments can largely look after their own interests and the issue is therefore mostly about managing risk. Where the focus for responsible business sharpens is in the field of business behaviour in the developing world. This is not an easy question.

In some areas, companies paying less tax are depriving the governments in those areas of receipts needed to tackle fundamental social problems. In other areas, companies paying tax are seen as supporting the activities of repressive regimes and lining the pockets of rich elites.

More work needs to be done on establishing what are levels of fair and efficient tax. Tax vehicles are so many and various that simple pronouncements of principle are naive. At what point do we expect a chief executive to tell the company’s AGM “we could have avoided this tax, but we thought the right thing to do was to pay it”?