Business Respect

Business Respect - CSR Dispatches No#109 - 18 Mar 2007

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An email newsletter with news and discussion focusing on corporate
social responsibility globally, looking at the companies in the news
and the emerging issues. Linked to the website at
http://www.mallenbaker.net and produced every two weeks.

In this issue, we consider the recent initiative to introduce carbon
labelling for products.

In the news:

1. US: Wal-Mart backs down over in-house bank
2. Japan: Livedoor boss found guilty in fraud trial
3. UK: Carbon labelling scheme for products launched
4. Germany: BMW chief executive attacks EC emissions targets
5. Gore targets investors on sustainability
6. Colombia: Chiquita says it paid criminals for protection
7. US: Charges dropped against former Hewlett Packard chair
8. India: Campaigners attack Tata's clean up offer at Bhopal
9. UK: Private equity companies to produce voluntary code on
disclosure

Feature articles on the internet:

1. Private Equity versus Public Trust - 15 Mar 2007 FROM Seeing the
Possibilities

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Topics:

Welcome
CSR News 18 Mar 2007
CSR FEATURES from the internet
Buying into carbon reduction

Want to read a hyperlinked version of this issue? You can find one on
the website at http://www.mallenbaker.net/csr/nl/109.html.

Copyright 2007 Mallen Baker. All rights reserved. For information on how
to subscribe, go to http://www.mallenbaker.net/csr/nl/subscribe.html.

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Welcome

* Is the recent announcement that certain products will carry a label
indicating how much of a 'carbon footprint' the product has a
revolutionary step towards the future, or a misplaced initiative that
will fail in the face of consumer confusion? We consider the question
in this issue's lead feature.

The subject is not so very far away from the focus for the current
website vote. If you recall, the question and current answers look
like this:

Recent announcements by the big supermarkets about environmental
practices represent:
A real shift towards sustainable practice 37 (17%)
A small step only, with much more needed 106 (49%)
Nothing but cynical public relations 74 (34%)

Thanks to the 217 people that have voted so far. There is still time
to make your voice heard!

Mallen Baker
mallen@mallenbaker.net

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CSR News

* US: Wal-Mart backs down over in-house bank

Wal-Mart has withdrawn its application to create an in-house bank
after the controversy provoked by the move threatened to result in an
approval process that would last years not months.

The company blamed a "manufactured controversy" over its plans to
obtain a US banking licence, arguing that it had never entertained
plans to enter into competition with the mainstream banking sector,
only to reduce credit and debit card transaction costs. The company
said it would now seek "other ways to serve customers".

The attempted move into financial services had provoked a wide
coalition of unions, consumer groups and some state-level banks to get
together to lobby the finance authority not to grant the licence.
After more than 1,900 letters had been received about the application,
the decision had been taken to hold public hearings.

* Japan: Livedoor boss found guilty in fraud trial

Takafumi Horie, the former boss of internet firm Livedoor, has been
found guilty of fraud following a high profile trial that has seen the
company dubbed 'Japan's Enron'

Horie was sentenced to two years and six months in prison. Unusually
for Japanese corporate scandals, he pleaded not guilty and says he
intends to appeal. Often in the past, executives have confessed in
return for more lenient sentences.

The judge said that Horie had overseen a network of decoy investment
funds intended to manipulate the company's accounting and evade the
law.

Horie's distinctive personal and business culture made him a popular
figure with many, but put him in conflict with the country's
conservative business establishment. As a result, the trial attracted
great public interest, and the verdict was broadcast live on Japanese
television.

* UK: Carbon labelling scheme for products launched

A labelling scheme to show the carbon footprint of individual products
to help customers choose what they buy is to be launched in the UK.

Walkers crisps will be among the first products to carry such a label,
along with certain ranges of Boots shampoo and Innocent smoothies. It
not only gives information about the carbon 'footprint' of the
product, but it shows the company's commitment to reduce the figure.
If companies fail to reduce the footprint over a two year period, the
label may be withdrawn.

The scheme is to run on a trial basis for a year and is being promoted
by the Carbon Trust.

* Germany: BMW chief executive attacks EC emissions targets

Norbert Reithofer, the new chief executive of BMW, has attacked
targets set by the European Commission for fuel emissions as
"physically impossible" and "economically unsound".

The comments refer to plans to impose a limit of 130g per kilometre on
CO2 emissions from all new cars by 2012. The german car industry,
dominated by luxury brands such as Mercedes-Benz, Audi and BMW, has
been active and vocal in a campaign against the controls proposed by
the EU environment commissioner Stavros Dimas.

Mr Reithofer argued that different vehicle sizes should be given
different limits, reflecting best practice for those vehicle types.
Since small cars make up the largest part of the market, they would
have to make a proportionately greater contribution.

