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Three weeks ago, Gap Inc. got a call from a journalist in India with some damning allegations: The San Francisco-based clothing company was contracting with a manufacturer that used child labor.
Not unfamiliar to child labor problems, the company immediately formed a team to deal with the situation. But the team wasn't headed by the public affairs department -- it was headed by an in-house lawyer, said Wilma Wallace, associate general counsel at Gap, who told the story Thursday at the General Counsel West Coast Conference in San Francisco.
Wallace and others on a panel called "Corporate Social Responsibility: The Real Issues" emphasized that in-house lawyers should be involved whenever a company is the target of human rights allegations or anything else that might foment activists and concerned consumers.
"At one time, this was the province of public and government affairs," said Charles James, top lawyer at Chevron. "Now it's migrated to the general counsel."
Difficult situations, like the one Gap faced, can be just as risky as any lawsuit.
Because the company has dealt with "ethical sourcing issues" -- as Wallace likes to call them -- the in-house lawyers tried to get out in front of the problem, she said. They launched an investigation in India and quickly confirmed what the journalist had told them. Then they talked with nongovernmental organizations to explain that they hadn't known it was happening and that they were taking steps to remedy the situation.
"The success was attributed to third parties reaching out and speaking on our behalf so we didn't have to," Wallace said.
Chevron's James said the Gap incident illustrated that the biggest issue in corporate responsibility is not what's going on at the company but instead what's going on with third parties that contract with the company.
Another threat, James said, is corporate campaigns -- focused efforts by activists that want to change companies. James laid out the "vicious circle" created by corporate campaigns where a big event, like a boycott or a strike, is followed by demands, which if met are followed by shaming the whole industry into doing the same thing, which is followed by turning the "concessions" into laws. And then it begins again.
James said companies that do "capitulate" to the demands of activists often use it to their advantage by trying to pass on the costs of whatever changes they've made to the rest of the industry.
He advised in-house lawyers to pay more attention. "I think general counsel are very unknowledgeable about these issues," James said.
Ronald Perkowski, senior counsel at Halliburton, sat on the panel along with Wallace and James.
CEOs are under more pressure than ever to incorporate
environmental, social, and governance (ESG) practices into their core
strategy — and as many as nine in ten are up to the challenge,
according to a McKinsey survey.
An artcile (MCKINSEYceosonstrategyandsocialissues)
in the October issue of McKinsey Quarterly summarized the survey
findings, reporting that 90% of the CEOs said they were doing more to
address ESG issues than they did five years ago. An overwhelming 95%
said public expectations for corporate responsibility are higher now
than they were five years ago.
In addition, many survey respondents noted that consumers punish companies that don't meet their expectations for corporate citizenship. Surprisingly, the CEOs ranked employees as having the most impact on a company's ethical reputation, with consumers coming in second. In five years, however, CEOs expect consumers to overtake employees as the single stakeholder group with the most influence.
Globalization and the emergence of powerful economies in China and India have complicated the landscape, as corporations are called upon to deal with a variety of social norms and expectations on ESG performance. Companies that successfully navigate these issues not only minimize risk but also gain competitive advantage, according to the study. "Water is the biggest issue for our company right now," said the CEO of a packaged-goods company. "The ability to do business in water-stressed areas is critical for us right now."
Despite the obvious advantages of good corporate citizenship, most companies struggle with competing priorities, such as shareholders' demand for short-term financial performance. Fewer than 20% of CEOs surveyed said current financial markets are equipped to take ESG issues into account. While standards do exist, they "have yet to become benchmarks to look up in the Wall Street Journal," said one CEO.
The most common refrain was that, while companies are doing more to incorporate ESG into core strategy, they are still not doing enough. While 72% of CEOs said ESG performance should be a pillar of company operations, just half said their own companies actually do this. The numbers were lower for supply chains: 59% said ESG should be enforced upstream, compared to 27% who said they have actually tried this approach.
The article concludes that while barriers to ESG "seem very hard to overcome," the report's authors were struck by the level of creativity and innovation companies are displaying in addressing key environmentally challenges.
Source: CSRwire
Target Joins Wave of Other Retailers & Companies Moving Away from PVC, a Major Source of Exposure to Lead, Phthalates and Dioxins
After a campaign by the Center for Health, Environment and Justice (CHEJ) and a coalition of health and environmental organizations, Target has agreed to systematically reduce its use of polyvinyl chloride (PVC) plastic, commonly known as vinyl. The company is reducing PVC found in many of its products including infant products, children's toys, shower curtains, packaging and fashion accessories. PVC products commonly contain toxic additives such as lead and phthalates and are often made in China.
