Corporate Responsibility 2003 -- Year in Review

Corporate Responsibility 2003 -- Year in Review

2003 was a fascinating year for those of us involved in the movement for corporate social responsibility. There have been scandals and setbacks, controversy and debate, paragons of good practice, and innovation in tools to manage and benchmark progress. It seems that none of the energy or momentum for improvement has diminished. And yet there is a gradual growing maturity in how CSR is described and put into practice.

At the start of the year, the Nike v. Kasky case got into full swing when the U.S. Supreme Court agreed to review the California Court's decision. Opponents of the principle of the Kasky case -- that corporate representations on issues around their conduct enjoyed less protection under freedom of speech than that afforded to the critics -- were hopeful this move would lead to the case being thrown out.

Various companies watched nervously from the sidelines as a range of organizations that have championed the principles behind open disclosure weighed in to lobby for the case to be defeated. In the end, of course, the Supreme Court had tantalised to no great effect -- deciding only to not decide for the time being. Faced with an extended process that could easily have seen a barrage of damaging publicity about past practice and mistakes, Nike settled -- leaving the principles of the case wide open.

On the one hand, those concerned for future accountability retain cause for concern. In spite of the settlement, Nike are not going ahead with their public reporting. On the other hand, there has not yet been the unleashing of a flood of copycat actions targeting any and every challengeable public pronouncement. The key word in that last sentence is 'yet', of course.

Nestle settled its claim against the Ethiopian government, digging itself out of its hole by agreeing to take only $1.5m instead of the $6m it had initially demanded, and then immediately donating this sum to famine relief in the poverty-stricken country. The company had received a barrage of negative publicity for its action, although it stuck to its principle that a government should not be sent the signal that it can simply move in and nationalize a company's operations with no compensation whatsoever. It had a strong point -- but lost the public sympathy nonetheless. It was not helped by yet another report, this time published in the British Medical Journal, which alleged continuing violations of codes of practice on baby milk substitutes.

In the U.K., Business in the Community launched the results of the first Corporate Responsibility Index, ranking 122 participant companies into quintiles based on their management of social responsibility. The Index made an immediate impact, with a number of high-scoring companies celebrating their good performance with references on their website and in their subsequent reports. On the other side, some companies that found themselves less highly placed were shaken into response -- either to promise to improve, or to attack the index methodology (the latter generally from media companies, who claimed that the benefit to society of their core activities was not properly captured).

The Ethical Trading Initiative saw a little turbulence when Littlewoods -- a founding member -- dropped out of the initiative following a management takeover. The NGO heads involved with the ETI immediately raised questions about the risk of taking part in such programs when they immediately and publicly attacked the company rather more vociferously than they had ever attacked companies that had never been supporters in the first place. Littlewoods survived the assault just fine -- although the experience probably won't lead them to review their decision any time soon.

The momentum against companies associated with the growing problem of obesity increased, with a second lawsuit against McDonald's where some of the overweight citizens of New York decided the company's advertising had mislead them into believing its burgers were healthier than they really were. The case was thrown out -- but the concept of corporate responsibility for obesity had been planted in the mind of the public, and generated a series of articles, comments and threatened legislation in different parts of the world.

Having held out for some time, companies joined a growing retreat from some of the most dubious countries for human rights violations. First of all, Saks Inc announced a policy against sourcing products for its ten major retail chains from Burma. Then, Lundin Petroleum -- having said for months that it would not follow Talisman Energy out of the Sudan -- did just that. Travel group Kuoni announced that it would remove Burma from its 2004 travel brochure. JJB Sports said it would withdraw stock manufactured in Burma. Eventually the highest profile hold-out of them all, British American Tobacco, caved to the pressure and said that it too would pull out of Burma. Ironically, according to the Business Respect poll, 68% of people thought that all of these companies should have stayed and tried to use their influence to make things better!

Needless to say, there was a steady stream of stories on the tobacco front. Pakistan Tobacco shocked and annoyed its critics by announcing that it was to voluntarily halt its advertising in electronic media in order to meet the 'reasonable expectations of society'. Too little too late, said the critics, as they did later when Philip Morris International began to include extra, detailed information on the health impacts of smoking in its packaging. BAT provoked outrage when it donated money to the University of Capetown -- mirroring a similar situation the previous year when the lucky recipient had been the department of corporate social responsibility in Nottingham University. The companies continued to get hammered by lawsuits, with Philip Morris in particular facing at one point an astonishing $10bn penalty for failing to effectively communicate risks attached with 'light' cigarettes. Such figures have generally been reduced on appeal, and yet provide a specter that hovers over the industry.

Companies also stepped up to the challenge of HIV/AIDS in Africa, with companies such as Gold Fields, Anglo American and others extended their initial support in providing anti-retroviral drugs for their employees to the families of those employees, and increasingly out into the local communities as well. The pharmaceutical companies made further concessions as well. GlaxoSmithKline, for instance, reduced the price of Combivir by nearly 50% to 90 cents per day.

On the downside, companies found themselves constantly in hot water over the issue of Executive Remuneration, with grumbles about inflated pay and benefits deals rising to a steady roar, and culminating in the U.K. in the first ever instance of such a deal actually being voted down at the AGM -- that dubious honor going to GlaxoSmithKline.

Governance generally saw considerable focus around the world. Sarbanes-Oxley continued to have reverberations in how U.S. corporations conduct themselves. In the U.K., the Higgs Report on the role of non-executive directors was met with controversy, but the main principles made it nonetheless into the revised Combined Code. In South Africa, listed companies were told that they had to comply with the King 2 Report. Unilever, however, managed to turn the debate on its head by complaining that shareholders needed to be more active -- urging more of them to actually vote at its AGM.

In amongst these, there were lawsuits flying around thick and fast, companies that joined the roll-call of corruption and bad practice, and to balance that hosts of awards that saw companies celebrated for good practice. This included the first year that the Business Ethics Awards saw a host of small companies honored, and the inauguration of the Asian Forum on CSR Awards. Construction firm Carillion became Business in the Community's Company of the Year, and Westpac topped the bill at just about everything it took part in.

More companies produced social and environmental reports in 2003 than in any previous year -- and the debate about the future of reporting started to seriously question whether the existing model was really a sustainable activity for business. New tools and standards appeared, or are promised, with the U.N. Norms on business and human rights and the ISO standard on CSR being two cases in point.

So that was the year that was. The real question of interest must be what all this says about what is likely to happen in 2004...

--------
This column has been reprinted courtesy of Ethical Corporation.