BMW says it has cut fuel consumption across its fleet by 30 percent
over fifteen years.

* Gore targets investors on sustainability

Former US Vice President Al Gore has urged investors to consider
climate change factors when making investment decisions.

Speaking at the National Association of ension Funds conference in
Scotland, he criticised companies whose business plans were "blind to
the carbon consequences" of how they did business. Increasing
environmental damage, he said, would have a negative impact on the
profits and performance of companies.

Companies that invest for the long term should find it easy and
profitable to integrate sustainable factors into how they analysed
potential investments.

* Colombia: Chiquita says it paid criminals for protection

Banana firm Chiquita Brands International has said that it paid
'protection money' to a terrorist group in Colombia after threats had
been made to staff.

The company is to pay a court settlement of $25m following an inquiry
by the US Justice Department after it had admitted that it paid about
$1.7m to the United Self Defence Forces of Colombia, which is listed
by the US and the EU as a terrorist organisation which has carried out
massacres in his recent past, although it is now involved in the peace
process.

Chiquita said it had only acted out of concern for the safety of its
employees. It has since sold its Colombian banana operations. The
company had initiated the inquiry when it approached the US Justice
Department four years ago.

* US: Charges dropped against former Hewlett Packard chair

Criminal charges brought in connection with the corporate spying
scandal at Hewlett Packard against Patricia Dunn, former chair, have
been dropped.

The action had been taken after it was revealed how she had launched a
vigorous internal campaign to identify the source of a boardroom leak,
leading to the use by private investigators of tactics that were held
to have invaded the privacy of the individuals at whom they were
directed. The revelation led to Ms Dunn resigning her position.

She had been accused, along with three others who have entered 'no
contest' pleas, of conspiracy and unauthorised access to computer
information.

* India: Campaigners attack Tata's clean up offer at Bhopal

Campaigners have demonstrated against the offer by Tata Group to pay
for, and clean up, toxic waste left by the 1984 gas leak disaster in
Bhopal. The company was accused of seeking to let Union Carbide off
the hook and pave the way for its new owner Dow Chemical to return to
India.

Around 100 people took part in a protest following Tata Group chairman
Ratan Tata's letter to the Indian government offering to set up a
trust fund to clean up the contamination. The site has been deeply
controversial throughout the decades following the incident at what
was then a pesticide factory, claiming 22,000 lives.

The protesters insist that Dow Chemical should itself clean up the
site, and that the Union Carbide officials at the time should be
punished.

* UK: Private equity companies to produce voluntary code on disclosure

The private equity industry has responded to attacks in recent months
with an agreement to produce a voluntary code that will improve the
disclosure of businesses privately owned.

The announcement by the British Venture Capital Association showed
that the sector is taking seriously the growing levels of criticism by
groups that fear the increasingly powerful companies are destroying
jobs and value for short term returns.

Senior private equity managers argue that they actually help to create
jobs by building more financially successful businesses. The move for
disclosure reflects the growing understanding that lack of information
is a barrier to such claims being accepted.

Unions criticised the announcement for relating to the companies owned
by the private equity firms, not the private equity firms themselves.

CSR FEATURES from the Internet

* 1. Private Equity versus Public Trust - 15 Mar 2007 FROM Seeing the
Possibilities

On both sides of the Atlantic, in Europe and America, private equity
finance firms are having the best of days and the worst of days. Over
the past weeks we have witnessed record-breaking deals and buy-outs.
Ever new acquisition targets are being announced as high street
brands, media companies, public utilities and household names are
being taken private, often into the commercial intensive care wards.

http://www.seeingthepossibilities.com/?p=53

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* Buying into carbon reduction

Article by Mallen Baker

In the UK, the Carbon Trust has launched a new approach to raising
awareness and giving consumers information - carbon product labelling.
The approach is to be trialled with Walkers crisps, several Boots
cosmetics and Innocent smoothies via their website. With Tesco having
separately committed to carbon labelling for a wide range of its
products, it seems like this is the way of the future.

Interestingly, the Carbon Trust scheme is not purely descriptive -
companies that take part commit to not only report, but to reduce, the
carbon impact of their product. If they don't do this over a two year
period the label will be withdrawn by the Carbon Trust.

The move followed a report by the Carbon Trust last year that broke
new ground by showing how carbon emissions are produced by product
type, rather than the traditional way of showing them by industry
sector. This showed that recreation and leisure represents the largest
part of UK consumer emissions at 31.6 MtC. Following a little way
behind and more or less bunched together with equivalent contributions
are space heating, food and catering, household and health & hygiene -
all in the low 20s. Clothing and footwear comes in at 16MtC, with
commuting trailing at 13MtC.