Target, the fifth largest U.S. retailer with $59 billion in annual revenue, is joining a growing list of dozens of companies including Wal-Mart, Microsoft, Johnson & Johnson, Nike, and Apple that are eliminating or reducing its PVC products and packaging. Wal-Mart just reached its two-year deadline to eliminate PVC from the packaging of its private brand products.
Previous testing has detected lead in a broad range of PVC consumer products including toys, lunchboxes, baby bibs, jewelry, garden hoses, mini blinds, Christmas trees, and electronics. Wal-Mart recalled PVC baby bibs and lunchboxes containing lead, and Toys R Us recalled PVC baby bibs containing lead.
Over ninety percent of phthalates, reproductive toxicants, are used manufacturing PVC products and are commonly found in children's vinyl toys. Last month California joined the European Union in banning phthalates in children's and infant's products. A similar ban has been introduced in Congress and in six other states.
Target will reduce PVC beginning with their owned brands. They will also work with other vendors and suppliers whose products are sold at Target.Target is taking the following steps in their owned brands:
- Eliminating PVC from a number of infant products and toys. Target children's eating utensils and lunchboxes are now PVC-free. Target baby bibs will be PVC-free by January 2008. Target is phasing out phthalates in most of their toys by Fall 2008 and eliminating phthalates in baby changing tables by January 2008.
- Replacing many PVC/Vinyl shower curtains with ethylene vinyl acetate plastic. Target expects 88% of its shower curtains to be PVC free by spring.
- Target will be 96% PVC-free in their placemat and table linen categories by Spring 2008.
- Target soft-sided coolers are now PVC-free.
- Reducing PVC in packaging. Target is reducing PVC packaging in the company's Target brand dinnerware, travel accessories, toys and sporting goods. For food packaging, Target has a requirement in place to avoid the use of PVC when possible. In the electronics category, Target is replacing the PVC clamshell with a modified paperboard/plastic packaging. The company is asking their vendors to reduce the amount of packaging on their products and use materials that are easily recyclable.
- Target has engaged their merchandiser buyers through a new Sustainable Products Guide, which includes a section on PVC.
"Since millions of toxic toys were recalled, parents are now looking for safer products for their children. Companies should ensure that customers are not rolling the dice with their families' health in the check out aisle. Target is doing the right thing by moving away from PVC and switching to safer alternatives," said Lois Gibbs, Executive Director of the Center for Health, Environment and Justice.
CHEJ and partner organizations held over 230 events at Target stores across the country. CHEJ's online video "Sam Suds" was seen over 50,000 times in the first month it was released. In 2006, 16 institutional investors wrote Target urging them to eliminate PVC. At Target's 2007 annual shareholder meeting, CHEJ addressed the CEO and ran an advertisement in USA TODAY. Target has been contacted by over 40,000 concerned individuals about PVC.
The Center for Health, Environment and Justice is a national nonprofit organization that was founded by Lois Gibbs in 1981 who won the nation's first community relocation of 900 families due to a leaking toxic waste dump in Love Canal, New York.
http://www.besafenet.com/pvc/media_resources_for_target_and_pvc.htm
Source: www.sustainablelifemedia.com
Reckitt Benckiser, a major manufacturer of cleaning and personal care products, has kicked off a new carbon-reduction effort that targets emissions not only from manufacturing operations but from raw materials and product use as well.
This "cradle to grave" approach measures the carbon impact of raw and packaging materials, manufacturing, logistics, and distribution, plus consumer use and disposal of products, which may have the greatest carbon impact.
The program, called Carbon 20, aims to reduce carbon emissions by 20% per unit by 2020. The company has outlined four key elements of the program:
"This different approach targets more than just the easy wins under our direct control like factory emissions or travel," says Bart Becht, CEO of Reckitt Benckiser. "It will require real partnership across our business and with our business partners to reduce energy consumption; and education and communication with consumers to enable them to tackle their own impact which can be the largest part, particularly where laundry or dishwashing machines are involved."
Reckitt Benckiser says it will work with external experts, including the Carbon Disclosure Project’s new supply chain initiative, to implement a carbon measurement system for the entire product lifecycle.
More needs to be done to ensure that the homes of the future are sustainable and that there are enough of them, according to a new report released by the Housing Corporation.
While a number of house building companies believe that issues concerning climate change are relevant to the sector, they do not fully understand how their carbon footprint impacts on the environment.
Currently, just 15 per cent of firms have "sustainable procurement polices", the survey claimed.
As the government has stated that it wants to see zero-carbon homes put in place by 2016, the report noted that "the sector will need to change very rapidly if it is to meet government targets".
The Housing Corporation added that the government should increase its support to the industry.
In total, at least six in every ten people know about climate change and global warming, according to a report carried out by the Department for Environment, Food and Rural Affairs.
Download the report: http://www.housingcorp.gov.uk/upload/pdf/building_sus_future.pdf
Freedom of Information campaigners the Open Society Institute (OSI) accused the ODA of failing a "basic anti-corruption indicator" by allowing the group only 90 minutes to examine its register of gifts and interests.
OSI researchers spent six months trying to obtain details of gifts offered to ODA staff. They were initially refused on the grounds that disclosure would violate the privacy of public officials. Last month the OSI was given the chance to view the records at the ODA headquarters, but researchers were only allowed to transcribe them by hand. Hospitality offered to Olympics staff included tickets to the Last Night of the Proms, the Heineken Cup rugby final and the Stella Artois tennis tournament. Its records do not indicate whether these offers were taken up or not.
Heather Brooke, OSI UK project director, said: "The greater amount of public money involved, the more susceptible a project is to corruption. It is very surprising to find that a project of the magnitude of the Olympics is failing in such a basic anti-corruption indicator.
"It's important for the ODA not to just do the right thing, but be seen to do the right thing," she added.
The ODA said in a statement: "We have strict rules for all members of staff. Employees and their families are not permitted to receive any form of hospitality from any third party participating in an active tender for the ODA's business. Occasional hospitality from partners with who we are already working closely is not unusual and can be important to help build relationships on what is a very challenging project."
There is no allegation that any corruption has taken place. The ODA's procurement policy states that the register will be able to identify any potential conflicts of interest and will seek information about them at the "early stages" of any procurement. Brooke said the "backward" approach to transparency must be improved if the contract award process was to be above suspicion.
The ODA said if it were to release the records in hard copy to campaigners, it would delete the names of those staff offered gifts. But Brooke argued the "whole usefulness" of the register would be taken away.
It must have seemed like Christmas had come early for former Ikea buyer John Brown as he received kickbacks of more than £1 million to ensure he bought goods including crackers and candles from companies owned by one individual.
But the festive spirit quickly vanished when Brown was jailed along with Adam Hauxwell-Smith and Paul Hoult after admitting corruption and fraud charges last month (News). The case bears witness to what can happen when buyers give in to temptation.
Corporate fraud is a fast-growing problem for UK business, according to the 2007 Global Economic Crime Survey from PricewaterhouseCoopers (PwC). It says the annual cost of financial crime to the average organisation has jumped from £800,000 to £1.75 million in just two years. And one in 10 UK firms reported they had lost a business opportunity to a rival because of it.
These findings come hot on the heels of KPMG research earlier this year, which found that purchasers are responsible for 9 per cent of global fraud cases. But earlier this year an SM poll revealed that only 12 per cent of buyers believed fraud was a growing problem, compared to 50 per cent who did not (News, 24 May).
So are buyers too complacent about the possibility of financial crime within their organisations?
Yes, according to Andrew Gordon, partner in forensic services at PwC. He says most UK firms (not just their buyers) are in denial about the issue. He believes the growing complexity of IT systems, an increasingly mobile workforce and, above all, a globalised market are responsible for the increase in corruption. He adds that while only 17 per cent of the firms surveyed believed they would become victims of economic crime, nearly half had been victims in the past.
Yet Gordon is hesitant to apply the same charge to buyers that he applies to the wider business community. "Procurement is such an obvious area for fraud to take place that most companies have put restrictive controls around the area. To an extent, that will have cut down on fraud and forced it elsewhere," he says. His argument backs the view of many of the buyers polled by SM, who argued that the introduction of e-procurement and the view of purchasing as a way to generate savings meant greater scrutiny.
Richard Abbey, head of the London financial investigations group for risk consultants Kroll, agrees. He adds that because suppliers' margins have been squeezed it had reduced their ability to pay kickbacks. Recent research by Kroll indicates buyers may have a point. Whereas 49 per cent of companies felt their firm was at risk from procurement fraud, only a fifth fell victim to supply or purchasing deception.
So how might an organization recognise scams occurring in its procurement department? Signs might include transfers of money at unusual times or individuals reluctant to hand over or delegate responsibilities for a particular account to a colleague.
Procurement consultant Eric Evans points out that supplier collusion is only one kind of procurement fraud. Managers should, he says, also be alert to suppliers defrauding buyers by providing substandard stock or, more frequently, buyers blackmailing suppliers by threatening not to renew contracts.
Hitesh Patel, director of KPMG forensic, says that in times of economic slowdown and high levels of personal debt, organisations should be on their guard. "Procurement processes have been strengthened in recent years. But processes are managed by humans and human behaviour is driven by pressures," he says. "As companies scale back and rationalise operations it can drive people in procurement to cross the line."