Aggregated figures hide a lot, of course. But this approach to
weighing up carbon footprint makes a great deal of sense. Traditional
sector-based approaches to attributing carbon impact give energy
producing companies a vast footprint compared to the rest - a fact
that leads many to describe them as the biggest 'part of the problem'
and 'difficult industries'. Of course, it is consumers who - in one
shape or another - consume this energy either directly or embedded in
the products we consume so this approach has always seemed really just
a convenient way of passing the buck.

If you switch it to allocate energy emissions to the areas where they
are actually used, you see construction, retail distribution, hotels
and catering, wholesale distribution and health & veterinary services
at the top of the consumption chain.

But how important is carbon labelling actually going to be in reducing
carbon emissions? Do we really think that consumers will switch
brands, or maybe begin to abstain altogether from certain products
because of the information they receive about the carbon footprint?

The jury is definitely out, and the current trial being undertaken by
the Carbon Trust won't give us this information, since people won't
have the basis to compare across brands until the mark is much more
widely used. When Tesco finally begins to deliver on its commitment to
use a similar mark across thousands of products, perhaps we will then
begin to see.

There are some obstacles that can be predicted. First of all, people
have little point of reference. So we now know that a 250ml bottle of
Innocent Drinks' Mangoes and Passionfruits smoothie has a carbon
footprint of 294g. What we don't really know is whether that's good or
bad. Few people can really envisage what it means to emit 100g of
carbon.

In the UK at the moment there has been furious fuss and debate over
another form of labelling - food nutrition labelling. Some companies
have been using a form of labelling that gives percentage figures on a
number of counts for recommended daily amounts. The government's
preferred form has been a 'traffic light' system, with red, amber and
green indicators for each measure to encourage consumption of
healthier foods. It may well be that there will be pressure from some
for a similar approach here. The problem is that establishing for
every product type what would fall into which category would be long,
detailed, and contentious.

In some ways, the Carbon Trust label neatly sidesteps this by ensuring
that the mark carries with it a commitment to reduce the impact, with
a threat of withdrawal if reductions are not achieved. So whether you
know that the figure given is good or bad, at least you know the
company has committed to improvements.

I am not so sure this is a good thing. It turns the initiative from a
descriptive label, providing information that gives consumers the
power to choose, into being an endorsement mark. Any company carrying
the carbon label will be promoted de facto as being good because of
the commitment they have made to reduce. The confusion between an
information system and an endorsement mark may mean that neither is
done very well.

The power of an information label is that you should be able to
persuade all manufacturers of all products eventually to buy into it,
or ultimately as the debate moves on over the years it may even become
required. That way, you can make comparisons.

However, if it is a much more exclusive club, where companies that can
reduce their emissions easily will buy in, it will inevitably have a
smaller take-up and the risk then that fewer consumers will recognise
it. It runs the risk of penalising the early mover company that took
action some years ago to reduce its carbon footprint and can now only
make further improvements at high cost, and rewarding the late
arrival, who can improve through a number of easy wins. All in all,
whereas there is a good argument to have an endorsement brand for
those companies that do well in this area, it should probably be
something different to the informational carbon label itself.

But actually the main benefit of carbon labelling doesn't come from
any of the above. It's most powerful contribution in the short term
will be to raise awareness and understanding amongst consumers to lead
them to better accept and support necessary public policy to mitigate
climate change.

Five years ago, we pretty much knew what we now know about climate
change. And yet, as far as most people were concerned it was
invisible, untouchable, unsmellable - some scientific thing that might
impact on grandchildren or grandchildren's grandchildren.

Now, the physical signs are evident. They have seen footage of melting
glaciers, and experienced abnormal weather patterns, and they are
beginning to understand that something is going on. It has become
real, and personal. This however, is only a start.

The power of carbon labelling is that whenever they go to shop, they
will see evidence of the importance of this issue. It will underline
for them that this is something serious. It won't matter so much
whether they then choose one product over another. It will matter more
whether they support higher fuel duty, or airport taxes, or a range of
other things that are calculated to get us living within our means. At
the moment, such support is by no means guaranteed.

No elected government, and no global governance institution, has put
forward a platform of people making do with less, for obvious reasons.
In most cases, it is going to be about finding innovative solutions to
reduce impact by enabling people to continue to have the things they
currently have, but differently. But in some instances, the solution
simply won't be that easy. Politicians will never have the courage to
act on these unless the public is ready for them. Carbon labelling is
more about readying the way for necessary action than it is about what
kind of washing powder you choose to use.

Because ultimately, at some point consuming unsustainably will need to
be removed as a legitimate consumer choice.

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Business Respect - CSR Dispatches No#109 - 18 Mar 2007