Indeed, PwC's survey indicates that fear of losing a job was held responsible for nearly twice as many cases of fraud as in 2005. But the motivating factor is often more basic than that. As judge Patrick Eccles told Brown: "Your moral compass was broken by greed."
The survey of 100 buyers found 41 per cent think procurement wants to maintain an air of secrecy about what the function involves. Some 37 per cent disagreed, and 22 per cent of buyers said this only happened sometimes.
But most agreed being secretive about the purchasing process was short-sighted and causes problems with peers and suppliers.
Many buyers linked professionalism with openness about their role. "I can't believe procurement professionals would ever want to be secretive about what they do," said Robin Hunt, director of procurement at the University of Surrey. "We need a culture of mutual trust if we are to truly add value. We should not be afraid of helping our customers and suppliers learn more about the procurement process."
Susan Davis, supply and inventory manager at Rexel Senate Electrical Supplies, agreed: "Suppliers who understand how we work are more able to respond to our needs and requirements. So what if good procedures are copied by competitors? They are only a part of what makes a good purchaser."
There were a number of reasons put forward to explain buyer mystique. "When I ask about this I am told 'we don't want to give them too much information as we could be doing ourselves out of a job'," says Natalie Frost, senior sourcing manager at Fujitsu. "This is complete nonsense."
Some claimed buyers who put up barriers tend to be those who don't want to be scrutinised, or who are not adding any value to their business. Others highlighted the lack of confidence in the profession and a wish to dress it up in complex language and jargon.
While honouring confidentiality remained a concern for some buyers, they said it should not conflict with being transparent.
"There is a need to maintain your negotiating position, which could be potentially undermined by disclosing too much," added one respondent. "As with everything there is a balance."
Source: CSRWire
Pioneer in Greenhouse Gas Emissions Solutions Tapped to Help Hollywood "Go Carbon Neutral"
The motion picture and television industries have a significant greenhouse gas footprint purely by the nature of their business. Greenhouse gases are produced in many parts of the production process - from electricity needed to run the lights and cameras, to travel and lodging for cast and crew. The Environmental Media Association (EMA) is working to help these industries reduce their impact on the environment by identifying Climate Clean, the only company that addresses six of the dangerous greenhouse gases, as its "Offset Provider of Choice".
"We wanted a provider who could verify that their offsets really made a difference. After evaluating a lot of organizations, we chose Climate Clean because it was the only organization that offers real, permanent offsets that address not only carbon dioxide (C02), but also five other greenhouse gases," said Debbie Levin, President of EMA. "Climate Clean understands that the first step in reducing emissions is to improve efficiency and make smart decisions about everything from light bulbs to caterers. Then it empowered us to offset what is left with verified emission reduction projects. Climate Clean takes a portfolio approach that delivers real greenhouse gas emission reductions that are beyond 'business as usual'."
The partnership between EMA and Climate Clean aligns with the current green mindset in Hollywood. Many studios in cooperation with EMA have been incorporating environmental messages into mainstream films and marketing to raise awareness and advocate for energy-efficient practices. With California leading the charge for strict state regulations for emissions, Hollywood needs to be among the first to address its large environmental footprint.
Climate Clean already has experience helping the film industry. It offset the San Francisco premier of Leonardo DiCaprio's environmental film "11th Hour" earlier this year through its exclusive Verified Emission Reduction Facility (VERF) Agreement with EcoSecurities, one of the world's leading companies for originating, developing, and trading carbon credits and guiding greenhouse gas emission reduction projects.
"We are delighted to partner with an organization that has made great strides in spreading environmental awareness and action," said Alan Silberberg, Director of Corporate Sales for Climate Clean. "Climate Clean uses a comprehensive methodology to ensure our offsets are real, surplus, verifiable, permanent, and enforceable. That means our customers know that they are making a measurable difference. By working with EMA to reach major studios, we will be able to make a real change for companies' commitment to being entertaining, and being green."
About Environmental Media Association
The Environmental Media Association (EMA) mobilizes the entertainment industry in educating people about environmental issues, which in turn, inspires them to take action. The 17th annual Environmental Media Awards, which honor film and television productions that have increased awareness of environmental issues and inspired personal action on these issues, premieres on E! November 7, 2007 at 8 pm. For more information, please visit www.ema-online.org.
About Climate Clean, LLC
Climate Clean is the pioneer in offsetting all six of the dangerous greenhouse gases and aerosols that contribute to climate change by offering a solution that addresses the whole problem. Led by an advisory board which includes renowned primatologist Dr. Jane Goodall and Dr. David Shearer, a scientist on the Toyota Prius design team, Climate Clean has developed a strict methodology for ensuring verifiable, measurable offsets. The company encourages people and organizations to reduce energy and resources first and then offset what is left to help transition toward a sustainable future. For more information, please visit www.climateclean.net.
